Transnet Bailout Will Break the Constrained Fiscus

Dear Editor

The DA, for the last 15 years, has stated that we do not support any further mega bailouts for State Owned Companies, and is alarmed that the ANC appears to be undermining policymaking in the GNU by insisting that Transnet gets a substantial bailout. South Africa cannot afford to spend more money on failing SOEs, and past bailouts have led to a Debt-to-GDP ratio at 75% while SOEs remain trapped in a debt spiral. In the 2024 MTBPS, the GNU committed itself to limiting any further fiscal support to SOEs, and we expect that to remain in place.

In past bailouts, Treasury has imposed conditional arrangements, but history shows these “conditions” have never worked, and in many cases after receiving a bailout, the SOEs have ignored the bailout conditions. Therefore, support to SOEs is not a bailout; it is a hostage situation.

Transnet has been subject to proposed reforms under Operation Vulindlela– but the reform programme has stalled to the point where it is a major break on economic growth. If Transnet continues to frustrate the reform progress, the DA is of the view that it is time for the immediate devolution of Transnet’s operational components, as well as bold and far-reaching reforms that bring private sector competition into port and freight rail logistics. Lessons from SAA and Eskom highlight that managing incremental reform in state-owned enterprises is lengthy for minimal performance improvement. Transnet’s complexity, and the centrality of port and freight rail logistics to the economy demands urgent action to avoid further economic fallout and keep the country trapped in low growth.

To achieve this, the DA calls on the government to:

• Conduct a full asset, process flow, and portfolio analysis to inform a breakup, devolution and private sector competition strategy.
• Provide clarity for potential investors.
• Ensure that the next injection of funds into Transnet comes from the private sector, not taxpayers.

We cannot afford another Transnet hostage situation. The DA insists that preparations begin immediately to secure a sustainable future for South Africa’s ports, railways, and freight infrastructure.

Regards

Dr Mark Burke
DA Spokesperson on Appropriations