All eyes will be on finance minister Enoch Godongwana on Wednesday when he tables the 2023 Medium Term Budget Policy Statement for signs on whether he is considering the debt relief request by Transnet, which has gone to National Treasury with cap in hand in a desperate bid to stay afloat.
Godongwana drew praise in the February budget when he gave Eskom a R254-billion lifeline to give the highly indebted utility a fighting chance. Eskom’s debt stood at R422-billion at the end of last year.
Transnet has now also asked taxpayers to absorb about R100-billion of its R130-billion debt pile, saying without this it would be difficult to turnaround its operational and financial challenges, which have hurt exports. The state-owned logistics company, which is without a permanent CEO and CFO, laid out its turnaround plans on Thursday.
Treasury is yet to indicate what it makes of Transnet’s request in light of deep austerity measures considered to rein in runaway government debt.
Transnet’s financial position has weakened significantly in the past five years, with revenue declining from R72.9-billion in the 2017/18 financial year to R68.9-billion in the 2022/23 financial period.
This is in a context where its operating expenses have increased from R40-billion to R45-billion in the same period.
The inability to improve profitability has resulted in Transnet increasing its borrowing from R123-billion to R130-billion. Transnet’s top brass said government support is also required to alleviate theft and vandalism across its network.
“A special work stream has been setup in the National Logistics Crisis Committee for this purpose. The critical areas of support required are more direct involvement in policing the rail network; an enhanced focus on organised crime as it relates to the trade of scrap goods, but particularly of scrap copper; support in prosecution and more rapid adjudication through the court system of those apprehended for theft of infrastructure and assistance in intelligence support to assist to prevent organised theft across the railway network,” reads the turnaround plan.
Transnet maintains a rail network of about 31 000 track kilometres over which commodities are railed. It also called for relaxation of the country’s procurement rules.
“A reduction in the onerous requirements of the PFMA (Public Finance Management Act) and NIPP (national industrial participation programme) as it relates to procurement, particularly for spares from original equipment manufacturers for locomotives and port equipment, but also in respect of the complex regulatory provisions set out by National Treasury, which limit the speed to which procurement can be executed,” it stated.
The energy and logistics crisis, coupled with a plunge in commodity prices has seen the taxman collect R21.5-billion less in corporate income tax, particularly within the
mining sector.
FNB analysts said major risks to the fiscal outlook were clustered around low economic growth, which has implications for tax revenue and borrowing costs, among others.
“The main budget deficit could widen further to around 5.1% of GDP in 2023/24 compared to treasury’s projection of 3.9% of GDP. With lacklustre economic growth and swelling spending pressures, the deficit will likely remain wider over the medium term.
“This, together with the already committed R254-billion Eskom debt relief and looming large redemptions, implies that government gross debt could be shown to stabilise at a higher level in 2025/26, if not significantly beyond.”
