Public Enterprises Committee receives update on progress at Transnet

7 September 2023

The Portfolio Committee on Public Enterprises received an update today from Transnet on its business operations, rail concessions, maintenance and infrastructure development.

Explaining the context of the meeting, the Chairperson of the committee, Mr Khaya Magaxa, said that the committee called the Department of Public Enterprises to appear before it with state-owned entities such as Transnet as they are a life blood of the South African economy. Furthermore, part of the committee’s mandate is to see how public entities are remodeled to build their capacities to advance their transformational agendas.

Leading the department, Minister Pravin Gordhan began by explaining that both internal and external issues have led to Transnet’s poor financial performance. He has asked the Transnet board to investigate various contributing factors to these challenges so that the board and the executive can improve the financial forecast of its various business operations in the coming financial years. He reassured the committee that each Transnet division is engaged in various initiatives to achieve this.

Transnet’s board Chairperson stated that the new board has hit the ground running and has identified issues contributing to Transnet’s poor financial performance. The board’s priority is to return to basics so that Transnet can improve its operational divisions and businesses as a matter of urgency.

Some areas of improvement were noted. The committee welcomed the news that Transnet has curbed irregular expenditure significantly through a process of reform in its internal controls environment and staff have received training to comply with the new regulations.

The committee heard that Transnet’s turnaround strategy hinges on several things, including the container segment, expansion of port terminals, improvement of rail tracks and the reintroduction of its rolling stock of locomotive to business operations, which is currently sitting idle at a huge cost to the company. Transnet has embarked on a public and private sector partnership to invest in its value chain and assets to unlock value to the market.

Meanwhile, Transnet’s Freight Rail Division, one of the major contributors to Transnet’s revenue, continues to drag the entity into financial decline. This is due to years of infrastructure maintenance neglect, which has increased the net operating cost of this division from R14.5 billion to R28 billion. Transnet is now in need of huge capital investment for it to run optimally and must pay R1 billion per month to service its debt.

In welcoming the update, the committee welcomed the efforts of Transnet’s management and board to improve matters and urged them to use all the available strategies and efforts to resuscitate Transnet and restore it to its former glory.

Issued by Yoliswa Landu, Media Officer, Parliamentary Communication Services, 7 September 2023