· steel, fertilisers, cement, fast-moving consumer goods, bulk liquids, wood and wood ......
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Contents
1 Performance highlights
2 Operating context
4 Value through the capitals
6 Presentation
18 Audited results
21 Media statement
IBC Corporate information
Transnet Presentation 2019 1
Revenue increased by 1,6% to R74,1 billion for the year, supported by a 9,1% increase in
petroleum volumes.
Operating expenses were contained to R40,3 billion, which represents a R6,8 billion saving against planned costs.
EBITDA increased by 3,8%
to R33,8 billion, with the EBITDA
margin increasing from 44,6% to 45,6%.
Performance highlights
Profit for the year increased by 24,7%
to R6,0 billion.
Gearing of 44,5% and cash interest cover at 2,9 times are both comfortably within loan
covenant requirements.
Cash generated from operations increased by 0,7% to R35,2 billion.
Capital investment of R17,9 billion
brought expenditure over the past seven years to R183,5 billion.
B-BBEE spend amounted to R29,93 billion or 92,62% of total measured procurement
spend per DTI codes.
of labour costs was spent on training, focusing on artisans,
engineers and engineering technicians.
The Company recorded a DIFR ratio of 0,71 – the eighth consecutive
year that a ratio below 0,75 has been achieved with the global
benchmark being 1,0.
2,5%
3,8%
24,7%
2 Operating context
Services providedOutbound servicesSouth African businesses moving products to international markets
Inbound servicesBringing products to South African markets
Commodities transportedMining exports, general freight and petroleum products
General freightContainerised cargo, local manganese, minerals, local coal, local iron ore, chrome and ferrochrome, agricultural products, iron and steel, fertilisers, cement, fast-moving consumer goods, bulk liquids, wood and wood products, industrial chemicals, intermediate products and automotive products
Petroleum productsCrude oil, refined petroleum products, aviation turbine fuel and methane-rich gas products
Tanzania
Namibia
Swaziland
Lesotho
Satellite officesOperating contextFive Operating Divisions spread throughout South Africa
Four satellite offices in Lesotho, Tanzania, Namibia and Swaziland
Three joint operating centres in Mozambique, Botswana and Zimbabwe
Specialist UnitsTransnet Group Capital Transnet Property
Port Elizabeth
Richards Bay
Durban
East LondonNgqura
EASTERN CAPE
KWAZULU-NATAL
WESTERN CAPE
Saldanha
Cape Town
GAUTENG
KWAZULU-NATAL
Durban
Johannesburg
MPUMALANGA
Transnet Corporate Centre
Johannesburg
GAUTENG
> ±30 400 km of track
> 20 953 route km> Core network:
12 801 route km
Richards Bay
Durban
East London
Port ElizabethNgqura
EASTERN CAPE
KWAZULU-NATAL
WESTERN CAPE
Saldanha
Cape Town
Mossel Bay
Freight Rail
Engineering
National Ports Authority
Port Terminals
Pipelines
FREESTATE
WESTERN CAPE
EASTERN CAPE
KWAZULU-NATAL
Durban
Pretoria: KoedoespoortGermiston
Bloemfontein
Uitenhage
Salt River
Employees Total Permanent Fixed-term contract
Operating Divisions’ overview
TFR
TPT
TPL
TNPA
TE
TFR
Rail corridor throughout South Africa
28 868
26 312
2 556
Employees
29%
71%
Revenue
R43,6billion
2,66%People with disabilities
Koedoespoort, Germiston, Bloemfontein, Durban, Uitenhage, Salt River
10 866
10 370
496
Employees
24%
76%
Revenue
R10,5billion
1,90%People with disabilities
Richards Bay, Durban, East London, Ngqura, Port Elizabeth, Mossel Bay, Saldanha, Cape Town
4 199
4 182
17
Employees
35%
65%
Revenue
R12,5billion
2,12%People with disabilities
Richards Bay, Durban, East London, Ngqura, Port Elizabeth, Cape Town, Saldanha
9 357
7 392
1 965
Employees
29%
71%
Revenue
R13,1billion
1,22%People with disabilities
Durban – Johannesburg
706
672
34
Employees
34%
66%
Revenue
R5,3billion
1,98%People with disabilities
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Transnet Presentation 2019 3
4 Value through the capitals
Total CSI spend R million 219 151
B-BBEE spend R billion 25,8 29,9
Committed supplier development R billion 63,4 4,96
Patients treated on Phelophepa train Number 157 418 91 588
Cash and cash equivalents
Total capital borrowings
Finance income
Financial capital
Property, plant and equipment
Rail track
Pipeline infrastructure
Information and communications technology (ICT) infrastructure
Manufactured capital
Social capital
Transactional, collaborative and constructive relationships with stakeholders
Engaged workforce
Social licence to operate
Natural capital
Natural resources we use to enable us to operate (water, air, energy, etc.)
Land on which to run operations
Biodiversity and ecosystem health
Capital expenditure (including accruals) R billion 21,8 17,9
Infrastructure maintenance spend R billion 16,4 14,7
Depreciation and amortisation R billion 13,7 14,3
Net impairment of assets R billion 1,4 2,7
Revenue R billion 72,9 74,1
Operating expenses R billion 40,4 40,3
ROTA % 5,9 5,8
EBITDA margin % 44,6 45,6
Profit R billion 4,9 6,1
Gearing % 43,4 44,5
Cash interest cover times 3,0 2,9
Energy-efficiency improvement % 0,9 0,5
Carbon emissions mtCO2e 4,0 3,78
Used oil reclaimed K 202 140,9
Alien invasive species eradicated Ha 1 307 1 158
Number of pipeline spillages Number 0 2
Asbestos waste removed Tonnes 929,8 49,2
MEASURE 2018 2019
Number of permanent employees Number 51 324 50 798
Personnel cost R billion 25,7 26,8
Training spend R million 741 740,8
Training spend (as % of labour cost) % 2,9 2,5
Engineering trainees Number 100 60
Investment in R&D R million 147 275
Technology transfer/intellectual property (% of TMPS) % 0,93 0,74
DIFR Rate 0,73 0,71
Skilled, healthy and motivated workforce
Standard operating procedures
Policies, frameworks, management systems and processes
Efficient and reliable leadership team delivering on our mandate
National pool of skilled artisans and engineers
Research and development
Human and intellectual capitals
Value through the capitals
Transnet’s approach to natural capital management encompasses energy efficiency, climate change mitigation and adaptation, water stewardship, biodiversity management and enhancement, and land use management
Transnet has developed a three-year plan (Stakeholder Engagement Plan 2021) that sets out precise actions required to rebuild relations particularly with our Shareholder, Government, investors, funders, customers, regulators, communities as well as employees
Implementing and embedding the Integrated Management System (IMS) across all operations
Developing and implementing an integrated training plan for key procurement staff
Advancing Transnet’s inland terminal strategy and addressing infrastructure and rolling stock maintenance requirements
Structuring and maintaining the information technology network for more reliable connectivity
Maintaining a strong capital base to maintain investor, creditor and market confidence to support future growth of the business
Maintaining a cash interest cover of at least 2,5 times
Through the modal shift of cargo from road to rail we aim to lower carbon emissions in the transport sector, especially for the hauling of large volumes of high-density freight over long distances
Contributing towards the development of young professionals through young professionals in training programmes
Developing intellectual property through research and development
Strictly adhering to the capital maintenance programme and cultivating a culture of maintenance and preservation of existing assets
Optimising Transnet’s property portfolio
Maintaining a capital-to-debt structure (gearing) below maximum parameters (< 50%)
Introducing stringent cost-containment initiatives to reduce costs across operations
Transnet’s Phelophepa Healthcare programme is a CSI flagship project across eight of South Africa’s nine provinces that is in its 25th year of operation, and provides experiential learning opportunities to an estimated 2 500 healthcare students per annum
Our integrated asbestos and hydrocarbon clean-up programmes enable us to manage the impact of historical environmental contamination
Ensuring integrated management of projects through the Integrated Capital Projects Programme
Managing working capital to meet target levels
Providing apprenticeship opportunities through the young engineers and technicians in training programmes
Applying Transnet’s Value Chain Coordinator (TVCC) in operations to streamline activity
Ensuring adequate reinvestment in the business and maintaining a stand-alone investment grade credit rating
Embedding a zero-harm safety culture across operations
As part of Transnet’s strategic plans to create enterprise development programmes that expand opportunities to communities where the Company operates, there are currently five enterprise development hubs for small businesses and entrepreneurs with the fifth mega-hub officially launched in March 2019 in Empangeni, north of KwaZulu-Natal
Strategies to preserve or create value
Transnet Presentation 2019 5
18 Audited results
Audited condensed consolidated financial results for the year ended 31 March 2019
Short-form announcementThis short-form announcement is the responsibility of the Transnet Board of Directors. It is only a summary of the information contained in the integrated report and annual financial statements and does not contain full or complete details. Any investment decision should be based on the integrated report and annual financial statements available on the Transnet website at www.transnet.net. The integrated report and annual financial statements are also available for inspection at the registered office of Transnet.
OverviewThe technical recession experienced during the second quarter of 2018, coupled with a decline in the agriculture, transport and manufacturing industries, as well as reduced activity in government sectors and trade, contributed to a marginal GDP growth rate of only 0,8% for the 2018 calendar year.
Amidst these trying economic conditions, Transnet had to address numerous allegations of fraud and corruption, performing its own forensic investigations and collaborating with various law-enforcement agencies to determine the extent and impact of reported incidents. The current leadership made significant progress in addressing each allegation, instituting the requisite remedial actions and taking steps to stabilise the organisation. The finalisation of these cases is taking longer than anticipated but the engagement with state agencies is ongoing to ensure the most effective closure of these matters.
Numerous other operational challenges impeded the Company’s ability to achieve the planned volumes and operational efficiency targets. The resultant lower-than- targeted revenue was, however, more than offset by stringent cost-containment measures, that resulted in a marginal decline in operating costs compared to the prior year.
Governance and complianceIn terms of the Public Finance Management Act, 1999 (PFMA) of South Africa, the Company is required to report the quantum of irregular expenditure incurred, which is expenditure that was incurred in contravention of procurement legislation, notwithstanding that value was received.
In the prior year, the audit opinion was qualified due to external audit being unable to obtain sufficient audit evidence that the disclosure of irregular expenditure was complete and accurate.
During the year under review, management made a significant effort to improve and establish adequate controls to maintain complete and accurate records of irregular expenditure. The vast majority of the irregular expenditure reported in the current year relates to expenditure in prior years arising from contracts entered into in prior years, which is indicative of both the identification of PFMA contraventions in the past, and the improvement in the procurement control environment that is now limiting new incidences of non-compliance.
The Board appointed the Auditor-General of South Africa to provide additional oversight, in respect of PFMA compliance, during the audit process of the year under review.
The amount of irregular expenditure reported in the current year is significant due to the progress made in identifying incidents of non-compliance in the past, specifically the inclusion of R41,5 billion expenditure on the locomotive contracts, entered into prior to 2015, that was the subject of several investigations at the time of finalising the prior year report.
Despite the abovementioned corrective action, the external auditors have expressed the view that Transnet’s implementation of certain of the Preferential Procurement Regulations, 2017 relating to tender pre-qualification criteria was inconsistent with the legislation. However, management was of the opinion that the affected expenditure was not irregular, as the use of the tender pre-qualification criteria was aimed at assisting the Company to achieve the competitive supplier development targets set by the shareholder. The Company ceased using the tender pre-qualification criteria in June 2018.
This matter has been considered in detail and, with input provided by various technical and legal experts, it appears that there are divergent views on whether the affected expenditure should be reported as irregular expenditure, as defined in the PFMA. This matter is still under investigation. Ultimately, however, the Company was not in a position to
satisfy external audit that the reporting of this category of irregular expenditure is complete and accurate and, accordingly, the external auditors have issued a qualified opinion, that is specific to the completeness and accuracy of the reported irregular expenditure, as required by the PFMA.
The qualified opinion is not related to compliance with International Financial Reporting Standards nor the Companies Act of South Africa, 2008 and accordingly, has no bearing on the financial strength and sustainability of Transnet as depicted in the annual financial statements. Transnet holds the view that the qualified opinion will not result in any negative action related to the debt book, and is satisfied with the adoption of the going concern assumption in the preparation of the annual financial statements.
ProspectsIn emerging from a year marked by several distractions, defined in large part by the Board and management’s efforts to remediate the wide-spread effects of corruption on the business, the way forward is clear. While experiencing operational challenges, particularly in the port environment, Transnet is confident that the continued efforts of the current leadership to enhance internal controls, improve operational efficiency and customer service, and to shape the ethical cultural bedrock required to set the Company on its new growth trajectory, will deliver the quality and reliable service needed to build a globally-competitive national freight system.
Despite the challenges experienced in the year’s difficult business and operational climate, it is heartening to note instances of record-breaking performance across the Company, evidence of the continued commitment of the many dedicated Transnet employees across South Africa.
The Company is expected to continue to generate strong cash flows, to maintain affordable levels of debt without any Government support, and to continue to report year-on-year improvement in financial performance. More importantly, Transnet will continue to strive to contribute to the overall efficiency and growth of the South African logistics environment and, in turn, have a positive impact on the economic growth of the country.
* Compound annual growth rate.
0
80 000
70 000
60 000
40 000
10 000
61 152 62 167 65 478 72 887 74 070
2015 2016 2017 2018 2019
50 000
30 000
20 000
Revenue 4,9%*
R m
illio
n
0
40 000
10 000
35 564 35 917 37 921 40 372 40 320
2015 2016 2017 2018 2019
50 000
30 000
20 000
Operating expenses 3,2%*
R m
illio
n
0
35 000
30 000
20 000
5 000
25 588 26 250 27 557 32 515 33 750
2015 2016 2017 2018 2019
25 000
15 000
10 000
EBITDA 7,2%*
R m
illio
n
0
7 000
6 000
4 000
1 000
5 302 393 2 765 4 851 6 047
2015 2016 2017 2018 2019
5 000
3 000
2 000
Profit for the year 3,3%*
R m
illio
n
Freight Rail
Pipelines
National Ports Authority
Port Terminals
Engineering
Outbound services / South African businesses moving products to international markets.
Inbound services / Bringing products to South African markets.
Export iron ore volumes railed.
Container volumes at ports.
Pipelines petroleum volumes.
Export coal volumes railed.
58,4mt
General freight volumes railed.84,7mt 4 534 341 TEUs
17 825 Mℓ
72,0mt Automotive volumes at ports.743 350 units
Transnet Presentation 2019 19
Condensed statement of financial positionAudited
31 March 31 March(in R million) 2019 2018
Non-current assets 339 422 352 333Current assets 16 078 17 490Total assets 355 500 369 823 Capital and reserves 148 631 156 874Non-current liabilities 173 782 158 036Current liabilities 33 087 54 913Total equity and liabilities 355 500 369 823
Condensed statement of cash flowsAudited
31 March 31 March(in R million) 2019 2018
Cash flows from operating activities 21 930 22 958Cash flows utilised in investing activities (20 124) (24 891)Cash flows utilised in financing activities (2 030) (109)Net decrease in cash and cash equivalents (224) (2 042)Cash and cash equivalents at the beginning of the year 4 380 6 422 Total cash and cash equivalents at the end of the year 4 156 4 380
Condensed income statementAudited
(in R million)31 March
201931 March
2018
Revenue 74 070 72 887
Net operating expenses excluding depreciation and amortisation (40 320) (40 372)
Profit from operations before depreciation, derecognition, amortisation and items listed below (EBITDA) 33 750 32 515
Depreciation, derecognition and amortisation (14 274) (13 686)
Profit from operations before items listed below: 19 476 18 829
Impairment of financial assets (444) (681)
Impairment of non-financial assets (2 244) (761)
Post-retirement benefit obligation expense (287) (268)
Fair value adjustments 3 271 410
Income from equity-accounted investees 19 9
Profit from operations before net finance costs 19 791 17 538
Finance costs (11 597) (10 211)
Finance income 387 302
Profit before tax 8 581 7 629
Tax (2 534) (2 778)
Profit for the year 6 047 4 851
Condensed segmental analysis
FreightRail
43 5
82
Engineering National PortsAuthority
Port Terminals
50 000
40 000
30 000
20 000
10 000
0
(R m
illio
n)
Pipelines
43 7
09
10 5
2411
250
12 4
5011
699
13 0
8612
393
5 26
24
488
20192018
Segment revenue
FreightRail
19 5
06
Engineering National PortsAuthority
Port Terminals
25 000
20 000
15 000
10 000
5 000
0
(5 000)
(R m
illio
n)
Pipelines
20 4
73
(737
)(1
39)
8 31
77
196
4 54
14
172
3 99
63
192
20192018
Segment EBITDA
Media statement
Transnet reports solid results in year ending 31 March 2019Performance highlights• Revenue increased by 1,6% to R74,1 billion. • Operating costs contained to R40,3 billion
(no increase on prior year).• EBITDA increased by 3,8% to R33,8 billion. • Profit for the year increased by 24,7% to R6,0 billion.• Capital investment of R17,9 billion for the year, bringing total
expenditure over the past seven years to R183,5 billion.• Cash generated from operations increased by 0,7% to
R35,2 billion.• Gearing of 44,5% and cash interest cover at 2,9 times. • The Company recorded a disabling injury frequency rate (DIFR)
of 0,71 – below 0,75 for the eighth consecutive year and well below the global benchmark of 1,0.
Governance and complianceSupporting National Government’s developmental mandateTransnet SOC Ltd is a significant entity in the lives of all South Africans; and as one of the largest logistics infrastructure SOCs on the African continent, it is in many ways the very heart and lungs of our economy. This 55 000-strong employee community is also a microcosm of the macrocosm that is the South African developmental state. As such, it is both our duty and privilege to support National Government’s developmental mandate through large-scale industrialisation, active and competitive supplier development (SD), job creation and employment equity – both within Transnet’s operations, and through the creation of direct and indirect industrialisation opportunities in the wider economy. We achieve this developmental mandate, in great part, through our sector partnerships and Transnet’s SD programme, which promotes industrialisation through contractually obligated SD plans. During the year, Transnet’s SD spend amounted to R5,7 billion, or 17,66% of TMPS1.
Transnet’s regulatory contextAs a business, Transnet, is not only governed by the Companies Act, and the standard regulations that underpin governance and compliance for all South African businesses, but is subject to a distinctive set of regulations – unique to SOCs and to South
African SOCs in particular – which include, inter alia, the Public Finance Management Act, 1999 (PFMA) of South Africa. At its core, the PFMA drives fair and equitable dealings between South African public institutions and their stakeholders, which manifests as a broad directive for transparency, accountability and sound financial management. In principle and in practice, the PFMA regulates the SOC’s management of finances and sets out the procedures for managing all revenue, expenditure, assets and liabilities, which includes reporting on the quantum of irregular expenditure incurred during the financial year. While the definition of “irregular expenditure” covers expenditure incurred in contravention of procurement legislation (notwithstanding that value may have been received), it is both inaccurate and prejudicial to assume that all irregular expenditure is a result of deliberate deceit.
In contravention of the PFMA By all accounts, Transnet was not immune to the now widely publicised scourge of ‘state capture’, which manifested as a systemic weakening of South Africa’s SOCs over the past nine years – by both organs of State and private sector companies – through the misallocation of resources, widespread corruption, weakened leadership structures and the breakdown in governance control systems. However, several ongoing investigations into the breakdown of Transnet’s own internal controls, particularly within the procurement environment, have revealed that, irregular expenditure can result from a myriad of factors, including procedural and policy misalignment; subjective and inaccurate policy interpretations by supply-chain officials; a lack of financial, business or supply-chain acumen; and poor procedural discipline. In as much as Transnet must continue to investigate past instances of PFMA violations relating to contracts entered into in prior years, it is critical that the causes of irregular expenditure are clearly understood and mitigated at source and that consequence management is appropriate to the actual causes of such events.
In the prior year, the audit opinion was qualified due to external audit being unable to obtain sufficient audit evidence that the disclosure of irregular expenditure was complete and accurate. Accordingly, management made a concerted effort to improve internal controls during the reporting year, which included the ongoing investigation and identification of PFMA contraventions in previous years. Management’s efforts further encompassed the methodical improvement of the recording and reporting of irregular expenditure – both to accurately identify and disclose
1 Total measured procurement spend (TMPS),
Transnet Presentation 2019 21
22 Media statement
instances of irregular expenditure, and to limit new incidents of non-compliance. The progressive success of these efforts is evidenced in part, by the fact that the vast majority of the irregular expenditure reported in the current year relates to expenditure in prior years arising from contracts entered into in previous years. The amount of irregular expenditure reported in the current year is significant due to the expected inclusion of R41,5 billion expenditure on locomotive contracts concluded prior to 2015.
Further, to enhance the Company’s ability to identify and remediate new instances of irregular expenditure, the Transnet Board, together with the Department of Public Enterprises (DPE), appointed the Auditor-General of South Africa (AGSA) to provide additional oversight, in relation to PFMA compliance, during the 2019 external audit process, thereby bringing the AGSA’s extensive supply-chain management expertise to bear in the interpretation of new audit findings in the procurement space.
2019 qualified opinionDespite the above corrective actions, the external auditors have expressed the view, that Transnet’s application of certain of the Preferential Procurement Regulations, 2017 relating to tender pre-qualification criteria was inconsistent with the legislation. Although the Company ceased using the tender pre-qualification criteria in June 2018, management did not consider the affected expenditure as constituting irregular expenditure as denoted in the audit finding, as the use of the tender pre-qualification criteria aimed to assist the Company to achieve the competitive supplier development targets set by the shareholder. This matter has since been considered in detail and, after input from various technical and legal experts it appears that there are divergent views on whether expenditure arising from tenders containing the pre-qualification criteria, should indeed be interpreted as irregular, as defined by the PFMA. This matter is still under investigation.
Ultimately, however, the Company was not in a position to satisfy external audit that the reporting of this category of irregular expenditure is complete and accurate and, accordingly, the external auditors have issued a qualified opinion that is specific to the completeness and accuracy of the reported irregular expenditure, as required by the PFMA.
Going concern statusBy way of clarification, the qualified opinion does not relate to compliance with International Financial Reporting Standards (IFRS) nor the Companies Act of South Africa, 2008. Accordingly, the qualified opinion has no bearing on the financial strength and sustainability of the Company, as adequately demonstrated by Transnet’s financial performance in the Financial Statements. The
Company holds the view that the qualified opinion will, therefore, not result in any negative action related to the debt book; and is satisfied with the adoption of the going concern assumption in the preparation of the Financial Statements.
Revenue and volume performanceNotwithstanding the above-stated audit qualification, Transnet SOC Limited has produced a solid set of results despite challenging economic conditions that led to lower demand in mining commodities. This, together with operational challenges, impacted on the overall volume performance for the year ending March 2019.
The Company experienced a decline in export coal volumes, minerals, cement and lime brought about by a combination of factors, including lower demand, community unrest, incidents of sabotage and operational challenges.
Notwithstanding these challenges, Transnet reported a marginal increase in revenue to R74,1 billion. The revenue increase was supported by a 9,1% increase in petroleum volumes as the inland multi product terminal reached full operationalisation. Revenue in the pipeline division increased by 17,2%, from R4,5 billion to R5,3 billion.
Rail operations experienced a 0,3% decline in revenue to R43,6 billion due to a 4,9% decline in volumes.
Transnet Engineering reported revenue of R10,5 billion, down from R11,3 billion in the prior year, due to lower external sales.
Revenue in the port terminal business increased by 5,6% to R13,1 billion, despite lower-than-expected container volumes.
Transnet’s operating costs decreased by 0,1% to R40,3 billion despite increases of 16,6% in fuel costs, representing a R6,8 billion saving against planned costs.
Funding perspectiveAs at 31 March 2019, the Company’s total borrowings amounted to R127,7 billion (2018: R122,6 billion), an increase of R4,9 billion compared to the prior year, primarily due to foreign exchange rate movements. The increase in the value of borrowings is offset by a corresponding increase in net derivative financial assets, as exposure to foreign exchange movements is fully hedged.
Transnet raised R6,2 billion in long-term funding for the period and is presently in advanced discussions for a further R13,3 billion, that will satisfy funding requirements through to the end of the 2020 financial year. None of this funding is supported by Government guarantees.
Capital investmentInfrastructure investment highlights for the period include• R3,1 billion invested in rail infrastructure.• R4,9 billion invested to maintain the condition of rolling stock. • R527 million invested in wagon fleet renewal and
modernisations.• R2,0 billion invested in the maintenance and acquisition of
cranes, tipplers, tugs, straddle carriers and other port equipment.
At 31 March 2019, the Company had accepted 525 new locomotives into operations as part of the 1 064 locomotive contract. Expenditure of R33,6 billion has been incurred to date on the 1 064 locomotive contract, with R3,9 billion invested in the current year.
Stabilising operationsAt the time of publishing this statement, the employment contracts of a number of former Transnet executives have been terminated through dismissal or resignation, and others are on suspension facing disciplinary proceedings. As a result, the Transnet executive and extended executive leadership structures presently include several interim appointments, some of whom have been with Transnet for more than two decades. As such, they bring institutional knowledge and organisational experience, as well as fresh perspectives and objectivity to the business. The process for recruiting permanent executive members is actively underway.
Engaging customersTo ensure Transnet better understands the commercial needs of our customers, the Company hosted numerous integrated customer and industry engagements during the year. The engagements included customer steering committees and customer breakfasts; and specific forums, such as the NAAMSA Automotive Industry Supply Chain Forum and the Container Liner Operators Forum. Constructive outcomes of the proactive engagements included concluding long-term take-or-pay contracts with eight manganese clients, as well as signing an internal Transnet Customer Charter (in September 2018) to drive a customer-centric culture in the Company.
Re-building trustTransnet is a significant entity in the lives of South Africans and the local business community. Notwithstanding the adverse findings and reports at the Zondo Commission and in the media, the Board and management are confident that the vast majority of the organisation’s strong Transnet community are good,
committed and passionate people who have given of themselves for the benefit of the organisation and all that it stands for.
Community engagementTransnet committed R151 million towards its Corporate Social Investments programmes across the country. The Phelophepa “Train of Hope” continues to provide high-end primary health care services to communities situated along Transnet’s business operations. Approximately 91 548 patients benefitted from the on-board clinics on the train, while the Company’s outreach initiatives reached 315 319 people through services such as health screening, education and counselling workshops.
IndustrialisationTransnet’s total recognised broad-based black economic empowerment (B-BBEE) spend for the year amounted to 92,62% of the total measured procurement spend of R32,31 billion. R13,61 billion was spent on black-owned enterprises, with overall supplier development spend of R5,7 billion.
Safety performanceNotwithstanding Transnet achieving a DIFR of 0,71, well below the global benchmark of 1,0, four employees passed away in Transnet’s operations during the year. The Board and management review the nature and causality of all fatalities to entrench group-wide safety awareness within the organisation.
Regrettably, 134 members of the public lost their lives in and around Transnet’s operational activities during the year. Railway crossings continue to be a safety challenge. Transnet’s rail network spans some 30 400 km and, due to its large footprint, is prone to encroachment by informal settlements. The Company is, however, unequivocally committed to doing more to raise safety awareness within communities that border its rail operations.
The Transnet Board of Directors and management convey their deepest condolences to the families, friends and colleagues of the employees and members of the public who lost their lives.
Issued on behalf of Mohammed Mahomedy, Acting Group Chief Executive at Transnet SOC Ltd
By: Molatwane Likhethe, Spokesperson. 011 308 2458/083 300 9586 [email protected]
Transnet Presentation 2019 23
24 Presentation
About TransnetTransnet is wholly owned by the Government of the Republic of South Africa. The company is uniquely positioned to provide integrated, seamless transport solutions for its customers in the bulk and manufacturing sectors. This is part of its drive to improve the efficiency and competitiveness of the South African economy.
Transnet has five operating divisions:
Transnet Engineering
The company’s engineering division reported a decline in revenue to R10,5 billion from R11,3 billion mainly due to decreased Africa sales emanating from tough competition and unfavourable macro-economic conditions.
National Ports Authority and Port Terminals
Transnet National Ports Authority recorded a 6,4% increase in revenue to R12,5 billion mainly attributable to the increase in tariffs and the discontinuation of clawback accounting which was partially offset by a decrease in volumes.
Container volume performance fell by 2,8% to 4,5 million TEUs (Twenty-Foot Equivalent Unit) as a result of the subdued economy and certain operational and weather-related challenges.
Bulk and break volumes contracted by 0,8% to 82,4 million tons largely due to constraints in supply-chain logistics and lower demand for mineral bulk commodities such as magnetite and coal.
Transnet Pipelines
The pipeline business managed to increase volumes by 9,1% resulting in the revenue increase of R5,3 billion, from R4,5 billion in the previous period.
Transnet Freight Rail
Overall volumes within the freight rail division declined by 4,9% from 226,3 million tons in 2018 to 215,1 million tons in the current reporting period. The division saw its revenue decrease by 0,3% to R43,6 billion.
The General Freight Business recorded a disappointing 6,7% decrease in volumes to 84,7 million tons as a result of the weak economic climate locally and globally as well as various operational issues including network and resource challenges.
Improved volumes were experienced in manganese, which set a new record, and increased by 2,2% to 14,0 million tons, chrome volumes rose by 6,0% to 7,1 million tons with timber, paper and publishing increasing volumes by 4,3% to 2,4 million tons.
Export coal rail volumes fell by 6,5% to 72,0 million tons from 77,0 million tons last year due operational challenges, derailments, community unrest, train cancellations as well as general low demand in the first quarter.
Volumes on the export iron ore line decreased marginally by 0,2% to 58,4 million tons as a result of the Saldanha bridge incident that resulted in a 1,7 million tons loss in the reporting period.
Contract progress to date is as follows:
OEM Name of the locomotives
Number of locomotives
ordered
Number of locomotives
accepted
General Electric Class 44D locomotives 233 233
China North Rail 45D locomotives 232 21
Bombardier Transportation 23Elocomotives 240 37
China South Rail 22E locomotives 359 234
Specialist unitsTransnet Group Capital manages Transnet’s largest capital projects.
Transnet Foundation is responsible for executing our corporate social investment initiatives.
Transnet Property manages the Company’s property portfolio.
Corporate information
Corporate information
Transnet SOC LtdIncorporated in the Republic of South Africa.Registration number 1990/000900/30.
Waterfall Business Estate9 Country Estate DriveMidrand1662
Executive directorsMr MS Mahomedy (Acting Group Chief Executive)Mr MD Gregg-Macdonald (Acting Group Chief Financial Officer)
Mr SI Gama’s employment contract was terminated in October 2018.
Mr T Morwe was appointed in November 2018 and his contract expired on 30 April 2019.
Mr MS Mahomedy was appointed during May 2019.
Mr MD Gregg-Macdonald was appointed during May 2019.
Independent non-executive directorsDr PS Molefe (Chairperson), Ms UN Fikelepi, Ms RJ Ganda, Ms DC Matshoga, Mr LL von Zeuner, Ms ME Letlape, Adv OM Motaung, Ms GT Ramphaka, Mr AP Ramabulana, Dr FS Mufamadi.
Ms V McMenamin resigned during February 2019.
Professor EC Kieswetter resigned during May 2019.
Acting Group Company SecretaryMs K NaickerWaterfall Business Estate9 Country Estate DriveMidrand1662
PO Box 72501Parkview2122South Africa
AuditorsSizweNtsalubaGobodo Grant Thornton Inc.20 Morris Street EastWoodmeadJohannesburg2191
Transnet Presentation 2019