The leadership crisis at state logistics company Transnet has deepened, with the head of the rail division, Siza Mzimela, tendering her resignation on Thursday, days after the abrupt departure of CEO Portia Derby and CFO Nonkululeko Dlamini last week.
The exit of the trio from Transnet’s C-suite comes as the drive to reform the organisation gains momentum and as the board prepares to present a performance turnaround strategy to public enterprises minister Pravin Gordhan at the end of October.
The turnaround plan includes a review of skills and management, which has been blamed for the mining industry’s R51bn loss in exports in 2022.
The beleaguered state-owned company has faced myriad crises, including inefficiencies, theft, vandalism and a deteriorating financial performance, with a devastating effect on the economy.
Under Mzimela, Transnet Freight Rail (TFR) has been blamed for an unreliable rail network, which has forced big business to divert the transport of goods to the more expensive road network, diminishing SA’s export volumes.
The high-profile resignations at Transnet have been broadly welcomed, particularly by big business, which has long been lobbying for an overhaul of its management. The Minerals Council SA, the Durban Chamber of Commerce and labour unions have all called for the dismissal of its executives.
Craig Ivy, head of listed credit at Futuregrowth, one of SA’s biggest institutional bond investors, said leadership changes at Transnet are long overdue.
“Given that over the years we have observed chronic underperformance from Transnet, the leadership changes were not unexpected. We hope that the incoming leadership will have extensive and suitable sector experience and will receive the necessary support from various government institutions to resolve Transnet’s many issues.”
In the wake of the departure of three senior leaders, Pepi Silinga, CEO of Transnet’s National Ports Authority, on Thursday morning sent an unsolicited text to staff assuring them he would remain at the helm of the ports authority, adding his detractors are fuelling rumours of his resignation.
“I am advised that some unnamed sources are peddling rumours in the media of my apparent resignation. There is no truth to the rumour, save to possibly betray the wishes of the detractors. The myth has [been] dispelled [through] the appropriate Transnet authorities,” he wrote in a text to staff.
Business Day understands that the Transnet board held high-level meetings this week to chart a way forward.
TFR, which Mzimela has led since 2020, is the company’s largest division, contributing almost 50% of Transnet’s revenue. It is also the most challenging division as it battles the escalation of theft and vandalism of its infrastructure as well as the lack of locomotives.
The rail corridors that were under Mzimela’s stewardship are essential to transport SA’s imports and exports, and inefficiencies in its network threaten the agricultural, retail, mining and automotive sectors.
Its financial position has continued to deteriorate. Transnet’s R5.7bn loss for the 2022/23 financial year was largely attributed to TFR’s worsening performance. Rail volumes dropped 13.6% from 173-million tonnes in 2021/22 to 149-million tonnes in 2022/23.
Transnet has appointed Russell Baatjies to take over from Mzimela as acting CEO from November 1. Michelle Phillips, CEO of Transnet Pipelines, will replace Derby in an acting capacity until a permanent replacement is found, while Hlengiwe Makhathini will act as CFO in Dlamini’s place.
Mxolisi Mgojo, former executive and head of the national logistics crisis committee, told Business Day that a big intervention to help Transnet is imminent. This includes a joint effort by Transnet, the government and the private sector to set up a war room for real-time oversight of the rail network.
“We need visibility of the supply chain. When talking about maintenance and planning, you need total visibility of the system 24 hours a day so we can look at what is working and not working,” Mgojo said.
The Minerals Council noted Mzimela’s resignation, saying it fully supports Mgojo’s efforts.
“We must reiterate that it is imperative that the private sector is given greater access to participation in operating trains and ports as a matter of urgency. The Minerals Council will continue to engage the Transnet board and new executives when they are appointed.
“Mining accounts for 80% of TFR’s revenue. The mining industry lost revenue of R51bn in 2022 when delivered tonnages to port were measured against targeted volumes,” the council said in a statement.
SA Transport and Allied Workers Union spokesperson Amanda Tshemese said Mzimela “was given so many tasks, but couldn’t complete a single one of those because she didn’t know anything about the division. We are hoping that whoever will be appointed will come with extensive knowledge of the TFR to turn around and stick to the plan.”
Challenges
During an address to mining companies on Thursday, Mzimela spoke about some of the challenges that have contributed to TFR’s drop in performance. These included “significant underinvestment” in maintenance, resulting in the quality of railways deteriorating.
“The damage may not be as visible on rails as they are on roads, but if you underinvest in maintenance you end up with bumps on the rails, which forces us to slow down trains from 80km/h to 30km/h.”
Mzimela said an increase in “climate- and weather-related incidents” forced the company to divert funding meant for routine maintenance to “emergency unforeseen maintenance”.
TFR spent R4.7bn on repairs on climate- and weather-related incidents in the past year, Mzimela said.
“Going forward, [Transnet] will need to raise significant funding to undertake the backlog in infrastructure work. In the meantime, the only thing we can do is to prioritise projects that can provide immediate value.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.