Parastatals considering foreign bond markets

The Department of Transport, along with its major state-owned enterprises, such as Transnet, is considering issuing international bonds to finance mega-projects on the horizon.

George Mahlalela, the department's director-general, said this week at the closing of the department's international investors' conference, in Cape Town, that no firm decisions had been made but that international bonds were "certainly an option".

The conference, which was attended by more than 500 delegates from international and domestic public and private-sector financial institutions, was aimed at drumming up interest in planned major infrastructure investments.

Mahlalela said the Department of Transport would set up a dedicated project finance office, which would include the department and private companies, to start planning how these mega-projects could best be financed.

Transport Minister Sibusiso Ndebele outlined several large projects that his department was championing, including R86-billion for new railway locomotives and coaches, and R22-billion for upgrading roads.

Ndebele made it clear that the country's ageing transport infrastructure was inhibiting economic growth.

Also this week, Transnet group CEO Brian Molefe briefed MPs on parliament's public enterprises committee about unserviceable trains, and about ports reaching the limit of their capacity.

Molefe outlined Transnet's capital investment programme, in which the parastatal has invested R87-billion during the past five years on the strength of its own balance sheet and without a government guarantee.

Of that amount, Transnet had spent R12.6-billion on improving the rail system, R6-billion on building the multi-purpose pipeline between Durban and Johannesburg, and R2.9-billion on upgrading capacity at ports.

Molefe went on to outline several other projects that had not yet been budgeted for by Transnet and which were more than five years away from implementation.

Mahlalela said the cabinet had approved, in principle, the transfer of a major portion of the old Durban international airport to Transnet, but the parastatal did not have the balance sheet strength to accommodate the project.

A bond analyst, who asked not to be named because the full details of what the government was planning in terms of the financing of the mega projects had not been announced, said a lot would depend on whether the Treasury was determined to reduce the national deficit.

The government has said that the deficit will be reduced to below 4% of GDP.