Transnet CEO Siyabonga Gama. Picture: FINANCIAL MAIL
Transnet CEO Siyabonga Gama. Picture: FINANCIAL MAIL

Transnet is determined to clean up its reputation, which has been tarnished by allegations of irregular procurement, CEO Siyabonga Gama said in Parliament Wednesday.

This was particularly important, he added, as the state-owned rail, freight and logistics company has to be able to borrow from the financial markets and it wants to ensure that there are no procurement irregularities.

In a briefing to the public enterprises committee, Gama noted that state-owned enterprises (SOEs) had been plagued by issues of project management and deviations from procurement regulations and Transnet had not been immune from this.

Investigations had been undertaken and most of them were 90%-95% completed.

Among the problems affecting the parastatal were weak accountability mechanisms and the absence of consequence management, as well as procurement irregularities, Gama said. There were allegations that third parties had earned commissions on contracts that Transnet had concluded between 2012 and 2015.

He said the Transnet board had been seized with these matters and reported them to the enforcement agencies. "Bad apples", where identified, would be removed from the company.

The Treasury is conducting its own forensic investigation into Transnet’s contracts with Regiments, McKinsey and Trillian Capital Partners.

The Transnet board is dealing with alleged irregularities into the contract to procure 1,064 locomotives.

Capital expenditure

Meanwhile, Transnet aims to devote R229.2bn to capital expenditure over the seven-year period of its market demand strategy, including R20bn for mergers and acquisitions, the parastatal’s chief financial officer Garry Pita said on Wednesday.

Capital expenditure of R1.9bn was earmarked for breakbulk, R10.3bn for piped products, R9.9bn for other bulk commodities, R12.5bn for manganese, R8.9bn for iron ore, R21.5bn for maritime containers, R14.3bn for coal, R102.4bn for general freight and R27.5bn on automotive and other sectors.

Capital expenditure of between R340bn and R380bn over the next 10 years depending on demand. This will increase capacity across all commodities and sectors, Pita said in a presentation to Parliament’s public enterprises committee on the group’s annual results for 2016-17.

Pita said that Transnet was fundamentally reinventing its business model and operational philosophy to extend its footprint in Africa, the Middle East and South Asia.

The aim was to become a fully integrated logistics service provider with end-to-end solutions as well as to establish an advanced manufacturing capability as an original equipment manufacturer for Africa.

Gama reported that in the year to end-March 2017 Transnet increased revenue 5.3% to R65.5bn and profit to R2.8bn, a huge increase from the prior year’s R393m. Gearing at year end stood at 44.4%.