South Africa’s logistics sector stands at a pivotal moment

Media Release

4 August 2025- This article was first published by Business Day on 4 August 

‘Wall of capital’ is waiting to flow into Transnet Infrastructure if right conditions prevail

South Africa’s logistics sector stands at a pivotal moment.

Transnet, the state-owned enterprise central to the nation’s rail and port operations, is navigating a critical turnaround through its Recovery Plan, with the promise of transforming the country’s transport infrastructure and catalysing economic growth.

Transnet estimates a R200 billion funding need, primarily from private sector sources.

Recent discussions with industry insiders indicate strong interest from investors and financial institutions that stand ready to inject billions of rands into Transnet’s ecosystem, provided the right conditions are met.

This buzz, coupled with tangible progress and lessons from public-private partnership (PPP) models, positions Transnet to not only revitalise South Africa’s logistics but also unlock prosperity across the region.

The stakes for Transnet’s turnaround are high.

For years, declining rail volumes, port congestion, and infrastructure decay have stifled South Africa’s economic potential, hampering exports and raising logistics costs. The government has acknowledged this crisis, rolling out logistics reforms, establishing a regulator, and creating a Private Sector Participation (PSP) office to drive change.

These steps signal a commitment to reversing Transnet’s fortunes, with early results showing promise.

In June 2025, Transnet reported a 10.7% increase in container handling at its port terminals and modest gains in rail volumes, driven by improved locomotive availability and enhanced security to combat cable theft. These achievements, though incremental, mark a shift from the persistent declines that have long plagued the company.

The real excitement, however, lies in the market’s response.

Industry experts note an unprecedented level of interest from private sector players, with over 115 responses to Transnet’s rail slot allocation process in February 2025 - and significant engagement with its Request for Information (RFI) for concession opportunities across five key corridors (163 responses).

This enthusiasm extends beyond cargo owners to financial institutions and third-party investors, all poised to inject substantial capital into Transnet’s infrastructure. The potential is transformative: a revitalised logistics network could lower costs, boost trade, and enhance South Africa’s competitiveness. Moreover, regional economies—Botswana, Mozambique, and beyond—stand to benefit, as efficient transport corridors unlock cross-border opportunities, amplifying the multiplier effect on Southern Africa’s growth.

Yet, this influx of capital hinges on one critical factor: bankability.

Investors are clear that Transnet’s concession structures must be robust to attract the billions waiting in the wings. The upcoming Request for Proposals (RFP), expected in August 2025, will be a defining moment. For the RFP to succeed, Transnet must ensure clear accountability between itself, as the infrastructure owner, and private sector partners.

Symmetrical penalty regimes—where both parties face balanced incentives and consequences—are essential to maintain trust and alignment. Without these, the relationship risks collapsing under uneven burdens.

The revenue model is equally critical.

Whether Transnet opts for bundled solutions, managing entire corridors, or disaggregated approaches, the structure must allow private players to earn returns over the long term, given the extended lifespan of infrastructure assets.

This is where lessons from traditional PPP models become invaluable.

We suggest adopting a two-stage RFP process, a hallmark of successful PPPs in sectors like energy. In the first stage, private sector players would review and comment on draft concession agreements, identifying risks that impact bankability—such as unclear pricing or liability frameworks. Transnet could then refine these agreements before the final bidding phase, ensuring structures that attract investment while mitigating risks. This approach, proven in South Africa’s renewable energy program, allows for considered feedback, preventing rushed decisions that could deter investors. By giving the private sector time to assess and price risks, Transnet can create a framework that balances urgency with precision, avoiding the pitfalls of short-term thinking that could inflate logistics costs for end users.

The optimism surrounding Transnet’s turnaround is palpable.

Financial institutions, through forums like Business for South Africa, have provided detailed input on Transnet’s reform documentation, reflecting a collaborative spirit. The market’s eagerness—evident in the flood of responses to Transnet’s initiatives—signals confidence in the sector’s potential.

If structured correctly, the RFP could unlock a “wall of capital,” transforming Transnet’s aging infrastructure into a modern, efficient network. This would not only support South Africa’s economic recovery but also position it as a logistics hub for the region, fostering trade with neighboring countries and driving shared prosperity.

For South Africa, the benefits of getting this right are profound.

A revitalised Transnet could reduce logistics costs, making goods more affordable and boosting export competitiveness. This aligns with broader national priorities, such as those in the National AI Policy Framework, which emphasises digital infrastructure and innovation. AI-driven tools, like predictive maintenance for rail or real-time port analytics, could further enhance Transnet’s efficiency, mirroring successes seen in the South African Revenue Service’s AI adoption. Regionally, improved logistics would unlock trade corridors, supporting economic growth in countries reliant on South Africa’s ports.

Transnet stands at an inflection point and can harness the market’s enthusiasm and capital.

Transnet must seize this chance to build a better future.

By Siyanda Mflathelwa, Sector Head of PPPs and Concessions at RMB

ENDS