Embattled state-owned company Transnet will have to tread carefully after the National Treasury agreed to grant it a R47 billion support package.
The rail, port, and pipeline company was given a lifeline on Friday when Treasury conceded to a request by the Department of Public Enterprises.
But the SOE will be subjected to strict conditions as the government keeps a close watch on Transnet’s operation and financial woes.
At the moment, Transnet can only tap into about 50% of the guarantee facility granted by the National Treasury.
It can immediately use this deal with its debt obligations and to fund its recovery plan.
Transnet’s debt is currently in excess of R135 billion and can no longer borrow more money from the market.
The guarantee facility will help settle the existing debt or help secure new debt from banks and other lenders.
But the Democratic Alliance (DA)’s Dion George has warned that this sets a dangerous precedent for other SOEs to bring out their begging bowls.
“No guarantee facility can address the root causes of this inefficiency and fiscal irresponsibility. In fact, the government’s safety net will ensure that the chaos is perpetuated while placing a substantial burden on our already strained national budget and further balloons our growing debt bubble.”
Meanwhile, Transnet is scrambling to address the backlog at some ports, hitting businesses hard.
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