Empower Transnet’s leaders; then straighten out finances

Henry

The logistics crisis in South Africa remains a serious challenge for the economy and therefore the private business sector and the government have already joined forces to work on solutions.

Business Leadership South Africa (BLSA) says it is worrying to learn of layoffs in the resources sector as commodity prices fall, “but also because mining companies are unable to take products to their markets”.

Inventory is piling up due to Transnet’s ongoing problems in delivering rail and port services. The only option is to reduce production, which again means the workforce is too large for the work that can be done.

Busisiwe Mavuso, CEO of BLSA, says that through Business for South Africa they entered into a partnership with the government and mobilized resources to tackle these urgent issues.

“The National Logistics Crisis Committee (NLCC) was set up as a coordination mechanism and has been functioning for six months with more than 45 experts from the private sector as well as CEOs with experience in the rail, port and road sectors.

“Five work streams are already in place to improve operations at railway lines, ports, on roads and at border posts and to tighten security. The government is leading three work streams that focus on policy, regulation and legislative reform,” says Mavuso.

According to Mavuso, the process has already produced several successes with 45% fewer vessels anchored outside the Durban harbor and a 36% reduction in the waiting period for container ships to drop anchor.

“Security patrols and other business-funded resources have already helped to reduce incidents on railway lines, and therefore the number of train cancellations.

“Furthermore, interventions at the Lebombo border post have led to an increase in vehicles being processed – from 1,600 to 1,900 per day.”

She says the short-term interventions can help to reduce the negative impact, “but the critical work is to resolve the long-term prospects for the sector”.

“As we have learned with the electricity sector, it is only deep structural reform that can sustainably change the performance of the system. The good news is that the NLCC has already produced an excellent guide to the required changes in the freight logistics roadmap and the framework for private sector participation. The cabinet has already approved it.

“It envisages a change from a monopolistic system that is almost entirely managed by Transnet to an open and competitive system with multiple operators,” says Mavuso.

She believes the most important challenge is to maintain momentum.

“On that front, we await the appointment of new leaders at Transnet. The operator has been without a permanent CEO and leaders in other key positions for nearly six months.

“There was a process underway to appoint a new chief executive in particular, but some news reports last week indicated that the board faced political interference during the process.

“That is a shame. If Transnet wants to regain its role as an efficient operator of rail and port infrastructure, it must have a board and executive team that is synchronized and accountable.

“One extremely problematic feature of the way in which state-owned enterprises are managed is that the board can be dominated by the minister in the department of public enterprises when it comes to the appointment of top managers.

“This basically means the board cannot function, as it cannot properly hold the executive to account – a problem we have seen before in the Eskom context.

“It is therefore important that the political processes focus on how to support and empower the board, and not undermine it. After all, the government – as the sole shareholder – can appoint the board members and this should then empower it to act.”

Mavuso says the next big challenge is Transnet’s finances.

“We were surprised at how little mention was made of Transnet in the budget speech last week.

“The treasury has provided a guarantee of R47 billion to Transnet, which enables it to incur new debts. However, the guarantee was provided with strict conditions, including that Transnet must enter into partnerships in the private sector, as required by the road map.

“The guarantee ensures that Transnet can meet its immediate obligations, but it is critical that it also delivers the reforms to enable the next step in its financial recovery.

“The treasury’s approach seems to be to keep up the pressure for sustainable reforms, as it should be given its guardianship over the country’s finances and the negative impact that Transnet has historically had on the state’s finances.”

Mavuso says the reform process quickly gathered resources and developed a plan.

“There have also been real short-term interventions to improve performance, but that momentum is at risk if we do not see strong appointments at Transnet empowered to drive reform in the utility under the leadership of the board.

“I look forward to an announcement being made soon so that we can jump to work.”