Founder: Turnaround Talk
With the Medium-Term Budget Policy Statement on the horizon, there is little expectation that South Africans will receive any positive news regarding economic growth.
With the country’s State Owned Companies and State Owned Entities in disarray, Government is under pressure to find a solution to key challenges that are impacting the economy.
With mismanagement and a culture of incompetence as chief challenges that SOEs face daily, we are starting to see a blueprint that will map out the privatisation of parastatals, which will hopefully address this issue. Unfortunately, things are not looking good for the South African Post Office.
Transnet plan
A News24 article points out that the South African presidency has a plan to reverse the collapse of a state-run ports and freight-rail sector that’s cost the economy at least $26.7 billion (R502 billion) since 2010: hand over most of the responsibility for fixing it to the private sector.
In the five years to the latest operating year, the amount of goods transported by Transnet has plunged to about 150 million tons from 226 million tons, forcing much of the national freight onto roads where heavy trucks are snarling traffic and damaging infrastructure. That poor performance, which has been blamed on a shortage of locomotives and cable theft, led lobby groups representing miners and businesses in the key port city of Durban to demand that Transnet’s management be removed. Over the past two weeks, the company’s chief executive officer and head of its freight rail division have resigned.
The article adds that the plan, the production of which was overseen by the office of the president, will be implemented by the Department of Public Enterprises, which has oversight of Transnet, the Department of Transport and the National Treasury.
Image By: RBCT
An implementation program included in the document envisages detailed plans for an improvement in performance on key rail lines to be formulated this month, make significant progress in concessioning two container terminals to private operators by April, and allocating third-party access to freight rail lines by July. By the end of this year, the possibility of concessioning the coal and iron ore line, both of which are about 900km long, will have been explored. The plan calls for setting up an independent port and rail regulator, a rail infrastructure manager and a rolling stock leasing company, which will be a venture with a private company.
The article points out that Transnet will be turned into a holding company with various subsidiaries in which stakes may be sold to private companies, the authors of the report said. The state will keep majority control of its infrastructure businesses, it said.
Early warning
Another News24 article points out that the SAPO was warned three years ago by a senior executive that it was facing imminent collapse, and only “a lot of miracles” have kept it from imploding, its CEO has said.
Post Office head Nomkhita Mona told Parliament’s Communications and Digital Technologies oversight committee that a senior executive who joined the company in 2020 was so concerned by its finances that he warned the group’s board it would face “day zero” by mid-2021.
The article adds that the executive, whom she did not name, resigned just one month after being appointed. He apparently believed his job was futile.
Mona said that after she was named CEO in early 2021, she did her own investigation based on the unnamed executive’s warnings.
Image By: marichav
The article points out that Mona denied that her tenure contributed to the shambles the entity finds itself in, saying that no “self-respecting thinker can attribute the failure of SAPO to the last few years”.
The state-owned entity, which has been placed in business rescue, made a R2.2 billion loss for the 2022/23 financial year. It has lost more than R6 billion over the past three years. Of its 1 108 branches, only 193 make a profit.
Mona said the group’s problems pre-dated her tenure as CEO, noting the entity last made a profit in 2006.
The article adds that, without additional funding from Government, she had not been able to implement an ambitious turnaround plan.
“Everybody knows this has been a long time coming,” she said.
Mona told News24 that the Post Office’s brand had become so tainted it had become near impossible to recruit qualified staff. As a result, many C-suite positions have been filled by acting executives.
“There was an element of people not wanting to come and work at SAPO for fear of affecting their own careers and images,” she said.
The recruitment drive for new executives was put on hold when the group was placed in business rescue. The BRPs have said they intend to publish their first business rescue plan next month.
Left with no choice
Government intimated that it would be increasing its focus on private sector economic growth earlier in the year. Despite this, very little has been done to fast-track this.
With the mining sector facing record profit losses, Government has been left with little choice but to privatise entities that it fastidiously guarded as their realm. Ultimately, it doesn’t matter if the Government has stubbornly dragged its feet up to this point; its next move will be its most important because job creation and economic growth will be good medicine to move past the frustrations we currently experience daily.
