Transnet, the state-owned rail and ports operator of South Africa, has reported a significant increase in losses for the first half of the year, as ongoing infrastructure deterioration and security issues hinder efforts to revive the business.

The operator’s loss amounted to R2.2 billion for the six months ending in September, a rise from R1.6 billion during the same timeframe last year, as revealed in an announcement sent via email on Tuesday.

The company has once again received waivers — similar to those obtained last year — from lenders to avert a debt default after breaching loan covenants in recent months.

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Increasing debt servicing costs have diminished Transnet’s cash interest cover — the ratio of earnings available for interest payments — to 1.9 times, while several loans stipulate a minimum of 2.5 times. Furthermore, net finance costs climbed by 7.9% to R7.1 billion during this period.

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As a crucial entity for South Africa’s import and export activities, Transnet has experienced poor performance in recent years. Rail inefficiencies reportedly cost the economy over R400 billion in 2022, according to the National Treasury, while the nation’s minerals council estimates that mining exports were R50 billion below target.

The ports operated by Transnet are recognized among the worst globally.

“Transnet has made progress, achieving initial successes in stabilizing operations, improving financial results, and addressing infrastructure challenges,” the company stated.

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The organization plans to focus on initiatives that enhance the availability of rolling stock and improve the condition of rail infrastructure. The ports have prioritized repairing essential equipment and procuring critical spare parts.

Transnet launched a turnaround strategy over a year ago aimed at revitalizing its rail and port operations while addressing the impacts of prior mismanagement, theft, and vandalism.

“There remains considerable work to be done, particularly regarding debt management and security challenges,” it acknowledged.

“Transnet’s progress following its recovery plan continues to be impeded by operational obstacles that are obstructing the clear advancements made in generating revenue and cash flow from operations after considering working capital adjustments.”

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