Supplementary Budget 2020

Treasury concerned about Transnet governance alarm bells

Pretoria - Despite logging a R14.1bn profit, Transnet needs to address concerns about governance lapses, the Treasury’s budget review has stated.

Transnet operates South Africa’s port, freight rail and pipeline infrastructure.

But the group has been linked to alleged wrongdoing in procuring locomotives, with allegations of kickbacks paid to Gupta-linked companies.  The board is also in a dispute whether an investigative report by legal firm Werksmans was indeed inconclusive.

Treasury said that to maintain investor confidence, Transnet would have to address concerns about governance lapses, including concerns about its supply-chain management practices.

Despite the upheavals and criticism, Transnet achieved an operating profit of R14.1 billion in 2016/17, up 28% from a year earlier.

Revenue grew by 5.3% to R65.5bn in 2017, supported by a tariff increase granted to the pipeline division and a recovery in freight rail volumes.

Over the next three years, Treasury expects Transnet to scale back its capital investment plans due to weaker-than-expected demand.

This, Treasury said, would allow Transnet to pay down its debt over a five-year period. The group expected to have sufficient cash to pay its interest obligations in the medium term.

Transnet currently has a R3.5bn government guarantees from Treasury, with an exposure of R 3.8bn.

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