Clearly , this would be an unsustainable burden , as customers have consistently expressed their concerns about the stateowned rail and logistics provider .

How did we get here ? Transnet , recognising the need for change , launched a comprehensive recovery plan in October 2023 . The primary goal was to accelerate private sector investment . In addition , shortly thereafter Transnet announced that Philippines-based International Container Terminal Services Inc ( ICTSI ) had emerged as the preferred bidder for upgrading and managing Pier 2 at the Durban Container Terminal .

However , this decision faced challenges . Maersk , the losing bidder , raised concerns about ICTSI ’ s financial stability . Despite this , ICTSI is on the verge of being awarded a 25-year concession to operate the container terminal in a 50-50 joint venture

with Transnet . This partnership model was intended to set the precedent for future private-public collaborations , but it has already encountered legal complexities .

During the PSG conference at Sun City in May , Transnet ’ s chair , Andile Sangqu , highlighted some successes resulting from the business-government collaboration through the Joint Steering Oversight Committee ( JSOC ). Notable achievements include the deployment of drones for surveillance and 24 / 7 security along critical rail corridors . Additionally , Transnet loaned seven cranes to the port of Cape Town during the festive period , demonstrating their commitment to efficient logistics operations 1 .

Operational improvements are becoming evident , with reduced vessel backlogs at ports and increased tonnages shipped by rail . However , Transnet faces significant challenges as it looks ahead .

• Railway reform and balance sheet fix : The National Rail Policy outlines the need for railway reform , which Transnet must implement . This involves streamlining operations , enhancing efficiency , and ensuring sustainable

growth . Simultaneously , Transnet grapples with a strained balance sheet , exacerbated by mounting debt exceeding R130-billion . The company must address this financial burden to secure its future . Achieving a marketfriendly tariff is crucial . This tariff should strike a balance between affordability for customers and revenue generation for Transnet .

• Investment dilemma : The national railway and ports system requires substantial investment , but neither the government nor Transnet can fully provide it . Properly implementing policy instruments is essential to remove roadblocks hindering private sector capital . The existing re-branded monopolistic structure of the stateowned railway system must evolve .

• Debt and tariff implications : Transnet ’ s debt burden necessitates strategic decisions . The proposed tariff aims to help Transnet trade its way out of financial challenges . By reducing reliance on government support and private sector infrastructure

investment , Transnet seeks to address its financial hole . However , this tariff has implications for the South African taxpayer , as banks earn substantial interest from Transnet ’ s debt .

• Shifting priorities : The proposed tariff signifies a departure from Transnet ’ s historical focus on minimising logistics costs as a percentage of transportable GDP . Instead , the emphasis now lies on financial sustainability and operational viability .

TRANSNET ’ S PATH FORWARD

University of Stellenbosch professor of logistics , Jan Havenga , has estimated that the cost of state capture at Transnet amounts to approximately R60-billion , equivalent to half of its total debt . This staggering figure highlights the impact of corruption and mismanagement on the state-owned rail and logistics provider .

State capture alone is costing Transnet about R500-million in interest every month . The Zondo Commission of Inquiry delved into mountains of evidence , revealing corruption related to the purchase of