Transnet Working on Plan to Eradicate Irregular Spending
(Bloomberg) -- Transnet SOC Ltd. said it’s putting together a plan to stamp out irregular spending that’s damaged the reputation of South African’s state-owned ports and rail operator and hurt its ability to attract investment.
The move comes after independent accountants could only sign off on a qualified audit of full-year financials amid a series of revelations that the Johannesburg-based company wasted billions of rand and broke a raft of regulations, mainly related to procurement contracts. Transnet moved to suspend Chief Executive Officer Siyabonga Gama over the scandal last week, although he’s fighting to stay in the role.
“A corrective plan has been defined and it will be presented to the board for their approval and we have got a number of initiatives and processes that will be in place,” Acting Chief Financial Officer Mohammed Mahomedy told reporters Monday. If there’s a way to claim back any incorrect spending that will be examined, he said.
The reform pledge was included in Transnet’s financial results for the year through March, which showed an 18 percent rise in earnings before interest, taxes, depreciation and amortization to 32.5 billion rand ($2.2 billion) and an 11 percent increase in sales. That was driven by rising volumes of rail-transported coal and automotives.
Transnet pledged to invest a further 163.7 billion rand over the next five years. That compares with 165.6 billion rand since 2012.
President Cyril Ramaphosa’s administration is clamping down on corruption and addressing poor management at state-owned companies, which are cash-strapped and pose an increasing risk to the nation’s finances. A judicial commission investigating the alleged plunder of state funds starts on Monday, and could unearth further information about dealings at Transnet, alongside other state-owned companies such as power utility Eskom Holdings SOC Ltd.
One of Transnet’s mis-steps was altering the terms of a deal to buy 1,064 new locomotives, an investigation by law firm Werksmans Attorneys found earlier this month. A separate report commissioned by the National Treasury found Transnet paid 509 million rand more for 100 locomotives after switching a supply contract to a Chinese rail company from Mitsui & Co. of Japan.
Former Chief Financial Officer Garry Pita and ex-Chairwoman Linda Mabaso quit earlier this year.
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