“Some improvements, but could do a lot better” — is probably the summary of Transnet’s report card for the past five years.

It has restored a sound balance sheet, followed by a steady performance according to some financial measures. Operationally, however, progress has been stubbornly slow.

“We openly admit we have ground to make up,” said acting CEO Chris Wells at last week’s results presentation for the year to March 2010. “Our service must be efficient, reliable and predictable.”

He was referring to operational efficiency, one of the six strategic objectives in the “shareholder’s compact” — what Transnet has promised government it will do.

Transnet Freightrail, the main contributor to group revenue (R20,8bn or 57%) and earnings before interest, tax depreciation & amortisation (Ebitda — R7,4bn or 50%), was badly affected by the global recession.

Volumes in the general freight business, which includes all goods traffic except coal and iron ore, fell by 20% “almost overnight”, said Wells.

But overall revenue increased by 6%, and Wells was encouraged by what he described as significant progress in container traffic — where volumes also rose by 6%.

Wells was critical of the operational performance on the Richards Bay coal line, which he said had been in decline since 2005/2006 (see sidebar).

Cable theft — a serious problem across the entire rail network — was partly blamed for the poor performance of the Richards Bay line, along with interruptions caused by the upgrading of the terminal at the port and “cancellation of trains by customers and Transnet”.

This highlights a frustrating aspect of the way Transnet presents its results. Apart from cable theft, which is admittedly not an easy problem to solve, there is no explanation of why Transnet had to cancel coal trains.

Was it a shortage of locomotives or staff? Derailments due to poor maintenance or inadequate signalling? Inefficient loading and unloading? Low productivity and absenteeism? Or a combination of these?

It would also be good to know which general freight divisions’ volumes have expanded and which have contracted, and what has happened to the tariffs that are applied to important commodities like grain and timber.

In discussing refurbishments of locomotives, it was reported that 62 damaged locomotives were restored last year. What is not revealed is how many locomotives are damaged or written off every year, and whether this measure of both infrastructure maintenance and staff competence is showing any improvement.

Wells noted that Transnet had saved R2bn in costs over the year, which sounds admirable — but how exactly was this done? What parts of the operations were affected?

This reticence contrasts starkly with the meticulous attention paid to financial reporting. This is important. Ratings agencies need to know the detail of Transnet’s gearing levels and its cash interest cover (both of which are more than healthy).

But some measures are more important than others. Cash flow is clearly a vital indicator, and it was heartening that cash generated from operations rose 22% to R16,4bn.

But a measure like Ebitda is more relevant to those interested in listed companies. For some reason Transnet tries to behave as if it were listed — on one occasion it claimed it could not comment on an issue because it was in a “closed period”, though there is no such thing for unlisted companies.

Then there is taxation. In principle it is nonsensical to expect an organisation like Transnet to pay tax. It is a monopoly that is owned entirely by the state, and any surplus revenue should be reinvested in the operations or used to keep tariffs as low as possible.

Yet last year Transnet had to pay no less than R1,7bn in tax (current and deferred), at an effective rate of 36%. This amounts to government paying tax to itself.

There were some other awkward areas that were glossed over at the results presentation.

The luxury Blue Train, first put up for sale in 2007, still has no takers. The word from the market is that no private operator wants it because Transnet’s operating charges would be prohibitive.

Transnet is not interested in running passenger trains and no longer has the bureaucracy to support them, yet the luxury operation has not been transferred to the Passenger Rail Authority along with the long-distance and suburban passenger services.

The Blue Train is a world-renowned brand, yet it is not mentioned by name in the results.

Detailed financial reporting is necessary, but by no means sufficient. This is an area where Transnet has shown no improvement, and no inclination to improve. To do so might provoke more interesting questions about its commercial future.