The Standing Committee on Public Accounts (SCOPA) has raised concerns about the impact of the current dispute between Transnet and Chinese locomotives’ supplier CRRC E-Loco on Transnet’s financial health.
The committee yesterday met with the Minister of Transport, Ms Barbara Creecy, and Transnet executives for an engagement on Transnet’s audit outcomes for the 2023/24 financial year. Transnet received an unqualified audit opinion with findings on compliance with legislation.
According to the 2023/24 annual report, Transnet Freight Rail faces a significant shortage of locomotives due to CRRC E-Loco’s refusal to deliver locomotives and spare parts. This has directly affected Transnet’s ability to deliver on its mandate.
The Chairperson of SCOPA, Mr Songezo Zibi, probed Transnet executives on how to resolve the impasse, raising concerns about the impact of the dispute on Transnet’s operations and the increasing debt.
“We have committed funds, have borrowed those funds. We have procured locomotives, and we don’t have them. There are governance issues. There is an issue with the revenue services. There is an issue with the South African Reserve Bank. The net effect of that is a gap in the capacity of the operations to be able to meet their objectives,” Mr Zibi said.
Group Chief Executive Officer of Transnet, Ms Michelle Phillips, informed SCOPA that Transnet purchased 1 064 locomotives, but all of those assets did not come into the system. “We are not getting the benefit of all of those assets, whilst at the same time we are having to pay for loans, whether it be redeeming loans or costs attached to those loans, despite not having the return that is attached to the specific loan,” she said.
Ms Phillips said the dispute is one of the causes for Transnet’s rising debt. “Unfortunately, we have to continue to increase the debt,” she said.
Another contributing factor Ms Phillips cited for rising debt costs is the theft of cables and signaling systems, which have resulted in a revenue loss of approximately R2.1 billion in the 2023/24 financial year. “Cable theft incidents in 2016/17 stood at 1 709 incidents, in 2018/19 it was 1 598 and in 2023/24 that number increased to 4 411 incidents of cable theft. In all these incidents, Transnet loses revenue,” she said.
Furthermore, Ms Phillips said Transnet’s debt has increased from R122 billion in the 2017/2018 financial year to R130 billion in the 2022/23 financial year.
Mr Zibi said he believes that multiple interventions are needed to resolve the dispute. “We need those assets, and they should be here because that has an impact on the volumes that we are able to transport,” he said.
He concluded by informing Transnet that SCOPA will hold a follow-up meeting with the Minister to discuss Transnet issues and will be conducting an oversight visit to the entity to look at governance issues and financial management, and the impact these have on Transnet’s finances.
“You have earned yourself an oversight visit from the committee. The things that are important to the committee is the strength of the governance, financial management, issues with supply chain management, the ability of the operations to generate enough cash in order to help Transnet to meet its mandate, the extent of the debt that it has and its impact on its financial status,” he said.
Faith Ndenze
11 September 2024
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