Transnet hopes to turn corner with second phase of recovery plan

TRANSNET has remained optimistic about turning the corner on its operational, financial and governance challenges and fulfilling its strategic role in the economy as it forges ahead with the implementation of the second phase of its recovery plan.

This as the struggling state-owned ports and rail logistics company began implementing its recovery plan in October 2023, with Phase 2 of the plan commencing on 1 April, 2024.

The core focus of Transnet’s recovery plan is to devise tactical initiatives that drive volume recovery and improve rail and port operations, with an emphasis on equipment availability, reliability and asset quality.

A pivotal element is the improvement of maintenance planning and adherence to plans to resolve operational bottlenecks and equipment shortages.

Transnet chairperson Andile Sangqu said on Friday they remained committed to meeting the deadlines that have been set for this process.

Sangqu said Transnet continued to engage with the government, including on areas where more time may be required, to ensure that implementation of the plan does not have any unintended consequences.

“Of course, we are not out of the woods yet. But the progress is real, the business is being stabilised, and we are increasingly optimistic about the future,” Sangqu said.

“The recovery journey will be long. But we continue to focus on meeting the targets we have set, in spite of the challenging environment in which we carry out this task, because we understand fully the cost of not doing so -- and, conversely, the benefit to our economy when Transnet plays its rightful, catalytic role.

“We particularly appreciate the positive comments that have come from some private sector rail operators who see the long-term benefits that this move will have on their own business development, and on the economy as a whole.”

Transnet will also be soon sharing its views on its recovery plan during a public comments process to be undertaken by the Interim Rail Economic Regulatory Capacity (IRERC).

Transnet Group CEO Michelle Phillips acknowledged that while some of the targets set in the recovery plan were met or exceeded, challenges persisted.

Phillips said although the total volume railed had improved by 1.5% to 151.7 million tons in the financial year ended March 2024, this was 1.8% below the target of 154.4m tons.

She said the under-performance was mostly due to a 4.4% miss on the iron ore line from Sishen to Saldanha Bay, as there was only 55.43m tons railed on this link.

However, the problems on this line may be easing as Transnet was able to ship an annualised 64.3m tons to the Port of Saldanha last month.

Phillips noted that revenue had also risen by 12.8% year-on-year, while operating expenditure grew by 8.3% from a year ago, which was a 4.2% saving on the budget.

She warned that these were preliminary estimates pending the official release of the audited year-end financial results at the end of September.

“We’ve had to improve on our equipment and rolling stock availability,” Phillips said.

“We’ve been able to achieve a return to service of an increased number of locomotives. And we've also seen, in the ports, delivery of some critical port equipment.”

At the ports, she said that new equipment had either been delivered or was scheduled for delivery soon.

These included 10 new haulers and a reach stacker already delivered to Durban Pier 1, as well as 35 new haulers for Durban Pier 2, 25 of which have already been delivered and 10 of which will arrive by mid-May.

A further six reach stackers are scheduled for delivery to the Durban port by mid-May, along with three empty handlers to be delivered by the end of April.

The Cape Town Container Terminal is also scheduled to receive four new reach stackers by the end of this month, while seven rubber tire gantry cranes have already been delivered.

Sangqu noted that the World Bank’s Container Port Performance Index 2020 placed all of South Africa’s commercial ports cluster at the bottom of the 351 ports evaluated based on objective data from shipping lines.

As a result, he reiterated Transnet’s commitment to attract private sector participation across the business is going to continue, as part of its corporate strategy and in accordance with government policy.

“The introduction of a private sector partner at Pier 2 is a long-standing priority of national government,” Sangqu said.

“The recovery of the Port of Durban and the expansion and modernisation of the container capacity at Pier 2 is therefore an imperative of the government and also of Transnet.

– BUSINESS REPORT