South Africa’s state-owned enterprises (SOEs) continue to feel the aftershocks of state capture, with Transnet and the Passenger Rail Agency of South Africa (Prasa) struggling to stabilise operations amid financial and governance challenges.
Executives recently faced intense scrutiny from the parliamentary standing committee on public accounts (Scopa), highlighting the vulnerability of the entities despite recovery efforts.
The state capture commission of inquiry, chaired by former chief justice Raymond Zondo, estimated that more than R57 billion in public funds was tainted by state capture, with more than 97% of that siphoned from just two SOEs.
The auditor general’s 2024/25 audit report raised further concerns. At Transnet, irregular, fruitless and wasteful expenditure remains high, with non-compliance to treasury instructions.
Debt levels have surged to R144.8bn, creating material uncertainty about Transnet’s ability to continue as a going concern. Maintenance backlogs exceed R26.5bn, contributing to operational failures, while weak internal controls continue to hamper oversight.
Prasa is facing similar pressures. Its operating deficit ballooned from R2.3bn to R8.3bn, with material losses of R1.3bn due to write-offs of property, plant and equipment.
Rolling stock impairments amounting to R2.6bn have been identified as part of its overhaul programme and budget constraints have forced a review of capital projects, delaying critical upgrades.
Transnet group chief executive Michelle Philips said the implementation of its recovery plan had prevented further decline in rail volumes but conceded that challenges remained, including derailments, locomotive availability, network constraints and theft, which accounted for 80% of rail volume disruptions.
She added that security interventions were gaining traction across all operating divisions, delivering “a noticeable year-on-year reduction in theft-related losses”.
Philips said Transnet recorded a 23% decline in security incidents in the 2024/25 financial year, down from 8 234 the previous year to 6 345, while revenue losses totalled R1.59bn, a 21% decrease compared to 2023/24.
Copper cable theft remained the most prevalent and damaging crime, often involving infrastructure destruction and environmental hazards.
While the Transnet and Prasa executives expressed appreciation for having earned the auditor general’s unqualified audit with findings, lawmakers were not as impressed.
Economic Freedom Fighters (EFF) MP Ntombovuyo Mente posed questions they found hard to answer.
Transnet chairperson Dr Andile Sangqu outlined structural reforms and partnerships aimed at modernising infrastructure. He said the company had signed a memorandum of understanding with Vopak South Africa to develop gas import infrastructure in Richards Bay, creating the country’s first liquefied natural gas (LNG) import facility.
“This boosts energy security, promoting industrial growth and boosting downstream gas-to-power opportunities in the province,” Sangqu said.
He added that Transnet National Ports Authority had announced FFS Tank Terminals as the preferred bidder to refurbish and operate a liquid bulk terminal at the Port of Cape Town under a 25-year concession, which would involve upgrading storage tanks, enhancing structural integrity and repurposing pipelines for vegetable and edible oils.
In Durban, Transnet had signed an agreement with the International Container Terminal Services Inc (ICTSI) to become the strategic operator of the Durban Container Terminal Pier 2, South Africa’s largest container terminal, for 25 years.
“The idea is to modernise port infrastructure by introducing the latest technology and improve efficiency, matching global standards,” Sangqu said.
He said Transnet was undertaking the corporatisation of Transnet Ports Authority to make it an independent port authority and was in discussions with ministers of transport and finance regarding the corporatisation of Transnet Rail Infrastructure.
Transport Minister Barbara Creecy said the decision to partner with the private sector had been taken in 2021, emphasising the need to improve operational efficiency and manage costs.
“What I think is important to say is that the problem that Transnet was trying to solve remains the problem that we’re trying to solve today — the efficiency of the operations and the cost of what it will take to improve the efficiency of operations,” she said.
The minister said international studies showed that the Ports of Durban and Cape Town were among the most underperforming globally, underscoring the urgency
of reforms.
Creecy also addressed concerns about private sector involvement.
“You would understand that about 65% of the container business in the country is handled at Pier 2.
“If you don’t hurry up and you don’t move them faster and more efficiently, what will happen is that the business will go to other ports in Southern Africa.
“Remember that there are other ports in Southern Africa that are currently being upgraded and will in due course become competitors of South Africa.”
The EFF’s Mente challenged the reforms, saying, “Minister, your attempt is somewhat helping but equally giving us a lot more questions. It also has a very big red flag, which indicates that there is no confidence in anyone who runs operations where ports are concerned at Transnet.
“If the GCEO [group chief executive officer] says 49% of operational control is handed over to a private company, it means they run above 60% of containers that come to Durban. Ultimately, then we have no control of what comes into the country in terms of those containers because a private person oversees operational control.
“And that’s where it becomes problematic. The auditor general has pointed out that somehow there is an exemption of the PFMA [Public Finance Management Act] into this company.
“This confuses the whole lot of us. How is a state concession exempted from PFMA? If that is not true, give us the logistical operation of it as well as the administrative element. Who’s going to report on this company? Who’s going to oversee this company?”
Creecy responded: “What is important to say is that all points of entry into the country are controlled by the Border Management Authority and by the South African Revenue Service.
“While you may have a private port operator, that operator does not control the security, the taxation and the other issues — security issues that pertain to a point of entry. Those processes remain in place.
“I also think it’s important to say that a 51% share given to ICTSI in the concession is not a vote of no confidence in the staff working the port. It’s a recognition of the scale of the capital investment being made.
“This particular agreement was extensively consulted with organised labour before it was entered into. You can see there are some benefits for those who would be working there.”
Transnet and Prasa face financial, operational and governance challenges despite recovery efforts
