How Rail and Port Chaos Add to South Africa’s Woes: QuickTake

For more than 15 years, South Africa has endured crippling blackouts as a result of dysfunction at Eskom Holdings SOC Ltd., the utility that supplies more than 90% of the nation’s electricity. Now government data shows the damage is being eclipsed by the impact of a deepening meltdown at the state-owned operator of freight rail, ports and fuel-pipelines. Transnet SOC Ltd. has been hobbled by years of mismanagement, underinvestment and corruption. Many mining companies and other exporters have resorted to using to trucks to get their goods to port, which has pushed up their costs, wrecked the roads and caused massive traffic jams. Yields on Transnet’s bonds plunged at the start of December when the National Treasury announced it would provide the company with 47 billion rand ($2.5 billion) in debt guarantees. But fixing the business won’t be a quick or easy process.

With roots dating back to the late 1850s, the company established a monopoly over the rail and port system as inland discoveries of gold, diamonds and other minerals bolstered demand for transport services. Its rail network spans 20,000 kilometers (12,427 miles), and is used to move coal to ports in the east of the country, and iron ore and manganese to harbors in the west. It also plays a key role in getting corn and other agricultural goods to local and international markets, and manufactured imports to warehouses and stores. It runs the country’s eight commercial harbors, including one at Durban on the east coast that handles more than 40% of port traffic. Its pipeline network, which traverses five of the nine provinces, transport an average of 16 billion liters (4.2 billion gallons) of liquid fuel and more than 450 million cubic meters (15.9 billion cubic feet) of gas each year.