Transnet's first profit in four years rests on a R12,5bn port gain

Transnet posted a R4,6 billion profit for the year to March 2026, its first in four years, and the number that made it possible came from Durban. The state logistics group reversed the R1,9 billion loss of the prior year on the back of a R12,5 billion accounting gain from the concession of Durban Container Terminal Pier 2 to International Container Terminal Services Incorporated, which took over the terminal’s management and operations.

As The Citizen reported on 18 September, that profit sits on top of a debt pile of R150,7 billion, up from R144,8 billion the year before. Strip out the Pier 2 gain and the year’s figures are in the red.

What Pier 2 carries

Pier 2 handles about 46% of South Africa’s container volumes and has been the single biggest source of congestion for importers and exporters for years. The concession hands its operation to ICTSI, which is expected to bring private capital and international terminal expertise to the modernisation. The partners plan to lift capacity from two million to 2,8 million twenty-foot equivalent units and improve crane productivity.

That is a real change at the country’s busiest container terminal, and it is the kind of private participation the 2022 National Rail Policy set out to allow. It is also, by its nature, a one-time accounting event. It will not repeat, and it cannot be relied on to service debt or fund the capital programme in the years ahead.

The interest bill

Transnet paid R17 billion in interest in the latest financial year, up from R15,8 billion. That is about R1,42 billion a month, or R47 million a day, roughly 11,5% of average borrowings. After capitalising some borrowing costs, R16,4 billion was charged against earnings, more than 3,5 times the reported profit.

About half of the debt is a legacy of state capture during the Gupta era. Approved government guarantee facilities have reached R196,3 billion, with R74,3 billion of Transnet’s debt covered by guarantees at year-end. The group raised R36,2 billion in new funding during the year, and lenders granted waivers after it breached interest-cover covenants affecting R30,8 billion of loans. The guarantees are now central to Transnet’s ability to refinance maturing debt and to remain a going concern.

The rail divide

The accounts show a group split in two. The National Ports Authority, Port Terminals and Pipelines generated a combined R16,6 billion in pre-tax profit. Freight Rail and the Rail Infrastructure Manager together recorded a R13,25 billion loss, and Transnet Engineering added a further R4 billion loss.

Freight rail volumes improved from 160,1 million tonnes to 167,9 million tonnes, still short of the group’s 180 million tonne target. CEO Michelle Phillips has said reaching that volume is necessary for the underlying business to break even, which confirms the operational turnaround is not complete.

Eleven private operators have been allocated routes on the rail network, and they will enter a network weakened by years of underinvestment, theft and deferred maintenance. Transnet has estimated that restoring and upgrading the freight network, including signalling, will require about R50 billion over five years. Its wider five-year investment programme has since grown to R129,1 billion, of which R115,9 billion is earmarked for maintaining and rehabilitating rail, port and pipeline infrastructure. Transnet Rail Infrastructure Manager spent R8 billion on capital projects in 2026.

What it costs the country

Roughly R500 million a day is lost to the economy in forgone export sales and higher logistics costs, an improvement on the earlier R1 billion a day estimate as coal and iron ore volumes recovered. That figure is the one ordinary South Africans meet in other ways. It is the reason a container of goods sits at the port instead of moving, and the reason exporters pay more to get product to a ship.

The question the reforms have not answered

Government guarantees have kept Transnet refinancing and avoided a liquidity crisis, and they transfer part of the financial risk to taxpayers. The reform programme now depends on a debt-laden group generating enough cash to rehabilitate the network while charging access tariffs private operators can afford.

Transport specialists argue the 2022 policy must go further and place the rail network in a properly capitalised, operationally independent infrastructure entity, with operators competing for access much as road users access infrastructure administered by Sanral. Without a solution to the debt burden and the rehabilitation backlog, private trains may simply add operators to a railway that still cannot run them reliably.

The next dated checkpoints are the tariff determinations that will set what private operators pay for network access, and the group’s own reporting on whether freight volumes move towards the 180 million tonne break-even mark in the year ahead.

Source: The Citizen, Durban port deal rescues Transnet from another nasty loss