Transnet on a mission to meet lender in the international market
Transnet aims to raise R15bn over the next financial year, mostly from domestic sources after a qualified 2018 audit spooked lenders
State-owned logistics company Transnet is on a mission to re-acquaint itself with lenders in the international markets, after a long absence and a torrid period in which it was tainted with corruption and governance problems.
Director Mpho Letlape, a member of the new board installed last May, briefed MPs in parliament’s public enterprises committee meeting on Wednesday, saying that lenders have complained about the lack of interaction with the company.
Transnet aims to raise R15bn from the market over the next financial year, although mostly from domestic sources. Chair Popo Molefe and acting CEO Tau Morwe are currently in London and Europe to meet market participants and have previously toured the US as part of a series of no-deal roadshows to re-introduce the company, said Letlape.
A qualified audit in 2018 spooked lenders, causing the board to scramble to ward off a default of its of R122bn debt.
Head of the board’s audit committee Ramasela Ganda said that the audit uncovered R8bn of irregular expenditure, with the concern that there may still be more to come. “The impact of the qualified audit was that we were faced with a R122bn default on our loans. We engaged with the financiers and lenders, who were not very keen to listen, at all. So we entered a war zone of sorts.”
Lenders were eventually persuaded not to withdraw, she said, and in preparation for the 2019 audit the board has put a remedial plan in place and asked management to review all contracts since 2012.
Letlape also briefed the committee on the actions Transnet has taken to restore good governance and confidence in the parastatal.
Former group CEO Siyabonga Gama was dismissed in October 2018 and three other senior executives — Thamsanqa Jiyane, former Transnet Freight Rail chief procurement officer; Lindiwe Mdletshe, supply chain manager; and Edward Thomas, chief procurement officer for the Transnet group — were suspended. They remain on suspension while investigations continue.
Two other senior executives — treasurer Phetolo Ramosebudi and CEO of Transnet Property, Thabo Lebelo — who were served with intention to suspend and dismissal notices, respectively, opted to resign.
Letlape said the board has decided not to begin disciplinary proceedings until investigations are completed as there are still more employees who might be added to the list.
Letters of demand to repay Transnet for monies it considers unjustifiably received have also been served on Gama; former CEO Brian Molefe; former CFOs Garry Pita and Anoj Singh, Ramosebudi and Thomas. Letlape said no response has yet been forthcoming.
The threatened suspension of another eight managers further down in the organisation is being dealt with by executive management, she said.
Criminal charges have also been delayed and negotiations are underway with China South Rail over penalities for what Transnet said it considers irregular contracts.
The Transnet delegation also told the committee that it is likely to cut its order for 1,064 locomotives from China South Rail by at least 100 as the volumes it expected in its businesses have not materialised in all areas. So far, 508 have been delivered and are rolling, with the rest still to be built.
“The market-demand strategy made sense five years ago but some areas have been slow. Some we might cancel completely. We have also given them notice that these contracts are irregular and we are negotiating timelines and penalties,” the delegation said.
Said acting CFO Mario van der Walt, the initial target in 2012 was that the market-demand strategy would see the investment of R300bn over seven years. This has now been revised to about R180bn.