Presented by: John Oosthuizen at the 2009 Railways and Harbours Conference in Cape Town.

1. Transnet’s Strategy For Managing Port
and Intermodal Demands
Presentation to the Annual Ports & Rail Conference
CAPE TOWN 3RD TO 5TH MARCH 2009

2. INTRODUCTION
• Ports are critical enablers of a country’s competitiveness
• Ports need to be oriented towards supply chains to meet the changing
needs of their customer base
• Transnet has 2 supply chain focused strategies for ports and rail
A corridor-focused strategy will align port and rail capacity and
–
operations
Establishing a container hub will provide supply chain benefits to cargo
–
owners, to the Sub Saharan Region and to South Africa
1

3. THE IMPORTANT ROLE OF PORTS
• Ports provide the basic infrastructure foundation of a country’s international
trade and are the umbilical cord to foreign markets. Ports integrate with
global supply chains
• Ports represent physical infrastructure and facilitators of national supply
chains.
• Ports are a core component of national economic development and security
– Efficient ports contribute to national competitiveness
– Ports are springboards for the economic development of hinterlands
– Ports are contributors to national economic, security, social and
environment priorities
Ports facilitate the efficient transportation of goods and hence international trade
which is vital for economic welfare of the nation state
2

4. PORTS ARE EVOLVING
• The development of global supply chains coupled
with globalisation of production and consumption has
changed the role of ports
• The contribution of modern ports is more related to
efficient distribution of products than the loading,
unloading of ships and berth availability
• Ports need to be oriented towards supply chains in
order to meet the changing needs of their customers
(shipping lines) and fullfil their new role in the supply
chain management era¹
Sources
1. Panayides, Dong-Wook Song; Notteboom, Rodrigues, 2004 and related research 3

5. POOR INFRASTRUCTURE INCREASES LOGISTICS COSTS IN AFRICAN
COUNTRIES
Cost to export (US$ per container)
390
China Least cost – Global
Mauritius 728
South Africa 1 087
Mozambique 1 155
Madagascar 1 182
• South Africa is
Lesotho 1 188
2nd cheapest
Tanzania 1 212 in Africa
• China is best
Namibia 1 539
in class and
Malawi 1 623
the most cost
Swaziland 1 798
effective
Seychelles 1 839
Angola 1 850
Zimbabwe 1 879
Zambia 2 098
Congo, Dem. Rep. 2 307
Botswana 2 328
Source: Doing Business Database, World Bank survey June 2008 4

6. THE CURRENT DOWNTURN IS BEING FELT IN THE INDUSTRY
Volumes have declined steeply
Hong Kong Singapore
• Global container growth averaged 10% over the last 10 -24% -13%
years. However, for 2008 volume growth fell to 8%
• According to Drewry* growth for 2009 is expected to Shanghai
Shenzen
be at 3.1%, recovering to 7% in 2011/12.
-6%
-16%
• Global container volumes fell rapidly in December 2008.
• The economic downturn is being felt in the shipping Major US Ports
industry
-7%
Orders for new vessels are being cancelled with
–
consequent loss of deposits made
Year on Year Container Volumes (TEU)
Excess vessel and port capacity exists
– Comparing Nov to Jan for 2007/08 and 2008/09
400
Thousands
Sea freight rates have plummeted
– 350
300
250
200
150
Nov Dec Jan Feb Mar
2007/08 2008/09
Sources: Drewry container forecast (December 2008), City Bank Company Focus (January 2009) 5

7. SOUTH AFRICA CAN PLAY A REGIONAL ROLE IN CONTAINER TRADE
Major trade routes and ports Hub-and-spoke model
Major trade routes and ports Hub-and-poke model
Seattle
Tacoma New York/New Jersey
Oakland Hampton Roads
Long Beach Charleston
Port Said
Savannah TanzaniaDar-es-Saalam
Dubai
Los Angeles Jeddah Nhava Sheva Luanda
Salalah Mozambique
Colombo
Tomasina
TEU
Namibia Zimbabwe
Less than 2 million Botswana Maputo
Madagascar
Walvis Bay
2 to 4 million
Santos
4 to 7 million Melbourne South Africa
Durban
Cape Town
Durban
7 to 10 million
Port Elizabeth Ngqura
More than 10 million
• Additional economic activity originating from the hub will induce additional
South African
employment opportunities and stimulate growth
economy
• Increased national trade competitiveness (through economies of scale, scope, and
density)
• Total yearly supply chain cost savings
Cargo
• Improved service levels
owners
• Improved time to cargo owner
• Increased maritime connectivity improves access to regional and global markets
• Reduction in number of calls (2.7 in average today)
Shipping
• Optimisation of vessel utilisation (fewer stops and increased efficiency at hub)
lines
• Improved port efficiency, feasibility, and speed
• New volume opportunities for incumbents and market entrants 6

8. 7
...WHICH PROMISES ATTRACTIVE GROWTH Base estimates
Additional potential
Million TEU
CAGR*
X%
South African gateway volumes 2020 SA port container volumes, million moves
Definition
Middle road forecast
2008 total 3.3
Low road forecast
25
Transnet 5-year plan
Incremental
20 6%
• SA import and export via direct vessel
Gateway
calls
volumes to 2020
15 5%
10 2020 Gateway
volumes
5
• Regionally based transhipment to/from
Sub-Saharan
0 (low volume) SSA ports, employing
African
2007 2018 2028 2038 feeder vessels
Transhipment
Total 10.2
Sub-Saharan Africa transhipment volume potential
• Domestic transhipment to/from (low
Domestic
Middle road forecast
TBD volume) SA ports, employing feeder
transhipment
12 Upside potential
vessels . . .
10%
10
• Trade route based transhipment at key
Interline
8 network ports between deep sea (big
14%
ships) vessel strings
6
Distribution • Cargo-generation by sea-port based
4 TBD
Zone logistics zones serving an inbound and
2 outbound distribution network between
0 SA and SSA
Total potential
2007 2018 2028 2038
* Compound annual growth rate
Source: Transnet Demand Model; Global Insight; Transnet; Flynn Consulting

9. THE PHYSICSAL CHARACTERISTICS OF A HUB
• Hub ports must have the following physical
characteristics:
– Able to serve vessels of up to 9000 TEU,
minimum 16m water depth
– Space to accommodate on-dock rail
– Mega terminals of 300 acres
– Long free time, long dwell times
– Incentives for short sea shipping
companies
– Free from navigational congestion
– Space for long-term expansion
– High connectivity
– Space for logistics/distribution activities
• All global hubs face the issue of competition
for space with cities. It is therefore
important to factor social impact (road
congestion, relocation of communities) and
minimise environmental issues
Source: Dynamar
8

10. 9
SEVERAL COUNTRIES ARE CONSIDERING REGIONAL HUBS
Major Sub-Saharan African ports
Major Sub-Saharan African ports
TPT Other
• Developing south-south trades, changing
trade route dynamics and growing Sub
Uganda
Saharan volumes offers opportunities for
Equatorial
Lamu
Guinea
regional transhipments and interlining
Mombasa
Zaire Kenya
Gabon
Rwanda
• Capacity developments are being
Congo Burundi Dar-es-Saalam
undertaken in many SSA countries
(HPH)
Tanzania
Luanda
• Several countries are considering hub
Malawi Mozambique
developments in spite of the current
Angola Zambia
economic situation
Madagascar
Tomasina
Zimbabwe
Namibia
Port Louis
• International terminal operators are
Botswana
Maputo (Mauritius)
Walvis Bay
pursuing opportunities in Sub Saharan
Swaziland
Africa
Lesotho
Durban
South Africa
Ngqura
Cape Town Port Other hubs
• Algeciras
Elizabeth
• Salalah
• Accra

11. TRANSNET HAS A GROWTH STRATEGY
• Transnet is a focused freight transport company, delivering integrated,
efficient, safe, reliable and cost-effective services to promote economic
growth in South Africa
• This is to be achieved through increasing our market share, improving
productivity and profitability and by providing appropriate capacity to
our customers ahead of demand
Focus on
customers

Focused freight company

Deliver integrated, efficient, safe reliable services Efficient,
 integrated
Promote economic growth
services

Improve productivity

Provide capacity
Capacity Economic
ahead of value-add
demand
10

12. TRANSNET IS FOCUSED ON INTEGRATED SUPPLY CHAINS
Transnet ‘s growth strategy has 2 supply chain focus areas, namely:
• An integrated corridor strategy that aligns port and rail capacity and
service delivery
• A container hub strategy that delivers supply chain benefits to cargo
owners and to the Sub Saharan Region, economic benefits to South
Africa, and growth opportunities for Transnet
11

13. INVESTMENTS AND OPERATIONS IMPROVEMENTS ARE FOCUSED
ACROSS A NUMBER OF KEY CORRIDORS
Road/rail volume
2006 2026
16.4 46.1
Maputo
14.3 33.4
Richards Bay corridor
Richards
Sishen • Coal Expansion
• Dry bulk terminal
Bay • Multi-purpose
terminal
Durban
Saldanha
43.3 109.3
East London
• Ore Line expansion
Natal Corridor
• Container terminals
Port • Island View refurbishment
• Agriport expansion
72.7 171.5 Elizabeth • Maydon Wharf
Cape Town refurbishment
• Automotive
12.0 29.4
Cape Corridor
• General Freight
• Container terminal
• NMPP pipeline
expansion
replacement
• MPT refurbishment South corridor
• Ngqura construction
• Ngqura Container
Terminal
• Manganese
12
Source: Transnet Freight Demand Model

14. TRANSNET IS IMPLEMENTING A HUB CONTAINER HUB STRATEGY
• Transnet is actively pursuing a hub strategy, seeking to grant the South
African economy access to the global markets and lowering the cost of
doing business in South Africa
• To that effect, it will start operations in Ngqura, as the port ideally placed
to attract transhipment cargoes through state of the art operations and
facilities and deep draft, thus offering an effective initial base for hub
activity
• Transnet will continue the development of existing ports to satisfy the
market ahead of demand in the spirit of a complementary port system
• In the short term Transnet will focus on the following areas:
– Provide capacity by focusing on efficiency and maximising the use of
existing assets
– Engage with customers and other stakeholders
– Source seed volumes for the hub
13

15. CONCLUSION
• Ports are critical enablers of a countries competitiveness
• Ports need to be oriented towards supply chains to meet the changing
needs of their customer base
• Transnet has 2 supply chain focused strategies for ports and rail
A corridor-focused strategy will align port and rail capacity and
–
operations
Establishing a container hub will provide supply chain benefits to cargo
–
owners, to the Sub Saharan Region and to South Africa
14

16. THANK YOU
15

17. BACKUP
16

18. 17
STAKEHOLDER HAVE DIFFERING REQUIREMENTS
Objective Input factors
Stakeholder
• Service availability / reliability
• Minimise logistic cost
Overall economy
• Cargo volumes / balance
• Capacity
(cargo owners)
• Efficiency / operating cost
• Capacity of land infrastructure
• Maximise profit • Location / centrality
Shipping &
• Connections
Logistics
• Possibility to expand
companies
• Network efficiency
• Minimise intrusion • Visual
Civil society
• Pollution/environment
• Energy use
• Land use
• Employment
• Economic benefit
Government
• Value added
• Strengthens human capital
• Cultivates maritime / logistics clusters
• Capital / infrastructure
• Maximise value creation
Transnet
• Efficiency/ operating cost
• Pricing/ revenue
Source: Transnet Hub team

19. PORT USER REQUIREMENTS
Industry research has identified the
factors that most affect port
attractiveness, namely:
• Shipping line requirements • Centrality index
Location / centrality • Draft
–
• Berth availability
Connectivity
–
• Port costs
Potential for expansion
–
• Service availability / reliability (Eg. Nautical
services)
Network efficiency
–
• Port reputation
• Cargo owner requirements • Speed of vessel turnaround
• Dock worker relationships
Service availability / reliability
–
• Potential for a dedicated terminal
Cargo volumes / cargo balance
– • Cargo volume
• Cargo balance
Efficiency / operating cost
–
• Import / export cargo balance
Capacity of landside infrastructure
–
• Feeder connections
• Inland truck and train services
• Network efficiency
18

20. PORT USER REQUIREMENTS
• What our research shows
There is an expectation that a load centre will be developed
–
Improved performance has generated tangible goodwill
–
However, to be competitive as a hub, significant further improvement is necessary
–
Good connectivity is essential
–
Call for a clear signal from Transnet
–
• What our customers are saying
Evidence of commitment to improved service
–
(Just) achieving targets
–
Better than many other terminals
–
Need to improve efficiency
–
19

21. EVOLUTION OF HUB PORTS OVER THE LAST 30 YEARS
Date N. America Europe Asia Others Total
1970 9 12 2 2 25
1980 7 6 8 4 25
1990 5 5 13 2 25
2000 3 6 14 2 25
20

22. TRANSNET IS MAKING GOOD PROGRESS ON OPERATING
PERFORMANCE ACROSS ITS DIVISIONS
2003/04 2005/06 2007/08
Growth in key commodities Key Performance Indicators
Net ton km per wagon (GFB)
Total freight (billion vol.km) 106 9.9%
105 105 105
103 681,684
620,204
Rail 100
2003/04 2007/08
2002/03 03/04 04/05 05/06 06/07 2007/08
Container moves per crane hour – Container
Containers (Thousand TEUs)
Terminals
3,717
25.6
3,400 22.6
22.0 Currently 25
3,010 18.2 15.8
2,864 14.7
Ports 2,528
Cape Town
2003/04 04/05 05/06 06/07 2007/08 Durban Port Elizabeth
Refined (million Ml/km) Percent capacity utilization
3.4 104.9
95.7
3.1 76.7
70.0 68.4
2.8 2.8
Pipe- 51.4
2.5
lines
Refined Crude Gas
2003/04 04/05 05/06 06/07 2007/08

23. SEGMENTATION OF CONTAINER TRAFFIC
Transhipment business segments
Definitions
• SA import and export via direct
Gateway
vessel calls
traffic
• Regionally based transhipment
Hub-and-
to/from (low volume) SA ports,
spoke T/S SA employing feeder vessels. …
• Regionally based transhipment
Hub-and-
to/from (low volume) SSA ports,
spoke T/S
employing feeder vessels.
SSA
• Trade route based transhipment at
Interlining/ key network ports between deep-
relay traffic sea vessel strings
• Cargo-generation by seaport-based
SSA
distribution zones SSA
distribution
zone
22
Source: Team analysis

24. CHARACTERISTICS OF WORLD CLASS PORTS
Requirement South Africa’s new port (Ngqura)
• Draft at berth • 16.5m
• Deep water berths accommodate • Rail and road connectivity • Intermodal transport linkages
larger vessels (+14m draft)
• Marine services • 24 hour operations
• On time berthing
• Highly productive terminals with • Can accommodate larger • 8 000 – 9 000 TEU’s vessels can
well trained staff, high-end vessels berth
systems and high waterside
productivity(>25 moves) • Good waterside • >3 cranes per vessel
• >25 moves CGH
• Good hinterland infrastructure performance
and connectivity
• Good, integrated land • Fast turnaround to hinterland
• High levels of security and safety transport (incl. Gauteng)
• Capacity ahead of demand
• Capacity ahead of demand • Capacity expected to exceed
demand until 2012
23

25. SOUTHERN AFRICA IS EXPECTED TO BECOME MORE COMPETITIVE
WITH THE SUEZ, CREATING INTERLINING OPPORTUNITES
24