#1 2012/13 delivering freight reliably “We are poised to become one of the world's largest freight logistics groups. The Market Demand Strategy will see Transnet's revenue grow from R46bn in 2011/12 to R128bn in 2018/19." - BRIAN MOLEFE, Group Chief Executive: Transnet delivering freight reliably “History will judge whether Transnet produces lasting dividends for the South African economy, society and the environment." - Brian Molefe, Group Chief executive: Transnet PILLAR 1: ABOUT TRANSNET 2 Inside the business PILLAR 2: MARKET 4 A financially DEMAND STRATEGY sound company 19 What is the 6 The freight MDS? movers 22 Infrastructure 8 Intelligent projects engineering 25 Investment 10 Port control focus 12 Moving cargo 26 Supplier and volumes customer development 14 Fuelled and running 28 Empowerment through job 16 Building creation sustainable communities PILLAR 3: THE GLOBAL MARKET 30 Why do CONTENTS business with Transnet Web: www.transnet.net Tel: +27(0)11 308 3000 1. Go to www.scanlife.com from your FOLLOW US HERE mobile browser. Choose the “Download Scanlife” option. Stay abreast 2. Press the download button when of company the site auto-detects your device. developments (If it doesn’t, search for a device that by following is similar to your phone.) us on our 3. The application will be downloaded to website either “Downloads” or “Applications”. and these You should now be able to scan any QR code. Scan any of the QR codes social media alongside to check that the app is channels. working properly. TRANSNET ISSUE 1 2012/2013 1 2 TRANSNET ISSUE 1 2012/2013 TRANSNET | GROUP STRUCTURE ABOUT US Being responsible for enabling the growth and significantly boost infrastructure development, development of the South African economy job creation and investment in South Africa, and through reliable freight transport is no expose the country to a host of international trading possibilities. easy feat but Transnet, through its vision, The nature and scope of Transnet’s operations mission and mandate policies, forges ahead – necessitates a proactive and concerted effort in maintaining the highest standard of safety, ensuring all its strategic objectives line up. health, environmental and quality (SHEQ) governance. SHEQ performance targets are included in the company’s strategy to promote a safe and healthy working environment for its s a state-owned company (SOC), employees, who are striving towards excellence Transnet is wholly owned by the in service delivery. The environmental-related government of the Republic of obligations arise from the National Environmental South Africa (RSA) and is structured Management Act of 1998, the National Water to provide transport and handling Act of 1998 and the National Environmental Aservices through its five operating divisions, Management Act: Waste Act of 2008, requiring namely, Transnet Freight Rail (TFR), Transnet the company to remove all its waste material Rail Engineering (TRE), Transnet National Ports and remediate the land. In accordance with these Authority (TNPA), Transnet Port Terminals (TPT) acts, an environmental provision of R1.8 billion and Transnet Pipelines (TPL). Special units was allocated in the current financial year for the include Transnet Property, Transnet Foundation remediation of soil-contaminated areas. With and Transnet Capital Projects. regard to quality, the ISO 9001:2008 Quality The company is the custodian of freight Management System plays a crucial role in rail, ports and pipelines and is responsible improving business processes and performance for enabling the competitiveness, growth and within Transnet, and the current system will be development of the South African economy updated to meet the challenges of the MDS. through the delivery of reliable freight transport Moving forward, Transnet has embedded and the handling of services that satisfy sustainability into its strategy and business customer demand. Overall, Transnet’s mandate practices by adopting a well-defined is to lower the cost of doing business in South Sustainability Framework as part of the Africa – efficiently – and within acceptable MDS. Through this framework, the company’s benchmarks. The company recently embarked economic, social and environmental dividends on its biggest project to date – the R300 billion are constantly tracked, placing Transnet at the Market Demand Strategy (MDS), which will forefront of change in South Africa. GROWTH IN RAIL NEW IE 20.9% VOLUMES TO D R160m 33% EMPLOYEES AN L E C DISBURSED INCREASE INCREASE ON I D TO CSI IN REVENUE AN B-BBEE SPEND : C S 201 D IN 2012 FOR 2012 TO R25.8BN 3 159 R MILLION TONS WO TRANSNET ISSUE 1 2012/2013 3 RESHAPING AFRICA While many global economies continue to face uncertainty, the longer-term outlook remains positive for South Africa and the region, with continued growth in emerging economies driving increased commodity demand - and Transnet is at the frontline of this growth with its new Market Demand Strategy. hanging global and regional trade ore, cement, agricultural commodities and patterns benefit South Africa containers. Transnet’s record-breaking capital as increased trade volumes and investment programme, a key element in its connectivity make it easier for local drive to boast efficiency and create capacity, companies to participate in global was R22.3 billion for 2012. Cmanufacturing supply chains. South Africa is highly integrated with the world economy, IT’S ALL IN THE NUMBERS which plays a central role in shaping Transnet’s Transnet’s revenue during the 2012 financial economic prospects. year increased by 20.9% to R45.9 billion – a Despite the deterioration of the country’s big jump from 2011’s figure of R38 billion. annual real growth rate as calculated by the Significant productivity and efficiency South African Reserve Bank, the outlook for improvements of 18%, not to mention volume Transnet has achieved yet Transnet’s key commodities remains positive. growth, were realised across all five operating another year of robust The aggressive investment that underpins the divisions. This statement demonstrates that the performance and is well Market Demand Strategy (MDS) is targeted company has achieved yet another year of robust on its way to delivering primarily at satisfying demand that has been performance and is well on its way to delivering on its commitment to validated with customers. This includes on its commitment to various stakeholders. various stakeholders. additional capacity for export coal, iron General freight volumes during 2012 ore and manganese as well as key domestic increased by 8.8% to 67.7 million tons (mt), commodities such as coal, magnetite, iron another improvement on 2011 figures. This 4 TRANSNET ISSUE 1 2012/2013 TRANSNET | OUTLOOK & FINANCIALS increase was due to on-time departures, which the previous year – evidence of Transnet’s set a new weekly record of 1.7mt. ability to generate strong sustainable cash Export iron ore volumes increased by 13.2% flows. Significant focus and improved working to 52.3mt as compared with the 2011 figure capital management, not forgetting improved of 46.2mt. This achievement was also mainly collections relating to the Passenger Rail as a result of increased departure and arrival Association of South Africa (PRASA), resulted R2.2bn efficiencies. Container volumes increased by in a working capital inflow of R781 million. The WAS INVESTED 6.6% due to an increase in transshipments while cash interest cover ratio remains strong at IN TRANSNET’S dry bulk increased by 7.7% and automotive 4.2 times (2011: 3.9 times). This is impressively COAL LINE EXPANSION AND volumes by 9.3%. above the target of 3.0 times despite an THE ACQUISITION increase in net finance costs resulting from OF CLASS 19E CUSTOMER SATISFACTION increased borrowings to fund the capital LOCOMOTIVES Following several stakeholder engagements, investment programme. It is expected that the it is clear that service delivery, innovation, cash interest cover ratio will not fall below the CAPITAL reliability, safety and communication are among target going forward. INVESTMENT FOR the important concerns raised by Transnet’s Despite the uncertain global financial 2012 AMOUNTED customers. The customer engagements proved markets and economic growth outlook (both TO A RECORD invaluable with Transnet’s strategic responses locally and abroad), Transnet successfully R22.3bn leading to the achievement of significant raised the funding required for its capital volume increases and operational efficiency investment programme. At the beginning of improvements. The outcomes include: the 2012 financial year, funding required was R10.7bn Developing the Transnet pricing / tariff estimated at R20.8 billion. As a result of WAS INVESTED guidelines, best practice methodology and pre-funding activities in the previous year, IN MAINTAINING models to sustain capital investment and funding was reduced to R12.9 billion. TRANSNET’S EXISTING support volume growth; Transnet repaid borrowings amounting to CAPACITY Designing a transparent capacity allocation R14 billion, which related predominantly to framework and processes to ensure fair domestic bonds, commercial paper and domestic R11.6bn allocation of capacity; and foreign loans that matured during the year. OF THE CAPITAL Implementing expanded and enhanced The gearing ratio deteriorated marginally to SPEND FOR 2012 integrated customer planning; 42.1% compared to 41.1% as at 31 March WAS INVESTED Developing enhanced key account 2011, despite the capital expenditure of R22.3 IN EXPANDING management