Transnet presented a turnaround plan that includes a partial government bailout of its R130-billion debt to Public Enterprises Minister Pravin Gordhan this week.
Transnet’s board of directors said in a media statement that it had completed the plan and that it would “discuss the operational and financial details of the business turnaround plan including areas which require immediate government support” with Gordhan and Finance Minister Enoch Godongwana.
This comes after Transnet posted a R5.7bn loss on the back of Transnet Freight Rail’s declining freight rail volumes that dipped 13.6% to 149.5 million tons (mt) in the 2022/3 financial year compared to 173.1mt during the previous period. Volumes have hovered at levels below 200mt since 2020.
Business Day reported that board executives led by Andile Sangqu had given the presentation to the ministers on Tuesday when the request was made ahead of Godongwana’s medium-term budget policy speech on November 1. Sangqu earlier told parliament that the entity was considering selling some of its assets to raise R50bn needed to finance its rail infrastructure maintenance.
“Once approved by the shareholder and funding commitment is secured, the plan will be discussed with key stakeholders such as organised labour, employees, customers and lenders,” Transnet said in the statement.
The turnaround plan outlines operational and financial initiatives which must be implemented in the next six to 18 months “to stabilise the business and position the company for growth”.
“The turnaround plan is predicated on several detailed goals to reform and strengthen the operational state of the freight rail division in particular, and with priorities of key elements, specifically the rail corridors that service key sectors of the economy,” the state-owned entity said.
It is premised on principles which include the balancing of financial stability and the operational performance of the business; improved use and care of assets and infrastructure; improved integration and operational execution across operating divisions; and improved employee engagement and visible management at operations. The development of a deeper accountability framework, cost reduction measures, cash flow and working capital improvements, as well as collaboration with all relevant stakeholders, including labour, customers, funders, government and industry are also part of the plan.
“The board has prioritised the filling of the three executive positions in the business, with the recruitment process having commenced this past week. The recruitment process is being prioritised for urgent finalisation,” Transnet said.
The logistics utility’s debt woes were exacerbated by the R41bn in irregular contracts that were allegedly awarded to the Guptas and their associates during the era of State Capture as highlighted in the State Capture Commission Report.
