- Transnet CEO Portia Derby said Transnet was still a long way from a permanent improvement in its financial situation.
- This has been further complicated by vandalism and theft of cables and recent cybersecurity breaches.
- Transnet chairman Popo Molefe said the R54 billion purchase of locomotive 1064 was further crippling the entity’s financial position.
Transnet Group CEO Portia Derby told Parliament’s portfolio committee on state-owned enterprises that with the moderate national and regional economic outlook and structural challenges of Transnet, the public entity did not expect to regain power. profitability only at the end of 2022.
Derby led a delegation from Transnet to brief the committee during the entity’s first parliamentary briefing to the legislature since the release of its annual report and financial statements in October, where it emerged that Transnet had suffered a loss net of R 8.4 billion for the year ended. in March 2021.
This is the first loss Transnet has recorded in years, and although the rail and logistics giant remains the only state-owned company to fund its own operating capital, even Transnet management fears the capture state, its previous management, vandalism and Covid-19 jeopardize its recovery.
Derby told the committee that improving performance and efficiency will be crucial in the years to come and that Transnet is still a long way from permanently improving its financial situation.
It was further complicated by vandalism and theft of cables, she said.
Still in trouble
“It’s been a tough year. There’s no doubt about it, given the impact of the pandemic. Despite that, we’ve won to some extent. We’re still a struggling business. There are a lot of things we do. have to do to get Transnet back to stable ground and is profitable again, “said Derby.
She said internal and external issues, including the ongoing Covid-19 pandemic and its impact on all national and regional economic activity, are expected to continue to weigh on the entity for the foreseeable future.
“The second half of 2022, maybe 2023, is when we’ll start to see some improvement. With the pace at which vaccination is taking place in South Africa and the continent, and the continued spread of omicron, the pandemic is expected to continue to restrict economic activity and performance, ”Derby said.
Derby further said the council was paying attention to security, following vandalism, cyber attacks and a recent attack on truck drivers in Mooi River.
“Devastating” impact of state capture
Transnet board chairman Popo Molefe said spending on major purchases meant there had not been adequate rehabilitation of the infrastructure network on which the new locomotives were supposed to run.
There had also been decades of neglect of the system, Molefe said.
“The impact of the state capture on Transnet has been devastating. This will be evident in our annual finances and the irregularities therein. It also becomes evident in our operational performance as it relates to the way we contracted when we bought locomotives and equipment. “Molefe said.
He said the controversial purchase of 1,064 locomotives under the leadership of former CEO Brian Molefe left Transnet in dire straits as the related working expenses in subsequent years were deemed inappropriate.
In addition, they could not be supported by the current rail network.
“We met with the National Treasury to sort out these issues because all of these challenges mean we can’t move trains when they need to be moved. The other problem is the criminal activity to which our infrastructure is exposed. In order for us to function properly, we need to harness all the collective energy and wisdom to meet these challenges, ”Molefe said.
Transnet and the Special Investigation Unit filed court documents in March to have said locomotive contract with China South Rail canceled.
Transnet “very exposed”
The Managing Director of Public Enterprises, Kgathatso Tlhakudi, said Transnet was a victim of the current economic cycle of the country and the region.
“It has been a difficult year, as you will see. Transnet is very exposed to the economic cycle, the pandemic and some of the challenges that we have encountered regarding the security of our infrastructure. It has had a direct impact on the performance of the business, ”Tlhakudi said.
He said the role of historical malfeasance could neither be underestimated nor overestimated in the challenges facing Transnet.
“The burden of the past should not continue to slow down performance in attendance. But we are confident that a good baseline has been established for improving the group’s performance in the future,” Tlhakudi said.
Committee chairman Khaya Magaxa said the committee would also like the Transnet delegation to tell the committee about the entity’s layoff plans and cyber attacks it suffered earlier this year.
“We would like to have an update on what happened and to what extent it was addressed. There will also be a 10% layoff of employees at Transnet. We hope you put us on the same page. wave in terms of the contributing factors behind that, ”Magaxa said.
Speaking on the malfeasance of previous attacks on Transnet’s current financial position, Auditor General Tsakani Maluleke said in her audit report of national and provincial departments and entities that R16.9 billion or 55% of irregular spending of Transnet had been initiated in previous years, but had been identified and disclosed. in the current year.
“About R 37 billion of Transnet’s amount relates to the purchase of 1,064 locomotives which has been found to be irregular.
“These transactions are the subject of ongoing investigations and legal proceedings, the outcome of which will determine the appropriate measures to be implemented to deal with the irregular expenditure, including the recovery of losses suffered, if any, of the measures disciplinary or apologies if there are good reasons to do so, ”said Maluleke.
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