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South Africa: Transnet's Turnaround
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Business Day (Johannesburg)
EDITORIAL
1 July 2008
Posted to the web 1 July 2008
Johannesburg
OF THE many numbers that Transnet released yesterday as it reported its year-end results, perhaps the most telling was that rail tariffs per ton per kilometre are on average 40%-60% cheaper than the cost to transport the same goods by road.
Yet the bulk of SA's freight business still goes by road, not rail, because most businesses still don't trust the railways to get their goods from City Deep to Durban (for example) safely and reliably.
Until they do, the turnaround in Transnet's rail operations is far from done. But it has at least begun: in the latest year general freight volumes showed their first increase for more than a decade. And Transnet reported healthy gains in productivity at its port and pipeline operations, as well as in the rail division.
This is important, because though there's no question that CE Maria Ramos has succeeded in turning around the group's finances in the four years since she took over a Transnet that was ailing in every way, it's the operational turnaround that's essential to make it easier and less costly to do business in SA, in line with the objectives set out in the government's growth strategy.
Transnet is well aware that regaining a competitive edge for its freight rail business remains a challenge. But its strategic focus has now shifted "from turnaround to growth".
Financially and operationally, the figures do show a group that appears well poised to grow its rail, port and pipeline businesses, into which it is investing R80bn over the next five years.
But life may not be quite as easy as it has been. The downturn in the economy is likely to have an effect . So too are the tighter regulatory constraints that Transnet is facing, particularly in its port and pipeline businesses. It has won the battle to prevent a government move to separate the ports out into a separate business, but as it succeeds, the group could well face new challenges.
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Will Ramos be around to oversee the growth strategy? That's the big question, given that her contract is due to expire soon.
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