"This is a sector that is struggling fully to transform... Today's announcement is a contribution towards changing the landscape of this industry," Gigaba told reporters in Johannesburg.

The audit firm has been appointed for five years at a cost of around R70 million a year.

This was the first time in South Africa that a local, black-owned firm would handle the entire audit account of a company the size of Transnet.

In its previous financial year, Transnet's annual revenue was R38 billion with audit fees of just over R60 million, making it one of the biggest audit contracts in South Africa, the parastatal said in a statement handed out at the briefing.

Gigaba said the transformation of the accounting industry remained a "sore point in our democracy and society at large".

The sector was still dominated by white South Africans at 89 percent, while black Africans represented only around three percent.

The minister said he had asked the boards of all state-owned enterprises to review their transformation progress.

Where it was time to rotate suppliers, their choice of a new incumbent should be determined by the empowerment agenda, he said.

Chairman of Transnet's audit committee Peter Moyo said SizweNtsalubaGobodo had undergone a rigorous process before being appointed.

"When appointing black people there is the question around compromise," he said.

Transnet went through a very rigorous and thorough appointment process.

"We looked at the independence of people, their ability to do the work, the price and their transformation credentials," Moyo said.

"SizweNtsalubaGobodo competed against very established firms -- and met all our criteria without any compromise. Transformation is not equal to lowering standards."

SizweNtsalubaGobodo would provide a team of 150 people to the Transnet project.

Gigaba said the appointment of SizweNtsalubaGobodo took place at a critical time as Transnet was rolling out a R300 billion capital investment infrastructure programme over the next seven years.

The firm was chosen out of three bidders based on technical ability, black economic empowerment and price.

Gigaba said his department was going to be hard on transformation with all SOEs.

"We will brook no deviations from those objectives [of transformation]," he said.

"We will assess the performance of the boards of directors on the extent to which they comply... but we want compliance not for its own sake but because they need to buy into the transformation agenda."

Gigaba said the idea was not for the big four accounting firms --PricewaterhouseCoopers, Deloitte, KPMG and Ernst & Young -- to be denied work by SOEs.

"We want to challenge the big four to transform... when they set up teams to audit state-owned companies we are going to insist on transformation," he said, adding that there should be black and female auditors on those teams.

"This is government's money and we want to spend it in ways that enhance government policies."

Gigaba said government had made it clear that SOEs must play a critical role in skills development, improved local procurement and supporting the broader transformation objectives.

He said other SOEs would be making similar announcements soon.