With the news this morning of a R47bn guarantee by the National Treasury to Transnet in support of its recovery plan, we look at some of the impacts of Transnet’s underperformance on SA’s export capability. In the recent Transnet Recovery Plan presentation, the company shows just how severe the decline in rail volumes has been over the past five years, with freight rail volumes having dropped by 34% since 2018.
Source: Transnet
We use this to estimate the lost export volumes of iron and coal over the past 5 years. We assume that had Transnet been able to maintain its rail capacity, that entire export capacity would have been exploited, especially given the high rand prices of these two commodities over the past three years.
The chart below shows the cumulative volume of these lost exports at the average iron ore and coal export prices over this period.
Source: Transnet, IMF, Mergence Calculations
Based on our assumptions, the result is an aggregate R220bn of Coal and Iron Ore exports that SA has lost out on over the five past year.
Turnarounds in both Eskom and Transnet are both crucial to the SA economy and reversing the associated loss in tax revenue is critical to supporting SA’s fiscus and future debt to GDP trajectory.
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