Transnet's financial position has deteriorated, with S&P Global Ratings lowering its long-term issuer credit rating and senior unsecured debt to 'B+' from 'BB-'. This downgrade follows multiple state bailouts amounting to at least US$5.6 billion (R103.8 billion) over the last five years, including direct financial assistance of US$312 million (R5.8 billion) to address locomotive and flood damage repairs in 2022.
The 'B+' rating signals vulnerability to adverse financial or economic conditions, though it reflects some capacity to meet financial obligations. The downgrade is attributed to factors such as "sizeable negative free operating cash flow" and an "unsustainable capital structure" absent ongoing government support. S&P noted that Transnet remains reliant on a US$2.75 billion (R51 billion) government guarantee package granted in 2025, intended to help cover US$1.02 billion (R18.9 billion) in debt maturing by 2026 and another US$617 million (R11.4 billion) due in 2027.
Revenue is projected to grow, reaching US$4.42 billion (R82 billion) in 2025 and US$4.69 billion (R87 billion) in 2026, up from US$4.14 billion (R76.7 billion) in 2024. However, Transnet Freight Rail (TFR) continues to face operational difficulties, including maintenance backlogs, aging infrastructure, and security challenges. As a result, rail volumes are forecasted to rise only to 160.8 million metric tonnes in 2025, below the 170 million target.
While government guarantees and concessional funding help avoid immediate liquidity issues, S&P maintains that core structural weaknesses remain. These will take time to resolve. The agency's stable outlook reflects expectations of continued government backing but warns that further downgrades are possible if financial support weakens or key metrics deteriorate.
Source: Freight News
