Transnet: Reputational Risk is Rising - says Wells

[Steve Appleton]

From Business Day, 12th August 2010:
http://www.businessday.co.za/articles/C ... ?id=117708

Reputational risk rising at Transnet, says Wells
TRANSNET’s corporate reputation has been contaminated by the poor reputation generally of SA’s state-owned companies and this has become one of the top 10 risks facing the company.
JULIUS BAUMANN
Published: 2010/08/12 06:36:28 AM

TRANSNET’s corporate reputation has been contaminated by the poor reputation generally of SA’s state-owned companies and this has become one of the top 10 risks facing the company, acting CEO Chris Wells said in the annual report released yesterday.

Mr Wells said Transnet’s reputation had also in the past year been subjected to a “sustained vicious and malicious campaign”, conducted mainly in the media as the company clamped down on poor governance within its structures. “These factors and the need to distinguish Transnet’s credible performance from that of struggling state-owned enterprises, have made it necessary to elevate to priority levels, the proactive management of the company’s reputation,” he said.

Transnet has in the past year made headlines over its battle with recently axed Freight Rail CEO Siyabonga Gama, while many other parastatals have been criticised for not having permanent leadership — including Transnet. The future of state-owned enterprises has also become a topic of political battle within the government and the African National Congress.

Mr Wells said in an attempt to better manage Transnet’s reputation the company would identify and agree on ways to engage the various stakeholders “central to ensuring the company’s future success. At present, reputation risk is inherent in all of the company’s top 10 risks. However, it has been agreed that henceforth this will be treated as an emerging risk to be considered, assessed and ranked as a separate risk among the top 10 risks”, he wrote.

As a risk to the company, reputation will now be ranked alongside non-delivery of capital projects on time and within budget; economic regulation; safety; environmental risks and funding and liquidity risk.

In his CEO’s review, Mr Wells also detailed plans for the involvement of the private sector in the development of ports, rail and pipeline infrastructure and for expanding freight capacity in SA. Partnering with the private sector was vital to fund expansion beyond the R93bn Transnet has been able to fund off its own balance sheet.

Apart from seeking partners to expand its key coal and iron-ore lines, Transnet will seek private investors in its inland terminals, multipurpose port terminals, short-sea shipping, customer-owned wagons and passenger port terminals.

“Each private sector participation initiative will be aligned with Transnet’s strategic objectives and will be structured in a holistic manner, specifically avoiding a fragmented approach to SA’s freight transportation network ”, said Mr Wells. “Opportunities will be sought to target capacity and performance bottlenecks and to lower transportation costs through optimal private-public collaboration. Transnet is mindful of the current challenging economic environment, where private sector liquidity and risk appetite are constrained. The company is, therefore, aware of the need for precision and predictability in project planning.”

He said that an executive had been appointed in his office to oversee the process. Transnet began the process in June, calling for interested investors in all 7300km branch lines.

baumannj@bdfm.co.za