Minerals Council wants Transnet CEO Portia Derby axed to arrest decline — reports

12 Jan 2023

A leaked letter sent to Transnet chairperson Popo Molefe by the Minerals Council on 4 December calling for the axing of CEO Portia Derby and urgent action to stem the rot of the state-run logistics company has elicited a curt response — but not a denial — from the council.

In response to news reports by Business Day and News24 which reported the existence of the letter yesterday, the Minerals Council said it would not comment on the contents of the letter which was “clearly marked confidential.”

Business Maverick has not yet been able to verify the contents of the letter, which is also reported to call for the firing of CEO of Transnet Freight Rail Sizakele Mzimela. But this smoke seems linked to a fire that has been raging for some time.

Council spokesman Allan Seccombe said in response to queries on the matter that “The Minerals Council is working in close collaboration and in a spirit of cooperation with the Transnet Board and Management to urgently resolve deep-seated problems and constraints in the rail and port logistics to the benefit of bulk commodity companies, Transnet and the fiscus.

“The Minerals Council and Transnet have established joint teams to address constraints on bulk commodity export channels. The Minerals Council and its members are committed to finding urgent, pragmatic and lasting solutions to the problems curtailing mineral exports.”

Mounting frustration

The bottom line is that there is no outright denial of pretty explosive allegations, which highlight the mining industry’s mounting frustration with the growing costs of South Africa’s failing state.

A Transnet spokesperson contacted by phone asked Business Maverick to send an email and had not replied to our request for comment ahead of publishing.

The letter was reportedly sent by the council’s president Nolitha Fakude to Transnet chairperson Popo Molefe on 4 December. On 19 December, the Minerals Council said it and Transnet had agreed to establish “joint collaborative structures” to keep the train and port network from going off the rails.

Read more in Business Maverick: “Minerals Council SA, Transnet agree on joint panels to ‘stabilise’ rail and port network”

“For more than 24 months, we have given the benefit of the doubt to the Transnet management team, who have aptly demonstrated, through several bizarre decisions and statements and in particular the ongoing tragic decline in the performance of Transnet, that they cannot resolve the crisis and are not capable of turning around the performance. We are insisting on the critical need for urgent change,” the council’s letter said, according to News24.

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The Minerals Council also reportedly offered to provide experts to arrest the situation, given the skills shortage and that “war rooms” should be established for each rail corridor, the targets of rampant vandalism and theft.

“Given that Transnet SOC’s operating performance is deteriorating, we cannot see how the company will avoid breaching its debt covenants early in 2023, at which stage the directors of Transnet SOC will need to place the company into liquidation or risk being sued for trading recklessly. The bulk commodity mining companies that are members of the Minerals Council are now demanding urgent action on this crisis, as it is now posing an existential crisis for Transnet and for the mining companies,” News24 quoted the letter as saying.

Transnet recorded a profit of R159-million during the six months to the end of September 2022, but this was overshadowed by its debt, which stood at R127.6-billion amid growing prospects of a potential default — a scenario reportedly outlined in the letter.

Read more in Business Maverick: “Transnet’s crumbling rail network and debt problems overshadow its profits”

In October, the Minerals Council estimated that the sector had lost R50-billion in lost exports of bulk commodities like coal and iron ore up to that point in 2022. That followed R35-billion in losses in 2021.

Ongoing shambles

There is no doubt that the mining industry — whose taxes and royalties have in the past couple of years thrown a lifeline to the Treasury — is fast losing patience with the ongoing shambles that is the South African state.

From Eskom to Transnet to the failure of the police to provide basic security to tackle zama zamas and procurement mafias to the delays in getting a transparent mining cadastre in place to shed light on the state of mining rights, a sector that accounts for almost 9% of GDP and most of the economy’s exports, the industry seems to be at its wits’ end.

Meanwhile, unperturbed by the Council’s equivocal response to the news reports, the DA came out yesterday in support of the call by the Minerals Council of South Africa to remove Derby from her position as CEO of Transnet.

“Her inefficiency has been palpable. Derby is yet another high-level cadre deployee, whose leadership has continued to run the state-owned entity (SOE) into the ground. Moreover, the recent statement by the minister responsible for the entity, Pravin Gordhan to the portfolio committee for Public Enterprises that Transnet was showing ‘green shoots of progress’ was tantamount to misleading Parliament. The entity is in fact close to liquidation according to reports in the media.

“It is time for government to appoint qualified, accountable leadership to SOEs, if not, the joint nightmare of Eskom and Transnet will bury this country. More specifically both sectors need to be thrown open to the private sector in the face of this patent failure of the state to deliver public goods and services”, the DA said.

Expect a lot more smoke to rise from this blaze. DM/BM

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Mounting frustration

Ongoing shambles