Transnet Online Integrated Report 2018

Creating value through the capitals

Manufactured capital

Through our manufactured assets – such as our buildings, equipment and transport infrastructure – we create value for the Company in the form of revenue from operations; and create infrastructural value for the wider economy, while reducing the cost of doing business in South Africa. While our road-to-rail strategy impacts positively on natural capital by reducing carbon emissions and air pollution, new rail, ports and pipeline infrastructure projects could adversely impact ecosystems and result in contamination of the natural environment and generate a variety of outputs in the form of waste materials as by-products.

Manufactured capital

1. Inputs

Property, plant and equipment R313,4 billion
Rail track 30 400 km
Petroleum and gas pipelines infrastructure 3 800 km
Port, rail and pipelines infrastructure
ICT systems, digital platforms and cloud services
Information and communications technology (ICT)

2. Key factors impacting manufactured capital

Capital projects: Deterioration in the macroeconomic environment > renders certain infrastructure capital projects unviable. Reprioritise capital projects to ensure capital investment affordability
Delivering rolling stock: Market challenges > Freight Rail to review delivery of rolling stock in line with validated demand
The current aged fleet is being retired > reduces locomotive capitalised maintenance
ICT infrastructure: Adapt to rapid advancements in digitalisation > explore 3D printing, drone technology, big data and advanced analytics
Future security models > move from a ‘closed loop’ system to an interconnected networked system with other cloud data centres

3. Approaches to managing manufactured capital outcomes

A ‘cradle-to-grave’ solutions Specialist Unit (Group Capital) > advises Transnet and clients on capacity solutions
Integrated Capital Projects/Programme > integrated view of the capital portfolio
TVCC > transparency of projects in the capital pipeline
Robust business case validation > test project viability
The Assurance Framework (ICPAF) > augments the assurance and control framework around capital projects
Programme prioritisation > allocates resources to programmes best aligned with strategy

4. Manufactured value created

Critical logistics infrastructure to meet national economic growth demands
Freight Rail > world-class heavy-haul ore export lines transporting a range of general bulk and containerised freight commodities
Engineering > original equipment manufacturer (OEM) for wagons and becoming a locomotive OEM (in-service maintenance, repair, upgrade, conversion, design and manufacture of various types of wagons, coaches, locomotives as well as equipment, machines and services)
Port Terminals > operates major port container terminals as critical facilitator of international cargo trade
Pipelines > strategic in the petroleum products supply chain, ensuring capacity anticipates demand, thus securing inland product supply
ICT >
– Electronic enclosures and certain mechanical sub-components
– Track-and-trace technology to track port assets, (e.g. tugs and dredgers)

5. Trade-offs – Manufactured capital impacts on other capitals

Value
Generated from operators

infrastructure-
intensive environment

ongoing
usage in
operations

revenue from
business
operations and
equipment usage

Decreased Increased

R89,4 million
Total value of revenue generated through waste management initiatives

sale of
scrap metal

responsible
corporate
citizenship

biosphere
rehabilitation
through waste removal

Infrastructure requirements to meet the 4th Industrial Revolution

investment
spend

some existing jobs may become redundant and replaced by technology

develop new service areas for people to fill

develop new ICT competencies and digital skills

12
Significant
environmental
incidents in 2018

damage
caused to
infrastructure

biospheric
damages caused
by spills or waste

costs of
biospheric
rehabilitation

loss of trust/
reputation

80
Running line derailments

damage to infrastructure (e.g. trains)

loss of fauna on rail paths of on coming trains

cost of infrastructure repairs and maintenance

140
Shunting derailments

damage to
infrastructure
(e.g. trains)

cost of
infrastructure
repairs and maintenance

61
Safety incidents in operations

safety incidents
and possible public
fatalities

safety incidents
and possible
public fatalities +
reputational damage

6. Key outputs

Transnet concluded a locomotive acquisition contract in 2014 which resulted in the acquisition of 1 064 new locomotives for General Freight and Coal businesses
402 locomotives accepted into operations
16 locomotives delivered and undergoing acceptance testing
Port expansion
Lengthening and deepening of Durban Container Terminal berths 203 to 205
Capacity expansion for manganese
Expanded beyond 5,5 mt
Export coal expansion
Expanded to 81 mtpa
Waterberg upgrade
Stage II
Nmpp project
The 24” main pipeline and 16” inland pipelines are fully commissioned and operational, and transported 199,48 billion litres of diesel from Durban to the inland region since commissioning
Wagon modernisation plan
86 new SCL wagons for the automotive business
346 CR wagons to be used within the mining sectors to transport ore from shafts to processing plants and for servicing the automotive market

Market Demand Strategy (MDS) themes

Sustainable Developmental Outcomes (SDOs)

The Capitals

Manufactured capital