New transport minister Barbara Creecy says the real reason Transnet finances appeared to look good during former president Jacob Zuma’s years was because the entity was neglecting maintenance of rail infrastructure and not because it was a well-run organisation, as claimed by the MK Party (MKP) .
MKP MP Thalente Kubheka launched a scathing attack against President Cyril Ramaphosa’s administration, saying it had taken only five years for “a great corporation” like Transnet to spectacularly decline and shrink by 43.5% under his and former public enterprises minister Pravin Gordhan’s leadership.
He was speaking during a parliamentary debate on the department of transport’s budget vote.
For many years it was taking money meant for maintenance and floating it as cash so the balance sheet looks much better than it was.
— Transport minister Barbara Creecy
“One thing we don’t agree on is why the rail system, particularly Transnet, is facing the problems it is facing. We agree the high point in freight was, as you said in your speech, when we were transporting 227-million tons in 2018,” said Creecy.
“We also agree it is unacceptable and paltry that today we are only transporting 149-million tons.”
Creecy said the question that should be asked is why Transnet was able to show “such a wonderful profit” on its balance sheet in 2018.
“It was because what they had been doing for many years was taking the money meant for maintenance and floating it as cash so the balance sheet looks much better than it was,” Creecy said.
The consequence was that rail maintenance was not done.
“If you take the Kumba line today, that is a very old line. The rails have not been replaced, they are cracking and there is a consequence of this magical figure you mention: 2,500 Kumba workers stand to lose their jobs.”
Creecy said she thought it was important to be honest when dealing with what happened in the rail system.
“What kind of rabbits were pulled out of the hat, and what was the consequence of those rabbits being pulled out of that hat? Because it’s not you and me facing those consequences, it is the workers of Kumba.
“The workers and other organised workers have said to me, ‘your priority is to get the freight to port, it is to stop retrenchments, to make sure we create more jobs and to make sure none of us lose the jobs we have because our families cannot starve.’”
Creecy said this means government is going to have other participants in the rail sector and port sector so it can do proper maintenance, build new lines, save and create jobs and can build the economy properly because the transport system should be about that.
Kubheka had earlier said it would be prudent for Creecy to tell people why and how Transnet and the Passenger Rail Agency of South Africa found themselves in difficult positions.
He said Transnet under Brian Molefe and later Siyabonga Gama had made net profits up to R5bn per annum after paying all its borrowing costs.
“This was a business running effective operations. It had introduced an investment programme known as the market demand strategy, had introduced efficiency measures and was meeting most of its customer’s needs.
“Transnet boasted a strong balance sheet and positive cash-flow position, and borrowed money from capital markets on the strength of its balance sheet and cash position.
“In three short years from 2021, Transnet was transformed into a critical failure and from 2023 finds itself in a bail zone, requiring and depending on financial guarantees from National Treasury for its borrowings and begging for allocations from the national fiscus.”
Kubheka said it was a matter of record that South Africa was in a deep economic crisis, largely due to the declining rail and port performance, with freight volumes dropping significantly from 2018 to date.
It is a matter of record that Transnet transported 227-million tons in 2018, shortly before the sixth administration came into office. The volumes transported decreased to 149-million tons in 2023.
“This is a 35% decrease over a five-year period under the Popo Molefe board appointed by Gordhan in 2018,” said Kubheka.
He said the 2018/19 Transnet corporate plan indicated it had been projected the company would handle 264-million tons by 2023.
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