Transnet: Talks to claw back R43bn ‘lost’ assets

[Steve Appleton]

From Business Day, 29 July 2011. http://www.businessday.co.za/articles/C ... ?id=149510

Transnet in talks to claw back R43bn ‘lost’ assets
Presidential proclamation had the unintended effect of appropriating to government all Transnet-owned port property situated below the high-water mark

LINDA ENSOR
Published: 2011/07/29 06:41:24 AM

CAPE TOWN — A presidential proclamation in 2009 had the unintended consequence of expropriating R43bn from Transnet’s port assets, threatening to compromise the parastatal’s financial position, CEO Brian Molefe warned yesterday.

Unless the situation was resolved, the group’s loan agreements — which underpin its five- year, R110bn infrastructure development programme — would have to be renegotiated.

Gouging R43bn in assets from Transnet’s balance sheet — 25% of its total assets — would weaken the company considerably and heighten risk for lenders.

Mr Molefe said in the group’s annual report tabled in Parliament yesterday that Transnet was engaging with different levels of government to ensure the seabed within its ports remained the property of the group. The assets "expropriated" include breakwaters, turning basins, entrance channels and quay walls.

The problem arose from a presidential proclamation, which was prepared by the Department of Environmental Affairs and came into effect in December 2009 to bring the Integrated Coastal Management Act into operation. "This proclamation had the unintended effect of appropriating to government all Transnet-owned port property situated below the high-water mark," Transnet directors said in the annual report.

Following interventions by Transnet and the Department of Public Enterprises, the proclamation notice was amended to exclude certain sections of the act from coming into effect.

This removed the immediate risk of expropriation and Transnet was now negotiating with the Department of Environmental Affairs to formulate proposed amendments to secure the group’s assets in the long term and ensure the National Ports Authority was able to perform its functions.

Department of Environmental Affairs spokesman Zolile Nqayi said yesterday the amendments to the Integrated Coastal Management Act dealt with "substantive issues that affect a number of state organs (including transport) and therefore it is not just a technical issue. The Transnet issue is just one of many."

There were different interpretations of the act which the department did not believe would result in expropriation. "The amendment is intended to clarify that the intention of the act is not to expropriate coastal properties. We are in the process of doing this."

Asked about the delay since December 2009 in finalising this critical issue , Mr Nqayi said the proposed amendment "has to follow all the due processes".

Department of Public Enterprises spokesman Mayihlome Tshwete said his department was engaging with the Department of Environmental Affairs on the amendments to the act "to find an amicable solution to the issues that Transnet has raised".

Another, unrelated risk was high wage increases, chairman Mafika Mkwanazi said. Transnet would come "under strain" if these were set at the same level as last year, after a strike.

The annual report also called for clarity on the rail reform policy framework establishing the functions of the planned rail economic regulator, which would regulate tariffs and access to the rail network by other operators. This would have "a material impact" on rail investment and operations strategy", Mr Molefe said.

The capacity constraints faced by economic regulators and the lack of an appeal mechanism were of concern to Transnet directors. They warned "unfair adverse tariff decisions" would negatively affect its sustainability.