Last month, Michelle Phillips, the ever-hopeful CEO of Transnet Group, insisted that “we are on the right track” when discussing the company’s supposed turnaround; a comical assertion since the state-owned entity, which oversees ports, rail, and fuel pipelines, once again reported dismal losses for the financial year ending March 2024. But hey, who needs fiscal responsibility when you can cling to delusions of progress?
By Themba Khumalo
In April, the ever-optimistic Transnet Group CEO Michelle Phillips sprinkled a little fairy dust on the grim reality of the beleaguered state-owned ports, rail, and fuel pipelines operator by boldly declaring, against all odds, they might see a miraculous double-digit revenue increase for the financial year ending in March 2024.
During her inaugural public address as the newly minted permanent Group CEO—after her appointment in February—she confidently announced that Transnet was banking on a revenue surge of up to 12% for the entire year.
This optimistic forecast, of course, came in the face of monumental delays and many bottlenecks at its ports, particularly in the delightfully dysfunctional Durban and Cape Town; not to mention the rail system, which is essentially a museum of cable theft and outdated equipment, especially on the crucial coal and iron ore lines to Richards Bay and Saldanha Bay.
Nevertheless, reality has a harsh way of making its presence felt; Transnet, instead, sits with a hefty burden of a R7.3 billion loss that feels like a crushing blow to the gut.
In August, the CEO, seemingly impervious to the multi-billion loss that looms like a primordial ghost, waltzed into parliament with all the grace of a hippo on a tightrope. Instead of taking the nation into her confidence on Transnet’s woes and the realistic way forward, she opted for a performance of hopeful rhetoric, promising us that better days were on the horizon as if optimism alone could patch the gaping holes in their financial ship.
When the critics unleashed their verbal artillery, her reply was as limp as a deflated balloon, offering a lacklustre explanation that the recovery plan was all about what the organisation could manage. She whined about the dire financial situation, the crumbling network, and the elusive rolling stock as if those were newsworthy revelations. Adding insult to injury, she droned on about the historical roots of Transnet’s operational challenges, as if a dusty past could somehow excuse the present debacle.
Come September, Phillips confidently declared, “We are on the right track” when pressed about the group’s turnaround, overlooking the inconvenient detail that Transnet had racked up a jaw-dropping loss of R7.3 billion. It was truly a masterclass in cognitive dissonance to celebrate progress while standing knee-deep in financial ruin.
At a PSG webinar, also in September, she exuded optimism that could rival a child’s belief in Santa Claus, asserting that Transnet could miraculously break even and “be back in the black” by March next year, courtesy of its so-called rail and port recovery plan. She said increasing rail volumes and restructuring debt payments might be the potion for a turnaround.
However, this sunny outlook gets eclipsed by the dark and daunting burden of increasing debt financing and interest costs, which amount to an astonishing R1 billion monthly.
Transnet is caught in a financial tar pit with a debt burden of R130 billion that clings to it like a leech, growing ever more grotesque and unwieldy with each tick of the clock, as if it were an alien creature intent on dragging the company down into the depths of hell.
At the Joburg Mining Indaba last week, she boldly declared, “We are going to stop the bleeding,” as though the gaping wounds of Transnet and, by extension, the country, could be stitched up with nothing more than rhetoric. Some observers, in their ever-astute manner and starving for a hint of optimism, claimed Phillips had finally found the right tune, a pleasing contrast to the woeful symphony of her predecessor.
Let us skip the dramatics surrounding this alleged turnaround and focus on the latest ruse being played on Transnet Freight Rail (TFR). Transnet has announced a vertical separation into an infrastructure manager and an operations company, claiming this will promote third-party engagement in South Africa’s national rail network. However, labour unions have rejected this initiative, denouncing it as shocking and ill-timed.
“We are against it as we do not know the dynamics around it. They are not being transparent enough about where the money is going to come from. We have so many unanswered questions at this stage. More than anything we are worried about job security. We do not know what is going to happen to those employees who will be transferred from one division to another. In addition to this, bringing other private operators into the rail network that has not been maintained for years is a disaster in waiting in terms of safety and efficiency of operations. This particle separation is retained privatisation and corruption because it is not communicated to us,” – South African Transport Allied Workers Union.
As of October 1, we have officially entered a new, albeit contentious, phase of TFR’s vertical separation, with the establishment of Transnet Infrastructure Manager (TRIM) and Transnet Freight Rail Operations Company (TFROC).
“The decision appears rushed and ill-considered, as the consultative process remains ongoing and is far from being completed. By Transnet’s own admission, they are running three to four months behind schedule with this planned segregation and/or separation of the Freight Rail division.” – United National Transport Union.
A freight, rail, and port logistics expert said the devil lurks in the details—details that Transnet has conspicuously failed to provide. He highlighted the Germans’ growing dissatisfaction with vertical separation, prompting consideration of a return to consolidation. He argued that merely splitting the company will not yield any positive outcomes; it requires a dedicated push to improve skills and competencies, ramp up efficiency, shift freight from road to rail, secure the network, tackle the maintenance backlog, and reintroduce the Chinese locomotives, among a myriad of other daunting challenges.
“Rail organisations achieve effectiveness by integrating their network and operational activities into a cohesive and unified structure. These functions must not be split, instead, they must be operated and managed as a single unit.”
If Transnet steams ahead with the new commercial framework, despite widespread concerns, the expert stressed the critical need to protect the interests of cargo owners. He called for a framework designed to prevent a situation where the involvement of multiple parties leads to widespread opportunistic profiteering.