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Transnet:
Progress report
Select Committee on Labour and Public Enterprises
Parliament
21 June 2006
Contents
1. Global trends in the transport and logistics industry
2. Macro economic view of SA’s transport & logistics industry
3. Transnet strategy
3. Restructuring update
Contents
1. Global trends in the transport and logistics industry
2. Macro economic view of SA’s transport & logistics industry
3. Transnet strategy
3. Restructuring update
Global GDP trends
GDP Growth
10
Growth Rate
World
Euro Area
US
1
2003
2004
2005
2006
2007
East Asia and Pacific
South Asia
South Africa
0.1
Period
Regional growth in container traffic, 2003 - 2008
Global transport trends in containers
• Global container volumes are increasing
– Global containerized traffic grew from 78m TEU to 106 million TEU between
2002 & 2005
• Increasingly large vessels
• Larger vessels demand larger, more efficient ports
–
–
–
–
Port congestion has become a global phenomenon
Strained capacity in USA and European ports to support container growth
Ports in Asia gearing to handle 250+ berth moves per hour
Average seaborne transport cost with an 8,000 TEU vessel is estimated to be
20-30% lower than that with a 4,000 TEU vessel
• Increased industry consolidation
– Top five carriers handle 63% of total volume
• Increased use of technology
*Source: Container management 2004
DCT projection – a South African growth example
Global transport trends in bulk commodities
• Forecast volumes handled at China’s sea ports by 2010
– Coal expected to reach 990 m tons
– Crude expected to be 140m tons (in 2004 China imported 110m tons via
shipping)
– Iron ore expected to reach 320m tons (imported iron ore was 200m tons in
2004)
• Larger vessels are coming on stream
– Ore carriers of 300,000 tons deadweight being constructed
– Unprecedented order book for new bulk vessels
– Freight rates remain high
*Source: Container management 2004
China’s share of global commodity usage
Percentage of world consumption in
2001
2011
Iron Ore
30%
46%
Crude Steel
25%
40%
Finished Steel
22%
36%
Platinum
21%
35%
Zinc
17%
29%
Copper
15%
26%
Aluminium
15%
26%
Africa’s share of natural resource reserves
Agenda
1. Global trends in the transport and logistics industry
2. Macro economic view of SA’s transport & logistics industry
3. Transnet strategy
3. Restructuring update
South Africa: macro-economic indicators
Macroeconomic Indicators
100
Rate of change
10
Gross domestic expenditure
Exports
Imports
Real GDP growth
1
2002
2003
2004
2005
0.1
Period
2006
2007
2008
745 million tons freight per annum. Total transport cost R135bn per annum.
Biggest portion of total is long-haul road transport.
Pipeline &
Water
0%
R0.3bn
Rail
9%
Air
9%
75% long-haul goes
by road
R11bn
R11bn
Road - Rural
20%
Road Corridor
38%
R25bn
SA’s logistics costs:
15.2% of GDP
(CSIR 2005)
R50bn
Road - Metro
24%
R30bn
Rail corridor = R135/ton
Road corridor = R360/ton
Modal split of traffic
Transnet constraints include ageing infrastructure
Rail
• 2 360 locomotives and 84 633 wagons
• Average age of fleet 27 years
• Current availability of fleet approximately 64%
Ports
• Depth of harbours
• Container handling facilities
Pipeline
• 40 years old
• 90% of operating capacity
contents
1. Global trends in the transport and logistics industry
2. Macro economic view of SA’s transport & logistics industry
3. Transnet strategy
3. Restructuring update
Aligning Transnet’s strategic focus with the economy
Mandate:
• Support SA’s export-led growth strategy
• Reduce the cost of doing business
Production location of key sectors
Maputo
SA’s economy:
1. Mining (6%)
49%
2. Manuf. (20%)
45%
3. Agriculture (4%) 6%
Richards
Why Strategic corridors?
Bay
•
Durban
•
East
London
Cape
Town
•
Coega
PE
•
Heavy Manufacturing zones
Mining zones
Freight Typology:
Up to 70% of
economy is bulk,
heavy-haul, long
distance and low
to medium value
traffic
Majority of export/ import traffic (excl.
containers) is typically bulk and heavy
manufacturing on rail
Majority of road haulage is for domestic
distribution
To support the export strategy and
economic growth for current key sectors,
connectivity between inland transportation
systems and ports are critical
Create efficient export systems Transnet
Focus
for growing sectors
Transnet strategic direction
• Focus on rail , ports, pipelines (Operations & Infrastructure)
• Focus on improving key corridors/ clusters
The turnaround time
Transnet business: commercial ownership,
development, maintenance and operations of South
Africa’s port, rail and pipeline infrastructure on behalf of
the South African government.
Transnet mandate: to lower the cost of doing business
in South Africa
Transnet strategy: to boost the integrity and
efficiency of the freight logistics network,
driven by ‘one company: one vision’ approach.
RAIL
PORTS
PETRONET
Core Transport Portfolio
Transport
Telecomms
RAIL
Strategic Support Divisions
Independent Regulators
HSA
The turnaround time
Key pillars of the Turnaround Strategy
•
Redirect the business
•
Restructure the balance sheet
•
Implement strict corporate governance
and vigilant risk management
•
Build human Resources capabilities
Provide efficient,
integrated
transport
logistics
network to the
bulk and
manufacturing
sectors
Implementation programme overview
Lower cost of
doing business
Corporate
governance and
risk management
• Shareholders compact
• Memo and articles of assoc
• IFRS
• Legal review
Redirect and reengineer
the business
• Reengineer core business
• Corporate HO restructure
• Operational synergies
• Customer focus
• Infrastructure development
4 Point
Turnaround
Human capital
Plan
development
• Skills audit and matching
• Recruitment and retention
• Skills and training
• Performance Management
• Career management
• Succession planning
Balance Sheet
restructuring
• Pension fund deficit
• Transfer SAA to govt
• Disposal of non-core
businesses
Economic development
One company, one vision
Targeted
sectors
CAPEX 5-YEAR PLAN (CORE)
5-Year Capex total projection: R 64bn
Rail (R31.5bn)
Replacement:
•Ore Line sustain (R460m)
•Coal Line sustain (R6192m)
•Capitalization of Maintenance (R8124m)
•General Freight (R10827m)
•Other smaller replacement projects (R1475m)
Ports (R18.6bn)
Replacement:
•Pier 1 re-surfacing (R659m)
•Reconstruct Island View Berths (R134m)
•Remodel Maydon Wharf (R1249m)
•Remodel South Arm (R633m)
•Other smaller replacement projects (R836m)
Expansion:
Expansion:
•Ore Line expansion (R2283m)
•Coal Line expansion (R1765m)
•Other smaller projects (R345m)
• Construction of the Port of Ngqura (R2493m)
• Container Terminal ExpansionSalisbury and Bayhead (R3837m)
• Cape Town Capacity expansion (R1838m)
• Other smaller expansion projects (R6888m)
CAPEX 5-YEAR PLAN (CORE)
Port Operations (R6.3bn)
Replacement:
•Durban Container Terminal (R274m)
•MPT West (R614m)
•Refurbish 8 Noell cranes(R240m)
•14 Gantry cranes & 78 Straddle carriers (R1167m)
•Other smaller replacement projects (R75m)
Expansion:
•Coega Container Terminal (R1254m)
•Saldanha Phase 1 & phase 1B expansion (R689m)
•Other smaller expansion projects (R1950m)
Pipelines
(R4.9bn)
Replacement:
• Upgrade of Gas Line - Lilly
(R396m)
Expansion:
• New Multi-product pipeline
(R2905m)
Gauteng to Maputo line (R620m)
 Terminalling and logistics (R499m)
•Other smaller expansion projects (R1627m)
contents
1. Global trends in the transport and logistics industry
2. Macro economic view of SA’s transport & logistics industry
3. Transnet strategy
4. Restructuring update
Restructuring update
Disposal of non-care assets:
Transfers to government in process of completion:
•
Metrorail
•
SAA
Sale of shares in terms of existing shareholder agreements:
•
VAE Perway
•
Equity aviation
•
Connex
Preparation of sale to private sector:
•
V&A Waterfront
•
Blue Train
•
Viamax
•
Freight Dynamics
Restructuring update
Agreement has been reached with trade unions on disposals.
Only outstanding entities requiring finalisation of agreement:
•
Autopax
•
Transtel
•
Arivia
Agreed framework for different types of disposals and
protection of employee benefits
Thank you