The selection process for a new CEO at Transnet has become a contentious issue due to allegations of external interference in the decision-making. What was once an eagerly awaited announcement has now turned into an intense debate, with questions about impartiality and transparency continuing to plague the process.

By Themba Khumalo

The announcement of a new group CEO for state-owned freight and logistics company, Transnet, set for the end of February, has been delayed, causing uncertainty among stakeholders.

The integrity of the selection process has come under scrutiny due to reports of backroom manoeuvring, with some key stakeholders even suggesting there was a violation of rules.

The delay has ignited a firestorm of controversy, as suspicions of external political interference have reached fever pitch, casting a dark shadow over the impending announcement. Concerns over autonomy and transparency have turned the eagerly awaited announcement into a contentious issue.

With Acting CEO Michelle Phillips, the board’s preferred candidate, caught in the middle, stakeholders are questioning the integrity of the selection process and raising red flags about potential governance issues within the state-owned entity.

There is a perception among some industry players that Phillips, who has been an interim CEO for four months, is a suitable candidate for a permanent appointment. However, her anticipated confirmation has now become embroiled in a controversy that has significantly impacted the proceedings.

According to a City Press report, sources have revealed that the board was bludgeoned into discarding its original list of preferred candidates and instead considered individuals, such as Phillips, recommended by prominent and politically well-connected figures.

People who are closely monitoring the situation allege that the Transnet board had already identified and contacted all the shortlisted candidates it intended to interview when it received instructions from influential political figures behind the scenes. There are serious allegations that these political figures may have had a hand in the selection process, even though the specifics of their involvement remain unclear. This development has raised concerns about the transparency and fairness of the recruitment process at Transnet, which is a critical state-owned enterprise in South Africa.

In November last year, there were reports that Ravi Nair, who had previously served as the CEO of Transnet Freight Rail, and Mlamuli Buthelezi, who had served as Group COO of Transnet, were both considered for the top position. The reports indicated that Nair’s selection was through internal procedures. Buthelezi, on the other hand, got an invitation to apply for the position by a headhunting agency appointed by the group’s selection committee.

Both candidates received official letters informing them they were shortlisted and would proceed to the final selection phase. They were waiting for further information regarding interview arrangements. However, despite their expectations and official confirmation, they were, in the end, not called for any interviews.

The alleged interference with processes reportedly caused Transnet to breach recruitment regulations, causing outrage among labour unions.

The United National Transport Union (UNTU) and the South African Transport and Allied Workers Union (SATAWU) have called for a restart of the selection process. Both unions believe beginning anew will lead to a fair and credible outcome.

In October of last year, Untu, a union that had reservations about the capabilities of the acting CEO, requested that the Transnet board hasten the process of appointing a suitable group CEO. The union voiced misgivings regarding Phillips, casting doubt on her suitability for the position and conveying a lack of trust in her leadership skills.

Phillips, who was managing Transnet Pipelines – a comparably small division within the Transnet group – has been subjected to stern criticism by Untu. The criticism stems from the perceived inefficiencies and inadequacies of the said division.

“Given the serious challenges Transnet is facing, we are of the view that someone with extensive institutional knowledge, skills, and expertise must be chosen to lead the organisation and implement an effective turnaround strategy,” the Fedusa affiliated union told Business Report on October 5.

The union added: “Phillips was previously the head of Transnet Port Terminals (TPT), where there were numerous performance issues, including a backlog in the movement of merchandise that led to an uproar in the citrus industry in 2020.”

The Business Report article further reported that the union had written a letter expressing worries about Phillips’ acquisition of two new cranes costing R80 million each. The concerns raised were that  TPT employees never received proper training to operate these cranes.

“This is not an attack on Phillips, but rather an example of our lack of confidence in her ability to manage Transnet Freight Rail (TFR), one of Transnet’s largest and most profitable operating divisions, given her limited experience in rail and/or even Transnet Engineering (TE),” the union said.

“Transnet mustn’t leave the GCE position vacant for too long, given the current dire situation,” the union told Business Report.

Peter Attard Montalto, the managing director at Krutham, emphasised in an interview with dailymaverick.co.za the significance of Transnet’s logistical operations in the South African economy. He stressed that the effort to improve the company’s weakened leadership, particularly the CEO role, should be approached with seriousness.

“We need to be cautious of where we put the bar after the disastrous reign of Portia Derby and her sidekicks. The bar is not if a person is just better, but if they can manage the deep institutional and structural change required of the roadmap [to reform Transnet’s operations] and the bailout conditionality. 

“Someone who can [also] shift the mindset [that is needed]—as must happen in all SOEs—from being the totality of their sector to being an enabler of their sector,” Attard Montalto told Daily Maverick.

In an opinion piece published by bnnbreaking.com, seasoned journalist Mazhar Abbas raised some critical points regarding the Transnet CEO debacle: “As the saga unfolds, various stakeholders, including government officials, Transnet employees, and industry observers, find themselves in a precarious position.

“The delay and the controversy surrounding the CEO appointment have raised questions about the future direction of Transnet and its ability to maintain its operational integrity amidst the turmoil. For a company that is central to the country’s economic infrastructure, the stakes could not be higher.

“The ongoing delay in appointing Transnet’s new CEO is more than just a procedural hiccup; it is a test of South Africa’s commitment to good governance and the rule of law. The allegations of interference, if proven true, could have far-reaching implications not just for Transnet but for the credibility of the country’s public sector at large. It underscores the importance of upholding stringent recruitment regulations and ensuring that appointments, especially in entities as crucial as Transnet, are made based on merit and fairness.”

Despite reservations regarding the selection procedure, Ayanda Shezi, Transnet’s spokesperson, assured City Press (news24.com) that the recruitment process for the vacant positions was progressing as scheduled. She stressed the significance of filling these positions as Transnet focused on executing its business recovery strategies.

Shezi informed the publication that the board had submitted a list of suggested candidates to the minister of Public Enterprises Pravin Gordhan, who is the shareholder representative, following governance protocols. She underscored that the recommended candidates possessed valuable skills and knowledge that would benefit Transnet.

She said, “The board has noted the increase in speculation and rumours about candidates for these roles. It strongly believes that it’s crucial to maintain the integrity of the process and to ensure that it’s fair and beyond reproach. As a result, it won’t be drawn into the conjecture and speculation.”