Transnet incurs R14.5bn irregular expenditure for 2021
Transnet, with total assets of R335.8 billion (2020: R338.3 billion), operates an extensive rail infrastructure and provides freight services, operates a 3 114-km high-pressure petroleum and gas pipeline network, and manages eight commercial seaports – Richards Bay, Durban, East London, Ngqura, Port Elizabeth, Mossel Bay, Cape Town and Saldanha.
Transnet was scarred by state capture, and was not spared Covid-19’s negative impact.
Its various operations have also suffered “security incidents”, “incidents of community unrest”, and “theft, vandalism, sabotage to assets and equipment as well as operational disruptions”.
The Auditor-General (AG) handed down a qualified audit report for the third year running, on the basis of irregular expenditure not being fully and accurately recorded, and payments made in contravention of supply chain management requirements.
Irregular expenditure incurred in 2021 was R14.1 billion (2020: R8.4 billion).
The AG was “unable to determine the full extent of the understatement of irregular expenditure stated at R104 billion” (2020: R131 billion).
Transnet has embarked on a clean-up plan, is revamping systems, including taking appropriate action against implicated individuals, and “disciplinary actions taken against certain former senior executives” has resulted in dismissals. These cases have been reported to law enforcement agencies.
Financial health and sustainability
Transnet’s cash interest cover of 2.0 times is in breach of certain loan covenants. All required default waivers were secured by August 12, 2021.