Johannesburg – Transnet CEO, Siyabonga Gama, has said that Futuregrowth Asset Management’s decision to freeze lending to several state-owned enterprises (SOEs) is “unfair and unfortunate”.
Gama, who spoke to Fin24 following the announcement of the group’s interim financial results at the head office in Johannesburg on Monday, dismissed Futuregrowth's recent move.
“I can’t lose any sleep in terms of Futuregrowth. If they decide not to buy Transnet bonds, that is their problem. It’s got nothing to do with me. I won’t lose any sleep on them,” he said.
Earlier this year, Futuregrowth halted loans to five SOEs. These include Eskom, Transnet, the SA National Roads Agency (Sanral), Landbank, the IDC and the Development Bank of Southern Africa (DBSA). The decision was driven by news that President Jacob Zuma would lead a panel to oversee SOEs.
Futuregrowth, though, has lifted its lending suspension against the state-owned Industrial Development Corporation (IDC) and the Land and Agricultural Development Bank of South Africa.
In its report, Transnet indicated that it was able to raise funds through debt capital markets owing to its investment grade credit rating and "solid standalone" credit profile.
The company raised R11.8bn through development finance institutions, commercial paper and call loans, export credit agencies and domestic bonds.
Transnet reported a 1.2% increase in revenue to R32.6bn for the six months ended September 2016. Ebitda (earnings before interest, taxation, depreciation and amortisation) remained flat, decreasing marginally by 0.3% to R13.9bn. This is in line with the company’s capital investment programme.
Further, operating profit was impacted by the increase of the depreciation of assets by 16.3% and the increase in finance costs by 24.2%.
“This causes a decrease in net profit,” said Gama.
Essentially operating profit decreased by 16.6% to R5.9bn, compared to the previous year’s level of R7bn.
Net profit took a knock of R628m, due to price reprieves to struggling customers, explained Gama.
Job preservation was also a contributing factor.
“We had to preserve jobs in the economy, not just in Transnet itself, but with other companies that trade with Transnet. We have preserved at least 3 000 jobs as a result of the R628m price reprieve.”
Transnet also implemented a cost containment strategy which resulted in a below inflation increase of 2.3% of operating expenses to R18.7bn.
This involved limiting the amount of overtime incurred, explained Gama.
“We also created a moratorium on the hiring of non-critical employees.”
The group also implemented discretionary spending on things like travel, accommodation, printing and telecoms.
“We had to bring those down significantly,” he added.