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MORE than R104 billion in irregular expenditure at Transnet has come to light as the state-owned enterprise examines supposedly clean audits conducted during the state-capture years by private sector audit firms.
The audits had largely misrepresented its financial position, especially on high-value tenders, the rail, port and pipeline group's chief financial officer Nonkululeko Dlamini said at a presentation of the group's results.
This comes as the group reported a record net loss of R8.4 billion for its financial year to the end March 2021. Transnet attributes the loss mainly to the impact of Covid-19 on its port and rail operations. Further, it breached its loan covenants with an outstanding balance of R19.1bn as at September 30.
Dlamini said audits by the auditor-general were still on-going.
Thus far, R59bn of SD contracts had been condoned by National Treasury, while R183.5bn in spending had been tested for irregular expenditure.
Dlamini reported that contracts for 1,064 locomotives with a value of R42.9bn were all found to be irregular, and that a review of tenders to the value of R62.4bn had identified R28bn as irregular.
“Private sector audit firms had their own materiality, the new auditors at National Treasury have their own materiality, which is much much lower. We have had to deep dive five years to identify the irregular expenditure numbers. Even the R104bn number is not complete and National Treasury has condoned R59bn. This is a journey - we accept we have work to do, we need a bit of space to do what we have to do," Dlamini said.
He said that of the low-value tenders (those falling below R2 million), 408,000 were impractical to test, approval was granted for about 339,000 historical tenders, while 69,000 relating to 2021 were not rendered impractical, giving credence to tighter procurement procedures compared to the pre-2017 processes which were the state capture period.
Strengthened controls yielded R14bn irregular expenditure and R18bn relating to prior years misstatements
In its results, the group saw revenue decline 10.5 percent to R67.3bn, while its Ebitda (earnings before interest, taxes, depreciation, and amortisation) plunged almost 43 percent to R19.5bn after the group's Ebitda margin declined to 28.9%.
Chief executive Portia Derby said the years of state capture affected not only Transnet but other state-owned enterprises as well. She appealed to government to ring-fence processes, as reputational damage affected international funding drives.
“We do global borrowing and the state capture years are not understood," Derby said, explaining the 104-step process now in place in procurement processes.
“We have been in this battle since October 2020 to understand how we have to deal with this issue; the rules are designed for government departments, not a company in a commercial space,” Derby said.
Dlamini also confirmed the group had been paid not just the R680m by global consulting company McKinsey, but R817m as a refund for services rendered during the state capture years.
Meanwhile, Derby admitted that though the cause of the recent fires at the Port of Richards Bay were still under investigation, there was dereliction of duty, which required the group's management to adopt a back-to-basics approach.
“It requires us to provide the necessary equipment and resources to ensure that terminal operators are efficient," she said.
In another development, Transnet is mulling its asset base up to the year 2037, as de-carbonisation is expected to reduce the use and therefore the haulage of coal.
This comes as it has ramped up its hauling capacity with locomotives that can now pull 200 wagons compared to the 100 wagon trains that was standard just three weeks ago.
– BUSINESS REPORT
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