http://www.businesslive.co.za/southafri ... f-transnet
06 August, 2011 17:11
By Chris Barron
Too nice to be the boss of Transnet?
Brian Molefe is a competent financial man and an affable person. But one wonders if he is not too nice to be the boss of Transnet, which requires some serious bottom-kicking to get where it needs to be. Any CEO who believes reinstated freight rail chief Siyabonga Gama deserves the R10-million he received after being suspended in 2009, then fired, is either a soft touch or completely out of touch.
And Molefe does. Indeed, he is so convinced Gama is being maligned by those who question his entitlement to this vast hoard that he thanks me - and he's far too nice a man to resort to cheap sarcasm - for giving him "a chance to explain" the Gama remuneration package that was revealed in Transnet's recently tabled annual report for financial 2011. The payout is "not that high" when you consider it included bonuses and incentives accrued over two years, he says.
But for 18 months of that time he wasn't at work, was he?
"No, but that was the settlement."
His explanation skirts the fact that Gama was fired for gross misconduct, which involved being carefree with taxpayers' money to benefit a friend in the cabinet.
When this is pointed out Molefe gently demurs. "The finding of a disciplinary committee went to the board as a recommendation," he says. That recommendation was to fire him, which the board did. "The board reviewed the decision," he says, omitting to mention that this was a new board, not the board that fired him. He implies that the decision to fire Gama was wrong.
This exchange suggests a CEO who might not be as ruthlessly intolerant of bad corporate governance as one needs to be at Transnet. It's an attitude that has dogged Transnet and other state-owned enterprises. It is especially worrying in someone responsible for a R110-billion spending programme.
Molefe, who was appointed in February, agrees that accountability has not been a strong feature of Transnet. "Yes, it's a problem, but it's a problem in government, not just Transnet. We see bad work in housing and so on. Accountability needs to be tightened, it is critical."
If his attitude to accountability seems contradictory, at least when it comes to his most senior lieutenant, then his understanding of incentives doesn't inspire confidence either. He sees nothing odd about Gama receiving a R2.5-million incentive bonus after being fired for dereliction of duty. He explains that he was entitled to this bonus for his performance prior to being fired.
"Part of the annual incentive bonus is retained by the company to be paid out after three years. So this was for a bonus he was given three years before."
One might have thought the idea of withholding part of the bonus was as a precaution in case something nasty came to light.
Well, apparently not.
Nevertheless, the public perception is that a senior executive who failed in his duties got an incentive bonus. Is this the kind of image Transnet needs? "The problem with public perceptions is that they are based on what the media writes," says Molefe. "And sometimes the media writes without understanding the facts."
He patiently repeats these "facts", because I clearly don't understand them either.
"That bonus was paid last year but it was not for last year, it was for three years ago. He had a performance contract. At the end of the year he was assessed and was deemed fit by the board to get his incentive bonus."
The fact that he committed a breach serious enough to get him fired was apparently neither here nor there.
Are incentive bonuses paid out too easily at Transnet?
"Incentive bonuses should be paid out to encourage correct behaviour," says Molefe. "So the question you should be asking is, are they paid out to reward correct behaviour?"
Taking Gama as an example, most people outside the charmed circle of highly rewarded state-owned enterprise executives might say no.
That, says Molefe, is because they don't understand the facts. Molefe says his priority is to reverse the flight of cargo from rail to road. "It's the first thing I'm going to fix." His goal is to double rail's market share to 30% in three years.
The trouble is that the man he is relying on to do this is freight rail's chief executive, Gama. Ethics and performance bonuses aside, Gama's record does not inspire confidence.
Molefe is the first to admit Transnet's reputation for unreliability is richly deserved. "The reason cargo goes by road rather than rail is because of a perception that Transnet is unreliable," he says. "Which is true. Our locomotives break down; we have derailments; we don't have on-time departures or arrivals. That is the honest truth, there is no reason to spin it. It is as bad as that."
He acknowledges that a large part of the problem has been lack of maintenance. This will be improved, he promises. In addition, 500 new locomotives will be bought over the next five years. Signalling will be improved with the automation of all points. This will reduce delays, as will victory over copper cable theft. He has taken "the extraordinary step" of hiring a senior police officer from the crime intelligence unit to lead the fight against copper theft.
He also wants to open a dedicated general freight line through Swaziland to Richards Bay and Durban. A feasibility study will be finished in September and he hopes the line will be ready for business in two years.
He is wary of partnerships with the private sector but concedes that Transnet needs them. Experience suggests private partners often have their own agendas which are not in the best interests of the public partner, he says. "When we want to invest more capital, employ more people, grow the business, they want to take out profits and pay dividends." The reason many such partnerships break down is because they are badly managed. Molefe insists that Transnet has good project management capacity.
Evidence suggests otherwise, notably the disastrous implementation of the Durban-Gauteng fuel pipeline project which cost close to R15-billion more than it should have.
"We need to learn from what happened and manage things better," says Molefe. "We have more robust project management now."
When the former Public Investment Corporation boss was appointed, observers thought his lack of operational experience, and the fact that he didn't know anything about trains, would be a problem.
"Not at all," says Molefe. "I need to understand business, know how to move volumes, I don't need to know how to fix a train. I don't think Jack Welch could fix a fridge."
Maybe not, but one wonders what the legendary boss of GE would have thought about Gama's incentive bonus?