GHALEB CACHALIA: Getting to the bottom of the Transnet problem

After Transnet CEO Portia Derby’s abrupt departure, Transnet Freight Rail (TFR) CEO Siza Mzimela has now gone too. And about time; she mismanaged this critical state-owned enterprise (SOE). After previously presiding over the collapse of SA Express, Mzimela was allowed to move on to Transnet without skipping a beat — unlike the SA Express employees, who were simply abandoned.  

Executive musical chairs aside, the bottom line is that Transnet is simply too big and unwieldy to run, especially with the state as the shareholder and a board that really reports to nobody. You can slice and dice the executive until you are blue in the face. Like Eskom, Transnet’s structure and lines of control are hopelessly inappropriate. 

TFR should be broken into four or five more manageable operations. The Sishen line, the coal line, the Northern Cape line to Gqeberha, the container corridor and all the other infrastructure should be independently owned. 

Another suggestion has been that longer trucks should be allowed on the N3 in the short term, with conditions that ensure their drivers cannot bypass toll gates. The tolls should be increased significantly, and the revenues used to subsidise the repair and upgrading of rail infrastructure. With working rail lines and the incentives aligned in the right direction, progress can be made.  

Urgent operational surgery aside, the blame for the demise of SA’s freight rail system must be placed squarely on the shoulders of the shareholder: government. How many CEO exchanges has the shareholder made? That tells you where the problem lies. The government is the problem; it can’t or won’t appoint the right people to run Transnet. 

How many years has public enterprises minister Pravin Gordhan had to get this right? Yet he has failed to make the right appointments at Eskom and Transnet to ensure they are run properly. The people he has appointed he has ended up firing. Not to put too fine a point on it, either there is something wrong with him or the governing party or the system.  

No other country operates such diverse and distinct businesses as part of the same group. So even if the government was able to find an executive who truly understands all of the businesses of Transnet in detail — an expert in freight rail, ports and pipelines wrapped up in a single individual — he or she would still fail. The contextual conditions are wrong. You simply cannot win as things are. 

The shareholder structure is wrong, political interference abounds and corporates within the monopoly are incorrectly integrated. That’s the problem. Not the pawns on the board or the deployees to the executive — they’re just window dressing. This is an extremely important moment for SA. Wisdom and statesmanship are required, and there’s no sign of it coming from Gordhan or elsewhere in government. 

The more people like Derby and other disastrous deployees who are well out of their depth are appointed, the more the minister blames the appointees. And when the occasional executive stands up to the minister, as did André de Ruyter at Eskom, they are unceremoniously shown the door and accused of having a political agenda. Either way, you can’t win. 

Procurement constraints

The bald facts are that you cannot operate a company like Transnet sensibly and profitably given the existing procurement constraints: (affirmative procurement policies); staffing constraints (BEE and cadre deployment); horizontal integration (negative scale effects of managing unrelated businesses as if they belong together); vertical integration (monopolies across the value chain that allow rail and ports to be under the same corporate entity); and an inability to reduce the cost structure (politics). 

If one were to offer Elon Musk, the Google boys, Apple’s Tim Cook or Amazon’s Jeff Bezos or the Virgin Atlantic grandpa the opportunity to run this company under these conditions they would laugh at you and wish you good luck. They might be less disparaging if procurement, deployment and staffing policies and practices were dealt with and other key measures effected, including the introduction of incentive systems, structural reform, cutting the company into its constituent parts and introducing sensible business practices. 

A pertinent question with regard to incentives is how Transnet Port Terminals pays its employees who drive the straddle carriers. Are they being incentivised to hit 20 “moves” per hour, the global standard? Presumably not, since the average number of moves has been low. Experts agree that incentivising of straddle carrier operators would be beneficial, but Transnet and the trade unions apparently disapprove of bonus schemes if other employees aren’t also given the chance to earn more. And we wonder why our port rankings are at the bottom of the global efficiency tables?  

To address the inefficiency problem Velile Dube was brought in as CEO  of Transnet Port Terminals in July 2020. He resigned or was shown the door in October 2021 and is now head of economic development & tourism in the Western Cape government. 

But let’s get back to what needs to be done. What is needed is to cut the business into its functional parts and allow management to manage the various parts without political constraint. Hold their feet to the fire and reward them if they succeed. Gordhan now admits that incompetence has been a problem at the apex of Transnet. But who approved the appointments?

A decade of playing with the lives of South Africans and the country’s economy should be proof enough that the minister must go. The problem with Transnet is not one of capability; it is one of governance. Once that is sorted it will be easy to sort out capability. Then, plainly stupid policies can be abolished and the company restructured. 

The time has come to resist calls for the president to get involved, as even Business Unity SA (Busa) has done, or for the appointment of new executives and “better management” of Transnet and Eskom without first making fundamental changes to the way SOEs are structured in SA. 

• Cachalia, an MP, is a member of parliament’s public enterprises portfolio committee and DA spokesperson on public enterprises.