JOHANNESBURG - Transnet has recorded its best annual financial results ever, despite reporting R800 million in irregular expenditure in the year to March.
Under-pressure Transnet chief executive Siyabonga Gama yesterday reported that Transnet’s net profit improved by 75 percent to R4.9 billion from R2.8bn, driven largely by an increase in railed export coal volumes, automotive volumes and port containers.
Gama, who released the results as he and two other executives faced a deadline to show cause by yesterday why they should not be suspended, said Transnet’s annual results were the best it had ever recorded. He also pledged that Transnet would invest a further R163.7bn over the next five years to aggressively grow volumes and seek new markets to compensate for lower growth expected within the traditional markets.
Accumulated irregular expenditure by the state-owned enterprise from 2005 now totals R8.1bn, but Gama stressed the amount for the reporting period was R800m. Gama admitted the 2017/18 financial year had been characterised by a number of serious procurement related governance challenges, which had impacted on the company’s reputation and the ability to attract investment. This resulted in external auditors issuing a qualified audit opinion related to the completeness of reported irregular expenditure.
“The expenditure was irregular in the sense that processes for procurement were not followed. We need to automate some of these systems. A remedial plan has been made and will be presented to the board,” he said.
Co-operating
Gama said Transnet was co-operating with the country’s Special Investigating Unit and the Hawks in conducting at least 22 investigations into the irregular expenditure from its procurement processes. He declined to comment on the process initiated last week to suspend him and two other executives. Transnet’s executives and the board are haunted by the deal to buy 1 064 new locomotives after an investigation by law firm Werksmans Attorneys earlier this month reportedly found that the terms were altered to provide kickbacks. A separate report commissioned by the National Treasury found Transnet paid R509m more for 100 locomotives after switching a supply contract to a Chinese rail company from Mitsui of Japan.
“That matter is best left to Transnet’s employees and the board,” he said. The United National Transport Union (Untu) expressed shock at the R8.1bn in irregular expenditure and demanded that the individual or individuals who neglected to fulfil their duties must be held accountable.
Steve Harris, the general secretary of Untu, said the irregular expenditure identified and reported by Transnet’s external auditors cast a shadow over the successes of the company, especially the new heights reached in the volumes of freight distributed by Transnet Freight Rail.
Harris said Untu welcomed any steps taken to prevent irregular expenditure in the future. Transnet’s revenue increased by 11.3 percent to R72bn in the year to March. Earnings before interest, taxes, depreciation and amortisation, Transnet’s major profit measure, increased by 18 percent to R32.5bn, with the margin improving to 44.6 percent from 42.1 percent. Gama said Transnet faced higher borrowing costs after ratings agency S&P Global in November downgraded South Africa’s credit rating to full junk status and Moody’s Investors Service placed the country on review for a downgrade.