Transnet Strategy and Infrastructure Plan September 2005

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Transnet Strategy andInfrastructure Plan
September 2005
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Context
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Ageing infrastructure Rail

• 2 360 locomotives and 84 633 wagons
• Lifespan of asset 20 to 30 years
• Average age of fleet 27 years
• Current availability of fleet approximately 64
• Number of derailments increased to 269 against
  target of 150
• CONSTRAINT TO CARRY
• 27.6mtpa ON OREX
• 69.2mtpa ON COALLINK
• 80mtpa ON GFB

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Ageing infrastructure Ports

• Depth of Durban Harbour entrance
• Single lane with depth of 12m
• International norm double lane with depth of
  13,5m
• CONSTRAINT SHIPS WITH CAPACITY OF 6000-7000 TEUs
  CANNOT CALL AT DURBAN
• Durban Container Terminal
• Current capacity of 1,4m TEUs
• Growth in TEUs 8 pa
• CONSTRAINT RUN OUT OF CAPACITY BY 2006
• Depth of Cape Town Harbour
• Currently 12.8m
• CONSTRAINT SHIPS WITH CAPACITY OF 6000-7000 TEUs
  CANNOT CALL AT CAPE TOWN
• Cape Town Container Terminal
• Current capacity of 510 000TEUs
• Terminal running at capacity
• CONSTRAINT NO CAPACITY FOR GROWTH

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Ageing infrastructure Pipeline

• DJP pipeline
• 40 years old
• Running at 90 operating capacity at present
• CONSTRAINT NO CAPACITY FOR GROWTH AND CONSTRAINT
  BY LIFESPAN BEYOND 2010

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The 745mt results in a total transport cost of
R135bn to the South African economy. The biggest
portion of this cost is attributable to long haul
road transport.
R0.3bn
R11bn
R11bn
R25bn
R50bn
R30bn
Rail corridor R135/tonRoad corridor R360/ton
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Understanding the Road / Rail trend over the past
decade
The last decade has seen growth in road traffic,
while rail traffic (excl. the export lines) has
declined
Data depicted on an index basis
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There are significant shifts in the SA economy
that warrant a closer examination of the supply
chains necessary to support the economy.
Beitbridge
SA needs to reduce logistics costs by one third
to sustain our competitiveness.
Maputo
Gauteng
Richards Bay
Sishen
Durban
Saldanha
East London
Cape Town
Port Elizabeth
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Strategic direction
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Our Mandate
Governments strategic agenda for economic
development
the public sector discharges its
responsibilities to our people as a critical
player in the process of the growth,
reconstruction and development of our country by
reducing the cost of doing business in our
country
President Thabo Mbeki, State of the Nation
address, May 2004
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An Integrated Transport Strategy
Transnet provides efficient, integrated transport
services to the bulk and manufacturing sectors.

• Ensure that Transnet provides an efficient
  transport platform that facilitates trade growth
  in SA
• Transnet is the custodian of Port, Rail and
  Pipeline Infrastructure Transnet serves specific
  industries to leverage its strength in assets
• Transnet collaborates with Customers to jointly
  design services and invest in areas that improves
  the performance of all parties

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Our vision is to become an efficient freight
transport company in Southern Africa
Key pillars of the Turnaround Strategy
Provide efficient, integrated transport to the
bulk and manufacturing sectors

• Redirect the business
• Restructure the balance sheet
• Implement strict corporate governance principles
  
• and adhering to vigilant risk management
  processes
• Build Human Resources capabilities

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Implementation plan
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Implementation programme overview
Lower cost of doing business
Targeted sectors
Redirect and re- engineer the business
Corporate governance and risk management

• Reengineer core business
• Corporate HO restructure
• Operational synergies
• Customer focus
• Infrastructure development

• Shareholders compact
• Memo and articles of assoc
• IFRS
• Legal review
• EWRMF

4 Point Turnaround Plan
Human capital development
Balance Sheet restructuring

• Skills audit and matching
• Recruitment and retention
• Skills and training
• Performance Management
• Career management
• Succession planning

• Pension fund deficit
• Transfer SAA to govt
• Disposal of non-core
• businesses

Economic development
One company, one vision
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Transnet Business Portfolio
Transport Portfolio
Independent Regulators
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The strategic direction of Transnet requires
separation between core and non-core businesses
Core Businesses
Non - Core Businesses
(SNO)
Transport
Telecomms
PROPNET
PROPNET
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Infrastructure plan
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Volumes and Investment per Corridor
Beit Bridge
Gauteng Mega Industrial Zone
Maputo
Richards Bay
Sishen
Durban
Saldanha
East London
Port Elizabeth
Cape Town
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Major Rail Projects

• Improved profitability, efficiency safety
• Increase coal capacity from 71mta to 86mta by
  2007/08
• Increase general freight capacity from 14mta to
  19mta
• Further investment of R9bn required to sustain
  this capacity
• Investment by NPA for additional berth 306 at a
  cost of R443m

Coal line capacity expansion (R2.5bn)
Wagon Fleet Renewal modernization (R4.1bn)
Upgrade of 200 18E Locomotives (R1.2bn)

• Upgrade of the wagon fleet
• Extend the life of wagons

Spoornet major projects

• Upgrading and over hauling the 6EIs to 18Es
• improvements in reliability and traction
• Reduced repair and maintenance costs.

Iron Ore line capacity expansion (R2.8bn)

• Optimize scarce resources and to capture market
  demand
• Affords sustainable profitability and increased
  productivity
• Recover the cost of the investment over the
  period
• Rand based tariff for the remaining period of
  contract

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Major Port Projects

• Durban 2005 expansion program
• Widening of the entrance channel
• Pier no 1 container terminal
• Deepening of Berths

Durban Port Investments (R4.5bn)
Ports (NPA SAPO) major projects
Cape Town Container Terminal expansion (R1.9bn)

• Increase in stacking capacity by 226k TEU by 2008
  and to 1.6m TEU by 2017
• To meet productivity expectations of customers

Port of Ngqura (R4.1bn)

• Alignment with govt objective to foster economic
  development
• The port expected to be operational by Oct 2005

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MAJOR PROJECT PETRONET

• New Multi-purpose pipeline (R3bn)
• Replacement of ageing asset
• Addresses the high risks of failure on the
  environment
• Provide additional capacity to meet the expected
  capacity constraints
• Alignment with govt.s objective of economic
  growth and a supply of
• environmentally safe transport mode for
  petroleum products.

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Human Capital Development Strategy
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The strategic context for HR
HR Enablers
Turnaround Strategy
Business Results
Leadership culture Performance and
reward Capability building Talent
management Transformation change Employee
relations HR systems measures
Business that is Growing Productive Profitable Su
stainable Re-engineered Achieves the strategy

The Four Point Turnaround Plan

• Implementation of Governance Principles
• Promote Skills Development

• Redirect the Business
• Restructure the Balance Sheet

HR capacity
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Transnet Leadership Competency Model
Transformational Leadership ensuringBusiness
Success
Restructuring the balance sheet
Institutionalising corporate governance risk
mgt
Redirecting the business
Building capability
4 pillars of transformation
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Sustaining the Transnet Way Developing
Others Self Development Manages and shares
information Role models the culture and
values Embraces diversity Professional Expertise
Managing the Transnet Way Optimizes business
performance Manages finances Manages people
teams Delights customers Manages programs,
projects contracts Manages risk and compliance
Leading the Transnet Way Is visionary and
inspiring Is strategic Is collaborative Is
innovative and entrepreneurial Has impact and
influence Is a change agent
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2
Competencies required to achieve transformation
and business success
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4
Anchoring the Transnet Way
Foundation competencies for personal
effectiveness
Is resilient Is emotionally intelligent Is an
excellent communicator
Is a conceptual and analytical thinker Is results
focused Is courageous
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An integrated talent management framework
S T R A T E G Y
Vision Mission Values
Talent Mgt Value proposition
Strategic HR planning
Sourcing Placing
Capacity building
Performance Management
Reward
Release
Talent Management
TM strategy position paper- principles-
definitions- framework- outcomes- benefits-
CSFs
-Performance Contracts- Feedback and coaching-
Performance reviews
Attraction and sourcing of key talentEmployment
brandingCompetency frameworkPlacementOn-boardin
g
Promotions Maintaining relationships Exit
interviews
Attraction and retention of key talent to
ensure- continuity- productivity-
profitability- Customer growth retention-
Employee engagement retention
IndividualPersonal Development plans- Career
plans- Mentoring- Key talent programs
opportunities- Leadership development
Strategic people planning Dept/BU- future
business environment, org design, skills- Gap
analysis- plans to close gap- succession
planning
Performance based reward -Guaranteed pay-
Incentive pay- Retention strategies-
Benchmarking
MeasurementEngagement surveyExit
interviews Turnover ratesCost of
replacement Time to fill First time acceptance
Company- Career ladders- Departmental and BU
skills plans- Succession plans
Strategic people planning - GroupExco Talent
Review Staff movements
Monitoring and measuring talent management
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Integrated performance management cycle
Strategic Review
Strategic Review
Business Planning Budgeting
Business Planning Budgeting LEReview
Guaranteed Pay
Incentive Pay (bonus)
People Performance Mgt Training- setting
targets coaching
People Performance Mgt Training- reviewing
performance
Mid-term review
Performance Contracting
Development Contracting
Development Review
Performance Coaching and Optimisation
Exco Quarterly business performance reviews
Exco Quarterly business performance reviews
Exco Talent Review Staff movements
Exco SPO measures incentives
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Outputs and outcomes
Redirect and re- engineer the business
Corporate governance and risk management

• Operating profit margin
• CFROI
• Capex delivery

• BEE spend
• SME spend

• Reengineer core business
• Corporate HO restructure
• Operational synergies
• Customer focus
• Infrastructure development

• Shareholders compact
• Memo and articles of assoc
• IFRS
• Legal review
• EWRMF

4 Point Turnaround Plan
Human capital development
Balance Sheet restructuring

• Skills audit and matching
• Recruitment and retention
• Skills and training
• Performance Management
• Career management
• Succession planning

• Pension fund deficit
• Transfer SAA to govt
• Disposal of non-core
• businesses

• Talent management
• Leadership pipeline

• Gearing ratio

Economic development
Change rail share of Transport GDP from 11 to 20
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