‘Step in right direction’
TRANSNET BOSSES’ PENDING SUSPENSION: PROBES OPEN CAN OF WORMS
Irregular wasteful expenditure at SOE shot up from R600m in 2016-17 to R8.1bn in 2017-18.
The imminent suspensions of three senior executives at state-owned enterprise (SOE) Transnet is a “sorely needed” intervention in the governance of SOEs and a “step in the right direction”, a leading economist says.
Sam Rolland, an economist at the Johannesburg-based thinktank, Econometrix, said the suspensions of Transnet CEO Siyabonga Gama, chief advanced manufacturing officer Thamsanqa Jiyane and supply chain manager Lindiwe Mdletshe were necessary and would be welcomed by the markets and rating agencies.
The three have been served with suspension notices and have until Monday to provide reasons why they should not be suspended. This follows investigations by law firms Werksmans Attorneys and Mncedisi Ndlovu & Sedumedi Attorneys and Fundudzi Forensic Investigators which exposed several possible acts of misconduct involving them. The firms recommended further investigation.
The action against the Transnet executives came against the backdrop of the report by Minister of Public Enterprises Pravin Gordhan this week to the parliamentary portfolio committee about the problems at Transnet.
He cited inefficiencies across its freight system. The firm’s irregular wasteful expenditure also shot up from R600 million in 2016-17 to R8.1 billion in 2017-18, according to its unaudited statement.
He said forensic investigations into the 1 064 locomotives saga involving foreign bidders and some local concerns had been undertaken and a probe was opened regarding procurement contracts processes. The Hawks and the Special Investigations Unit were investigating criminal charges, while forensic investigations had also been opened.
Rolland said: “This is a sorely needed intervention in the governance of the SOE. The ballooning of irregular and wasteful expenditure to R8.1 billion in 2017-18 shows how the rot was allowed to carry on. Under the guidance of Gordhan, who would have been acutely aware of the risks the poor performance poses to the fiscus, this is certainly a step in the right direction.”
He said the Ramaphosa government had committed to rooting out corruption in different spheres of government, while also increasing foreign direct investment. “To achieve this, he needs to be seen to be taking hardline steps to fix these broken SOEs for any investors to consider South Africa seriously.”
The economist said an acceleration in the transformation of SOEs was likely if the economy started growing again, since the for corruption would be limited. “It is also critical that the state re-examine the ownership structures of these entities while fitting into the current policy. Already, an equity partner has been proposed for SAA and it is recommended that other entities follow suit to lessen the reliance on the state and, ultimately, the taxpayer,” Rolland said.
“In the short term, the moves are designed to allow the SOEs to gain access to capital markets, addressing the funding requirement was previously a significant worry for Eskom, so installing a competent board is essential to gain the trust of capital markets.
“In the medium to long term, it is crucial these SOEs improve operating efficiencies and cut expenses by reducing head counts, renegotiating contracts and cutting losses through wasteful expenditure and corruption.”
Rating agencies have emphasised that government guarantees endanger the fiscus. Rolland said that if the government made concerted moves to reverse the decline of SOEs, “the knock-on effect may be greater willingness to invest”.
It’s a sorely needed intervention in governance of the SOE.