Presentation 2019 - Transnet
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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
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information
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INTEGRATED REPORT
AND ANNUAL
FINANCIAL
STATEMENTS
Transnet Presentation 2019
1
Performance highlights
Revenue increased by
1,6% to R74,1 billion for the year,
supported by a 9,1% increase in
petroleum volumes.
3,8%
Operating expenses EBITDA
were contained to R40,3 billion, increased by 3,8%
which represents a R6,8 billion to R33,8 billion,
saving against planned costs. with the EBITDA
margin increasing
from 44,6% to 45,6%.
24,7%
Gearing of 44,5% and cash interest cover Profit for the year
at 2,9 times are both comfortably within loan increased by 24,7%
covenant requirements. to R6,0 billion.
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.
2,5%
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 Operating context
Transnet Satellite offices
Operating Corporate Centre
Johannesburg
context MPUMALANGA
> ±
30 400 km of
Five Operating GAUTENG track
Divisions spread > 20 953 route km Tanzania
throughout > C
ore network:
South Africa 12 801 route km Namibia
Four satellite Swaziland
offices i n Lesotho,
Tanzania, Namibia Lesotho
and Swaziland
Three joint
operating centres Pretoria: Koedoespoort
in Mozambique, Germiston
Botswana and KWAZULU- Freight Rail
Zimbabwe Bloemfontein
NATAL
FREE
STATE Durban
Specialist Units EASTERN
Engineering
CAPE
Transnet Group Capital Uitenhage
Transnet Property
WESTERN
CAPE
National Ports Authority
Salt River
Port Terminals
Pipelines
KWAZULU-
NATAL Richards Bay
Durban
Services provided
EASTERN
CAPE Outbound services
East London
Saldanha WESTERN Ngqura South African businesses moving products to
CAPE Port Elizabeth international markets
Cape Town
Inbound services
Mossel Bay
Bringing products to South African markets
Commodities transported
Mining exports, general freight
and petroleum products
KWAZULU-
General freight
NATAL Richards Bay
Durban
Containerised cargo, local manganese,
EASTERN minerals, local coal, local iron ore, chrome and
CAPE ferrochrome, agricultural products, iron and
East London
Saldanha WESTERN
Ngqura steel, fertilisers, cement, fast-moving
Cape Town
CAPE Port Elizabeth consumer goods, bulk liquids, wood and wood
products, industrial chemicals, intermediate
products and automotive products
Petroleum products
Crude oil, refined petroleum products, aviation
GAUTENG turbine fuel and methane-rich g
as products
Johannesburg
KWAZULU-
NATAL
Durban
Operating Divisions’ overview Transnet Presentation 2019
3
Employees Total Permanent Fixed-term contract SCAN TO DOWNLOAD
OPERATING DIVIONS
REPORT
Rail corridor throughout South Africa
R43,6
Employees Revenue
28 868 29%
TFR
TFR
2,66%
26 312 People with billion
71% disabilities
2 556
Koedoespoort, Germiston, B
loemfontein, Durban, Uitenhage, Salt River
R10,5
Employees Revenue
10 866 24%
1,90%
10 370
TE People with billion
76% disabilities
496
Richards Bay, Durban, East London, N
gqura, Port Elizabeth, Mossel Bay, Saldanha, Cape Town
R12,5
Employees Revenue
4 199 35% 2,12%
4 182
TNPA People with
disabilities billion
65%
17
Richards Bay, Durban, East L
ondon, Ngqura, Port Elizabeth, C
ape Town, Saldanha
R13,1
Employees Revenue
9 357 29%
TPT 1,22%
7 392 People with
billion
71%
disabilities
1 965
Durban – Johannesburg
R5,3
Employees Revenue
706
34% 1,98%
TPL
672
People with
disabilities billion
66%
34
4 Value through the capitals
Value through the capitals
MEASURE 2018 2019
Financial capital Revenue R billion 72,9 74,1
Operating expenses R billion 40,4 40,3
Cash and cash equivalents
ROTA % 5,9 5,8
Total capital borrowings
EBITDA margin % 44,6 45,6
Finance income
Profit R billion 4,9 6,1
Gearing % 43,4 44,5
Cash interest cover times 3,0 2,9
Manufactured capital
Property, plant and equipment Capital expenditure
R billion 21,8 17,9
(including accruals)
Rail track
Infrastructure maintenance spend R billion 16,4 14,7
Pipeline infrastructure
Depreciation and amortisation R billion 13,7 14,3
Information and communications technology (ICT)
infrastructure Net impairment of assets R billion 1,4 2,7
Number of permanent employees Number 51 324 50 798
Human and intellectual capitals
Personnel cost R billion 25,7 26,8
Skilled, healthy and motivated workforce
Training spend R million 741 740,8
Standard operating procedures
Training spend (as % of labour cost) % 2,9 2,5
Policies, frameworks, management systems and processes
Engineering trainees Number 100 60
Efficient and reliable leadership team delivering
Investment in R&D R million 147 275
on our mandate
Technology transfer/intellectual property
National pool of skilled artisans and engineers % 0,93 0,74
(% of TMPS)
Research and development DIFR Rate 0,73 0,71
Social capital Total CSI spend R million 219 151
B-BBEE spend R billion 25,8 29,9
Transactional, collaborative and constructive
relationships with stakeholders Committed supplier development R billion 63,4 4,96
Engaged workforce
Patients treated on Phelophepa train Number 157 418 91 588
Social licence to operate
Energy-efficiency improvement % 0,9 0,5
Natural capital Carbon emissions mtCO2e 4,0 3,78
Used oil reclaimed K 202 140,9
Natural resources we use to enable us to operate
(water, air, energy, etc.) Alien invasive species eradicated Ha 1 307 1 158
Land on which to run operations Number of pipeline spillages Number 0 2
Biodiversity and ecosystem health Asbestos waste removed Tonnes 929,8 49,2
Transnet Presentation 2019
5
Strategies to preserve or create value
Introducing stringent Managing working capital to meet target levels
Maintaining a strong capital base to maintain
cost-containment initiatives to reduce costs
investor, creditor and market confidence to
across operations
support future growth of the business
Ensuring adequate reinvestment in the
business and maintaining a
Maintaining a capital-to-debt structure
Maintaining a cash interest cover of at least stand-alone investment grade credit rating
(gearing) below maximum parameters (< 50%)
2,5 times
Ensuring integrated management of projects
Advancing Transnet’s inland terminal strategy Strictly adhering to the capital maintenance
through the Integrated Capital Projects
and addressing infrastructure and rolling stock programme and cultivating a culture of
Programme
maintenance requirements maintenance and preservation of existing
assets
Structuring and maintaining the information Applying Transnet’s Value Chain Coordinator
technology network for more reliable (TVCC) in operations to streamline activity
Optimising Transnet’s property portfolio
connectivity
Implementing and embedding the Integrated Contributing towards the development Providing apprenticeship opportunities
Management System (IMS) across all of young professionals through young through the young engineers and technicians in
operations professionals in training programmes training programmes
Developing and implementing an integrated Developing intellectual property through Embedding a zero-harm safety culture across
training plan for key procurement staff research and development operations
As part of Transnet’s strategic plans to create
Transnet has developed a three-year plan Transnet’s Phelophepa Healthcare programme enterprise development programmes that
(Stakeholder Engagement Plan 2021) that is a CSI flagship project across eight of South expand opportunities to communities where
sets out precise actions required to rebuild Africa’s nine provinces that is in its 25th year the Company operates, there are currently
relations particularly with our Shareholder, of operation, and provides experiential learning five enterprise development hubs for small
Government, investors, funders, customers, opportunities to an estimated 2 500 healthcare businesses and entrepreneurs with the fifth
regulators, communities as well as employees students per annum mega-hub officially launched in March 2019 in
Empangeni, north of KwaZulu-Natal
Transnet’s approach to natural capital Through the modal shift of cargo from road to
Our integrated asbestos and hydrocarbon
management encompasses energy efficiency, rail we aim to lower carbon emissions in the
clean-up programmes enable us to manage
climate change mitigation and adaptation, transport sector, especially for the hauling of
the impact of historical environmental
water stewardship, biodiversity management large volumes of high-density freight over
contamination
and enhancement, and land use management long distances
6 Presentation
Transnet Presentation 2019
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8 Presentation
Transnet Presentation 2019
910 Presentation
Transnet Presentation 2019
1112 Presentation
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1314 Presentation
Transnet Presentation 2019
1516 Presentation
Transnet Presentation 2019
1718 Audited results
Audited condensed consolidated financial results
for the year ended 31 March 2019
Short-form announcement In the prior year, the audit opinion was qualified due to
external audit being unable to obtain sufficient audit
satisfy external audit that the reporting of this category of
irregular expenditure is complete and accurate and,
This short-form announcement is the responsibility of the evidence that the disclosure of irregular expenditure was accordingly, the external auditors have issued a qualified
Transnet Board of Directors. It is only a summary of the complete and accurate. opinion, that is specific to the completeness and accuracy of
information contained in the integrated report and annual the reported irregular expenditure, as required by the PFMA.
financial statements and does not contain full or complete During the year under review, management made a significant
details. Any investment decision should be based on the effort to improve and establish adequate controls to The qualified opinion is not related to compliance with
integrated report and annual financial statements available on maintain complete and accurate records of irregular International Financial Reporting Standards nor the
the Transnet website at www.transnet.net. The integrated expenditure. The vast majority of the irregular expenditure Companies Act of South Africa, 2008 and accordingly, has no
report and annual financial statements are also available for reported in the current year relates to expenditure in prior bearing on the financial strength and sustainability of
inspection at the registered office of Transnet. years arising from contracts entered into in prior years, which Transnet as depicted in the annual financial statements.
is indicative of both the identification of PFMA Transnet holds the view that the qualified opinion will not
Overview
contraventions in the past, and the improvement in the result in any negative action related to the debt book, and is
procurement control environment that is now limiting new satisfied with the adoption of the going concern assumption
incidences of non-compliance. in the preparation of the annual financial statements.
The technical recession experienced during the second quarter
of 2018, coupled with a decline in the agriculture, transport The Board appointed the Auditor-General of South Africa to
and manufacturing industries, as well as reduced activity in
government sectors and trade, contributed to a marginal GDP
provide additional oversight, in respect of PFMA compliance,
during the audit process of the year
Prospects
growth rate of only 0,8% for the 2018 calendar year. under review. In emerging from a year marked by several distractions,
Amidst these trying economic conditions, Transnet had to defined in large part by the Board and management’s efforts
The amount of irregular expenditure reported in the current to remediate the wide-spread effects of corruption on the
address numerous allegations of fraud and corruption,
performing its own forensic investigations and collaborating year is significant due to the progress made in identifying
business, the way forward is clear. While experiencing
with various law-enforcement agencies to determine the incidents of non-compliance in the past, specifically the
operational challenges, particularly in the port environment,
extent and impact of reported incidents. The current inclusion of R41,5 billion expenditure on the locomotive
Transnet is confident that the continued efforts of the
leadership made significant progress in addressing each contracts, entered into prior to 2015, that was the subject of
current leadership to enhance internal controls, improve
allegation, instituting the requisite remedial actions and several investigations at the time of finalising the prior year
operational efficiency and customer service, and to shape
taking steps to stabilise the organisation. The finalisation of report.
these cases is taking longer than anticipated but the ethical cultural bedrock required to set the Company on
the engagement with state agencies is ongoing to ensure the Despite the abovementioned corrective action, the external its new growth trajectory, will deliver the quality and reliable
most effective closure of these matters. auditors have expressed the view that Transnet’s service needed to build a globally-competitive national
implementation of certain of the Preferential Procurement freight system.
Numerous other operational challenges impeded the Regulations, 2017 relating to tender pre-qualification
Company’s ability to achieve the planned volumes and criteria was inconsistent with the legislation. However, Despite the challenges experienced in the year’s difficult
operational efficiency targets. The resultant lower-than- management was of the opinion that the affected business and operational climate, it is heartening to note
targeted revenue was, however, more than offset by stringent instances of record-breaking performance across the
expenditure was not irregular, as the use of the tender
cost-containment measures, that resulted in a marginal Company, evidence of the continued commitment of the
decline in operating costs compared to the prior year. pre-qualification criteria was aimed at assisting the Company
to achieve the competitive supplier development targets set many dedicated Transnet employees across South Africa.
by the shareholder. The Company ceased using the tender
Governance and compliance pre-qualification criteria in June 2018. The Company is expected to continue to generate strong
cash flows, to maintain affordable levels of debt without any
In terms of the Public Finance Management Act, 1999 This matter has been considered in detail and, with input Government support, and to continue to report year-on-year
(PFMA) of South Africa, the Company is required to report provided by various technical and legal experts, it appears improvement in financial performance. More importantly,
the quantum of irregular expenditure incurred, which is that there are divergent views on whether the affected Transnet will continue to strive to contribute to the
expenditure that was incurred in contravention of expenditure should be reported as irregular expenditure, as overall efficiency and growth of the South African logistics
procurement legislation, notwithstanding that value was defined in the PFMA. This matter is still under investigation. environment and, in turn, have a positive impact on the
received. Ultimately, however, the Company was not in a position to economic growth of the country.
Revenue 4,9%* EBITDA 7,2%* Operating expenses 3,2%* Profit for the year 3,3%*
61 152 62 167 65 478 72 887 74 070 35 564 35 917 37 921 40 372 40 320 5 302 393 2 765 4 851 6 047
25 588 26 250 27 557 32 515 33 750 7 000
80 000 35 000 50 000
70 000 6 000
30 000
40 000
60 000 5 000
25 000
R million
R million
50 000
R million
30 000 4 000
R million
20 000
40 000
15 000 20 000 3 000
30 000
20 000 10 000 2 000
10 000
10 000 5 000 1 000
0 0 0 2016 2017 2019
0 2016 2017 2019
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2018 2015 2018
* Compound annual growth rate.Transnet Presentation 2019
19
Condensed income statement Condensed statement of cash flows
Audited Audited
31 March 31 March 31 March 31 March
(in R million) 2019 2018 (in R million) 2019 2018
Revenue 74 070 72 887 Cash flows from operating activities 21 930 22 958
Net operating expenses excluding Cash flows utilised in investing activities (20 124) (24 891)
depreciation and amortisation (40 320) (40 372)
Cash flows utilised in financing activities (2 030) (109)
Profit from operations before depreciation, Net decrease in cash and cash equivalents (224) (2 042)
derecognition, amortisation and items listed
below (EBITDA) 33 750 32 515 Cash and cash equivalents at the beginning
of the year 4 380 6 422
Depreciation, derecognition and amortisation (14 274) (13 686)
Total cash and cash equivalents at the end
Profit from operations before items of the year 4 156 4 380
listed below: 19 476 18 829
Impairment of financial assets (444) (681)
Impairment of non-financial assets (2 244) (761)
Condensed statement of financial position
Post-retirement benefit obligation expense (287) (268) Audited
Fair value adjustments 3 271 410 31 March 31 March
Income from equity-accounted investees 19 9 (in R million) 2019 2018
Profit from operations before net Non-current assets 339 422 352 333
finance costs 19 791 17 538
Current assets 16 078 17 490
Finance costs (11 597) (10 211)
Total assets 355 500 369 823
Finance income 387 302
Capital and reserves 148 631 156 874
Profit before tax 8 581 7 629 Non-current liabilities 173 782 158 036
Tax (2 534) (2 778) Current liabilities 33 087 54 913
Profit for the year 6 047 4 851 Total equity and liabilities 355 500 369 823
Outbound services / South African businesses
moving products to international markets.
Port
Terminals
72,0mt Export coal volumes railed. 743 350
units Automotive volumes at ports.
Engineering National Ports
84,7mt General freight volumes railed.
Freight Rail Authority
4 534 341 Container volumes at ports.
TEUs
58,4mt Export iron ore volumes railed. Pipelines 17 825 Mℓ Pipelines petroleum volumes.
Inbound services /
Bringing products to South African markets.
Condensed segmental analysis
Segment revenue Segment EBITDA
43 582
43 709
20 473
2019
50 000 25 000
19 506
2018 2019
2018
20 000
40 000
15 000
(R million)
(R million)
8 317
30 000
7 196
10 000
4 541
4 172
3 996
13 086
12 393
12 450
3 192
11 250
11 699
20 000
10 524
5 000
(737)
(139)
5 262
4 488
10 000 0
0 (5 000)
Freight Engineering National Ports Port Pipelines Freight Engineering National Ports Port Pipelines
Rail Authority Terminals Rail Authority Terminals20 Media statement
Freight Rail
Engineering
Pipelines
National Ports
Authority
Port TerminalsTransnet Presentation 2019
21
Media statement
Transnet reports solid results in year African SOCs in particular – which include, inter alia, the
Public Finance Management Act, 1999 (PFMA) of South Africa.
ending 31 March 2019 At its core, the PFMA drives fair and equitable dealings between
Performance highlights South African public institutions and their stakeholders, which
manifests as a broad directive for transparency, accountability
• Revenue increased by 1,6% to R74,1 billion.
and sound financial management. In principle and in practice, the
• Operating costs contained to R40,3 billion PFMA regulates the SOC’s management of finances and sets out
(no increase on prior year).
the procedures for managing all revenue, expenditure, assets and
• EBITDA increased by 3,8% to R33,8 billion. liabilities, which includes reporting on the quantum of irregular
• Profit for the year increased by 24,7% to R6,0 billion. expenditure incurred during the financial year. While the definition
• Capital investment of R17,9 billion for the year, bringing total of “irregular expenditure” covers expenditure incurred in
expenditure over the past seven years to R183,5 billion. contravention of procurement legislation (notwithstanding
• Cash generated from operations increased by 0,7% to that value may have been received), it is both inaccurate and
R35,2 billion. prejudicial to assume that all irregular expenditure is a result of
• Gearing of 44,5% and cash interest cover at 2,9 times. deliberate deceit.
• The Company recorded a disabling injury frequency rate (DIFR)
of 0,71 – below 0,75 for the eighth consecutive year and well In contravention of the PFMA
below the global benchmark of 1,0.
By all accounts, Transnet was not immune to the now widely
publicised scourge of ‘state capture’, which manifested as a
Governance and compliance systemic weakening of South Africa’s SOCs over the past nine
Supporting National Government’s developmental years – by both organs of State and private sector companies –
mandate through the misallocation of resources, widespread corruption,
Transnet SOC Ltd is a significant entity in the lives of all South weakened leadership structures and the breakdown in governance
Africans; and as one of the largest logistics infrastructure SOCs control systems. However, several ongoing investigations into the
on the African continent, it is in many ways the very heart and breakdown of Transnet’s own internal controls, particularly within
lungs of our economy. This 55 000-strong employee community is the procurement environment, have revealed that, irregular
also a microcosm of the macrocosm that is the South African expenditure can result from a myriad of factors, including
developmental state. As such, it is both our duty and privilege to procedural and policy misalignment; subjective and inaccurate
support National Government’s developmental mandate through policy interpretations by supply-chain officials; a lack of financial,
large-scale industrialisation, active and competitive supplier business or supply-chain acumen; and poor procedural discipline.
development (SD), job creation and employment equity – both In as much as Transnet must continue to investigate past instances
within Transnet’s operations, and through the creation of direct of PFMA violations relating to contracts entered into in prior
and indirect industrialisation opportunities in the wider economy. years, it is critical that the causes of irregular expenditure are
We achieve this developmental mandate, in great part, through our clearly understood and mitigated at source and that consequence
sector partnerships and Transnet’s SD programme, which management is appropriate to the actual causes of such events.
promotes industrialisation through contractually obligated SD
plans. During the year, Transnet’s SD spend amounted to In the prior year, the audit opinion was qualified due to external
R5,7 billion, or 17,66% of TMPS1. 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
Transnet’s regulatory context internal controls during the reporting year, which included the
As a business, Transnet, is not only governed by the Companies ongoing investigation and identification of PFMA contraventions
Act, and the standard regulations that underpin governance and in previous years. Management’s efforts further encompassed the
compliance for all South African businesses, but is subject to a methodical improvement of the recording and reporting of
distinctive set of regulations – unique to SOCs and to South irregular expenditure – both to accurately identify and disclose
1
Total measured procurement spend (TMPS),22 Media statement
instances of irregular expenditure, and to limit new incidents of Company holds the view that the qualified opinion will, therefore,
non-compliance. The progressive success of these efforts is not result in any negative action related to the debt book; and is
evidenced in part, by the fact that the vast majority of the satisfied with the adoption of the going concern assumption in
irregular expenditure reported in the current year relates to the preparation of the Financial Statements.
expenditure in prior years arising from contracts entered into in
previous years. The amount of irregular expenditure reported in
Revenue and volume performance
the current year is significant due to the expected inclusion of
R41,5 billion expenditure on locomotive contracts concluded Notwithstanding the above-stated audit qualification, Transnet
prior to 2015. SOC Limited has produced a solid set of results despite
challenging economic conditions that led to lower demand in
Further, to enhance the Company’s ability to identify and mining commodities. This, together with operational challenges,
remediate new instances of irregular expenditure, the Transnet impacted on the overall volume performance for the year ending
Board, together with the Department of Public Enterprises (DPE), March 2019.
appointed the Auditor-General of South Africa (AGSA) to provide
additional oversight, in relation to PFMA compliance, during the The Company experienced a decline in export coal volumes,
2019 external audit process, thereby bringing the AGSA’s minerals, cement and lime brought about by a combination of
extensive supply-chain management expertise to bear in the factors, including lower demand, community unrest, incidents of
interpretation of new audit findings in the procurement space. sabotage and operational challenges.
Notwithstanding these challenges, Transnet reported a marginal
2019 qualified opinion increase in revenue to R74,1 billion. The revenue increase was
Despite the above corrective actions, the external auditors have supported by a 9,1% increase in petroleum volumes as the inland
expressed the view, that Transnet’s application of certain of the multi product terminal reached full operationalisation. Revenue in
Preferential Procurement Regulations, 2017 relating to tender the pipeline division increased by 17,2%, from R4,5 billion to
pre-qualification criteria was inconsistent with the legislation. R5,3 billion.
Although the Company ceased using the tender pre-qualification
criteria in June 2018, management did not consider the affected Rail operations experienced a 0,3% decline in revenue to
expenditure as constituting irregular expenditure as denoted in R43,6 billion due to a 4,9% decline in volumes.
the audit finding, as the use of the tender pre-qualification
criteria aimed to assist the Company to achieve the competitive Transnet Engineering reported revenue of R10,5 billion, down
supplier development targets set by the shareholder. This matter from R11,3 billion in the prior year, due to lower external sales.
has since been considered in detail and, after input from various
technical and legal experts it appears that there are divergent Revenue in the port terminal business increased by 5,6% to
views on whether expenditure arising from tenders containing the R13,1 billion, despite lower-than-expected container volumes.
pre-qualification criteria, should indeed be interpreted as
Transnet’s operating costs decreased by 0,1% to R40,3 billion
irregular, as defined by the PFMA. This matter is still under
despite increases of 16,6% in fuel costs, representing a
investigation.
R6,8 billion saving against planned costs.
Ultimately, however, the Company was not in a position to satisfy
external audit that the reporting of this category of irregular Funding perspective
expenditure is complete and accurate and, accordingly, the As at 31 March 2019, the Company’s total borrowings amounted
external auditors have issued a qualified opinion that is specific to R127,7 billion (2018: R122,6 billion), an increase of R4,9 billion
to the completeness and accuracy of the reported irregular
compared to the prior year, primarily due to foreign exchange
expenditure, as required by the PFMA.
rate movements. The increase in the value of borrowings is offset
by a corresponding increase in net derivative financial assets, as
Going concern status exposure to foreign exchange movements is fully hedged.
By way of clarification, the qualified opinion does not relate to
compliance with International Financial Reporting Standards Transnet raised R6,2 billion in long-term funding for the period
(IFRS) nor the Companies Act of South Africa, 2008. Accordingly, and is presently in advanced discussions for a further
the qualified opinion has no bearing on the financial strength and R13,3 billion, that will satisfy funding requirements through to
sustainability of the Company, as adequately demonstrated by the end of the 2020 financial year. None of this funding is
Transnet’s financial performance in the Financial Statements. The supported by Government guarantees.Transnet Presentation 2019
23
Capital investment committed and passionate people who have given of themselves
for the benefit of the organisation and all that it stands for.
Infrastructure investment highlights for the period include
• R3,1 billion invested in rail infrastructure.
• R4,9 billion invested to maintain the condition of rolling stock. Community engagement
• R527 million invested in wagon fleet renewal and Transnet committed R151 million towards its Corporate Social
modernisations. Investments programmes across the country. The Phelophepa
• R2,0 billion invested in the maintenance and acquisition of “Train of Hope” continues to provide high-end primary health care
cranes, tipplers, tugs, straddle carriers and other port
services to communities situated along Transnet’s business
equipment.
operations. Approximately 91 548 patients benefitted from the
At 31 March 2019, the Company had accepted 525 new on-board clinics on the train, while the Company’s outreach
locomotives into operations as part of the 1 064 locomotive initiatives reached 315 319 people through services such as
contract. Expenditure of R33,6 billion has been incurred to date on health screening, education and counselling workshops.
the 1 064 locomotive contract, with R3,9 billion invested in the
current year. Industrialisation
Transnet’s total recognised broad-based black economic
Stabilising operations empowerment (B-BBEE) spend for the year amounted to 92,62%
At the time of publishing this statement, the employment of the total measured procurement spend of R32,31 billion.
contracts of a number of former Transnet executives have been R13,61 billion was spent on black-owned enterprises, with overall
terminated through dismissal or resignation, and others are on supplier development spend of R5,7 billion.
suspension facing disciplinary proceedings. As a result, the
Transnet executive and extended executive leadership structures Safety performance
presently include several interim appointments, some of whom Notwithstanding Transnet achieving a DIFR of 0,71, well below the
have been with Transnet for more than two decades. As such, they global benchmark of 1,0, four employees passed away in
bring institutional knowledge and organisational experience, as Transnet’s operations during the year. The Board and management
well as fresh perspectives and objectivity to the business. The review the nature and causality of all fatalities to entrench
process for recruiting permanent executive members is actively group-wide safety awareness within the organisation.
underway.
Regrettably, 134 members of the public lost their lives in and
Engaging customers around Transnet’s operational activities during the year. Railway
crossings continue to be a safety challenge. Transnet’s rail network
To ensure Transnet better understands the commercial needs of
spans some 30 400 km and, due to its large footprint, is prone to
our customers, the Company hosted numerous integrated
encroachment by informal settlements. The Company is, however,
customer and industry engagements during the year. The
unequivocally committed to doing more to raise safety awareness
engagements included customer steering committees and
within communities that border its rail operations.
customer breakfasts; and specific forums, such as the NAAMSA
Automotive Industry Supply Chain Forum and the Container Liner The Transnet Board of Directors and management convey their
Operators Forum. Constructive outcomes of the proactive deepest condolences to the families, friends and colleagues of the
engagements included concluding long-term take-or-pay contracts employees and members of the public who lost their lives.
with eight manganese clients, as well as signing an internal
Transnet Customer Charter (in September 2018) to drive a
Issued on behalf of Mohammed Mahomedy, Acting
customer-centric culture in the Company.
Group Chief Executive at Transnet SOC Ltd
Re-building trust By: Molatwane Likhethe, Spokesperson.
Transnet is a significant entity in the lives of South Africans and 011 308 2458/083 300 9586
the local business community. Notwithstanding the adverse Molatwane.likhethe@transnet.net
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,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 Freight Rail Transnet Engineering
Overall volumes within the freight rail division declined by 4,9% The company’s engineering division reported a decline in revenue
from 226,3 million tons in 2018 to 215,1 million tons in the current to R10,5 billion from R11,3 billion mainly due to decreased Africa
reporting period. The division saw its revenue decrease by 0,3% to sales emanating from tough competition and unfavourable
R43,6 billion. macro-economic conditions.
The General Freight Business recorded a disappointing 6,7% National Ports Authority and Port Terminals
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 Transnet National Ports Authority recorded a 6,4% increase in
77,0 million tons last year due operational challenges, derailments, revenue to R12,5 billion mainly attributable to the increase in
community unrest, train cancellations as well as general low tariffs and the discontinuation of clawback accounting which was
demand in the first quarter. partially offset by a decrease in volumes.
Volumes on the export iron ore line decreased marginally by 0,2% Container volume performance fell by 2,8% to 4,5 million TEUs
(Twenty-Foot Equivalent Unit) as a result of the subdued economy
to 58,4 million tons as a result of the Saldanha bridge incident that
and certain operational and weather-related challenges.
resulted in a 1,7 million tons loss in the reporting period.
Bulk and break volumes contracted by 0,8% to 82,4 million tons
Contract progress to date is as follows:
largely due to constraints in supply-chain logistics and lower
Number of Number of demand for mineral bulk commodities such as magnetite and coal.
Name of the locomotives locomotives Transnet Pipelines
OEM locomotives ordered accepted
General Electric
Class 44D locomotives 233 233
China North Rail 45D locomotives 232 21
Bombardier
Transportation 23Elocomotives 240 37 The pipeline business managed to increase volumes by 9,1%
China South Rail 22E locomotives 359 234 resulting in the revenue increase of R5,3 billion, from R4,5 billion
in the previous period.
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 Presentation 2019
Corporate information
Transnet SOC Ltd Acting Group Company Secretary
Incorporated in the Republic of South Africa. Ms K Naicker
Registration number 1990/000900/30. Waterfall Business Estate
9 Country Estate Drive
Waterfall Business Estate
Midrand
9 Country Estate Drive
1662
Midrand
1662 PO Box 72501
Parkview
2122
Executive directors South Africa
Mr MS Mahomedy (Acting Group Chief Executive)
Mr MD Gregg-Macdonald (Acting Group Chief Financial Officer)
Auditors
Mr SI Gama’s employment contract was terminated
SizweNtsalubaGobodo Grant Thornton Inc.
in October 2018.
20 Morris Street East
Mr T Morwe was appointed in November 2018 and his contract Woodmead
expired on 30 April 2019. Johannesburg
2191
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.www.transnet.net
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