On Track to Deliver through Collaboration & Partnerships

Mr Mike Fanucchi : Chief Customer Officer  Transnet June 2018

SAPICS Annual Conference

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Transnet Group is the custodian of ports, rail and pipelines and has a vital role to play in furthering South Africa’s Developmental objectives

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Freight Rail(TFR)

Rail

South Africa Government

• Owns and operates South Africa’s rail network

• 20 500 km of railway track.

• General Freight & two heavy haul export lines

Specialist Units

Transnet Capital Projects (TCP) Transnet

Property (TP) Transnet

Foundation (TF)

Engineering(TE)

National Ports Authority (TNPA)

Port Terminals (TPT)

Pipelines (TPL)

Ports Pipelines

Transnet SOC Ltd

100% ownership

• Engineering and maintenance services.

• Support to TFR for rolling stock maintenance

• Owns and manages the ports in South Africa

• 8 commercial ports

• Cargo handling services.

• 16 Cargo terminal operations across 7 SA ports

• Owns & operates RSA’s petroleum & gas pipeline infrastructure

• 17,2 billion litresof petroleum products through 38,00km pipelines

Transnet is leveraging transport assets to build competitive Supply Chains

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7. SaldanhaBulk (export iron ore),

breakbulk

6. Cape TownContainers, breakbulk 4. Ngqura

Containers

3. East LondonContainers, breakbulk, agri‐Bulk, automotives

5. Port ElizabethContainers, breakbulk, bulk, automotive

WESTERN CAPE PORTS WESTERN CAPE PORTS

EASTERN CAPE PORTSEASTERN CAPE PORTS

KZN PORTS KZN PORTS

• 20 500 Route Km rail network• >226 million tons of freight p.a. (2015)• 4.6 million TEUs pa • 18 Billion liters of petroleum

1. Richards BayBulk (export coal, magnetite, chrome), breakbulk

2. DurbanContainers, breakbulk, agri‐bulk, automotive

Transnet’s Growth Imperative

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Embrace change for a very dynamic

future

Well-governed processes that

are being effectively

managed to drive efficient performance

Make invaluable contribution to

new investments by

using both public resources

and by leveraging

private sector resources

Promote investment, job development, enable skills

acquisition and enable growth

of business

Assess and develop business models, both now and for the future where issues of sustainability will be integral to any

solution developed

Accelerated profitable growth in the context of the shareholder mandate – that of Transnet and our commercial and economic stakeholders

- The core of the Business Development function

“President Ramaphosa, in his State of the Nation Address set us all a challenge: to encourage significant new investment in our economy with the aim of achieving sustained inclusive growth, creating jobs, reducing poverty and transforming our economy.” – Pravin Gordhan on 15 may 2018The growth investment funnel has been developed to respond, enable, and align to the following ambitions set by the Minister of Public Enterprises for SOCs:

Proactively responding to this Mandate in the era of the 4th

Industrial Revolution

Mission • Linking economies; connecting people; growing Africa!

Mandate

• Assist in lowering the cost of doing business in South Africa, enabling economic growth and ensuring security of supply through providing appropriate (port, rail and pipeline infrastructure in a cost-effective and efficient manner

• Strategic objectives are aligned with national plans and the SSI

SSI = Statement of Strategic Intent, SOE = State‐owned EnterpriseSource: Transnet Corporate Plan 2017/2018, PwC State-Owned Enterprises Catalysts for public value creation April 2015, http://inclusivewealthindex.org

Vision• Fuelling Africa’s growth and development as the leading

provider of innovative supply chain solutions

Public value creation• SOEs have to balance economic, social and other objectives by remaining

financially sustainable, while creating value for citizens and society• The “Inclusive wealth” of a country includes the sum of three kinds of assets:

- manufactured capital (e.g. roads, machinery, buildings)- human capital (people’s health and skills)- natural capital (e.g. forests and fossil fuels)

• Creating public value is linked to Transnet’s mandate

In response, Transnet is actively refreshing its brand as it moves into new markets, expands its service offering, and redefines its market position

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Driving Transnet’s growth trajectory ‘above and below the line’

Revenu

e

1 April 2016 31 March 2025

Quantum Aspiration

‘New Business objective’

Budget Commitment

R 135 bn (FY25)

Impact of ‘Strategic National Investments’ Private Sector stimulus and enablement (PSPs)

Positiv

e Im

pact

‘Above the line’

‘Below the line’

R 61,2 bn(Actual )

R70 plus bn(2018 Est)

R100 bn(2020 Target)

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The growth imperative – 5 + 1 focus and accountability areas

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Freight solutionsWorld-class, customer-centric end-to-end freight solutions: • R2R• Partnerships

Liquids and gas• LNG• Energy

DigitalMonetising digital freight- and infrastructure capabilities

Infrastructure and spatial solutions

Advanced manufacturing

•Developing Pan African and International opportunities leveraging core capabilities

•Asset focused R&D and Innovation •Southern African positioning in general freight and FMCG logistics space

•Business model transformation •Partnerships and M&A opportunities

Granular and diversified growth: Transnet 4.0 in action

Regional Growth

‘100 by 20 in 3’External / (Internal)

R 1 (10) bnR 5 (15) bn

R 9 bnR 15 bn

R 0.25 bnR 5 bn

R 4 bnR 10 bn

R 46 bnR 70 bn

TIH and OEM forex

earnings grow to $ 750 m

(R7 – 10 bn) pa by 2020

from R 66 bn in 2017To beyond R 100 bn in 3 years : 2020

BD Function:>Co-ordinate>Align>Prioritise>Accelerate

Business Development

Customers are at the centre of our business

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Customer

GroupBusiness 

Development

Freight Rail Commercial 

Pipelines Commercial

EngineeringSales and Marketing

National Ports Authority

Commercial

Port TerminalsSales and Marketing

Disconnected CRM processes Seamless process

CustomerVoice of the Custom

erTransnet 

Key Account Manager

Transnet business functions

Desired processCurrent processes

From this… to this…

Customer acquisition and growth: Gaining market share: Road to Rail and Regional integration

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Key initiatives for expanding markets

> Sales-to-Market and segment-specific strategies.

> Service improvements in support of strategic brand positioning.

> Authentic pursuit of service excellence.

> Promote innovation and creative approaches to market identification, market entry and service delivery.

‐160.0

Eskom

Cement

-2.200 -0.620

0.53

0

ABL

Iron

0.07

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Export

RBCT

0.67

0

Non-RBCT expo

rt

1.80

0

Domestic Coal

0.76

0

Mang

1.00

0

FMCG /Intermo

dal

0.40

0

Chrome

Export Iron Ore

Domestic

Iron Ore

0.57

0

3.20

0

KEY DEVELOPMENTS

• 147,071 trips taken off the South African roads, over a distance of 176 million kilometres.

• 1335 trucks taken of the roads.

Addi

tiona

l Ton

nage

(milli

on)

Market stratification of the surface transport market speaks to the strengths of rail, port and logistics players in various industries

Freight Cargo Type

*RAM %

Export Coal >95%Export Iron Ore >95%Export Manganese >95%Magnetite 70%Ferrochrome 56%Chrome 46%Iron Ore 45%Domestic/Power Coal 41%Cement 39%Motor Vehicles 25%Iron & Steel 19%Chemicals 19%Pulp 17%Containers 24%Maize 14%Petrol 12%Fertilizer 11%Other Man 10%Diesel 6%Limestone 5%FMCG Foods 2%Other Agri 0%

1Bulk Export

2Break BulkExport &Domestic

3Specialised

Freight

4General Freight

TPT/ TNPATFR

Business leaders must focus on what will result in growth

• Market drivers & suitability to rail• Cargo owner classification• Indicative value from FDM• Rail – Port correlation• Profitability Rail/ Port• Competitiveness against road• Speed of market shift• Terminal configurations & access• Capital investment• Profit• Cost performance (by asset by

activity)

Biggest growth and profit opportunity for Transnet

11*RAM: Rail Addressable Market

Developing Solutions across all sectors of the economy : Commitment from Industry to accelerate Capacity Creation

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Primary SectorExport & Domestic

MiningAgriculture

Secondary SectorManufacturing,

Industrialisation, Beneficiation

Tertiary / Consumption Sector

Common User Facilities – Chrome and Manganese Junior Miner Capacity Creation Back of Port developments Regional Railway; Ports; Terminal Supply Chain

Collaboration Fruit Exports – Industry Collaboration and Branch

Line Rehabilitation

Revised Operating models; TVCC Approach; Customer and Industry Collaboration for Fuel and Chemicalsvolumes

Hub development for Finished Steel products Eskom Collaboration for Coal to Power Stations Customer Collaboration and Market Development Creation of the Automotive hub in PE and Cato Ridge

New Market Development & Partnering – FMCG Multi Purpose Terminals – Cato Ridge; Natalspruit Operational efficiencies for growth of Sugar & Grain

volumes Bimodal Technologies Terminals Development – PSPs Partnering required for First / Last Mile; Cold Chain

Development & Value Add Services

Locomotives & Wagons - Capacity Creation and Improved Reliability & Efficiency:

New Loco Deployment –Improved reliability and Efficiency on growth flows

Wagon Builds for Commodity Demand Commitments –General purpose wagons for mining commodities; High Profile Automotive Wagons; Reefer Containers & Wagons

Expansion programmes and capacity creation for ensuring Rail access of mining commodities

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Coal Waterberg line upgrade to heavy haul Emerging coal miners – Mpumalanga Coal Feeder Lines upgrade : 20t/a – 26t/a in

Mpumalanga

Manganese Manganese expansion programme Ports connectivity Back of port operations Postmasburg / other Common User Facilities

Increase throughput by moving coal from road torail

Increase volume throughput running fully loaded jumbo wagons from Waterberg and Mpumalanga coal fields

Enable emerging miners within the NorthernCape to cost effectively rail commodities to theport for export

Create rail capacity from the Northern Cape tonew, expanded, modern manganese terminalPort of Ngqura

Chrome Pendoring & Steelpoort multi user facilities Tharisa mine siding; Marikana siding extension Mandlazini Chrome Hub Richards Bay

Magnetite Phalaborwa consolidation yard Palmloop & Droogland Loops Waterval Boven Horseshoe bypass

Increase chrome & ferrochrome throughput by increasing loading capacity

Create offsite pre-assembly & staging area -address port challenges; increase Transnet capacity

Increase train wagon length - additional volumes

Increased network flexibility and capacity Increased capacity through the Eastern

mainline

Supply chain complexity in the Transnet context

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Mining Train Loading Rail Transportation

Train Unloading & 

Storage

Material Reclaim and 

Vessel LoadingShipping

Integrated Planning and Execution

Customer Customer

Up to 350 000t/ vessel

3 Mt; 20 X p.a.

34 200t per train37 trains per week

Transnet and private sector’s roles in reducing the cost of logistics

Source: Logistics Barometer 2016, University of Stellenbosch 15

Transport cost is the biggest contributor to logistics costs in SA, but warehousing and inventory cost is growing

Source: Logistics Barometer 2016, University of Stellenbosch16

Transnet International Holdings – Revitalising Regional Infrastructure

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Regional Integration

One of the overarching objectives for Transnet is to integrate South Africa with the Region and the rest of the world

The company’s core focus remains on growing volumes - Transnet is seeking new growth paths

Transnet’s International Strategy focuses on seeking new markets through geographic expansion

Significant opportunity for Private Sector Partnering

Transnet International Holdings operationalised by 31 March 2018

Collaboration, Partnering and Capacity Creation at work!

• Supply Chain Solution – Maputo Corridor• Cost effective bridging capacity projects third

offloadingsite for Manganese in Saldanha • Cost effective loading facility - Postmasburg

Common User Facility• Logistics solution for finished steel products on rail

- Isando Steel Hub• Ceres Rail – Cold Chain for Fruit Exports

Solethu Marine Services

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Transnet ESD Programs

• Business Incubation and mentorship

• 15 companies are incubated in PE and Richards Bay

• A total of 97 jobs were created in the 17/18 FY.

Shanduka Black Umbrellas (R36.5m)

• Incubation for Systems Engineering and Research Centre

• A total of 129 entities were assisted in the 17/18 FY

• 41 are black youth and 32 are black women owned entities.

Matlafatso Centre –Wits (R70m)

• Financial assistance to 31 black disabled SMMEs to manufacture furniture in Limpopo

• A total of 21 SMMEs are cooperatives.

• 30 Direct jobs have been created and machinery to the value of more that R8m owned by black owned SMMEs

Furntech (R10m)  Godisa (R55m)

• Provides financial assistance to current suppliers

• In 2013 Transnet awarded a 15.5bn oil contract to 9 black owned SMMEs

• Some of these suppliers benefited through this fund.

• A total of 21 SMMEs benefited from this fund.

Transnet ESD Programs

• School program that provides entrepreneurship skills.

• 321 learners benefited in the 2017/18 FY and 20 Youth Owned Businesses were formed.

• Established 5 entrepreneurial academies in 4 provinces and more than 35 jobs created in the 2017/18 FY.

JASA (R12.1m)

• Develop entrepreneurship and innovation for the Transport and logistics industry 

• 10 youth owned businesses were registered as EMEs. 

• 40 Unemployed youth received entrepreneurial skills via the program.

Be Bold  Entrepreneurial Youth Program (R1.5m)

• 100 black owned were incubated and provided with entrepreneurial skills over a 3 year period

• Program included funding research and innovation to school learners. As a result 36 businesses were established by the school learners.

• 1 of the 20 Black Industrialists was from this program

SABS (R85m)

• Aims to empower SMMEs through a mini MBA.

• 118 SMMEs were assisted over a 2 year period.

• 22 direct jobs created and SMMEs reported 8‐14% increase in Revenue.

GIBS Program (R10.5m) CVC Africa (R70m)

• Develop entrepreneurship and innovation for the Transport and logistics industry 

• Incubation and mentorship in KZN and EC.

• A total of 201 beneficiaries benefited in the 2017/18 FY.

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Partners - Private Sector Participation:To facilitate growth we consider various commercial models

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Tambo Springs

Agri-bulk Terminals

Ngqura Waste Treatment

LNG

Building on successes to grow business opportunities, integrate the Region & encourage Private Sector Participation

Continue to build on the successes achieved through MDS

Innovation in the development Logistics solutions forcompetitive supply chains

Close collaboration with industry and customers to create capacity

Partnering with industry to redevelop rural economies, old mining towns, branch lines network

Partnering for Regional Development

Transnet – Contributing to South Africa’s Economic Growth,

Development and Competitiveness

PSP Opportunities Common User Facilities Logistics Hub

Development – Tambo Springs

Rail system – SwaziRail Link; Botswana Link; Waterberg HH

Bimodal Technologies Cold Chain facilities &

equipment

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Thank You