Unlocking potential through current programmes and future initiatives Presenter: Mmadiboka Chokoe, Executive Manager: Supplier Development, Transnet

Transcription

1 Unlocking potential through current programmes and future initiatives Presenter: Mmadiboka Chokoe, Executive Manager: Supplier Development, Transnet September 2013

2 Transnet is a custodian of ports, rail and pipelines and has a number of operating divisions which have key focus areas TRANSNET Freight Rail Engineering National Ports Authority Port Terminals Pipelines SA Rail Line and Freight Operator: Rail operator responsible for rail freight logistic solutions Serve the mining, manufacturing and industrial sectors Product Manufacturing: Manufacture Assembly Rebuilds Refurbishments Upgrades & Conversions Maintenance & Service SA National Maritime Authority: Responsible for the safe, efficient and effective management of South African ports Port Terminals Operator: Monitoring and executing port terminal operations within South African ports Oil and Gas Pipeline Operator: Transportation of petroleum and gas products via a pipeline network within South Africa Owns and operates 21,000 km track, including 1,500km dedicated heavy haul Africa s rolling stock and maintenance supplier of choice Landlord to 8 commercial Ports around the South African coastline 16 cargo terminal operations across South African Ports km of pipeline capacity for petroleum and gas products Source: TRE value analysis PAGE 2

3 Setting the scene One color one model and as few options as possible PAGE 3

4 Introduction South Africa and Africa s commercial and industrial giant, is now gearing up to take first steps into a new future, a future built on the foundation of a well-developed multimodal transport network and intra-regional trade. At the forefront of this initiative is Transnet. Transnet s mandate is to lower the cost of doing business in South Africa, whilst promoting shared growth and transformation. Transnet recently embarked on its biggest project to date the R600 billion Market Demand Strategy (MDS), which will significantly boost infrastructure development, job creation and investment in South Africa, and expose the country to a host of international trading possibilities. PAGE 4

5 Corporate Strategy (MDS) drives various other strategies and frameworks inside Transnet to cascade and align with its objectives Key Transnet guidance framework s / strategies / plans Corporate Strategy (MDS) Supply Chain Policy (SCP) Document reference Corporate Plan Supply Chain Policy Key objectives (not exhaustive) Focus area Increase volume and revenue growth Create greater capacity Increase operational efficiency Maintain financial strength Improve safety and health Develop Suppliers: growth, transformation Carry out procurement cost-effectively while meeting commercial, regulatory and socioeconomic goals Ensure good governance via integrated Supply Chain Management Integrated Supply Chain Management (iscm) Strategy iscm Strategy Optimise value from sourcing activities Increase supply chain efficiency Proactively manage compliance risk Integrate SD strategy Develop supplier base Enterprise and SD Strategy Enterprise and Supplier Development Strategy Support NGP/NDP objectives through leading empowerment and transformation of the supplier base Leverage procurement to develop local suppliers to support localisation and industrialisation; creating jobs and reducing the unemployment rate Source: Team Analysis Supplier Development Plan (SDP) Transnet SDP Identify key areas to target for SD within the IC 3 framework, together with their Strategies Provide implementation framework for SDP PAGE 5

6 The majority of the MDS expenditure over the next 7 years will be in General Freight and Freight Rail requiring a responsive and competitive local supplier base Commodity split (Rbn) Major programmes GFB Break Bulk Export Coal Bulk Export Iron Ore Other Containers (Ports) Piped Products GFB rail capacity growth to meet market demand volumes from 79,7mt to 170,2mt Increase export coal to 97,5mt including Waterberg Divisional split (Rbn) Increase export iron ore to 82,5mt Increase in fleet and improvement to the infrastructure TFR TRE TNPA TPT TPL Other Increase export manganese to 16mt Completion of the New Multi-Product Pipeline (NMPP) PAGE

7 The need for Meaningful Transformation Key Facts By 2030 there should be approximately 60million people living in SA. Globally, 15 to 24 year-olds make up 40 percent of the total unemployed population. SA 60% of between 15 and 35 are unemployed. High levels of unemployment could lead to social instability. PAGE 7

8 South Africa s Inequality PAGE 8

9 South Africa s Inequality PAGE 9

10 Underpinning the MDS is a commitment to ensure that Transnet creates lasting economic, social and environmental value for South Africa MDS is an enabler for localisation, transformation and empowerment. The 300 billion in capital expenditure, and an additional R300 billion in operational expenditure invested over a seven-year period will open doors for extensive supplier development and enterprise development opportunities. Supplier Development opportunities present themselves along the entire Transnet value chain however what is key on Transnet s transformation agenda is the development of competitive Black industries that can take advantage of the opportunities presented by MDS This requires the prioritising industry-specific skills transfer and skills related to manufacturing for our local Black SMMEs through: i. on-the-job training and apprenticeships in international supply contracts for local suppliers, and ii. providing financial and non-financial assistance to Black SMMEs (particularly in rural areas) to nurture innovation and create jobs. Skill vs Education PAGE 10

11 Transnet s SD approach is to leverage the MDS infrastructure programme to foster economic growth and promote transformation SD objectives SD approach SD objectives Transformation Growth Programmatic Ensuring transactions to bring HDI s * into the economic mainstream through the advancement of HDI ownership Address economic disparities and entrenched social inequalities through the use of: Generic B-BBEE scorecard Ownership Management Control Employment equity Preferential procurement Enterprise development Socio economic development Skills development Drive economic Transformation (Empowerment) Strategic Focused Enterprise Development Facilitate economic Growth Achieving SD objectives through leveraging high-value procurement by including: Industrialisation Localisation Promoting technology transfer Job creation and preservation Developing industryspecific skills Enterprise development Rural integration * HDI = Historically Disadvantaged Individuals as per the B-BBEE Act 2003 ** FRC = Further Recognition Criteria Source: Team analysis PAGE 11

12 A fundamental shift should take place to move our Black SMMEs from products/services with low complexity into Manufacturing, Design and Technology Development Product complexity Technology Development Design& Prototype Manufacturing Technical support Maintenance and replacing *Desired supplier base capability Current supplier base has high maintenance and replacing capability but little IP to penetrate industries with high product complexity The current supplier base has high capability in products or services that have little or low complexity Black owned enterprises participate mainly in the technical support and maintenance industry Increasing capability should take place within industries with high complexity Government policies should support the BI initiative Current supplier base capability A number of initiatives should be implemented to ensure the shift in current capability: Capability Transfer of IP Skills development and training Enterprise development Incubation process where established industries PAGE 12

13 Transnet has committed R200 million in the 2012/2013 FY to create an enabling environment for Black SMMEs/BI s to participate meaningfully in the mainstream economy Description Independence Independent and Empowered Black Industrialists Financial Support Incubation and Innovation Skills Development Development Banks DST DTI Supplier Development Parks SOC collaboration -CSIR/AIDC/Mines/ SABS/Anglo Zimele FET colleges Universities of Technology Department of Science and Technology OEM s Partnership PAGE 13

14 Through the facilitation of a licencing partnership, Transnet developed Rail2Rail who s capability and capacity have grown sustainably ED SD impact Historical Context 2007-Sole supplier An award for 1 million concrete sleepers (over 5 years) was received from Transnet Successful application to participate in the Transnet CSDP through securing a licence agreement with Rail One GmbH of Germany SD initiatives Job creation Job preservation AS at April 2009* 35 direct new jobs 0 jobs As at October 2012* 85 direct new jobs 35 jobs Key lessons Facilitating joint-ventures between established OEM s and local SMME s accelerates the development of local suppliers Investment in plant Capacity Transformation R70m pcs pa 51% R73m pcs pa 51% Skills development 35 people 120 people * Values are based on snapshot position at that time (i.e. not incremental) Source: TFR Report Oct 12 PAGE 14

15 Case Study: CSDP - 50 Like New Locomotives Of the 3000 Component parts listed, 2000 were sourced locally in South Africa. New HVC, EM200 Control System and Rewire Fabricated and equipped at TRE UTEX AR10 Main Alternator Imported from US Listed for localization in next order. UTEX Engine Imported from US Listed for localization in next order. Modified Cooling, Engine and Inertial Air Hoods All hoods and cab structures fabricated in Bloemfontein That represents about 67% of the line items and over 40% of the product cost. Plans have been presented to Transnet for additional units with increased local sourcing. Under frame 40 Supplied by EMD and 10 fabricated locally by DSC Fuel Tank New D43 Traction motors supplied from EMD Fabricated by local suppliers including Kare Bogies (2 per unit) cast by SCAW PAGE

16 TRANSNET will continue to aim for Sustainable Development and Transformation through fostering partnerships between government, private sector and industry Development of New Black Industrialists Transforming the Local Industries Creating strategic Relationships with the following Institutions : DST DTI CSIR Innovation Hubs OEMS Allow for transfer of key technology and skills from international organisations to build local capability which does not exist Enable downstream SD through unlocking opportunities Facilitate increase in transformation of the local supplier base through shifting spend Structuring Meaningful BEE Deals Capital Investment Technology and IP Transfer Reducing the cost of steel Reviewing the current tariff methodology Setting targets for local content on specific components Improve SOC s procurement and transformation approval processes Create significant opportunities' to channel the increased MDS spend to grow the local economy, and make a deliberate effort to support the meaningful participation of Black people, Incentivise Black people for investment in plant and machinery to build industries PAGE 16