By Chumisa Yona.
As commodity prices open a ‘once-in-a-decade’ windfall for South Africa, easing fiscal pressure, its faltering freight and logistics system has left significant value on the table.
With the logistics chain being the growth lever that underpins the mining and export sector, Transnet’s performance (or underperformance) represents both a systemic risk and a latent opportunity.
As debate around its reform success fluctuates between optimism and disappointment, the story of Transnet is less one of collapse than of under-execution at a moment of great opportunity.
The credibility of South Africa’s broader reform agenda hinges on visible recovery in freight performance. Both the National Logistics Crisis Committee (NLCC) and Operation Vulindlela have produced roadmaps for private-sector participation, but implementation remains slow.
For investors, this lag raises the perception of execution risk – that even when policy direction is correct, delivery capacity lags the plan.
That credibility gap not only affects Transnet’s cost of borrowing but also influences sovereign-risk pricing and the appetite of lenders such as the African Development Bank, which extended a $1 billion loan in 2024 for network rehabilitation.
Root causes and reality of underperformance
The root causes of Transnet’s underperformance have been well documented. Locomotive paralysis, due to the lack of spare parts and maintenance support from CRRC E-Loco Supply, remains a major factor in Transnet’s logistics challenges, as well as infrastructure decay, vandalism, deferred maintenance, port congestion and poor turnaround times.
But one of the most critical factors holding back progress remains the issue of reform inertia.
While the NLCC and the Transnet Recovery Plan have created reform momentum, implementation lags persist. The 11 rail-slot concessions granted to private operators in August 2025 will only contribute meaningful tonnage from 2026/27 onward.
These hindrances are resulting in Transnet’s goal to enable a ‘globally competitive freight system’ falling short of reality. In FY2023/24, Transnet transported 151.7 million tonnes (Mt) of rail freight against its stretch target of 170Mt, missing its target by about 18Mt.
Using average market prices for coal, iron ore, and manganese during that period, this equated to roughly R36 billion in unshipped export value – around 0.5% of GDP and nearly half of Transnet’s annual group revenue.
The following year, the pattern repeated. In FY2024/25, Transnet achieved 160.1Mt versus its 170Mt target (and well below the 193Mt stretch goal). Most of the shortfall came from iron ore (4.98Mt), followed by general freight business (3.05Mt) and coal (1.92Mt).
Applying conservative 2025 average export prices – coal around R1 980/t (approximately $110/t) and iron ore around R1 890/t (approximately $105/t) – the missed export opportunity in those commodities alone amounts to roughly R13 billion.
To drive the final nail into the coffin, Kumba Iron Ore’s FY24 annual report reveals that rail inefficiencies drained an estimated R411 billion from South Africa’s economy in 2023 – a blow that deepened the government’s tax revenue shortfall.
The Minerals Council South Africa had already flagged a R150 billion loss in 2022 for mining companies due to logistics failures, while the South African Association of Freight Forwarders estimates that Transnet’s ongoing underperformance is costing the economy R96 million every single day, adding up to more than R35 billion annually.
Macroeconomic and fiscal impact
Transnet’s fragile recovery continues to weigh on national output. Even modest underperformance in freight volumes has ripple effects across the economy – constraining export earnings, weakening fiscal buffers and dampening growth momentum.
The opportunity cost of missed shipments is not just commercial; it reflects a broader misalignment between infrastructure capacity and economic potential.
Alongside the loss of revenue is the state’s loss of fiscal agility, with these constraints being especially acute in a low-growth environment where every marginal rand counts toward debt service, infrastructure investment and social spending.
The employment impact is equally significant. Rail-linked towns and logistics corridors depend on throughput to sustain jobs in transport, maintenance and support services. When freight volumes fall short, the knock-on effects are felt in local economies, small businesses, and household incomes.
Investor implications
For South African resource equities, the constraint on returns is increasingly logistical, not geological.
Even when commodity prices are favourable, miners cannot fully realise value if rail and port systems underperform.
This disconnect between production and export capacity has become a strategic concern for investors. It signals operational fragility and underscores the importance of infrastructure performance in assessing sector resilience.
Logistics reliability has become a strategic variable for investors. In an environment where production capacity often exceeds export throughput, the ability to move goods efficiently is now as critical as commodity prices or exchange rates. As investors, we are now increasingly monitoring rail and port performance as a leading indicator of operational effectiveness and sector resilience.
Transnet’s operational bottlenecks have turned a potential fiscal tailwind into a neutral – or mildly negative – fiscal outcome.
Pathways to recovery
There are three key focus areas that could unlock an accelerated local logistics recovery.
Firstly, South Africa’s ports and rail have historically operated in silos. Full corporatisation of the National Ports Authority (announced in 2024) must be accompanied by integrated digital scheduling and unified accountability for throughput.
Secondly, frequent leadership changes have eroded institutional stability and therefore ensuring continuity of management and transparent reporting of corridor-level KPIs is critical to rebuild investor trust.
And lastly, industry’s appetite for running its own trains is growing. Eleven new third-party rail slots are a start, but regulatory certainty and standardised access fees are vital to scale participation to the targeted 250Mt network throughput by 2030.
The forward view
South Africa’s growth story simply cannot be divorced from its logistics story.
Eskom’s stabilising energy supply will be meaningless if goods cannot move efficiently.
Therefore, Transnet’s operational recovery is not a peripheral state-enterprise issue – it is the macro variable that determines whether South Africa captures or forfeits the next industrial upswing. As such, it is crucial that execution of its reform is expedited.
Chumisa Yona is an ESG analyst at Old Mutual Investment Group. This piece was first published with Moneyweb.