Monday, December 7, 2009

Transnet Seek Funds Whilst Rail Freight Group Leadership Battle Rages On

Bitter Arguments Divide Company as Power Struggle Continues
Shipping News Feature

SOUTH AFRICA – The long knives are out at Transnet, the leaderless state owned transport group with diverse parties joining in the argument as to who should take over control of the company’s executive. Acting group CEO Mr Chris Wells announced plans on Friday to sell bonds for between $500 million and $1 billion to fund group expansion and shipping infrastructure and took the opportunity to criticise opponents in the leadership dispute.

The arguments surround the suspension of Siyabonga Gama, CEO of Transnet Freight Rail (TFR) who is suspended pending investigations of corruption as detailed here in September. Now various groups including the ANC have been raising objections to the suspension claiming it is a plot against Mr Gama. Mr Wells stated that there was a well orchestrated campaign by employees and outsiders designed to bring the current temporary management into disrepute, alleging irregularities over the reappointment of Ernst and Young as auditors and non compliance with capital expenditure controls.

The temporary board rejected out of hand the allegations and insisted that the campaign was a malicious plot by Gama supporters. ANC leader Mr Brian Sokutu said he felt it was entirely justifiable to speak out on the issue as the people involved considered Mr Gama was being treated unfairly.

Three names for the vacant post of CEO were lodged with Minister of Public Enterprises Barbara Hogan in June. These did not include Mr Gama who was suspended three months later. The post has become a poisoned chalice after former CEO Maria Ramos quit in November 2008. The board’s favourite Pravin Gordhan withdrew when he was appointed Finance Minister in May then Sipho Maseko, head of BP Africa tired of the dispute and refused nomination. Transnet say the decision “rests with the Minister”.

Whilst the situation exists inter company disputes will continue to cause problems for the group and doubtless investors will want a settled agreement to the leadership crisis, with satisfaction from all involved parties, before they are happy with the bond issue. The enquiry into Mr Gama’s behaviour is due to begin in mid January. Outlook for freight cargoes carried by the group is good with manganese export shipments scheduled to almost double to around 7 million tonnes annually by 2015 whilst coal and iron ore shipments, which are also set to rise, are hampered by the delay in infrastructure development the bonds are intended to alleviate.

Pic: - Copyright Nils Öberg