Songezo Zibi, chair of the standing committee on public accounts, has called on the government of national unity to resolve capital funding shortfalls at rail agency Prasa, ports operator Transnet and state-owned airline SAA amounting to about R220bn.
Zibi’s remarks followed a committee briefing by transport minister Barbara Creecy on the governance, performance, financial sustainability, potential policy and legislative changes at SAA, the Passenger Rail Agency SA (Prasa) and Transnet.
Prasa required a R120bn cash injection to get back to the pre-Covid-19 operational levels, while Transnet needed an about R100bn cash investment to reach a healthy fiscal position.
The standing committee on public accounts was informed that though SAA was now debt-free and would not be requesting additional funding from government, the state-owned airline required a cash injection investment through an equity share partner to reach a healthy financial state.
“The impact of funding challenges is profound. For Prasa commuters it means far fewer trains can run on the same line because there is no electronic signalling equipment, which can double the time it takes to complete each journey,” Zibi said.
“Transnet’s problems mean tonnages have dropped precipitously, leading to penalties, delays at ports and extensive damage to the road network resulting from increasing trucking volumes. The government needs to respond and act with urgency, and ensure the funding is available.”
During her briefing, Creecy patted herself on the back, saying since her appointment into the crucial portfolio she had begun several processes to ensure the department’s entities fulfil their core mandates and are able to account for their expenditure.
The entities include rail operator Prasa, ports operator Transnet, SAA and the Road Accident Fund.
The transport ministry is important to SA’s development agenda as the minister must see to it the roads, rail, air and sea network are conducive to the importing and exporting of goods and services to help contribute to the country’s economic development.
Regarding Prasa, the minister said the rail agency had begun recovery of its rail and station network infrastructure that had been severely affected by theft and vandalism during the Covid-19 pandemic.
“A total of 31 of 40 priority lines have been returned to service, with the work of reinstating signalling on these lines ongoing. This will ensure that the frequency of services on the line is increased, with the ultimate aim of reaching the target of 600-million annual passenger trips,” Creecy said.
In September, the auditor-general called on the board of Prasa, which spent R3.8bn on irregular expenditure, to fast-track its infrastructure modernisation programme to ensure effective deployment of new trains to improve service delivery.
Prasa received government subsidies from the department of transport amounting to R7.2bn for operations and R12.3bn for capital expenditure during 2022/23.
The rail agency, which is one of the many state-owned enterprises hollowed out by years of corruption and mismanagement linked to state capture, received a qualified audit opinion in 2022/23.
Creecy said Prasa was working on filling outstanding vacancies in executive positions.
Some of the vacant executive posts include that of group CFO, chief information officer, CEO for Prasa Rail and CEO for Prasa corporate real estate solutions.
“The entity received a qualified audit finding from the auditor-general for the last financial year, which noted improvements compared to recent years, with 87% of performance targets met,” the minister noted.
Creecy said the continued sustainability and success of Transnet was “perhaps the greatest factor in ensuring that our economy stabilises and promotes inclusive growth that creates work for the many millions in our country who need it”.
“Transnet’s current recovery plan aims to achieve the movement of 190-million tonnes of freight per annum by the end of the 2025/26 financial year. During the course of 2024 the entity has failed to reach its own targets on recovery of freight volumes. In the 2023/24 financial year Transnet achieved only 28% of its targets,” she said.
Creecy bemoaned the fact that “our ports are underperforming”, saying: “The industry standard is 25-30 crane moves per hour. Currently our ports are performing at less than 20 moves per hour. This results in long waiting times for vessels.”
The minister said Transnet’s annual financial statements for 2023/24 reflect an improvement on the previous year as revenue generated improved 11.6% to R76.7bn, while cash generated from operations improved 13.6% to R28.8bn.
“Transnet has debt (R137bn) plus debt service costs, which means it has R14bn of limited funds for maintenance. National Treasury has approved a borrowing facility of R47bn during the 2024/25 Budget statement. This is to facilitate capex projects that will increase the operational efficiency and the income of Transnet which in turn will allow for the formation of capital to repay the debt.”
Creecy said SAA’s audit of the 2023/24 financial statements had started and was progressing according to plan: “This process is anticipated to be finalised by February 2025.”
The airline received R48.3bn in government bailouts from 2017/18 to 2022/23. It was slapped with disclaimed audit opinions by the auditor-general from 2018/19 to 2021/22.
It was placed in business rescue on December 5 2019, mainly because of operational instabilities, pressure on the fiscus, lack of funding and withdrawal of services by key service providers. It exited the rescue process on April 30 2021.
In 2018 to 2022 irregular expenditure increased from R22bn to R44.5bn, while fruitless and wasteful expenditure increased from R24.8m to R207.3m over the four-year period.
“Since exiting business rescue SAA has repositioned itself as a leading national carrier taking advantage of its ability to provide long-haul and intercontinental flights services and leveraging its partnerships with other airlines,” Creecy said.
“The entity currently has 16 aircraft operating on three domestic, 10 regional and two international routes.”
She said that since her appointment, she had begun a number of processes as a shareholder representative “to ensure that the department’s entities are fulfilling their core mandates and able to account for their expenditure”.
These include a process of revising the department’s strategic plans and those of its entities “to ensure they are fit for purpose and align with the priorities of the seventh administration”.
The others pertained to initiating a process to account for the expenditure of infrastructure grants disbursed to provinces and municipalities, a yearly review of the audit charter of the entities, accelerating the filling of key vacancies, enhancing IT controls and ensuring that all entities table their annual reports to parliament on time.
Update: October 22 2024
This article has been updated with new information.
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