OMPHILE MAOTWE
TRANSNET has been decimated into an unrecognisable state.
A well-functioning society is one that has a government that prioritises its people through the effective running of state organs. A failed state such as the one run by the corrupt ANC government is one that has dismally failed to maintain state-owned enterprises (SOEs) to the point of bankruptcy without adequate consideration of the far-reaching implications on members of society.
Transnet and the string of recent resignations is the culmination of state failure and an erosion of public assets. The resignation of Transnet group chief executive (GCE) Portia Derby, which was followed by the resignations of Transnet Group chief financial officer Nonkululeko Dlamini and Freight Rail CEO Sizakele Mzimela, represents the failed project of attempting to disparage the legacy of business excellence and success left by former GCE Siyabonga Gama.
Gama inherited a fully functional organisation and then set about to decimate it to the unrecognisable Transnet which has over the past two years raked up a net loss position of close to R12billion. When he took the helm of Transnet as acting GCE in 2015, he set out to strengthen the organisation under the Market Demand Strategy pioneered by Brian Molefe.
Gama deepened the importance of Transnet in the economy by ensuring dramatic operational improvements and introducing a total system day-to- day operations system that managed the business from cradle to grave as well as astute management of the interfaces between rail and port activities while ensuring bulk liquid rail operations supported the pipeline business.
While Gama is facing charges to the tune of R300 million with his co-accused, the case has not yet been pleaded, so we shall presume he is innocent until proven guilty. What we do know is that during his era, the road-to-rail strategy was a huge success, and the number of trucks on the road declined. There was also a huge focus on Transnet’s engineering capabilities with a new diesel locomotive for the continent unveiled in 2016.
During his tenure, Gama emphasised business growth, a search for new markets and the strengthening of Transnet as the logistics backbone of our country. In addition, he was a great leader of people, who inspired a vision that everyone wanted to be a part of.
His performance management system was designed to measure outputs and the business generated a net profit of R4.9billion and an operating profit of R32.5bn in 2018. This demonstrates what a successful business Transnet was at the time that Gama was let go at Transnet, by the Pravin Gordhan appointed board he described during the State Capture Commission as ill-equipped to be members of the Transnet Board.
Transnet has consistently floundered in its operations since Derby’s tenure. Transnet railed 226 million tons in 2018, the last year of Gama’s tenure, and has declined since. When Gama was the GCE, the equally competent and experienced Ravi Nair ran Transnet freight rail and between 2016 and 2018 they managed to increase volumes from 214million tons to 226 million tons amid a flat GDP growth in the country.
However, Mzimela and Derby have presided over a disastrous, if not catastrophic decline in rail volumes. Transnet freight rail volumes declined to 149.5 million tons for the year ended March 2023, a massive 34% decline from the 226 million tons in 2018, a mere five years ago.
Derby and Mzimela have a constant refrain that the business was affected by cable theft and inadequate locomotives. Cable theft is not new to Transnet and is an inadequate alibi for poor performance. Locomotive unavailability is an emotional management decision they made when they cancelled the locomotive contracts without appropriate reflection. All the alibis point to a self-inflicted lack of management and business acumen.
What we are experiencing now is a direct result of Gordhan’s leadership (or to put it correctly, disastrous leadership) of the SOE sector. In his quest to “connect the dots”, he systematically instructed the Popo Molefe-chaired board to get rid of the management, probably based on “gossip”, as Gordhan testified at the State capture commission.
The result of that is the suffering economy, the loss in the tax base and depleted public finances to the tune of billions of rand annually.
When Transnet handles fewer volumes for imports and exports, our private sector fails to generate profits and maintain healthy balance sheets, which affects employment. Transnet was also once lauded as a place of highly skilled personnel working towards positioning it as a formidable entity that showcases the competence of government entities.
Currently, with the gross mismanagement by Derby and the 2020 failed class experiment, it is a shadow of its former self. Performance management systems are no longer adhered to. Employee reward and recognition for outstanding performance are no longer used as incentives to motivate employees because the Derby management style is one of shouting down at employees.
After dismantling the entire leadership at Transnet, Derby appointed some of her former colleagues from the Department of Public Enterprises as Transnet executives. At the time of Derby’s resignation, all the top executives and divisional CEOs at Transnet have only been there for less than three years. This has dethroned Transnet from being the logistics backbone and leaves it in a position that requires perpetual re-strategising as they are failing to get it right.
The legacy of Derby’s failures is also often ascribed to her lack of a desire or aptitude to listen to the advise of those she found at the institution. In 2022 under Derby, Transnet came close to defaulting on debt worth R17bn. The entity is now repaying R1bn a month, but it is not generating enough to service this debt. Wasteful and fruitless expenditure to the tune of R2.4bn is a clear indication that the recently resigned CEOs failed. What is interesting was the constant refrain that they were trying to turn the business around. There was nothing wrong with the business they took over.
However, they used their misguided business case for change to decimate a well-performing business. They then used state capture propaganda to try to convince us that they were trying to turn it around. There was nothing that needed a turnaround until they arrived.
Transnet under the leadership of the ANC has descended into a state of total chaos. There is no effective crisis management because they are not investing in human capital and are failing to attract and maintain skilled individuals with sufficient acumen to deal with the challenges of turning things around at Transnet. The Derby-Mzimela axis ran amok at Transnet, behaving like indunas instead of respecting employees and processes.
Ministerial overreach also severely compromised productivity with Gordhan’s interference. A grave loss of institutional memory and knowledge is a result of Derby’s purging of all the executives who served under Gama, her offer of severance packages to knowledgeable and experienced personnel and her unnecessary “new broom sweeps clean” actions.
These are detrimental consequences because Transnet is no longer leveraging its competitive advantage in the commodity cycle, eg steel and cement, and instead focusing on value extraction.
These are traces of the 2003 corridor strategy that Derby reverted to that has done absolutely nothing to improve the situation at Transnet. What cannot be disputed is that the new Transnet under the Popo Molefe-led board, Minister Gordhan and Derby highlights the inability of our government to run a multi-billion enterprise.
The problem is not with Transnet being a state-owned entity. The problem is lack of political leadership, and a corrupt government that fails to perform its oversight role while deploying ministers that want to line their pockets at the expense of efficiency.
The resignations of three CEOs within days of each other are utterly disgraceful. Shutting down railway services and the inability to afford diesel is yet another example of the cost of corruption.
For Transnet to return to its former glory, the ANC government and its cronies must be removed because the longer they remain with their influence, the bigger the hole they will continue to dig at Transnet.
Omphile Maotwe is the treasurer of the EFF.
Daily News