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Transnet on Monday reported a significant increase of irregular expenditure to R8.1bn in 2017/2018, up from R692m in the previous financial year, triggering a qualified audit.
Chief financial officer (CFO) Mohammed Mahomedy told Fin24 that the sharp rise in irregular expenditure was due to the company reviewing contracts from as far back as 2009 and identifying the procurement issues in these results.
Mahomedy said the company adopted stricter reporting processes for 2018 but he could not comment on previous years as he was only appointed CFO in May.
The state freight and ports company released its financial results in Kempton Park with a cloud hanging over three executives – CEO Siyabonga Gama, chief advanced manufacturing officer Thamsanqa Jiyane, and supply chain manager Lindiwe Mdetshe who have until Monday afternoon to explain to the board why they should not be suspended.
At the results presentation Mahomedy explained that the increase in irregular expenditure was due to breaches in the Public Finance Management Act (PFMA) relating to procurement.
Siyabonga Gama acknowledged that the state-owned company’s (SOC) reputation has “suffered” around allegations of corruption and said that most of these issues relate to third parties being paid by Transnet suppliers.
He said that more than 22 investigations are currently underway and the parastatal is working with the Special Investigating Unit (SIU) and the Hawks.
At the heart of allegations of corruption at Transnet is the R54bn purchase of 1 064 locomotives from China South Rail which is alleged to have paid kickbacks to Gupta associates for the awarding of the tender.
Gama added that Transnet has a lot of work to be done around procurement, in order to receive a clean audit and the management team has drafted a remedial plan which will be presented to the board.
Transnet’s operational results according to the company were ” sterling”, with revenue increasing by 11.3% to R72bn in 2017/2018, mostly driven by an increase in railed export coal volumes, automotive volumes and port containers.
Earnings before interest, tax, depreciation and amortisation (Ebitda), which is the main measure of profit for Transnet, increased by 18% to R32.5bn.
No word on suspension
Chairperson Popo Molefe who gave the three executives until Monday to explain why they should not be suspended was not present at the presentation. Gama refused to comment on the deadline saying the matter was between the parties involved.
The action taken against the three executives follow the release of the report by Werksmans Attorneys probing the China South Rail locomotive deal.
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