Following its meeting with the Minister of Transport, Ms. Barbara Creecy the Standing Committee on Public Accounts (SCOPA) has urged the government to speedily resolve capital funding shortfalls at South African Airways (SAA), Passenger Rail Agency of South Africa (PRASA) and Transnet. These amount to between R220 billion and R240 billion for Transnet and PRASA alone.
The capital injection is needed so that they can reach pre-COVID-19 levels of performance and fulfil their mandate in terms of servicing the economy so it can grow. Rail and other logistics challenges have repeatedly been cited by the South African Reserve Bank and economists as a significant obstacle to economic growth.
The committee received a briefing from the Minister of Transport, Ms Barbara Creecy, on the governance, performance, financial sustainability, potential policy and legislative changes at SAA, PRASA and Transnet. PRASA currently requires a R120 billion cash injection to get back to the pre-COVID-19 levels of operation. The Minister has indicated that some of this money will come from government grants and the rest from other forms of investments such as private-public partnerships.
Similarly, Transnet needs between a R100 billion and R120 billion cash investment to reach a healthy financial level. Transnet will get some of the funds from investments in third-party operators and the rest is expected from the government.
The committee was informed that SAA is now debt-free and will not be requesting additional funding from the government, however, the airline requires a cash injection investment through an equity share partner to reach a healthy financial state.
On the funding model of the Road Accident Fund (RAF) which relies mostly on the fuel levy, the Minister has informed the committee that the Department of Transport is monitoring the work of the Cabinet committee that is responsible for moderating fuel price increases. Also, the Minister is currently assessing whether the Road Accident Benefits Scheme Bill should be tabled again in Parliament to address the legislative reforms that are required to respond to the challenges experienced by RAF.
“The impact of funding challenges is profound. For PRASA commuters it means far fewer trains can run on the same line because there is no electronic signalling equipment, which can double the time it takes to complete each journey. Transnet’s problems mean tonnages have dropped precipitously, leading to penalties, delays at ports and extensive damage to the road network resulting from increasing trucking volumes. The government needs to respond and act with urgency, and ensure the funding is available,” said SCOPA Chairperson, Songezo Zibi.
Members of Parliament also urged the Minister to fast-track the development of a new funding solution for the RAF through legislation and policy changes to ensure it is financially sustainable in the future. The RAF is underfunded and perpetually insolvent as a result.
