Public Enterprises Minister Pravin Gordhan has been forced to crack the whip and order Transnet to produce a convincing turnaround plan within one month in a bid to quickly address the derailment of the group’s operational and financial performance.
The state-owned logistics firm last week swung into a massive R5.7 billion loss for the year ended March 31, 2023, down from a R5bn profit a year before, as the volumes delivered by its freight rail business dropped 13.6% during the period, from 173 million tons to 149 million tons.
Gordhan yesterday told the Parliament’s portfolio committee on public enterprises Transnet was finding itself in a situation where its performance was declining and impacting on the commodity sector and the economy as a whole.
He said that part of Transnet’s problem was that not all of the recovery that needed to happen from the State Capture period had been concluded.
“But we also know that there are both internal factors and external factors impacting Transnet’s performance. Accordingly, and in terms of the Memorandum of Incorporation, we’ve asked the board to look into a number of matters as a matter of urgency,” Gordhan said.
“I would like the committee to take into account that some of the issues might be raised might be work in progress, and that in a month’s time or so we could come back and give you a better briefing once the board has had an opportunity to process some of those issues that Transnet is currently working on. And that will then also enable the committee to get a fuller picture of what the path ahead looks like as far as Transnet is concerned.”
The group’s latest results show that earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased 2.1% to R23bn, while operating expenditure increased two percent to R45.9bn.
Revenue increased by just 0.6% to R68.9bn, from a previous R68.5bn, boosted by positive port and pipeline operational performance.
The troubled logistics firm cited power supply disruptions, cable theft and floods in KwaZulu-Natal as the reasons for its poor performance.
South African mining companies recently reported shrinking revenue and profit margins as a result of Transnet’s inefficiencies in exporting ore, and called for experienced personnel at the leadership of the State-owned group.
In his maiden address to Parliament yesterday, Transnet chairperson Andile Sangqu said they had identified that there were many challenges that the company was facing, and that it was not going to be possible to deal with all of these challenges at once.
Sangqu said Transnet was facing some long-standing challenges and it was going to take time to extricate itself from the present situation.
“But be that as it may we do believe that there are issues that can be addressed quite successfully in the short term. In other words, over a six-month period, 12-month period, and 18 months period,” Sangqu said.
“And that is really the focus and priority that the board is giving to those issues whilst we are keeping our picture in terms of the long term of the organisation. And it’s a careful balancing act to try and make sure that we maximise our ability to focus on both at the same time.
“Having said that, we also believe that some of these challenges are within our own control. And therefore we have a sharper focus as the board on what we believe is sort of a back-to-basics approach, looking at our own processes, our own operational reform and business.
“In this regard, we are seized with developing a turnaround plan, as the Minister has mentioned, which we think that we would have a sound plan that would have been approved by the board in a month’s time from now.”
Sangqu added that Gordhan had been very clear in directing the board on what he would like to see being done.
“The board is seized with this assignment and we are committing ourselves to report to the minister on those issues and apprise him on the progress we are making and so that he is in a better position to have a good understanding of what the direction of trouble is as Transnet,” he said.
“It’s still very early stages for this board to comment quite substantively on a number of issues. But we just want to assure you of our commitment to turn the company around in our determination to find lasting solutions to the problems at hand.
“We also have recognised that some of the challenges are completely outside our own control.”
BUSINESS REPORT