Transnet CEO Michelle Phillips confirmed that the entity had taken steps to remove the R42.9bn from its books, arguing it had complied with all prescribed processes.
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Transnet has revealed a growing standoff with the Auditor-General (AG) over R42 billion in irregular expenditure linked to its controversial procurement of 1,064 locomotives, highlighting ongoing tensions over accountability and financial governance at the State-owned logistics company.
Briefing Parliament’s Standing Committee on Public Accounts (Scopa) on Tuesday, Transnet CEO Michelle Phillips confirmed that the entity had taken steps to remove the R42.9bn from its books, arguing it had complied with all prescribed processes.
However, the AG maintains that the expenditure remains irregular, citing incomplete processes, including unresolved criminal proceedings.
Phillips explained that Transnet followed due procedure after the expenditure was not condoned by National Treasury.
“We believe we have done what is required. We approached the board to approve the removal of the amount from our books, but this is not a write-off of debt,” she said.
She added that while Transnet had addressed all administrative and contractual aspects under its control, the outstanding criminal investigations fall outside the entity’s authority.
“We can do nothing further regarding the R42bn. Unfortunately, the AG’s interpretation ultimately prevails,” Phillips noted, underscoring the impasse.
The dispute means the R42bn could reappear in Transnet’s financial statements for the new financial year, prompting further deliberations between management, the board, and oversight authorities.
Sandra Coetzee, Transnet chief legal officer, said the matter remains active in the courts, particularly due to an interlocutory application filed by Chinese firm China Railway Rolling Stock Corporation (CRCC), which is seeking to strike out portions of Transnet’s founding affidavit. This step precedes a full judicial review of the case.
Coetzee noted that the AG believes Transnet has not fully exhausted its responsibilities, including efforts to recover losses, enforce consequence management, and ensure criminal prosecution.
“We have filed a review application, but court timelines are beyond our control. Many individuals involved in the original procurement are no longer with Transnet, limiting internal disciplinary action,” she said.
Despite these challenges, Transnet has made criminal referrals and lodged complaints with relevant authorities.
Beyond the dispute, Transnet outlined progress in addressing audit findings and strengthening governance. As of January 2026, the entity had 470 audit findings from the AG, of which 43% have been resolved. The remainder are in progress, partly due to ongoing digital transformation initiatives.
Efforts to curb irregular expenditure have yielded some improvement. Irregular expenditure from the 2023/24 financial year declined from R3.8bn to R3.2bn, with only R279 million classified as new cases. The bulk relates to legacy, multi-year contracts.
However, fruitless and wasteful expenditure rose by R42m due to a non-compliant contract.
Transnet has implemented reforms across five key areas, including enhanced governance oversight, improved reporting and monitoring of procurement deviations, stricter audit action plans, and real-time compliance checks during bid evaluations.
On the financial front, Transnet reported a significantly improved performance.
Nosipho Maphumulo, Transnet's chief financial officer, said the entity reduced its net loss to R1.9bn from over R7bn in the previous year — a 74% improvement. This was driven by a R6bn increase in revenue and a R2.6bn reduction in operational expenditure.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose by more than 39% to R30.6bn, while capital expenditure increased by 44% to R24bn, reflecting continued investment in infrastructure.
However, rising debt remains a concern. Transnet’s borrowings increased from R137.6bn at the start of the financial year to R144.7bn, with projections indicating a peak of R156.7bn before a planned reduction to R107bn over five years.
Government guarantees have played a crucial role in stabilising Transnet’s financial position, particularly after credit rating downgrades threatened immediate repayment obligations of over R46bn.
While operational improvements and financial recovery efforts are underway, the unresolved R42bn dispute underscores the lingering legacy of governance failures — and the complex path Transnet must navigate to restore credibility and financial stability.
BUSINESS REPORT