Transnet to overhaul procurement and finance functions
Transnet has set up a loss control function, which will report to new group CFO Nonkululeko Dlamini.
Transnet announced on Friday that it had set in motion plans to recover its finance function after it reported irregular expenditure of R9.97 billion for the year ended 31 March 2020.
“The legacy of non-compliant procurement events continues to have a lingering effect on the business,” the statement read. This particularly refers to the Preferential Procurement Framework, dating back as far as the 2011/12 financial year, which resulted in a significant increase in the company’s reported irregular expenditure.
Transnet said that the process to identify and accurately report all irregular expenditure is largely manual in nature and continues to result in reporting inaccuracies. “The resultant concern relating to the completeness of the reported irregular expenditure has resulted in the external auditors issuing a qualified opinion for the 2019/20 year.”
According to the statement, to address the irregular expenditure, Transnet plans to “review previous remedial plans to close gaps and address the backlog in its implementation, as well as identifying sustainable solutions to address present and historic challenges”.
This includes the complete overhaul of Transnet’s procurement and finance functions.
The group said that its procurement function, responsible for the bulk of the irregular expenditure incurred, has been separated from finance. “This has the advantage of ensuring better alignment between planning and procurement, improving efficiency in infrastructure delivery, amongst others.”
As part of the restructure, the state-owned entity has established a loss control function that will be reporting to the new group CFO, Nonkululeko Dlamini. The function will specifically deal with Public Financial Management and Accountability (PFMA) compliance, reporting, as well as improving Transnet’s internal control environment. The loss control function will also collect information on root causes that led to PFMA transgressions, employees responsible for the irregular expenditure, losses suffered, and any breakdown in internal controls.
Despite the irregular expenditure, the company reported a 1.3 percent increase in revenue. The company said that, as a result, it is committed to doing its part to help grow South Africa’s economy.
About the results, Nonkululeko said:
“We operate in the South African economy and I think when things happen, whether it’s load shedding, but also in the context of the sluggish economic growth, for whatever reason, when you talk about a modest increase in revenue, it really does talk to economic conditions that we experience.”