TRANSNET board chairman, Andile Sangqu has advised that the development of a turnaround plan for the business has been completed and is expected to be submitted to the shareholder (the Department of Public Enterprises) this week.
Sangqu said that representatives of the board will meet with the DPE as well as the Ministry of Finance to discuss the operational and financial details of the business turnaround plan, including areas which require immediate government support.
Once approved and funding commitment is secured, the plan will be discussed with key stakeholders such as organised labour, employees, customers and lenders. The turnaround plan outlines operational and financial initiatives which must be implemented in the next six, twelve and eighteen months to stabilise the business and position the company for growth.
“The turnaround plan is predicated on several detailed goals to reform and strengthen the operational state of the freight rail division in particular, and with priorities of key elements, specifically the rail corridors that service key sectors of the economy,” Sangqu said.
He said that the turnaround plan is premised on principles which include:
- The balancing of the financial stability and the operational performance of the business.
- Improved utilisation and care for operational assets and infrastructure.
- Improved integration and operation execution across operating divisions.
- Improved employee engagement and visible management at operations.
- The development of a deeper accountability framework.
- Cost reduction measures, cash flow and working capital improvements.
- Continuous engagement and collaboration with all relevant stakeholders, including organised labour, customers, funders, government and industry.
Sangqu said that the board has prioritised the filling of the three executive positions in the business, with the recruitment process having commenced. The recruitment process is being prioritised for urgent finalisation, given the criticality of these positions to the organisation, and the lead role the incumbents will play in the execution of the turnaround plan. The board also continues to work closely and collaboratively with stakeholders, including the National Logistics Crisis Committee (NLCC).
The brief from the DPE
Earlier this month, the Minister of Public Enterprises, Pravin Gordhan reiterated his earlier instructions to the Transnet board to devise a turnaround plan that should help increase rail volumes, improve efficiencies, improve internal controls, and boost infrastructure investment, among many interventions that Transnet requires.
Gordhan said that the board has the DPE’s full support in its efforts to devise its plan as was requested in the comprehensive statement that he made on September 1, 2023, following the presentation of Transnet’s FY22/23 financial results.
The board’s responsibility also entails ensuring that Transnet’s executive management structure is optimised and infused with the requisite talent to sustain Transnet’s strategic overhaul and ensure accountability for non-performance.
Minister Gordhan’s injunction to the Transnet board requested it to make recommendations on the following:
- Operational Transformation: To develop or enhance the plan to radically transform the operational performance of each of the business areas, including the restructuring of the entity to more effectively and efficiently deliver on its mandate.
- Root causes: To identify the root causes of the inability of management and staff to meet the performance targets and a plan to deal with the deficiencies.
- Stringent/rigorous accountability Oversight: To develop, with the DPE and National Logistics Crisis Committee (NLCC), a new framework for transparency and accountability through detailed reporting on the successful execution of the turnaround strategy.
- Management review: Conduct a thorough review of the executive management, to establish whether persons with the right skills are optimally utilised to deliver on the mandate.
- Information and operational data Transparency: A culture of accountability, discipline and transparent access to relevant information must be engendered in the organisation.
- Digitisation of systems: Mechanisms to speed up the automation and digitisation of performance reporting systems to prevent deliberate and wrongful manipulation of data.
- Rigorous system of controls: Implement urgently the controls identified by the Auditor General reports.
- Excessive cost structure: Launch an initiative aimed at curbing superfluous expenses to boost financial sustainability.
- Employee Engagement: An internal campaign must be put in place to instil a “higher purpose” among all employees.
Gordhan said that operational issues (including VSPs) are the domain of the board. “The partnership between government and business provides a clear vision for capacitating Transnet so that it can increase freight and rail volumes,” he said.
