Presentation 2019 Contents 1 Performance highlights 2 Operating - - PDF document
Presentation 2019 Contents 1 Performance highlights 2 Operating context 4 Value through the capitals 6 Presentation 18 Audited results 21 Media statement IBC Corporate information For more information SCAN TO DOWNLOAD INTEGRATED
SCAN TO DOWNLOAD INTEGRATED REPORT AND ANNUAL FINANCIAL STATEMENTS
For more information
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%.
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
spend per DTI codes.
training, focusing on artisans,
engineers and engineering technicians. The Company recorded a DIFR ratio
year that a ratio below 0,75 has been achieved with the global benchmark being 1,0.
2
Operating context
Services provided
Outbound services
South African businesses moving products to international markets
Inbound services
Bringing products to South African markets
Commodities transported
Mining exports, general freight and petroleum products
General freight
Containerised 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 products
Crude oil, refined petroleum products, aviation turbine fuel and methane-rich gas products
Tanzania Namibia Swaziland Lesotho
Satellite offices
Operating context
Five Operating Divisions spread throughout South Africa Four satellite
in Lesotho, Tanzania, Namibia and Swaziland Three joint
in Mozambique, Botswana and Zimbabwe
Specialist Units
Transnet Group Capital Transnet Property
Port Elizabeth Richards Bay Durban East London Ngqura
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 Elizabeth Ngqura
EASTERN CAPE KWAZULU- NATAL WESTERN CAPE
Saldanha Cape Town Mossel Bay
Freight Rail Engineering National Ports Authority Port Terminals Pipelines
FREE STATE WESTERN CAPE EASTERN CAPE KWAZULU- NATAL
Durban Pretoria: Koedoespoort Germiston 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
billion
2,66%
People with disabilities
Koedoespoort, Germiston, Bloemfontein, Durban, Uitenhage, Salt River
10 866
10 370
496
Employees
24% 76%
Revenue
billion
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
billion
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
billion
1,22%
People with disabilities
Durban – Johannesburg
706 672 34
Employees
34% 66%
Revenue
billion
1,98%
People with disabilities
SCAN TO DOWNLOAD OPERATING DIVIONS REPORT
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 Profjt R billion 4,9 6,1 Gearing % 43,4 44,5 Cash interest cover times 3,0 2,9 Energy-effjciency 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 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 Effjcient and reliable leadership team delivering
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 effjciency, 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
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 confjdence 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
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 fmagship project across eight of South Africa’s nine provinces that is in its 25th year
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
As part of Transnet’s strategic plans to create enterprise development programmes that expand opportunities to communities where the Company operates, there are currently fjve enterprise development hubs for small businesses and entrepreneurs with the fjfth mega-hub offjcially launched in March 2019 in Empangeni, north of KwaZulu-Natal
Strategies to preserve or create value
Transnet Presentation 2019
5
6
Presentation
Transnet Presentation 2019
7
8
Presentation
Transnet Presentation 2019
9
10
Presentation
Transnet Presentation 2019
11
12
Presentation
Transnet Presentation 2019
13
14
Presentation
Transnet Presentation 2019
15
16
Presentation
Transnet Presentation 2019
17
18
Audited results
Audited condensed consolidated financial results
for the year ended 31 March 2019
Short-form announcement
This 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
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.
Overview
The technical recession experienced during the second quarter
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
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 compliance
In 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
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
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.
Prospects
In 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
Transnet is confident that the continued efforts of the current leadership to enhance internal controls, improve
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
environment and, in turn, have a positive impact on the economic growth of the country.
* Compound annual growth rate. 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 million
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 million
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 million
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 million
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 position
Audited 31 March 31 March (in R million) 2019 2018 Non-current assets 339 422 352 333 Current assets 16 078 17 490 Total assets 355 500 369 823 Capital and reserves 148 631 156 874 Non-current liabilities 173 782 158 036 Current liabilities 33 087 54 913 Total equity and liabilities 355 500 369 823
Condensed statement of cash flows
Audited 31 March 31 March (in R million) 2019 2018 Cash flows from operating activities 21 930 22 958 Cash 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
4 380 6 422 Total cash and cash equivalents at the end
4 156 4 380
Condensed income statement
Audited (in R million) 31 March 2019 31 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
Freight Rail 43 582 Engineering National Ports Authority Port Terminals 50 000 40 000 30 000 20 000 10 000 (R million) Pipelines 43 709 10 524 11 250 12 450 11 699 13 086 12 393 5 262 4 488
2019 2018
Segment revenue
Freight Rail 19 506 Engineering National Ports Authority Port Terminals 25 000 20 000 15 000 10 000 5 000 (5 000) (R million) Pipelines 20 473 (737) (139) 8 317 7 196 4 541 4 172 3 996 3 192
2019 2018
Segment EBITDA
20
Media statement
Freight Rail Engineering Pipelines National Ports Authority Port Terminals
Transnet reports solid results in year ending 31 March 2019
Performance highlights
(no increase on prior year).
expenditure over the past seven years to R183,5 billion.
R35,2 billion.
below the global benchmark of 1,0.
Governance and compliance
Supporting National Government’s developmental mandate
Transnet SOC Ltd is a significant entity in the lives of all South Africans; and as one of the largest logistics infrastructure SOCs
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
R5,7 billion, or 17,66% of TMPS1.
Transnet’s regulatory context
As 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
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
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
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 opinion
Despite 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 status
By 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 performance
Notwithstanding 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 perspective
As 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 investment
Infrastructure investment highlights for the period include
modernisations.
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
the 1 064 locomotive contract, with R3,9 billion invested in the current year.
Stabilising operations
At 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 customers
To ensure Transnet better understands the commercial needs of
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 trust
Transnet 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 engagement
Transnet 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
initiatives reached 315 319 people through services such as health screening, education and counselling workshops.
Industrialisation
Transnet’s total recognised broad-based black economic empowerment (B-BBEE) spend for the year amounted to 92,62%
R13,61 billion was spent on black-owned enterprises, with overall supplier development spend of R5,7 billion.
Safety performance
Notwithstanding 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 Molatwane.likhethe@transnet.net
Transnet Presentation 2019
23
24
Presentation
About Transnet
Transnet 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
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 units
Transnet 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
Transnet SOC Ltd
Incorporated in the Republic of South Africa. Registration number 1990/000900/30. Waterfall Business Estate 9 Country Estate Drive Midrand 1662
Executive directors
Mr 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 directors
Dr 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 Secretary
Ms K Naicker Waterfall Business Estate 9 Country Estate Drive Midrand 1662 PO Box 72501 Parkview 2122 South Africa
Auditors
SizweNtsalubaGobodo Grant Thornton Inc. 20 Morris Street East Woodmead Johannesburg 2191
Transnet Presentation 2019
www.transnet.net