Is Transnet on track for recovery?

Transnet, South Africa's state-owned rail and port operator, has recently reported a return to profit after a period of significant losses. However, the African Rail Industry Association has raised some key concerns regarding the company's financial results and infrastructure maintenance. In a recent interview on CNBC Africa, Mesela Nhlapo, CEO of the association, expressed skepticism about Transnet's financial turnaround and highlighted the need for transparency and accountability. Nhlapo described Transnet as 'cash-strapped' and questioned the sustainability of its operations in the long term. One of the main issues raised by Nhlapo is the revaluation of Transnet's property, which led to a reported profit of 5 billion rand despite ongoing concerns about infrastructure neglect. Nhlapo pointed out that while maintenance spending has increased over the years, much of it has been directed towards repairs rather than planned maintenance, raising doubts about the sudden increase in asset valuation. Nhlapo emphasized the importance of addressing these concerns to safeguard the future of South Africa's rail network. He called for greater government oversight and adherence to rail policy guidelines to ensure that state entities like Transnet operate efficiently and ethically. One of the key solutions proposed by Nhlapo is the implementation of third-party access to rail networks, as mandated by the government's rail policy. He also urged the government to waive the fuel levy on diesel prices to level the playing field between rail and road transportation. In response to Transnet's plans to invest 44 billion rand in port infrastructure, Nhlapo questioned the sufficiency of this investment given the broader challenges facing the company. He stressed the need to prioritize maintenance of existing rail infrastructure and operational efficiency to avoid further financial strain on Transnet. Nhlapo also highlighted the importance of improved communication and coordination within Transnet's operations, citing instances of locomotives idling for extended periods due to outdated control systems. Despite reaching out to Transnet for clarification on the revaluation of assets and track quality index, Nhlapo noted that the company's response was limited due to sensitivity around financial information. However, he reiterated his commitment to pursuing transparency through official channels to ensure accountability and public trust in Transnet's financial reporting. As South Africa grapples with economic challenges and the need for sustainable transport infrastructure, the scrutiny on Transnet's financial management and operational practices is likely to intensify. The concerns raised by the African Rail Industry Association serve as a reminder of the importance of robust governance and oversight in state-owned enterprises to safeguard public interests and long-term viability.