If South Africa is to have a reliable, cost-effective and safe freight system, port and rail infrastructure will require large-scale investment, National Treasury has warned.

Treasury fired the warning in the 2023 Budget Review report annexed in the Budget Speech Finance Minister Enoch Godongwana presented to Parliament at the Cape Town City Hall on Wednesday.

The report provided a status report of the country’s largely financially besieged State-owned companies (SOEs).

In the document, Treasury said following historical underinvestment, Transnet now plans to increase capital investment spending over the next five years to address a maintenance backlog and increase the capacity of existing infrastructure.

In the 2021/22 financial year, Treasury said the SOE reported a profit of R5 billion, after a loss of R8.7 billion.

“This improvement was largely the result of higher revenue as the economy recovered, and a reduction in recognised third-party claims related to litigation or customer claims. Capital investment declined by 16.8% to R13.2 billion in 2021/22 due to lack of funding,” Treasury said.

The document said some progress has been made to enable private-sector participation and access to the rail network.

This is part of a broader shift away from a divisional and modal service offering, to a more strategic collaborative approach. It will enable Transnet to participate in integrated commodity value chains, and work with the private sector to grow the investment portfolio in a financially sustainable manner, while unlocking new revenue streams.

“In January 2023, it [Transnet] issued a request for quotations for private-sector participation in its container corridor between Johannesburg and Durban,” Treasury said.

Concerns remain regarding the entity’s ability to service the current demand for cargo transportation on the freight system and keep pace with tonnage growth, Treasury said.

The Adjustments Appropriation Act (2022) provided an additional R2.9 billion to Transnet to restore infrastructure damage caused during the April 2022 floods in KwaZulu-Natal, and this work is underway.

During 2023/24, Treasury says it will assess Transnet’s freight corridors and associated port operations to identify interventions that should be implemented to improve operations and ensure that freight infrastructure is used optimally.

Denel

Denel remains financially distressed and unable to fulfil its financial obligations, notes Treasury's report.

Treasury said the entity has not submitted annual financial statements for the year.

“Funds amounting to R3.4 billion were allocated to the entity through the Special Appropriation Act (2022), with set conditions relating to the implementation of its turnaround plan and clarity on a sustainable business model.”

These funds, Treasury said, can only be disbursed if Denel substantially meets the conditions before the end of March 2023. Government is closely monitoring this situation.

Eskom

Treasury said Eskom remains reliant on continued State support to operate and meet its financial commitments.

In 2021/22, revenues increased to R246.5 billion as a result of higher tariffs and a partial recovery in sales, it states.

“Although savings of R20 billion were achieved during the year, these were offset by increases in primary energy and personnel costs. Eskom reduced its net loss position to R12.3 billion in 2021/22 from a loss of R25 billion in the prior year," said Treasury.

Despite higher revenues, Treasury said continued power cuts and operational inefficiencies have reduced sales volumes over the years, with customers increasingly choosing other energy generation options where they are available.

Source: South African Government News Agency