Transnet grilled in parliament over debt, governance failures and audit concerns

Despite showing signs of recovery from the Jacob Zuma state capture presidency, which was marked by the hollowing out of state-owned enterprises, logistics entity Transnet faced a barrage of questions from MPs in parliament on Tuesday.

MPs appeared unimpressed with what they described as Transnet’s poor implementation of recommendations by the auditor-general, which flagged serious concerns about the state-owned entity’s financial sustainability, governance and operational performance. 

The issues were raised during a briefing to the standing committee on public accounts (Scopa) on the entity’s 2024/25 audit outcomes.

Key findings by the auditor-general included persistently high levels of irregular, fruitless and wasteful expenditure, as well as non-compliance with treasury instructions regarding the premature removal of irregular expenditure from accounting records.

The report also flagged material uncertainty about Transnet’s ability to continue as a going concern, citing a worsening financial position, including debt levels rising to R144.8 billion and reliance on borrowing to cover operating costs.

In addition, Transnet continues to fall short on maintenance requirements, resulting in a cumulative backlog estimated at between R26.5bn and R32.3bn, alongside weak internal controls.

However, Transnet group chief executive Michelle Phillips, supported by chairperson Dr Andile Sangqu, chief legal officer Sandra Coetzee and audit committee chair Khulekelwe Glynnis Mbonambi, presented a report that painted a picture of a company on a path to financial and operational recovery.

Addressing the challenges facing the entity, Phillips said the implementation of the recovery plan had prevented a decline in rail volumes, which were “now on an upward trajectory”.

She conceded that derailments, locomotive availability, rail network constraints and theft remained the primary drivers of rail volume losses, accounting for 80%.

However, Phillips said security interventions were gaining traction across all operating divisions, delivering “a noticeable year-on-year reduction in theft-related losses”.

She said Transnet recorded a 23% decline in security incidents in the 2024/25 financial year — down to 6 345 from 8 234 the previous year — while revenue losses totalled R1.59bn, a 21% decrease (R419.31 million) compared to 2023/24.

Copper cable theft remained the most prevalent and damaging crime, often involving infrastructure destruction and environmental hazards.

She said legal matters were progressing towards the resolution of the 1064 locomotive procurement dispute with manufacturers.

“The high court endorsed settlements with Bombardier and Wabtec as just and equitable remedies in the 1 064 review application.

“Review proceedings continue against the two Chinese OEMs [original equipment manufacturers], with Transnet and the SIU [Special Investigating Unit] required to first resolve outstanding interlocutory applications brought by CRRC,” said Phillips.

“On Wabtec, all locomotives delivered, settlement was concluded with a R70.3m credit note to Transnet.

“The BT/Alstom settlement was also concluded, with R468.2m received and remaining locomotives being delivered under a revised schedule.

“Both OEMs have settled in full, with delivery commitments progressing.

“The CRRC settlement agreement was concluded in November 2022, resolving claims, determining corrected locomotive pricing and enabling further deliveries.

“But implementation stalled due to failure to meet conditions precedent,” Phillips said.

Despite the progress, challenges remained in relation to the delivery and maintenance of the affected locomotive fleet.

Those included insufficient locomotive availability on the coal export line, reliability issues and maintenance backlogs affecting the 43D and 44D locomotive fleets and a large portion of the CRRC fleet being out of service due to limited OEM support and spare parts constraints.

Capacity constraints and the need to improve operational efficiency on key freight corridors were also flagged.

“There is a limited payload capacity, due to suboptimal wagon deployment across corridors. Also compounding issues is a mismatch between wagon allocation and current freight demand patterns.”

Phillips said financial performance highlights for the year ended 31 March 2025 showed that revenue reached R82.7bn — 7.8% higher than the previous year.

“The reported net loss for the year was R1.9bn, reflecting a 74.0% improvement compared to last year, while rail volumes achieved for the year increased by 5.5%.

“[The] government has guaranteed borrowings amounting to R43.75bn, representing 30.2% of total borrowings.

“Transnet received an additional R99.6bn for debt redemptions over the five-year corporate plan period.”

She said Transnet had introduced several measures to prevent the recurrence of irregular, fruitless and wasteful expenditure, including a digital procurement system introduced in December 2025 to replace manual processes, improved tracking and follow-up on audit findings, escalation of disputed issues to treasury and strengthened consequence management in areas of recurring non-compliance.