Transnet has been dealt a blow, with S&P Global Ratings downgrading its long-term issuer credit rating and senior unsecured debt to ‘B+’ from ‘BB-’.
The latest downgrade highlights the company’s precarious financial position following years of state bailouts to the tune of at least R103.8bn over the past five years. This included a direct bailout of R5.8bn to cover locomotive and flood damage repairs in 2022 and guarantee facilities totalling R98 billion (R47 billion in 2023 and R51 billion in 2025).
A B+ rating indicates that a company is “more vulnerable to adverse business, financial, and economic conditions but currently has the capacity to meet financial commitments”. This rating is lower than Transnet’s former BB- rating, which is better in terms of creditworthiness.
The ratings agency pointed to Transnet’s “sizeable negative free operating cash flow” and its “unsustainable capital structure” without government backing, among the reasons for its latest rating downgrade.
The lifeline in the form of the latest R51 billion government guarantee package granted in 2025, which includes R41bn for 2026 and 2027 funding needs and R10 billion for liquidity has kept Transnet afloat, ensuring it can refinance looming debt maturities of R18.9 billion in 2026 and R11.4 billion in 2027, the agency noted.
“Transnet is entirely dependent on state support to be able to service its debt,” S&P said.
“The substantial support provided by the government in the form of guarantees underpins Transnet’s access to funds to refinance its upcoming debt maturities, which, in our view, would otherwise have been extremely challenging.”
Revenue is projected to grow to R82 billion in 2025 and R87 billion in 2026, up from R76.7 billion in 2024 but the outlook is not rosy.
Transnet Freight Rail (TFR) continues to grapple with operational woes, including maintenance backlogs, ageing infrastructure, and security incidents. S&P said it expected TFR’s rail volumes to reach 160.8m metric tonnes in 2025, up from 151.7m in 2024, falling short of the company’s 170m target.
“Structural business weaknesses remain and will take time to improve materially,” S&P said.
The agency said the government’s commitment to provide guarantees and concessional funding from the National Treasury’s Budget Facility for Infrastructure offered breathing room.
“Although the government guarantees might alleviate the short- and medium-term liquidity issues, they do not change our view on cash flow generation and leverage,” S&P said.
Transnet’s standalone credit profile stands at ‘ccc+’, reflecting its cash burn and high debt levels.
S&P said its stable outlook for the company hinged on its reliance on state support.
“The stable outlook reflects our view that Transnet will not face any material payment or liquidity events, thanks to the current R51 billion government guarantee framework,” the agency said.
However, a weakening of government support or worsening financial metrics could trigger another downgrade.
