Transnet, the State-owned transport utility struggling for financial and operational viability, said yesterday it was amending its supply chain management (SCM) and procurement policies (TPP) to help it become more efficient and enable it to reach long-term partnerships with private sector companies.
The utility said in a statement carried on the JSE’s news service that the amendments would improve efficiency in its procurement processes. The amendments would enable it to implement the departures from Treasury Instruction notes, granted by the National Treasury.
Transnet’s plans to reach a greater number of partnerships with private sector companies to bring the State-owned utility back on its feet have been met with some political opposition.
For instance, the Democratic Alliance expressed concern that Transnet’s past track record of corruption might deter potential business partnerships, while the EFF has labelled the public-private participation model as indirect privatisation.
Transnet had last year this time pleaded to Parliament’s Standing Committee on Finance for a “more flexible” procurement policy for State-owned companies, arguing that Treasury rules made them uncompetitive and resulted in higher prices for goods and services.
Both Transnet and Eskom had previously asked to be exempt from preferential procurement, arguing that requests to the Treasury for deviations were also too time-consuming.
“The SCM policy will differentiate between procurement of goods and services for the normal day-to-day administration of Transnet, and the procurement of goods and services with direct impact on revenue generation,” Transnet said in the statement.
The TPP Policy had also been amended to cater for procurement of goods and services with direct impact on revenue generation. The amendments would become effective from October 1, 2024.
In the year to end-March 2024, Transnet reported a R7.3 billion net loss, but if one reversed a provision for litigation, the net loss would have been R3.8bn, which was a 25% improvement on the previous year.
Nevertheless, years of neglected capital investment and maintenance, theft and rising costs among a host of other issues continue to create significant difficulties for its customers be it on the roads, railways or at the ports.
The amendments state that the utility be allowed to “acquire critical supplier stakeholders such as OEMs [Original Equipment Manufacturers] and other strategic suppliers or service providers and enter into strategic long-term agreements and partnerships within the ambit of the policy”.
“This will support the supply, maintenance, upgrading and refurbishment of critical infrastructure, rail network, equipment and components, to cover the lifecycle of the operations assets that are utilised for delivery to customers.”
It would also sustain the quality of services to customers in other revenue streams such as the Transnet Blue Train.
These agreements and partnerships would ensure the standardisation of the operations equipment and components, open opportunities for cost saving through leveraging of economies of scale, transformation objectives and optimisation of resources, the utility said.
For procurement directed at revenue generation, “Transnet must adopt a customised cluster of procurement mechanisms that are designed to fast-track the procurement process, while ensuring compliance to the principles to the PFMA [Public Finance Management Act] and other application legislation,” it said.
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