Transnet faces 'toughest years'

Johannesburg - State-owned transport utility Transnet said the next three years will be the most challenging the group has ever faced.

"The next three years are going to be the most difficult Transnet has ever had," said Transnet's acting CEO Chris Wells while speaking to journalists at the group's annual results presentation on Wednesday.

"But we're still investing in infrastructure, even though the markets don't demand it now because of the downturn," he said.

He said the group's volumes - on average 12% lower in April and May when compared to the same period in 2008 - are under pressure.

"The economy in 2009 will remain in a recession and demand for commodities will remain weak. I expect things to recover to some extent in 2010 and 2011, but not to the same levels of our 2008 financial year," said Wells.

However, Transnet - which is self-funded and does not receive government subsidies - will still carry on with its R80.5bn five-year capital investment plan.

"In the 2010 financial year, close to R21bn will be spent, which is record investment expenditure for us," said Wells.

He named six possible funding sources which have been put in place, one of which was Transnet's domestic bonds.

"We're currently drawing down R1bn a month (from our domestic bonds), but we're aware that as other state-owned enterprises tap into the domestic bond market for funds, we have to have alternative funding sources" he said.

Other funding sources include loans from other institutions, and negotiating funding agreements with development finance institutions like the African Development Bank.

Of the R80.5bn capital expenditure plans, 59% (R47.5bn) will be spent on infrastructure-related projects, about 32% (R25.8bn) on rolling stock and 9% (R7.2bn) on the acquisition of machinery, equipment and floating craft.

The capital expenditure programme for the 2009 financial year amounted to R19.4bn, up from R15.8bn the previous year.

- Fin24.com