Assessing performance management in Transnet

Abstract

Background: In December of 2007 at its 52nd conference in Polokwane, the “ruling political party” of South Africa the African National Congress (ANC) called for the review of State-Owned Enterprises (SOEs) performance (PRC, 2016). The president of the ANC’s brief for this review was to consider the financial performance of the entities together with whether their Constitutional responsibilities were being met (PRC, 2016). The Presidential Review Committee (PRC) of SOEs was then established and mandated to do an examination on all SOEs in the country(PRC, 2016). The PRC understood its mandate as primarily making recommendations that would influence reform in the SOEs by being effective and efficient (PRC, 2016). Most SOEs continue to be inefficient and the weight is felt on the country’s fiscus as governments debt is pushed into unsafe territory (Mutize & Gossel,2017). The poor performance of SOEs not only affects a SOE under scrutiny, however there is deep concern from business, local and internal investors, civil society and government on that the failure of SOEs will have a huge spill over effect on the weakening of the economy of South Africa (News24, 2014). The SA Government’s continuous bailout of some SOEs has resulted in rating agencies continued monitoring of government’s bailouts or the issuing of guarantees because of the threat it poses to both the fiscal and policy priorities (Mutize & Gossel, 2017). Typically, a guarantee would be a commitment the State would make if an SOE defaults on the repayment of a loan it has taken (AGSA, 2018). In the event that an SOE is unable to honour its repayment agreement to a lender, the state then, through the Ministry of Finance provides surety by means of a guarantee to the lender (AGSA, 2018). Though the Provision of a guarantee on an SOE is not necessarily negative, especially when a decision has been taken by government to provide support to an SOE established in a specific industry or sector, due to that key industry or sector in the South African economy struggling to grow as expected (AGSA, 2018). However, in recent times calls on guarantees or bailouts for SOEs have increased the countries budget deficit, government debt and borrowing costs, and has resulted in downgrades from rating agencies (AGSA,2018). It is important that SOEs’ reliance on government guarantees is reduced by making sure that reliable turnaround strategies are implemented, including addressing leadership and governance issues at the SOEs (AGSA, 2018)