Transnet pipeline another parastatal failure - DA

Alf Lees says massive cost escalation could've been avoided if private sector had done the job

Transnet's Multi-Product Pipeline: Another parastatal fails

The Democratic Alliance (DA) is concerned by recent announcements on the Multi-Product Pipeline from Durban to Gauteng. It has been indicated that the estimated cost of the pipeline will more than double from an original estimate of R11.2 billion to the latest estimate of R23.4 billion. This represents an enormous failure to control costs and budget effectively.

Parliament has had to appropriate significant additional funding for the project on top of a 10 cents per litre fuel levy that motorists throughout the country will have to pay to fund the project. It has also become clear that the project will now only be completed by the end of 2013, some two years behind schedule.

This is another example of inefficient and ineffective management of a state-owned enterprise. The failure of Transnet to deliver this pipeline underlines the fact that the parastatal should never have been involved in this project in the first place. During the initial bidding process, there were several competitive bids made by private sector organizations to deliver the pipeline.

It is unfortunate that the contract was given to Transnet, as it has now cost the state an additional R12.2 billion to deliver the pipeline. A private sector bidder would have been contracted to complete the project within a certain timeframe and within a certain budget - failure to do so would not have been at the state's expense, but rather at the private provider's expense. The unfortunate outcome is that R12.2 billion that could've been spent on building houses, schools, roads and hospitals is being wasted on Transnet's inefficient provision of this pipeline.

The Zuma administration has shown a clear propensity to rampantly expand the role of the state. It is indeed true that the state can and must contribute to the development of our country, but wherever the private sector can effectively provide goods without public interference, it should be allowed to do so.

When Parliament reconvenes next year, I shall ask the minister to appear before the NCOP's select committee on labour and public enterprises to explain how the cost estimates spiralled out of control, what will be done to ensure that delivery of the project occurs on time and within budget, and why the tender was awarded to Transnet in the first place.

Statement issued by Alf Lees, MP Democratic Alliance NCOP member for finance, Kwazulu-Natal, December 9 2010

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