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38
STRATEGY AND
RESOURCE ALLOCATION
Market Demand Strategy (MDS)
Transnet remains committed to the MDS and its principle of
meeting validated market demand through new capacity and
infrastructure, with the Capital Investment Plan as a key enabler.
The MDS, now in its sixth year, aligns with the Shareholder’s
priorities in the annual Shareholder’s Compact.
R21,4 billion
investment in
infrastructureTRANSNET Integrated Report 2017 39
Figure 5
Market Demand Strategy
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3 Read more
The Shareholder’s Compact Framework40 STRATEGY AND RESOURCE ALLOCATION continued
MDS evolution
The principal objective of the MDS is to close 2017
the gap between the market demand for cargo
Figure 6
Year 5
transport and handling services and the capacity realigning
2016 with market
to satisfy this demand.
2015 Year 4
expanding
2014 Year 3
2013 planning
Year 2
2012 adjusted
Year 1
MDS completed
crafted
EBITDA R18,9 billion R21,0 billion R23,6 billion R25,6 billion R26,2 billion
Capital investment budget R300,1 billion R307,5 billion R312,2 billion R336,6 billion R277,8 billion
Transnet has shifted focus from expansionary to sustaining objectives. The investment in sustaining infrastructure
(as a percentage of the portfolio) has increased from 40% in MDS Year 1 to 60% in MDS Year 5.
Infrastructure sustaining
investment (% of budget) 42,0% 38,7% 51,0% 56,7% 60,0%
Infrastructure expansion
investment (% of budget) 58,0% 61,3% 49,0% 43,3% 40,0%
Actual capital investment per year
(including intangibles) R27,6 billion R32,3 billion R34,1 billion R29,8 billion R21,4 billion
Capitalised maintenance
(infrastructure, locomotives
and wagons) (% of actual capital
investment per year)1 25% 25% 22% 21% 29%
Progress on mega-projects
Number of MDS wagons 2 007 3 281 2 700 2 100 100
Number of GFB locomotives
(1064, 95 and 60) – 9 110 50 183
Number of coal line locomotives
(100 and 110) 14 862
NMPP phase 13 68% 81% 82% 97% 96%
Manganese phase 1 4
FEL 3 FEL 3 11% 13% 93%
Manganese phase 2 5
FEL 3 FEL 3 PFMA approval FEL 4 9%
Waterberg upgrade phase 1 FEL 2 FEL 3 FEL 3 Approval FEL 4
Expansion of Cape Town
Container Terminal 98% 100%2 – – –
Coal line to 81 mt PFMA approval 18% 32% 49% 86%
Ngqura container development
(TPT and TNPA) phase 2A 89% 100%2 – – –
Reconstruction of the Sheet-pile
Quay Wall in Maydon Wharf5 13% 14% 89% 58% 88%
DCT Berth deepening FEL 1 FEL 2 FEL 3 PFMA approval FEL 4
Overvaal Tunnel doubling FEL 1 FEL 2 FEL 3 FEL 3 PFMA approval
1
opex is based on annual maintenance initiatives for locomotives, rail infrastructure and wagons
C
and is generally spent fully within a financial period.
2
Projects completed. National Eastern Cape
Gauteng Western Cape
3
he project faced challenges due to procurement delays for critical equipment, which has impacted the
T
schedule. The project, however, is back on track and will be completed within the 2017 calendar year. KwaZulu-Natal Northern Cape
Mpumalanga North West
4
Project expected to be completed in the 2017/18 period.
Limpopo
5
his programme has been re-baselined and optimised, and is now based on a revised schedule and
T
cost estimate.TRANSNET Integrated Report 2017 41
Progress on the MDS
Transnet invested R145 billion (excluding intangibles) in the past While still committed to a counter-cyclical investment strategy, our
five years, and expects to invest a further R229,2 billion by 2024. implementation of the MDS in the current economic climate requires
Current capacity remains ahead of demand across much of the more agility. Accordingly, we assess and rephase key programmes
freight system. The MDS aims to grow rail volumes to 273 mtpa and projects in response to changes in global and domestic markets.
by 2024. This increased capacity will be achieved through operational To accelerate growth, the Board of Directors of new revenue
efficiencies, sustaining current infrastructure and rolling stock, streams, including appropriate acquisitions, and funding for the
and by creating additional capacity for validated demand. Company’s geographical expansion into the rest of Africa.
MDS strategic thrusts
Transnet’s future success is underpinned by its culture and behaviours. We must hold a clear vision of a shared and prosperous future in
which we pursue excellence in all we do, have an openness to learn and the discipline to deliver consistently high performance outcomes.
Figure 7
Transnet has introduced four MDS strategic thrusts to drive an organisational culture that can thrive amid exponential change.
Promote ethical leadership at all levels of the organisation.
Continue to grow the modal shift from road to rail – increase
weekly railed tempos. Develop and deploy innovative customer value propositions
by harnessing the knowledge, experience and strengths across
Fully implement Group-wide Capital Platinum Standard. Operating Divisions and functional departments.
Optimise the capital portfolio and eliminate negative-return Meet efficiency-improvement targets through a high-
projects. performance ethos, supported by the right skills at the
right time.
Identify cost-saving opportunities in procurement and eliminate
unnecessary overhead and administrative expenditure. Provide reliable and predictable services and exceed
customer expectations.
Implement a capital and income statement planning system –
ensure every Rand spent is justified and tied to growth. Build trust through an ethical and governance-led organisation.
Maintain industry ‘legitimacy’ by practising care in the way
Driven we impact the six capitals through all our activities.
Efficient
Agile
Adaptable Admired Impeccable
Innovative
Motivated by excellence
A
Digital Inventive
Customer-centric
Advanced
Single-minded United Embrace the benefits of technology to achieve
Tolerant of others’ ideas interoperability, information transparency and integrated
technical support systems.
Understand our impact
Implement real-time customer feedback systems, thereby
enabling stakeholders to make informed assessments of
Promote an ethical culture in all we do by recognising
our performance.
our connectivity to – and impacts on – each other and
all our stakeholders. Introduce ‘click-of-a-button’ transparency on the state
of Transnet’s capital portfolio.
Engage the broader stakeholder base in proactive and
responsive ways. Implement digital dashboards that show a ‘single version
of the truth’ – focus problem-solving and decision-making
Build enthusiasm and motivation by actively engaging
accordingly to shift performance.
people in the field.
Create new mobile applications to display operational
Know Transnet through its people – an ‘employer of
activities and progress in real time.
choice’ and a work environment in which to grow and
prosper personally and professionally. Introduce appropriate ICT governance controls.42 STRATEGY AND RESOURCE ALLOCATION continued
Interconnected elements of the MDS
The table below demonstrates the connectivity between our MDS strategic imperatives, commercial drivers and outcomes, and the value
created for the economy through our Sustainable Developmental Outcomes (SDOs):
MDS strategic imperatives
MDS thrusts Financial sustainability Capacity creation and maintenance
Agile Diversify revenue sources to reduce exposure to Promote efficiency through capital
commodity demand and associated volatility. optimisation and a flexible project resourcing
Manage liquidity and raise cost-effective funding. and delivery model.
Pursue stringent cost management and optimisation Create critical logistics infrastructure and
interventions – including re-shaping the core of capacity ahead of validated demand for cargo
Transnet’s operations – in line with activity levels – transport and handling services.
to improve productivity and efficiency; and Continuous enhancement of the project
ultimately to enhance profitability. lifecycle programme methodology.
Be resilient in the management of working capital.
Generate a return on assets commensurate with the
associated risk.
Pursue private-sector partnerships.
Implement ‘take-or-pay’ contracts and agreed
escalation rates aligned with capital investment Deliver cost-effective solutions that are
requirements. benchmarked to the market and quality
Maintain key financial ratios. projects that deliver a return on investment
Ensure the right size and agile capital portfolio while improving productivity and efficiency.
to achieve strategic objectives, and to ensure Meet and exceed customer expectations by
the Company is sufficiently agile to respond delivering projects within agreed commitments.
to changing environmental factors. Create value for the customer through
Commercial drivers
specialised advisory services, and the
Build a strong profile by networking with development and implementation of both
Admired rating agencies, regulators, investors and other capital and non-capital solutions.
key stakeholders.
Develop highly competent finance personnel in
addition to well-rounded business leaders.
Drive digitalisation of the business through the Achieve project visibility for improved
CIO Council in collaboration with various line decision-making through digital project
functions, including New Business Development, portfolio dashboards based on key performance
Digital with an emphasis on the commercialisation of indicators.
digital products and the digitalisation of the Two sub-committees, namely the Digital Business
organisation. Forum and the Cloud Governance Committee
report to the CIO Council and ensure capacity and
focus are created for digitalisation.
Ensure key decision-makers and Operating Divisions Promote collaboration with stakeholders
have the right levels of financial and operational and promote customer-centricity in delivery
performance information for efficient decision- to co-create optimal solutions.
making.
United
Commercial Continued financial stability and strength. Optimised capital portfolio and asset utilisation.
outcomes Cost-effective funding. Creation of capacity ahead of validated demand.
Collaborative private-sector participation. Provision of critical logistics infrastructure.TRANSNET Integrated Report 2017 43
MDS strategic imperatives
Sustainable
Developmental
Operational excellence Market segment competitiveness Outcomes
Build operational readiness and infrastructure Promote an integrated and aligned regional Employment
reliability by ensuring right skills at the right infrastructure network that allows for Measurable direct,
time, appropriate digital innovation and strong value chain optimisation at network and indirect and/or induced
governance capability. industry levels. employment.
Provide ‘Project Factory’ support for large and Identify and pursue new business opportunities
Skills development
complex programmes. in existing and new markets by developing
innovative products and logistics solutions. Enhanced or improved
Mitigation of programme and project risks
human capabilities.
through: Reduce the total cost of logistics as a
percentage of transportable GDP. Productive capacity of
• The Integrated Capital Projects/Programme people within and outside
Assurance Framework (ICPAF); and Promote end-to-end logistics solutions
the Company.
by partnering with private-sector
• Transnet’s Integrated Assurance Model.
logistics providers. Industrial
capability building
Leverage the complementarity of our Operating Grow Transnet’s brand reputation and Industrial development
Divisions by optimising what makes Transnet credentials in existing and new markets. for South Africa.
unique and gives us our competitive advantage. Develop market/segment-specific brand Improved competitiveness.
Consistently transport record tonnages by rail and positioning strategies.
heavy haul operations to achieve global standards. Investment leveraged
Develop capabilities for improved and integrated
Private-sector investment
Grow capability in container and manufacturing branding, marketing and sales capacity.
in the country’s freight
sector transport and develop Transnet academies Promote Transnet’s commercial contribution
logistics system.
for skills development to reinforce our status as to economic growth and job creation.
a trusted, innovative SA brand and a top employer Become a sustainable contributor to domestic Regional integration
in South Africa. and regional growth. Improved freight logistics
Increase our levels of responsiveness to the connectivity
needs of our current customers. on the continent.
Transformation
Align reporting systems, measurements and Develop digital solutions to improve the ease Employment equity within
dashboards with business processes to provide of doing business with Transnet. the Company.
integrated customer and operational perspectives. Implement systems to increase the visibility Black Economic
Utilise advanced data analytics to create ‘one of customer engagements and the resolution Empowerment within
version of the truth’ for performance. of customer issues. supplier entities.
As a digital organisation, avail analytics to end- Information and data will become the
users through multiple digital platforms to core building blocks required to become a Health and safety
support agile decision-making. logistically enabled organisation. Improved physical and
Implement best practice reference models for mental health and safety
digitalisation to serve as common platforms of employees.
for all Operating Divisions, thereby ensuring Improved physical and
uniformity and standardisation across the mental health and safety
organisation. of communities.
Succeed together by living the Transnet culture, Unite the people of Transnet around the common Community development
promoting shared practices and aligning purpose of serving our customers with pride. Measurably improved
measures and scorecards to build common Streamlined and effective contract management economic, social, cultural
standards to meet customer expectations. activities across the Company to promote and environmental well-
compliance with legal and contractual terms. being of communities.
Environmental
stewardship
World-class operations in rail, ports and pipelines. Market competitiveness. Enhanced capacity of the
Infrastructure reliability. Customer satisfaction. natural environment to
Capital projects on time and within budget. Integrated intermodal system. meet the resource needs
of future generations.
Business continuity. Increased volumes.
Large-scale shift from road to rail.44 STRATEGY AND RESOURCE ALLOCATION continued
Provincial Government Plans & P
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Strategic planning
Transnet’s strategic planning occurs at various levels. While each level addresses capacity planning
Level 1
Level 2
Level 3
Level 4
Level 5
differently, efforts are fundamentally aligned and geared towards the same objectives.
The Company’s Long-term Planning Framework is a critical link between national and provincial
Figure 8 masterplans and policy, and Transnet’s MDS.
The frameworks informing Transnet’s strategic planning and goal-setting are outlined in Figure 8.
At each level, the Company ensures appropriate resourcing that is both aligned with targets, and
able to adapt to changing market conditions and other external impacts.
The MDS medium-term planning horizon
P.4 To meet long-term demand, Transnet must invest for long-term growth prospects, but be mindful of short- to medium-term
volatility in the domestic and international markets. This approach is reflected in the reduction of the Capital Investment
Plan from R277,8 billion to R229,2 billion over the next seven years, in response to the lower-than-planned freight demand.
Seven-year targets for the MDS strategic imperatives are shown below:
Regional integration
(Africa revenue)
R million R million
2 095,1
1 860,1
1 864,9
2 135,4
2 828,2
226,8
1 250,0
1 512,5
1 981,6
Nil
25,8
31,1
44,5
8,2
268,8
323,8
455,7
Nil
117,8
222,0
321,8
3 527,3
4 224,8
5 631,8
3 000 6 000
2 500 5 000
2 000 4 000
1 500 3 000
1 000 2 000
500 1 000
0 0
Freight Rail Engineering National Ports Port Terminals Pipelines Total Africa
Authority revenue
102 Read more
More information on Transnet’s short- to medium-term commercial outlook17 500 20 000
15
16
16
17
1
2
1
5
5
1
1
2
7
1
2
30 000
15 000 17 500
25 000
12 500 15 000
TRANSNET
20 000Integrated Report 2017 45
10 000 12 500
15 000
7 500 10 000
7 500 10 000
5 000
2 500 5 000 5 000
0 2 500 0
Freight Rail Engineering National Ports Port
0 Terminals Pipelines Overall capital
R million Authority investment
Freight Rail Engineering National Ports Port Terminals Pipelin
Authority
Financial sustainability
Capacity creation Financial sustainability
R million R million R million %
(Capital expenditure per Operating Division)
15 654 65 478
16 240 75 646
16 828 93 402
17 035135 288
945 27 557
860 32 180
720 52 399
1 065 72 549
25 104
21 772
1 208 27 264
1 582 45 279
2 765
3 189
5 921
15 431
44,4% and 2,9 times
45,0% and 2,7 times
45,2% and 2.9 times
37,8% and 4.0 times
R million R million R million
65 478
75 646
93 402
135 288
27 557
32 180
52 399
72 549
25 104
21 772
27 264
45 279
2 765
150 000 60 000 20 000
R million R million
2 020
1 768
5 653
5 745
2 419
7 390
1 706
2 216
1 845
599
21 438
23 375
28 036
32 173
150 000 60 000 20 000
20 000
120 000 50 000 16 000 35 000
17 500 120 000 50 000
30 000 16 000
90 000 40 000 12 000 50
15 000
90 000 25 000
40 000 12 000
12
60500
000 30 000 8 000 40
20 000
10 000 60 000 30 000 8 000
30 000 20 000 4 000 15 00030
7 500
30 000 20 000
10 000 4 000
5 0000 0 0 0
2 500 Revenue EBTIDA Cash flow0from Net profit 5 000 0 Gearing and cash 0
operations after tax interest cover
R million
0 Revenue EBTIDA 0 Cash flow from Net
operations aft
Freight Rail Engineering National Ports Port Terminals Pipelines Overall capital
Authority investment
Capacity creation
Market
Financial
(Capital segment competitiveness
sustainability
expenditure per Operating Division)
(Rail Addressable Market Share growth: RAMS % NTK) Market segment competitiveness
R million R million R million
R million R million%
(Rail Addressable Market Share growth: RAMS % NTK)
478
646
402
30 288
557
32 180
399
549
25 104
21 772
264
279
2 765
189
5 921
23 15 431
44,4% and 2,9 times
45,0% and 2,7 times
45,2% and 2.9 times
37,8% and 4.0 times
654
240
828
035
945
860
720
065
2 020
1 768
5 653
5 745
208
582
2 419
7 390
30 1 706
2 216
845
599
21 438
23 375
28 036
32 173
%
1565
1675
1693
135
27
52
172
127
145
22,1 1 3
29,4
31
31
22,1
25
23
23
20 000
150 000 60 000 20 000 35 000
17
%
29,4
31
31
25
23
30
17 500 30 000
120 000 50 000 16 000
15 000 30
25 25 000
12
90500
000 40 000 25 12 000 50
20 20 000
10 000
60 000 30 000 20 8 000 15 00040
15
7 500
15 10 000
5 000
30 000 20 000 4 000 30
10
2 500 5 000
10
50 0 0 0
0 0
Revenue EBTIDA Cash flow5from Net profit Gearing and cash
0 Freight Rail Engineering National Ports operations
Port Terminals Pipelines
after tax Overall capital
interest cover
General Freight Intermodal Authority investment
0
General Freight Intermodal
Financial sustainability
Operational excellence
Market
R Railsegment
million
Freight volumes competitiveness R million Operational excellence
R million %
65 478
75 646
93 402
135 288
27 557
32 180
52 399
72 549
25 104
21 772
27 264
45 279
2 765
3 189
5 921
15 431
and 2,9 times
and 2,7 times
and 2.9 times
37,8% and 4.0 times
(Rail Addressable Market Share growth: RAMS % NTK) Freight Rail volumes
150 000
mt 60 000 20 000
29,473,8
3176,0
3176,0
3076,0
22,157,2
2560,0
2360,0
2360,0
219,1
234,0
246,1
273,0
% mt
73,8
76,0
76,0
76,0
57,2
60,0
60,0
60,0
219,1
234,0
246,1
273,0
120 300
000 50 000 16 000
44,4%
45,0%
45,2%
30 300
250
90 000 40 000 12 000 50
25 250
200
60 000 30 000 8 000 40
20 200
150
30 000 20 000 150 4 000 30
15
100
100 0 100 0 0
50
Revenue EBTIDA Cash flow from Net profit Gearing and cash
5 50
operations after tax interest cover
0
0 Export coal Export iron ore Total Freight Rail 0
volumes
General Freight Intermodal Export coal Export iron ore Total Freight Rail
volumes
Market segment competitiveness
Operational
(Rail Addressableexcellence
Market Share growth: RAMS % NTK)
Freight Rail volumes 2017 2018 2020 2024
%
29,4
76,031
76,031
76,030
22,1
60,025
60,023
60,023
mt
73,8
57,2
219,1
234,0
246,1
273,0
30
300
Performance The year Short-term Medium-term
highlights ahead planning planning
25
250
20
200
15
150
10
100
5
5046 STRATEGY AND RESOURCE ALLOCATION continued
Transnet long-term planning principles United Nations Sustainable Development Goals
Provide capacity marginally ahead of demand to enable and
1 8 9 11 12
promote economic growth in South Africa and in the region
Figure 9
Adopt sustainability principles as part of development plans,
including improved energy efficiency and reducing 2 6 7 8 9 10 11 12 13 14 15
carbon emissions
Integrate rail, port and pipeline planning within Transnet 3 9 11 12
Pursue alignment with national road and electricity
4 7 8 9 11 12 13
supply planning
Assume that operational efficiency is optimised first, then
5 8 9 12
consider infrastructure-based capacity solutions
Target rail suitable freight to shift from road to rail 6 8 9 11 12 13
Benchmark internationally on world-class handling services,
7 9 11 12
new technologies and best practices.
Plan to improve South Africa’s global competitiveness by
8 8 9 11 12
reducing the total cost of freight transport and logistics.
Identify opportunities in Africa and leverage the economies
9 8 9 11 12
of scale in global trade
Provide responsive infrastructure that meets South Africa’s 1 5 6 7 8 9
economic needs in line with the New Growth Path and the 10
10 11 12 13 14 15
National Development Plan
Transnet’s long-term strategic perspective Two baseline fundamentals are apparent:
P.4
The world stands on the brink of a technological revolution that • The customer is at the centre of all that is conceived, designed
will fundamentally alter the way we live, work and relate to one and executed, and informs all efforts, powered by both new and
another. The digital 4th Industrial Revolution will see a fusion of current technologies; and
technologies poised to disrupt almost all industries and transform • Technology is a key enabler to realise short-, medium- and
production, management and governance systems. Transportation long-term objectives.
and communication costs will likely drop, and logistics and global
supply chains will become more effective, with the cost of trade As the custodian of competitiveness of the country’s transport
diminishing at a rapid rate, all of which will drive new markets and logistics industry, Transnet will look at replicating and
and economic growth. The 4th Industrial Revolution promises a possibly leading disruptive industrial innovations by consuming
systemic transformation that impacts civil society, governance new technologies such as AI, 3D printing, Internet of Things (IoT)
structures and human identity in addition to having solely and robotics, which exponentially increase the pace of change.
economic and manufacturing ramifications. Transnet’s Digital Transformation strategy is focused on
innovation that supports investments in technology, business
Maximising the penetration of Transnet’s current market with processes and business model review to create value for
existing products is a key focus of the MDS. Equally important will customers, employees and the Shareholder.
be the diversification of business with new services and markets.
Digitalisation is an opportunity to accelerate diversification and to
realise new business models for Transnet.TRANSNET Integrated Report 2017 47
Transnet 4.0 – ‘Transnet of tomorrow’
Management has adopted the Transnet 4.0 vision for accelerating growth in the context of the 4th Industrial Revolution. The aim is to deliver
on MDS outcomes, while fundamentally reinventing the existing business model to acclimatise to the challenges and opportunities of this
emerging paradigm.
Transnet 4.0 has three main growth areas:
Accelerate efforts to extend the Company’s footprint in the fast-growing
1 Geographic expansion regions of Africa, Middle East and South Asia.
Transform from being a business primarily focused on transport and
2 Product and service innovation cargo handling towards becoming a fully integrated logistics service
provider, offering end-to-end solutions to key partners.
Establish an advanced manufacturing capability in rail, ports and transport
Expanding the scope of Transnet’s
3 manufacturing business
as an original equipment manufacturer (OEM) for Africa through the
provision of customer-focused asset lifecycle solutions.
Transnet International Holdings focus areas
Rail
The sector’s primary aim is to grow cross-border volumes and enable regional
integration, focusing on the:
• Maputo Corridor (South Africa, Swaziland, Mozambique);
• East/West Corridor (South Africa, Namibia, Botswana, Lesotho); and
• North/South Corridor (South Africa, Zimbabwe, Zambia, Democratic Republic
of Congo, Tanzania).
It is anticipated that rail operators will execute a unified railway system
per corridor, as if no boundaries exist between countries involved.
The increase in cross-border volumes is the largest revenue driver of
the Transnet International Strategy.
Engineering
As economic growth in Africa unfolds, the need for a road-to-rail modal shift
intransportation becomes more urgent, and the demand for rolling stock and
associated maintenance will increase. Engineering already operates in this
space and is well positioned to meet increased demand. Capacity of its
extensive manufacturing facilities is easily increased by initiating additional
shifts. The development of the TransAfrica Locomotive is expected to satisfy
a market need at a competitive price.
Ports
The basis of Transnet’s geographic expansion for the ports sector lies in port
concessions, which remain lucrative in the region. The low incidence of distressed
or cancelled contracts demonstrates that this route has achieved the desired
outcome. Excluding South Africa, approximately 69% of all containers are
shipped through terminals operated by the private sector. While port concession
opportunities are limited, Transnet is well positioned to compete in this arena.
Pipelines
The discovery of new oil and gas reserves in Africa has resulted in a significant
demand for new infrastructure capacity and new-build project opportunities.
Oil and gas commodity prices remain low and, in some instances, below project
hurdle rates, placing a damper on new-build plans. Numerous new-build
opportunities are likely to reach final investment decision in 2018, and will be
issued to the private sector on concession. This signals a strong political desire
to drive oil revenues and provide frontier economies an opportunity to enter the
global oil and gas sector. Transnet is well placed to participate in such concessions.48 STRATEGY AND RESOURCE ALLOCATION continued
Digitally enabled growth
1 Geographic expansion The above three converging growth areas will be underpinned by
the optimal use of technology to drive service proficiency and
reliability. Transnet 4.0 requires that we become a multi-faceted
As custodian of the South African ports, rail network and pipeline
and service-oriented manufacture-driven, digital organisation.
infrastructure, enhanced connectivity of the regional freight system
The rapid incorporation of leading technologies into new and
is a priority, and is embedded in the Statement of Strategic Intent
existing products and processes will be a key characteristic as
and the Shareholder’s Compact. Transnet International Holdings (TIH)
Transnet moves forward.
will co-ordinate all activities beyond the borders of South Africa.
TIH was approved by the Transnet Board of Directors, DPE and the
Minister of Finance. It is envisaged that TIH will be operational Resourcing for the long term:
during the financial year.
Transnet of tomorrow
The current linear model of growth, founded on resource
consumption and pollutant emissions, is unsustainable.
2 Product and service innovation Transitioning towards a more circular economy will require
fundamental changes to Transnet’s business model. Disruptive
Key initiatives to support Transnet’s focus on product and service innovation is already reshaping our existing business model
innovation include: and how we prepare for the ‘Transnet of tomorrow’.
• Introducing portfolio management to develop solutions from
ideation to concept launch; The United Nations Environment Programme (UNEP)
commissioned an analysis of the options for a green economy
• Supporting the growth of the natural gas sector in South Africa
transition for selected key economic sectors in South Africa, at
by developing and implementing a business case for Transnet’s
the request of the South African Department of Environmental
role as a national LNG and gas infrastructure developer and
Affairs . The findings reflect that longer-term sustainable growth
1
operator;
is related to the management of natural resources. Increasing the
• Encouraging PSPs through a combination of efforts such as
efficiency of use and curbing waste of such resources would
separating the terminal and rail haulage business; creating
reduce the decline – and support the growth – of some capitals.
digital track-and-trace; and sharing asset utilisation with the
private sector;
Transnet has developed the Sustainability Risks and Opportunities
• Intensifying Transnet’s footprint regionally and globally with Assessment (Transnet SROA©)2 methodology to:
competitive supply chains on corridors; • Identify risks and trends that have a likelihood of occurring over
• Creating and enhancing logistics ecosystems to accelerate Transnet’s long-term planning period (30 years), that would have
economic growth through our property portfolio; a high impact on Transnet’s ability to deliver on its mandate; and
• Establishing Transnet as Africa’s own rail, ports and • Identify and recommend opportunities to enhance value
transport OEM; and creation over the long term.
• Driving property/spatial development and innovation.
• Pursuing digital solutions and other exponential growth Analysis of Transnet’s long-term sustainability risks and trends
opportunities in the context of the 4th Industrial Revolution. identified six key emerging risk areas, with their parallel emerging
opportunities, namely:
• Circular Economy3
• Disruptive Technology4
Expanding the scope of Transnet’s
3 manufacturing business • Energy
• Water
• Biodiversity
We intend to expand the scope of our manufacturing capabilities
• Social Inequality
as well as seek new markets for existing products. Engineering will
soon launch a shunting locomotive targeted at the African market
77
Read more
and, additionally, develop a mainline locomotive. The Operating
More information on emerging risks and trends.
Division has also expanded into the ports sector, focusing on the
maintenance and enhancement of cargo-handling equipment.
1
UNEP: South African Green Economy Modelling Report, 2013.
2
The SROA process was driven by a 27-participant team from multiple disciplines, of which 17 were Transnet employees. The SROA team performed a scenario
analysis on the six risk areas to determine how each risk may evolve over the next 30 years. A valuable outcome of the process was a set of recommendations
for diversifying revenue streams, harnessing co-benefit opportunities and reducing operating costs based on re-imagining the ‘Transnet of tomorrow’ from a
sustainability perspective.
An alternative to a traditional linear economy (make, use, dispose) in which we keep resources in use for as long as possible, extract the maximum value from
3
them while in use, then recover and regenerate products and materials at the end of each service life.
4
Technological innovations that create new market and value networks and eventually disrupt an existing market and value network.TRANSNET Integrated Report 2017 49
The conceptual roadmap of the ‘Transnet of tomorrow’.
Rail infrastructure 30-year rail Resourcing fundamentals
infrastructure
Our vision for improved rail services includes investment: Align infrastructure with freight type.
new elements of service reliability, while
rolling stock models will be upgraded and
refined to provide a better representation
R167 billion Improve operational characteristics.
Ensure network connectivity.
of journey times, dwell times and turnaround 30-year rolling stock Standardise infrastructure.
times. Corridor services will offer infrastructure
end-to-end solutions, thus aligning mainline Align with Prasa/non-Transnet operator
investment:
upgrades with train-handling requirements requirements.
at the endpoints. R283 billion Match capacity to demand.
Develop regional integration.
Port infrastructure 30-year port Resourcing fundamentals
infrastructure Improve infrastructural and
We envisage new port sites along South investment: operational efficiency.
Africa’s coast, with sustainable approaches
for future port development. Ports will R226 billion Maximise port zone functions.
harness the value of leading-edge emerging Develop back-of-port logistics areas to
digital technologies. Durban’s container increase port capacity.
capacity planning will be revised and a more
comprehensive suite of import options will Integrate and align port and rail capacity planning.
be devised for natural gas through the port Maintain flexibility to respond to changing
system. This landscape will also consider the technological and economic conditions.
potential port and pipeline infrastructure
required to import and distribute gas in Respond to environmental opportunities
South Africa, including Floating Storage and and constraints.
Regasification Units (FSRUs) power barges Develop regional integration.
and land-based power generation. Port system-wide capital investment.
Align with planning initiatives of key stakeholders.
Pipeline and Gas 30-year pipeline and Resourcing fundamentals
gas infrastructure Align with the planning initiatives of local,
infrastructure investment:
provincial and national Government, and other
Transnet will identify new pipeline, terminal
and storage investment opportunities in
R38 billion key stakeholders.
Maintain flexibility to respond to changing
South Africa. We envisage much improved
technological and economic conditions.
planning across the liquid fuel system as a
result of better engagement with key Respond to environmental opportunities and
stakeholders such as Government, oil constraints in a sustainable manner.
majors and historically disadvantaged Follow a common user principle in developing
South Africans. Sustainable infrastructure an integrated liquid fuels supply system.
will consider rehabilitation, reuse and
optimisation of existing infrastructure. Provide a logical range of facilities to meet
Transnet will enjoy successful partnerships local as well as hinterland demand.
with other gas roleplayers. Transnet Integrate and align pipeline with port and oil
Infrastructure Planning will also be terminal capacity planning.
upgraded to meet the fast-evolving gas
energy landscape, with due consideration Maintain the flexibility to respond to changing
for the drivers of natural gas use and other technological and economic conditions.
Government initiatives. Meet the market demand and provide equitable
access and capacity for all parties that want to
participate in the oil and gas business sector.
Facilitate the DoE’s security of supply objectives
Africa expansion to comply with the Petroleum Pipeline Act and
the Gas Act.
Transnet envisages multiple rail, port and pipeline projects on
the continent, facilitated through Transnet International Improve infrastructural and operational
Holdings. Specific strategies are developed around areas of efficiencies and reduce transport and
interest. The regional freight system benefits from deeper logistics costs.
integration and enhanced connectivity. Transnet continues to
participate in the New Partnership for Africa’s Development
(Nepad) Business Foundation, Southern African Railways
Association, Port Management Association of Eastern and
Southern Africa and other regional forums.The Transnet
Electrons Data Molecules
2046 LTPF period Declining
Renewable Artificial growth in
Risk energy smart grid intelligence petroleum
demand
mitigation
Electric vehicle Augmented Water
The following list (EV) recharge reality pipelines
represents trends and infrastructure
events that require
continuous assessment Integrated Desalination
and have the potential into satellite facilities
to pose risks and/or
opportunities:
2024 MDS period
‘Uberisation’ of mobility Concentrated Drone Catalyse
systems solar power (CSP) surveillance biofuels industry
Structural changes in
Energy system Broadband Gas
commodity demand
transformation bunkering
Autonomous road
freight systems Microwave
transmitters Rapidly advancing
Social activism: #mustfall Coastal wind environmental
campaigns energy supports regime
‘Green Port’ Customer-
Automation impacts centric platform
on job opportunities Gas pipelines
Scale up
Rapidly advancing rooftop solar PV Blockchain
environmental regime application
LNG import
Changing demand terminals
for petroleum
Internet of Things
Energy system
transformation
New competencies 2017 Financial year
Pilot rooftop Social activism Petroleum
required to navigate solar PV ‘must fall’ campaigns pipelines
4th Industrial Revolution
Fibre optic backbone
Digital-led innovation
Electrons Data Molecules
Diversification of Diversification of revenue Diversification of revenue streams
revenue streams by streams by leveraging digital by leveraging core competence in
leveraging property innovation: infrastructure to:
portfolio for: Extension of fibre backbone Tolling model for LNG infrastructure
Rooftop solar PV to value-added service such as Identify revenue-generating potential
broadband, cellular and WiFi
Wind energy across the biofuel value chain
opportunities
Concentrated solar power Rent port space for desalination facilities
Digital service offerings (or diversify into this market)
Electric vehicle recharge Customer loyalty programmes
centres Secure partnership to supply renewable
(e.g. Discovery drive loyalty energy to desalination facilities
Co-benefit programme)
opportunities: Rent access to water pipelines within
Co-benefit opportunities: corridors
Support road-to-rail Provision of digital access to
initiatives through Co-benefit opportunities:
communities in proximity to
collaboration with car Integrate biodiversity ecosystem services
Transnet network
manufacturers through into biofuels industry
provision of EV centres Reduce operating cost by:
Position SA ports as leading gas bunkering
Advanced manufacturing Removing intermediary costs
on the continent
of upstream energy through digital replacement
infrastructure Build competency in desalination and sell
Preventing theft through
on into other markets
Reduce operating drone surveillance
cost by: Reduce operating cost by:
Minimising time wastage via
Pursuing renewable real-time augmented reality Lowering exposure to oil price volatility
energy cost at price parity through biofuel switching
Increasing efficiency via
with grid electricity Lowering carbon tax exposure through
automation and autonomous
Minimising energy cost processes biofuels
volatility Securing water supply via access to
desalinated water for usage in operationsof tomorrow
Freight Manufacturing Service
Declining Industrial Meteorological 2046 LTPF period
commodity scale 3D big data
demand printing analytics
Road-to-rail Waste stream Waste trading
modal shift optimisation digital platform
well advanced and upcycling
Autonomous Automisation 2024 MDS period
Drone pilot
road freight impacts job training
system opportunities
Drone New
Upstream
freight system competencies
energy
infrastructure
‘Uberisation’ of Biodiversity
mobility system ecosystem services
Advanced
manufacturing
Road-to-rail
modal shift Advisory
Drone services
Conversion to manufacturing
25k Kv AC traction Tourism
strategy marketing
Distributed
2017 Financial year
Wayside energy
power technology storage system
adopted for most
corridors to provide
the most optimal Locomotive
operating model manufacturing
Road
railer freight
Freight Manufacturing Service
Diversification of Diversification of revenue Diversification of revenue
revenue streams by streams by leveraging core streams by leveraging core
leveraging property competence in manufacturing to: competence and strategic assets:
portfolio for: WESS can be sold into the SADC South African tourism industry has
Distributed power and Africa market growth potential
technology for most
Participate in upstream emerging Advisory services can be targeted
corridors
renewable energy market in South to public sector areas where
Dual voltage Africa and Africa capabilities are lacking
locomotive fleet
Establish and dominate local drone Biodiversity revenue-generating
Road-to-rail freight market and scale up to reach opportunities are emerging,
African markets especially where there is a linkage
Drone freight system into the food value chains
Leverage existing decentralised
Co-benefit property portfolio to launch an The waste trading digital platform
opportunities: agnostic EV recharge may have significant growth
Freight node infrastructure opportunity as well as scalability of
optimisation the platform solution into other
Co-benefit opportunities: geographical markets
Improved energy Skills and competencies in the
generation and energy manufacturing space and The meteorological big data
distribution (low move downstream to maintenance analytics capability will provide
carbon) information relevant to multiple
Opportunity to establish a industries. (e.g. insurance industry)
Reduced cost of business around the training of
moving things drone pilots Reduce operating cost by:
Reducing operating Utilising ecological infrastructure
Reduce operating cost by:
cost by: instead of civil infrastructure
Optimising waste management wherever viable
Creating economies initiatives
of scale by optimising Optimising waste management
flow densities over Lowering energy cost through initiatives
long distances waste-to-energy conversionYou can also read
