Although the State-owned freight and logistics group Transnet has posted its first profit in four years, Group CEO Michelle Phillips has warned that the turnaround is far from finished.
In an exclusive sit-down with The National this week, Phillips was candid that posting a R4.6 billion profit for the year ended 31 March 2026 against a R1.9bn loss the previous year was not a victory lap, but the first proof that a three-year-old recovery plan is finally producing measurable results.
Transnet's revenue rose 7.1% to R88.6bn and rail volumes climbed 4.9% to 167.9 million tons.
"I suppose we breathe a little bit better," Phillips said of the results, tabled roughly two weeks before the interview and due before Parliament's Portfolio Committee on 6 October. "But I mean, there's still so much to be done."
The numbers behind the relief
That caution is borne out by the numbers themselves. While earnings before interest, taxes, depreciation, and amortization (Ebitda) rose to R30.9bn, net operating expenses grew faster, up 10.8% to R57.7bn, and finance costs and depreciation continued to eat deeply into operating gains.
Phillips said finance costs of roughly R15bn and depreciation of about R23bn "wipes out" most of what the business earns from operations, which is precisely why private sector participation (PSP) deals have become central to the turnaround math rather than a peripheral reform.
The clearest illustration is the Durban Gateway Terminal (DGT) transaction, in which Transnet sold a 49.999% stake to the Philippines' International Container Terminal Services Inc. (ICTSI) for R10.5bn, generating a R12.5bn profit on disposal that significantly boosted the year's bottom line.
Commentators, Phillips noted, have been quick to credit DGT for the improved results but she insisted it was only part of the story.
"You would have seen the improvement... all around in terms of our volumes, across the port and rail operating divisions," she said.
Privatisation or private sector participation?
Phillips was equally direct in pushing back on the narrative that Transnet is being "sold off" piece by piece through multiple long-term concessions.
Left-leaning organisations and labour movements such as Cosatu have strongly opposed the unbundling of Transnet, arguing that the state should inject equity into the parastatal instead of selling off strategic public assets.
"Transnet will remain state-owned, and everything that we have custody of is state property... it's not sold off to anyone," Phillips said.
She argued that private terminal operators, from Grindrod to Bidfreight to the Fresh Produce Terminal, have operated inside South African ports for more than two decades, making the practice far from novel.
What is new, Phillips acknowledged, is extending private participation into rail, a shift dependent on the still-pending National Rail Bill.
According to Transnet's own documents, the accounting separation of Transnet Freight Rail into an operating company (TFR) and infrastructure manager (TRIM) is complete, and Rail Access Agreements have been signed with 11 Train Operating Companies (TOCs), the first of which are expected to begin running in the 2026/27 financial year.
Money — or the scarcity of it — was the thread running through nearly every answer.
Phillips rejected the framing that Transnet was “asking” the government for billions in support as the TRIM has approached the National Treasury for R26bn to fix and refurbish the rail network.
“No, we're not asking. We are applying,” she said, describing the rigorous process of applying to National Treasury's Budget Facility for Infrastructure (BFI).
Treasury approved R14.8bn in BFI grant funding during the year. Phillips said this money directly reduces how much Transnet must borrow on the market to fund its R129bn five-year capital programme.
“If I get BFI funding, my request to the market is then less,” she explained. “I borrow less.”
Debt: the story beneath the story
That borrowing discipline matters because Transnet's loan book, sitting at around R150bn, remains the single biggest drag on an otherwise improving business.
“If this was a business that did not have the R150bn loan... this business is profitable immediately,” she said.
Phillips added that she expected the debt to have peaked and to decline "quite substantially" as guarantee renegotiations lower interest costs and asset disposals, including thousands of surplus residential properties and non-core assets like golf courses, free up cash.
The interview also surfaced the operational scars behind the improved numbers. Phillips cited over 5,000 incidents of cable theft, sabotage and vandalism in a single year, costing an estimated R1.7bn alongside derailments, rolling stock constraints, adverse weather and take-or-pay penalty adjustments of R658 million.
Rail volumes recovery
The improvement in rail volumes has been attributed to network rehabilitation, better maintenance execution and asset availability rather than any single deal. However, Phillips was more specific about where that leaves the business relative to what the country actually needs to move.
She put the national freight task at around 250 million tons, against roughly 168–170 million tons currently being moved by rail, an 80-million-ton gap that private TOCs alone won't close. The TOCs have collectively committed to an additional 24 million tons over three years, nowhere near enough to close the gap on its own.
On coal specifically, Phillips gave the most granular targets: a 4-million-ton uplift year-on-year, an ambition to push past 60 million tons this year toward 65 million tons, with rail lately running at what she called a "70-million-ton tempo" in strongest recent weeks.
She was equally blunt that iron ore remains badly constrained, currently unable to move 60 million tons on that line at all, because the infrastructure doesn't yet allow it, which is precisely the gap Transnet is trying to plug through the BFI.
Unresolved saga of the 1064 locomotives
Pressed on the long-running 1064 locomotive procurement, one of the more damaging legacies of Transnet's state capture-era contracting, Phillips gave the fullest public update in some time.
Of the four original locomotive suppliers, Wabtec (formerly General Electric) and the Alstom/Bombardier consortium have settled and fulfilled their revised contractual obligations; Transnet finished receiving the last of the Alstom-supplied locomotives this past year, enabling the introduction of new electric units into the network.
The Chinese supplier, CRRC, remains a different story. Settlement talks stalled because CRRC's South African entities faced action from SARS and the Reserve Bank, freezing their bank accounts and barring them from trading, conditions outside Transnet's control that were written into any settlement as a precondition.
By Transnet's tally, roughly 95 electric locomotives and around 210 diesel units remain outstanding under the CRRC contracts. Compounding the problem, CRRC unilaterally terminated the associated maintenance contract, leaving several hundred already-delivered CRRC locomotives standing idle across the network, engines Transnet says it cannot maintain without the original equipment manufacturer's support.
Phillips said the recovery plan's official volume targets were deliberately built without assuming a CRRC resolution, "because I can't control it."
Meanwhile, Transnet and the Special Investigating Unit are preparing answering affidavits to the interlocutory applications brought by CRRC and CRRC SA Rolling Stock.
Perhaps the most revealing moment came when Phillips addressed critics who say the reform process is moving too slowly.
"Compared to what?" she asked. "It's the first time that this country is doing these kinds of things... if you want to do this right, then you take the time and you do it properly."