State-owned port, freight rail a nd logistics compa ny Transnet has flagged several indicators related to the “material uncertainty” of its ability to continue as a going concern.
However, its directors have expressed confidence that these challenges will be overcome and that the group will stay on its recovery path.
These concerns, raised in the 2024/25 annual report tabled in parliament, have been partly offset by the R145.8bn in government guarantees received after the end-March financial year-end.
The indicators mentioned by the auditor-general in reference to a note to the financial statements by the directors included a net loss of R1.9bn in the 2024/25 financial year, a net current liability position of R65.2bn, covenant breaches on the cash interest cover and other breaches after credit rating downgrades by S&P Global Ratings and Moody’s Ratings, and ongoing operational challenges at Transnet Freight Rail.
The auditor-general’s report noted that after the year-end, government guarantees of R145.8bn had been received, “but increased borrowings, litigation exposure and legislative uncertainty around Transnet National Port Authority corporatisation persist. Despite the recovery plan, several targets remain unmet.
‘Material uncertainty’
“These events and conditions indicate that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern.”
Nevertheless, the auditor-general concluded that the group’s use of the going-concern basis of accounting was appropriate.
The current year’s 44.2% increase in capital expenditure will contribute positively to operational efficiencies
— Whoever said it
However, the directors noted that Transnet’s revenue performance for the year to end-March 2025 improved by 7.8% when compared with the prior year, and the R1.9bn loss was a 74% reduction in the loss from the previous year.
They stressed that Transnet had to remain focused on addressing operational challenges to return the group to sustained operational profitability and, in so doing, address rising debt levels.
“The current year’s 44.2% increase in capital expenditure will contribute positively to operational efficiencies,” they said.
The directors said in the note to the financial statements that the 2025/26 corporate plan envisaged an improvement in financial performance as operations improved over time.
“Financial performance has shown signs of stabilisation in key areas of the business,” they said.
“After performing the assessment and considering all associated risks, the directors believe that material uncertainties relating to events or conditions which may cast significant doubt on the entity’s ability to continue as a going concern exist, but these are adequately mitigated.
“The directors still believe the group will continue to have access to adequate resources and facilities to be able to continue its operations and fund the capital investment programme for the foreseeable future as a going concern. They therefore continue to adopt the going-concern assumption in preparing the financial statements of Transnet SOC.
“Another annual improved revenue performance, reliable cash generation from operations after working capital changes and improved rail volume performance provide an adequate base for Transnet to continue its drive to sustainable profitability.”
Transnet would focus on improving cash generation to support capital investment and to partially repay loans.
The directors said Transnet expected to have continued access to debt capital markets, primarily through its domestic medium-term note programme and long-term loans to satisfy its funding requirements.
The auditor-general also highlighted Transnet’s noncompliance with a National Treasury instruction regarding the treatment of irregular expenditure.
A total amount of R86.3bn was not condoned. Of this amount, R42.9bn was removed from accounting records by the accounting authority in a manner that contravened a National Treasury instruction that stipulates that irregular expenditure may be removed from the accounting records only once the relevant authorities have completed their processes and the matter is resolved.
“In this instance, the losses were still under review by the relevant authorities, rendering the write-off premature and inconsistent with the prescribed framework. Consequently, this treatment constitutes noncompliance, and the irregular expenditure should remain disclosed until all investigations and determinations are finalised,” the auditor-general said.