Capture still spooks Transnet
● Transnet is struggling to recover from state capture as contracts from that era come back to haunt it.
It said at its results presentation on Friday it was reviewing 12,800 contracts. Auditors have found the company failed to identify and correctly report on all the contracts that contributed to R114bn in irregular expenditure.
Among the dodgy contracts that contributed to the company once again receiving a qualified audit was the controversial project to buy 1,064 locomotives for R54bn.
Investigations have found that costs of the project ballooned from R38bn to R54bn in 2013, with Gupta-linked companies benefiting immensely.
Transnet has taken legal action to recoup money lost through the abuse of the procurement processes that implicates former executives and benefited other companies.
“The process to identify and accurately report all irregular expenditure … continues to result in reporting inaccuracies … [and] resulted in the external auditors issuing a qualified opinion for the year under review,” Transnet said.
Irregular expenditure in the year under review was R9.9bn.
Transnet’s revenue rose 1.3% to R75.1bn on the back of a 2.9% tariff increase. Rail freight volumes fell by 1.3% and port container throughput dipped 2.4%. “The decline in rail freight volumes was mainly due to deteriorating economic conditions and low demand … particularly in the construction and manufacturing industries,” it said.
Rail volumes were affected by a
“poor operational performance” due to power supply issues, the bad condition of the rail network, and weather. Ageing equipment affected container loading at ports. The company invested R2.5bn in new port equipment in the year under review.
Group CEO Portia Derby said: “We are increasingly finding it difficult to operate in strong winds, so we have started a capital project … in Cape Town to ensure we are able to operate in strong winds.”
Transnet said it saved R4.7bn by managing overtime, travel and telecoms, and limiting the hiring of consultants. It invested R18bn to improve rail infrastructure, maintain rolling stock and renew and modernise its fleet, and on new port equipment.
Board chair Popo Molefe said: “Transnet has performed below its potential in recent years, which has constrained its financial position and left us with limited room for budgetary adjustments.
“Insufficient maintenance of ageing infrastructure and a sedentary posture towards safety and systems reliability has impaired our operations, resulting in inadequate service delivery.
“The knock-on effects have included declining levels of customer satisfaction, lower volumes and undue financial pressure.”
Public enterprises minister Pravin Gordhan, who represents the government as the shareholder of Transnet, took a swipe at external auditing firms for ignoring the rot that set in at Transnet and other state-owned entities at the height of state capture.
“The challenge that we had is that auditing firms … responsible for audits during that state capture period did not uncover all the malfeasance … It is that we are asking some of these firms to account for, and to explain whether they were willing or just silent partners in the state capture process.”
Gordhan said his department was in discussions with the National Treasury and the auditor-general to look into ring-fencing irregular expenditure incurred during the state capture period so that it did not “contaminate” the current audit findings.
‘Transnet has performed below its potential in recent years’