Transnet vows end to deviant spending

Transnet has come under fire for not having tight controls to ensure its managers spent according to the Public Finance Management Act (PFMA) rules when awarding contracts to external suppliers. The portfolio committee on public enterprises questioned yesterday how the R8.4 billion irregular expenditure reported in the 2011 annual report escaped three levels of auditing. Transnet chief financial officer Anoj Singh pointed out that the irregular nature of the contracts emanated from the manner in which they were awarded, because Transnet’s procurement policies were not followed. However, the money did not need to be recovered as it was not lost.

“Work was performed by the contractors and value was received by Transnet. So the money was not spent in vain, it was not fruitless and wasteful, but the manner in which the contract was awarded, was the problem,” he said. Aubrey Mokoena, a member of the portfolio committee, said this was not the point, as the concern was that neither the internal auditing committee nor the external auditors or the auditor-general picked this up. Transnet group chief executive Brian Molefe said the R8.4bn figure related to previous years and the group had since put controls in place to avoid repeating the mistake. In the 2012 financial year, Transnet spent R195.5 million irregularly. But committee member Gerhard Koornhof said the fact that the external auditors specifically pointed out that Transnet did not take the necessary steps to prevent this irregular expenditure was what most concerned the committee.

Molefe said the parastatal had intensified PFMA awareness training and implemented a Cura system, which was a centralised database of PFMA-reportable violations. Transnet was in the process of linking its contract management and procurement systems to ensure PFMA compliance. Transnet said the R89.6m in fruitless and wasteful expenditure related to incidents such as staff returning hired vehicles late and money spent on repairs after accidents involving company vehicles. There were about 200 of these instances in the 2011/12 financial year. Molefe also told the portfolio committee that the Transnet Pension Fund and Transnet Second Defined Benefit Fund (TSDBF) made ad hoc bonus payments of R1.23bn to their pensioners in addition to their monthly pensions.

Cumulatively, approximately R1.9bn had been paid to pensioners on top of their 2 percent statutory increases. Singh said the 2 percent statutory increase was afforded by the pension fund itself and the annual bonuses that Transnet provided had seen the annual pension of members increase three times above inflation for the last three years. “In terms of the long-term solution, that 2 percent will remain as a statutory increase and we are looking to supplement that in the long term with the annual bonuses,” Singh said. Over the past four years, Transnet made ex gratia bonus payments of R385m to the members of TSDBF.

Meanwhile, DA public enterprises spokeswoman Natasha Michael said she had asked the public protector, Thuli Madonsela, to conduct a full investigation into which party was at fault in the payment of pensions and why the annual increases of these pension funds had been limited to 2 percent when inflation was in the region of 6 percent. “We have 70 000 widows that are suffering. “We must find out where the problem lies,” she said.