LETTER: Pressure on Transnet to toe the line?

Last week, Transnet board chair Popo Molefe indicated concerns regarding the government’s localisation plans: “In its application, local content requirements have now included compelling state-owned companies to procure through (local) middle persons (who buy goods outside the country) and then put their own mark up. So even before you acquire equipment you have already lost a significant percentage of your budget.”

A few days later, BusinessLIVE published a statement from Transnet spokesperson Ayanda Shezi, which indicated that Transnet is committed to and supports the government’s localisation initiatives (Transnet committed to localisation policy, December 9).

Transnet board members and employees should not be afraid to criticise — or at the very least question or prod — new initiatives and plans from the government which they need to incorporate in their operations.

One has to wonder whether pressure was placed on the board chair and others within the state-owned entity after their comments. This surely does not portend well for the much-hyped spin-off of the Transnet Ports Authority as an “independent” entity.

Instead of pursuing localisation — which will increase prices of imported goods and fuel increased inflation in coming months and years — provide subsidies for those businesses deemed “appropriate”. The government would do much more for economic activity and job creation in the country by focusing resources on upgrading the country’s ports and rail networks.

The country’s railways are in a decrepit state. Transnet needs as much private sector skills and capital investment as possible, to save and upgrade what now exists, and to ensure that the country has reliable ports and railways in the future.

Shezi states that, “[Transnet] remain[s] committed to supporting localisation, for the industrialisation of the SA economy”. Unfortunately, because it increases costs and thus serves as a barrier to trade and business, localisation will only discourage the inflow of the necessary amount of capital that would be needed for meaningful industrialisation.

Given the immense pressure that state-owned enterprises such as Eskom, SAA and others place on the fiscus — something that ratings agencies consistently raise as an area of concern — any moves of reform towards sound management and financial responsibility and transparency should be applauded and supported.

Chris Hattingh
Deputy Director, Free Market Foundation

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