South Africa's state-owned freight logistics giant, Transnet, has reported a profit of R4.6 billion for the year to March, marking a significant turnaround in its fortunes. This achievement is particularly noteworthy given the company's challenges in recent years, including state capture and operational inefficiencies. Transnet's return to profitability has been hailed as a miracle story, and it provides a positive example for other state-owned enterprises (SOEs) in the country. The company's profit-making is a welcome development for the South African economy, which has been struggling with stagnant growth and high unemployment.
Transnet's turnaround is all the more remarkable given the extent of the challenges it faced. During the height of state capture, the company was nearly decimated, with significant amounts of money stolen through official channels and various operational areas affected. The collapse of Transnet had a ripple effect on other SOEs, such as the Passenger Rail Agency of South Africa, which relies on Transnet for operational efficiency. The company also faced threats and sabotage from criminal syndicates, including the fuel pipeline project from Durban to Johannesburg. Officials were even threatened and some were killed, highlighting the severity of the situation.
The return to profitability by Transnet and other SOEs, such as Airports Company South Africa and the Development Bank of South Africa, is a positive development for the South African economy. It demonstrates that with good governance and efficient financial management, SOEs can contribute meaningfully to the lives of South Africans. The turnaround of Transnet's fortunes also highlights the importance of resuscitating prominent SOEs to contribute positively to economic growth. South Africa's developmental agenda and trajectory rely heavily on SOEs, and Transnet's example provides a model for others to follow.
The achievement of a return to profit-making for Transnet is particularly impressive given the speed with which it was achieved. The company's leadership and competent engineers were hollowed out, and it was considered ripe for the taking by criminal syndicates. However, the implementation of a turnaround strategy has enabled Transnet to overcome its challenges and report a profit. This achievement demonstrates that when governance works, profit is possible, even in the face of significant adversity.
The turnaround of Transnet's fortunes has significant implications for the transport sector and SOEs more broadly. It provides a standard against which performance in the sector can be measured, and it highlights the importance of good governance and efficient financial management. The transport portfolio is an infrastructure department, and it is high time it came to the party, with all entities seeking to replicate what Transnet has achieved. The benefits of SOEs' performance should be felt across South Africa, particularly by the poorest of the poor.
Transnet's obligation now is to prove that its achievement was neither an accident nor a coincidence by posting further profits in the coming years. The company must enhance the aspects of its strategy that worked and ensure that the upward trend is continued, given the constrained fiscal environment the government operates under. When private businesses are recording losses and reducing the scale of operations, SOEs must stand firm and demonstrate that they can deliver positive results.
The achievement of Transnet and other SOEs that have recorded a profit highlights the need for a complete move away from the culture of bailouts and turnaround strategies that have failed in the past. There is a need for a clear focus on ensuring that performance targets benefit the poor, working-, and middle-class South Africans. Donald Selamolela, chair of parliament's portfolio committee on transport, has called on all SOEs to seek to replicate what Transnet has achieved, and it is clear that this is a goal worth striving for.
Key points
- Transnet reports R4.6bn profit, first in years, after turnaround strategy amid state capture and operational challenges.
- The company's profit-making sets an example for other state-owned enterprises in South Africa.
- Transnet's turnaround highlights the importance of good governance and efficient financial management in achieving positive results.
