Transnet brochure

TRANSNET SOC LTD

WWW.TRANSNET.NET Brochure cover 2 Transnet.indd 1

08/09/2015 21:23

2 AFRICAINDUSTRYMAGAZINE.COM

Transnet Brochure pages.indd 2

08/09/2015 22:13

TransneT Soc Ltd

INFRASRUCTURE INVESTMENT full steam ahead

Many Western economies are leading the charge towards austerity – the imposition of strict public spending limits in the face of growing debts. But the miseries inflicted by this sort of policy have been spurned in South Africa, where the national Government is banking on serious investment to underpin the country’s growth strategy. This is encapsulated by the massive capital expenditure programme at Transnet Soc Ltd, the State-owned, freight rail, ports and pipelines utility. so far, so good. Last year’s A nd impressive annual financial

figures have been eclipsed by the latest set, with both revenues and profits driving forward. It’s an early vindication that stagnation and under-investment cannot be the foundation stones for economic prosperity.

Of course, heavy financial spending also poses a challenge, but the regime

is satisfied that its arrangements with German and Chinese banking partners are manageable and sustainable.

The Market Demand Strategy, launched four years ago, set out a cohesive plan to radically improve the country’s infrastructure as well as offering hope to businesses and thousands of unemployed people.

There was also a firm commitment to

The current seven-year programme is ambitious in its scope; R336bn overall, triggering massive improvements to services and ensuring that South Africa is open to business, both at home and abroad.

■ Hundreds of new locomotives being built.

■ 633,000 jobs created or sustained.

■ 19% of port container traffic growth forecast.

■ 555km of new pipeline.

■ Huge shift of freight from road to rail.

AFRICAINDUSTRYMAGAZINE.COM 3

Transnet Brochure pages.indd 3

08/09/2015 22:13

‘‘

‘‘

TransneT Soc Ltd

The MDS marks a definite move to demonstrate the role we should play in the development of our economy.

Acting CE of Transnet, Siyabonga Gama Siyabonga Gama

empowering black businesses. Acting chief executive of Transnet, Siyabonga Gama, said: “This is the fourth year of the MDS and our unprecedented programme to expand and revamp South Africa’s rail, port and pipelines continues to break records. Spending increased to R33bn, taking total spend to R93.2bn over the past three years.

Last year, we announced that we had awarded a R50bn contract for the building of 1064 locomotives to four global equipment manufacturers. In

March this year, we celebrated the successful completion of the first batch of 95 electric locos, 85 of which were completed at Transnet’s Koedoespoort facility and the rest in China.”

The company sees a battle looming in its efforts to take freight off the roads. Hauliers are not happy, but roads, especially in rural areas, have been plagued by 58-tonne monster lorries, leaving the network at breaking point. And that is before taking into account the massive 12,000 annual death toll on the roads. Currently, rail transports around 200m tonnes of freight, but there is room for huge gains as the market is around 1.2bn.

This is just one element of a multi-stranded approach to tackling infrastructure issues. The arteries have to be free-flowing, says Mr Gama. He described overall investment plans as “simply staggering”, adding: “The MDS is a revolutionary transition in the life of Transnet. It marks a definite move to demonstrate the role that we should play in the development of our economy.

We are also creating employment, enhancing local suppliers and

Transnet is building hundreds of locomotives with China South Rail and China North Rail

Transnet’s progressive march forward can even be measured in numbers.

For the governmentowned body recently published its latest annual financial figures, and they make impressive reading.

■ Revenue up by 8% to R61.2bn.

■ EBITDA increased by 8.2% to R25.6bn.

■ Overall growth in rail volumes of 7.7% to 226mt.

■ Export coal up 11.9% to 76.3mt.

■ Iron ore and manganese up 10.7% to 69.6mt.

■ Operational efficiency up 16.6%.

■ Seven-year investment programme revised upwards to R336bn.

■ Cash generated from operations, after working capital changes, increased by 21.1% to R30.6bn.

■ Gearing improved to 40% and cash interest cover at 3.6 times.

■ Training spend increased by 3.7% to R644.1m. training for critical skills.”

Strong growth in rail volumes led the way, with further inroads into market share. During the year, capital spend at R33bn took the three-year running total to R92.8bn.

Bulk cargoes surged, with an 8.1% increase at the ports, while Pipelines’ petroleum volumes rose by 3.6%.

Transnet Engineering increased sales to customers other than Freight Rail by 6.3% to R1.7bn, mainly driven by a

4 AFRICAINDUSTRYMAGAZINE.COM

Transnet Brochure pages.indd 4

08/09/2015 22:13

Transnet Soc Ltd

xxxxx xxx xxx xxxx xxx xxxxx

strong focus on sales of locomotives and wagons to the rest of the continent.

Container volumes at the ports remained flat, however, with commodities affected by global demand.

One area of note is in efficiency gains, where a creditable 16.6% improvement was reported across the business.

The group incorporates Rail Freight, Pipelines, Ports and Engineering arms.

FUNDING One of the cornerstones of the development plan is finding the capital to underpin it. The recent deal with Germany’s KfW bank has pumped R2.8bn into new rail rolling stock, a 15-year agreement includes a five-year period of grace with only interest payments. This comes on top of a R30 billion loan facility agreement with China Development Bank (CDB) – for the funding of hundreds of locomotives the company is building with China South Rail and China North Rail as its build programme gathers momentum.

Transnet will be drawing the first slice of R18 billion over four years. The loan between CDB and Transnet came about as part of a bilateral memorandum of understanding between South Africa’s President Jacob Zuma and his Chinese counterpart President Xi Jinping. The two heads

The current seven-year programme forcasts 19% port container traffic growth

of state signed a $5 billion MOU in December 2014, cementing bilateral relations between the two partners.

The proceeds of the loan will be used to fund the company’s 232 diesel and 359 electric locomotives it is building with CNR and CSR respectively. These locomotives are part of Transnet’s record-breaking 1064 locomotives acquisition programme. These deals have been made possible due to wellmaintained fiscal policies, while much of the world remains in turmoil. And it also augurs well for the future, as South Africa has a solid framework covering commerce, labour and maritime issues.

This will be important as Transnet aims to become an increasingly important player in the local and subSaharan markets.

FUTURE PLANS The ambitious seven-year growth programme aims to consolidate and create more than 600,000 jobs across Transnet’s network of activities.

Revenue growth is forecast at 18.5% by next year. There are a series of leading objectives, such as addressing capacity constraints, improving rail systems and developing supply chains.

Alongside these, will be robust measures to gauge and review performance – vital aspects on large infrastructure projects. As well as 1,000 new locos, there will be an additional 60,000 rail wagons and much increased container capacity at ports.

Investments include R210bn in freight rail, R52bn at the National Ports

Transnet’s busy container terminals are regular ports of call for the global shipping trade

AFRICAINDUSTRYMAGAZINE.COM 5

Transnet Brochure pages.indd 5

08/09/2015 22:14

TransneT Soc Ltd

Transnet carries all fuel and gas via its Pipelines Authority, R51bn in port terminals and R13.9bn in pipelines.

Transnet has eight ports and also carries all fuel and gas requirements via its pipes. It has five operating divisions; Rail Freight, the National Ports Authority, Port Terminals, Engineering and Pipelines. Transnet Port Terminals handles sea-route freight imports and exports, operating facilities in Richards Bay, Durban, East London, Ngqura, Port Elizabeth, Cape Town and Saldanha.

A R1.9bn investment is taking place at Ngqura. It is envisaged that container traffic can increase by 19%.

Implementation of Transnet Value Chain Co-ordination is also underway – this sets out to improve collaboration between operating divisions as well as Transnet places huge emphasis on training and skills

systems and processes.

One ongoing project is edging nearer to completion. The New Multi Products Pipeline runs from Durban to Gauteng, carrying different grades of fuel, but it has been dogged by delays and rising costs for years. There have been environmental concerns, detours and costs have spiralled to R23bn.

Although the pipeline has been laid, further pumping stations are required.

However, when at full capacity it will deliver 1m litres per hour, meeting demand needs up to 2030. The business handles 16bn litres of liquid fuel and more than 450m cubic metres of gas. Revenues were up 4.2% on the back of a 5.1% rise in delivery prices charged to customers.

AFRICA STRATEGY Transnet is not just focussed on delivering an enhanced service for businesses within its borders, it is also looking at cross-border pollination and overseas opportunities. There was an encouraging rise of cross-border revenues to R2.55bn in the past year.

The ports of Durban and Ngqura are seen as natural growth hubs for transhipments to West and East Africa. It is hoped this will open up further connections to Angola, Namibia, Mozambique, Mauritius and Tanzanian ports. Also, freight rail has offices in Swaziland and Lesotho and hopes are high for business in the Maputo east-west and north-south corridors. Transnet would also like to be the preferred locomotive manufacturer for sub-Saharan Africa. The country’s membership of BRICS (Brazil, Russia, India and China) will also help to fuel potential overseas opportunities SKILLS Transnet places huge emphasis on training and skills. It has earmarked R7bn for this, along with providing

6 AFRICAINDUSTRYMAGAZINE.COM

Transnet Brochure pages.indd 6

08/09/2015 22:14

TransneT Soc Ltd

Transnet sees positive outcomes for the company – and the wider economy – by fostering links with local businesses

Durban is seen as one of the natural growth hubs for transhipments to West and East Africa

another R1.1bn in bursaries. It has schools of excellence for engineering, maritime, rail and pipelines. The intention is to grow the workforce to 67,200 by the end of the seven-year development plan. It has to ensure that skill shortages do not hinder the pace of progress.

The Transnet Academy is committed to developing a competent workforce, with its schools having a focus on technical, operational, security and leadership skills.

SUPPLY CHAIN PARTNERSHIPS The clear target in supplier development has been in helping small firms grow. These businesses are the backbone of an economy and Transnet sees positive outcomes for the company – and the wider economy – by fostering links with local businesses.

This closely follows the government strategy on Broad-Based Black Economic Empowerment, which is designed to transform the economy, putting black businesses and entrepreneurs to the fore.

According to Minister for Trade and Industry, Dr Rob Davies, progress was

being made and must continue: “In the automotive sector, government support has taken the industry from the production of 356,800 units in the year 2000 to over 566,000 units in 2014. This support has grown auto exports from 11,000 units in 1995 to over 270,000 units in 2014; 300,000 jobs have been created in the automotive sector.

Dr Davies reiterated that the Government’s intervention, aimed at arresting the decline of the clothing, textiles, leather and footwear sector, resulted in 68,0000 jobs being retained in the sector and 6,900 new jobs created since 2010. By the end of March this year, a total of R3.7bn support of the private sector had been approved since the inception of the Clothing and Textile Competitive Programme in 2010. Since 2009, the Department of Trade and Industry supported agro-processing industries to the value of R1.2bn through various schemes.

Minister Davies said that what the Government has achieved so far, through the implementation of previous iterations of IPAP, shows that the policy is working. However, there is a need

to scale up industrial development in the country.

“We need to scale up the impact of our industrial policy as we are not yet where we need to be. In order to achieve this we need stronger conditionalities to be attached to existing incentive programmes when it comes to competitiveness raising, Broad-based Black Economic Empowerment (B-BBEE), supplier development and localisation. We also need to roll out the Black Industrialists Programme and also develop new, sector-specific, incentive schemes, which have proved to be effective in leveraging investment,” he said.

WHY TRANSNET IS CRUCIAL South Africa is a diverse emerging economy that forms part of the BRICS (Brazil, Russia, China, India) consortium. The country has a wealth of natural resources, an established manufacturing base and a growing skilled workforce. However, to exploit these potential advantages is not so simple and having an infrastructure that runs smoothly is vital.

There have been a number of issues around energy supply, while Transnet’s much-hyped, multi-purpose fuel pipeline has been subject to lengthy delays. Foreign investors in particular are keen to see that any deficiencies of this nature are ironed out. The huge public investment strategy should now begin to have a positive effect. ■

AFRICAINDUSTRYMAGAZINE.COM 7

Transnet Brochure pages.indd 7

08/09/2015 22:14

2 AFRICA INDUSTRY MAGAZINE September 2015

Wilderness brochure pages.indd 2

08/09/2015 22:16

8 AFRICA INDUSTRY MAGAZINE September 2015

Unilever brochure pages.indd 8

08/09/2015 22:21

TRANSNET SOC LTD Physical address Carlton Centre 150 Commissioner Street Johannesburg 2001 Postal address P.O. Box 72501 Parkview South Africa 2122 Tel: +27 11 308 3000 Fax: +27 11 308 2638 Email: enquiries@transnet.net TRANSNET.NET

EVEREST GLOBAL MEDIA LTD Email: info@everestglobalmedia.com Company number: 09619508 EVERESTGLOBALMEDIA.COM AFRICA INDUSTRY MAGAZINE Issue 01 September 2015 Copyright Š 2015 Everest Global Media Ltd All rights reserved

AFRICAINDUSTRYMAGAZINE.COM

Brochure cover 2 Transnet.indd 2

08/09/2015 21:25