Transnet has pushed back its plans to issue a tender for the procurement of new locomotives by a month as it has yet to finalise internal legal and governance processes related to the tender.
The procurement is key to tackling Transnet’s shortage of locomotives, which has been flagged by mining companies as having contributed to lost revenue to the tune of R35bn in 2021 from contracted coal, iron ore and chrome volumes that could not reach ports.
Initially scheduled to be issued by the end of July, the tender for the locomotives will now be issued in August, CEO Portia Derby told Business Day. She declined to comment on the size of the contract.
“The business case, financial models [have] been done, but now we have to go through the governance processes,” Derby said on the sidelines of the company’s presentation of annual results, which showed it swung into a R5bn profit.
One of the issues Transnet needs to iron out before it issues the tender is to ensure that invitation to tender is in line with the government’s industrial policy goals. Under procurement guidelines, the government wants 55% local content in the manufacturing of diesel-powered trains and 60% for electrical locomotives.
Transnet’s dismal role as a crucial player in the economy came after it suspended and challenged in court R50bn-plus contracts with companies such as China South Rail to supply more than 1,000 locomotives on grounds that they were awarded on the basis of a flawed commercial strategy and that Treasury instructions were deliberately ignored.
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The suspension of the 2014 contract, one of the largest single procurement events undertaken by a state-owned company, has left the ports and container terminals operator unable to use 300 of the locomotives.
Derby was speaking shortly after the company issued an earnings report that showed it returned to the black, booking R5bn earnings after suffering a R8.7bn loss in the previous year.
The recovery was boosted largely by the revaluation of its property portfolio — an accounting exercise that helped it put through R11bn to its income statement as it grappled with long-standing challenges such as fire-related disruptions at the ports, cable theft and vandalism.
“If we don’t value our assets correctly, when we sell it below value who does that benefit? The re-evaluation of our assets means we would have them at the correct value [and] it helps us with our balance sheet and it gets reflected on the income statement,” Derby said.
Audit
The results for the year to the end of March also showed that it secured its first unqualified audit in four years, a feat achieved by getting the Treasury to ringfence irregular expenditure from the state-capture era.
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