Transnet on its Strategic Direction for 2002/03

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE
12 June 2002
TRANSNET ON ITS STRATEGIC DIRECTION FOR 2002/03

Chair: Mr B Martins (ANC)

Documents Handed Out:
Transnet Strategic Direction 2002/03 Part 1
Transnet Strategic Direction 2002/03 Part 2

SUMMARY
The Transnet Board Chairperson and the group CEO highlighted the strategic direction of Transnet - which includes such divisions as Spoornet, SAA and Transstel. Priorities include ensuring that employment equity targets are met, maximising profits, ensuring ethical conduct as part of good corporate governance as well as maintaining a good public image.

MINUTES
Input by Chairperson of Transnet Board
Dr B Khumalo noted that their approach as a board is to be "eyes and ears-on" - rather than to be "hands-on" which approach they felt should be left to the executive management of the organisation. On issues of corporate governance, he pointed out that the group CEO meets regularly with unions and he himself has also been involved similarly to ensure good industrial relations. He pointed out that the focus of the Board in 2002/03 is the alignment of the organisation's policies with national policies, mandates and interpretations of stakeholder expectations and mandates aspirations.

The Board prioritises visionary, dynamic and decisive leadership. They believe they have an important role to play in the support of NEPAD-related initiatives. The Board also looks at practising good corporate governance and it acts on transgressions and alleged transgressions very decisively. The group CEO and himself will lead a re-launch of the good corporate governance initiative.

Dr Khumalo noted that the nature of the group's shareholding is that profit generation goes hand in hand with development. Productive and mutually beneficial stakeholder relations is also a priority area. These stakeholders include Parliament, Department of Public Enterprises, employees, Department of Trade and Industry, as well as the customer. He pointed out that the customer is the most crucial stakeholder as business centres around him. The image and reputation of the organisation is also a priority for them because this has an influence on how people perceive the organisation. The better the reputation, the better the chances for industry and public partnerships and business.

Safety in services, especially in the rail industry, is apparently one of the most crucial focus areas for the organisation.

As a rule, successful organisations are vigilant about: technological leadership/prowess, financial health, fiscal base as well as financial integrity. These organisations are also vigilant about people management and human resources management, here best practices are a must. He pointed out that their employee programmes ensure that Transnet employees are well looked after.

The value system and corporate culture of Transnet includes:
- customer obsession because the organisation is there because of the customer - who must be well looked after.
- innovativeness by making sure that they encourage and reward innovations.
- industriousness/productiveness equal productivity and this is where every employee has to be worthy of being a Transnet employee.
- respect amongst colleagues is also a central value.
- corporate patriotism which involves the will to protect the name of the organisation especially regarding controversial situations.
- frugality which basically entails the optimal use of resources in a diligent and honest manner whilst adding value to the organisation.
- probity is central in good corporate governance and that this entails leading by example, from the board itself down to the most junior employee with a strong emphasis on ethical conduct at all times.

Input by Transnet CEO
Mr Mafika Mkhwanazi briefed the committee about the journey Transnet has taken in transformation since its formation in 1910 as the SAR&H. In 1981 the organisation was changed to the South African Transport Services (SATS) and in 1990 it became Transnet.
In 1991 a manpower utilisation plan was launched to streamline the organisation so as to become competitive. Another milestone took place in 1996 when executive management was appointed to lead the group. Other milestones include the adoption of the Public Finance Management Act (PFMA) as well as the restructuring of the Transnet Pension Fund ably assisted by the Portfolio Committee on Public Enterprises.

Mr Mkhwanazi noted the Business Units within Transnet: Metrorail and Spoornet (rail transport), Petrorail (fuel and energy related issues), National Ports Authority (sea-related transport) with the SA Port Corporation playing a more hands-on role, Propnet (administering all Transnet properties), Transtel (internal telecommunications although this will change somewhat with the unit's involvement in the second fixed line operator venture).

Employee and social environments units include Transnet Housing, Transmed Fund, Pension Fund and the Transnet Foundation Trust. Transnet subsidiaries also include: Autopax for road transport, B2B Africa holdings, Protekon Engineering Consultancy, Marine Data Systems, SAA and Arivia.kom amongst others.

Mr Mkhwanazi also noted the group's interpretation of shareholder expectations:
- good corporate governance,
- infrastructure development,
- black economic empowerment,
- employment equity amongst other issues.

He pointed out that since black management had taken over at the organisation, Transnet has not made any losses. He stated that Transnet is in the top three regarding transformation initiatives for employment equity. This includes pilot and train driver training focusing on the historically disadvantaged persons.

The strategic intention of Transnet is to manage and develop profitable, self-sustaining business in a select range of portfolios. Strategic objectives include human capital development, as well as increasing the financial value of the organisation. The business focus is to ensure market leadership in logistics solution provision and leveraging the property portfolio for maximum return.

The critical success factors are identifying business portfolios that Transnet wants to participate in, capital requirements and prioritisation as well as potential investment partners amongst others.

Financial objectives include increasing the financial value of Transnet and providing the shareholders with appropriate dividends, measurements include to improve net operating profit as compared to the previous year and also to improve cash generated from operations.

Customer objectives include to develop and maintain an advanced business competence measured by public fatalities, safety index, NOSA rating, market share, etc.

Internal objectives include to ensure a high degree of safety standards measured by Black Economic Empowerment spending, employee fatalities, improved corporate governance, etc.

Lastly, learning and growth objectives include to enhance human capital developments through an effective training programme and business leadership and these are measured by performance management implemented for all levels, training spending as a percentage of operating costs in seven categories including employment equity, containment and management of HIV/AIDS as well as staff turn-over.

Discussion
Mr Khomphela (ANC) thanked Transnet for the progress shown by their presentation. He pointed out that they were showing that black people can and are taking the country forward. He also commended the CEO on the intervention regarding the Jakavula housing scandal. He added that since Transnet was historically white, he would like to see them also bringing up cases of misconduct, theft, etc as committed by white people where applicable.

Mr Sibiya (IFP) thanked Transnet for their presentation. He wanted to know as to what plans are in place to prevent corrupt practices like those by Mr Jakavula. Secondly, he noted that they seem to have focused more on women empowerment, what about the disabled?

Mr Henning (NNP) asked what assurance Transnet can give that there will not be a repetition of the Coleman Andrews saga - not only SAA but other divisions as well. He said that he is concerned that Mr Macozoma is not even concerned about clarifying as to why he acted in the way he did.

On the issue of female managers, Mr Louw (ANC) asked if these were females in general or black females specifically. Also, where exactly are the Transnet-owned buildings built in the rural areas?

Mr Khumalo pointed out that they have circulated guidelines on good corporate governance and they are going to re-launch this campaign in three weeks time at the organisation. He noted that a good (ethical) corporate governance culture is part of the performance contract that an employee signs at the organisation, especially at senior level. Regarding the SAA saga, he said that Transnet feels that this is behind them and new systems to ensure customer satisfaction, financial viability as well as good corporate governance are in place.

Mr Mkhwanazi replied that on the question of discipline, they deal equally with both black and white employees who might have transgressed. On the question of the disabled, he pointed out that Transnet is deliberately recruiting the disabled people as part of its equity policy. On the issue of training female managers, he pointed out that generally it is more blacks as they are the worst of the worst. Regarding rural schools, he pointed out that they unfortunately have not brought along the information but it will be forwarded to members in a short period of time - within this week.

Meeting adjourned.