Transnet Online Integrated Report 2017
Market Demand Strategy (MDS) themes
  • Financial sustainability
  • Capacity creation and maintenance
  • Market segment competitiveness
  • Operational excellence
  • Human capital
  • Organisational readiness
  • Sound governance and ethics
  • Constructive stakeholder relations
  • Sustainable developmental outcomes
Sustainable Developmental Outcomes (SDOs)
  • Employment
  • Skills development
  • Industrial capability building
  • Investment leveraged
  • Regional integration
  • Transformation
  • Health and safety
  • Community development
  • Environmental stewardship
The Capitals
  • Financial Capital
  • Manufactured Capital
  • Intellectual Capital
  • Human Capital
  • Social and Relationship Capital

Abridged Governance

Creating value through Transnet’s governance structure

Transnet´s governance structure supports the Company´s ability to create value in the short, medium and long term by creating an enabling environment within which to achieve strategic objectives.

Characteristics of an enabling environment

Financial accountability
  • A mature Audit function enables us to review and assess the integrity and effectiveness of our accounting and financial control systems.
  • A Group-wide Step-up Programme on the critical financial reporting controls environment managed within the office of the Chief Financial Officer ensures the end-to-end adequacy of key financial control processes.
  • The Board of Directors annually approves the Financial Risk Management Framework (FRMF). The FRMF is a financial risk management policy that provides a framework within which Transnet Treasury operates and aids in meeting the Company´s objectives while mitigating the associated risks.
  • The Board of Directors and Group Leadership Team (GLT) hold periodic strategic planning workshops where, among others, the Financial Results, Corporate Plan, Shareholder´s Compact and Company Performance are reviewed to ensure balance and information integrity.
Performance monitoring
  • The Acquisitions and Disposals Committee monitors the implementation of strategic acquisitions against approved plans. The committee is also responsible for decision-making on economic and social impacts. It ensures that procurement and provisioning policies are fair, equitable, transparent and cost-effective.
  • The Acquisitions and Disposals Committee approves tenders and contracts up to the maximum of the investment decision. It also monitors trends in supplier development spend and progress on plans including support of the Government´s economic policies, Competitive Supplier Development Programme, Local Supplier Development and Preferential Procurement and Enterprise Development.
  • The Internal Audit function conducts annual audits on the Company´s corporate governance structures to provide assurance that governance-related processes and controls are consistently applied by the Board of Directors to support MDS performance.
  • The Internal Audit Plan is aligned to the MDS and continues to focus on the key risks and challenges faced by the Company. The Plan further considers the overall control consciousness of employees, including contract personnel, and addresses factors that could influence the satisfactory realisation of Transnet´s goals and objectives.
The safeguarding of resources and the limitation of undesirable outcomes
  • Our Internal Audit function assists the Board of Directors to safeguard the Company´s manufactured assets through acquisition and disposal policies and by approving procurement transactions within a stringent delegated authority framework.
  • Our ICT Governance function manages Transnet´s ICT architecture and drives effective measures to minimise adverse business impacts of digital risks through systems recovery and Information security.
  • The Acquisitions and Disposals Committee monitors strategic acquisitions and disposals and makes recommendations to the Board of Directors.
  • The Audit Committee assesses any significant risk-control failings or weaknesses identified and their potential impact, and confirms that appropriate action has been or is being taken.
  • Our Risk Management function contributes to a climate of discipline and control which reduces opportunities for fraud and other operational losses.
  • The Audit Committee ensures compliance with and adherence to applicable legal, regulatory and accounting requirements, and contributes to a climate of discipline and control which will reduce the opportunity for fraud.
  • The Risk Management function monitors environmental outcomes relating to energy, climate and water, and helps to mitigate the risks relating to non-compliance with environmental legislation.
  • Transnet has an established, principles-based Integrated Assurance Model (IAM) that provides a clearly defined, documented approach for integrating and aligning Transnet´s assurance processes and control systems, thereby enabling appropriate risk and governance oversight.
An integrated mindset regarding the business´s inseparable elements
  • By embracing King III – and now King IV – the Board of Directors ensures that the Company´s strategy, risk compliance, performance and sustainability are inseparable.
  • The Sustainability Forum meets quarterly and is tasked with developing key performance indicators (KPIs) in relation to analysing sustainability performance.
  • The Board of Directors approves the Company´s Integrated, Financial and Sustainability Reports and ensures that all material aspects are covered.
  • The Risk Committee reviews the Company´s risks on a quarterly basis, and an annual review is performed by the Board of Directors. The Integrated Report, which is approved by the Board of Directors, aligns risks with strategy, operations and the Company´s most material aspects.
Ethical leadership and an ethical organisational culture
  • Our Remuneration, Social and Ethics Committee helps to maintain world-class standards in the social and ethics environment, with due regard to all relevant legislation, policies, legal requirements and codes of best practice.
  • Our governance framework enables the value system set by the Board of Directors and top management to filter into the organisation´s corporate culture, allowing them to lead by example – ‘tone at the top´.
Ethical, inclusive stakeholder relations to promote social trust (corporate citizenship)
  • Our Remuneration, Social and Ethics Committee advises the Board of Directors in regard to responsible corporate citizenship and the ethical relationship between the Company and its stakeholders, both internally and externally.
  • The committee manages the Company´s legal and moral obligations for its economic, social and natural environment, including the objectives and standards of the Company´s conduct and activities.
  • The Acquisitions and Disposals Committee recommends potential private-sector participation models to the Board of Directors.
  • The Acquisitions and Disposals Committee monitors trends in supplier development spend and progress.
The ability to attract and retain the right skills
  • Our remuneration philosophy and policy environment monitors reward practices and ensures that competitive reward strategies and programmes are in place to facilitate the recruitment, motivation and retention of high-performance staff at all levels.
  • Our Corporate Governance and Nominations Committee ensures that the Board to the Board of Directors´ composition and structure enables it to fulfil its mandate and obligations in the context of Transnet´s strategic mandate.
  • The Board of Directors´ skills matrix monitors its mix of skills. The Board of Directors´ skills currently include Legal/Compliance, Accounting/ Finance, IT, HR, Business Acumen, Operations, Engineering, Risk, Corporate Governance, Procurement, Strategy, Logistics and Marketing.
A culture of innovation
  • Data will become the currency for the digital economy, and the collection and dissemination of data will become a critical baseline for revenue diversification through innovative service solutions. ICT governance plays a critical role in securing the organisation´s data assets and intellectual capital as it moves into the new digital economy. The ICT Governance function manages Transnet´s interactions with cyberspace, identifies vulnerabilities, assesses risks and acts to mitigate them at a reasonable cost with technology and processes that minimise cost and effort. Beyond risk management, ICT governance manages cybersecurity to ensure organisational resiliency and strategies for business continuity in the event of a cyberattack.

Creating value through Transnet’s governance structure

Governance Structure

The Company operates within the following control objectives:

Control objectives Aspects of Transnet´s control objectives
Ethical leadership, oversight and accountability
  • The appointment of the Board of Directors and the determination of the Board of Directors´ strategic and operational objectives.
Active and informed direction of the Company
  • Board direction includes approving the Company´s strategy and KPIs in line with the Shareholder´s Compact; providing input into the Corporate Plan; identifying critical risks and overseeing appropriate risk mitigation strategies; determining the Company´s Risk Appetite; and reviewing the Enterprise Risk Management Framework annually.
Progress monitoring of organisational strategy
  • The Board of Directors monitors the implementation of the MDS through Annual Work Programmes and is kept abreast of the achievements and risks associated with achievement of the strategy. Long-term sustainability is a key focus of the Board of Directors and it monitors economic, social and environmental outcomes on a continuous basis.
  • Economic benefits, such as cost efficiencies, reliable services, local supplier industry development, job creation, rural development and financial stability, are monitored by the Acquisitions and Disposals Committee.
  • Social outcomes include good governance, accountability and transparency, zero tolerance
    of fraud and corruption, a representative workforce, safety, employee wellness, Broad-Based Black Economic Empowerment, community benefits and proactive stakeholder engagement, which are closely monitored by the Remuneration, Social and Ethics Committee (REMSEC).
  • Environmental outcomes relating to energy, climate and water. Risks relating to non-compliance with environmental legislation are monitored by the Risk Committee.
Appropriate governance structures
  • Governance structures are underpinned by clear mandates that fulfil the Board of Directors´ responsibilities in line with the Companies Act and PFMA requirements.
Enhanced internal governance processes
  • Internal governance processes are enhanced through:
    • The Transnet Value Chain Co-ordinator (TVCC), an interdependent forum to ensure business optimisation and integration of the value chain service offerings;
    • The Group Capital Integration and Assurance Unit, tasked with reviewing the capital (mega) projects business cases between the different front-end loading (FEL) stages to ensure project readiness before consideration by the respective governance structures; and
    • The Capital Investment Forum, responsible for reviewing business cases and making recommendations to the Capital Investment Committee.
An impeccable governance framework
  • The Company´s governance framework complies with specific requirements of the Companies Act and ensures that the Audited Financial Statements are made available to the appropriate stakeholders.
  • It promotes transparency, accountability and integrity with respect to Transnet´s management practices.
  • It adheres to the prescribed requirements for the composition, appointment, remuneration and the election of directors.
Embedding a culture of entrenched ethical values, principles, standards and norms
  • Ethical values, standards and norms guide both employee and supplier behaviour through the Company´s Code of Ethics (the Code) and Integrity Pacts with suppliers.
  • The Code aims to instill a culture of honesty, respect, integrity and overall ethical behaviour
    in terms of employees´ engagements with internal and external stakeholders.
  • The Code is revised every five years or as and when required.
Adopting a ‘zero tolerance´ approach to fraud and corruption
  • The Company´s fraud and corruption preventative methodology enables it to identify and mitigate the occurrence of fraud and corruption through risk assessments and compliance checks. These are performed annually across the Company.
  • The top-three areas at risk of fraudulent activities for the 2016 financial year were procurement, human resourcing and resource management (i.e. the potential misuse of resources). Mitigating controls and action plans are in place to reduce risks of fraud and corruption in these areas.
  • Transnet´s fraud investigation methodology actively addresses fraud and corruption by responding to allegations of fraud and corruption in a timely manner. Investigations have numerous outcomes, including disciplinary action, and criminal and/or civil action. Subsequent to an investigation, all internal control weaknesses or breakdowns in processes are rectified to prevent future repetition of the irregularity.
  • During the year, the Company´s Anti-fraud Policy was amended to include elements of
  • Formal fraud and corruption awareness training is conducted on an annual basis with all employees, including both bargaining and non-bargaining council employees.
  • Transnet´s tip-offs anonymous hotline enables employees and the public to report unethical behaviour. The hotline is managed by Transnet Internal Audit and all reported cases are investigated through an established forensics investigation process. Cases reported are managed through an automated case-management system and allocated to the relevant Operating Division for investigation. Operating Divisions´ fraud working groups are mandated to monitor the investigation of reported allegations. The hotline is available 24 hours a day, seven days a week and the call centre agents are able to converse in all 11 official South African languages.