Musical chairs with massive debt won’t save Transnet

22 October 2023

The Democratic Alliance (DA) notes Transnet's appeal for Government to absorb its massive R130 billion debt burden. This situation is not dissimilar to Eskom, reflecting an inability to repay its debt and need to borrow more to remain barely operational. Taking their queue from Eskom’s debt relief scheme, where a whopping R254 billion in debt will be transferred to the national balance sheet, Transnet wants the same. This plea was reportedly formally submitted to Minister of Public Enterprises, Pravin Gordhan, and Finance Minister, Enoch Godongwana, during a joint presentation on the so-called turnaround strategy of State-Owned Entities (SOEs).

Earlier this year, when the Treasury consented to take over a substantial share of Eskom’s debt, the DA forewarned that it would establish a dangerous fiscal precedent with other unviable SOEs clamouring for taxpayer-funded relief.

The DA remains opposed to the absorption of Eskom’s debt as it recklessly exposes taxpayers to the financial ramifications of governmental mismanagement. The same applies to Transnet and every other dysfunctional SOE.

The ANC must confront the inconvenient truth that Transnet, much like every other SOE, is a haven for systemic inefficiency, corruption, and economic imprudence. Despite receiving nearly R6 billion in prior bailouts, the entity remains unviable and stands as a massive impediment to achieving sustainable economic growth. The entity does not even have sufficient interest cover to service existing loans, let alone take on new ones. Moreover, independent analyses project that Transnet's operational inefficiencies cost South Africa up to 5% of its GDP in 2023 and now jeopardises an estimated 35,000 jobs across various sectors.

Rather than indulging in this never-ending loop of fiscal irresponsibility, Government must own up to its shortcomings and implement substantive, but necessary, reforms. Instead of persisting in a futile quest for more taxpayer money, Government must accelerate Transnet's privatization. Exporters who have capacity, should be given unconditional access to Transnet corridors to transport their products.

Moreover, Government must immediately suspend bureaucratic hurdles, such as BBBEE and localization criteria, in all procurement processes within Transnet. The business units under Transnet have no validity in central management and ownership. They must be unbundled, and innovative public/private partnerships sought to own and run these as a precursor to privatisation. Such measures are critical to instilling the incentives that drive the operational efficiencies which are crucial for revitalizing the entity to the benefit of all South Africans.

Minister Godongwana must reject this latest entreaty from a poorly managed, cadre-ridden institution. On the 1st of November the Minister has the opportunity to make good on his promise to cease the endless bailouts to moribund SOEs and prioritize South Africans instead. Fiscal discipline and prudent financial management must take precedence if we are to secure a stable, prosperous future for every South African.

Issued by Ghaleb Cachalia & Dion George, DA, 23 October 2023