Transnet told Parliament yesterday that it was to focus on rail network rehabilitation as the logistics group posted a 4% compound annual growth rate (CAGR) decline over 2022/2023.
This comes as it also aims to improve service delivery, improve rolling stock quality, deploy digital solutions for greater efficiencies and client responsiveness and address security-related incidents amid the challenges and constraints experienced by the freight rail division.
Presenting its financial report for 2022/2023 before the portfolio committee on public enterprises in the National Assembly, Transnet said in the next financial year, it intended to optimise commercial returns through reviewing cost allocations, leverage private sector participation models to raise capital, enhance volumes and improve utilisation and align to rail reform requirements.
Transnet’s irregular expenditure of R2.2 billion, which decreased by R561 million in the 2023 year, was incurred by R1.7bn multi-year contracts, repeat non-compliance with various supply chain management prescripts, and fruitless and wasteful expenditure, among other shortfalls.
It said there was a widening gap between required and actual capitalised operational expenditure (copex) deployed, which had increased to roughly 302%, resulting in freight volumes declining significantly by 6.6% (CAGR) over the period under review.
A decline in copex is a result of multiple factors, including the inability to access locomotive spare parts, long-standing locomotives and the lack of IP and technical support from multiple original equipment manufacturers (OEMs).
The struggling logistics operator said at the end of financial year 2019/20, there were 106 long-standing locomotives, which had increased to 315 by the end of the 2023 financial year and had contributed to the decline and decreased locomotive reliability.
A huge spike in cable theft incidents over the past five years was escalating revenue loss and repair costs. Over the past five years, there had been a 179% increase in security-related incidents, resulting in the theft and vandalism of infrastructure. Although there was a 30% improvement in incidents in 22/23 when compared to the previous financial year, incidents remained high.
Crippling theft and vandalism of key infrastructure had also resulted in operational disruptions, including cable theft, which increased from 120km stolen in 2017/18 to 1 506km in 2021/22, but which had reduced to 1 037km in 2022/23.
Transnet clarified that the net financial impact for 22/23 of the cable theft and vandalism was R3.7bn, which was a marginal improvement from the R4.1bn from financial year 21/22.
Transnet reported a 0.6% revenue increase due to port and pipeline networks, automotive, break-bulk and petroleum volumes, offset by lower rail and container volumes.
Net operating expenses were contained at 2.0% increase despite a challenging economic climate and impairment of assets.
The logistics group last week announced the establishment of an interim infrastructure manager, a move that will culminate in the reform of the country’s rail network by, among others, opening the market to third parties, with effect from April 2024.
In another development, the Special Investigating Unit (SIU) and Transnet said yesterday that they had been granted an order to interdict pension benefits of former executives worth R8.9m.
The SIU said that along with Transnet, they received an order from the Special Tribunal to interdict the pension payout due to two former Transnet executives linked to fruitless and wasteful expenditure of about R33.5m.
The SIU said in a statement that in terms of the Special Tribunal order, Lerato Mary Theresa Makenete, former executive manager responsible for group business continuity and disaster management, and former executive manager for safety, Landela Hawkins Madubane, have been interdicted from withdrawing their pension benefits from the Transnet Retirement Fund.
BUSINESS REPORT