South Africa’s state-owned logistics utility Transnet has suffered another major blow as S&P Global downgraded its credit rating, raising alarm over the company’s deteriorating financial health, sluggish reforms, and heavy dependence on government bailouts.
In its assessment, S&P warned that Transnet is burning through R13.5 billion annually in negative free cash flow, with no signs of stabilising its operations or improving performance. The agency cited weak debt-servicing capacity, underperforming rail volumes, and excessive fixed costs as key drivers of the downgrade. Crucially, S&P concluded that Transnet remains entirely reliant on state support, with no clear path to sustainability.
The decision follows a R51 billion government guarantee facility granted in May 2025 to help Transnet refinance maturing debt—just two years after a similar R47 billion lifeline in 2023. The funding comes amid continued operational failures, including freight backlogs, missed performance targets, and a bloated cost structure.
Despite its dire financial position, Transnet recently implemented salary hikes well above inflation, further fuelling criticism that it lacks fiscal discipline. According to S&P, the company’s decision to increase staff pay during a financial crisis “reinforces doubts” about management’s commitment to reform.
Business Leadership South Africa (BLSA) CEO Busi Mavuso described the situation as “a textbook example of unsustainable economics,” warning that government guarantees are enabling inefficiency and delaying structural reform.
“S&P is calling out what has become clear to many of us – Transnet is resisting change and moving too slowly,” Mavuso said. “We cannot keep throwing money at the problem, hoping it will fix itself.”
Mavuso urged National Treasury to attach strict, enforceable conditions to any further support, including allowing private sector participation in the logistics sector. While some progress has been made under Operation Vulindlela—including early steps to separate rail infrastructure from operations—Mavuso said implementation has lagged behind targets, and logistics reforms from Phase One remain unfulfilled.
“There are companies ready to invest,” she added, “but they need certainty that their capital won’t be undermined by political interference or Transnet’s resistance to competition.”
Though backlogs at ports have eased and certain rail corridors have seen modest improvements, S&P’s downgrade confirms that systemic issues remain unresolved. In addition, Moody’s Ratings warned in May that Transnet could run out of operational funds within three months unless it secured government support.
The downgrade is the latest chapter in a long-running saga of mismanagement and governance failures at South Africa’s state-owned enterprises. Like Eskom before it, Transnet has become a cautionary tale—but unlike Eskom, which has shown some willingness to reform, Transnet appears stuck in survival mode.
“This is a wake-up call,” Mavuso concluded. “Transnet cannot continue as if it is business as usual. The president must act decisively to get the agreed reforms implemented—fast.”