Transnet CEO Portia Derby has called on the government to reconsider the state’s procurement regime for state-owned enterprises (SOEs) in an effort to ease requirements for the entities to procure goods and services speedily.
Derby, speaking at the Black Business Council (BBC) annual summit on Thursday, says the government should rather consider the introduction of sector specific licensing requirements for procurement which would level the playing field between SOEs and the private sector.
“With the deregulation of electricity and transport, if we do not build towards sector licensing ... you will have no state-owned enterprises because the private sector will outcompete us and you will have no manufacturing because you would’ve left the private sector to do whatever they have to do because trust me they will be buying from the cheapest markets,” Derby says.
“You do need constant vigilance and activism.”
Until recently, Derby has maintained Transnet was unable to enter into materials, reliability and spares agreements with third parties because of regulations set out in the Public Finance Management Act which prevents SOEs from entering into long-term agreements with suppliers or manufacturers without providing evidence of funds.
The regulations previously led to Transnet being unable to regularly maintain its infrastructure, which is used by its customers to transport goods from rail to port.
“If you do not have the budget ... you cannot get into a long-term agreement. These agreements make sense if they are 10 or 15 years because you tie them up to the life of the asset. And because we couldn’t do that it means that long lead items ... we could only buy when we could point to the money,” Derby says.
“You can’t run a company like that ... by having these agreements and shifting towards a maintenance culture that says that we need to have our locos at 92% capacity ... the chances of getting an order on a more frequent basis is somewhat enhanced because now we are able to have these long-term agreements.
Transnet’s procurement policies have been under scrutiny in recent years, not least because of the four controversial contracts worth R54.5bn for the acquisition of more than 1,000 locomotives.
Transnet signed the multibillion-rand contracts, one of the largest procurement initiatives by a SOE, for the acquisition of the locomotives in March 2014. The deal was signed with China Railway Rolling Stock Corporation (CRRC) as part of a strategy to renew Transnet’s rolling stock.
The initial estimated price of the locomotives tender was R38.6bn but it soon shot up to R54.5bn amid claims of corruption in awarding the contracts.
The tender was suspended by Transnet without the entity receiving the remaining spare parts and components for its locomotives from CRRC, leaving about 120 of its locomotives idle.
Successive interventions by Transnet and recently by public enterprises minister Pravin Gordhan to resolve the impasse have failed.
The tender for the Chinese spare parts and components was only meant to be for four years which is “unsustainable”, Derby says, because at the end of the period there was a collapse in demand.
“What we have to do is to start industrialising based on a maintenance programme because maintenance is something that has to be done regularly,” she said.
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