TransNamib to turn around fortunes

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WINDHOEK – Just more than 60 days after being appointed, TransNamib’s new board of directors has announced an ambitious 180-day turnaround plan that hopes to make the loss-making SOE generate a positive cash flow of N$12 million each month.

Announcing the aggressive turnaround strategy yesterday (Thursday), the company’s board chairperson, Dr Pieter Oosthuizen, said: “After 180 days TransNamib will be self-sustaining and even show a profit. The management team will then embark on phase 2 of transforming TransNamib into an efficient and well functioning state enterprise.”

According to Dr Oosthuizen, the Minister of Works and Transport, Erkki Nghimtina, fully supports the turnaround plan and has therefore made available N$400 million that the board requested to implement the ambitious plan.

“The new board has been tasked by the minister to use its diverse skill base in order to improve the current financial performance of TransNamib. We are fully committed to this mandate,” said board member and spokesperson, Dantagos Jimmy – Melani.

While addressing the operational shortfall, the aggressive plan also provides for funding the current N$20 million per month shortfall until the 180-day plan is fully implemented.

“We are also aware of the fact that we need to address the current creditor’s book. In order to achieve this, an amount of N$70 million is required to clear the

“long-standing debt to our critical suppliers”, further stated Oosthuizen.

During the last five years TransNamib’s revenue has declined by 14 percent, while cost of sales and operating expenses have increased by 6 percent and 7 percent respectively.

The company has not been profitable for the last four consecutive years, with losses increasing year-on-year.

During 2013 alone, TransNamib experienced a loss of N$183 million while it is expected to announce a loss of N$126 million for 2014.

Elaborating on the daunting task of turning TransNamib into a self-sustainable and efficient operation, Jimmy-Melani said the key focus areas for the company to work on in the short-term include the refurbishment and reinstatement of 12 General Electric locomotives, at a cost of N$60 million, within 120 days, the improvement of human capacity and operational structures and addressing the operational shortfalls while aiming to reduce long-standing debt.

The refurbished locomotives will be used to service the highest impact customers and commodities.

“I would like to advise that this (refurbishment of locomotives) is the first and only capital expenditure leg in the 180-day plan, and through this we aim to revive the financial position of the company”, added Jimmy-Melani.

TransNamib currently has 23 locomotives available for mainline use, but the demand from current customers and freight arrival at Walvis Bay far exceeds the company’s capabilities.

“Due to the shortage in locomotives we leave behind close to 10 000 tonnes per day, equating to 12 trains per day in Walvis Bay. In order for operations to function efficiently we need 15 locomotives per day, of which three are for shunting purposes and 12 for hauling trains on the mainline. Due to the current lack of capacity, we are using mainline locomotives for shunting. This impacts on our operational key performance targets”, noted Jimmy-Melani.

The current situation in Walvis Bay means TransNamib has only four locomotives per day available to do shunting as well as mainline services, and to compound the problem; these locomotives regularly fail in the section, leaving further tonnages behind.

According to Jimmy-Melani the Walvis Bay to Windhoek and Walvis Bay to Oshikango routes account for about 80 percent of TransNamib’s revenue.

Board Chairman, Dr Oosthuizen, went on to explain that after the 180-days, Phase 2 will be implemented over a 12 month period, which will consist of upgrading the railway lines to Southern African Development Community (SADC) standards to enable larger trains to move faster on these tracks.

He explained that a recently formed joint venture, between TransNamib and DNM Rail, will be used extensively for the implementation of the second phase.

“At the same time, TransNamib’s management team will also embark on phase 3, which is a 36-month plan to update the company’s old and redundant technology.

Most of TransNamib’s technology and equipment is 50 to 60 years old. You will appreciate that this will be an intensive capital exercise and it will therefore be spread over three years”, continued Dr Oosthuizen.

TransNamib’s CEO, Sara Naanda, also stated, “The rail industry is an intensive business, and as such, much of its financial resources are consumed in capital expenditure and on maintenance of assets. This 180-day turnaround plan will therefore require significant funding, other forms of necessary support and commitment from all the stakeholders in order to yield the desired positive outcomes.”

Naanda noted amongst others, the plan will ultimately focus on reducing TransNamib’s dependence on government for funding, will grow the business commercially to increase market share and will implement prudent financial control measures in order to achieve financial sustainability.