The decision by Portia Derby and Nonkululeko Dlamini — respectively Transnet’s CEO and CFO — to leave the freight logistics company has been in the making for months now. The new Transnet board, under chair Andile Sangqu, has to be applauded for orchestrating these moves. Now the board needs to move speedily to stabilise the leadership ranks of the state-owned monopoly owner and operator of SA’s ports, pipelines and freight rail assets.
Derby, who was never a frontrunner in the selection process in 2020, has presided over the most astonishing deterioration of the parastatal’s performance — at vast cost to SA’s commodity producers and the country’s fiscus.
In the past three years volumes transported from mines to ports by Transnet Freight Rail (TFR), Transnet’s largest division, have dropped dramatically. Volumes have plunged from 173-million tonnes to 149-million tonnes, all in the middle of a commodities price boom. It’s the very picture of a missed opportunity.
Frustrated by Transnet’s inefficiencies, local producers have had to resort to trucking their produce on national roads, only to have to wait for days at ports characterised by some of the world’s highest prices and worst inefficiencies to offload their export-destined cargo.
Some of the reasons for Transnet’s failings were beyond Derby’s control. These include corruption, cable theft and the legacy of the state capture project that targeted Transnet and Eskom, the state power monopoly, for looting on an eye-watering scale.
Still, there was much that was within her control. Exiting the China Railway Rolling Stock contract — for the purchase and maintenance of the bulk of the 1,064 diesel and electric locomotives from the Chinese state-owned company — was a textbook example of a self-inflicted wound.
Supported by the previous board, Derby’s executive cancelled the contract, which was tainted by corruption. Efforts to regularise it, and release the spares required to fix hundreds of locomotives, failed spectacularly. Even a political intervention by Pravin Gordhan, the public enterprises minister whose department oversees Transnet, has yet to yield positive results.
The corporatisation of Transnet National Ports Authority into a 100%-owned Transnet subsidiary with its own board is behind schedule for no good reason. Furthermore, once Derby had ousted the executive team she inherited she went on to appoint her own lieutenants. Most of these — notably Sizakele Mzimela, CEO of TFR — have turned out to be a disappointment.
Months into the job, after completing the cull of the executive, Derby inexplicably retrenched hundreds of highly skilled people, revealing her failure to understand the complexity of Transnet’s operations. Some senior staff, such as widely respected human resources head (now administrator of the troubled Post Office) Khaya Ngema, chose to leave rather than ride the runaway locomotive.
During her tenure Transnet, which operated for more than a decade without an explicit government guarantee, breached its debt covenants. Last October it required a fiscal injection for the first time. A month ago Transnet reported a R5.7bn loss and, at the half-year stage ending in September, the haemorrhaging has continued. The situation was clearly untenable.
A month ago Dlamini, whose reputation was being undermined by Transnet’s chaotic finances, tendered her resignation. Derby leaves at the end of October. It is now time for fresh eyes to look at Transnet’s problems.
The business community at large — especially commodity exporters — will probably find the news of Derby’s departure to be too little too late. But it is good news, because for months she turned a deaf ear to their appeals for better service.
Last November the Minerals Council SA, which represents the majority of mining companies, called for Derby’s head, and that of Mzimela. Instead of engaging constructively with the industry, Derby and Mzimela became defensive, stopped attending meetings and accused the council of resisting transformation. Objectively, it is hard to see how Mzimela can stay. The performance numbers cannot justify her role as part of the solution.
While Friday’s announcement should be welcomed as offering a fresh start for Transnet, it would be wrong to blame Derby and Mzimela for all of Transnet’s ills. The old board, which operated for months with vacancies, should shoulder part of the blame. There is little sign that it had demanded better of management. The government is equally to blame. It took almost a year to refresh the board.
However, an opportunity now exists to install credible leadership and change across this all-important company. The private sector, through the national logistics crisis committee, should continue to help out.
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