Transnet launches ambitious investment plan


Transnet SOC Ltd announced that it expects to create up to 588 000 new job opportunities across the economy through its Market Demand Strategy (MDS), which will see the company spend R300 billion on capital projects over a seven-year period. The MDS is aimed at expanding South Africa’s rail, port and pipelines infrastructure, resulting in a significant increase in freight volumes, especially in commodities such as iron ore, coal and manganese. It will also lead to a significant modal shift from road to rail. The main objective of the strategy is for Transnet to invest in building capacity to meet validated market demand that will enable economic growth. The MDS is the centrepiece of government’s growth strategy through investment in infrastructure and a key component of enabling the aspirations of the New Growth Path (NGP). The MDS will catapult Transnet Freight Rail (TFR), which has the lion’s share of the investment programme, into the world’s fifth biggest rail freight company. Rail volumes will increase from approximately 200 million tons to 350 million tons during the period. By 2019, TFR will increase its market share of container traffic to 92% from 79% currently. The increase will have a major impact on reducing the cost of doing business. Studies conducted by Transnet show that rail in South Africa is on average 75% cheaper than road transport. In addition, the large scale shift from road to rail will address costs, congestion and reduce carbon emissions. HIGHLIGHTS OF THE MDS:

1. R300 billion capital investment programme

  • R205 billion will be allocated to rail projects and R151 billion to general freight to support the growth in volumes to 170 million tons per annum (mtpa)
  • Expand export coal from 68mtpa to 97,5mtpa
  • Expand iron ore export from 53mtpa to 82,5mtpa
  • Container volumes handled through the ports to increase from 4,3 million to 7,6 million twenty-foot equivalent unit containers (TEUs)
  • Investment in the final phases of the New Multi-Product Pipeline

2. Stronger financial position: Revenue growth of 16% p.a. over the next seven years, driven by volume growth

  • EBITDA – Transnet’s key measure of profitability – will more than triple to R68 billion by 2018/19
  • R213,6 billion of the required funding will be generated from operating cash flows
  • R86,5 billion of the required funding will be raised from debt capital markets
  • Gearing and cash interest cover will remain within target levels of 50% and greater than three times respectively

3. Significant productivity and efficiency improvements expected in rail and port operations

4. Growth of the local industry through programmatic procurement – approximately 50% of the R78 billion set aside for locomotives will be spent on local suppliers

5. Transnet’s employee headcount will peak at 74 000 in 2018/19. The total number of jobs expected to be created via MDS will peak at 588 000 – this includes direct, indirect and economy-wide jobs.

6. Skills development: R7,7 billion spent on training by 2018/19 including R4,7 billion on bursaries and grants

As a result of various management interventions, including the Turnaround and Quantum Leap strategies over the last few years, Transnet has built a strong position and will continue to play a pivotal role in supporting government’s drive for an infrastructure investment-led economic growth. Through the MDS, Transnet will satisfy validated demand by accelerating investment in freight logistics capacity and will support reliable, efficient and cost effective movement of bulk and manufactured goods. The successful implementation of the MDS will see Transnet’s revenue almost triple from R46 billion to R128 billion over the next seven years, driven by strong volume growth. On the ports side, containers handled will grow from 4,3 million TEUs to 7,6 million TEUs, while petroleum products through pipelines will increase by over 3 billion litres to more than 20 billion litres by 2018/19. The successful implementation of the MDS will position Transnet as a top-tier logistics and transport provider. Transnet’s investment programme over the period is expected to create and sustain hundreds of thousands of direct and indirect jobs, every year for the next seven years. The company will increase its headcount by 25% over the seven-year period to support the growth of the business. In order to deliver effectively on the promises of the MDS, Transnet will prioritise skills development to promote a high performance culture. The MDS will meet the NGP objectives including skills development, youth employment and efficiency targets. In uncertain economic conditions like this, state-owned companies and major businesses have a responsibility to step forward, invest and create jobs. Transnet will continue to invest significant resources in recruitment, development, deployment and retention of key operational, technical and managerial skills to facilitate growth. All these interventions will be balanced with the need to contain costs. MDS is not just about Transnet, but key to South Africa’s growth objectives. This strategy aims to deliver a lasting economic, social and environmental value to society. A combination of partnerships with its stakeholders and the successful execution of MDS, will enable economic growth for the country. This is a huge challenge for the company, but Transnet has developed a comprehensive implementation plan to ensure a successful delivery of the strategy.


Enhanced by Zemanta

, ,

No comments yet.

Leave a Reply