Transnet’s new procurement policy to demand transformation spinoffs from R300bn investment

Transnet chairperson Mafika Mkwanazi on the group's procurement review and Public Enterprises Minister Malusi Gigaba on government's desire for State companies to lead the economic transformation push. Camera Work: Nicholas Boyd. Editing: Darlene Creamer.

20th February 2012

By: Terence Creamer

Creamer Media Editor


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The board at State-owned company (SoC) Transnet will complete a wide-ranging review of the group’s procurement policies by the end of March and the new policy, which will have a strong transformation underpinning, will have implications for the procurement approach pursued during the implementation of the group’s R300-billion, seven-year investment programme.

Chairperson Mafika Mkwanazi said the review was currently wending its way through the board’s subcommittees. He also stressed that it would abide by the Public Finance Management Act, as well as the new regulations associated with the Preferential Procurement Policy Framework Act (PPPFA), from which Transnet and the other major SoCs had received temporary exemption.

The new PPPFA regulations came into force on December 7, 2011, and the SoCs had until December this year to align their policies with the rules that, among other issues, designated certain products for local procurement by government departments, as well as State companies and agencies. The initial exemption of the SoCs was met with some anxiety within the local business community, with Consulting Engineers South Africa warning it could dilute the effectiveness of the regulations and create confusion in the marketplace.

Public Enterprises Minister Malusi Gigaba said he anticipated that Transnet’s new procurement policy, as well as those of the other SoCs, would be closely aligned with government’s transformation objectives – objectives that would also be hard-wired into the shareholder compacts that provided the performance-appraisal framework for the SoC boards, CEOs and executives.

Speaking at an event held to confirm the appointment of black accounting firm SizweNtsalubaGobodo as Transnet’s new external auditor for the coming five years, Gigaba said he intended to be “hard” on the issue of transformation and would “brook no deviations” from the SoCs, which were expected to lead the way for corporate South Africa as a whole.


The SoCs would be set “stretch” targets for both skills development and transformation.

Transnet itself had set aside at least R7.7-billion of the R300-billion earmarked for its rolling capital investment programme to 2019 for skills development initiatives, and the other enterprises were also in the process of responding to governments call to train in advance of their needs.

The next SoC Chairpersons Forum, which would be held in March, would focus on the progress being made in both areas. “We must now move beyond having the intentions outlined in policy, to implementing them,” Gigaba said, indicating that best practices would be shared and the various SoCs benchmarked against each other.

The SizweNtsalubaGobodo award provided a possible foretaste of what was in store at the SoCs for other professional-services sectors, including the legal and engineering professions. But Gigaba stressed that traditional service providers, including the “big four” auditors, would not be denied work from government, particularly if they made transformation strides.

With the award, SizweNtsalubaGobodo became the first black-owned auditor to manage Transnet’s full audit account, which was worth some R70-million a year in fees. Hitherto, Deloitte had conducted the group’s external audit.

Executive chairperson Nonkululeko Gobodo indicated that the company would be dedicating 150 of its 900-strong professional staff to the audit, but stressed it had the resources in place to meet it commitments. However, the firm was on an active recruitment drive to expand its capacity in line with its continued growth as a company.

Edited by Creamer Media Reporter




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