With weak revenue and investment within South Africa, Transnet has announced plans to achieve its planned expansion through new investment in the rest of Africa and the Middle East.
Transnet has set a target of generating ZAR100B (US$7.4B) revenue a year by 2020, partly through the expansion of its non-South African port, rail and pipeline operations. It also aims to greatly increase its exports of locomotives, wagons and other engineering equipment. It is particularly keen to improve rail links from Democratic Republic of Congo and Zambia to South Africa, in order to boost the volume of copper and other mining commodities shipped through South African ports.
The company has already cut its planned investment budget, known as its market demand strategy, over the next seven years from ZAR300B (US$22.2B) to ZAR229B. This reduction could be reversed if there is a more concerted recovery in the mining industry.
South Africa’s very weak economy and lower trade volumes have prompted it to make some cuts. Its capital expenditure for the half year to the end of September was 5% lower than in the same period last year.
Despite this, there has been some recovery in Transnet’s position. Its post-tax profit for the first six months of financial year 2017-18 was 230% higher than in the same period last year, at ZAR3.4B. Transnet Freight Rail recorded a 6.5% rise in the volume of export coal carried, in comparison with the previous year. Nevertheless, at the end of November, credit ratings agency Moody’s placed Transnet and other South African corporates under review for a credit downgrade, because of their strong links to the South African government.