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New CEO faces tough task to get Transnet on the right track

Feb 04 2020 05:00
Helena Wasserman

The new CEO of Transnet, Portia Derby, has her work cut out for her.

Unlike most of SA's other state-owned enterprises Transnet isn't a financial basket case. While it has a debt burden of almost R128 billion, in the past financial year posted a profit of R6 billion. Yet, it has wreaked immense damage on South Africa.

Its inability to transport goods cheaply and quickly has weighed on economic growth for many years.

Exporters and importers have complained of inefficiencies and bottlenecks at ports, with ships having to spend days at sea before cargo can be handled.

According to a Treasury report, the average turnaround time at the Durban harbour is three times longer than at other large ports around the world. It is also prohibitively expensive. The cost of exporting a 20-foot container from Cape Town reached $2 000 five years ago - more than double the average for high-income economies. 

The South African rail service is also notoriously inefficient and expensive. The Treasury report states that transporting dolomite from the Northern Cape costs R608.97/tonne by rail - compared to just R256.23/tonne by road.

Knowing Transnet well

Derby, previously a former director general of public enterprises, knows Transnet well, says Terence Creamer, editor of Engineering News.

A BSc graduate with an honours degree in economics and an MBA from Wits, Derby has spent most of her career in government. However, a decade ago she resigned from civil service to join former Public Enterprises Minister Alec Erwin at Ubu Investments, which gives technical assistance to infrastructure projects on the continent, particularly in West Africa.

Most recently she was an executive director in charge of African projects at engineering firm Aurecon.

Her work in the private sector focused on infrastructure, so she has the financial know-how combined with technocratic and policy expertise from her time in government, Creamer says.

He expects that Derby will continue Transnet's recent trend of working more closely with the private sector, allowing more concessions to local companies. Transnet has already signalled it will run a large liquefied natural gas (LNG) hub in Richards Bay with a private partner, and Creamer thinks private partners will be part of the Tambo Springs Inland Port, which will link road and rail transport in Gauteng.

There is more scope at the ports for private operators, potentially competing with Transnet Port Terminals, as well as concessions for private companies to operate rail lines, Creamer says.

"This could be crucial for lowering the cost of logistics, which remains a binding constraint on South Africa's growth ambitions."

Another priority should be re-establishing Transnet's credibility after years of corruption and state capture, Creamer believes.

Here Derby comes with some tricky baggage in the shape of her disgraced former husband, Brian Molefe, described by Transnet chair Popo Molefe as one of the "key protagonists or architects of state capture at Transnet".

A former Transnet CEO himself, Molefe is blamed for one of Transnet's biggest problems: a disastrous R56 billion contract for more than 1 000 locomotives, which has been plagued by allegations of fraud and kickbacks.

During his stint as Eskom CEO, Molefe stands accused of awarding coal contracts to Gupta-owned companies.

According to two people who know her well, Derby's marriage to Molefe, with whom she has two children, broke down a decade ago in part due his close association with the Gupta family.

"She was anti-Gupta before the rest of us even knew what state capture was," one associate told Fin24, on condition of anonymity.

Derby has vowed not to block any clean-up at Transnet, which may involve prosecution of her ex.

"Remember also that the investigations are complete, actions are now coming from the courts," an associate said.

The article has been corrected to reflect Transnet's debt burden and to remove a reference to legal prosecution of Molefe.

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