Transnet, which runs the railways, ports and pipelines that connect sub-Saharan Africa’s most industrial economy with the outside world, is in deep trouble. It should serve as a cautionary tale
Save time by listening to our audio articles as you multitaskThe companies that run power stations, railways and ports can be every bit as systemically important as banks. Eskom, South Africa’s state-owned electricity firm, was once among the world’s largest utilities by installed capacity. In recent decades it has been hollowed out by graft, cronyism and mismanagement. Daily blackouts now close South African factories, offices and shops.
Another South African firm stumbling towards collapse may be even more systemically important, since it affects not just its home country but the wider region., which runs the railways, ports and pipelines that connect sub-Saharan Africa’s most industrial economy with the outside world, is in deep trouble.
Last year, even as coal prices were booming, South Africa’s coal exports slumped to their lowest level since 1993. This is because Transnet’s main coal line, which ought to carry 81m tonnes to ports, carried just 54m. This represented lost exports worth at least 80bn rand . Iron-ore exports, which also go by train, slumped to their lowest since 2012, while volumes of general freight sank to levels last seen during the second world war, reckons Jan Havenga of Stellenbosch University.
Yet often politicians want firms to be state-owned so they can give jobs to pals or enrich themselves. These firms tend to arrest development, not accelerate it. A recentstudy found that fully 40% of state-owned firms in sub-Saharan Africa were unprofitable and that their losses could destabilise local banking systems, hurting the flow of credit to the rest of the economy.
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