Today, with some fanfare, the presidency will introduce a roadmap for Transnet’s turnaround. From what I’ve seen, there’s a lot in it that’s good. It really is a plan to fix a critical national asset, sweat it properly and develop it for the future.
However, if we’re not very watchful, its rational approach and focus on opening the infrastructure for all to use — specifically the private sector — could be what causes it to fail.
There is good news. The new management at Transnet seem to be good people. Chair Andile Sangqu, Russell Baatjies at Transnet Freight Rail and acting group CEO Michelle Phillips all have good reputations and are committed to the roadmap and transparency.
There has been broad consultation on the development of the Transnet plan, driven by Operation Vulindlela in the presidency, with the mines and manufacturers, and with organised labour.
Also, it’s a good plan. It’s good to remove Transnet’s monopoly over freight rail and open it to competition and new operators, and to run Transnet a bit more like the old SA National Roads Agency Limited (Sanral) and a bit less like an asylum.
The problems, though, are multitudinous and complicated. The situation at Transnet is very bad indeed, and it’s important to remember that this is what state capture left us, brought to you by the political party now trying to fix it. That is suboptimal.
It’s good to remove Transnet’s monopoly over freight rail and open it to competition and new operators, and to run Transnet a bit more like the old SA National Roads Agency and a bit less like an asylum.
Let me quote the roadmap to give you some sense of the mess: “Volumes transported on the rail network as a whole declined from 226-million tonnes (Mt) in 2017/18 to just 149.5 Mt in 2022/23.”
It goes on: “While the performance of SA’s ports has improved in recent years, the container terminals at the Ports of Durban and Ngqura were ranked 365th and 361st respectively out of 370 ports worldwide by the World Bank in 2022.
“This underperformance has left SA unable to fully participate in recent commodity price booms. Since 2010 SA has forfeited an estimated $26.7bn in iron ore and coal export trade.”
That’s half-a-trillion bucks in today’s money, by the way.
It is eye-wateringly bad, but strangely it is only the spectre of swathes of job losses in mining, as opposed to the fiscal meteor hurtling towards us, that has spurred the government to act. The proximity of the election has injected an additional sense of urgency. But it’s probably too late to save thousands of jobs.
Then there is a debt pile of something like R130bn. We reported last Friday that Transnet is looking to the National Treasury for some kind of debt transfer, like what is happening at Eskom. That’s bad for the Treasury and for people who need government services.
However, the bigger issue is that Transnet shouldn’t be scratching around at Treasury for R20bn or R40bn. It ought to be approaching a development bank. The question is, why isn’t it? A good plan for Transnet — a clear view of the deal sheet, underwritten by the National Treasury — would easily attract R100bn in development finance to fix the railways.
It can only mean the problem lies with the National Treasury, and I think the issue must be trust — trust that there is political will to execute a contractual plan designed around the new roadmap and new debt.
That brings me, weirdly, to the Energy Regulation Amendment Act, the peg upon which the hopes of the private sector have been hung for a secure energy future. It is dead in the water (in this administration at least) and, to be cynical, seems to have been designed as a fail-safe by those in government who do not support the liberalisation of the energy market — namely the department of mineral resources & energy.
This is why the Economic Regulation of Transport Bill, currently working its way through parliament, is potentially a problem. It is critical that the new-look Transnet gets out of the corridors of the presidency and into proper parliamentary oversight, but this can be done without a whole new bill, within the boundaries of existing legislation.
The presidency wants to get the newly formed infrastructure manager — an independent rail regulator with its own board — into the department of transport, and the assets themselves into the new state-owned entity (SOE) holding company.
A new bill could be used by those ideologically opposed to the involvement of the private sector in the railways to slow things down, and offer opportunities to water down the roadmap by vested interests, or worse.
We know the ANC is fractious and divided on this, and the bill could be a political mechanism to hold the ANC’s varying factions, labour and other parties together for the election. It will not help deliver the roadmap, and it certainly could scupper it. Perhaps that’s why Transnet is talking to the Treasury, not the banks.
A lot of good progress is being made to develop the infrastructure manager, and we may be surprised by the extent of it when we see it, but there is a problem of capacity at the department of transport to run a regulator of such complexity.
There are good people in the department, but they are not even close to being ready for the scale and importance of this work. Our economy hangs on their ability to get this right, and nobody in government seems to be worried about it.
The timelines in the Transnet roadmap need to be regarded with the greatest scepticism. They are truly fantastical and will not happen, but it doesn’t mean the plan is bad. Fixing Transnet is, in hindsight, a more important job than fixing Eskom. It has been a quiet and insidious cancer in our economy, and now we are sick.
The roadmap may be too late, but it is not too little. We still need to act with haste, and there is nothing rational stopping us from doing so. Compared to Eskom, a turnaround at Transnet is simple. The hurdles are political.
• Parker is Business Day editor-in-chief.
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