In the decade leading up to 2013, Transnet tried to conduct itself like a listed company. After emerging from a multibillion-rand loss it sought to observe a “closed period” — meaning no release of price-sensitive information through media interviews — ahead of releasing financial results, which were always on time.
Nowadays, however, this pretence has been dropped. Instead, the state-owned transport and freight logistics company conducts itself like any of the financially distressed state-owned enterprises (SOEs). For the first time since it unbundled SAA and the Passenger Rail Agency of SA (Prasa), it received a fiscal bailout last October to plug holes.
Like other SOEs, its guarantees are no longer implicit, as they were in the 2000s, but have become explicit as financial weaknesses grow.
All its rail lines are moving far less cargo than they did decades ago. Management, which came in to clean up state capture, blames this on the legacy of how its predecessors repurposed the monopoly to benefit a few, cable theft and a lack of spares to keep locomotives running.
These are valid reasons. But they are often conveniently overstated. Most, if not all, of those who orchestrated state capture have been hounded out of Transnet, and the so-called masterminds are facing criminal prosecution. All of Transnet’s divisions are now headed by new executives with no history with the company.
Once management cancelled the tender with CRRC, the Chinese SOE that was supplying the bulk of the 1,064 diesel and electric locomotives, it should have thought about how the trains it had taken delivery of would be fixed. Attempts by management and its depleted board have failed to resolve the dispute with the Chinese.
More concerning, disclosures that Transnet is preparing for another locomotive acquisition tender suggest that the political intervention by public enterprises minister Pravin Gordhan has failed to resolve the dispute.
Meanwhile, a perfect storm of dark clouds is hovering ominously over Transnet. Two factors are driving it: first, Transnet is suffering from serious operational and financial weaknesses; and second, its interim board, made up of six nonexecutive directors, does not give confidence that it can provide serious oversight over the executive during this critical time.
Apart from improving efficiencies, it needs to allow the private sector into its rail and ports infrastructure — tasks that require board supervision.
The current leadership speaks more and eloquently about the past and factors outside its control, and less articulately about its share of the blame for the deepening crisis. As well as the vacancies on the board, there is little evidence that Transnet is able to attract top-class talent to fill the many vacancies it has. And this has nothing to do with state capture.
Worse, Transnet, which has listed bonds to fund capital expenditure, has sought an exemption to disclose the scale of irregular, fruitless and wasteful expenditure as this will make it less attractive to attract new buyers.
The collapse of operational efficiencies and weak governance are enough to scare away investors as it seeks to refinance maturing debt.
Instead of secrecy, Transnet should disclose more, be less defensive about its weaknesses, accept help from business and the government should immediately fill the board vacancies to provide effective supervision of the executive.
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