The future of Transnet Ltd. is along supply chains

VRYBURG– This is a piece of two locomotives passing through Swartruggens, in the North West Province, South Africa. A small town, with massive capacity for development, but limited resources and capital while attracting some tourists largely from Europe.

NATIONAL POWER TRAIN— Transnet Limited is one of those unlimited companies pumping coal, iron ore and other goods along our nation’s arteries. Rail infrastructure in South Africa spans over 21 000km, and the 4th longest train carries coal stretches nearly 4km toward Saldanha Bay. We are at a point where some reports from Transnet Ltd suggest that some corridors are becoming increasingly saturated, while others remain heavily underutilized. While much of the rail network in Africa emerged for the purposes of extracting resources to the ports, agglomeration and human settlement was a genuine response to a type of hope embroiled on industrialization. The mercantile motives behind low cost labour, and least-cost infrastructure resulted in railway lines that the policy position in SA describes as uncompetitive. Transnet Ltd has done significantly well with respect to its market share of the total tonnes shipped, growing from capturing no more than 13% into 2013, to breaching the 25% mark in 2018. At this point it is generating more income per ton shipped than road transport (which has stagnated for the last five years or so and is due for regulatory interventions). With the policy positions between the White Paper on Rail Transport Policy and the Road Freight Strategy, it is fundamentally clear that the future is sustainable road freight that is productive; but also a rail freight industry that leans on its inherent characteristics. Intermodalism and logistics hubs are at the core of the SA economy.

Turning towards the political economic history of Transnet Ltd, the entity has evolved from various reform efforts driven by public policies in response to the growth of road transport, and combustion related revenue opportunities. Against the backdrop of deregulation, rail transport in SA had to find ways to become more competitive without being insulated from the free-market, as it was before. Naturally to survive, debt, lack of capacity and logistical competencies become an issue during the teething phase in a new democracy. Transnet Ltd.’s history of CEOs does not start in 1990, but it dates back to 1910 of which each one would make an interesting topic for discussion.

However, the future of Transnet Ltd is not linear, but seems quite clearly defined along the supply chains of an economy faced with urgent structural reforms, demographic shifts and political dynamics influencing the competitive position of an emerging economy.

Now, into the modern case: the leadership at Transnet Ltd. have over the years presented their own unique ambitions and participating in redressing some of the core issues related to this bolstered behemoth. Given the company’s frequent presence in the news, I thought it would be cool to briefly reflect on some notes about key executives in my outside knowledge of Transnet Ltd’s evolution specifically between 2004 and 2018.

I am interested in identifying what exactly Maria Ramos, retiring CEO of Absa, did to Transnet between 2004 and 2009, with her 4-point strategy to get the entity out of debt and re-inspire confidence in the financial performance of the business. Her focus seemed to be about facilitating a financial and economic resolve throughout the business, but there’s obviously a lot more to it than that. Or consider Brian Molefe, who is deeply embattled politically at this time had a fair role between 2011 and 2016 leaning on pursuing the Market Demand Strategy (MDS). The MDS focused on expanding the capital base in order to signal to the market that Transnet Ltd is shifting how its supply-side is composed.

When Siyabonga Gama came in between 2016 and 2018, a tapered the MDS slightly with a focus on improving efficiencies to commensurately substitute the capital investment costs where plausible, in addition to leaning the business toward projects, technology enhancements and penetrating new freight segments. Acting since 2018, Tau Morwe seems to be focused on reorientating Transnet Ltd into a unified entity across functions and divisions with a potentially aggressive inclination toward improving the productivity of each asset and person; the strategic synergy within and across divisions; and redefining Transnet Ltd.’s value proposition both internally and externally. It is quite clear that each CEO has been rather sensitive to the previous executive’s interventions while updating the software below the surface to derive greater value from the existing infrastructure, assets and liabilities. However, the future of Transnet Ltd is not linear, but seems quite clearly defined along the supply chains of an economy faced with urgent structural reforms, demographic shifts and political dynamics influencing the competitive position of an emerging economy.

*Views expressed here are my opinion based on various sources.


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