Case
Teaching Notes
Supplementary Resources
Abstract
Africa was facing a strike by the unions, representing more than 85 000 people. After consulting government and key customers, the Transnet board had chosen to cut away those of its businesses not associated with freight transport after the government, its sole shareholder, had given it a mandate to reduce the cost of doing business.
The memorandum given by the unions to Alec Erwin, the Minister of Public Enterprises stated that they were embarking on rolling mass action in protest against “unilateral decision-making, unilateral implementation, undermining and disrespecting labour and its members”. It said: “Labour wishes to place on record the following: We remain ideologically opposed to privatisation of strategic public assets which can benefit the masses of our people, the workers and the economy as a whole particularly infrastructure delivery, training and job retention and creation.” It declared that the unions were “absolutely right to insist on a genuine process of negotiation over the restructuring of the Transnet Group.”
Strike action had started in the Eastern Cape on 13 February. The Northern Cape and Western Cape followed suit on 14 February. Transnet workers in Gauteng, North West, Mpumalanga and Limpopo had then joined the protests on 20 February.
Ramos and Pradeep Maharaj, Transnet's group executive of strategy, were reviewing COSATU's statement, which declared: “The unions are absolutely right to insist on a genuine process of negotiation over the restructuring of the Transnet Group, including proposals to privatise Freight dynamics, the Transnet Pension Fund Administration, Autopax and the Blue Train, and plans to transfer SAA, Metrorail and Shosholoza Meyl out of Transnet and to move other business units within Transnet.” They looked at each other. Had they made the right strategic decisions?
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2023 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1 Transnet's Major Transport Businesses
NPA (National Ports Authority): Provides port infrastructure and marine-related services; manages port activities in a landlord capacity for eight ports. During 2004, this division reported a R2.14 billion profit.
SAPO (South African Port Operations): Port and cargo operator in all the major ports of South Africa, managing port, terminal and cargo operations. The most import and export commodities are handled through South Africa's six largest ports: Richards Bay; Durban; Saldanha; Cape Town; Port Elizabeth; and East London. SAPO handles the cargo and also implements logistics solutions for its container, bulk, bulk break (multipurpose) and car terminal operations. During 2004, this division reported a R348 million profit.
Spoornet: Freight and rail operator, which focuses on the transportation of freight, containers and mainline passengers by rail. In 2004, this was the largest division of Transnet. Its core business provides logistics solutions, particularly in the mining and heavy and light manufacturing sectors. During 2004, this division reported a R668 million loss.
South African Airways: Major commercial airline with extensive national and global operations: 20 destinations in Africa and carrying passengers and freight to 40 cities in more than 30 countries on six continents. During 2004, this division reported a R8.72 billion loss.
Metrorail: Operates commuter rail transport in most of the major cities in South Africa.
Petronet: Owns and operates an extensive high-pressure fuel pipeline network through which petroleum products and gas are transported. Petronet pumps and manages the storage of petroleum products. The liquid field network extends from KwaZulu-Natal to the Free State, Gauteng, North West and Mpumalanga. During 2004, this division reported a R239 million profit.
Other significant divisions:
Freight Dynamics: Road freight transport.
Propnet: Property management.
Transtel: Operator of Transnet's private telecommunications network.
Transwerk: Supplier and refurbisher of railway wagon and rolling stock.
Other significant subsidiaries:
Autopax: Passenger and road transport.
Protekon: Construction and project management.
South African Express Airways: Regional passenger airline.
Viamax: Logistics and fleet management (R94 million profit).
Marine Data Systems: Transport logistics.
Owner Driver Management: Transport logistics.
Source: Transnet Annual Report 2004, pp. 37–39.
Exhibit 2 Board Members and EXCO
Transnet board members, 2005
- Chairman Transnet: Mr F.T.M. Phaswana. Has a directorship in Anglo American Corporation of South Africa; deputy chairman and treasurer: Inyathelo (The SA Institute for Advancement).
- Dr I. Abedian: chief executive: Pan African Investment and Research Services.
- Professor G.K. Everyingham: professor of accounting at UCT. He is also a director of the V&A Waterfront.
- Ms N.B.P. Gcaba: partner at Spoor and Fisher Attorneys. She is also the chairperson of the Transnet M-Cell Ltd Trust.
- Dr S.E. Jonah: company director: Anglo Gold Ashanti. Other directorships: Commonwealth African Investment Fund (Zimbabwe), Anglo American Corporation of South Africa; chairman Transnet Second Defined Benefit Fund.
- Mr P.G. Joubert: director of companies.
- Ms N.N.A. Matyumza: general manager: Eastern Region, Eskom Distribution.
- Mrs M.A. Mpses: businesswoman.
- Mr S. Nicolau: businessman.
- Ms K.C. Ramon: chief executive officer: Johnnic Holdings.
- Mr C.F. Wells: chief financial officer: Transnet.
- Ms Z. Stephen: company secretary.
Transnet EXCO members, 2005
- Mr Pradeep Maharaj: group executive: strategy and transformation.
- Mr K. Pilela: CEO: National Ports Authority.
- Mr C. Wells: chief financial officer.
- Mr T. Morwe: CEO: South African Port Operations.
- Mr L. van Niekerk: chief operating officer.
- Mr L.R.R. Molotsane: acting CEO: Transwerk.
- Mr C. Moller: CEO: Petronet.
- Mr V. Kahla: group executive: legal and risk.
- Mr S. Gama: CEO Spoornet.
- Ms B.S. Tshabalala: treasurer.
- Ms M. Ramos: group executive officer.
- Mr B. Nomvele: chief information officer.
Source: Transnet Annual Report 2005.
Exhibit 3 Transnet's Four-point Turnaround Strategy
1. Redirect and Re-engineer the Business
This pillar is aimed at improving efficiencies and effectiveness of the core business units through re-engineering processes and realising synergies between the various operating divisions. Within this pillar, a far-reaching programme has been launched to improve efficiencies, reduce costs and deliver a reliable service to all clients and increase market share.
2. Restructuring the Balance Sheet
This pillar seeks to rationalise the business portfolio and achieve a better focus on the core business units. Non-core businesses will be transferred to government and others will be sold. The proceeds will be used to fund the R40 billion infrastructure investment and reduce borrowing.
3. Ensure Corporate Governance and Risk Management
This pillar is designed to ensure the highest standards of corporate governance are adhered to and the company's risk management is improved. A fraud prevention plan and an ethics programme have been launched.
4. Develop Human Capital
This is focused on revitalising our human resources by transforming the culture and behaviour of employees. Transnet aims to be an employer of choice. The aim of this pillar is to increase talent management and leadership development, transformation management as well as performance and reward management.
Strategic Intent
Transnet Limited is a public company with the South African government running as its sole shareholder. Both operating and controlling South Africa's major transport infrastructures, Transnet is also responsible for ensuring that the country's transport industries operate according to world-class standards and that they form an integral part of the overall economy.
Transnet is not only vital to South Africa's development, but it also combines forces with other businesses in order to expand transport operations across Africa and beyond. By doing so, Transnet assists in creating valuable business opportunities that extend far beyond the shorelines and borders of the country.
Recognised today as the dominant player in the southern African transport and logistics arena, Transnet aims to be cost-efficient as well as an efficient service provider. By working closely with its clients, Transnet is building on existing corridors and clusters and exploiting the synergy between port and rail to tailor solutions according to its customers' needs.
Source: available at www.transnet.co.za/TurnAroundStrg.aspx
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2023 Sage Publications, Inc. All Rights Reserved
