Transnet on its Annual Report and Financial Statements for 2013/14

Meeting report

Chairperson’s opening remarks
The Chairperson received apologies from Mr N Kwankwa (UDM), as well as from Mr N Singh (IFP), who would be departing early from the meeting.  She welcomed everyone and said that they would be encountering Transnet for the first time as a Committee. She also welcomed the Chairperson of the Transport Portfolio Committee, Ms D Magadzi (ANC), with one of her committee members, Mr L Ramatlakana (ANC). She also acknowledged the presence of the Passenger Rail Agency of SA (PRASA) CEO, Mr Tshepo Lucky Montana.

Presentation by Transnet
Mr Brian Molefe, Group Chief Executive Officer of Transnet, reported that there had been a 12.8% rise in revenue, amounting to R56.6 billion, and earnings before interest, depreciation, tax and amortisation (EBITDA) had increased by 12.13%, to R23.6 billion.  Yearly profit had increased by 24.9%. Gearing was at 45.9%, and cash interest cover was at 3.7 times.  Capital investment had risen by 15.6% to R31.8 billion.  Cash generated from working capital changes had increased by 11.6%, to R25.3 billion. There had been a strong growth in automotive containers on rail of 25.2%.  Total B-BBEE spend had been R38.8 billion, which amounted to 94.4% of the total measured procurement spend for the year, in line with Department of Trade and Industry (DTI) codes.

Referring to energy and carbon emissions, he said Transnet had recorded a 0.2% reduction in electricity consumption, as well as a 0.9% reduction in carbon emissions, and while these seemed like low numbers, they were significant reductions given the nature of their sector.  While they had introduced cost reduction initiatives due to the uncertain economic environment, they had encountered several economic factors, such as the strikes of NUMSA and an unrecognized union, which had stopped the coal lines. Transnet’s total borrowings had increased by 23.7%.

Mr Molefe informed the Committee that Transnet had community outreach projects which encompassed health, education, sports development and volunteering, as well as heritage preservation.  In the interests of safety, the entity strived to reduce employee fatalities.  They had recorded seven fatalities in the 2014financial year, compared to nine in the previous financial year.

In terms of human resources, they had exceeded the target for black employees.  Their representation of women in executive positions was growing and they had maintained a 50% percentage.  Following another successful year of market demand strategy (MDS) implementation, they were confident that these strategic objectives remained appropriate and relevant in the context of the South African economy. They would be prioritizing operational efficiency and volume growth in their continued implementation of MDS.

The Chairperson thanked Transnet for their presentation and asked members to engage with what had been presented.

Discussion

Ms N Michael (DA) enquired about the Durban port, which was reported to have had an interruption.  Transnet needed to brag more about the work they did in communities, because South Africans did not know about it.  They had great initiatives, and those needed to be celebrated accordingly. She also enquired about the confusing pension fund scenario, because they had received differing reports in the media.

Mr E Marais (DA) wanted to know about the Saldanha harbour development, and what it meant for Transnet.  He also enquired about the impact of the entity’s increased borrowings.

Ms P van Damme (DA) commended Transnet for their ability to address gender issues, as well as their community outreach projects. She asked about the unrecognized union which had embarked on a strike.

Mr M Cele (ANC) also enquired about the pension fund issue that seemed to be controversial in the media.  He added that the programmes provided by Transnet should be accessible to all South Africans, especially those in rural areas.

Ms D Rantho (ANC) wanted to know if Transnet had any interaction with training colleges, and if they were able to reach communities as far afield as Sterkspruit with their programmes, as they were the ones who needed them the most.

The Chairperson asked if Ms Magadzi had anything to ask or to add to the discussion.

Ms Magadzi thanked the Chairperson for the opportunity of attending the committee meeting.  She wanted Transnet to have a strong relationship with the portfolio committees of both Public Enterprises and Transport in order to facilitate a united approach towards improving South Africa’s public transport and ensuring access for all.

Mr Thabo Lebelo, Transnet Property Group Executive, explained what happened in the case of the Durban port disruption.  He said there had been a failure of the system which facilitated the movement of trucks on the road as a result of the Neotel internet service provider crashing.  It had taken about 25 minutes for the system to come back on line, which meant that there had been a disruption of the movement of trucks on the road.

Mr Molefe said the pension fund issue was not an issue of merit, but rather a class action based on a misinterpretation of what the purpose of Transnet had been in replacing the South African Transport Services in 1990. A judge had granted a class action on behalf of the aggrieved, and Transnet had lodged an appeal which sought to challenge this.  The date of the appeal would be confirmed by the end of business that day.

Ms Rantho said that Transnet should not give the ‘nitty gritty’ details on the pension fund case, but rather provide a summary.

The Chairperson noted this concern.

Mr Molefe continued that borrowings should be seen in relation to total assets.  At that point in time, their borrowings were not worrisome, even though they had increased.

Ms Disebo Moephuli, Transnet’s Chief Risk Officer, said that they strived to eliminate employee fatalities completely.  Most accidents were caused by car accidents, as well as not adhering to standard operating procedures.  They had a driver training initiative aimed at reducing accidents.

Ms Magadza said that even though it might not be economically viable, Transnet should consider opening lines in rural areas in order to include marginalized rural people.  She believed trains would be most convenient for them, and they should enjoy the same privileges as all South Africans.

Mr R Tseli (ANC) emphasized the fact that all programmes should be focused on rural communities, as they needed them the most.

Ms Rantho wanted to know if Transnet had regional offices, and raised concern over the travelling expenses for the large delegation which the entity had brought to the meeting. She said that freight was moving to the road, and it would assist to bring it back to rail in order to reduce the number of vehicles on the road.

Mr Molefe said the entity was committed to expanding its train lines in order to include all South Africans. This was in line with their outreach initiatives, which sought to take care of the vulnerable in society.  They tried to reach as many people as they could, but they had budget constraints.  Opening more lines was part of their long term initiatives.  He added that they had good relations with The Southern African Development Community (SADC), especially Zimbabwe, with whom they shared ideas and advice.  There was a strong focus on social responsibility.

The Chairperson thanked Transnet for their presentation and added that they all needed to be social activists together, working with other entities to ensure they made South Africa a better place for all.  She thanked the Chairperson of the Portfolio Committee on Transport and the CEO of PRASA for attending the meeting.

The minutes of the Committee’s previous meeting, after a minor amendment, were proposed for adoption by Ms Michael, and seconded by Ms Rantho.  The minutes were adopted.

The meeting was adjourned.