Irregular costs at Transnet rise by R40bn
Group receives a qualified external audit
TRANSNET said yesterday that irregular expenditure accelerated by more than R40 billion in the year to the end of March as the transport and rail freight logistics company began to come to terms with the aftermath of its controversial locomotive contracts.
Chairperson Popo Molefe said the group received a qualified external audit opinion from SizweNtsalubaGobodo after the auditing firm identified gross violations and negligent cost-control measures under the previous leadership.
Molefe said irregular expenditure would have remained in the R8bn region recorded last year, but escalated by R41.5bn after the completion of investigations into the locomotive contracts concluded before 2015.
Molefe said irregular expenditure would continue to haunt the group until it had resolved four original equipment manufacturer supply contracts through negotiations with the affected parties.
“Clearly, once we say the contracts were irregularly entered into, those contracts fall to be set aside, but you cannot say they are illegal,” he said.
“Together with the participants, we have to go to court and say all of us following the investigations accept that these contracts were irregular, and we are asking the court to set them aside.
“But there are business imperatives that the country needs locomotives. There are the following factors upon which we are now asking the judge to issue an order on what is a just and equitable remedy. In other words, those can include new maintenance contracts, rescheduling those who are behind their deliveries.”
Transnet reported a 24.7 percent increase in profit to R6bn during the period and a 1.6 percent increase in revenue to R74.1bn.
The group experienced a decline in export coal volumes, minerals, cement and lime brought about by lower demand, community unrest, sabotage and operational challenges.
Transnet’s operating costs decreased 0.1 percent to R40.3bn despite an increase of 16.6 percent in fuel costs.
The company said it managed to raise R6.2bn in long-term funding and was in advanced discussions for a further R13.3bn to the end of the 2020 financial year.
Acting group chief executive Mohammed Mahomedy said Transnet remained viable, with a solid set of results due to a 9.1 percent increase in petroleum volumes as the inland multi-product terminal reached full operationalisation.
“We’ve had challenges with commodity prices, which had gone down to significantly lower than previously, and this put us as Transnet under pressure,” Mohammedy said.
“However, in the current year Transnet has presented a marginal topline growth in revenue, which is just above 1 percent. What is also quite key is that operating expenditure of Transnet has been something that we have taken seriously as a business, and we have put in relevant cost-containment measures and that have yielded a point one percent decrease on a year-on-year basis.”
Molefe reiterated that Transnet was pursuing several civil cases against organisations and individuals, such as former chief executives Brian Molefe and Siyabonga Gama, as well as ex-chief financial officer Anoj Singh.
“On whether these actions were criminal or fraudulent, it is the function of law enforcement agencies (to clarify this),” he said.
“We have reported them in terms of the Prevention and Combating of Corrupt Activities Act, so each of those people will have to act in their own time. We will, in the coming period, be talking to the Hawks, SIU, and later, maybe, the NPA to find out where each one of them is in terms of the matters we reported to them.”