As Transnet, we must make sure we keep our promises
• New leadership is part of process to forge a reliable, efficient, cost-effective logistics operator
Since assuming office in July 2023, the Transnet board and executive management have been seized with restoring Transnet’s role as a vital cog in the SA economy.
The recent Investing in African Mining Indaba, held in February in Cape Town, was a valuable opportunity to engage with key stakeholders, most notably customers and suppliers, and take them into our confidence about how we plan in the first instance to stabilise Transnet’s performance.
Our message to our stakeholders, starting with our own staff, is that we must do what we promised we would do. One of the promises we made was to stabilise Transnet leadership by appointing key executives. Turning around our performance requires depth of skills, knowledge and experience. Transnet needs strong and capable leadership to deliver on the commitments to drive volume recovery and enhance rail and port operations.
The announcement of Michelle Phillips as group CEO, Nosipho Maphumulo as group CFO and Russell Baatjies as CEO for Transnet Freight Rail (TFR) is our delivery on commitment.
Strong governance structures and rigorous accountability are at the heart of our ability to deliver on our mandate. Now we have a stable leadership team that will drive the strategic direction of the business and help us implement our strategic objectives.
We are doing what we said we would, and in so doing we are ensuring that Transnet becomes a reliable, efficient and cost-effective logistics operator across port, rail and pipelines in SA and across the continent.
Over the past few years Transnet has experienced operational, financial and governance challenges that have compromised its performance as well as the business of key customers and the SA economy at large.
Our immediate solution to this is the implementation of the Transnet recovery plan, with clear targets aimed at achieving recovery in volumes and stabilising our financial metrics by the end of the 2024/25 financial year. The central task of the new executive is to ensure this happens.
We are implementing the recovery plan in the context of a changing policy environment in line with the government’s reform programme, so Transnet has aligned its plan to the freight logistics roadmap. The roadmap, as well as the regulatory change emanating from the Transport Economic Regulation Bill, will, over time, change the landscape for port and rail logistics and the structure and form of Transnet.
The Transnet National Ports Authority (TNPA) is undergoing a process of corporatisation, with an independent board appointed to give the TNPA greater separation from port operations. The same process is anticipated for rail, with the first step being the separation of TFR into the Transnet Infrastructure Manager (TRIM) and the Transnet Freight Rail Operations Company (TFROC). Competition will intensify for the operations companies, Transnet Port Terminals (TPT) and TFROC, while greater regulatory protection will be provided to infrastructure provision through the TNPA and the TRIM.
These changes, which emanate from the freight logistics roadmap and the white paper on national rail policy, will need to be driven in parallel with the recovery plan, and will require changes to Transnet’s operating model in respect of establishing and managing regulatory provisions in the case of Transnet Pipelines, the TNPA and the TRIM, and repositioning and drawing in the private sector to assist in improving Transnet’s competitiveness in the case of the TFROC and TPT.
In addition to these structural changes, there are a range of transactional processes identified in the roadmap and highlighted as imperative by the National Treasury that require immediate action. These are for port and rail private sector participation transactions that reduce the burden of debt, increase operational performance and volume throughput, and begin to align Transnet to a more competitive operational landscape.
Our journey to recover volumes and regain lost capacity across Transnet’s operations has been made easier by the consistent support we have received from stakeholders. For example, through collaborative partnerships with our customers there has been a marked improvement in the delivery of spare parts for our repair and maintenance work, which is assisting Transnet to increase its rolling stock availability and reliability.
The successful implementation of the recovery plan and the freight logistics roadmap is predicated on government support. Towards the end of 2023 the government announced a much-needed credit guarantee of R47bn to allow Transnet to meet its debt obligation and free up resources to improve operations.
The finance minister announced no further assistance in the budget, for now at least. While the guarantee will assist during this phase of recovery, we remain of the view that an equity injection will be necessary at some point in the future, if we are to truly turn this vital state-owned company around and position it to add greater value to its shareholder.
On our part, we will continue to focus on meeting the targets we have set, in spite of the challenging environment in which we carry out this task, because we understand fully the cost of not doing so and, conversely, the benefit to our economy when Transnet plays its rightful, catalytic role.
We look forward to working with the new executive leadership to lead Transnet into a new era of recovery, growth and operational excellence.
WE REMAIN OF THE VIEW THAT AN EQUITY INJECTION WILL BE NECESSARY AT SOME POINT IN THE FUTURE