An aerial view shows oil tanks of Transneft oil pipeline operator at the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia June 13, 2022. Picture taken with a drone. REUTERS/Tatiana Meel

South Africa’s National Treasury said on Friday it has issued state-owned rail and ports firm Transnet a support package of 47 billion rand ($2.5 billion) to help with a recovery plan, which includes meeting its immediate debt obligations.

“The financial support package provided for the entity is a 47 billion rand guarantee facility against which Transnet will drawdown an initial amount of 22.8 billion rand to deal with immediate liquidity matters such as settling maturity debt,” the National Treasury and the Department of Public Enterprises said in a joint statement.

Transnet has been struggling to provide adequate freight rail and port services due to equipment shortages and maintenance backlogs after years of under-investment. The logistics utility’s underperformance has impacted commodity exports and other sectors such as manufacturing and retail, weakening Africa’s most advanced economy.

The company, which has a 130 billion rand debt and recorded a loss of 5.7 billion rand in the financial year to March, has seen freight volumes decline to 150 million metric tons in financial year 2022/23 from 226 million tons in the 2017/18.

Transnet’s new board is pursuing a recovery plan which seeks to restore freight volumes and return the company to profitability over the next 18 months. The turnaround plan includes splitting the freight rail subsidiary into two – an infrastructure management company and an operating unit.

The company is also targeting reduced port backlogs and will make another attempt to open up parts of its rail network to private operators after last year’s false start.

Transnet on Oct. 26 said it had requested funding from government, reported to be around 100 billion rand, including an equity injection, to help fund the recovery efforts.


But the government on Friday said it had not considered an equity injection, saying the budget for the 2023/24 financial year was closed.

Transnet’s single $1 billion international bond, which matures in 2028, rose on the news, with its price up as much as 1.8 cents to 98.9 cents, its highest price since Aug. 1 according to Tradeweb data. ($1 = 18.8111 rand) (Reporting by Bhargav Acharya and Nelson Banya; Additional reporting by Rachel Savage; Editing by Sonali Paul, Tom Hogue and Toby Chopra)