Durban - The Minerals Council South Africa (MCSA - formerly Chamber of Mines) has sounded alarm bells about the state of Transnet, saying the once mighty company is on the verge of collapse and to save it, the current CEO and other top managers should be fired.
The council says if nothing is done to save Transnet now, the company may soon default on its debt repayment and be sued for reckless trading.
This is contained in a confidential letter penned on December 4, 2022, by Nolitha Fakude, the president of the Council to Dr Popo Molefe, the chairperson of the board of Transnet.
In the letter seen by IOL, Fakude raises a number of concerns to Molefe and said Transnet’s performance has worsened further following the two-week strike (in October last year) with noticeable declines in tonnages on all the major bulk commodity lines.
“The bulk commodity mining companies that are members of the Minerals Council are now demanding urgent action on this crisis, as it is now posing an existential crisis for Transnet and for the mining companies.
“Given that Transnet SOC’s operating performance is deteriorating, we cannot see how the company will avoid breaching its debt covenants early in 2023, at which stage the directors of Transnet SOC will need to place the company into liquidation or risk being sued for trading recklessly.
“The time for urgent action is now,” Fakude said.
Among the changes they propose to Molefe is that the current group CEO, Portia Derby be fired and so is Siza Mzimela, the CEO of Transnet Freight Rail (TFR), the biggest division in the group.
“The Board of Transnet needs to immediately arrest the crisis by implementing the following urgent critical interventions:
“1. Urgent action to change the management team of both Transnet SOC and TFR.
“This includes the removal of the existing Transnet Group CEO and CEO of Transnet Freight Rail and their replacement with properly qualified and experienced rail freight leaders.
“As indicated the MCSA members have lost confidence in the existing
“Transnet leadership team, and we do not think that they have the capability to turn-around the current crisis situation.
“At the meeting held on 25 November, we clearly articulated the industry view that the leadership of Transnet are failing. It is critical that the Transnet Board considers the urgent appointment of well experienced and senior leaders to drive Transnet SOC and TFR at the earliest convenience.
“2. Urgent steps to parachute in industry experts to work with the board of Transnet through a steering committee: to help stabilise the situation in each of
the four bulk commodity lines.
“There is a critical shortage of suitably skilled technical leaders in each of the rail corridors. The industry is prepared to parachute in real capacity to assist in resolving the short-term crisis issues, this will include previous experts who were retrenched by Transnet. This steering committee would meet regularly to drive, monitor and evaluate progress,” Fakude proposed to Molefe.
Fakude added that they would also write to President Cyril Ramaphosa and ask for his intervention as the Transnet crisis is similar to that of Eskom.
“The Minerals Council will as well write to the State President, His Excellency President Ramaphosa, demanding an urgent Ministerial intervention in the crisis.
"This includes our view that a “NECOM” equivalent should be established. It is critically important to state that the current and deteriorating Transnet rail and port performance is a crisis and requires very urgent leadership attention.
“This crisis represents an existential crisis for the South African bulk commodity mining sector and is on par with the Eskom crisis,” she said.
She concluded that the board of Transnet has to be bolstered by filling up the four vacancies in it.
“We understand that Transnet SOC has four vacancies on the Board.
“Having large gaps of real expertise on Boards not only compromises the strategic direction of Transnet but is also contrary to the principles of good governance.
“There is a critical need to appoint these four directors and we urge him to consider people with material business and rail sector expertise, including mining sector rail experts” Fakude concluded.
Transnet spokesperson, Ayanda Shezi, said t is a well-known fact that the company is recovering from a significantly challenging period.
Among them, she counted rampant cable theft and infrastructure vandalism experienced in recent years and state capture which she said has been extremely damaging on Transnet.
“It has resulted in, among other things, the unavailability of locomotives and spare parts, impacting both Transnet and its customers negatively.
‘These are challenges that Transnet has been upfront about, and the company is implementing measures to address these.
“Transnet has a strong working relationship with the Minerals Council, and is in regular
discussion with the mining sector, and other customers, around suggestions for ongoing
improvements to our service.
“Where there are challenges, these are addressed jointly, in the interests of all parties. To this end, a recovery steering committee has been put in place, as outlined in the joint communication issued by Transnet and the Minerals Council on 19 December 2022.
“We are confident that this will soon begin to yield the desired results. Transnet will not be commenting on the letter forwarded by IOL.”
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