NATIONAL PORTS AUTHORITY 2017

Transcription

1 NATIONAL PORTS AUTHORITY 2017 Digital Admired Agile United

2 CONTENTS Navigating this report HIGHLIGHTS 1 BUSINESS OVERVIEW 2 REGULATORY ENVIRONMENT 4 PERFORMANCE CONTEXT 5 OPERATIONAL PERFORMANCE 6 Core initiatives for Overview of key performance indicators 9 Financial performance review 11 PERFORMANCE COMMENTARY 12 Financial sustainability 12 Looking ahead 12 Capacity creation and maintenance 13 Looking ahead 13 Market segment competitiveness 14 Looking ahead 16 Human capital 17 Organisational readiness 17 - High-performance culture and environment 17 - Skills development 17 - Health and safety 17 Governance and ethics 18 - Environmental stewardship 18 - Social accountability 18 Icons key Market Demand Strategy (MDS) Financial sustainability Capacity creation and maintenance Market segment competitiveness Operational excellence Human capital management Organisational readiness Sound governance and ethics Constructive stakeholder relations Sustainable Developmental Outcomes Sustainable Developmental Outcomes (SDOs) Employment Skills development Industrial capability building Investment leveraged Regional integration The Capitals Transformation Health and safety Community development Environmental stewardship NATIONAL PORTS AUTHORITY TOP 5 RISKS AND KEY MITIGATING ACTIVITIES 19 OPPORTUNITIES 20 ABBREVIATIONS AND ACRONYMS 21 CORPORATE INFORMATION 22 Financial capital Manufactured capital Intellectual capital Human capital Social and relationship capital Natural capital Performance Key Improvement on prior year performance Decline on prior year performance Equivalent performance to prior year Target achieved Target partially achieved Target not achieved Material clusters MDS strategic thrusts Build social trust through ethical leadership and corporate citizenship Unlock organisational value by attracting talent, fostering innovation and building unity Ensure long-term financial stability in a tough economy Ensure customer-centricity and build partnerships for sustainable growth Promote transformation and growth in the wider South African economy A A

3 TRANSNET National Ports Authority NATIONAL PORTS AUTHORITY Highlights In the year under review, revenue dropped by 6,9% to R10,4 billion (2016: R11,1 billion). The decline is largely attributable due to a zero tariff determination by the Port Regulator and a negative claw-back adjustment of R1,0 billion (2016: positive R136 million), as well as a decrease in break-bulk and automotive volumes. The depressed local economy adversely affected volumes directly linked to the country s GDP performance. Net operating expenses increased by 3,9% to R4,0 billion (2016: R3,9 billion) which is below the inflation rate of 6,1%. Operating expenses increased by 3,9% The Division s EBITDA was 12,6% lower than the previous year at R6,2 billion (2016: R7,3 billion), mainly due to inadequate volumes and revenue performance. EBITDA 12,6% lower On the construction of Joint Operations Centres (JOCs) across seven ports: the JOCs in the ports of Durban, Richards Bay, East London, Port Elizabeth, Cape Town and Saldanha are operational, with the Port of Durban JOC operating 24/7. The Port of Ngqura is in the final stages of construction. The Port of Mossel Bay is still at early stages of construction. Joint Operations Centres Port development framework plans have been completed for all ports. Port development Four new tugs were introduced to the port system as part of the tug-building project. Four new tugs Port maintenance dredging volumes were exceeded during the past year. (2016 actual: 4,28 million m 3 vs 2016 target: 4,25 million m 3 ) Port maintenance Port real estate vacancies were successfully maintained within the target range. Port real estate vacancies maintained Port security audits were completed in alignment with International Ship and Port Facility Security Code (ISPS) standards. Port security audits Two port festivals at the ports of Durban and Port Elizabeth were held during the year under review. Port festivals are platforms to promote interaction with communities and expose them to the maritime sector as a way of facilitating transformation to the sector. Port festivals

4 2 TRANSNET National Ports Authority 2017 Business overview The National Ports Authority (TNPA) operates as a port landlord - managing, controlling and administering the South African ports system. Core services include the maintenance and provision of port infrastructure, as well as the provision of maritime operations, such as pilotage, towage (tug assistance), dredging, and lighthouse and navigational services. The Operating Division owns and operates Transnet s commercial ports, which are situated in Durban, Richards Bay, Cape Town, Port Elizabeth, Ngqura, Mossel Bay Saldanha, and East London. South African ports owned by TNPA facilitate over 90% of South Africa s global trade and service the shipping feeder network connecting the west and east coasts of Africa. Major commodities handled at the ports include coal, iron ore, containers, automotives, steel, fruit, ferrochrome, manganese ore, and petroleum and chemical products. TNPA, in its role as regulator, is required to ensure that efficient port services are rendered to port users. As part of its oversight responsibilities, it ensures compliance by port users with conditions contained in the operators agreements and licences.

5 TRANSNET National Ports Authority Eight operational ports under the National Ports Authority s control Figure 1 Beit Bridge LIMPOPO NORTH WEST GAUTENG MPUMALANGA Maputo SISHEN Sishen FREE STATE KWAZULU- NATAL Richards Bay Durban NORTHERN CAPE EASTERN CAPE Saldanha Cape Town WESTERN CAPE Ngqura Mossel Bay Port Elizabeth East London National Ports Authority

6 4 TRANSNET National Ports Authority 2017 Regulatory environment The National Ports Authority, as a regulated entity, is required to ensure that the execution of its strategy is in compliance with the National Ports Act, No 12 of 2005 (Ports Act). The Ports Act requires TNPA to assume the role of a regulator of port users, while also being regulated by the Ports Regulator. There are three levels of regulation and control within the port environment: 1. Regulatory oversight and compliance; 2. Economic regulation; and 3. Efficiency of port operations. On 1 August 2016, the National Ports Authority applied for an average tariff adjustment of 8,02% for the 2018 financial year. On 1 December 2016, the Ports Regulator of South Africa published its tariff decision for the 2018 financial year, approving an overall average tariff increase of 5,97%. In response to managing regulatory and revenue risks, Transnet engaged with the Ports Regulator of South Africa and port users (through roadshows) during October 2016 to review the multi-year tariff methodology, which was then published on 31 March 2017 for the 2019 to 2021 tariff periods.

7 TRANSNET National Ports Authority Performance context The National Ports Authority aims to create sustained economic value with respect to its policy mandate. It does so through its strategic role as the national provider of port infrastructure capacity and efficient and competitive port services. Strategically, TNPA assumes the role of market integrator aimed at creating value across the supply chain. During the 2017 financial year, operational performance measures were better than target across most measures used by the Division. This is indicative of the valueadding role that the Division aims to play. However, with the national and global economies still underperforming, the operational efficiency improvements made by the Division are not translating into commensurate financial returns as yet. Against the background highlighted above, TNPA s strategic efforts during the year were focused on managing its regulatory obligations, delivering on its planned infrastructure programme, improving integration of operational performance, and enhancing customer relations as part of the total value proposition to facilitate market segment competitiveness. TNPA continues to implement key elements of its operating strategy, which is geared towards the reduction of ship turnaround time, vessel waiting time and cargo dwell times, as well as to the better utilisation of port assets thereby reducing port costs.

8 6 TRANSNET National Ports Authority 2017 Operational performance Core initiatives for 2017 Implementation Improvement Compliance Operations Implement the capital and maintenance programme. Improve the availability of the marine services fleet through the fleet management programme. Oversee compliance with Terminal Operator Performance Standards and Marine Operator Performance Standards performance targets. Fully operationalise the Division s JOCs. Systems Compliance to slot-booking system. Capacity Monitor promulgated berth depths and dredging programme to ensure capacity availability. Tariffs Implementation of Regulator approved tariff strategy.

9 TRANSNET National Ports Authority Core initiatives for 2017 (continued) Programme Customer Culture Smart Peoples Port Information system elte Environmental compliance Values Training Community Key projects Execute the tug fleet replacement programme. Fully operationalise customer interaction platforms. Foster a customer-centric culture. Deliver Smart Peoples Port Program. Develop and implement an order to cash revenue transactional system. elte connectivity under the ambit af the Smart Peoples Ports Program Embed a safety culture and ensure environmental compliance. Roll-out of Culture Charter values. Continuous improvement training. Promote a people s port theme through port festivals and various community programmes. Operation Phakisa Key Projects: Initiative 2: Port of Saldanha Purpose-built oil and gas port infrastructure; Initiative 5: Port of Saldanha Development of General Maintenance Quay to an offshore supply base; Initiative 7: Richards Bay Floating dock; Initiative 8: East London Boat-building cluster.

10 8 TRANSNET National Ports Authority 2017 Core initiatives for 2017 (continued) Integrated solution Smart People s Ports Programme (SPPP) which is an integrated solution that seeks to create a single view of the port will; Intelligently collect real time information to be able to do integrated planning, integrated monitoring of our processes, reporting and synchronise our processes throughout the value chain. Provide elte broadband around the port precinct and surrounding areas. Reduce traffic congestion within the vicinity of the port. Make use of drone to technology to perform quay wall, hull and buoy inspections. Perform Business Continuity Management & Incident Investigation Management through the Case Management Solution Cash payment system Order to Cash payment system provide an ecommerce platform that will afford our customers 24hr access to our ports and empower them to use a self-service facility without any physical interaction with TNPA.

11 TRANSNET National Ports Authority Overview of key performance indicators Key performance area and indicator Unit of measure Actual Target Actual Target Financial sustainability EBITDA margin % 65,4 61,1 61,3 60,00 Operating profit margin % 51,0 43,7 43,8 39,8 Gearing % 42,3 34,6 28,4 33,13 Net debt to EBITDA times 3,04 3,04 3,00 2,89 Return on average total assets excluding CWIP % 7,61 6,9 5,3 6,23 Asset turnover excluding CWIP times 0,15 0,16 0,12 0,16 Cash interest cover times 4,01 2,8 3,4 3,38 Capacity creation and maintenance Capital expenditure R million Operational excellence Productivity Anchorage waiting time Durban average hours 33 n/a n/a n/a Pier 1 New Pier 2 New Cape Town average hours Port Elizabeth average hours Ngqura average hours Richards Bay average hours Average ship turnaround time Durban containers STAT hour 46 n/a n/a n/a Pier 1 containers STAT hour New Pier 2 New Cape Town containers STAT hour Port Elizabeth containers STAT hour 17, Ngqura containers STAT hour Dry bulk Coal (RBCT) hours Iron ore (Saldanha) hours Manganese (Port Elizabeth) hours

12 10 TRANSNET National Ports Authority 2017 Overview of key performance indicators (continued) Key performance area and indicator Unit of measure Actual Target Actual Target Operational excellence Productivity (continued) Berth occupancy Durban % Cape Town % Port Elizabeth % Ngqura % Berth utilisation Durban % Cape Town % Port Elizabeth % Ngqura % Market segment competitiveness Volume and revenue growth Containers 000 TEUs Break-bulk million tons 7,57 7,3 6,6 6,8 Liquid bulk million kilolitres 41,70 40,85 41,04 41,3 Dry bulk million tons 170,79 180, Vehicles units Tariffs Average tariff increase % 4,80 6,2 0 5,97 Human capital Training spend % of personnel cost 8,14 9,97 3,40 4,65 Employee turnover % 6,00 4,00 4,97 5,00 Employee headcount permanent Revenue per employee R million 2,56 2,40 2,49 2,20 Risk, safety and health Cost of risk % of revenue 3,0 3,1 2,78 3,0 DIFR rate 0,71 0,75 0,66 0,75

13 TRANSNET National Ports Authority Financial performance review for the 2017 financial year Year ended Year ended 31 March 31 March % Salient features R million R million change Revenue (6,9) Containers (2,3) Break bulk (12) Dry bulk ,6 Liquid bulk (2,7) Automotive (32,8) Clawback (1 103) 136 (911) Other (15,5) Operating expenses (4 012) (3 860) 3,9 Energy costs Maintenance Materials Personnel costs Other (467) (436) 7,1 (344) (340) 1,2 (76) (76) (2 248) (2 074) 8,4 (877) (934) (6,1) Profit from operations before depreciation, derecognition, amortisation and items listed below (EBITDA) (12,9) Depreciation, derecognition and amortisation (1 821) (1 602) 13,7 Profit from operations before items listed below ,0 Impairments and fair value adjustments (49,1) Net finance costs (1 736) (1 837) (5,5) Profit before taxation (28,2) Total assets (excluding CWIP) R million ,1 Profitability measures EBITDA margin 1 % 61,3 65,4 (4,1 ) Operating margin 2 % 43,8 51,0 (7,2) Return on average total assets (excluding CWIP) 3 % 5,32 7,6 (2,3) Asset turnover (excluding CWIP) 4 times 0,12 0,15 (20) Capital investments 5 R million (31,2) Employees Number of employees (permanent) number (4,3) Revenue per employee R million 2,49 2,56 (2,7) 1 EBITDA expressed as a percentage of revenue. 2 Profit from operations before impairment of assets, fair value adjustments, net finance costs and taxation expressed as a percentage of revenue. 3 Profit from operations before impairment of assets, fair value adjustments, net finance costs and taxation expressed as a percentage of average total asset, excluding capital work in progress. 4 Revenue divided by average total assets excluding capital work in progress. 5 Actual capital expenditure (replacement + expansion) excluding borrowing costs.

14 12 TRANSNET National Ports Authority 2017 Performance commentary Financial sustainability In the year under review, revenue decreased by 6,9% to R10,4 billion (2016: R11,1 billion) due to a zero tariff determination by the Port Regulator and a negative claw-back adjustment of R1,0 billion. The decrease in volumes is primarily due to the following revenue streams: Containers R88 million or 2% decrease Break-bulk R30 million or 12% decrease Net operating expenses increased by 3,9% to R4 billion (2016: R3,9 billion). The increase in expenses is primarily as a result of higher energy costs, as well as personnel costs increasing to R2,2 billion (2016: R2,0 billion). The increase is below the 6,1% inflation rate, thus showing a 2,2% decrease in real terms. The Division s EBITDA was 12,6% lower than the previous year, at R6,4 billion (2016: R7,3 billion). The decline is largely attributable to the tariff decision by the Port Regulator. Liquid bulk R19 million or 3% decrease Automotive R175 million or 33% decrease Looking ahead 2018 Marginal volume growth is expected for TNPA has embarked on cost-saving initiatives to ensure that it achieves the 2018 financial year targets relating to EBITDA and other key financial ratios. The operating cost includes R109 million for research and development to enable future capital expansions; R61 million for the smart people s port and R375 million in maintenance costs.

15 TRANSNET National Ports Authority Capacity creation and maintenance The National Ports Authority s capital expenditure was 27% below budget at R2 billion (2016: R2,9 billion). The current economic climate has necessitated a measured approach to capital expenditure. The Division undertakes to manage the capital expenditure programme more efficiently in the coming financial year. This includes setting and achieving appropriate targets. Various Operation Phakisa initiatives were undertaken during the year and have advanced to varying levels of completion. This includes the commissioning of a new 90 ton Boat Hoist and Slipway, including new Lead-in Jetties at the Port of Port Elizabeth and the upgrade of the old General Maintenance Quay to a fullyfledged Offshore Supply Base berth at the Port of Saldanha Bay. Significant progress was made on the 3-feet Plan initiatives in ship repair, boat building, rig repair and offshore oil and gas exploration support. During the reporting year, upgrades at the various existing ship repair facilities under Phakisa Initiative 5 progressed well with the completion of the Outer Dry Dock Caisson refurbishment and Dry Dock Concrete Repair in Durban Transnet has adopted a Private Sector Participation model for Operation Phakisa new port facilities on a design-fund-build-operate-transfer basis. During the period under review, Transnet approved a number of business cases and strategic options for execution. Those initiatives include: Establishment of purpose-built oil and gas infrastructure and the appointment of facility operators at the Port of Saldanha Bay; Implementation of strategically prioritised projects in Richards Bay; and Implementing strategically prioritised projects in East London. As part of its continued support for the development of liquid bulk port infrastructure, TNPA awarded rights to Burgan Cape for a liquid bulk terminal at the Port of Cape Town, and gave preferred bidder status to Oil Tanking Grindrod Calulo (OTGC) for a liquid bulk terminal at the Port of Ngqura. TNPA has also awarded rights to Sunrise Energy to develop and operate a Liquefied Petroleum Gas (LPG) terminal at the Port of Saldanha. Looking ahead TNPA plans to invest R1 768 billion during the 2018 financial year and R34,9 billion over seven years (2018 to 2024) in capacity creation, infrastructure renewal and modernisation projects. Major projects planned are as follows: Acquisition of 5 remaining tugs; Reconstruction of sheet pile quay walls at Maydon Wharf; Operationalise Ngqura for containers; Acquisition of new Grab Hopper Dredger; Acquisition of new Cutter Suction Dredger; Helicopter replacement in Durban; Tank farm Ngqura; and Smart people s port. TNPA will continue its efforts on the Operation Phakisa projects. Expression of Interest market processes have now completed for the establishment of an Offshore Oil and Gas Hub at the Port of Saldanha Bay, Floating Dock for Richards Bay, and the establishment of a boat-building cluster at the Port of East London. The market intelligence gained and responses are informing the private sector participation process per facility scheduled for TNPA allocated R2 billion for maritime transport manufacturing (refurbishment of existing ship repair facilities) at South African ports by

16 14 TRANSNET National Ports Authority 2017 Market segment competitiveness At 4,466 million TEUs (2016: 4,439 million TEUs), container volumes were 9,81% below target, despite a 0,61% improvement on prior year results. The subdued performance was due to poor market conditions, increasing competition among shipping lines service consolidation, blank sailings and limited parcel sizes. Additionally, a number of regular transshipment services have relocated to alternate ports. Shipping lines continue to seek more consolidation opportunities, mainly due to price pressures and low demand. Even though dry bulk commodities grew by 4,96% at 179 mt (2016: 171 mt), they were 0,49% below target. Due to a severe drought during the reporting period, there was an increase in the import of maize. This resulted in 941% more maize being imported than originally budgeted. Iron ore exports improved by 0,57% (2016: 58,7 mt v/s 2017: 59,0 mt) on the prior year, but were below target by 1,66%. Several challenges faced by mines contributed to unsatisfactory performance. Unplanned equipment outages at the Port of Saldanha also impacted on the overall performance. Coal export volumes increased by 0,16% on prior year (2016: 76,7 mt v/s 2017: 76,8 mt), however volumes were 4,51% below target. The coal export market was impacted by several challenges including China s continued reluctance to import coal as well as India s curtailed coal intake in the second quarter of the 2017 financial year. This, coupled with an unfavourable market price, made it difficult to achieve the target of 80,4 mt. Challenges in the coal market were somewhat offset by increased exports to the burgeoning African markets of Morocco and Egypt. Economic stagnation seen globally, and in South Africa in particular, had a considerably negative impact on the automotive sector. Vehicle volumes, at units (2016: units), reflected a decline of 4,34% from the prior year, in addition to being 9,44% below target. Poor volume performance was marginally lessened by the car rental industry s rotation of cars. Liquid bulk volumes at 41 million Kl (2016: 41,7 million Kl) were marginally below prior year volumes and 0,45% above target. The growth in demand seen regionally for South African exports and Rand/Dollar fluctuations had a positive effect on liquid bulk volumes. 0,61% improvement on prior year 0,57% growth 0,16% increase Average Anchorage Waiting Time: Following on from the prior year, Ports continue to perform exceptionally well with respect to operational performance targets (average hours waiting). The favourable performance is attributable to minimal disruptions from equipment failure, continuous monitoring of terminal operations, and engagement with all stakeholders with a view to enhancing operational efficiency. Additionally, the introduction of the mooring master system at the Port of Ngqura has minimised the impact of long waves and excessive wind disruptions during the winter season, thus generating significant improvements in operational efficiencies. Durban Container Terminal (DCT) Pier 1 was, impacted by inclement weather conditions, causing operational stoppages that resulted in the KPI s not being achieved at the end of financial year This was further impacted by some vessels at the port of Port Elizabeth arriving ahead of scheduled time during the period. Ship Turnaround Time (STAT): All ports performed well and exceeded set Container KPI targets except for DCT s Pier 2. The favourable performance is a result of regular monitoring. Exceptional Average Anchorage Waiting Time

17 TRANSNET National Ports Authority Market segment competitiveness (continued) Commissioning of an automated mooring system (AMS) and associated measures to mitigate operational disruptions has yielded improved performance, resulting in the Port of Ngqura achieving a favourable deviation of 26,8% on anchorage waiting time and 19% on STAT. The head office JOC facility is complete, and information systems hardware installation is currently at 98% completion. Construction of the Port of Mossel Bay JOC facility is at 10% completion. Construction of the Port of Ngqura JOC facility is at 66% completion, and it is estimated that the port will be commissioned during the first quarter of the 2018 financial year. Terminal and marine performance assessments are gaining momentum through the operations oversight control process. Compliance to slot-booking system has improved across the port system, with the reduction of marine delays across all major ports namely Richards Bay, Durban and Cape Town. Several initiatives aimed at improving customer service and market performance were undertaken. These include the implementation of port operational performance standards, the rollout of operational centres, deployment of smart technology, customer service training, and improvement of market relations. Construction of JOCs across seven ports and the national JOC based in head office, has seen the JOCs in the ports of Durban, Richards Bay, East London, Port Elizabeth, Cape Town and Saldanha being operationalised, with the Port of Durban JOC operating 24/7. Transnet s digital culture continued to gain momentum within TNPA, driving the Divisions effort to create a high-tech smart port system. The smart peoples port is an integrated system that is appropriately enabled by technology to provide safe, efficient and predictable port services, to drive an inclusive economy in which TNPA acts as the integrator of the overall transportation ecosystem. The Digital culture is gaining momentum within JOCs through: The integrated ports managementsystem (IPMS) providing supply chain visibility and performance targets with Terminal Operation Performance Standards (TOPS); Marine Operations Performance Standards (MOPS); Hauler Operations Performance Standards (HOPS); and Rail Operations Performance Standards (ROPS). ROPS are used as measures to facilitate the creation of an efficient high-tech port system, through the smart people s port concept which includes the introduction of drone technologies. This initiative has received international recognition, with South Africa receiving an award in 2017 for this cutting-edge technology.

18 16 TRANSNET National Ports Authority 2017 Looking ahead TNPA will maintain and entrench activities that have led to the achievement of operational excellence, such as the continued implementation of the integrated business execution system. The following programmes are currently either being designed or implemented to achieve operational excellence: The commissioning of TNPA JOCs across all SA ports and head office as a vehicle for coordination and collaboration towards improving the performance of the wider port supply chain. The main focus of the JOCs includes integrated planning of service delivery (marine, terminal, road and rail). Proactive deviation management is key in the JOCs and will provide a platform for port performance visibility. The concept of Collaborative Decision Making (CDM) is currently being explored to ensure effective planning through the use of available resources. The CDM model, intended to integrate the effort of the TOC and TVCC with respect to Transnet s Operating Divisions and stakeholders, will be pursued through an MOU and NDA. TNPA will continue to engage all internal and external stakeholders on developments pertaining to the model. Continued quarterly assessments of the performance of terminal operators against TOPS and the issuing of TOPS Year 5. Iterative improvement on TOPS targets in year five will ensure that TOPS is more reflective of the performance levels expected by customers at South African terminals. A port performance benchmarking exercise is planned for the 2018 financial year. Once completed, the capacity validation exercise will be used as a base to ensure that efficiency improvement targets are aligned to international standards. Revision and reissuing of MOPS for shipping lines and TNPA marine services, giving greater recognition to the queuing time of vessels relative to marine operations completed and signed off by both internal and external stakeholders. The revised MOPS will ensure that there is alignment in the interpretation of delays. The setting of ROPS for Transnet Freight Rail (operating trains within port limits) and terminal operators having rail infrastructure and operations within terminal boundaries. Continued focus will be placed on port-train turnaround time to ensure efficient flow of trains at the port within given operating models. Concern around road/terminal congestion has necessitated the need to develop HOPS for the road freight community operating within the ports. During the 2018 financial year, TNPA will continue with a pilot study in Durban aimed at addressing the efficient movement of freight from port to road, to minimise port congestion. This will form the basis for HOPS. The HOPS key performance indicators have been accepted by stakeholders, and the development of a dashboard concept is underway. Improvement of the capacity of operational personnel to deliver through the implementation of operations leadership programmes. Continued improvement in the availability of the marine service fleet through the fleet management programme. The 2018 financial year is a year of embedding sustainable operational efficiency initiatives supported by continuous improvement for the benefit of customers. Availability and reliability of craft to service vessels is at the forefront of an improved service offering. 2018

19 TRANSNET National Ports Authority Human capital The National Ports Authority s permanent headcount for the 2017 financial year was employees (2016: 4 349). Transnet National Ports Authority (TNPA) permanent employee headcount Actual (2016) Target (2017) Black employees represented 85,8% of the total employee base (2016: 83%). 85,8% Actual (2017) Female employees represented 32,8% of the total employee base (2016: 30%). 32,8% Variance 4,3% Key People with disabilities represented 2,1% of the total employee base (2016: 2,4%). 2,1% Improvement on prior year performance Decline on prior year performance Equivalent performance to prior year Target achieved Target partially achieved Target not achieved Organisational readiness High-performance culture and environment TNPA achieved Top Employer certification which highlighted areas of improvement in human resources practices. The Division actively promoted values and behaviour associated with the Culture Charter and rolled out action plans to improve 2017 Culture Charter ratings. Chief Executive Awards were hosted for the first time as part of the Recognition and Rewards aspect of the Culture Charter. Introduced the employee value proposition within the TNPA. This consists of initiatives aimed at creating an environment where employees feel valued within the organisation. Top Employer certification Improvement of 2017 culture charter ratings Chief Executive Awards Employee Value proposition Skills development In all, learners were exposed to the business to create awareness of the port environment among the youth. A total of pupils and 112 schools visited the port on school tours (tour and info sessions). The Operating Division facilitated the following training in terms of critical skills: 26 engineers; 10 technicians-in-training; and Six pilots in training learners pupils Training in critical skills Health and safety A DIFR of 0,66 was recorded against a target of 0,75, with 28 disabling injuries and one fatality recorded at the Port of Cape Town. More than 50% of the incidents were manageable within work areas. With respect to the recorded fatality, a full board of inquiry was held and recommendations are being concluded. The 2018 financial year will see a focus on incident investigations; sharing of lessons learned; the creation of awareness through enhanced communications; leadership and management visibility; and innovative safety programmes across operations.

20 18 TRANSNET National Ports Authority 2017 Governance and ethics Environmental stewardship Through National Ports Authority s Invasive Alien Plants Eradication Project, alien vegetation at the ports are continuously monitored and cleared to ensure an improved ecosystem. The intended outcomes of these efforts are: Alien vegetation eradication; Restoration of indigenous vegetation; Compliance with the Conservation of Agriculture Resources Act; and Natural habitat protection and restoration. The National Ports Authority s biodiversity management programmes include ecological monitoring of the marine environment; landside biodiversity studies to improve understanding of critical ecosystems within TNPA; ongoing implementation of Invasive Alien Plants Eradication projects that protect threatened habitats in ports; and working with key government stakeholders to develop management programmes for port marine environments that are of national importance. The intended outcomes of these efforts are: Protection of ecological habitats of conservation importance on TNPA land; Improvement of port planning and capital projects delivery by making sure biodiversity protection is at the centre of development decisions; Restoration of indigenous vegetation and improvement of ecological status thereof; Compliance with environmental regulatory requirements; and Minimising risks to ecosystems, human health and the economy that are associated with the degrading quality of biological diversity. Invasive Alien Plants Eradication Project Biodiversity Management Programmes Social accountability Overall, 26 CSI learners were enrolled for the General-purpose Rating course at the Transnet Maritime School of Excellence. The learners have completed the theoretical part of the programme, achieving the Standard for Training Certification and Watchkeeping (STCW), and are now ready to undergo practical sea training. Twenty-three schools in the TNPA Adopt a School programme have been provided with wi-fi connectivity. Two port festivals at the ports of Durban and Port Elizabeth were held during the year under review. Port festivals are a platform for promoting interaction with communities and exposing them to the maritime sector as a way of facilitating transformation to the sector. TNPA created 177 new construction jobs during the 2017 financial year. 26 CSI learners 23 schools Two port festivals 177 new construction jobs

21 TRANSNET National Ports Authority National Ports Authority s top 5 risks and key mitigating activities Key risks 1. Adequate port infrastructure maintenance 2. Uncertain global and domestic economic recovery 3. Execution and delivery of the accelerated capital expenditure programme 4. Enhancing the skill set to meet the demands of a changing port environment 5. Challenges experienced in expeditiously introducing new entrants and industries into the port system Mitigation activities The necessary resources must be acquired timeously to effectively execute the infrastructure maintenance plan Operations must be informed by a balance between commercial imperatives, maintenance and the protection of current assets, especially in the container sector Port Engineers and Maintenance Managers are to dedicate more time doing on-the-ground inspections both internally and externally, thereby executing their oversight mandate Constant monitoring of the economic climate to inform our business planning process, identify domestic and external risks, and advise on possible mitigation and intervention Management of volume and revenue targets Promote and market the South African port system locally and globally to attract more business and investment Implement the pricing/tariff strategy Diagnose lost business opportunities and quantify the impact thereof on the South African economy, and define Customer Relationship Management role to enhance customer centricity Identify and develop new business cases for value-added logistic opportunities in the developed and developing sectors Leverage regional and continental trade agreements for mutual economic benefit Capacitation of infrastructure and procurement departments, including capacity for dealing with tenders and contracts, claims handling, procurement management, project programme office and document control Ensure that new infrastructure is planned and designed to cater for new generation vessels and oil rigs Improve tracking and monitoring of projects through better governance (Enterprise Project Management Office, gate reviews, Capex, Investment Forums) Improve project risk management Accelerate environmental impact assessment approvals Streamline finance and funding processes Onboarding of specialists such as project finance, transaction advisors and legal advisors, from inception of the project Monitor and improve procurement cycle times, and adherence to the Procurement Procedure Manual Incorporate Scope Change Management and Earned Value Management in Project Progress Reports Review organisational structure and align it with the execution of strategy Retraining and upskilling of existing staff to meet changing business needs Review of existing job descriptions to align to changing business needs Develop and implement the recruitment and retention plan Implement the talent management programme Review and enhance succession pipelines Finalise the Concession Procedure Manual and roll it out in the business Training and development of all cross-functional teams to deal with concessions Acquire sector-specific knowledge in the liquid bulk, oil and gas sectors, and the regulatory environment affecting them Dedicate capable resources to strategic projects that have been prioritised and manage crossfunctionally; for example, appoint transaction advisors and/or specialists for major projects as required by the PFMA, and strengthen and improve governance and oversight structures Improve tracking and monitoring of projects through better governance (Enterprise Project Management Office, Gate Reviews, Capex, Investment Forum) Enforce minimum requirements of B-BBEE as per port regulations

22 20 TRANSNET National Ports Authority 2017 Opportunities Promotion of the Port of Ngqura as a regional transshipment hub in sub-saharan Africa. Increasing revenue and employment through Operation Phakisa projects. Promoting regional port development through cooperation on various fronts such as human resource development, port planning and engineering, technology, maintenance and capital dredging. Expanding the South African port system (e.g. Durban Dig-out Port). Promotion of the South African port system globally to attract investments and optimise industrial development zones. Improving efficiencies and customer services through integrated technology, and improving market collaboration. Improving supply chain efficiencies through effective JOCs. Development of a maritime centre of excellence.

23 TRANSNET National Ports Authority ABBREVIATIONS AND ACRONYMS AMS Automated mooring system NDA Non-Disclosure Agreement B-BBEE Broad-Based Black Economic Empowerment OEMs Original Equipment Manufacturers Capex Capital expenditure OTC Order to cash CDM Collaborative Decision Making OTGC Oil Tanking Grindrod Calulo CSI Corporate Social Investment PFMA Public Finance Management Act CWIP Capital work in progress RBCT Richards Bay Coal Terminal DCT Durban Container Terminal ROPS Rail Operations Performance Standards DIFR Disabling injury frequency rate SHC Shareholders compact EBITDA GDP Earnings before interest, taxation, depreciation and amortisation Gross domestic product STAT STCW Ship Turnaround Time Standard for Training, Certification and Watchkeeping HOPS Hauler Operations Performance Standards TEUs Twenty Foot Equivalent Unit IPMS Integrated ports management system TOC Transnet Operation Centre ISPS International Ship and Port Facility Security Code TOPS Terminal Operations Performance Standards JOC Joint Operations Centres TVCC Transnet Value Chain Coordinator KPI Key performance indicator LPG Liquefied Petroleum Gas Million Kl Million kilolitres million m 3 Million cubic meters of dredging MDS Market Demand Stratety MOPS Marine Operator Performance Standards MOU Memorandum of Understanding mt Million tons

24 22 TRANSNET National Ports Authority 2017 CORPORATE INFORMATION Transnet SOC Ltd 47th Floor, Carlton Centre 150 Commissioner Street Johannesburg 2001 Incorporated in the Republic of South Africa. Registration number 1990/000900/30 Executive directors SI Gama (Group Chief Executive) GJ Pita (Chief Financial Officer) Independent non-executive directors LC Mabaso (Chairperson), Y Forbes, GJ Mahlalela, PEB Mathekga, ZA Nagdee, VM Nkonyane, SD Shane, BG Stagman Group Company Secretary NE Khumalo 47th Floor, Carlton Centre 150 Commissioner Street Johannesburg 2001 Auditors SizweNtsalubaGobodo Inc. 20 Morris Street East Woodmead Johannesburg 2191 The Internal Audit function has been outsourced to SekelaXabiso (Pty) Ltd, Nkonki Inc. and KPMG Services (Pty) Ltd. SekelaXabiso (Pty) Ltd 1st Floor, Building 22B The Woodlands Office Park 20 Woodlands Drive Woodmead Johannesburg Nkonki Inc. 3 Simba Road Sunninghill Johannesburg KPMG Services (Pty) Ltd 85 Empire Road Parktown Johannesburg PO Box Parkview 2122 South Africa Reporting formats Forward-looking information All references to forward looking information and targets in the 2017 reports are extracted from the 2018 Transnet Corporate Plan approved by the Board of Directors. Available in print format and full HTML report Available online in PDF format Transnet s Integrated Report 2017, Annual Financial Statements 2017 and Sustainability Report 2017 are available in PDF on Integrated Report 2017 The 2017 Integrated Report is the Company s primary report to all stakeholders. Integrated Report 2017 Annual Financial Statements 2017 Sustainability Report 2017 The 2017 Annual Financial Statements include reports of the directors and independent auditors. The 2017 Sustainability Report documents Transnet s sustainability performance in greater detail. Operating Division Reports 2017 Feedback on this report We welcome feedback on our National Ports Authority Operating Division Report to ensure that we continue to disclose information that is pertinent to all our stakeholders.

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