Cruising for a bruising?

Maria Ramos’s plans to revamp the underperforming transport parastatal look certain to run into staunch resistance from the labour movement.

Jane Barrett, policy research officer at the South African Transport and Allied Workers Union (Satawu), last week slammed Transnet’s proposed restructuring as based on flawed premises, lacking full assessment of the social impact and, in some cases, probably not justified.

Satawu is not to be sniffed at. A tough and well-organised union, it has successfully blocked concessioning plans at rail subsidiary Spoornet. It has also been involved in bruising confrontations with the state over the concessioning of Durban’s port operations.

A week of high drama started last Friday when Ramos told the assembled media that Transnet had lost R6,1-billion in the year ending March, and Minister of Public Enterprises Alec Erwin announced new boards for Transnet and struggling subsidiary South African Airways (SAA). It continued last week with the sudden resignation of chief financial officer Sindi Mabaso and human resources executive Ziyanda Danana.

On Thursday Spoornet announced its intention to proceed with the retrenchment of 952 workers, a move immediately opposed by Satawu.

The group also revealed that its gearing — ratio of debt to equity — is 83%, suggesting it will struggle to raise capital from financial markets, at least at group level. Ramos believes the ideal ratio to be between 55% and 60%.

The first major drain on Transnet’s finances was the hedging losses suffered by the national carrier SAA —R11-billion over the past two years. Another hole was created by a R7,6-billion liability for pension benefits. Ramos attributed the poor performance to losses in non-core operations and inefficiencies in Transnet’s key activities. She unveiled a strategy that hinges on adhering to a vigilant risk management and strict corporate governance as well as restructuring the balance sheet by redirecting the business.

Last week Ramos told the Mail & Guardian that hedging will now be undertaken in a prudent manner. The company will now hedge only the net foreign exposure between revenue and expenditure, “even then not the full amount — and with board approval,” she said. Under her proposed structure, Spoornet, the National Ports Authority, South African Ports Operations (Sapo) and Petronet will remain as key pillars of the business. Most of these units are in a reasonable state. The ports authority posted a profit of R2,1-billion and boasts net asset value of R7,2-billion; Sapo generated R2,9-billion to post a pre-tax profit of R348-million; while Petronet brought in R919-million in revenue and a R239-million profit. Spoornet posted a loss of R668-million from revenue of R13,4-billion. But it has embarked on a R14-billion, five-year programme to upgrade infrastructure and procure new locomotives.

In a move confirmed by Erwin, SAA will be moved out of Transnet but remain a state-owned enterprise. The commuter rail operator Metrorail will be ceded to the Department of Transport. A range of subsidiaries will, however, be sold off or subjected to “disinvestment”, including road passenger division Autopax and Transtel, the telecommunications subsidiary that is to have a stake in the yet-to-be-licenced second national telephone operator. A board decision has been taken to sell haulier Freight Dynamics.

Barrett sees the losses as a “nice excuse” to hasten what the government has always wanted to do: flog underperforming divisions without consulting the unions.

She also quarrels with Transnet’s targeting, arguing that a decision to sell a division should be based on its contribution to the group and not simply on whether it makes money or can be profitably sold. Transtel was a case in point, as telecommunications infrastructure was “critical” to running a railway network.

Ramos acknowledged this to be the case, but noted that even at Transtel, Transnet will look at the crucial parts and invest from the rest. “A division has to have a strategic fit,” she said.

As evidence that the social impact of restructuring had not been properly assessed, Barrett cited long-distance bus operator Translux, which was widely used by migrant workers and facilitated cross-border trade — factors not considered in debates on its privatisation.

Last Friday Ramos made no mention of the future of Durban’s container terminal, but Erwin’s spokesperson Gaynor Kast confirmed that the government was still intent on concessioning it to private operators. Barrett accused the government of “cherry-picking”, which would leave the car and general cargo terminals vulnerable.

Centrally, Barrett argued that “nobody has shown that Transnet (in its present form) can’t pay for itself” over the long term. Even SAA’s losses were in line with those of other major airlines and had been compounded by its “foolish” hedging contract.

Ramos said at the media conference that Transnet hoped to raise investment capital through public-private partnerships. Barrett said Satawu did not oppose these partnerships in principle, but would resist any arrangement “where the private partner enjoys unwarranted control or is milking profit”.

Questions will also be asked about Mabaso’s departure. She was reappointed along with Ramos as one of the only two executive members of the board last Friday.

Barrett pointed to lack of skills as a more serious problem, noting that Transnet had reduced its training budget from 5% to 3% of its wage bill over the past two years. Ramos said that all budgets are being revised, including training. She described Transnet as suffering from a skills mismatch.

Ramos said she did not believe that Transnet and labour’s position were diametrically opposed and confirmed that they would be meeting in the near future.

The mess by numbers

Transnet’s dull-looking annual report contains some explosive figures. It reveals that in the year to March 2004: