Transnet could rehire hundreds of experienced railway staff laid off two years ago by CEO Portia Derby, after her abrupt resignation this week.
Derby’s costly retrenchment exercise cut R3.2bn off the embattled utility’s wage bill but weakened the state-owned company which, alongside Eskom, was a prime target for state capture during the Jacob Zuma years.
She quit on Friday amid sustained pressure from mining and industry interests, ending a two-year tenure that saw Transnet’s performance slump and the country miss out on a commodities boom. Instead miners are preparing to lay off thousands of workers as South Africa’s freight rail capacity slumped.
Her decision to offer voluntary severance packages (VSPs) had backfired, as 450 skilled and experienced personnel subsequently left that year, crippling the organisation.
The company lost engineers, financial managers, project management specialists and up to 200 train drivers, as well as crane and lift operators and artisans. All these employees had what are considered scarce skills. They were either replaced by inexperienced people or not at all.
In its 2022 annual report, Transnet said the VSP process was aimed at cutting the company’s operational costs by R3.2bn. The plan was for the savings to be diverted to other running costs and capital investment.
“Transnet’s permanent employee headcount has reduced by 7.2% to 46,086 as at March 31 2022 ([down from] 49,642 in 2021) due to the combination of the VSP process, natural attrition, and retirements,” the company reported last year.
A senior government leader, speaking on condition of anonymity, said there would be a drive to recruit back some of these former employees.
“They let go of the most experienced, honest people that knew rail. It was in their blood. We are going to get some of this lost skill back.”
Meanwhile, other top executives of the state-owned rail and ports company are said to be on the verge of leaving.
Several highly placed sources in Transnet and the government were confident Transnet Freight Rail (TFR) CE Siza Mzimela would be tendering her resignation before the end of the week.
The board announced on Friday that Derby would be stepping down from her role at the end of this month. It also announced the resignation of group CFO Nonkululeko Dlamini, whose last day was on Friday.
Transnet Pipelines CEO Michelle Phillips is the acting group CEO, while Hlengiwe Makhathini has been appointed acting group CFO.
Public enterprises minister Pravin Gordhan instructed the board to prepare a turnaround plan after Transnet reported a R5.7bn loss and declining revenue. Its freight rail division was the worst hit, recording a reduction in volumes from 173-million to 149-million tonnes.
They let go of the most experienced, honest people that knew rail. It was in their blood. We are going to get some of this lost skill back
— Anonymous senior government leader
Gordhan directed Transnet to develop a plan to radically transform the operational performance of each business, restructure the company and undertake a review of the executive management “with a view to establishing whether persons with the right skills are optimally used to deliver on the mandate”.
Derby and her leadership team have been under severe pressure owing to the continued deterioration of the performance of the company, especially its most critical division, TFR.
Various business chambers, the Minerals Council and labour unions have called for her and Mzimela to be shown the door, citing the company’s inability to ferry enough bulk export commodities to ports — which is wrecking the economy, costing miners and other exporters billions of rands and leading to job losses.
It is not clear if the board has recommended changes to the minister. Board chair Andile Sangqu told the Sunday Times on Saturday that they had received a turnaround plan from management and would be assessing it before making any moves.
“The board will interrogate and engage with the plan. From October 3, the board will evaluate all the options across all the business operations, and it will decide if it believes the plan is adequate. If the plan is not adequate, it may just take it back to management to address whatever issues the board is not happy with.”
Sangqu said if they found the turnaround plan to be solid, they would present it to Gordhan the following week. He said the plan needed to have built-in checks and balances. “This is because we want to make sure that it is a credible plan — that is capable of turning the company around.”
It had to have six-, 12-, and 18-month milestones.
“If we do it that way, it lays a foundation for turning the company around in the long term,” Sangqu said.
Contacted for comment, Gordhan said: “To the best of my knowledge, the board followed up on my directives. But I’m not privy to their discussion.”
He said that at the results announcement it was made clear to the board that it needed to find the root cause of the poor operational performance and ensure appropriate people were in the right posts.
“The board is in the process of implementing that injunction. The reason for all of this is to ensure Transnet’s performance is changed quite radically for the better, and the board must do what is necessary to ensure that,” Gordhan added.
A well-placed Transnet insider said it was not clear how many other members of the executive committee would leave, but indications were high that Mzimela was on her way out.
“From what I understand, next week won’t end with her still in the position.”
Derby and Transnet group spokesperson Ayanda Shezi did not respond to requests for comment. According to a spokesperson for Mzimela: “Ms Mzimela is still the CE of Transnet Freight Rail.”
While a shortage of locomotives and spare parts, cable theft, vandalism and poor maintenance contributed to crippling Transnet, inexperience and a shortage of technical, financial, operational and project management skills also led to the company’s weakened state.
All members of the executive committee, including Mzimela, were appointed after Derby took up her post in February 2020.
Former Coega Development Corporation CEO Pepi Silinga came in as head of Transnet National Ports Authority in October 2020. Jabu Mdaki was named CEO of Transnet Port Terminals (TPT) in January 2021. Kapei Phahlamohlaka, who heads the property division, was appointed in September 2020. Ralph Mills, CEO of Transnet Engineering, assumed the role in April 2020.
Philips, now the acting group CEO, has been with the company since 1999, but moved to TPT in 2021.
There’s also been unhappiness in the government and the business sector over Transnet’s slow implementation of a cabinet directive to open more of its rail network to private sector operators — a crucial economic reform for the country.
Brendon Hubbard, a senior fund manager at investment management firm ClucasGray, said Derby’s resignation was expected, given the pressure from business and unions.
“Multiple industry bosses have met with Gordhan to request his intervention in Transnet’s demise. We are surprised TFR CEO [Mzimela] has not resigned. However, it is difficult to have two senior executives resign at the same time.”
Hubbard said they noted Derby jumped only after labour expressed its displeasure. Cosatu issued a statement on Friday calling on the two top executives to be axed, as mining companies have indicated an intention to retrench workers owing to TRF’s poor performance.
“If the crises at Transnet are not dealt with decisively and quickly, we may lose 35,000 mining jobs, and even more indirect jobs in the value chains and host communities. This will plunge these workers into absolute poverty. The highveld region in Mpumalanga will bear the brunt of this catastrophe,” the federation said on Friday.
National Union of Mineworkers highveld regional deputy secretary Thapelo Malekutu welcomed Derby’s resignation.
“We believe Portia was for trucks and did not have an interest in fixing Transnet,” he said.
Last week, mining company Glencore said it was contemplating retrenchments at its iMpunzi processing plant. It said 214 employees would likely be affected.
In a section 189 notice, Glencore said its iMpunzi complex, whose operations include the Arthur Taylor Colliery, had become unsustainable given lower coal prices and TFR’s locomotive challenges.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.