Engagement with organised labour on the governance, financial and service delivery challenges facing Transnet

Meeting report

The Chairperson said that Transnet failed to improve efficiencies in the economy and asked the unions about what they know regarding the challenges faced by the entity and what could be done to improve the current condition. He asked for the trade union's opinions on the developments at Transnet and their position.

South African Transport and Allied Workers Union (SATAWU) Presentation

The presentation provided a critical analysis of the state of South Africa's rail industry and the challenges it faces. In this presentation, Mr Jack Mazibuko, General-Secretary, SATAWU, highlighted the deteriorating conditions in the rail sector and the proposed prescriptions in the White Paper on National Rail Policy. He also discussed the role of public-private partnerships in eroding the independence and performance of state-owned enterprises. Concerns about the future of centralised collective bargaining were raised as well as the potential retrenchment of organised labour if the business is transferred to private equity partners.

Mr Mazibuko said there was a need to address the interference and relationship between the state and private sector to resolve the financial and operational challenges faced by the rail industry. He also mentioned the importance of considering climate change and introducing renewable energy in the planned restructuring of the rail sector.

SATAWU argued that the promulgation of market conditions could lead to risky forms of employment and socio-economic conditions and called for new organising methods and advocacy strategies to avert rapid market reforms. It also emphasised the importance of safety, local economic development, and the expansion of freight corridors.

He concluded by recommending investments in infrastructure, rolling stock, human capital, and new business models to turn the rail sector around and create new employment opportunities.

See attached for full submission

United National Transport Union (UNTU) Presentation

Mr Cobus van Vuuren, General-Secretary, UNTU, provided an overview of the operational challenges and staff morale issues faced by Transnet.

One of the processes discussed was that of procurement and it was described as cumbersome and time-consuming, impacting the ability to source spares and maintain the fleet. Fraud and corruption were also mentioned as significant problems and the company's debt burden was highlighted as being due within the next five years. Outsourcing work and unbalanced employee ratios were identified as issues within Transnet Engineering (TE).

The discontinuation of business development, theft, and vandalism were also mentioned as concerns. The presentation discussed challenges faced by other divisions of Transnet, such as the lack of tugboats in ports, berth-deepening delays, and the termination of permanent shift allowances. The impact of theft and vandalism on Transnet Freight Rail was emphasised, as well as the availability of locomotives and infrastructure maintenance.

The integration of Transnet Engineering and Transnet Freight Rail was indicated as potentially detrimental to the revenue, and the insufficient volumes and outdated technology were identified as problems within the Port Terminals. The presentation also discussed employee morale issues, including environmental factors, lack of development opportunities, and bullying. Overall, what was highlighted was various operational challenges and staff morale issues faced by Transnet.

See attached for full submission

Congress of SA Trade Unions (COSATU) Presentation

Mr Tony Ehrenreich, National Deputy General-Secretary, COSATU, discussed the concerns and challenges related to the operations of Transnet, one of the state-owned enterprises in South Africa. He highlighted the impact of Transnet's inefficiency on various sectors, including manufacturing and mining, which is leading to reduced output and economic growth. He emphasised the need for urgent action to address these issues and prevent the involvement of international financial institutions like the International Monetary Fund (IMF) and the World Bank.

One of the main concerns raised is the management situation at Transnet, with senior leadership resigning and a lack of contingency plans, resulting in a loss of expertise and operational challenges. The presentation suggested implementing a carefully designed turnaround strategy funded by the government. Financial difficulties were also highlighted, with Transnet requesting a bailout from the government, however, given the Finance Ministry's financial austerity plans, it is uncertain if there will be sufficient funds available.

He further discussed the need for replacement parts for locomotives and the impact of cable theft on the functioning of the rail system. He mentioned instances of looting and corruption within Transnet, which need to be investigated and acted upon. Concerns were raised about the future of state-owned enterprises, the potential involvement of the private sector, and the need to maintain administered prices at the lowest possible levels to maintain a comparative advantage. Mr Ehrenreich suggested considering a 20-year contract period for private sector involvement, with key service delivery reverting to the state afterward. Overall, the presentation highlighted the urgent need to address the challenges faced by Transnet and other state-owned enterprises to ensure economic growth and prevent further decline.

See attached for full submission

Discussion

Mr N Dlamini (ANC) expressed concern over the presentation’s subtle requests to government for funding. He said that UNTU tried to identify some of the problems faced by Transnet and its workers. He added that the organisation should be in a position to make money even though government funding and/or bailouts are not always the solution. He stated that the Transnet Ports National Ports Authority (TPNA) and the Transnet Ports Terminals (TPT) should be making money from their operations and the stakeholders who presented to the Portfolio Committee should have advised on how this problem could be resolved.

He noted that the Transnet Freight Rail (TFR) is a bit different but should also be making money because its main function is to transport commodities from the mines to harbours. He added that mining companies pay for service, so there should be some profits.

He mentioned that signalling and ageing infrastructure have been pointed out as problems.

Mr Dlamini recalled a time when South African Railways was still operational, and the country had no problems regarding steel because it was produced locally and then given to the railway network. He said that he agreed with UNTU that private sector participation may not be the solution to the problems that Transnet is currently facing because it would be costly to import all the necessary material. This would negatively affect the consumer as selling prices would drastically increase.

 

He said that the unions would recall that South Africa was very efficient and busy until it became easier to export goods via Mozambique. He recalled that in one of his oversight visits to Transnet, it was mentioned that Mozambique would overtake South Africa. As predicted, Mozambique took over and lost the business only because of the civil war in the country. He said that it was unfortunate that these concerns were not taken seriously.

 

He stated that the Durban Port is not preferable compared to other ports as the rail network leading to it is not operating at its best. He asked why there is no willingness to reverse engineer and manufacture parts locally to ensure that the economy keeps moving forward when there are shortages. He said the problem is well known, yet there is no movement towards a solution. There is capacity to produce parts that are needed but there is no willingness to resolve the issue.

 

He addressed the issue of staff morale and agreed with SATAWU’s submission that problems started around 2018. Certain decisions were made that created crises at TPT, especially the Durban ports. Vessels would have to be offloaded in five days but workers would do that in three to four days because of the implemented incentive schemes. He said that the incentive scheme kept workers motivated to work harder than ever before and it was during this time that Transnet was the employer of choice. The discontinuation of incentives negatively affected business as workers were no longer motivated to go the extra mile as they did.

Mr Dlamini added that he expected union representatives to address this matter but they did not, and they also did not comment on whether the unbundling of Transnet would help the workers or not. Some workers at Transnet were of the opinion that the unbundling of Transnet would negatively impact their bank book and that TPT would have to compete for slots with the private sector. The workers expressed concern over their jobs whereas the unions are not communicating with the workers about their concerns but are expecting funding from government when it has been public knowledge that the funding of R100 billion would come from the private sector. He asked what was the final position on the matter of the R100 billion and if it would it come from government or the private sector as previously stated.

Mr G Cachalia (DA) thanked the unions for their representations and highlighted that UNTU’s presentation was detailed and interesting. He said there had been a patent failure in the state-owned enterprise (SOE) which is defined by an inefficient distribution of goods and services, compounded by irrational incentives. Given the absence of funds, the pressure of government borrowing, and Transnet's worthlessness, he said there is no alternative to the entry of the private sector into Transnet's business. He said that the entity’s actions in the provision of public goods should also be carefully monitored, agreed with Mr Dlamini on the issue of incentives, and asked why they were removed. He also asked about the impact the removal of incentives has had on the effectiveness of business.

Ms N Mhlongo (EFF) asked if the workers of Transnet had been spoken to regarding the dissolution of the Department of Public Enterprises, and if the workers put forward their comments and concerns regarding the unbundling of Transnet.

She asked COSATU representatives if the Passenger Rail Agency of South Africa (PRASA) could be resolved by partnerships with the taxi industry since it is their direct competitor and alleged saboteurs according to the presentation.

Highlighting that trucks play a critical role in transportation; she asked if they could also be partnered with TFR in the same way that the taxi industry collaborated with BRT in the metros. She said the collaborations would be an attempt to prevent sabotage and ensure that goods are transported.

She asked how are employees consulted regarding the directions that Transnet will take, if they are given a platform to share the inputs and objectives, and if any strategies are being put in place.

Ms Mhlongo added that government must indeed bail out Transnet. It cannot be allowed to collapse and be sold because it is a strategic company that must be guarded for the interests of the country. She said that the private sector is strongly driven by profits and this could easily result in a lot of people losing their jobs. She inquired if workers could be asked about what needs to be done for more locomotives to be operational and if there could be more effort regarding engineering, upskilling of workers, and diesel mechanic training.

She asked for the reasons behind Transnet’s failure to comply with the four-shift pattern.

Mr S Gumede (ANC) thanked the union’s representatives for their presentations and how they discussed matters of concern. He said that the Portfolio Committee was behind, considering that it is almost the end of the current government’s term and that of the Department of Public Enterprise. This would limit the Portfolio Committee’s ability to collaborate. He said that it would be unclear, for some time, who would be responsible for the implementation of the recommendations brought forward. It would also be difficult to know who will be held accountable for the implementation of ideas.

He proposed that the Committee have a joint meeting with the Department of Public Enterprises, Employment, and Labour as well as the management of the various SOEs. This would facilitate in-depth discussions and recommendations on the current state of SOEs and how to move forward regarding bailouts from government.

He said that sometimes he does not support bailouts and made an example of Denel which was once given R1.8 billion and incurred losses that amounted to the same of R1.8 billion. He highlighted that the relationship between the unions and the management was not discussed in the presentation. He asked the Committee to wait for Transnet to present its financial reports because that would indicate whether a bailout would be a good idea.

He asked about the state of the relationship between the unions and the management because it seems that they do have discussions.

Mr Gumede indicated that the 3877 cases that were opened were still unsolved and the inefficiencies of the police were still a problem. He referred to the case of the Chief Executive Officer (CEO) who was found with a truckload of rail infrastructure which was still pending and added that Transnet and Eskom should be the two pillars of the Department of Enterprises so they could not possibly allow for failure.

He asked the Chairperson to chair a meeting between all stakeholders so they could contribute and be held accountable for their respective SOEs.

Mr F Esack (DA) said a lot discussed in Transnet's Budgetary Review and Recommendations Report (BRRR) which shows that funding the entity again would be the same as refinancing debt. While the union's concern over privatisation is understandable, there is nothing left in Transnet's fiscus, and bailing it out again compounds the actual problem. He made an example of the D40 fleet which is now 40 years old, and asked where the money to replace the fleet would come from, if not from the private sector.

He asked how the unions felt about the integration of Transnet Engineering and Transnet Freight Rail, and if this integration would not place even more strain on Transnet Freight Rail.

Lastly, Mr Esack asked what the union's thoughts were on the employees who have been getting paid while they were at home, and what the union's contributions to the theft and vandalism in the workplace were.

Ms C Phiri (ANC) said that the presentations were quite similar and asked how the unions feel about the mass resignation of the leaders at Transnet, especially since a lack of leadership was one of the problems faced by the entity. She asked about the resolutions or ways in which they can have a better relationship with the new leadership.

She asked if the system allows the unions to contribute to the entity.

She mentioned that in one of the oversight visits in Durban, she asked the unions about their contributions to the management and the survival of Transnet. There was hope that Transnet would survive and be in a better position than all other entities under the Department of Public Enterprises. She said that unions are not given opportunities to improve Transnet which limits their decision-making powers and places that burden on the labourers and Portfolio Committee who do not understand the working conditions at Transnet.

Ms Phiri said that the Committee needs to follow up with Transnet to ensure that recommendations were implemented, and that work was being done. She added that the relationship between the workers who are in the trucks and locomotives needs to be understood, especially the hostility among them.

She stated that in one of the Committee’s oversight visits, they were told that gas had been stolen from Transnet which was an indication of how employees may be the ones behind the theft because laymen do not understand the worth nor the use of the gas. She asked how Transnet is protecting itself against theft and vandalism.

She said that the matter of China North was a bitter pill to swallow for Transnet because they could produce their material and importing material from China, which does not suit the South African railway network, did not make sense. She indicated there was no communication about this to the Committee or the speaker and added that unions must give the Committee tangible reasons to make follow-ups on Transnet.

To conclude the discussion, the Chairperson added that the failure to shift from road to rail was among the failures at Transnet. He asked why the unions have not applied pressure towards achieving this goal when it would have significantly lowered costs and created more jobs. He said that unions have the power to fast-track the process of shifting Transnet from road to rail.

He mentioned that there are challenges in rail but the plan can be executed and the army could also be asked to protect the railway from theft and vandalism. Theft and vandalism are criminal activities that should not be used as an excuse not to execute the road-to-rail plan. He indicated that this would be a form of extortion.

The Chairperson clarified to the Committee Members that trucks that are seen transporting goods from the mines were privately owned and not the property of Transnet. He said that relying on private-public partnerships is one of the many contributing factors to the problems at Transnet and the entity should look toward partnering up with other state-owned enterprises instead. He added that this would improve capacity - he gave an example of how a partnership between PRASA and Transnet could empower the two entities. This partnership would help people keep their jobs and create even more jobs.

He stated that the private sector has proven that it cannot be trusted with job security and asked how unions are helping to solve these problems.

Responses

Satawu

Mr Mazibuko said that he would correct some misconceptions by the Committee Members and try not to be political even though one of the reasons for the current state of Transnet is the bad policy decisions. He added that this has affected the labour performance of the entity. He said that the unbundling of Transnet is one of the root causes behind Transnet's problem with transport and it is important to reflect on the entity's background to understand the problems it is currently facing.

He indicated that the policies made by the Committee and the Department put Transnet in its current state. An example of this is the Road Freight Sector which has more than 150 000 employees, 50% of the work that Transnet did was given to the Road Freight Sector which now has dilapidating infrastructure. He indicated that this directly resulted from wrong policy decisions that SATAWU was objecting to. Secondly, the criteria for which Transnet is applying for Private-Public Partnership is not inclusive of small, black businesses that need to be empowered.

The first thing that needs to be done to secure a successful shift from road to rail is the improvement of the infrastructure. Branch lines used by Transnet are no longer operational because clients have opted to buy trucks to transport their goods and railway lines not being used for a period longer than 6 months, make them susceptible to vandalism. He added that Transnet ends up having limited ways in which it can use to transport goods and its privatisation means small businesses and the economy at large will be suffocated by the high prices that private companies will charge.

Mr Mazibuko explained that the ageing locomotives are the reason why Transnet cannot perform at its highest capacity. Trains offloading at different ports are older than 40 years and cannot be repaired to perform at high speeds. He mentioned that the ageing locomotives and the number of trains that were not operational when Committee Members were conducting oversight visits are the issues that need to be considered when the entity is expected to perform. Transnet cannot be expected to be at its best when it currently has one tugboat that directs other vessels to deliver goods into the country.

He said that there are not enough resources at Transnet and that negatively contributed to the morale of the employees. What also contributed negatively to the morale is the management not giving workers opportunities to make meaningful inputs. He added that the new Board has come up with a turnaround strategy yet workers have not seen it even though they will be the ones implementing it.

He indicated that the workers were not responsible for appointing people to management positions and inquired about how the Department and government ensure that the appointed candidates understand Transnet and its business.

He stated that people who have collapsed the South African Airways (SAA) cannot be deployed to Transnet with the hopes of improving it.

He said that government has good infrastructure when it comes to Transnet Engineering (TE), but when work is given to private companies, it cannot be expected for TE to fix the old trains at Transnet. This creates a crisis and advancement toward privatisation.

He emphasised that SATAWU does not support the amalgamation between Transnet Engineering and Transnet Freight Rail because their responsibilities are completely different. Mr Mazibuko recommended that government speak in one voice to the Committee. PRASA cannot come up with programs to source trains from private sectors when Transnet Engineering has the capacity to manufacture new trains. These are both government institutions that need to be in communication with each other regarding such matters.

He said there have been engagements with the Board and the Minister to do a feasibility study on the locomotives that Transnet needs to run its operations to the best of its ability. The 1 064 locomotives deal does not negatively affect the performance of Transnet because the entity would be able to run its operations. This is not possible yet as there are only 40 locomotives that are operational and the 40 trains are stuck due to missing parts that take up to six months to procure.

The issue of Transnet and security needs reflection as the entity had its railway policing. Crime statistics show that crime in South Africa is very high, so the Defence Force and the Police Service cannot be deployed to Transnet. The entity already pays a lot of money to private security companies that should be trained to meet the security needs of Transnet. This would be the most effective way of dealing with vandalism and theft.

Mr Mazibuko responded to the question on whether unions are strategising with Transnet and said that submissions were made and it was proposed that labour be represented in decision-making strategic committees, even on the Board.

He highlighted that challenges within Transnet cannot be solved overnight and that more meetings must be held for thorough engagements and development of strategic plans. Mr Mazibuko reiterated that the government must speak in one voice because the National Crisis Logistics Committee, the Department of Public Enterprises, and the government are all saying completely different things. There have been discussions that certain divisions of Transnet should fall under the Department of Transport. He indicated that the idea does not support the rebuilding and transformation of Transnet and that such things further weaken the entity because workers are not informed of most of the decisions that are taken.

The corruption at Transnet, as highlighted in the Zondo Commission, cannot be overlooked when discussing the challenges. It cannot be assumed that there are no longer any corrupt activities taking place at the entity now that the Zondo Commission has exposed some of them. He said the debts are still a big problem and could result in creditors applying for liquidation.

Cosatu

A COSATU representative agreed with the points made by Mr Mazibuko and said that it was clear that there was no clear, comprehensive plan to turn around Transnet. However, the greatest contributors to the sluggish economic performance are Transnet and Eskom. These entities were functional ten years ago but were contaminated by corruption under the Zuma administration. The private sector initiated a lot of that corruption and it is also clear that public servants cannot be trusted. When looked at from the outside, the private sector is the most corrupt but colludes in almost every sector of the economy.

He stated that the biggest theft in South Africa was in the private sector when Marcus Jooste and others were said to have stolen R280 billion. The Zondo Commission also showed how international companies were involved in the corruption of South Africa, yet today, it said that the two SOEs that are important to turning around the economy must be funded, managed, and directed by the same companies. He told the Chairperson that the consequences of experiences as a country are not appreciated, especially with private companies.

He said there is a need for action, finances, and turnaround strategies sooner rather than later, as the last ten years have highlighted Transnet's challenge to perform and meet the demands of the economy. There have been several interventions and changes in leadership but there has not been a coherent, strategic plan that is meant to address the issues.

He added that the unions have not been involved and consulted and that the failure of Transnet is also a result of a lack of an evidence-based plan. He said that inventory cannot be sold at Transnet as it was in SAA for it to operate effectively and added that debts also need to be addressed at all levels. He indicated that he supported the suggestion that all relevant leaders and stakeholders be in the room and discuss possible solutions for the crises at Transnet.

He agreed with the Chairperson's sentiments and said that people cannot be allowed to extort Transnet and private companies must not be given shares in the business out of fear that they will sabotage it. He said this was done with the taxi and the BRT but must not set a precedent. Focus must be put on public institutions to provide services to the public. He also indicated that a strategy is already in place that delegates different transportation to different industries.

Untu

Mr van Vuuren responded to the question on TFR and said that boats cannot be berthed without tugboats and money cannot be made without tugboats as they are responsible for signalling.

He said that the discontinued incentive system did not consider the fact that 60% of the equipment meant to be used is not working, out of use, or irreparably damaged. The security concerns in TFR had been addressed and Mr van Vuuren urged the Committee to read it in detail.

He highlighted that financial assistance is required because when shareholders run a business and a Board that has been put in place and as a shareholder, there is a duty to ensure that the business is sustainable. He said that the required investment for Transnet to be sustainable has not been made for many years and shareholders also have to ensure that the company has all the necessary tools and equipment to meet the demands of the business.

The Chairperson thanked the union's representatives for their presentations and responses. He noted that Committee Members wished to continue the discussion but could not due to time constraints. He said that unions viewed Members as government and further explained that the Parliament is a legislative branch independent of the judiciary and the executive. All these branches have different functions, but the Committee's role is to facilitate oversight.

He thanked the union's representatives for giving the Committee insight into the current condition of Transnet and could not allow Members to further engage, as they had to attend the Medium Term Budget Speech in Parliament.

The meeting was adjourned.