As Transnet gets ready to release its long-awaited financial results, the journey to this point has been one marked by numerous challenges and sharp learning curves for CEO Portia Derby, who joined the organisation in February 2020.
After extensive delays, the state-owned logistics company will release its results for the year ended in March 2021 on Friday, following a drawn-out process with the auditor-general.
The trouble with the books was not entirely unanticipated for Derby, a seasoned businessperson and a former public servant. As she told Business Day in an exclusive interview: “I didn’t know what the bomb would look like when it exploded, but I knew that it would.”
As Transnet began to prepare its financial statements for the year in question, Derby learnt that the sprawling parastatal’s audits in the past have, rather inexplicably, been run fundamentally from the centre. “I don’t know how it is possible,” she says, noting that the company consisted of six distinct businesses and employed a total of 56,000 people.
In 2021, things were done differently, with active support from the operating division. And while Derby knew it simply could not be smooth sailing ahead, she was alerted to only one material issue. “We were all in cloud-cuckoo-land at the time” she says — until October that is when the audit was closing and Derby was, for the first time, presented with a “shocking” 400 pages of supply chain issues. The result has been a qualified audit and extensive back and forth with the auditor-general.
While the waters appear choppy inside the organisation, the troubles are also observed from the outside as the company continues to grab headlines for all the wrong reasons as severe operational issues affect its customers, and the SA economy.
Transnet has been beset with problems over the reporting period which will be presented on Friday, including major operational and security issues on its rail network which has continued to make headlines as it’s caused SA miners to lose out on billions in export revenues amid a global commodity price boom.
Beyond March, rail has continued to perform poorly as certain commodity prices creep ever-higher, while the July riots and a subsequent cyberattack severely impacted Transnet operations. Recent fires at its Richards Bay terminal has heaped further pain on the company and its customers.
Derby says she is comfortable with Transnet’s strategic direction and progress thereon. “For me, where we are at now is you are getting down to the brass tacks. The real wake-up-in-the-morning, management issues and supervisory issues.”
While many of the problems facing parastatals, including Transnet, have been attributed to the state capture years, Derby says this was a relatively small period in the company’s history and could not be blamed for what in fact were legacy issues. What state capture did however do was disempower decision-makers in the organisation — causing lasting problems, which have manifested in operational issues, and which the entity is grappling with now.
In a bid to get Transnet’s wage bill — which accounts for 63% of revenue — down, the company has granted voluntary severance packages to almost 3,000 employees. Labour and customers alike are concerned this will cause critical skills to leave the organisation.
Derby’s view is that it’s better that those who are emotionally disengaged are better off leaving. The organisation needs the right people, she says — those “not worried about how much money they will make or what their bonus is, but rather people who take pride when a vessel goes out on time”. Where some employees who were not disengaged but considered leaving the organisation, Transnet has been able to consult them and in many cases to keep on board, she said.
Like with the preparation of financial statements under Derby’s leadership, there is a concerted effort to decentralise other aspects of the organisation, like moving managers out of head office and stationing them in the field.
Despite criticisms from organised labour that Derby and her executive are costing the company millions more per year, with little yet to show for it, she remains confident in, and reliant, on her leadership team.
Without them attempting a turnaround of Transnet would never have worked, she says. “It’s too big, it’s too complex, there are a lot of processes and it really needs a number of hands.”
Derby is aware continuity is a major challenge facing parastatals. Indeed the likes of Eskom have had new management come in with vigour several times, only to lose hope as they get to grips with the extent of the rot and eventually exit, making room for the new, rosy-eyed executives.
Derby does not foresee Transnet falling into a similar cycle. “Strategy requires time and implementation is not an overnight success, so to my mind I have 13 years until retirement,” she says. “I can stay here until I am 60, I am good for that.”
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