Transnet’s Africa announced it management plan to offer consulting service outside of its domestic market. This may be a flawed corporate strategy. Lets discuss.
21 September 2015
TRANSNET’s announced plan to increase its international revenue by consulting in other countries. Good or Bad Idea?
Some say that the diversion of skilled managers could increase or mask its domestic weaknesses. It is not yet world class at its domestic markets. Good? Yes. But probably not world class.
Transnet acting CEO said last week that the state-owned freight and logistics company intended to increase its revenue from international business to 25% by 2025 from 4.2% currently. Most of this would be from business on the continent and opportunities in the Middle East he suggests.
A local transport economist Andrew Marsay retorts that Transnet is not yet “intrinsically viable” at performing in its critical home market. The company should focus on restructuring itself to become more viable in SA, rather than looking abroad for solutions, he asserts.
Transnet’s general freight business today does not yet fully cover BOTH its rail operating and capital costs.
There are some who believe that much rail business is subsidised by other Transnet business units such as the ports or the pipeline sectors.
Transnet instead need to focus on examining how to fully implement its 7 year plan to obtain a lion’s share of the general cargo business against trucks. The planning period to obtain a stated objective of as much as 80% general cargo share is about half over and the truck share is from most independent reports actually at better than an 80% share.
We as Conrail managers faced this dilemma in its corporate history. We elected to avoid what some saw as potential consulting and rail operations markets in 1994 European markets with their so called open access — in favor of executing domestic at home projects with far less risk and higher potential operating income growth. Looking back, it was a good choice. By working at home we managed to improve our company rail operating ratio from 84% to 79.9%.
At the same time, we rolled out a very strong truck competitive doublestack market share. In some long distance lanes, we managed to earn a 40% or better share with bog train technology. With interline container train service between the West and East Coast, we managed to get a 75% estimated market share against long haul trucking.
THAT is a WOW impact for a freight railroad.
Wandering off to Europe would have been nice. But no where near as profitable.
What do you think Transnet? Where is you WOW impact gong to come from?
Can you accomplish such WOW market truck to rail general cargo share shifts with fewer skilled people because of some wandering off to other overseas ventures?