The Standing Committee on Public Accounts (SCOPA) was briefed by the Special Investigating Unit (SIU) on its investigations into matters involving Transnet. It was told that the Unit had concluded investigations into eight matters related to the findings of the Judicial Commission of Inquiry into State Capture. Transnet also presented its annual report and financial statements for the 2021/22 financial year, focusing on the entity's irregular, fruitless and wasteful expenditure.
The SIU’s presentation explained the phased approach it was using to deal with its investigations, with particular emphasis being placed on the acquisition of 1 064 locomotives involving four contracts with original equipment manufacturers, valued at R54 billion. They were also dealing with shady contracts, allegations of corruption and conflicts of interest.
Transnet’s presentation concerned an overview of asset optimisation, long-standing legal matters and financial performance. Their presentation also noted matters related to compliance, the organisation’s strategy, and the repositioning of the business.
The Committee asked Transnet about the impact of their voluntary separation packages, the internal risks of controlling information technology systems, errors in reporting found in their financial statements, and the use of consultants rather than the organisation's internal capacity when capturing financial data. The Committee also raised concerns around the procurement of locomotives, the vetting of executives, the blacklisting of directors, the decline of freight rail and security concerns.
The Chairperson set out the meeting’s agenda, which included a briefing on Transnet’s 2021/2022 annual report and financial statements. This meeting was initially scheduled for June, but a postponement was requested. He said this could add to a level of confusion, as Transnet had released their 2022/23 annual report on Friday. From time to time, they would refer to issues emanating from the latest report, but engaging with the 2021/2022 annual report was the priority. This was so matters could be closed correctly.
The Chairperson said Transnet was now reporting a R5.7 billion loss, and needed a turnaround strategy. He noted the comprehensive and elaborate disclaimer of “may, shall, hope and believe” in the Transnet presentation. The Committee would touch on this from time to time, but would still consider it in its entirety. However, the main task in the meeting was to engage with the 2021/22 annual report and financial statements.
He welcomed Mr Pravin Gordhan, Minister of Public Enterprises, and delegates from Transnet, the Special Investigating Unit (SIU), the Auditor+General South Africa (AGSA) and National Treasury. He said an opportunity would be given to the Minister to make opening remarks, followed by the SIU and Transnet presentations, which would be taken as read. The hearing after the presentations would be led by Mr S Somyo (ANC) and Ms B van Minnen (DA). He requested that everyone be mindful of time in their questions and responses, as there was a sitting at 14h00.
Minister Gordhan said there were annual reports for two financial years, which would allow the Committee to see the progress made between the years. The challenges were issues the Committee had been dealing with over time; therefore, the responses could sound familiar. He would come in when needed.
The Chairperson said the SIU’s presentation would be first, and all presentations would taken as read. He asked Advocate Andy Mothibi, Head, SIU, to proceed.
Special Investing Unit’s presentation
Adv Mothibi presented an update on the SIU's investigation to the Committee, outlining the progress and results on the matters investigated in Phases 1 and 2. He also set out the focus areas and matters allocated to Phase 3. The SIU had adopted a phased approach as the investigation methodology, and had concluded investigations into eight matters related to the Judicial Commission of Inquiry into State Capture and Transnet.
Phase 1 investigation focus areas
The SIU was investigating allegations of irregularities in the following contracts/matters:
- Acquisition of the 1 064 Locomotives; four contracts with original equipment manufacturers (OEMs) valued at R54 billion;
- Relocation of two OEMs from Koedoespoort to the Durban facility at a cost of R1.4 billion;
- Maintenance of locomotives by China South Rail (CSR);
- The appointment and contracts awarded by Transnet with three transactional advisors (McKinsey, Trillian and Regiments), and the interest rate swap transactions concluded with Nedbank;
- The award of a contract to Iqembu for the automation of processes for R70 million;
- Allegations of corruption;
- Conflicts of interest identified through the SIU’s forensic data analysis.
Phase two investigation focus areas
- Contracts awarded to Neotel (Pty) Ltd for the supply of closed circuit television (CCTV) cameras at the ports to the value of R882 million, the master service agreement and other contracts;
- Software solutions contracts awarded to Systems Applications Products (South Africa) (Pty) Ltd (SAP);
- The procurement of an analytical tool to the value of R72 million – Cutting Edge;
- An information communication technology (ICT) contract awarded to T-Systems South Africa (Pty) Ltd, and the involvement of Zestillor; and
- A wagon optimisation and demurrage solution and payments to Global Softech Solutions (Pty) Ltd (GSS)
Phase 2 KwaZulu-Natal (KZN) matters
- Roll-on-roll-off (RORO) tender
- The reconstruction, deepening and lengthening of the Durban container terminal berths 203 to 205
- New multi-product pipeline – allegations of corruption involving IGS Consulting Engineers and Transnet Group Executive, Mr Herbert Msagala.
- Tandem cranes procured from ZPMC Engineering.
- Cranes procured from Liebherr.
- Transnet pipelines investigation referred to the SIU by Transnet Group Forensics.
High level summary of key outcomes
- Seven civil matters before court
- Value of contracts in respect of civil matters before court -- R56.9 billion.
- Actual Cash recoveries -- R113.6 million.
- Value of contracts set aside/civil actions -- R26.4 million.
- 14 disciplinary referrals
- 92 referrals to the National Prosecuting Authority (NPA) referrals.
- 60 administrative referrals -- South African Revenue Service (SARS), blacklisting, Construction Industry Development Board (CIDB).
- Interim Presidential Report.
Status of investigations
- Procurement of the 1 064 Locomotives and the relocation of the building yard from Gauteng to KZN:
- Investigation concluded; ongoing support being rendered in respect of (iro) SIU referrals.
- Civil litigation underway.
2. Appointment of McKinsey, Trillian and Regiments: Transaction advisory for 1 064 locomotives:
- McKinsey - investigation concluded.
- Regiments – investigation concluded.
- Trillian – investigation concluded.
3. Nedbank Interest Rate Swap transactions:
- Investigation concluded; ongoing support being rendered iro SIU referrals.
- The SIU and Transnet had completed the court papers to bring a review application in the Special Tribunal, to review and set aside the interest rate swap transactions.
- Transnet and Nedbank in the final stages of mediation in an attempt to reach a settlement over the irregular interest rate swap transactions.
- Investigation concluded
5. Conflicts of interest investigations -- Transnet officials conducting business with Transnet without the required declarations/authority, identified through the SIU’s forensic data analysis:
- Investigation concluded; ongoing support being rendered iro SIU referrals.
6. Neotel – CCTV’s contract (now trading as Liquid Telecommunications).
- Investigation completed iro the CCTV’s contract to supply CCTV cameras to the Transnet National Ports Authority (TNPA) ports.
- The SIU found that the contract was awarded irregularly.
- The SIU investigating was ongoing into other contracts awarded to Neotel, including the minimum service agreement (MSA).
- Investigation completed.
- Senior Counsel (SC) to be appointed and briefed to recover bribes/commissions paid.
- The SIU was participating in settlement discussions with the NPA and Transnet.
8. Procurement of Analytical Tool – Cutting Edge:
- Investigation completed, civil litigation phase.
9. Zestilor contract ceded from T-Systems:
- Investigation nearing conclusion.
- T-Systems was no longer in South Africa, and the SIU team was considering the legal avenues available to the SIU to evaluate the prospects of successful civil litigation and recoveries.
10. Wagon performance optimisation – GSS
- Investigation concluded; ongoing support being rendered iro SIU referrals and civil litigation.
Status of Phase 2 KZN investigation
11. The reconstruction, deepening and lengthening of the Durban container terminal berths 203 to 205:
- Investigation completed -- civil litigation phase.
12. NMPP – Allegations of corruption iro corruption of a Transnet official: Mr Msagala:
- Investigation completed -- civil litigation phase
13. Cranes procured from Liebherr:
- Investigation concluded; ongoing support being rendered iro SIU referrals.
- Civil litigation phase.
14. Transnet pipelines investigation:
- Investigation concluded; ongoing support being rendered iro SIU referrals.
15. Allegations of corruption at Transnet Property Operating Division:
Phase 3 matters
Transnet had referred the following matters to the SIU for investigation:
- Tambo Springs
- Ambrose Park leases
- Waterfall Offices lease
- Newlyn leases
- Seaworld lease
- Various irregularities at Transnet Properties Operating Division
Status of Phase 3 investigations
- Allegations of corruption at Transnet Property Operating Division:
- Investigations ongoing into corruption and conflicts of interest.
- The SIU was working closely with law enforcement agencies (LEAs) to expedite the tracing of the flow of funds within the criminal syndicate, and money laundering companies that the SIU had uncovered.
2. Investigation into the provision of personal protective equipment (PPE) during the Covid-19 National State of Disaster involving the procurement of PPE:
- The investigation had been concluded and the SIU team was working closely with the relevant LEA’s and the NPA.
(For the detailed presentation, see annexure).
Adv Mothibi underscored that the perennial issue the SIU faced when investigating and making referrals was officials facing disciplinary action resigning. As stated before, however, even when the employer-employee relationship was terminated, the SIU continued to pursue these officials. When submitting civil litigation for recovery, these officials were cited as parties to the damage caused to Transnet. He said there was no escaping this, and when the SIU worked with the NPA referrals, these officials would not escape a criminal charge pursuit.
The Chairperson thanked the SIU and asked them to remain for the questions session after Transnet’s presentation.
Transnet 2021/22 annual report
The Chairperson said Transnet would now proceed with their presentation on the 2021/22 annual report. Ms Portia Derby, Group Chief Executive Officer (GCEO), would deal with the performance section of the presentation, and there were also sections of the presentation delineated to Ms Nonkululeko Dlamini, Group Chief Financial Officer (GCFO). He asked that the board make introductory remarks.
Dr Popo Molefe, Transnet Board Member, said he was no longer the chairman of the Transnet Board, but the new chairman had sent apologies for his absence. He said he was the only member of the board present in this meeting, and apologised for the absence of the other board members. The members of the board were new, and their absence was due to scheduling issues pertaining to other professional commitments. He said the GCEO would lead the presentation, along with executive directors where it concerned areas that needed to be covered.
Dr Molefe said he was pleased that the SIU had lucidly covered what they had dealt with regarding recoveries and consequence management around matters that had damaged Transnet. He asked that the GCEO proceed and, due to the large group of executives, that people should introduce themselves when they speak.
The Chairperson asked Dr Molefe to confirm he was a member of the board.
Dr Molefe said he was still a member of Transnet’s board,
Ms Derby commented that the absent board members were on "Teams" for responses if needed.
2021/22 annual report overview
Ms Derby listed what she described as the entity's unique assets:
- An overall asset base of R356 billion
- 3 800 km pipeline infrastructure
- 1 854 locomotives
- 64 329 wagons
- Eight commercial ports along 2 796km of coastline.
- 16 cargo terminals across seven South African ports.
- A 30 400km railway network track, and two heavy-haul lines.
- Six rail and port manufacturing and maintenance factories.
- 132 maintenance depots and 11 engineering yards,
- An investment property portfolio amounting to R29.1 billion.
She addressed three of Transnet's long-standing legal matters:
- McKinsey: Transnet had received the payment due to them of R870 million. Since the release of the State Capture Report, some of the OEMs have come forward to settle matters with Transnet with regard to the allegations.
- Richards Bay Land Claims: Transnet had entered into an agreement with the Mandlazini community in the Richards Bay area regarding a land claim settlement. The matter was to be formalised by the National Land Claims Commissioner.
- Total/Sasol: The Constitutional Court delivered its judgment on the SASOL/ Total contractual dispute on 21 June 2022.
Ms Derby went on to describe performance highlights of the freight rail and engineering divisions.
- Record weekly railed manganese (356 000 tons) had resulted in increased exports through the Port of Port Elizabeth.
- Automotive capacity was up by 25% by the re-opening of the central corridor goods line.
- The ore corridor had set a new weekly record of 1.36m tons.
- Re-opening of the Cookhouse Blaney branch line reduced travel time between East London and Gqeberha by 50%.
- Cross-border revenue of R263 million (2021: R173 million) was achieved against a target of R183 million.
- Research and development expenditure was R98 million (2021: R142 million), against a target of R99 million.
National Ports Authority
- Revenue increased by 8,5%, to R12.54 billion.
- A new operating model had been introduced.
- Automotive imports were up by 88%, and exports up by 16%.
- The Durban Multi-Purpose Terminal was 17.6% above budget due to increased ad hoc shipments and handling more bi-weekly services.
- Durban Agriport was 17% above budget due to the export programme and high demand for local grains.
- Petroleum volumes of 15.35 billion litres exceeded the prior year by 17.5%.
- Ordered versus delivered volumes were above budget at 98.9% (2021: 95%).
- The multi-product pipeline (MPP) capacity use of 91:148 Ml per week was 12% above the prior year.
- The planned versus the actual delivery times were above the prior year at 88.3% (2021: 83,2%).
- Net profit for the year before taxation was R1 526 million (2021: R569.7 million), due mainly to an increase in the value of the investment properties.
- Freight Rail properties had been transferred to Property as part of the strategy to consolidate investment properties under Property’s purview.
Financial performance summary
Presenting the financial performance summary, GCFO Dlamini listed the following statistics:
- Revenue of R68.5 billion was an increase of 1.8% over the previous year.
- Net operating expenses, at R45 billion, decreased by 5.9%.
- Earnings before interest, depreciation, tax and amortisation (EBIDTA) was R23.4 billion, and increase of 20.5%.
- Net profit after tax was R5 billion, compared to an R8.7 billion loss the previous year.
- Capital investment amounted to R13.2 billion, a decrease of 16.8%.
- Cash generated from operations was up by 18.1%, at R29.1 billion.
- Gearing decreased by 45.5%.
- Cash interest cover: 2.6 times.
- The lost time injury frequency rate (LTIFR) recorded a performance of 0.69 against a tolerance of 0.75, which was within the global benchmark of 1.0.
- The broad-based black economic empowerment expenditure (B-BBEE) expenditure had amounted to R29.2 billion, or 99.8% of target
Financial performance highlights:
- Transnet received an unmodified audit opinion for its annual financial statements.
- There was a R5.8bn government injection for the KZN floods and repair of long-standing locomotives.
- Gearing at 43.6% was an improvement compared to prior year.
- There was a reduction in irregular expenditure compared to the prior year.
- Successful issuance of US$1bn in global medium-term funding.
- Recovery of long outstanding debt.
- Moody’s had revised the entity's outlook to stable from negative, while S&P had affirmed its ratings at the BB level.
Ms Dlamini said Transnet continued to strive for improved performance amid key factors constraining operations. The main challenges facing the organisation were locomotive unavailability; security challenges (increase in theft and vandalism); derailments; the impact of the April 2022 KZN floods on operations; the October 2022 industrial strike action; and high levels of debt and high repayment obligations. The financial implications had been a breach of the lender covenant -- cash interest cover (CIC) -- and a loss position of R5.7 billion.
Regarding reportable items in terms of the Public Finance Management Act (PFMA), an exemption on irregular, fruitless and wasteful expenditure (IFWE) was applicable from FY 2022 to 2024. Irregular expenditure had been R2.2bn, of which R1.7bn was related to multi-year contracts, and resulted from repeat non-compliance with various supply chain management (SCM) prescripts. Fruitless and wasteful expenditure had decreased by R8m (67%), and was related mainly to losses suffered due to inadequate internal controls in place.
The IFWE exemption afforded Transnet an opportunity to deal with legacy challenges in the SCM environment, and to implement internal control measures that ensured accurate and complete reporting of IFWE. It was allowed to report its IFWE in the integrated report (IR) instead of the annual financial statements (AFS) effective from the financial years ended 31 March 2022 up to 31 March 2024.
Ms Derby gave an overview of Transnet's strategy to repositioning the business:
In line with the National Rail Policy and the economic regulation of transport, TFR had finalised the accounting separation to determine the actual cost of the infrastructure. This would provide input into the regulatory model determining a fair access fee. Infrastructure would be classified into three tiers -- A, B and C standard. The opportunity existed to continue investing and prioritising long-term sustainable and profitable income flows.
Engineering was well positioned as a final assembler and manufacturer of key components for rail.
National Ports Authority:
The TNPA, as a wholly owned subsidiary of Transnet, was focused on becoming a world- class port authority and would enhance oversight of port terminal operations. Transnet would retain control of the subsidiary and consolidate its assets, liabilities, revenue and expenditure. The future focus was on constructing a world- class hub port in Durban.
The port terminals’ strategy would see it to become a world-class port operator. Collaborative partnerships were being explored in terminal operations to position South Africa’s ports for continental infrastructure integration.
Securing a direct import terminal at the port of Durban and acquiring a terminal operating licence was a key strategic objective for pipelines in aligning with the Transnet liquid fuels master plan.
Transnet Property manages a portfolio of commercial and residential properties. There had been a shift from basic property management of non-core properties to a full-scale asset management approach of the entire Transnet property portfolio. Partnerships would play a pivotal role in some of Transnet’s investment property developments.
The resolution of critical challenges was being addressed in the following areas:
Transnet was shifting to an outcomes-based security contract, with a comprehensive security strategy and plan. It was working with the South African Police Service (SAPS) and security agencies to proactively address the criminality affecting the organisation.
Capital was required throughout the rail and port network for infrastructure refurbishment, maintenance and expansion, to support the key commodity segments. The cost of this could not be generated by Transnet’s operations. Interventions required a government-led integrated funding plan.
Transnet and the SIU had successfully brought an application in terms of Rule 30, challenging the China Railway Rolling Stock Corporation (CRRC) application to have the 1 064 locomotive contract review dismissed as an irregular step. Transnet was starting a new procurement event to make up the shortfall in traction power. In the event that the deadlock was not resolved, an alternative OEM support strategy would be pursued.
(For the detailed presentation, see annexure)
Mr S Somyo (ANC) acknowledged Transnet’s attempt at moving towards a positive performance. He said the shape of Transnet could be summed up as the major expenditure being personnel costs, at more than 50%. The actual movement of goods, which was mainly on rail, was around 48%. It could be assumed that the personnel-related costs were due to offering severance packages. He asked if Transnet wanted to address this concern. There were unintended consequences to offering severance packages, and he asked Transnet to outline the results and end game in real terms regarding these severance packages.
The Chairperson noted the format of the discussion would be one question followed by a response to that question.
Ms Derby said the severance packages were offered to 5% of their staff at the time. From those who wanted to take severance packages, the vast majority were close to retirement. In the instances where young people applied for severance and wanted to take severance packages, the People Team asked them to provide reasons for their departure. Where the reasons pertained to the environment in which the employees were operating, conversations were had with them, especially those with the latest skills. Transnet did manage to retain these employees.
Ms Derby said the impact faced by Transnet was not the result of the voluntary separation packages (VSP) being offered to employees. Transnet still had a staff of around 50 000, and aggressive training programmes for train drivers, and drivers that lifted equipment. Ms Derby said they ensured that more of the employees who carried the operating machines were retained.
For an efficient operational base system, IT systems were essential. Over a three to five year period, Transnet had completely outsourced its IT. Complete outsourcing meant that the service provider controlled the service and connectivity. Transnet’s connectivity had previously been outsourced to Liquid Intelligence Technologies, and before that to Neotel.
In terms of the period under review, if Transnet wanted to increase the scope of their contract with the service provider beyond 15% or R15 million, approvals from National Treasury were required.
Ms Derby said over the last period, when the new service provider contract kicked in, in 2020, Transnet had introduced a hybrid set-up allowing them to upgrade their IT systems, enabling it to run more efficient integrated systems and processes. This meant that they would start to have a base for operational efficiency.
In terms of outsourced IT systems, Transnet had taken over some pillars but was still embarking on taking over others and concluding tenders regarding support. The servers were at least under the control of Transnet. Applications had also been moved to the cloud, which was Transnet’s server environment. Regarding connectivity, Transnet had sold their equipment to Neotel and Liquid Intelligent Technologies, but had now taken over connectivity, which was important for implementing automated digital systems. This was because many of their processes and systems worked through various platforms that needed to communicate with each other, or communicated via manual manipulation, which led to inefficiency.
Ms Derby said her response was long, but in summary, inefficiency was not due to the 5% of employees leaving but due to Transnet’s underlying operating systems. It had now taken over most of the operational systems and concluded tenders for new partners. She said SAP had been introduced in 1979, and had not been updated in a while. Transnet was in the process of implementing the latest upgrade -- the SAP High-performance Analytic Appliance (HANNA). She said some operating divisions had been upgraded, but others had not. These upgrades were going to change the IT and operating environment for greater efficiency.
Mr Somyo asked if Transnet thought this process would result in broadened risks. He said that in response to these risks, there needed to be an institution that could deal with such exposure.
Ms Derby said Mr Somo was correct, and concerning the IT environment, Transnet had a Chief Information Officer (CIO). The CIO was responsible for the physical assets, such as the moving of data to the cloud and the moving of connectivity to a new service provider and Transnet in part. Each division had its own IT teams, because there was no standard operating system across divisions, except perhaps for the Finance and People divisions.
To deal with the issue of digitisation, they hired a Chief of Digital, who worked with each of the operating divisions and assisted with prioritisation. The immediate priority was for operating divisions, in conjunction with the CIO, to deal with operating systems and for the Chief of Digital, alongside the internal auditors, to deal with the digital side of things. The Chief of Digital and internal auditors worked on going through the risks and controls identified by the AGSA. Transnet had a strong team and supporters to prioritise these workflows.
The Chairperson asked all the executives present from Transnet to introduce themselves.
The executives from Transnet included Adv Sandra Coetzee (Chief Legal Officer), Mr Velile Dube (Chief Procurement Officer), Ms Silindile Khubeka (General Manager Loss and Control), Ms Basani Duiker (Chief Director: Supply Chain Management, Monitoring and Compliance, NT), Ms Jabu Mdaki (Chief Executive: Transnet Port Terminals), Adv Michelle Phillips (Chief Executive: Transnet Pipelines), Mr Pepi Silinga (Chief Executive: Transnet National Ports Authority), Ms Sizakele Mzimela (Chief Executive: Transnet Freight Rail), Mr Ashwyn Govind (Group Chief Security Officer), Ayanda Shezi (Spokesperson), Mr Ralph Mills (Chief Executive: Transnet Engineering), and Ms Sayeeda Khan (Chief Audit Executive).
Mr Somyo thanked Transnet for their response. He said that with Transnet having a Chief of Internal Audit, he hoped there would be consistency regarding compliance. He said over the period, some statements had needed correction -- in some cases, during the auditing process. He asked what the cause of this was. There had been statements needing correction during the current and previous audits.
Ms Dlamini responded that Mr Somyo was correct, and there were two areas Transnet was focused on to ensure there would be accurate and complete recording before year-end. She said the internal audit was important, as it assisted the within-year monitoring of challenges.
The GCFO said that going back three years, Transnet had had to deal with several areas to ensure stability. One of these areas was from a people perspective -- there had been changes on the ground, with people taking severance packages. Transnet was now training employees on the ground for the jobs they held. This was to ensure jobs were being done properly, resulting in a reduced need to correct errors in reporting. Ensuring people did their jobs at all levels meant that internal auditors would find fewer errors and external auditors arriving at the end of the year would then find no errors.
The CFO said Transnet was not in a position where all matters regarding compliance and reporting had been completely dealt with and there were no errors to be found. Once automated systems were put in place, it would be less of a job to ensure that numbers were being recorded. Automated systems would allow the focus to be on analysis. Prioritising the renewal of systems would contribute significantly to resolving financial year-end issues.
Ms Derby said she was no accountant, so when the issue of incorrect statements was raised, she wanted to understand what it meant. In terms of Transnet’s properties, four had been declared as non-current assets for sale, and per the International Financial Reporting Standards (IFRS), it would be stated that management was committed to selling these properties as part of their corporate plan approval, and all internal governance processes at Transnet were followed. She said they were actively looking for buyers. One of the buildings was the JW Sauer Building in Kimberley, which the Government initially wanted to purchase but due to the conclusion of the contract taking too long, it had opted out. The AGSA had then stated that due to the sale falling through, the building could not be classified as a non-current asset, which was then an error that Transnet had to correct.
Ms Derby said the Carlton Centre was already on the market when the audit came to a close, so they had to look at Transnet’s records. All the required approvals were sought as per the IFRS and Transnet's internal governance. They had to wait for the market’s decision, and there was also a National Treasury instruction note, which specified the minimum information required for a 54G capital gains tax exemption. This was because, at this point, a complete submission needed to be made to the Department of Public Enterprise (DPE) for final approval before the transaction could proceed. They had not got that far because the transaction had closed, and they could not make a final application.
The RB Plaza Building was another property that had a similar issue. Transnet was in the market awaiting closure, but did not get shareholder approval because the whole detail was not received. Ms Derby said she wanted to know what this detail was, because she was concerned that if the misstatements were of a nature that reflected a skills deficit, that needed to be dealt with. The issue was having the IFRS on one hand, and the Public Finance Management Act (PFMA) on the other, that needed to be complied with. What needed to be resolved was how to deal with more modern governance guidelines on how and when to make a section 54 PFMA application.
Mr Somyo said the detail had exposed process issues that needed attention, such as the moving from internally-led processes to externally-led ones related to interests that kept processes under one vehicle. However, the audit was the audit, and it ought to highlight this. Transnet’s response would have been based on the management level, and then picking up areas and getting into them. The reputation of any institution was to follow this through in totality. This had come before the AGSA had made its findings on the follow-through regarding the issues raised in the management letter. They would then want to decide on the long-term benefits for the institution, such as what capacity or resources were needed to ensure the proper observation of these things.
When looking into how they accounted, there would be areas where they had performed well, or there could have been deficiencies. In this instance, there was an audit committee and documents, so before finality, there ought to be a run-through process done. He asked if Transnet had discovered deficiencies. In terms of the outlook, and the basis of capturing financials, he said if corrections could be made during the process, it meant the matter was in the financials. Was the level of capacity adequate to ensure thorough observations, or were there lapses in terms of accountability? He asked if Transnet made use of consultants in these instances or just relied on its internal capacity.
Ms Derby said that in terms of the audit, they wanted to issue the financials at the end of July. This was because they had to adhere to Luxembourg’s rule that their financials had to be posted by the end of July. Posting financials later than July could result in penalties, given that Transnet had bonds in Luxembourg. This had been the initial intention, but as the audit was running, a few issues needed negotiation between Transnet and the AGSA. The next date they were chasing was to finalise the audit by the end of August so they could minimise the Luxembourg issue. They also had to bear in mind that they had mid-year results in September.
Ms Derby said there were also board changes during this process, and they had to do briefings while having arguments with the AGSA around these issues. This was because they would call National Treasury for assistance under normal circumstances. The AGSA was often called in to be the arbiter between the auditee and the auditor. Normally if there was time, Transnet would have challenged some of the findings and at least arrived at the fact that this was a matter they had to deal with. In the end, getting all the approvals was a tight crunch, and they had to live with the consequences of that decision. The reason for their decision to extend the audit was to fight to get an unqualified audit. The unqualified audit positively affected Transnet, given its significant debt, as it continued to depend on the market. Another decision could have been made, but they were looking for ways to get to an unqualified audit and then, after this exercise, to have a discussion with the AGSA. This was because the point raised was fundamental. If there were governance gaps, then those should be disclosed, because effectively, Transnet would have gone through its internal governance, and would have stated that until approval from the Minister was received, it had not shifted from where it was currently classified. She agreed that these were areas that needed to be worked on.
Mr Somyo noted that a Chief Audit Executive had been appointed in 2022. Was this an indication of the functionality around this area?
Ms Derby said the internal audit function at Transnet had been 100% outsourced, and all the organisation had was a small team that administered the third-party service provider. There was a long story about who ended up in an internal audit capacity. Unfortunately, during COVID, the person appointed as Chief Audit Executive had passed away, and was subsequently replaced by Ms Sayeeda Khan. During Mr Brian Kgomo’s (the former Chief Audit Executive) appointment, the board had decided that Transnet would shift to a co-sourced internal audit function. Transnet had been rebuilding its internal capacity and ensuring that when tenders went out, they had strengthened internal capacity. Transnet was big, and needed to ensure that the audit partners were significant, able to cover the organisation and had the requisite experience. She said since the appointment of Ernst & Young (EY) and Deloitte as external service providers, who had the capacity, Transnet was building internally for the internal audit.
She said Transnet hoped that the systems would assist in sorting out the first line, which was entering data, and that the internal audit capacity would go to the second line, which was assurance. After this, the external audit would then be done. The CEO said ideally, by the time the external auditors came, issues needing to be identified had been dealt with. However, they were still enhancing capacity in this area.
Mr Somyo said Transnet was a huge operation which required attention, concerning the size of its personnel. This was why Transnet's personnel costs were reported to be higher than 50%. The response given on reporting systems had been good. However, their procurement left a lot to be desired. Looking at the list of infringements, the AGSA had stated that Transnet chose higher-priced quotations and entered contracts that were then abandoned, which added to expenses. He asked what their response was in dealing with these concerns that were eating away at the organisation's capability around procurement. The issue of procurement needed to be dealt with diligently.
Ms Derby said procurement was a huge issue that needed to be resolved. One challenge was that many things went wrong at the tender submission point. To address this, an internal tender system was introduced, which reduced irregularities at the submission point, but this system did not resolve issues that arose past the submission point. Ms Derby said the tender to automate fully would close on 13 September. Transnet had made it clear to the National Treasury that they intended to automate their procurement process fully. There was a clear target of having a small team to deal with evaluation. Automation would be a saver, because it allowed the process to be faster.
The other issue Transnet was working on was having a catalogue when purchasing equipment, to fast-track the procurement process. Mr Vuledzani Nemukula would deal with the details surrounding the procurement process. This was because until a solution was found, Transnet was still using the same processes, and it needed to be indicated what interim processes were being put in place to ensure accountability as they moved towards an automated process.
Mr Nemukula, Chief Procurement Officer, Transnet, acknowledged the procurement challenges at the entity. These challenges were the reason they had looked into the entire procurement process and implemented reforms. These reforms included, but were not limited to, systems such as the e-tender solution. The e-tender solution was a good system, and all tenders were submitted through it. The e-tender system assisted with ensuring there was no irregular expenditure or information holes when auditors arrived. All necessary information was stored in the system.
Mr Nemukula said they had gone through all their supply chain management (SCM) processes and procedures, and had found themselves in the position that some of their policies were not required in terms of regulations. Transnet had improved its SCM policies and decided to hire people skilled and experienced enough to run procurement in their operating divisions. The most important thing they were still working on was ensuring the people hired were equipped and supported enough to perform their jobs. Transnet was also working closely with National Treasury and the AGSA to ensure their people understood the PFMA principles and National Treasury regulations.
Mr Somyo asked if Transnet’s SCM procurement unit was vetted. Had they gone through a vetting process in terms of a high security-related assessment framework?
Mr Ashwyn Govind, Group Chief Security Officer, spoke on the state of security clearance, and said a vetting unit within Transnet had been established. It had been six months in the making. SCM was a priority area for vetting, and those processes had already been instituted.
Mr Somyo asked if all the people within the unit had been cleared.
Mr Govind said they were in the process of vetting them through the State Security Agency (SSA).
The Chairperson said Mr Govind should respond with a yes or no.
Mr Govind said yes -- there were some in the process of being vetted and some who had been cleared, but he was not sure about the exact numbers.
Ms Derby said vetting was run by the SSA, but they could find out what the backlog was. Transnet was in charge of the lifestyle audits, and management had been audited. She said SSA provided certificates, and those were still outstanding, but she could not provide a reason for the delay.
Mr Somyo said that in terms of a sufficient response to the question on vetting, he wanted to know how many people had been vetted.
The Chairperson asked if this information could be pulled out. He said the purpose of this meeting was for people to have such information at their fingertips. This had been six months in the making, but it had to be noted that the requirement that all SCM executives had to be vetted was a 2014 Cabinet decision. He understood the lifestyle audit matter, but he wanted information on the executives.
Mr Govind said Transnet would provide this information to the Committee in writing.
Minister Gordhan said there was a real discussion to be had about the issue of vetting, but this was the SSA’s responsibility. Transnet dealt with the lifestyle audits.
The Chairperson said he understood this, but Mr Govind had stated that the vetting process started six months ago, and that was where he was at. The SSA dilemma was understood.
Mr Govind said it had been for only six months in terms of in-house vetting capability. The vetting process directly handled with the SSA was in place, and the backlog regarding SCM sat with the SSA.
The Chairperson said a written submission on what and how many submissions Transnet had made to the SSA regarding vetting could be sent to the Committee. He said there was information that could be pulled up now that did not require a written submission. The point of communication via email and WhatsApp was to ensure that information was available here in the meeting.
Mr Somyo said he would happily accept a clear indication of their vetting processes on SCM. He noted that there had been an appointment at a senior level around 2020, and someone who had occupied this position since that time had been referred to a critical area that required attention. He said that what was bad about the audit was when certain things became repeat findings, it became problematic. This was because it seemed as though there was no respect for audit outcomes. It would be comforting to see those matters, specifically the legislated issues, were attended to.
Mr Somyo said that it was painful when one set a path to achieve a high-performance standard, but then continuously failed to do so. He said Transnet’s performance at the end of the 2021/22 year had been above about 30%. The recent year-end outcomes released last week had shown that its performance was below 30%. These performance results told a story that Transnet was failing. The failure was such that the Minister was directing the board on what to do in terms of improving performance.
Transnet had stated that if they had freight rail, their performance would be at 47%. It also provided figures, and what the organisation seemed to have lost concerned the dysfunctionality of their rail system. The rail issue was a compounded concern, because they were not only talking about the trains but also the actual infrastructure of the system. It was well-publicised that the Minister had gone to China in April. What the progress had resulted from the visit?
Minister Gordhan said China was starting to open the door for further discussions. The first round of discussions was between CRRC E-Loco and Transnet executives. Engagements in China had established at senior level the willingness to resolve the matter sooner rather than later. At various levels, Transnet had been given a mandate by CRRC E-Loco to represent CRRC E-Loco in any local discussions that needed to take place. The chief executive was on record with this, along with SARS and the South African Reserve Bank (SARB). He said the CEO could come in and explain what the latest position was. He said the visit was where the discussions and an intent to resolve the issue had been concluded. There were matters in South African hands that the CEO could speak to.
Ms Derby said there were two matters involving SARS and the SARB. In terms of SARS, most of the matters had been resolved. A tax clearance certificate was needed to trade in South Africa, which was now in hand. The second issue was that the two companies CRRC had, and their various bank accounts, were restricted by SARB. The application for one of the two companies was anticipated to be submitted in the next day or two. An authorised dealer had to handle their application on their behalf. The second company would have the application made before Friday. As soon as the application was made, their priority was to have the restrictions lifted so their funds were not forfeited.
Ms Derby said SARS would send the funds as soon as the restrictions were lifted. Transnet had also made it clear to CRRC that the last of the two conditions precedent would be met, and the definitive settlement agreement would be implemented with immediate effect.
Minister Gordhan said parts would begin to come into the country and the first batch of technicians, whose visas had been made ready. There would be a second batch of technicians, which would take care of repairing the standing locomotives. An equally important part was the 99 outstanding locomotives. During the initial discussions, the delivery dates were set as half delivered in November 2023, and the other half delivered early next year.
Mr Somyo asked if the CEO of Transnet was happy with this situation, as the chief executive of the organisation.
Ms Derby said they were comfortable that they were there. It had been a difficult and long negotiation. However, on the back of two experiences in November 2022, when Transnet signed a definitive agreement with the two conditions precedent, the CRRC had supplied them with parts and then there had been a stalemate.
She said the Minister’s visit had assisted with their understanding of the CRRC’s concerns and as a result, the discussions had progressed. The technicians' issue had been sorted out, and Transnet had sent a list of parts that could be airlifted, because the parts could be fitted as soon as they arrived in South Africa.
Ms Derby said there was some localisation done in Transnet Engineering involving compressors. However, this was expensive and time-consuming and, given Transnet’s cash position, could not be a continued practice.
The Minister had indicated it that each passing month meant pushing out the delivery schedule. Therefore, if the return to service of locomotives started three months after working with the CRRC, the delivery schedule would be pushed out. Transnet's challenge was that it needed to close the matter so that locomotives could be on their way.
Ms Derby referred to the long-standing locomotives, and said Transnet had locomotives from Wabtec, Alstom and Mitsui. In May, the board had permitted them to start the procurement process for the return to service of these locomotives. Those tenders had closed around July and August, and by the end of this financial year, 70 locomotives would be in service. 237 would be in service in the following financial year. There was positivity regarding the locomotive issue.
Mr Somyo said he asked about the state of happiness at Transnet because of the organisational pressure faced in the recent past, and because those who were in the coal production line had objectively lost opportunities in terms of transportation. This had had an actual material effect, and there was also personal pressure in this area. The institution itself had a negative benefit in terms of the recently outlined National Treasury reports concerning performance, specifically for not finalising this area. He said this would drive them to an improvement as far as performance in other areas was concerned. The Minister, for his part, would facilitate this kind of agreement.
Ms B van Minnen (DA) said the AGSA had found in terms of financial management that effective and appropriate steps had not been taken to prevent irregular expenditure amounting to R1.2 billion. This was disclosed in the legislative compliance section, as required by the PFMA. Most of the irregular expenditure was because of non-compliance with the procurement processes. What was Transnet’s stance on this?
Ms Derby said procurement processes were an area they were looking to refine. In 2016, there was straightforward procurement, and since then instruction notes and amendments have been added which had added complexities. Because of the convoluted systems, people’s non-compliance in most cases was not due to corruption or fraud -- they just could not keep up with the rule changes. This was why retraining people in the new processes and systems was a priority for them. She said there was no tolerance for non-compliance with the procedures and rules they had set for themselves. This was an internal issue, so they needed to simplify the process, which was, to an extent the reason for implementing a fully automated procurement process. Automation removed the possibility of somebody deciding not to follow a particular rule in the process.
Ms Basani Duiker, Chief Director: Supply Chain Management, Monitoring and Compliance, National Treasury (NT), said that looking into irregular expenditure in previous and current financial years was critical to them. Moving forward, Transnet had to deal with the irregular expenditure incurred historically. There had been a decline in irregular expenditure over the years, and this was due to transactions implemented in prior years. The biggest challenge was the lack of documentation. An e-tender system was implemented to allow Transnet to receive and file documents electronically.
Ms Duiker said there had been a reduction in irregular expenditure from R1.1 billion in 2021/2022, to below R500 million in 2022/23. This was the result of dealing with historic irregular expenditure through determination tests and identifying non-compliance. Transnet had made sure to determine the loss and consequence management actions that needed implementation. Measures were being put in place to deal with non-compliance. Transnet was putting in place combined assurance model activities where the first-line management activities were being improved. The SCM policies, procurement manuals, tools, and templates for the delegation of authority have been revised to strengthen the management activities. In terms of the second line, the internal audit function and its assurance activities have been mentioned. The internal audit function within the SCM space provided real-time assurance of high-value performance.
Ms Duiker said they had started implementing contract file reviews. This entailed reviewing different contracts established within Transnet for compliance, starting from the 2022/23 financial year. Transnet identified them in advance and reported them in their regular expenditure. This was to deal with these contracts well before the AGSA arrived, but it was also to strengthen the culture of compliance and consequence management.
Ms Van Minnen said that according to the AGSA, there was a lack of appropriate audit evidence that goods, works and services were procured through a procurement service which was fair, equitable, transparent and competitive. The PFMA required an appropriate procurement and provision system. This required the accounting authority for a public entity to ensure that an appropriate procurement and provisioning system, which was fair, equitable, transparent, competitive and cost-effective, was maintained. How would they respond to this, and was this connected to the issues that Transnet had been talking about?
Ms Duiker agreed that the issues were related, because before they moved to an e-tender portal, there had been several instances, especially in the multi-year contracts they had established before 2018/19, where they did not have the documentation. The lack of documentation was mostly due to floods and fire incidents. There were multi-year contracts where they did not have documentation on the procurement processes that would have been implemented. These contracts were still active.
Ms Van Minnen asked if there were several documents not electronically stored, which had been destroyed in various floods and fires. She asked what kind of retention system they used, if that was the case.
Ms Derby said she would confirm the exact date, but around 2019, there had been a fire and documentation was lost. She suspected that it was documentation left at MetroFile. There was a hacking incident in 2021, although there were no significant financial losses due to the incident itself. There was some information and documentation that was lost in that process. Some documentation had been lost when the systems were cleaned up. This, however, was an area that they were working on. The upgrade of the IT environment at Transnet was a centralised document management system that had been nearly impossible to implement across the group. She said one would find a solid basis for documentation in certain areas, but as an organisation, it was a priority area. Fire and flood issues were historical. There have been other incidents in recent times.
Ms Van Minnen said the Committee was sensitive to the issue of solid-based stories after what they had seen recently with other entities. She asked if Transnet was exploring options to ensure the security of documents both electronically and physically at this particular point. This was because Transnet could not run the risk of having massive documents that could not be filed or at risk of destruction.
Ms Derby said the Committee had her full assurance, and evidence could be provided in the form of the team working on this issue. Transnet had shared services, and in implementation, it was implemented. There were certain functions they had moved into it, to begin with, and they were adding to these functions. It made sense that the shared services took responsibility for the entire document and management architecture. This project was run by the Head of Shared Services and the Chief Digital Officer. This was one area that they were working to fast-track. There was a single system, and one challenge was that it tied back to their big project. Transnet planned to get one single system where, when one looked at performance, irrespective of which operating division one was in, one could look at the same information base. These were two critical projects that were running. She said If one went to finance, one could get the records on legal, contracts or procurement. This was the project Transnet was working on.
Ms Van Minnen noted concerns regarding procurement, where contracts and quotations were awarded to bidders who did not score the highest points in the evaluation process. How was this happening? What was being done to deal with this situation?
Mr Nemukula said the AGSA’s statement referred to certain instances within the organisation where procurement processes were undertaken, and contracts were awarded to the service provider that had not scored the highest points. The reason for this was that the company that scored the highest points from a financial perspective was not at a level that Transnet could trust with the delivery of services. Objective criteria were used, the second leading service provider was chosen, and the leading service provider was overlooked. The overlooked company had been put under business rescue, and was subsequently liquidated. Ms Duiker could provide more details on this issue.
Ms Duiker said another example of a similar case was an instance within the quotations process, where there were emergencies. Instead of following other processes to select and identify suppliers that would be appointed to resolve the emergency, Transnet followed a quotations process. When the quotation process was followed, criteria were established that required bidders to respond so their functionality could be tested. Their capacity and capability were then tested. With one of the bidders, it had been discovered upon further testing during an emergency that the company did not provide the services Transnet required, so Transnet could not appoint them. It had appointed a company with the capacity and the capability to resolve the emergency.
Ms Van Minnen said that except for the documentation for the procurement of commodities designed for local content, the document did not necessarily stipulate the minimum threshold flow of production, as required by regulation 8(2) in the Preferential Procurement Regulations (PPR), 2017. The SIU had mentioned the PPE issue, and she asked if this had also applied to the procurement processes for some of the COVID-19 PPE.
Ms Derby said they would not respond to the PPE issue, because it was a current matter.
Ms Van Minnen said that with local content, there was a general concern that the documentation was not always compliant. There was also no certainty about how much had to be local content.
Mr Nemukula said whenever a request for proposal (RFP) was issued by Transnet, the local content requirements were indicated. The PPE issue referred to was from a specific point in time, when Transnet needed to ensure at least masks were available within the organisation. Unfortunately, this was at the time when the demand for masks within South Africa was at its optimum level. it was therefore not possible for them to get masks from local suppliers. However, regarding all their RFPs, the specific local content needed was indicated. He admitted that Transnet did get into positions where there was an absence of suppliers that met the local content requirements. In these cases, the Department of Trade, Industry and Competition (DTIC) was contacted so that an exemption could be provided accordingly.
The Chairperson said Transnet had stated that PPE matters were in the current period. He asked whether there were no PPE-related matters at Transnet at the height of COVID-19 in 2021/22. The Chairperson said this sounded unlikely. He asked Transnet to go back to this response.
Ms Derby said they did have PPE-related matters during the 2021/22 period. There was a matter involving significant overpricing that had been dealt with. There had been procurement issues related to COVID and the inflation of prices.
The Chairperson asked Ms Derby to get the details, and the Committee would come back to this issue.
Ms Van Minnen said that consequence management was important. With the SIU report, there had been an emphasis on investigations dealing with state capture and all kinds of issues. The audit reports noted that no adequate disciplinary steps were taken against the official who had contravened SCM regulations, as required by the PFMA. The PFMA required an accounting authority for public entities to take effective and appropriate disciplinary steps against any employee responsible for irregular, fruitless and wasteful expenditure. She said there seemed to be concern in the audit regarding records, evidence and measures taken in sufficient time. What was happening in this space?
Ms Duiker said consequence management was handled by the Head of People, and there had been improvements. Each operating division had its own human resources (HR) department which looked at consequence management and issues around irregular expenditure. This matter was being attended to, but in terms of the specifics, that would be addressed by the Head of People. From a loss control perspective, they had consolidated and monitored the trend. They ensured that each irregular expenditure concern was addressed and consequence management was implemented.
Ms Derby said there had been a period where a large number of events had involved irregular expenditure. When these events were identified, there had been a process of defining the cause and effect of the expenditure. Perhaps the immediate reaction would training, a disciplinary process, or whatever action was required. If it was a fraudulent act, there would be an investigation and a disciplinary process. There was a huge number at some stage, so there was a process of splitting things up and handing them over to each executive and their operating division to run through consequence management. There was a historical backlog Transnet was working through, and making headway with the backlog took time. As a result of previous issues around consequence management, it had been decided that the Chief of Digital and Chief of People would work together to create an app. This app would house consequence management, and all the cases that needed to be dealt with. The reason for the app was to have a system that alerted heads of units and operating divisions when matters needed to be fast-tracked. The issue of dealing with cases and getting to closure was something that they tried to manage as tightly as possible. However, looking at this last audit report, consequence management had greatly improved.
Ms Van Minnen said reports showed slow progress with investigations regarding consequence management. The reason for this was cited as a lack of records and the keeping evidence. The AGSA had also found that disciplinary committee meetings were not being held for confirmed financial misconduct cases. The situation involving no action had seen irregular expenditure increase from R1.47 billion in 2020/21 to R2.24 billion in 2021/22. Was this related to this, and how was it being dealt with?
Ms Duiker said that regarding the specifics and numbers, the Head of People could deal with that. The unfortunate part was the timing issue. This was because those matters had been resolved in the AGSA report for this year. Last year, three paragraphs touched on disciplinary matters, financial misconduct, and disciplinary processes not being taken on time, but only one of these matters remained. This was the issue of consequence management not being done on time. Even in this respect, it was not that it was not being done in time -- it was more the processes that were involved. As many as ten cases were being referred to the department dealing with forensics issues, and they needed to come back. Some of those cases were being addressed by the Chief Audit Executive’s team, and those there were from the prior year. The Auditor-General had highlighted consequence management for the current year, and improvements were noted in that section.
Ms Van Minnen said, as highlighted by the SIU, that there was an issue with people facing consequence management resigning or retiring. She asked what effective steps Transnet was taking to ensure that if this was the case, and disciplinary action did not continue, these people were not popping up in other entities across government. She asserted that this was a common problem that bedevilled the entire system.
Ms Derby said people did pitch up at other entities, including Transnet, because they were able to resign. This was also common during the process of an investigation, when no incriminating findings had yet been made. Many left before disciplinary action could take place. Her view was that there should be a way to ensure that those who had resigned were still subjected to disciplinary action. Where it was known they had undergone disciplinary action, there needed to be a way to bar them from working at Transnet. She asked the Chief Legal Officer and Chief of People if there was a way to do this. Individuals had the right to due process, but this area still needed a sound solution. Transnet was keeping accurate records of its people, because inaccurate records were part of the problem.
Adv Sandra Coetzee, Chief Legal Officer, said individuals were entitled to due process, as indicated by the CEO. What they were aiming for was a database of perpetual offenders. They were not aware of the existence of such offenders when receiving reference requirements and requests. The facts were reported at the time. If there was a disciplinary standard with no findings, the facts would be reported as of the date the request was made. Nothing was being hidden, but respect for the rights of individuals was required.
Transnet's recruitment compliance system requires at least a formal compliance agency perspective. It required the consideration of questions such as whether the person had been cited in the Zondo Report, or if there were adverse findings related to them. If the person had worked in a state-owned company, there was a degree of due diligence. Their system required enhanced due diligence to ensure people did not enter a business under those circumstances.
Ms Van Minnen asked if they could get back to the PPE issue related to COVID. If not, she was done with her questions.
Mr Nemukula said the COVID issue involved a safety matter with one of the service providers Transnet had last year. The value involved was R37 million. He said the SIU had addressed this matter earlier, and the name of the company was Lalela.
The Chairperson asked that the question on vetting be responded to.
Mr Govind confirmed that since the 2014 instruction, Transnet had submitted 755 vetting requests to the SSA. To date, only 93 had been returned.
The Chairperson asked for the figures at an executive level.
Mr Govind said he would have to look for those specific details.
Mr A Lees (DA) said his party did not support the Russian invasion of Ukraine, but it had created a bonanza for the country's coal exports. Transnet had been unable to provide the service. According to Stellenbosch University’s estimates, in 2022, losses experienced by the South African economy amounted to R411 billion, and R788 billion in direct foreign revenue. The coal price peaked in June 2022 at $296, and in June 2023, it was at $98. This bonanza was in the year they were talking about, and Transnet was not able to meet the requirements. Traditionally, the Richard's Bay line was the main line for exporting coal, but now coal trucks clogged the M3 and M4, and some exports went through the Democratic Republic of Congo (DRC). He asked if it was true that the coal mines were so desperate to secure the Richard’s Bay line's infrastructure that private security had been introduced at a massive cost to the industry.
Ms Derby acknowledged the general frustration at Transnet not being able to move coal volumes at the level the industry desired. There were two Iines that were fundamentally electric. With the North Corridor line, the export miners were on the electric side, and the smaller coal miners were mainly on the diesel side. The iron ore line was fully electric. To curb cable theft, Transnet had entered into an agreement with the coal industry to assist in providing support in terms of people and technology. She said Ms Sizakele Mzimela, the Chief Executive of Transnet Freight Rail, could provide the details of this agreement.
Ms Mzimela acknowledged the frustrations of the coal customers, which were reflected in the numbers. The most significant decrease in volume movement was with export coal, and a category called GfE metals, which covered chrome commodities. She said the export coal, as correctly stated, ran on the North Corridor, which went to Richards Bay. The export coal was moved through the Richard’s Bay Coal Terminal (RBTC). Their terminal in Richard’s Bay was used only by small coal miners. The issue with this corridor was that specialised CRRC locomotives were being used, and every single month, these locomotives were being parked because Transnet could not get spare parts. Transnet had also never received full delivery of the outstanding locomotives. When talking about 200 parked locomotives, that could be the equivalent of 50 additional trains running on the export coal and chrome lines. The issue of parked locomotives had not been resolved yet which was why they were looking forward to the solution that had been shared.
Ms Mzimela said the North Corridor experienced the second-highest amount of theft and vandalism. The Container Corridor, which was Johannesburg to Durban, experienced the highest. However, the impact on the Container Corridor was not as significant as the coal line, because the Container Corridor had a two-line system. With the coal line, a single incident of theft and vandalism halted the movement of crates on the entire line. This was why the impact of theft and vandalism was severe and the coal industry had offered assistance. Incidents had been reduced by 30%, but the impact had not improved.
Mr Lees said this was not only a loss to the economy, but Transnet’s inability to run their business had meant the private sector would have to move in. He had met Ms Mzimela at SA Express, and she was now running a company that was not running any better than SA Express. He hoped that Transnet did not go into business rescue.
His question pertained to the announcement about the private rolling stock on Transnet's line. He said the private rolling stock did not seem to be materialising in a concrete sense. Assuming that they protected infrastructure, they had drones and armed patrols every six kilometres. The private rolling stock had absorbed all sorts of costs to do Transnet’s job for them. He asked where they were in terms of aligning with private enterprise to use Transnet’s infrastructure, which was being guarded by private enterprises.
Minister Gordhan said the reference to SA Express was unfortunate. He had convened discussions with the Minerals Council, where there was an accepted view that cable theft was an area of common concern. The private sector, and specifically the coal industry, had volunteered to invest in security. The issues they were dealing with were locomotives, the operational concerns the new board was attending to, and security-related matters at Transnet. He said that even with assistance from the private sector, Transnet would not be able to cope. A state approach had been invoked before, which would be invoked again next week. He clarified that the involvement of the private sector in the security issue was an acceptable arrangement, with mutual agreement between Transnet, the Department of Public Enterprises (DPE), and the private sector.
Ms Derby said that in terms of third-party access, security was a shared responsibility. The third-party and private sector operators would have to use the same infrastructure Transnet had, to form part of the system and deal with the level of insecurity. From 1 October, Transnet would be able to indicate who the infrastructure manager on their side would be.
Mr Lees asked about the cooperation forum referred to by the Minister, and the discussions with the Minerals Council, and if this had resulted in the security arrangements. What benefits come out of this forum? Was the forum useful, and had it served its purpose?
Minister Gordhan said interactions with the private sector were useful, but they did not always agree. The Department’s doors were open to the private sector. Transnet’s previous board had opened its doors to the private sector too. The executives of Transnet had interacted on a corridor-by-corridor basis with businesses about operational activities.
The Minister said there was now a National Logistics Crisis Committee, established under the aegis of the President, to enable three years of focus between government and business. This was still in the early stages and needed time. The intent was clear -- to have a logistics system that was on the first level operational. The second level perhaps had the state on the one hand, but the private sector needed to be included to ensure proper law and order regarding logistics. The third level would be run by corporations, government and senior business executives. This was a case of starting at a particular level, but continuing to elevate to a better point. Society, and not just government, had to deal with a fairly serious set of issues impacting the economy.
Mr Lees said he had asked the question because much of what they had discussed in this meeting had been the issue with the CRRC locomotives. The sooner they could get more rolling stock would mean funding from outside of taxpayers and the state ambit. He assumed that most of them would celebrate this. He looked forward to this moving forward as fast as it could, and was surprised at how long it was taking.
Regarding the revaluation of assets, he asked if the R5 billion profit in 2022 was a paper entry. If the assets had not been re-evaluated, Transnet would have made a R5 billion loss. He asked the CEO and CFO for clarification.
The CFO said it was not cash flows from operations, but rather ensuring that the property investment, which was an asset in Transnet’s base, was correct.
Mr Lees said he understood what re-evaluation was. His question was really, if this was taken out of their results, would Transnet have shown a loss of revenue?
The CFO said the loss would be less than R 5 billion. Judging from operations and looking at projected figures, it would have been between R2.52 billion and R2.7 billion. It would not have been R5 billion.
Mr Lees said this was a significant loss. There has not been a sudden improvement or decrease in this current financial year. The reported loss last year was R5.7 billion. One could not go back and reflect on doing well in the previous year. Paper entries could not be done every year -- that was not helpful.
Regarding the CRRC, he was unclear why SARS could not just issue the tax certificate. He asked what the drawback was.
Adv Coetzee said for a tax clearance certificate to be issued, disputes about taxes due and payable had to be resolved, otherwise it was a non-compliant position. The matter that Transnet had assisted CRRC in resolving pertained to outstanding disputes between SARS and CRRC. The resolution of those disputes would enable the issuance of the tax certificate.
Mr Lees asked if there were still disputes that had not been resolved.
Adv Coetzee said the disputes had been resolved in two ways. For what could not be resolved, there was an agreement to have the matter settled by the final determination of a judgment. The other matters that could be resolved had been resolved successfully. There were small logistical issues that needed to be resolved in terms of the SARS matter. In the case of the South African Reserve Bank, they had to await the outcome of CRRC’s certification.
Mr Lees said he was still confused, because it was not clear. He asked if the taxpayer's certificate issue and the SARB issue remained.
Adv Coetzee said this involved confidential taxpayer information. Enough information had been provided. She said there was no reason, other than logistical matters to be resolved, for a tax certificate to be issued.
The Chairperson said they did not want the substantive material information. The question was whether a tax certificate had been issued or not. It was a yes or no question. He said the Committee understood that the material details were not under their purview. With the issue of outstanding documents, he had heard timelines that this would be done in the next day or two.
Minister Gordhan said this was a complex matter. There was a connection between the two matters, and this was what the CEO was trying to clarify. The one matter depended on the other, and after a lot of hard work, they could be close to concluding the matter. Once the matter had been concluded, they would ensure that, to extent that they were allowed, they would put the facts before the Committee and indicate the nature of the settlement. In any case, the settlement would be put before the SIU and the courts, so there would be transparency.
The Chairperson said he would assume this was a work in progress. The issue of clarification had been covered in large part by the Minister.
Mr Lees said this business was critical. He and the Minister had a long history of sparring over South African Airways (SAA), but SAA was a minnow regarding their economy. Transnet was the lifeblood, or the death, of the economy. A huge number of executives were sitting in this meeting, and their responsibility was massive. He and the Minister sometimes disagreed, but also agreed on many things. There were 11 areas of concern mentioned, and the board had to direct the Transnet organisation to address them.
The Minister had said Transnet was not a business that could be played around with, and Mr Lees was in support. They needed to get this organisation running, and stop worrying about other things. He urged them to focus on the business.
His last question was silly, but he wanted clarification on a term he had never heard before. What was a "Head of People?"
The CEO said that the Head of People would be what was referred to as "Human Resources."
Ms V Mente (EFF) said to the Minister that once a person failed in their assumed position, especially an important one at a state-owned entity (SOE), that failure followed them everywhere. They could not defend such a situation when the downfall and collapse of Transnet and other SOEs was happening right before their eyes. If successes follow a person, their failures should too. The failure and collapse of SA Express had been painful. The situation at SA Express was not unfortunate -- it resulted from people not doing their jobs. People’s failure to perform their jobs left many destitute. Transnet’s failure was leading to a high death toll, and the reason the Committee was here was to try to prevent its collapse. Her comment was due to the Minister trying to comfort Ms Mzimela by saying what had happened at SA Express was "unfortunate," when it was not.
Minister Gordhan responded that this refrain had been heard before, and in politics, people chose the facts they wanted to remember or forget to suit their argument. He said there was stealing, state capture and undermining of SA Express, and by the time the DPE arrived, it was dead, and their attempts to revive it did not work. This failure was not due to the actions of the Minister or the managers -- it failed due to wholesale theft, and the thieves were not being attacked here. The thieves were not being brought here to answer the questions of why they stole and undermined SA Express. He said it was nice to be emotive, but emotions needed to be based on facts.
Mr Somyo said the Chairperson should not allow deviations from the agenda set for this meeting.
Ms Mente asked the Minister not to collapse them.
The Chairperson said he would not collapse them. A question had been raised, and the Minister was just responding. After this, they would proceed with the meeting.
The Minister said he had the right to reply to an assertion in a democracy, and added that the colour red had belonged to many of them before the EFF. Corporate governance and the PFMA required that the accounting authority was the Transnet board. The board then had to delegate its executives which it had appointed itself, or the CEO. The job of the executives was to execute, while the Department’s job as a shareholder was to ensure the shareholder compact agreed to was complied with. The intervention from last week was to state that they had taken Transnet far enough, and that something different needed to be done to put the organisation back on track and give everyone concerned the opportunity to do this work. He said the Committee was aware that the causalities and ghosts of state capture were still there.
Minister Gordhan said the SIU’s report covered a minuscule amount of the cases that had come to the attention of the Committee. There was still theft going on, being done by all sorts of people in all sorts of government institutions. He e did not want to get into this, because he also had facts that one day he would share.
The Chairperson said the SA Express matter had been raised but had to been concluded, and he suggested that it be brought back. It had been concluded that the former CEO of SA Express needed to come before the Committee. The SA Express matter was outstanding and on the agenda, and time needed to be scheduled to deal with it.
Ms Mente said it would be great to bring in SA Express. From the SIU, she wanted to know if the issue of blacklisting individuals to ensure they did not appear in other companies, had been mastered. There was a similar issue at Eskom that the National Treasury also wanted clarification on.
Adv Mothibi said it was a phenomenon in various state institutions, and the SIU had identified that as part of the process, not only companies needed to be blacklisted, but directors too. The phenomenon was that companies would be blacklisted, but the directors would resurface elsewhere in different companies. This was being dealt with, and the Companies and Intellectual Property Commission (CIPC) was involved. This blacklisting process would assist with this issue as they traced these individuals. The SIU would continue to work with Transnet’s management regarding the framework of dealing with it, and Transnet would be responsible for monitoring it internally.
Ms Gina Pretorius, Lead Investigator, SIU, said blacklisted people were mentioned by name in the SIU’s presentation. It had included blacklisting at an individual level, not just at a company level.
The Minister said the area that required attention was the process of declaring directors delinquent, which was too slow. It was in the public’s interest to make the process faster. He was not sure if this would be something the CIPC or the Company’s Act could do to make the process faster.
Ms Mente said she was happy with the process, because the SIU was trying to work on the matter. She asked if everyone at Transnet, including the CEO, had been vetted.
Ms Derby said she did not know and had yet to receive her vetting certificate.
Ms Mente asked again if everyone present from Transnet had been vetted. She said the CEO, as the leader of the delegation, should know the answer to this question.
Ms Derby said she did not know because the vetting process was something that was done, and when clearance was received, a vetting certificate would be issued. She did not know the answer to the question, but she could speak to the implementation and completion of lifestyle audits. She could present the lifestyle audits of everyone in her delegation.
The Chairperson said he had asked for the response to this question to be pulled. He asked which executives present had been vetted.
Ms Duiker said she had made the necessary submissions and taken the necessary tests. She had been with Transnet for over a year, but had still not received her vetting certificate.
The Chairperson said there was a reason the Committee was harping on this vetting issue -- there was a context to their request. He asked again who had their vetting certificate and clearance.
Mr Pepi Silinga, Chief Executive, Transnet National Ports Authority, said he had been subjected to vetting processes, but had not received his vetting certificate either.
The Chairperson asked if his assumption was correct that none of the executives had received their vetting certificate.
Ms Mente said the Minister needed to respond to this issue. This was because there had been an issue with the CEO of Eskom, who had stated that he had refused to be vetted. This information had come to light during his exit from Eskom. Hearing that vetting certificates had not been received could result in instances where people wrote books about the corruption in Transnet when they were part and parcel of people not following protocol. It was difficult to be content with the fact that the vetting process had been complied with. The lack of issuing vetting certificates was one thing, and the provision of information and subjecting individuals to the vetting process was another. The Committee wanted to get to the bottom of the issue of individuals being subjected to the vetting process.
Ms Mente asked if the person responsible for vetting could state whether everyone had complied with the vetting process. The issue of vetting certificates was something else.
Mr Govind said he could confirm that all the executives were in the process of being vetted, and were making the necessary submissions. The vetting process for each executive was at different stages, but some had already made submissions to the SSA. Transnet was at the mercy of the SSA and its processes.
Ms Derby said it was a matter of record that none of the executives had refused to undergo vetting. Everyone had been compliant. They could not determine the process of their own vetting, and where there was a requirement and request from the SSA to make submissions, Mr Govind had ensured that Transnet was compliant.
The Chairperson said that they raised this issue to build a case on issues they had with SSA. He noted there was a backlog of about 640 people.
The Minister said a quick check needed to be made on the SOEs that reported to the DPE. This would take a while, but a report would be given to the Committee on this matter.
Ms Mente said that Transnet’s CFO had stated that they were waiting for a resolution on a matter that concerned locomotives, and asked what the resolution was. On page 32, there was a financial performance breakdown, and as Mr Somyo had stated, the strength of Transnet was freight rail. Freight rail constituted 47% of the organisation’s business, but was performing the worst. This was followed by engineering, which had also performed extremely badly. There were other parts of Transnet, but these were the two biggest in terms of the business itself. As the business was failing year after year, she asked if they believed Transnet was in a position to be saved.
Ms Derby said the revenue contributions were Transnet Freight Rail (TFR) at 43%, Transnet Engineering(TE) at 10%, Transnet Port Terminals (TPT) at 17%, and Transnet National Ports Authority (TNPA) at 16%. The other operating divisions were big as well. She said Transnet could be saved. With TFR, the main issues raised pertained to the IT environment. The sorting out of the IT and then sorting out the systems that run the business, would ensure that some operational inefficiencies were dealt with.
Ms Derby said locomotives assisted with the movement of cargo. It had been indicated that there had been under-investment in rail maintenance in the past and current financial years. If maintenance of the tracks took place, it would allow for faster traffic movement.
Security instances were a challenge. Transnet could either reduce the level of security instances directly, or move towards a diesel system. It was difficult for Transnet to move to a diesel system at short notice because 60% of their system was electric, and the other 40% was diesel. Unfortunately, the numbers in this immediate year had reflected a R1.8 billion loss due to derailments. Derailments were related to the under-investment in track maintenance, and this was a focus area for them.
Regarding Mr Lees’s third-party concern, the economic regulator was coming to rail for the first time. This meant there would be cost-reflective tariffs for infrastructure. This would ensure enough funds for maintenance. Ms Derby said security instances had resulted in a R1.7 billion revenue loss. It could be argued that the strike was under their control and should have been dealt with, but it had still cost Transnet R1.8 billion.
Ms Derby said long-standing locomotives had cost Transnet R6.16 billion. Regarding whether there was a change coming, the issue of locomotives and the related losses was something Transnet was able to deal with. As for the other issues, Transnet was approaching the Government for funding for infrastructure and a way forward. The organisation could be turned around. In terms of Transnet Engineering (TE), Transnet needed to ensure the right sizing for the business. There was capacity to build 4 500 wagons, a year but they were ordering 300 to 400. With additional players, there could be more orders, but not at the 4 500 level designed for an economy growing at 5% per annum.
Ms Mente said the capacity the CEO spoke of had been during Transnet’s glory days. Transnet currently could not build 4 500 wagons. Regarding the maintenance contract, there were two different understandings, and it had been witnessed in this meeting that the Minister had responded that maintenance was complex. The Minister’s response was an answer that was not an answer to the complexities of maintenance. She had asked if the maintenance contract with the Chinese Railway Rolling Stock Corporation (CRRC) was workable. Would Transnet be comfortable with telling the Committee that maintenance would be done soon, or would still be an issue next year?
Ms Derby said the SARB had an obligation, as the entity with consent from the CRRC to deal with their tax matters, to keep those discussions confidential. There was verbiage concerning a tax compliance statement and a certificate, and SARS and CRRC were dealing with these issues. SARS thought of these matters as resolved, and the payments that needed to be made had to be to a bank account where the funds could not be forfeited. Transnet had to wait for the closure of this matter until the SARB returned with their final response. Once the final response was received, the two conditions precedent for implementing the definitive settlement agreement could become effective and immediate. She said the maintenance agreement with CRRC was simpler than those signed by other OEMs.
Ms Mente said in essence, there was a possibility that the same response could be given in February next year. This would be because they did not know if the issues would be resolved during the period.
Ms Derby said Transnet had issued two tenders in January 2023. One tender was for the rest of the OEMs to support the maintenance with the return of long-standing locomotives. The other tender was for an OEM stepping in in the event the issues around the CRRC could not be resolved. If it seemed as though there would be no closure for the CRRC matters, this tender was available and in evaluation. If the evaluation outcome arose before the closing of the CRRC matter, there would be no option but to proceed with the tender. The reason this tender had not been their first option was because there would be a new OEM, and effectively, this would be like converting a Mercedes Benz into a BMW. The electronic systems were being redesigned, and it would take 18 to 24 months before all the CRRC locomotives were available to be taken over by another OEM.
There was a similar issue regarding the OEM running the Iron Ore Corridor. The OEM had decided not to bid for the return to service tender. This tender would be closed before the end of September, and another OEM would take over. With the tender concerning long-standing locomotives, 80% of the components were made by Toshiba. Toshiba was part of the consortium that Transnet was talking to about bringing back locomotives to service.
Ms Mente said a lot of money would be spent. Switching from the old OEM to a new one would require an entire process of drawing parts and installing new technicians who would build new locomotives. This would not assist Transnet with moving to new grounds. She said that the 161 that could not be maintained, and the long-standing locomotives, were all going to be refurbished, which could take one or two years.
She said a new OEM coming in under evaluation looked simple, but it meant new trains were being purchased from new people. New people would be refurbishing the long-standing locomotives, which was a long process. This meant another R5 billion would be lost and perhaps amount to a R10 billion loss by the next financial year.
Ms Mente said Transnet’s mandate was to ensure that locomotives and freight rail were functional. Transnet needed to ensure the state had functional rail and harbours to offload. If this was their response, they were nowhere near getting the organisation to work. She wanted to know from the Minister if there were new developments during the BRICS Conference concerning certain agreements with the Chinese. The Minister had also gone to China to negotiate on these matters. Was there another option that did not require waiting for one or two years, because people were dying? Was this the only way?
Minister Gordhan said the Transnet executives would elaborate on the details. With the Chinese locomotives, roads needed to be crossed to untangle the mess the 1 064 locomotive project left behind. They were trying to ensure that these matters were resolved. Not all of the 1 064 locomotives were from the Chinese. There was a particular deal made with General Electric (now Wabtec), Bombardier and the Chinese state-owned manufacturers, China South Rail (CSR) and China North Rail (CNR), which was now CRRC. CRRC was the parent company. There had been engagements in China with the CRRC’s chairperson and a designated person from CRRC E-LOCO Supply, dealing with locomotives. He said each locomotive category needed to be taken, and the question of how and when locomotives were being brought into operation and what had been achieved or still needed to be achieved, had to be asked. The CRRC matter was clear -- there were two conditions precedent that needed to be resolved. This resolution would be done sooner rather than later, and the groundwork regarding it had been done.
He said the executives could share the specifics on General Electric, Bombardier and related settlements in that regard.
The Minister said the maintenance question was separate. The question had asked in which instances maintenance was the responsibility of the OEM and TE. The chief executive of TE was present, and could speak to the capacity of TE and the OEM. The maintenance issue and the primary delivery of locomotives could be separated. The impression was that there was not a plethora of locomotives running around that could be refurbished. The specific types of locomotives required were not plentiful in South Africa.
Dr Molefe said the board's preferred option was to resolve issues with the CRRC. This was because resolving these issues was easier in terms of moving towards the delivery of locomotives that had to be maintained, and the remaining 90 that still needed to be manufactured. He said there had been a settlement with General Electric (now Wabtec). Transnet had issued a request for proposal (RFP) inviting them to come in and maintain the locomotives they had supplied. Wabtec maintained their locomotives, and there were more than 100 of their locomotives in the state’s yard because Transnet could not get spares. There were over 200 Chinese locomotives out of about 350. He said that to try and redesign the locomotives would take a long time.
Transnet wanted to resolve the issue with CRRC, but in the unlikely event that efforts to resolve the issue failed, Transnet would have to procure new locomotives. He said they would rely on the companies whose designs were used by the Chinese when designing their locomotives. Locomotives could not be designed for manufacturing in one year, so Transnet needed to work hard to convince the CRRC and other parties such as SARS and SARB to resolve the issues. Dr Molefe said a lot of work had been done to respect the independence of SARS and SARB and they were optimistic this would lead to the timely resolution of the issue before the economy collapsed. Transnet was pivotal to South Africa’s economy.
Ms Derby said that, as indicated, the issue of time was the reason for their first option being a resolution with the CRRC. Transnet had a second option, but it would take time. Their corporate plan did not presuppose that Transnet would receive all the CRRC locomotives now -- it was based on the return to service of the balance of the locomotives. By the end of the financial year, there would be an additional 30 or so locomotives. These locomotives would have greater reliability and material, and involve agreements with OEMs. There were so many locomotives waiting because of the long lead items. All these locomotives should be returned to service by the 2024/25 financial year.
She said the third-party access and increase in rail use by other parties would start next year. The point the Minister had raised about the ease and time it took to get alternative locomotives was something that needed to be addressed.
Ms Derby said the issues raised were mindful of the challenges Transnet faced. Concerning the third party issue, Transnet was working on a leasing company. This was where they took older locomotives, and fixed them up for use by third parties. The issue with this was the reliability of the locomotives, because most of them were 50 years or older. The immediate focus was to close on the CRRC matter, as it had a material impact on Transnet.
Ms Mente said there was a question she had asked earlier about the issue of the locomotive resolution. The CFO of Transnet had said the resolution regarding locomotives had been cited as a critical matter in Transnet’s presentation. The locomotives were the issue being discussed, and it pertained to the need for the CRRC matter to be resolved so that locomotives could be available for the movement of goods.
She concluded that, given the CFO’s response, they were nowhere near getting anything done. They could not get locomotives running, which meant they were not going to get Transnet running. This was because the Transnet mandate was based on the movement of goods, and if goods could not be moved by rail, the roads would be used and people would die. She asked what this said about the people heading up Transnet. The entity was a dismal failure.
Ms Mente asked for another meeting, because the Committee was not being told what the CRRC and Transnet wanted from each other. It did not look like two people fighting, but rather that there was something the Committee was not being told in terms of their agreements. She asked what the two parties wanted, and how a resolution could be reached. Dr Molefe had indicated that their first choice was a resolution. She agreed it was indeed the first option, because everything was being procured from the CRRC as the standing OEM. The relationship, however, had collapsed. She asked how it could be mended.
Dr Molefe suggested that the board, through Transnet’s management, send a written submission to the Committee to the extent possible regarding the issues and agreements. This would have to be done without compromising the independence of the organs of state over which Transnet did not have control.
The Chairperson said what Ms Mente wanted was a snapshot ventilation of the matter, but a written submission would be welcomed. Given that there were questions to the President sitting in the House that required the attendance of Members of Parliament, and this meeting being approved to end at 13h00, it would be correct to suspend this meeting now.
He said there would be another meeting to discuss the latest agreements with closer scrutiny. This was because the Committee had no choice but to agree with the Minister that something had to be given to Transnet. One could not move from a R5 billion profit to a R5 billion loss. He did not accept the reasons cited for the loss. Broader structural and governance reforms needed to be implemented at Transnet.
The Chairperson said the structuring of the next meeting should be in the form of an oversight visit. This was to allow for an interaction with all the components of Transnet. The Committee needed to look at how they proceeded because they were unhappy with Transnet as things stood.
Regarding the SIU, blacklisting and referrals, faster movement was needed. Mr Philani Godfrey Mavundla had been cited as blacklisted in the SIU’s presentation, but he was still the Mayor of Umvoti Local Municipality. When things moved slowly, favouritism was assumed based on political proximity. The Zikhulise Group was cleaning maintenance transport, but there were serious concerns about the quality of the house the company had built in Umlazi. The owners of the group had gone on to have reality shows and soccer teams. There was an urgency to address this otherwise, these were just desktop exercises.
Minister Gordhan thanked the Committee for the session. He requested that Transnet’s board be given a few weeks to attend to the mandate they had received from the shareholders before scheduling their visit.
The Chairperson said the visit was not an immediate course of action. The Committee was mindful of the board's situation.
The Minister asked that elaborations on the questions that had been asked regarding the locomotives be sent to them in writing.
The Chairperson said Transnet and the Department of Public Enterprises would be given time.
He noted that next Tuesday, the Committee would be briefed on the SIU’s intelligence report on the former CEO of Eskom, and the meeting with Brigadier Jaap Burger. Next Wednesday, the SIU would brief the Committee on their Integrated Financial Management System (IFMS) investigations, and National Treasury would brief the Committee on the IFMS implementation.
The meeting was adjourned.
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