Meeting the freight logistics challenge Presentation to the Portfolio Committee on Transport Maria Ramos Group Chief Executive Transnet Limited 2 August 2007

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Efficient and effective freight logistics is critical to economic growth Global economic liberalisation and advances in transport and ICT have given rise in recent years to high levels of global sourcing in many production systems Imports by high-income countries from developing countries have risen from below 15 percent in the 1970s to nearly 40 percent today, and their share is expected to rise to more than 65 percent by 2030 (World Bank, 2006) Supply chains have emerged as key competitive weapons as goods become increasingly commoditised This requires our international supply chains to be globally competitive in terms of cost, speed, reliability, flexibility and reach Transnet is focused on delivering a world class integrated bulk freight logistics system that will provide local firms with a competitive advantage

The South African freight system is far bigger than Transnet Source: NFLS, 2005 This view of the system players ignores the very important role played by shipping lines

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

What the NFLS says: The problem statement The freight system in South Africa is fraught with: Inefficiencies at system and firm level Structural infrastructure shortfalls and mismatches A lack of integrated planning The skills base is deficient Information gaps and asymmetries abound The institutional structure of the freight system is inappropriate and The regulatory frameworks are incapable of resolving the problems in the industry

What the NFLS say: The system challenge Impact Ageing infrastructure Restricted capacity, Unreliable services, High investment requirements Low efficiency High cost, Unreliable services, Low service levels Low collaboration Duplication, Under-utilisation, High costs Lack of integrated planning Spatial and timing mismatches, Wasted effort and resources Inappropriate regulatory framework and institutional structure No ability to change system, Monopoly pricing for “competitive” services, No or low competition

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

What MSA says: Key strategic challenges Export competitiveness Lack of alignment for value added exports Barriers to cross border SADC traffic System sustainability High systems cost of domestic freight (externality costs) Sustainability of the freight industry High systems costs together with significant resource constraints, create a dynamic of a gradually deteriorating and eventually, financially unsustainable system

South Africa has been unable to overcome this challenge What MSA says: Lack of alignment makes it difficult to address the challenge The system lacks proper alignment There has historically been no institution or grouping of institutions with the function of integrating across the individual components of the system Each component of the system has been managing to its own narrow objectives Components of the system have therefore maximised against an unintegrated set of constraints and towards an unintegrated set of objectives South Africa has been unable to overcome this challenge An integrated Transnet can go a long way towards overcoming this challenge

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Transnet’s view of the freight system challenges The challenges identified by the NFLS and MSA are valid Transnet’s turnaround strategy is aimed at addressing these challenges Transnet has identified additional challenges through the freight demand model and analysis of the container market

Freight demand model The model was developed in August 2006 to assist with long term capacity planning A first of its kind in South Africa Modelling risk mitigated through stringent verification procedures which included: Utilising multiple sets of economic forecasts Comparing modeled flows against actual Transnet Freight Rail (previously Transnet Freight Rail) flows and outputs of SANRAL’s national freight flow model Interviews with industry analysts, customers and supply chain experts to confirm forecasts and verify flows for the top 23 commodities comprising more than 90 percent of the total freight demand by weight Model results were closely aligned with previous assumptions of long term demand for the ports

A pareto based combination was adopted A pareto based combination was adopted. The modelling framework provided a economic structure which was then enhanced with empirical research for 90% of total GDP by weight. Verify with: Known flows Rail data National freight flow model Actual data – based on publications and personal interviews Macro-economic data National I-O model Apportionment - Supply and demand per commodity on a geographical basis Allocation - Flows per commodity Macro-economic forecast Commodity forecasts Parameters: 354 magisterial districts 95 commodity groupings The total output was compared to the national freight flow model (SANRAL) and strong correlation on corridor and rural flows confirmed a high degree of accuracy.

South Africa is a transport intensive economy Our long transport corridors is the key reason behind this abnormal demand Transport needs to be especially efficient to overcome this challenge Source: Supply Chain Management Centre, University of Stellenbosch

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Our structural problem with corridors will grow. Million tons 2006, 2011, 2016, 2021, 2026 Likely and high scenario Gauteng-Beitbridge (incl. Polokwane) Gauteng-Nelspruit (incl. Witbank) Gauteng-Lobatse Gauteng-Richards Bay Gauteng-Cape Town Gauteng-Durban Coastal Gauteng-East London Gauteng-PE Growth in the two major corridors can only be addressed with a sustainable intermodal solution

Intermodal solutions provide the most efficient solution The continued absence of an intermodal solution has led to a sudden increase in South Africa’s truck fleet in an attempt to address freight owners’ door-to-door needs It is important to note that this increase has taken place after the release of the NFLS – the NFLS therefore did not take this into account Failure to address the corridor challenge will result in corridor gridlock Intermodal solutions provide the most efficient solution Source: NAAMSA data

Primary flows are completely rail orientated for obvious reasons Million tons 2006, 2011, 2016, 2021, 2026 Likely and high scenario Magnetite Domestic iron ore Export iron ore Export coal Domestic manganese Export manganese Capacity expansion should follow well developed systemic patterns Source: Centre for Supply Chain Management, University of Stellenbosch

Knowledge about rural traffic will facilitate branch line strategies. Rural traffic in South Africa will pose growth challenges for the second economy Million tons 2006, 2011, 2016, 2021, 2026 Likely and high scenario Limpopo Mpumalanga North West Kwazulu Natal Northern Cape Free State Eastern Cape Western Cape This is primarily a road demand but rail solutions are possible where infrastructure is already installed Knowledge about rural traffic will facilitate branch line strategies.

Total tonnage demand and shipped In the likely scenario, total tonnage shipped will more than double in the next 20 years Total tonnage demand and shipped Likely scenario Coordinated action is required by all stakeholders to optimise the investment required to meet this demand Source: Centre for Supply Chain Management, University of Stellenbosch

.... and almost triple in the high scenario Total tonnage demand and shipped High scenario Source: Centre for Supply Chain Management, University of Stellenbosch

The economy will grow the fastest, by weight, in basic energy related commodities, basic earthworks, building related and food commodities Supply/Demand data: Growth in tons – 2006 to 2026 Source: Centre for Supply Chain Management, University of Stellenbosch

But when depicted as a % growth more beneficiated growth is expected Supply/Demand data: % Growth in tons – 2006 to 2026 Source: Centre for Supply Chain Management, University of Stellenbosch

Salient points South Africa is a transport intensive economy Freight demand will more than double in the next 20 years The sudden increase in the truck fleet will lead to increasing congestion throughout the freight system Future freight demand can best be met through the development of intermodal corridor solutions

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

The container freight system The container is the core of a highly automated system for transporting freight internationally Almost all beneficiated goods are transported in containers Maximising opportunities arising from the globalisation of production and supporting an export led growth strategy requires a world class container freight system Maritime connectivity and ocean freight rates are the main drivers behind the competitiveness of South Africa’s container supply chains

Distribution of costs across value chain Ocean freight is the biggest determinant of our container supply chain competitiveness

Source: Port of Singapore Authority, 2006 Comparison of supply chain costs At around 3,5 Million TEU, South Africa accounts for only 0.75% of the world container market and our market is dominated by two lines Source: Port of Singapore Authority, 2006

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Transnet vision and mission Transnet is a focused freight transport company delivering: Integrated, efficient, safe, reliable and cost effective services which help promote economic growth in South Africa INCREASED Market share IMPROVED Productivity and profitability PROVIDING Capacity for customers ahead of demand 31

TRANSNET’S CUSTOMERS PREFER US BECAUSE: Transnet values TRANSNET’S CUSTOMERS PREFER US BECAUSE: We are: Reliable Trustworthy Responsive Safe service provider OUR EMPLOYEES ARE: Thinking Disciplined Results orientated Ethical Committed Safety conscious Accountable 32

Four-point turnaround plan Enabling economic growth Four-point Turnaround Strategy Redirecting and Re-engineering the Business Strategic Balance Sheet Management Ensure Corporate Governance & Risk Management Develop Human Capital Delivering efficient & competitive services Revitalising HR by transforming culture and behaviour of staff Be a preferred and sustainable employer Focusing on: - Talent management - Leadership - Transformation - Performance and reward management Highest standards of corporate governance Improvement in risk management, especially safety in all operations Dispose all non-core activities and focus on core business units Appropriate rate of return on invested capital (>WACC) Post retirement funding Optimise cash flow and cash management Strategic asset/liability management Improving efficiencies and effectiveness of core divisions Realising port-rail synergies Customer focus Infrastructure and maintenance Focused freight transport company Strategic intent 33

Structure to support strategy TRANSNET COMPANY Operational divisions (continued businesses) Discontinued Businesses Discontinued businesses SA Express Transtel Telecoms Viamax Autopax freightdynamics Housing Loan Book Shosholoza Meyl Arivia.kom Transnet Freight Rail RAIL Engineering PORTS PIPELINE National Ports Authority Transnet Port Terminals Transnet Pipelines Supporting businesses: Property, Capital Projects 34

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Strategy implementation: achievements to date Capital investment to address infrastructure challenges On target with 2007 (R11,7 bn) roll out of five-year investment plan Replacement of assets (R8,2 billion) Expansion investments (R3,5 billion) Major projects commenced and spending next five years per Corporate Plan New Multi Product Pipeline (NMPP) from Durban to Johannesburg (R9,3 billion) Widening and deepening of the entrance channel at the Port of Durban (R2,6 billion) Ngqura Container terminal (capacity from 2010 onwards) (R6,1 billion) Coal line capacity expansion to 86 mtpa (R3,3 billion) Ore line expansion to 47 mtpa (R3,8 billion) Acquisition of 404 new locomotives (R4,9 billion) Project management: Establishment of Capital Projects Focus on: Co-ordination, implementation, skills, planning and delivery 36

Strategy implementation: achievements to date Disposal of non-core assets to refocus the business R20 million and R3 million, respectively Metropolitan Life (including Kagiso Trust Investments) and Fifth Quadrant respectively Transnet Pension Fund Administrators (100% - administration and investment services) R1.8 billion London & Regional Consortium V&A Waterfront Holdings (Pty) Ltd (26%) R30 million VAE SA (Pty) Ltd VAE Perway (Pty) Ltd (35%) R70 million Equity Aviation Services (Pty) Ltd (and employee share scheme) Equity Aviation Services (Pty) Ltd (49%) R250 million (funded by issue of equity of 15% in Neotel (Pty) Ltd via Transpoint Properties (Pty) Ltd) Neotel (Pty) Ltd (formerly the Second Network Operator) Transtel Telecom FSN Metro assets R2 billion (no cash flow – transaction effected by share buy-back) Department of Public Enterprises South African Airways (Pty) Ltd (100%) Price Buyer Businesses disposed 37

Disposal of non-core assets – Subsequent events Strategy implementation: achievements to date Disposal of non-core assets – Subsequent events R5,8 billion – Subject to certain conditions Newshelf 664 (Pty) Ltd “C” Preference share Approximate R1,0 billion Subject to Competition Commission approval Bidvest Ltd Viamax Pty Ltd (100%) Fair value of R1,4 billion – Subject to Competition FirstRand Bank Ltd Transnet Housing Loan Book Price Buyer Businesses 38

Strategy implementation: achievements to date Human capital development Achievements: Focus on: Change management programmes in place Organisational culture Career planning and remuneration Recruitment and retention SPO’s defined for all managers and performance assessed Performance management Skills mapping completed Leadership development plans Prioritising skills and succession planning Skills demand planning Capacity building and skills development Talent management Additional capacity building 175 additional engineering bursaries 173 students at institutions of technology (to be increased to 300) 1 261 additional apprentices in different trades 20 Thuthuka bursaries through SA Institute of Chartered Accountants 39

Strategy implementation: achievements to date Re-engineering the business: Vulindlela projects Second year of implementation Improve productivity levels and operational efficiencies Orientate businesses towards customers Address safety Culture of planned maintenance Increase in market share – volume growth (especially GFB in Transnet Freight Rail) Savings of more than R2 billion have been achieved since inception Success/achievements in 2007 Improved GFB freight flows (3 mt) Capacity created on Iron Ore and Coal Line that exceeds current demand from clients Increase in monthly port handling capacity at DCT (TEU’s 186 000 vs 158 000) Procurement savings of R500 million p.a. and reduction in safety incidents (R200 million) 40

Strategy implementation: achievements to date Efficiency improvement: Transnet Business Intelligence projects (TBI) Implementation of TBI projects Effective use of technology, world class systems and processes Financial management and reporting Improving processes and systems that enable information management Identified KPI’s across businesses to measure key value drivers Benchmarking against international companies to ensure world class performance Implemented Key Performance Indicator project to measure: Key volume drivers KPI performance weekly/monthly Performance vs benchmarks – all areas of business 41

Strategy implementation: achievements to date Transnet Second Defined Benefit Fund (TSDBF) Active management and leadership from Transnet Currently in surplus of R1,9 billion as opposed to being in deficit in 2006 of R1,6 billion (aided by the sale of MTN shares-M Cell and V&A Waterfront) Rule amendments submitted to the Minister for approval Generally to enable bonus amounts to be paid to pensioners to exceed 2% pension increase (subject to affordability) Transnet to pay ex-gratia bonuses of R125 million to pensioners All to receive an additional 1% Previously disadvantaged widows and members with >15 years service who receive low pensions and/or also over 65 years old receive additional amounts 42

Strategy implementation: achievements to date Transnet Pension Fund Act Amendment Bill Bill passed by Parliament enables non-Transnet employees of businesses transferred to other Government agencies to remain members – awaiting Presidential approval Rule amendments approved by Minister of Public Enterprises with the concurrence of the Minister of Finance Fund will become multi-employer with new employer guaranteeing obligations of its employees Fund now in substantial surplus (R1,1 billion) 43

Put in place a special committee to manage Regulation Strategy implementation: achievements to date Economic Regulation National Ports Act Act in force from November 2006 Places responsibility on Transnet National Ports Authority to ensure safe, efficient and effective functioning of ports system Independent Regulator oversees Transnet National Ports Authority’s functions, approves tariffs, hears complaints and appeals from port users Transnet is investing in systems and capabilities to perform additional functions prescribed by legislation Interacting with shareholder on certain aspects of Act Pipelines NERSA (energy regulator), declined Transnet Pipelines’s application for 5,6% increase Methodology for pipeline tariffs not yet approved by NERSA Transnet engaging with relevant authorities; important that tariff methodology enables Transnet to earn a fair return on invested capital (> WACC) Put in place a special committee to manage Regulation 44

Strategy implementation: achievements to date Risk Management Operational Risk Established a Risk Committee of the Board and appointed a Chief Risk Officer that serves on EXCO Appointed GE Human Resources and HR Sub-Committee dealing with human capital in sustaining the turnaround Improved safety measures and roll out safety awareness and training programmes Reviewed safety procedures and strengthened capacity in problematic areas Improved controls and campaign against fraud 45

Strategy implementation: achievements to date Risk Management Financial Risk Financial Risk Framework in place covering all risks (interest, currency, market) Asset and Liability Committee ensures that financial risks are effectively managed Stringent financial objectives are set to ensure that targeted financial ratios are achieved/maintained Improved internal financial and system controls 46

Performance vs Corporate Plan/Compact 2007 Transnet performance highlights: three-year view Achieved 99% of budget (Target: >90%) 208% R11,7 bn R11,8 bn R3,8 bn Capex (excl. Aviation) – 278% R37,4 bn R9,9 bn Shareholders equity Improvement against compact 19% 53% 39% 48% 83% Gearing Exceeds compact by 17% 70% 6,8% 5,8% 4,0% Cash flow return on investment (CFROI – real return) Exceeds compact by 2% 54% 5,4 times 5,3 times 3,5 times Cash interest cover Exceeds compact by 16% 139% 40,7% 35% 17% EBITDA Exceeds compact by 21% 78% R8 470 m R7 022 m R4 750 m Operating profit Performance vs Corporate Plan/Compact 2007 Improvement vs 2004 2007 Actual 2007 Compact 2004 Actual Measures 47

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Financial results 2007 Consolidated income statement 39,6% 40,7% EBITDA margin (%) 4 930 7 404 Profit for year 102 1 082 Profit for the year from discontinued operations 4 828 6 322 Profit for the year from continuing operations 33 2 Income from associates (2 042) (1 902) Taxation (2 406) (2 437) Net finance costs 9 243 10 659 Profit from operations before net finance costs 1 105 2 189 Profit on sale of interest in businesses, impairment of assets, dividends received and fair value adjustments (2 163) (3 018) Depreciation and amortisation 10 301 11 488 EBITDA (15 733) (16 726) Net operating expenses 26 034 28 214 Revenue 2006 R million 2007 for the year ended 31 March 49

Five-year EBITDA Margin Growth Financial results 2007 Five-year EBITDA Margin Growth 86% growth 41 40 29 22 17 50

Core operating division performance Operating divisions EBITDA (R million) Revenue (R million) 4% %▲ 14 574 2007 2 910 2006 3 737 28% 14 055 Transnet Freight Rail 4% increase in revenue. Total volumes 176,6 mt (2006:178 mt) - GFB 79,6 (2006: 79,7) - Iron ore 30,0 (2006: 29,6) - Coal 67,0 (2006: 68,7) Volumes negatively impacted by - Customer’s production constraints, - Capacity constraints - Derailments 3% decrease in operating cost compared to prior year – improvements from the re-engineering programme Capital expenditure R7,4 billion Transnet Freight Rail contribution to Group EBITDA 33% 51

Core operating divisions performance Transnet Rail Engineering contribution to Group EBITDA 9%* * Mainly internal and eliminated on consolidation Operating divisions 1 088 47% 738 7 317 90% 3 845 Transnet Rail Engineering EBITDA (R million) Revenue (R million) 4% %▲ 14 574 2007 2 910 2006 3 737 28% 14 055 Transnet Freight Rail Revenue increase mainly due to integration of Transnet Freight Rail maintenance operation. Locomotive reliability and availability exceeded targets Annual number of wagon maintenance lifting increased from 12 000 to 20 000 Record production of 1 022 new iron ore and coal wagons Capital expenditure R623 million 52

Core operating divisions performance Increase in revenue mainly due to volume increases - Containers 14% - Vehicles 25% Capital expenditure R1 026 million Berth occupancy 66% (2006: 58,9%) Transnet National Ports Authority contribution to Group EBITDA 40% 4 627 9% 4 242 6 107 12% 5 438 Transnet National Ports Authority 1 088 47% 738 7 317 90% 3 845 Transnet Rail Engineering EBITDA (R million) Revenue (R million) 4% %▲ 14 574 2007 2 910 2006 3 737 28% 14 055 Transnet Freight Rail Operating divisions 53

Core operating divisions performance Transnet Port Terminals contribution to Group EBITDA 14% Operating divisions 1 561 31% 1 193 4 098 14% 3 585 Transnet Port Terminals 4 627 9% 4 242 6 107 12% 5 438 Transnet National Ports Authority 1 088 47% 738 7 317 90% 3 845 Transnet Rail Engineering EBITDA (R million) Revenue (R million) 4% %▲ 14 574 2007 2 910 2006 3 737 28% 14 055 Transnet Freight Rail Revenue increase 14% vs 2006 - Containers (13% in TEU’s) - Automotive (18% in Units) - Bulk (2% in tons) Capital expenditure R1 740 million 54

Core operating divisions performance 15% increase in revenue vs 2006 - Petroleum volumes (8,1%) - Gas (14,6%) - Tariff increase 2,5% Capital expenditure R310 million Board approval to commence with the Multi Product Pipeline subject to certain governance issues being resolved Transnet Pipelines contribution to Group EBITDA 8% Operating divisions 931 8% 860 1 218 15% 1 060 Transnet Pipelines 1 561 31% 1 193 4 098 14% 3 585 Transnet Port Terminals 4 627 9% 4 242 6 107 12% 5 438 Transnet National Ports Authority 1 088 47% 738 7 317 90% 3 845 Transnet Rail Engineering EBITDA (R million) Revenue (R million) 4% %▲ 14 574 2007 2 910 2006 3 737 28% 14 055 Transnet Freight Rail 55

Financial results 2007 Consolidated balance sheet R million 2006 R million for the year ended 31 March ASSETS Non-current assets 57 843 50 144 PPE and other 57 720 48 125 Long term loans and advances 123 2 019 CURRENT ASSETS 19 411 28 202 Inventory, receivable assets and cash 9 841 7 588 Derivative financial assets 5 658 3 874 Assets classified as held-for-sale 3 912 16 740 Return on average total assets (%) TOTAL ASSETS 77 254 78 346 56

Cash generated from operations (R million) Cash interest cover (times) Financial Results 2007 Abridged consolidated cash flow statement (5 379) (4 637) Other 11 244 13 488 Cash generated from operations 5 865 8 851 Cash flow from operating activities 2006 R million 2007 for the year ended 31 March Cash generated from operations before working capital changes increased by 20% to R13,5 billion Net cash generated from operating activities increased by 51% to R8,9 billion Cash generated from operations (R million) Cash interest cover (times) 4,3 3,5 4,8 4,5 5,4 7 178 7 040 10 089 11 244 13 488 57

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Integrated and coordinated action between the port, rail and pipeline systems is necessary to meet the challenges by: Implementing a high performance rail corridor backbone for the country that will start to recapture corridor market share from road and provide the capacity to meet the long term demand for freight in the economy. Operating the ports in a complementary manner to make the port system more efficient, increase maritime connectivity and reduce ocean freight rates Integrating physical, financial and information flows along the port-rail-pipeline supply chain to ease the administrative burden of trade and create greater visibility and responsiveness within industry supply chains. Formulating and implementing integrated service strategies for key customer segments to realise the synergies of the port, rail and pipeline systems. Enhancing the connectivity of the South African freight system with the regional freight system

Integrated port and rail masterplan Integration is well advanced in Transnet as can be seen from the following examples Integrated port and rail masterplan Integrated freight infrastructure solution for the Port of Ngqura Integrated solution for Toyota Focus on corridor performance management In all these cases, a fragmented approach would yield a sub-optimal solution

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Ports and rail master plans Informed by the freight demand model and stakeholders Corridor approach adopted in the development of the plans Ensures integrated port and rail planning and investment Ports are clustered into three regional groupings ensuring that the associated coastal regions are assured of both bulk and general cargo facilities Infrastructure strategy premised on creating capacity ahead of demand Corridor solutions are expensive and risky. This risk can be managed through coordinated and complementary action between the port, rail and pipeline systems

Future core rail infrastructure Ore line upgrade to 93 million tons in 3 stages Extension of Loops and electrification upgrade CT - Kimberly Upgrade signalling, power supply and electrification Kimberly - Gauteng Bellville Intermodal Hub Upgrade Loop extensions and power supply upgrade Loop extensions and electrification Bloemfontein - Springfontein Upgrade axle load, Glencoe - Gauteng New industrial line: Durban – Richards Bay, Richards Bay - Ermelo Coal Line capacity upgrade to 92 Million tons Gauteng Freight Ring Sentrarand rail hub development Future core rail infrastructure

An integrated approach to container capacity Transnet’s capacity strategy for containers is premised on a complementary system of ports This creates flexibility within the system and optimizes investment Creating capacity ahead of demand is critical to ensure the reliability of the system

Container terminal expansion (2011) Container capacity plan: Western Ports Container terminal expansion (2011) For 12% growth scenario further capacity to be provided by additional 2 berths in Cape Town or container expansions in Saldanha (2019) 12% Shortfall in stacking capacity due to expansion project (EIA) approval delays, to be supplemented by inland stacking capacity 10% TEU VOLUMES & CAPACITY 8% EXISTING CT CONTAINER TERMINAL CAPACITY YEARS

Container capacity plan: Eastern Ports Existing DCT Capacity Pier One (2008) Capacity shortfall possibly supplemented by Ngqura (2010 – 2013) Bayhead & RHB 600 series developed in parallel ( 2013) Additional capacity required for 12% growth scenario at 2017 is currently under review 12% 10% 8% TEU VOLUMES & CAPACITY YEARS

Container capacity plan: Central Ports Surplus capacity to handle overflow volumes from Durban from 2010 - 2013 For 12% growth additional capacity required at 2016 12% New Ngqura 4 berth container terminal 2008 10% 8% TEU VOLUMES & CAPACITY EXISTING PE TERMINAL CAPACITY YEARS

Structure Context Freight system challenges What the NFLS says What Moving South Africa says Transnet’s view The freight demand model Demand forecasts The container value chain How is Transnet responding to the challenges? Turnaround Strategy How has Transnet performed to date? Progress on the turnaround strategy Financial performance Where will we focus going forward? Integrated objectives Infrastructure Long term 5 Year Plan

Capex spending five-year plan: R78 billion* 13% Capex spending five-year plan: R78 billion* RAIL Transnet Freight RailR34,8 bn Coal Line – R4,9 bn Ore Line – R3,8 bn General Freight – R15,3 bn Maintenance Capitalisation – R10,8 bn PIPELINE Transnet Pipelines R10 bn Multi-product pipeline – R9,3 bn Gas line upgrading – R0,2 bn 13% PORTS Transnet Port Terminals R9,5 bn Durban – R0,9 bn Richards Bay – R0,7 bn Ngqura – R1,5 bn Cape Town – R0,4 bn Saldanha – R2,9 bn 12% 45% 24% PORTS Transnet National Ports Authority R18,5 bn Richards Bay – R0,8 bn Ngqura – R4,7 bn Cape Town – R3,8 bn Durban – R7,6 bn Floating craft – R0,7 bn 5% RAIL Transnet Rail Engineering R4,1 bn Equipment - R2 bn Upgrade of facilities – R1,1 bn * Continuing businesses

Capex five-year plan: R78 billion* 12,8 Capex five-year plan: R78 billion* Annual spending over five years Cumulative R78 bn R21.5 bn R16.9 bn R17.5 bn R12.7 bn R9.4 bn Five-year plan 2012 2008 2009 2011 2010 Rail Ports Pipeline and other * Continuing businesses 70

5 Year Infrastructure Investment Plan

Funding requirements: Next 5 years 2008-2012 R million 2007 R million 40% – 45% 39% Gearing * Funding requirements over 3 years approximately R25 billion (15 207)* (3 764) Funding requirements (10 085) (1 860) Loan redemptions (5 122) (1 904) Cash shortfall (78 014) (11 674) Gross capital expenditure 69 805 8 851 Cash flows from operating activities ECA umbrella facility DMTN program – R30 billion facility rated by Moody’s Raise cost effective borrowings at the appropriate tenors 72

Funding requirements: Next 5 years 2008/09 R million 2009/10 R million 2010/11 R million 2007/08 R million 20011/12 R million Cash flows from operating activities 7 653* 15 529 12 579 15 363 18 681 Gross capital expenditure (16 935) (21 481) (17 480) (12 714) (9 404) Proceeds from disposals and other investments 2 516 301 140 66 64 Loan redemptions (5 054)** (2 287) (220) (2 327) (197) Funding requirements (11 820) (7 938) (4 981) 388 9 144 * Including sale of “C” Preference shares ** Redemption of T004 bond 73

Challenges next 3 years Grow the business Volumes/activities Efficiencies and reliability improvements Customer satisfaction Providing safe services Roll out of investment plan Replace assets and capacity creation Roll out of Transnet Business Intelligence project (TBI) Risk Management and Corporate Governance Safety of people and freight Complying with environmental requirements Strengthening internal controls WE ARE DEDICATED TO FULFILLING OUR VISION AND MISSION: To deliver on our commitment to our customers and co-operation with all stakeholders To play a leading role in the transport and logistic sector to support economic growth in South Africa and fulfil the role required by the Shareholder 74

Thank you