Date: 26/08/2003
Source: Ministry of Public Enterprises
Title: Radebe: Release of Transnet's financial results for 2002/2003
STATEMENT BY JT RADEBE, MP, MINISTER OF PUBLIC ENTERPRISES, ON RELEASE OF TRANSNET's FINANCIAL RESULTS FOR 2002/2003, Carlton Centre, Johannesburg, 26 August 2003
The Chairmen of the Board of Transnet and SAA;
Members of the Boards of Transnet and SAA;
The Chief Executives and Chief Financial Officer of Transnet and SAA;
The Executive Management of Transnet and its divisions and subsidiaries,
Members of the media,
Ladies and Gentleman.
Once again it is my pleasure to reflect on the financial results of the major transport logistics company in South Africa, Transnet, and its various divisions and subsidiaries, including SAA. I would like to congratulate and thank all members of Transnet, from the apex of Chairman and CEO to the workers who are the foundation of this great company, for the sterling work they have put in to making 2002 a successful and fulfilling year for the Transnet Group.
As always, the release of Transnet's financials today has been eagerly awaited. I must thank the media for their continued interest in the well-being and work of Transnet. Without the print and electronic media, including TV and radio, much of Transnet's contribution to the development of our country and the immediate region through transport logistics activity and increasing infrastructure investment would remain closed to the public mind. I am sure that you will agree with me that the confidence we in Government have in the future of Transnet is well placed.
I wish to make just a few points about the detailed package of results and presentations that have been presented to you this morning.
First of all the diversity of Transnet's activities in various spheres of rail transport, ports operations and administration, freight and cargo handling, support services and so on should not be overshadowed by the significant and very public face of SAA as the major actor in the commercial aviation sector. We all know that Transnet is the major shareholder of South African Airways (SAA) holding 95% of the equity and thus is invariably affected by the operational and other pressures that SAA experiences in the market. But Government's assessment of Transnet as a whole takes into consideration the whole profile of this large and sophisticated enterprise.
In summary, then, Government is well satisfied with the overall performance of Transnet during 2002. Although we are conscious that the loss after tax for the year ended 31 March 2003 is R0.6 billion compared to the R3.5 billion profits after tax in the prior year we are equally aware that this loss is mainly due to the inclusion for the first time of a new accounting rule, AC133, that requires companies to report, inter alia, on changes in the fair value of derivative financial instruments. The impact of AC133 is not unique to Transnet, or to SAA for that matter, and the media have reported a number of other similar cases from the private sector where AC133 has had a presumed negative impact on business activity.
Let me just say as an aside that the impact of reporting rules, conventions and procedures on SAA and Transnet is not new. Just some time back we were able to see how the way extraordinary items and/or non-recurring income were reported affected the picture of Transnet's health. Similarly, in our collective endeavours to ensure that South African accounting standards are adequately benchmarked against international standards, new accounting practices, such as AC133 are necessary even though they bring a new perspective to some elements of the business. We should not divorce the sense of these new rules with the added requirements of the PFMA that have also brought a greater transparency to the way our enterprises operate and function. All of this is surely for the better.
SAA will provide a more detailed outline of the origin and impact of the AC133 inspired impact on their bottom line. Hedging, as we know is an integral part of risk management in any environment exposed to major foreign currency transactions. We would of course not condone hedging activity for purposes of speculation, but we can emphasise that Boards of Directors generally must monitor such hedging activity very carefully and exercise their responsibilities accordingly. I don't need to explain the mechanics of AC133 to a media audience such as this one, and I would simply add that the assistance that Government has provided Transnet and SAA in providing guarantees reflects our confidence in the overall management and strength of both SAA and Transnet. These are strong companies that perform well and provide enormous benefits to the country as a whole, and we support them every inch of the way in their endeavours to fulfil their mandates to Government and to the people of South Africa.
Let me turn to the material issues at hand, namely the operational performance of Transnet's core business.
As you have seen, the profit from operations before other income is equal to R5 billion, representing a very pleasant increase of some 248% from the prior year. This impressive operational performance can be attributed to South African Airways; the National Ports Authority; and Spoornet. However challenges remain for some areas of our activities, particularly the South African Ports Operation and Metrorail. Plans are in place to deal with these.
The positive performance was achieved through a combination of high turnover as a result of increase in volumes and savings in operating costs, both of which are commendable features of the overall results. I would like to point out that SAA has done extremely well in a global aviation environment that still reels from the impacts of September 11 2001 and its aftermath and the SARS epidemic. At a time when some international airlines have struggled even with substantial government subsidies and assistance, SAA has managed to outshine all with its performance. The operation of the new aircraft so far, to be outlined later by SAA, also reveals the good sense of the acquisition. These are all very positive developments.
Members of the media aware that the development needs of our country and our continent place enormous pressure on Transnet and our other state owned enterprises. Cabinet recently announced a major programme for the extension, expansion and refinement of our logistics infrastructure investment countrywide, including cross-border concerns. Part of that programme is an audit and assessment of the current and future infrastructure plans of all SOEs, including Transnet, in particular the rail and ports spheres. Our view is that the financial strength of Transnet provides a solid foundation for our programme, that the overall plans of the Group are aligned to the development agenda that the country has adopted, and that there can be no turning back in the development of a strong infrastructure backbone in our region with public and private support and contributions. Transnet's business and operations form a core element of the overall NEPAD landscape and we encourage Transnet to continue to strengthen its operations in Africa in the same spirit of partnership, skills and technology transfer and capital investment we expect from international operators in our own economy.
For us the major message of Transnet's improving performance to date is to see it grow even more, for it to develop its capacity even more, and for the results of expanded in-house training and development and its numerous social responsibility programmes to feed into an ever-growing contribution to Africa as a whole. Transnet's active approach to tackling HIV/AIDS is also welcome.
We are confident that Transnet can fulfil this mandate. Where necessary, Government as the major shareholder will continue to provide support and assistance, in the knowledge that our interest and investment is sown in fertile ground.
In conclusion, I wish to say that with these strategies in place I am confident that Transnet and SAA will be in a position to improve on their performance in the new financial year and beyond.
Well done, and continue the good work!
Thank you.
Issued by Ministry of Public Enterprises
26 August 2003
Source: Ministry of Public Enterprises
Title: Radebe: Release of Transnet's financial results for 2002/2003
STATEMENT BY JT RADEBE, MP, MINISTER OF PUBLIC ENTERPRISES, ON RELEASE OF TRANSNET's FINANCIAL RESULTS FOR 2002/2003, Carlton Centre, Johannesburg, 26 August 2003
The Chairmen of the Board of Transnet and SAA;
Members of the Boards of Transnet and SAA;
The Chief Executives and Chief Financial Officer of Transnet and SAA;
The Executive Management of Transnet and its divisions and subsidiaries,
Members of the media,
Ladies and Gentleman.
Once again it is my pleasure to reflect on the financial results of the major transport logistics company in South Africa, Transnet, and its various divisions and subsidiaries, including SAA. I would like to congratulate and thank all members of Transnet, from the apex of Chairman and CEO to the workers who are the foundation of this great company, for the sterling work they have put in to making 2002 a successful and fulfilling year for the Transnet Group.
As always, the release of Transnet's financials today has been eagerly awaited. I must thank the media for their continued interest in the well-being and work of Transnet. Without the print and electronic media, including TV and radio, much of Transnet's contribution to the development of our country and the immediate region through transport logistics activity and increasing infrastructure investment would remain closed to the public mind. I am sure that you will agree with me that the confidence we in Government have in the future of Transnet is well placed.
I wish to make just a few points about the detailed package of results and presentations that have been presented to you this morning.
First of all the diversity of Transnet's activities in various spheres of rail transport, ports operations and administration, freight and cargo handling, support services and so on should not be overshadowed by the significant and very public face of SAA as the major actor in the commercial aviation sector. We all know that Transnet is the major shareholder of South African Airways (SAA) holding 95% of the equity and thus is invariably affected by the operational and other pressures that SAA experiences in the market. But Government's assessment of Transnet as a whole takes into consideration the whole profile of this large and sophisticated enterprise.
In summary, then, Government is well satisfied with the overall performance of Transnet during 2002. Although we are conscious that the loss after tax for the year ended 31 March 2003 is R0.6 billion compared to the R3.5 billion profits after tax in the prior year we are equally aware that this loss is mainly due to the inclusion for the first time of a new accounting rule, AC133, that requires companies to report, inter alia, on changes in the fair value of derivative financial instruments. The impact of AC133 is not unique to Transnet, or to SAA for that matter, and the media have reported a number of other similar cases from the private sector where AC133 has had a presumed negative impact on business activity.
Let me just say as an aside that the impact of reporting rules, conventions and procedures on SAA and Transnet is not new. Just some time back we were able to see how the way extraordinary items and/or non-recurring income were reported affected the picture of Transnet's health. Similarly, in our collective endeavours to ensure that South African accounting standards are adequately benchmarked against international standards, new accounting practices, such as AC133 are necessary even though they bring a new perspective to some elements of the business. We should not divorce the sense of these new rules with the added requirements of the PFMA that have also brought a greater transparency to the way our enterprises operate and function. All of this is surely for the better.
SAA will provide a more detailed outline of the origin and impact of the AC133 inspired impact on their bottom line. Hedging, as we know is an integral part of risk management in any environment exposed to major foreign currency transactions. We would of course not condone hedging activity for purposes of speculation, but we can emphasise that Boards of Directors generally must monitor such hedging activity very carefully and exercise their responsibilities accordingly. I don't need to explain the mechanics of AC133 to a media audience such as this one, and I would simply add that the assistance that Government has provided Transnet and SAA in providing guarantees reflects our confidence in the overall management and strength of both SAA and Transnet. These are strong companies that perform well and provide enormous benefits to the country as a whole, and we support them every inch of the way in their endeavours to fulfil their mandates to Government and to the people of South Africa.
Let me turn to the material issues at hand, namely the operational performance of Transnet's core business.
As you have seen, the profit from operations before other income is equal to R5 billion, representing a very pleasant increase of some 248% from the prior year. This impressive operational performance can be attributed to South African Airways; the National Ports Authority; and Spoornet. However challenges remain for some areas of our activities, particularly the South African Ports Operation and Metrorail. Plans are in place to deal with these.
The positive performance was achieved through a combination of high turnover as a result of increase in volumes and savings in operating costs, both of which are commendable features of the overall results. I would like to point out that SAA has done extremely well in a global aviation environment that still reels from the impacts of September 11 2001 and its aftermath and the SARS epidemic. At a time when some international airlines have struggled even with substantial government subsidies and assistance, SAA has managed to outshine all with its performance. The operation of the new aircraft so far, to be outlined later by SAA, also reveals the good sense of the acquisition. These are all very positive developments.
Members of the media aware that the development needs of our country and our continent place enormous pressure on Transnet and our other state owned enterprises. Cabinet recently announced a major programme for the extension, expansion and refinement of our logistics infrastructure investment countrywide, including cross-border concerns. Part of that programme is an audit and assessment of the current and future infrastructure plans of all SOEs, including Transnet, in particular the rail and ports spheres. Our view is that the financial strength of Transnet provides a solid foundation for our programme, that the overall plans of the Group are aligned to the development agenda that the country has adopted, and that there can be no turning back in the development of a strong infrastructure backbone in our region with public and private support and contributions. Transnet's business and operations form a core element of the overall NEPAD landscape and we encourage Transnet to continue to strengthen its operations in Africa in the same spirit of partnership, skills and technology transfer and capital investment we expect from international operators in our own economy.
For us the major message of Transnet's improving performance to date is to see it grow even more, for it to develop its capacity even more, and for the results of expanded in-house training and development and its numerous social responsibility programmes to feed into an ever-growing contribution to Africa as a whole. Transnet's active approach to tackling HIV/AIDS is also welcome.
We are confident that Transnet can fulfil this mandate. Where necessary, Government as the major shareholder will continue to provide support and assistance, in the knowledge that our interest and investment is sown in fertile ground.
In conclusion, I wish to say that with these strategies in place I am confident that Transnet and SAA will be in a position to improve on their performance in the new financial year and beyond.
Well done, and continue the good work!
Thank you.
Issued by Ministry of Public Enterprises
26 August 2003
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