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 failed to maintain state-owned enterprises (SOEs) to the point of bankruptcy without giving adequate consideration to the far-reaching implications for 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 Portia Derby, that was followed by the resignations of Transnet group chief financial officer Nonkululeko Dlamini and freight rail chief executive Sizakele Mzimela, represents the failed project of attempting to disparage the legacy of business excellence and success left by former group chief executive Siyabonga Gama.
Derby, Dlamini and Mzimela inherited a functional organisation and then set about to decimate it. Transnet has, over the past two years, raked up a net loss position of close to R12 billion. When Gama was appointed as group chief executive he had 21 years of exposure to all Transnet businesses, having served in the Transnet group executive committee from 2000.
When Gama became acting group chief executive in 2015, he set out to further strengthen Transnet under the market demand strategy pioneered by Brian Molefe. Gama deepened the importance of Transnet in the South African economy by ensuring operational improvements, introducing a day-to-day operations system, astute management of the interface between rail and port activities and ensuring bulk liquid rail operations supported the pipeline business. Transnet Engineering was transformed into a world class manufacturing business immersed in the assembly of passenger coaches, rail wagons and the first African assembled locomotive to be exported to railway organisations on the continent.
Gama is one of five people accused of R93 million fraud and corruption in a case relating to the procurement of 1 064 locomotives by Transnet. 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 being 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 net profit of R4.9 billion and operating profit of R32.5 billion in 2018. This demonstrates what a hugely successful business Transnet was at the time that Gama was let go by the Pravin Gordhan appointed board he described at 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 tonnes in 2018, the last year of Gama’s tenure, and has steadily declined ever since. When Gama was group chief executive, the equally competent and experienced Ravi Nair ran Transnet Freight Rail and between 2016 and 2018 increased volumes from 214 million tonnes to 226 million tonnes amid a flat GDP growth. Mzimela and Derby have presided over a disastrous, if not catastrophic decline in rail volumes. Transnet freight rail volumes declined to 149.5 million tonnes for the year ended March 2023, a 34% decline from the 226 million tonnes of 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 self-inflicted lack of management and business acumen.
During Gama’s tenure, Transnet was the best performing state-owned entity, was financially independent and did not require a state subsidy. What we are experiencing now is a direct result of Gordhan’s leadership of the SOE sector. In his quest to “connect the dots”, he 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 of the economy leading to the loss in the tax base and depleted public finances to the tune of billions of rands annually. Epic losses force the treasury to consider budget cuts that ultimately impedes the functions of provinces. Over and above that, when Transnet handles less volumes for both imports and exports, the private sector fails to generate profits and maintain healthy balance sheets, which affects employment.
Transnet was once lauded as a place of highly skilled personnel working towards positioning it as an entity that reflects the competence of government entities. With the gross mismanagement by Derby and the 2020 failed class experiment, it is now a shadow of its former self. Performance management systems that emphasise outputs, internal competition and daily reports on operational performance 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 leadership at Transnet, Derby set out to appoint her former colleagues at the department of public enterprises as Transnet executives. One-time acting director general of public enterprises and PWC consultant Andrew Shaw was made head of strategy. Sandra Coetzer, a maritime policy researcher at the department of transport, was tapped to become chief legal guru at Transnet. Friends such as Pepi Silinga, who used to head the Coega Development Corporation, was recruited by Derby to run the National Ports Authority. As at the time of her resignation, all the top executives and divisional chief executives at Transnet have been there for less than three years. This has dethroned Transnet from being the logistics backbone of South Africa. An overhaul of systems and daily operations is required, and the current executives are failing to cope as they have inadequate logistics knowledge, skill and competence to run such a behemoth of an organisation. The legacy of Derby’s failures is also often ascribed to her lack of a desire or aptitude to listen to advice of those she found at the institution.
In 2022 under Derby, Transnet came close to defaulting on debt worth R17 billion, which could have triggered a debt crisis. The entity is now repaying R1 billion a month, but it is not generating enough to service this debt. Wasteful and fruitless expenditure to the tune of R2.4 billion is a clear indication that the recently resigned chief executive failed. What is interesting was the constant refrain that they were trying to turn the business around. There was nothing wrong with the business when they took it over. 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. Ministerial overreach by Gordhan has also severely compromised productivity. A loss of institutional memory and knowledge is a result of Derby purging all the executives who served under Gama.
What cannot be disputed is that the Transnet under the Popo Molefe led board, Gordhan and Derby serves as a symbol of 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. For Transnet to return to its former glory, the ANC government and its cronies must be removed because the longer they remain with influence, the bigger the hole they will continue to dig at Transnet.
Omphile Maotwe is the Economic Freedom Fighter’s treasurer general.