Transnet is locked in a growing standoff with the Auditor-General of South Africa (AG) over R42 billion in irregular expenditure linked to its controversial procurement of 1,064 locomotives, bringing renewed scrutiny to financial governance at the state-owned entity.
Briefing Parliament’s Standing Committee on Public Accounts (Scopa), Transnet CEO Michelle Phillips confirmed that the company had taken steps to remove the R42.9 billion from its books, arguing it had followed all required processes.
However, the AG maintains that the expenditure remains irregular due to incomplete processes, including ongoing criminal proceedings.
“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,” Phillips said.
She added that unresolved criminal investigations fall outside Transnet’s control, reinforcing the deadlock between the two parties.
“We can do nothing further regarding the R42bn. Unfortunately, the AG’s interpretation ultimately prevails,” Phillips noted.
Legal Disputes and Governance Pressures
According to Transnet chief legal officer Sandra Coetzee, the matter remains active in court. Chinese firm China Railway Rolling Stock Corporation (CRCC) has filed an interlocutory application seeking to strike out portions of Transnet’s affidavit, an initial step before a full judicial review.
Coetzee said the AG believes Transnet has not fully met its obligations, including recovering losses, enforcing consequence management and ensuring criminal prosecution.
While the company has filed a review application and made criminal referrals, court timelines remain beyond its control, and many individuals involved in the original procurement are no longer employed by Transnet.
Beyond the dispute, Transnet reported progress in addressing audit findings. Of 470 issues raised by the AG as of January 2026, 43% have been resolved, with the remainder in progress as part of broader digital transformation efforts.
Irregular expenditure has shown some improvement, declining from R3.8 billion to R3.2 billion in the 2023 24 financial year, with R279 million attributed to new cases. However, fruitless and wasteful expenditure increased by R42 million due to a non compliant contract.
The company has introduced reforms across governance, procurement monitoring and compliance, including stricter audit action plans and real time checks during bid evaluations.
On the financial side, CFO Nosipho Maphumulo reported a significant turnaround. Net losses narrowed to R1.9 billion from over R7 billion the previous year, a 74% improvement, driven by a R6 billion increase in revenue and reduced operating costs.
Earnings before interest, tax, depreciation and amortisation EBITDA rose by over 39% to R30.6 billion, while capital expenditure climbed 44% to R24 billion, reflecting ongoing infrastructure investment.
However, debt remains a key concern. Borrowings increased to R144.7 billion, with projections indicating a peak of R156.7 billion before a planned reduction over the next five years. Government guarantees have been critical in maintaining stability following credit rating downgrades.
Despite operational and financial gains, the unresolved R42 billion dispute underscores the lingering impact of past governance failures and the complex path ahead for Transnet as it seeks to rebuild credibility.