Former Transnet Group CEO Portia Derby and the former boss of its rail division, Sizakele Mzimela, have received R11.9m and R9.2m, respectively, in exit payments — despite leaving the rail and ports entity in shambles.
Transnet’s 2024 annual report, tabled on Friday in parliament, showed that Derby received a payout of R16.8m, of which R11.9m was classified as “other payments”. Mzimela received a final payout of R12.7m, with R9.2m falling under “other payments”.
Asked to explain these “other payments”, Transnet said its remuneration policy includes various elements such as salary, a 13th cheque, contributions towards retirement funding, acting allowances and leave pay, among others. The entity, however, refused to elaborate on the specific nature of the additional payments to Derby and Mzimela or whether they constituted golden handshakes, saying termination agreements were confidential.
“The reward dispensation provides for a differentiated approach in terms of different categories of employees. The termination agreements form part of the contractual employment obligations, which are required to be honoured and are confidential in line with the Protection of Personal Information Act.”
It said the termination agreements with executives were in line with the group’s remuneration policy, which was aligned to the now defunct department of public enterprises’ guidelines.
According to the report, Derby’s pay also consisted of R4.5m in salary, a R417,000 pension contribution and a R1m Unemployment Insurance Fund (UIF) contribution.
Her total pay (R16.8m) was up from R8.5m a year earlier.
Mzimela’s final payment doubled to R12.7m, up from R6.1m in 2023, and included R9.2m in “other payments”, a R3.5m salary and a R1m UIF contribution. No contribution towards pension was made in the year under review.
Derby and Mzimela did not respond to requests for comment.
In total, Transnet paid its 21 top executives — including group CEO Michelle Phillips — R107m in total, up from R87m in 2023.
Derby left Transnet in October 2023 after widespread criticism of how she was running the company, as rail and port volumes declined, revenue tumbled and the country’s logistics crisis deepened. She was followed out of the door by Mzimela who was also blamed for the shambolic state of the Transnet Freight Rail (IFR) division, Transnet’s biggest unit. The CFO, Nonkululeko Dlamini, also left.
Derby and Mzimela were specially hauled over the coals for dragging their feet in effecting reforms allowing private sector players access to the port and rail network. Under their watch, Transnet debt exceeded R100bn, and the company has since had to be bailed out by a R47bn loan guarantee from the National Treasury to keep going.
South African Transport and Allied Workers Union (Satawu) secretary-general Jack Mazibuko said the exit packages were golden handshakes that were not deserved, given the state of the entity when Derby and Mzimela stepped down.
“They (Derby and Mzimela) left a trail of debt and a company on its knees. Instead of the board helping Transnet they have awarded them golden handshakes. We have a problem with how Transnet does things. When former CEO Siyabonga Gama resigned, he received a golden handshake as did many others. We will register our concerns with the new minister of public enterprises [sic], Barbara Creecy.”
Dlamini, the former CFO, received R3.67m, including a R2.8m salary, a R1m UIF contribution and a R770 000 for “other payments”. She earned a total of R5.8m in 2023. Transnet said “other payments” for Dlamini related to accrued leave days that were owed to her at the time of termination.
Phillips, who acted for a few months before her appointment was confirmed in March, received a total pay of R5.5m including R417,000 in “other pay” and a R343 000 retirement benefit.
“In respect of Phillips, ‘other payments’ relate to an acting allowance that was payable to her for the period that she assumed the acting group CEO role,” Transnet said.
The previous board also received a hike in earnings, with current chair Andile Sangqu taking home in excess of R2m for leading the non-executive directors and overseeing the executives.
The tension between industry and Transnet came to a head when the Minerals Council wrote to former board chair Popo Molefe, calling on Derby and Mzimela to be axed as bulk commodity producers missed out on revenue at the peak of the commodity price cycle. As the crisis deepened and coal exports via Richards Bay reached a 30-year low of 49-million tonnes in 2022, the Presidency and business set up a logistics crisis to help turn Transnet around.
A new board took over and helped draft an ambitious turnaround plan that aims to bolster revenue, increase volumes to 200-million tonnes and turn a loss of R5.7bn in 2022/23 and R7.3bn in 2023/24 into a profit.
Poor contract management, poor contract oversight, and fines and penalties were cited as some reasons behind the downturn.
Transnet said on Friday that a National Treasury framework requires all entities to disclose or confirm fruitless and wasteful expenditure, including that which is under assessment. It said it was assessing a number of activities, including accidents that were found on investigation to have been caused by employee negligence.
“Most of these are subsequently recovered from the responsible employees. Internal controls that were found to be inadequate did not address the risk at the time but have since been enhanced. These form part of our audit remedial plan and the impact of the enhancement is seen with the reduction in actual loss incurred.”
In results released on Monday, Transnet posted an 11.6% increase in revenue to R76.7bn from R68.7bn in 2023 — mainly as a result of tariff increases and a marginal improvement in volumes.
Phillips said in the annual report that all of the operating divisions had reported higher revenue figures compared to the previous financial year, despite operational challenges. TFR remains the largest revenue contributor to the group.
“Currently, TFR is faced with a significant shortage of locomotives as a result of the long-standing fleet, with this number showing trends of increasing year on year due to the current impasse with China Railway Construction Corporation.”
She said Transnet Engineering was helping with returning to service locomotives that are stuck in depots but is struggling to source spare parts.
This she blamed on capacity constraints and intellectual property rights on certain overhaul parts that prevent Transnet from speedily returning the locomotives to service. “TFR’s strategy to support the Transnet maintenance policy is to partner with the respective locomotive original equipment manufacturers through long-term maintenance agreements to improve the availability and reliability of the current fleet.”
Sangqu said the entity had made marginal improvements since implementing its turnaround plan, resulting in a slight improvement in losses compared to last year.
In the period under the review, Transnet saw higher rail volumes of 151.7-million tonnes, up from 149.5-million tonnes in 2023. Cash generated from operations was up 13% at R28.8bn.
Sangqu said the success of the interventions to set Transnet on a sustainable path required stable, competent and experienced executive leadership. “Leadership stabilisation remains a key strategic priority for the board because it enables continuity and effective execution,” he said.
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