Transnet Pipelines owns, maintains and operates a network of 3800km of pipelines transporting 17.1 billion litres of petroleum annually. However, pipeline volumes have been impacted by the closure of oil refineries and vandalism. File picture: Supplied
Transnet’s high debt of about R230 billion and a maintenance backlog of over R70bn were among the most serious stumbling blocks to its recovery plan, the utility told the Parliamentary Portfolio Committee on Transport yesterday.
The rail, ports and pipelines operator said despite these challenges, the implementation of a recovery plan had shown positive results, with a notable 28% improvement in coal corridor performance, and a total of 771 metric tons of rail freight transported over 24 weeks.
It said a decline in profits had been accelerated by legal obligations, after the Gauteng High Court earlier this year awarded Sasol and TotalEnergies R6bn in damages over a battle with Transnet over tariffs for the transportation of crude oil.
Transnet told the committee that its financial position has weakened, with revenue declining from R72.9bn to R62.9bn between 2017/2018 to 2022/23, while operating expenses increased from R40.4bn to R45.9bn.
"The weekly performance tempo on the coal corridor has improved significantly by 28% since the inception of the recovery plan, exceeding the baseline target."
Transnet was however expected to report a loss for the first six months of the fiscal year in January.
It said timelines for the implementation of private sector participation initiatives have been plotted for the short term.
"Transnet is facing stagnant declining market share volumes in key growth segments including the container business, with high value commodities such as coal and chrome impacting overall volumes," they said.
These challenges have led to operations under-performing, resulting in declining volumes with the most significant decline being the Rail Operating Division (Transnet Freight Rail).
Within the port and pipeline environment, volume declines have been less pronounced compared with the rail division.
Consequently, the financial position of Transnet had deteriorated over the period to the extent that its sustainability was threatened, they said.
On the maintenance backlog, there are significant infrastructure maintenance backlogs for all networks estimated at R51.4bn for network restoration, and R19.2bn for sustaining costs to the core network. Declining asset conditions have resulted in reduced network capacity, poor reliability of key corridors and declining port and rail volumes.
Transnet Freight Rail (TFR) operations had been adversely impacted by the non-availability of the fleet.
The utility reported that it continued to be burdened by R60bn lost during the state capture years.
The first part of the recovery plan identifies several key themes for improvement performance and driving operation.
On the pipelines network, declining liquid petroleum demand, network vandalism and theft, as well as high barriers to entry for junior players, and the closure of refineries, has had a significant cost impact.
The recovery plan outlined a new strategic direction, leading to necessary adjustments in both the Corporate Plan and Shareholder Compacts to ensure alignment.
Further, the strategy seeks to leverage private sector participation to unlock value chain growth for both South Africa and Transnet.
Additionally, the recovery of rail volumes, port container and pipeline volumes have also stabilised while Transnet strives to save costs.
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