QUESTION ONE: CASE STUDY $-$ TRANSNET $[25]$

South Africa handed Transnet a $47-$billion$-$rand lifeline on Friday, which it said would help the stateowned rail and ports firm meet its immediate debt obligations. Transnet has struggled to provide

adequate freight rail and port services in South Africa due to equipment shortages and maintenance

backlogs after years of under$-$investment. The logistics utility's underperformance has impacted

commodity exports and other sectors such as manufacturing and retail, weakening Africa's most

advanced economy.

"The financial support package provided for the entity is a $47$ billion rand guarantee facility against

which Transnet will drawdown an initial amount of $22\mathrm{.}8$ billion rand to deal with immediate liquidity

matters such as settling maturity debt," the National Treasury and Department of Public Enterprises

said. Pepkor's CEO said this week the discount retailer is struggling to import goods due to

Transnet's problems and had nearly $$40$ million worth of stock stuck at sea. Transnet, which has

debts of $130$ billion rand and recorded a loss of $5\mathrm{.}7$ billion rand in the financial year to March, has

seen freight volumes decline to $150$ million metric tons in financial year $2022/23$ from $226$ million

tons in the $2017/18.$

Its new board is pursuing a recovery plan which seeks to restore freight volumes and return the

company to profitability over the next $18$ months. The turnaround plan includes splitting the freight

rail subsidiary into two $-$ an infrastructure management company and an operating unit. The

company is also targeting reduced port backlogs and will make another attempt to open up parts of

its rail network to private operators after last year's false start. Transnet on Oct. $26$ said it

had requested funding from the government, reported to be around $100$ billion rand, including an

equity injection, to help fund the recovery.

But South Africa's government said on Friday it had not considered an equity injection, saying its

budget for the $2023/24$ financial year was closed. Transnet's single $$1$ billion international bond,

which matures in $2028,$ rose on the news, with its price up as much as $1\mathrm{.}8$ cents to $98\mathrm{.}9$ cents, its

highest price since Aug. $1$ according to Tradeweb data. Andrew Bahlmann, Chief Executive of Deal

Leaders International's corporate and advisory arm, said the government had no choice but to bail

out Transnet, "given the appalling impact that Transnet's incapacity has on the economy and

particularly our vital export markets." "The business and investment community will expect to see

some immediate improvements in port delays and rail performance to feel the financial package is

justifiable or just good money thrown after bad," Bahlmann said in a note.

Source: https:$//$www$.$reuters.com$/$world$/$africa$/$safricas$-$transnet$-$gets$-25-$bln$-$govt$-$support$-$package$2023-12-01/$

$1$

QUESTION:

According to Grutter $(2010$:$8),$ another way of looking at an operation is to see how different parts of

the organisation fit together. The $3$S model divides an organisation into three levels of operation:

strategic, systemic and situational. Demonstrate how you would apply the $3$S model to improve

operations at Transnet.

Mark Allocation:

Theory on the $3$S Model $=10$ marks

Application & Context to Transnet $=15$ marks