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Big losses could force pace of change at Transnet
Stella Sigcau is backing the parastatal in the dispute with Mac Maharaj over its privatisation, write SVEN LUNSCHE and DON ROBERTSON
In anticipation of the large losses, some government sources are calling for an acceleration of Transnet's restructuring and privatisation programme. But the pace of change led to a public altercation between Transport Minister Mac Maharaj and Public Enterprises Minister Stella Sigcau this week. Transnet's commitment to servicing its bankrupt pension and medical funds is likely to cost the group at least R1.4-billion in 1996/97 and will wipe out any surplus funds that could arise out of potential combined trading profits of about R1.25-billion from its six main operations. The overall trading profit hides large losses at two of the operations - the PX parcel division and SA Airways. The pressure on Transnet executives showed this week when managing director Saki Macozoma publicly attacked the accelerated restructuring agenda put forward by Maharaj. On Friday, Macozoma was backed by the Transnet board and by Sigcau, who is responsible for Transnet. Sigcau's spokesman Wandile Zote said the minister shared the board's concern about Maharaj's statements on Transnet's restructuring. Macozoma's attack, which labelled Maharaj's statement as reckless and as undermining the negotiation process with labour, brought to a head differences between Maharaj and Transnet/Sigcau about the extent of change at the group. Government sources, however, say that Maharaj's proposals for the various divisions at Transnet have generally been backed by his cabinet colleagues. The proposals include the full or partial privatisation of Autonet, PX, SA Airways, and Portnet's harbour operations. An inter-ministerial government committee, chaired by Deputy President Thabo Mbeki, will soon examine a master plan for Transnet. According to sources, the plan could entail the allocation of pension-fund deficits to the various operations and their subsequent ring-fencing. This would provide potential investors with a clearer financial picture as well as eliminate cross-subsidisation. The committee will also examine whether future investors could pay off the pension deficit instead of paying taxes, as recommended by the Finance Department. Analysts are confident that Transnet will report a good overall profit from its six major divisions, but stress that its commitment to providing at least R1.4-billion to service the R10.3-billion of debentures raised to cover shortfalls in the pension fund will wipe out any surplus funds. They also warn that the financial provisions could be even larger. In the 1995/96 financial year, the total commitment for the pension fund and medical aid was R1.9-billion, which included an additional R175-million for increased pensions and contributions to employees and R409-million for pensioners and medical benefits. These figures were similar to those made in the 1994/95 financial year and are likely to be repeated as staff shrinkage has been slight. The combined profit of the trading divisions is expected to be about R1.25-billion, after taking into account the losses from PX and SAA. A divisional breakdown of expected earnings shows that SAA is set to post a loss of about R350-million as increased operating costs including higher fuel prices take their toll. This compares with a profit of R324-million in the 1995/96 financial year. A loss is also expected by analysts in the current (1997/98) financial year, although SAA executives forecast a return to the black. In spite of efforts to restructure the PX parcel division, a loss of at least R500-million is expected compared with the R433-million loss in the previous period. Earlier this year, executive director Joe Ndhlela said the division had hoped to keep losses down to about R475-million, but the provisions for 2 000 staff members who took voluntary retrenchment would increase this figure. He added that PX would not be profitable until 2000 and that the loss in the 1997/98 financial year would be about R290-million. Spoornet will probably show a profit of R350-million against R98-million in 1995/96, but only about R100-million of this will represent a trading profit. The balance consists of extraordinary items including the repayment of debts by countries such as Zimbabwe. Petronet should increase profits by about 10% from the R180-million reported in 1995/96. Petrol sales during the 1996/97 financial year were up by about 6%. Portnet looks set to show some improvement, although increased costs will have affected operations. Earnings are expected at about R1.5-billion (R1.39-billion). Tonnages handled increased by 5.2% during the 1996/97 financial year. Autonet's five-year profit strategy is running to plan and headline earnings are expected to show a 80% improvement on 1995/96. The result could be an increase in profits to about R26-million (R23-million).
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