Ramos sorts out Transnet
Fin24

Ramos sorts out Transnet

2004-08-27 14:02

Johannesburg - Transnet CEO Maria Ramos has brought the skills she learned as National Treasury Director General to Transnet.

At Treasury she introduced strict cash management, restructured the debt portfolio and introduced multi-year budgeting. In addition, at all times she focused on delivery, and at Transnet that means keeping the customer satisfied.

Transnet reported a net loss of R6.332bn for the year ended March 30 2004 from a R421m loss in the same period a year ago. The group reported an operating profit of R187m from an operating profit of R5.088bn a year ago.

National carrier South African Airways (SAA) reported a loss of R8.73bn from a loss of R6.197bn before. SAA's net losses over the past two years totalled R15bn.

Ramos attributed Transnet's underperformance to disparate businesses and a lack of synergies within the group.

"There are just too many loss-making businesses and too many disparate businesses," she said.

Ramos launched a four-point turn around plan that included the need to redirect the business, restructure the balance sheet, implement and adopt strict corporate governance principles and adhere to a vigilant risk management process.

This meant that Transnet would slim down to roughly half its size in terms of revenue, as it exited non-core operations, which could either be privatised or given back to the government, who is Transnet's only shareholder.

The new Transnet would have a total turnover of R22bn compared with the current R44bn.

Looking ahead, the group stated that in its first stage going forward, it intends building a solid foundation with head office restructuring, operational efficiency, vertical separation and divestment of non-core operations.

The second stage would see the implementation of a new business model by establishing a central, strategic optimisation unit that would focus on integration bottlenecks, operational synergy between the rail system and the ports.

The third stage will see the delivering on the mandate with operational integration for port and road, public-private partnerships, key account management for customers, logistics management capability and partnerships of a local and global nature established for growth.

Transnet will spend R14bn upgrading Spoornet infrastructure over the next five years.

"At present Transnet still has only single year budgeting for capital expenditure, so everybody puts forward their pet project. We then find that not all projects can go ahead, which then results in under-spending of the capital budget," Ramos said.

The Transnet capital expenditure fell by 26.2% in the year to March 2004 to only R7.82bn, even as many Transnet customers complained of poor service due to lack of rolling stock.

The iron ore line only increased its tonnage shipped by 5.9% to 27 million tons in the year to end March 2004, whereas Chinese imports of iron ore surged by 34.9% in the first half of 2004 to 97.75 million tons.

The lack of Transnet capacity meant that Australian and Brazilian iron ore producers received the lion's share of the increase.