The Minerals Council SA has called for the axing of two Transnet leaders, including CEO Portia Derby, citing the unfolding crisis at the state-owned rail and port operator and the “catastrophic impact” it has currently on the mining industry.
In a confidential letter dated December 4 2022, the Minerals Council — which speaks on behalf of the country’s biggest mining companies, which are also Transnet’s biggest clients — said the worsening operational performance at Transnet demanded urgent action.
“The bulk commodity mining companies that are members of the Minerals Council are now demanding urgent action on this crisis, as it is now posing an existential crisis for Transnet and for the mining companies,” the letter, signed by Nolitha Fakude, the president of Minerals Council, reads.
“For more than 24 months we have given the benefit of the doubt to the Transnet management team, who have aptly demonstrated, through several bizarre decisions and statements and in particular the ongoing tragic decline in the performance of Transnet, that they cannot resolve the crisis and are not capable of turning around the performance.
“We are insisting on the critical need for urgent change.”
The council’s letter, addressed to Transnet chair Popo Molefe, was first reported by News24. It came as mining companies ranging from Thungela Resources to Kumba Iron Ore count billions of rand in lost revenue stemming from inefficiencies at Transnet.
The utility’s sprawling supply chain infrastructure makes it a crucial player in the economy.
In the letter, Fakude called for the sacking of Derby, who took over as CEO in 2020 — inheriting a company described as having been at the heart of the state capture project. Fakude also urged the board of Transnet to remove Sizakele Mzimela, who heads up Transnet’s freight rail division.
Minerals Council “members have lost confidence in the existing Transnet leadership team and we do not think that they have the capability to turn around the current crisis situation”, the business lobby group said in the letter.
Other urgent interventions the Minerals Council outlined in the document include drafting in industry experts to work with the board of Transnet through a steering committee to help stabilise the situation in each of the four bulk commodity lines.
“There is a critical shortage of suitably skilled technical leaders in each of the rail corridors. The industry is prepared to parachute in real capacity to assist in resolving the short-term crisis issues, this will include previous experts who were retrenched by Transnet. This steering committee would meet regularly to drive, monitor and evaluate progress,” the letter read.
‘War rooms’
It also proposed the establishment of “war rooms” for each rail corridor reporting to the steering committee.
These will comprise experts from the industry and Transnet, and will take urgent short-term steps to address critical constraints on performance.
In December, Business Day reported Transnet is facing two bond repayments coming due in the next two months that are worth a combined R1.088bn.
“We cannot see how the company will avoid breaching its debt covenants early in 2023, at which stage the directors of Transnet will need to place the company into liquidation or risk being sued for trading recklessly,” the Minerals Council said in the letter.
Transnet declined to comment but it said it was recovering from cable theft, infrastructure vandalism and widespread corruption under the state capture project.
“It has resulted in ... the unavailability of locomotives and spare parts ... These are challenges Transnet has been upfront about, and the company is implementing measures to address these,” it said.
“Transnet has a strong working relationship with the Minerals Council, and is in regular discussion with the mining sector, and other customers, around suggestions for ongoing improvements to our service.”
The Minerals Council also declined to comment on the contents of the letter but emphasised that it was working in “close collaboration and in a spirit of co-operation with the Transnet board and management to urgently resolve deep-seated problems and constraints in the rail and port logistics to the benefit of bulk commodity companies, Transnet and the fiscus”.
About two weeks after the letter landed on Molefe’s desk, Transnet’s board and leaders of the Minerals Council issued a joint statement saying they had agreed to set up collaborative structures to help stabilise and improve the throughput of SA’s rail and ports systems.
With Garth Theunissen
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