STATE-OWNED freight and logistics company, Transnet, appears to be on its way to overcoming challenges of State Capture, corruption and collapse in governance with the successful appointment of a new leadership team, taking action against executives implicated in corruption and stabilising its finances despite challenges posed by the COVID-19 pandemic.
Transnet briefed parliament’s portfolio committee on Public Enterprises on Wednesday.
Portia Derby, Transnet Group CEO since February this year, says the company expects the South African economy to shrink by 9,5% this year and this will hit revenue across freight, exports of goods and minerals as well as fuel carried in its pipelines.
Transnet has overhauled its executive committee.
Following Derby’s appointment, Nonkululeko Dlamini joined from the Industrial Development Corporation (IDC) as Chief Financial Officer (CFO), former South African Airways CEO Siza Mzimela as CEO of its largest division Transnet Freight Rail (TFR), military man Ralph Mills as the CEO of Transnet Engineering.
Velile Dube was confirmed as the CEO of Transnet Port Terminals (TPT), which operates 19 ports and harbours around the country.
He is one of only three internal appointments in a 15-person executive committee, a reflection of the desire to make a clean break with the company’s chequered past.
On Thursday, the company announced that Phephi Silinga, the former CEO of Coega, will join Transnet as the CEP of the National Ports Authority.
The company offered a brutally frank assessment of what caused state capture, attributing the phenomenon to a “breakdown in internal controls, especially in the procurement space.”
The company also pointed to “deliberate intervention by the proponents of state capture to create an enabling environment to profit commercially,” as well as a “culture of fear.”
To deal with it, the company has initiated a board led clean-up process which, started in February 2019 and has seem the company make representations to Zondo Commission of enquiry into State Capture, the Special Investigation Unit (SIU) has begun with criminal investigations and in March made disciplinary referrals to Transnet has taken disciplinary action against executives and senior managers implicated in wrong doing.
In the last financial year, the company has recovered R711 million in irregular expenditure and has served summons to erstwhile employees for the recovery of funds.
In August, the former group executive for Transnet Capital Projects, Herbert Msagala, had properties, including farms and 35 cars, seized by the SIU.
The top three layers of executive management have all undergone lifestyle audits with the rest of the company set to follow suit while and Ethics and Integrity Unit has been established.
The Board has been removed from procurement decisions through the disbandment of the Disposal and Acquisition Committee and replaced instead with a finance and investment committee, where the board offers strategic oversight and guidance.
The company is also in the process of settling a range of legal matters, including the infamous 1064 locomotive, through which the Gupta family and associates siphoned off millions of rands out of Transnet.
Transnet has reached a settlement with Trillian and has suspended the contract with China South Rail and China North Rail, the company says this suspension may need to be lifted and CSR undertakes maintenance works of TFR fleet.
In the year to March last year, the company delivered revenue of R 74 billion, the highest in the preceding five years.
Earnings stood at R 33 billion while the company spent R18 billion in capital investment.
Transnet total borrowings stood at R 127 billion with gearing of 44% and only about R3.5 billion are covered by government guarantees for debt raised in 1998.
Derby says the company will negotiate all new debt to have payments deferred for three years to ease pressure on cash flows and management is looking to reduce debt by 15% over the next four years.
The company says it has already felt the devastating impact of the lockdown in the year so far with April, the first month of the full lockdown, being the hardest hit, where they achieved only 60% of planned revenue.
Derby says they are now seeing recovery with easing of the lock down.
Transnet has seen a general slump in commodity prices and expects prices to remain subdues despite some recovery.
The company expects oil to average $35 a barrel this year while container volumes are only expected to recover to pre-COVID levels at the end of 2022.
(COMPILED BY INSIDE POLITICS STAFF)