Transnet has relaxed its procurement regime in an effort to make the company more agile and responsive to urgent needs.
The shift allows the group to enter into long-term agreements with original equipment manufacturers (OEMs) and customers who can step in faster than if they went through traditional procurement routes.
The new procurement policy is active this month. Transnet told its bondholders on Tuesday that amendments to its supply chain management (SCM) policy and preferential procurement policy aimed to boost efficiency in its procurement processes.
"The SCM policy will differentiate between procurement of goods and services for the normal day-to-day administration of Transnet and the procurement of goods and services with direct impact on revenue generation."
The move could be seen as a sign of the government’s commitment to revitalise Transnet, whose faltering operations have throttled the economy and weighed on business confidence. At the same time, it may open the door to corrupt practices at the state-owned company that became the epicentre of the looting frenzy under state capture.
Transnet has long flagged the onerous Public Finance Management Act procurement processes as one of the roadblocks in acquiring essential equipment quickly.
One of the newly inserted clauses in the amended SCM policy deals with identifying "critical suppliers such as OEMs, and other strategic suppliers" and entering into long-term agreements.
"This will support the supply, maintenance, upgrading and refurbishment of critical infrastructure, rail network, equipment and components to cover the life cycle of the operations assets that are utilised for delivery to customers," reads the amendment.
"These agreements and partnerships will ensure standardisation of the operations [sic] equipment and components, open opportunities for cost savings through leveraging of the economies of scale, transformation objectives and optimisation of resources which will result in value money."
The trade, industry & competition department in June threw SA’s ailing port and rail network a lifeline in proposals that would see industry players enter into agreements that are otherwise prohibited under the country’s competition regime.
The department warned that the proposed exemptions did not entail fixing selling prices, resale price maintenance and collusive tendering.
‘Intervention arrangements’
One of the key amendments announced on Tuesday will allow Transnet to enter into joint "intervention arrangements" with customers to "pull together and combine resources and capabilities to address any Transnet procurement challenges" that may directly affect customers in a particular region.
"A customer buyback/step-in clause in a commercial agreement between Transnet and the customer or group of customers is in the form of a joint intervention arrangement that should be considered for situations where the customer may be in a better position to supply the goods or services to Transnet quicker than Transnet internal procurement processes, particularly in situations where delays in procurement will lead to Transnet not being able to meet its commercial contractual commitments."
One of the major operational issues affecting Transnet performance over the past five years was lack of locomotive spare parts. Since 2019, Transnet has struggled to get a service provider to supply parts for some of the trains bought in a controversial deal for 1,064 locomotives.
As a result, about 200 locomotives remain idle due to a standoff with the Chinese Railway Rolling Stock Corporation (CRRC), which refuses to supply parts due to a dispute with the SA Revenue Service.
The impasse saw coal miners come together under the banner of the Richards Bay Coal Terminal to help Transnet Freight Rail (TFR) procure some of the spare parts. The CRRC locomotives were meant for use on the north, northeast and Cape corridors, which account for about 50% of TFR revenue and support the primary exports of coal, chrome and manganese miners.
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