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No major impact of rating on Transnet

Companies
Durban - The recent downgrades of South Africa’s sovereign rating will not have a major impact on Transnet, as only about 19 percent of the state-owned company’s expenses were foreign, chief executive Siyabonga Gama said on Thursday.

Speaking on the sidelines of the World Economic Forum (WEF) on Africa in Durban, Gama said credit downgrades generally had negative implications, because there were certain funds that only invested up to investment grade.

“When you get to sub-investment grade they move their funds elsewhere. Which means the cost of credit goes up,” said Gama.

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Transnet chief executive Siyabonga Gama said there has been some recovery and that recovery means we are beginning to move slightly more than we probably moved last year. Photo: Simphiwe Mbokazi

But he said the limited exposure to foreign debt would cushion the company, charging that given the current exposure, the sovereign downgrade would mean that, at the current R8.6 billion finance costs, Transnet would pay an additional R160 million.

“What has helped us is that they have not downgraded our local currency,” he said.

Gama said Transnet’s foray into the rest of Africa was going ahead.

“At the moment we are looking at about six or seven different projects across the continent, ranging from countries such as Nigeria, Senegal, Togo on the west coast and Kenya and Tanzania on the east coast. Closer to home, we are looking at certain projects in Mozambique and Zimbabwe.

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“We are making some very good progress. There are long lead times in terms of getting into these projects, but I think the fact that we have set aside this amount and that we have a project pipeline where we are now dedicating resources to make sure that we complete whatever feasibility studies are required.”

These, he said, were largely ports and rail projects.

Improvement

Following the recent slump in the commodity prices that affected the company’s performance in the past financial year, the group was bracing itself for improvement. “We are seeing signs of green shoots.

“There has been some recovery in commodity prices, albeit it is not at the same levels that we had in 2014, where I think we had record highs. There is some recovery and that recovery means that we are beginning to move slightly more than we probably moved last year,” he said.

Commenting on the impact of the relatively low intra-Africa trade on Transnet’s ambitions to grow into the rest of Africa, Gama said: “It does pose an impediment to the rest of the continent.

"Africa is a very rich continent, but we continue to remain underdeveloped, because we do not have enough power. We need power in order to stimulate our manufacturing sectors, we do not have enough infrastructure and we need infrastructure in order to move goods from one point to another.

"We do not have enough telecommunication capability and we need to be able to move data and information if we are to propel ourselves to the Fourth Industrial Revolution.”

He said many countries battled with indecisiveness and bureaucracy. “Sometimes it is just over regulation. What the (New Partnership for African Development) business initiative has found is that the feasibility studies that ought to be made to create bankable projects are not up to scratch. People are not coming up with feasibility studies that banks can fund.

"There is funding that is available, but people are not spending enough time to develop these bankable infrastructure projects. That is the key issue.”

In a speech at last year’s WEF conference, Gama lamented what he called lack of bias for action and implementation.

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