NATIONAL PORTS AUTHORITY 2017 · TRANSNET National Ports Authority 2017 1 Port security audits were completed in alignment with International Ship and Port Facility Security Code

NATIONAL PORTS AUTHORITY 2017

Admired

Agile

DigitalUnited

Market Demand Strategy (MDS) Icons key

Financial sustainability

Organisational readiness

Capacity creation and maintenance

Sound governance and ethics

Market segment competitiveness

Constructive stakeholder relations

Human capitalmanagement

Operational excellence

Sustainable Developmental Outcomes

Sustainable Developmental Outcomes (SDOs)

Employment Transformation

Skillsdevelopment

Health and safety

Investment leveraged

Environmental stewardship

Industrial capability building

Community development

Regional integration

The Capitals

Financial capital Human capital

Manufactured capital Social and relationship capital

Intellectual capital Natural capital

Performance KeyImprovement on prior year performance Target achieved

Decline on prior year performance

Target partially achieved

Equivalent performance to prior year Target not achieved

MDS strategic thrustsMaterial clusters

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

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Navigating this report

CONTENTS

HIGHLIGHTS 1

BUSINESS OVERVIEW 2

REGULATORY ENVIRONMENT 4

PERFORMANCE CONTEXT 5

OPERATIONAL PERFORMANCE 6

Core initiatives for 2017 6

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

NATIONAL PORTS AUTHORITY TOP 5 RISKS AND KEY MITIGATING ACTIVITIES 19

OPPORTUNITIES 20

ABBREVIATIONS AND ACRONYMS 21

CORPORATE INFORMATION 22

1TRANSNET National Ports Authority 2017 1

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

NATIONAL PORTS AUTHORITY

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%

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 m3 vs 2016 target: 4,25 million m3)

Port maintenance

Port real estate vacancies were successfully maintained within the target range.

Port real estate vacancies maintained

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

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.

Highlights

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.

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.

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.

Business overview

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3TRANSNET National Ports Authority 2017 3F

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Eight operational ports under the National Ports Authority’s control

Beit Bridge

SISHEN

LIMPOPO

MPUMALANGANORTHWEST

FREE STATEKWAZULU-NATAL

EASTERN CAPE

GAUTENG

NORTHERN CAPE

Maputo

Richards Bay

Durban

Port Elizabeth

Mossel BayCape Town

Saldanha

Sishen

Ngqura

National Ports Authority

EastLondonWESTERN

CAPE

• 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.

There are three levels of regulation and control within the port environment:

1. Regulatory oversight and compliance;2. Economic regulation; and3. 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%.

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.

Regulatory environment



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 value-adding 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.

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.

Performance context

Core initiatives for 2017

Operational performance

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.

Compliance to slot-booking system.

Monitor promulgated berth depths and dredging programme to ensure capacity availability.

Implementation of Regulator approved tariff strategy.

Implementation

Improvement

Compliance

Operations

Systems

Capacity

Tariffs



Core initiatives for 2017 (continued)

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.

Programme

Customer

Culture

Smart Peoples Port

Information system

eLTE

Environmental compliance

Values

Training

Community

Key projects

Core initiatives for 2017 (continued)

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

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.

Integrated solution

Cash paymentsystem



Overview of key performance indicators

2016 2017 2017 2018Key performance area and indicator Unit of measure Actual Target Actual Target


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


Capital expenditure R million 2 938 2 800 2 020 1 768


Productivity

Anchorage waiting time

– Durban average hours 33 n/a n/a n/a

• Pier 1 New 32 26 28

• Pier 2 New 40 30 36

– Cape Town average hours 23 32 25 28

– Port Elizabeth average hours 16 30 30 30

– Ngqura average hours 20 32 16 28

– Richards Bay average hours 42 60 21 55

Average ship turnaround time

– Durban containers STAT hour 46 n/a n/a n/a

• Pier 1 containers STAT hour New 43 51 55

• Pier 2 New 53 55 53

– Cape Town containers STAT hour 24 27 26 27

– Port Elizabeth containers STAT hour 17,1 28 16 20

– Ngqura containers STAT hour 23 30 24 28

Dry bulk

– Coal (RBCT) hours 41 46 44 46

– Iron ore (Saldanha) hours 47 50 45 50

– Manganese (Port Elizabeth) hours 69 78 85 78

Overview of key performance indicators (continued)

2016 2017 2017 2018Key performance area and indicator Unit of measure Actual Target Actual Target


Productivity (continued)

Berth occupancy

– Durban % 69 65 – 75 61 65 – 75

– Cape Town % 61 60 – 70 73 60 – 70

– Port Elizabeth % 33 30 – 40 50 55 – 65

– Ngqura % 40 50 – 60 47 70 – 80

Berth utilisation

– Durban % 89 85 – 95 75 85 – 95

– Cape Town % 71 70 – 80 91 70 – 80

– Port Elizabeth % 67 60 – 70 82 75 – 85

– Ngqura % 84 75 – 85 80 75 – 85


Volume and revenue growth

Containers 000 TEUs 4 439 4 952 4 466 4 493

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 170,79 180,14 179 178

Vehicles units 697 048 736 294 666 810 665 980

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 4 349 4 996 4 160 5 173

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



Financial performance review for the 2017 financial year

Year ended Year ended31 March 31 March

2017 2016 %Salient features R million R million change

Revenue 10 379 11 144 (6,9)

– Containers 3 690 3 778 (2,3)– Break–bulk 220 250 (12)– Dry bulk 1 130 1 070 5,6– Liquid bulk 679 698 (2,7)– Automotive 359 534 (32,8)– Clawback (1 103) 136 (911)– Other 5 404 4 678 (15,5)

Operating expenses (4 012) (3 860) 3,9

– Energy costs (467) (436) 7,1– Maintenance (344) (340) 1,2– Materials (76) (76) –– Personnel costs (2 248) (2 074) 8,4 – Other (877) (934) (6,1)

Profit from operations before depreciation, derecognition, amortisation and items listed below (EBITDA) 6 367 7 284 (12,9)Depreciation, derecognition and amortisation (1 821) (1 602) 13,7

Profit from operations before items listed below 4 546 5 682 20,0Impairments and fair value adjustments 124 244 (49,1)Net finance costs (1 736) (1 837) (5,5)

Profit before taxation 2 934 4 089 (28,2)

Total assets (excluding CWIP) R million 77 888 74 849 4,1

Profitability measuresEBITDA margin1 % 61,3 65,4 (4,1 )Operating margin2 % 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 investments5 R million 2 020 2 938 (31,2)

EmployeesNumber of employees (permanent) number 4 160 4 349 (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.

• Marginal volume growth is expected for 2018.• 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.

Looking ahead

2018

Performance commentary

• 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.


• 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 – Liquid bulk R19 million or 3% decrease – Automotive R175 million or 33% decrease



• 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 2018.

• TNPA allocated R2 billion for maritime transport manufacturing (refurbishment of existing ship repair facilities) at South African ports by 2019.

• 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.


• 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 fully-fledged 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

Looking ahead

2018

• 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 2017. 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.

• 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 666 810 units (2016: 697 048 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

ExceptionalAverage Anchorage Waiting Time




• 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.

Market segment competitiveness (continued)

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.

Looking ahead

2018



Transnet National Ports Authority (TNPA) permanent employee headcount

Variance 4,3%

Human capital

The National Ports Authority’s permanent headcount for the 2017 financial year was 4 160 employees (2016: 4 349).

Key

Improvement on prior year performance

Decline on prior year performance

Equivalent performance to prior year

Target achieved

Target partially achieved

Target not achieved

Black employees represented 85,8% of the total employee base (2016: 83%).

Female employees represented 32,8% of the total employee base (2016: 30%).

People with disabilities represented 2,1% of the total employee base (2016: 2,4%).

32,8%

2,1%

85,8%

2 751 learners

5 396 pupils

Training in critical skills

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.

Skills development

• In all, 2 751 learners were exposed to the business to create awareness of the port environment among the youth.

• A total of 5 396 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.

Top Employer certification

Improvement of 2017 culture charter ratings

Chief Executive Awards

Employee Value proposition

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.

Actual (2016)

Target (2017)

Actual(2017)

4 996

4 349

4 160

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.

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.

Invasive Alien Plants Eradication Project

Biodiversity Management Programmes

26 CSI learners

23 schoolsTwo port festivals

177 new construction jobs



National Ports Authority’s top 5 risks and key mitigating activities

Key risks Mitigation activities

1. Adequate port infrastructure maintenance

• 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

2. Uncertain global and domestic economic recovery

• 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

3. Execution and delivery of the accelerated capital expenditure programme

• 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

4. Enhancing the skill set to meet the demands of a changing port environment

• 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

5. Challenges experienced in expeditiously introducing new entrants and industries into the port system

• 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 cross-

functionally; 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

• 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.

• 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).

Opportunities



AMS Automated mooring system

B-BBEE Broad-Based Black Economic Empowerment

Capex Capital expenditure

CDM Collaborative Decision Making

CSI Corporate Social Investment

CWIP Capital work in progress

DCT Durban Container Terminal

DIFR Disabling injury frequency rate

EBITDA Earnings before interest, taxation, depreciation and amortisation

GDP Gross domestic product

HOPS Hauler Operations Performance Standards

IPMS Integrated ports management system

ISPS International Ship and Port Facility Security Code

JOC Joint Operations Centres

KPI Key performance indicator

LPG Liquefied Petroleum Gas

Million Kℓ Million kilolitres

million m3 Million cubic meters of dredging

MDS Market Demand Stratety

MOPS Marine Operator Performance Standards

MOU Memorandum of Understanding

mt Million tons

NDA Non-Disclosure Agreement

OEMs Original Equipment Manufacturers

OTC Order to cash

OTGC Oil Tanking Grindrod Calulo

PFMA Public Finance Management Act

RBCT Richards Bay Coal Terminal

ROPS Rail Operations Performance Standards

SHC Shareholders compact

STAT Ship Turnaround Time

STCW Standard for Training, Certification and Watchkeeping

TEUs Twenty Foot Equivalent Unit

TOC Transnet Operation Centre

TOPS Terminal Operations Performance Standards

TVCC Transnet Value Chain Coordinator

ABBREVIATIONS AND ACRONYMS

Reporting formats Forward-looking informationAll 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.

Transnet ’s Integrated Report 2017, Annual Financial Statements 2017 and Sustainability Report 2017 are available in PDF on www.transnet.net.

Feedback on this reportWe 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.

Available in print format and full HTML report

The 2017 Integrated Report is the Company’s primary report to all stakeholders.

Integrated Report 2017

Available onlinein PDF format

The 2017 Annual Financial Statements includereports of the directors and independent auditors.

The 2017 Sustainability Report documentsTransnet’s sustainability performance in greaterdetail.

Annual Financial Statements2017

SustainabilityReport2017

Operating DivisionReports2017

Integrated Report 2017

Transnet SOC Ltd47th Floor, Carlton Centre150 Commissioner StreetJohannesburg2001

Incorporated in the Republic of South Africa.Registration number 1990/000900/30

Executive directorsSI Gama (Group Chief Executive)GJ Pita (Chief Financial Officer)

Independent non-executive directorsLC Mabaso (Chairperson), Y Forbes, GJ Mahlalela, PEB Mathekga, ZA Nagdee, VM Nkonyane, SD Shane, BG Stagman

Group Company SecretaryNE Khumalo

47th Floor, Carlton Centre150 Commissioner StreetJohannesburg2001

PO Box 72501Parkview2122South Africa

AuditorsSizweNtsalubaGobodo Inc.20 Morris Street EastWoodmeadJohannesburg2191

The Internal Audit function has been outsourced to SekelaXabiso (Pty) Ltd, Nkonki Inc. and KPMG Services (Pty) Ltd.

SekelaXabiso (Pty) Ltd1st Floor, Building 22BThe Woodlands Office Park20 Woodlands DriveWoodmeadJohannesburg

Nkonki Inc.3 Simba RoadSunninghillJohannesburg

KPMG Services (Pty) Ltd85 Empire RoadParktownJohannesburg

CORPORATE INFORMATION


www.transnet.net

Documents

NATIONAL PORTS AUTHORITY 2017 · TRANSNET National Ports Authority 2017 1 Port security audits were completed in alignment with International Ship and Port Facility Security Code