Transnet’s long-term strategic perspective
The world stands on the brink of a technological revolution that will fundamentally alter the way we live, work and relate to one another. The digital 4th Industrial Revolution will see a fusion of technologies poised to disrupt almost all industries and transform production, management and governance systems. Transportation and communication costs will likely drop, and logistics and global supply chains will become more effective, with the cost of trade diminishing at a rapid rate, all of which will drive new markets and economic growth. The 4th Industrial Revolution promises a systemic transformation that impacts civil society, governance structures and human identity in addition to having solely economic and manufacturing ramifications.
Maximising the penetration of Transnet’s current market with existing products is a key focus of the MDS. Equally important will be the diversification of business with new services and markets. Digitalisation is an opportunity to accelerate diversification and to realise new business models for Transnet.
Two baseline fundamentals are apparent:
- The customer is at the centre of all that is conceived, designed and executed, and informs all efforts, powered by both new and current technologies; and
- Technology is a key enabler to realise short-, medium- and long-term objectives.
As the custodian of competitiveness of the country’s transport and logistics industry, Transnet will look at replicating and possibly leading disruptive industrial innovations by consuming new technologies such as AI, 3D printing, Internet of Things (IoT) and robotics, which exponentially increase the pace of change. Transnet’s Digital Transformation strategy is focused on innovation that supports investments in technology, business processes and business model review to create value for customers, employees and the Shareholder.
Transnet 4.0 – ‘Transnet of tomorrow’
Management has adopted the Transnet 4.0 vision for accelerating growth in the context of the 4th Industrial Revolution. The aim is to deliver on MDS outcomes, while fundamentally reinventing the existing business model to acclimatise to the challenges and opportunities of this emerging paradigm.
Transnet 4.0 has three main growth areas:
Accelerate efforts to extend the Company’s footprint in the fast-growing regions of Africa, Middle East and South Asia.
|Product and service innovation||
Transform from being a business primarily focused on transport and cargo handling towards becoming a fully integrated logistics service provider, offering end-to-end solutions to key partners.
|Expanding the scope of Transnet’s manufacturing business||
Establish an advanced manufacturing capability in rail, ports and transport as an original equipment manufacturer (OEM) for Africa through the provision of customer-focused asset lifecycle solutions.
Transnet International Holdings focus areas
The sector’s primary aim is to grow cross-border volumes and enable regional integration, focusing on the:
As economic growth in Africa unfolds, the need for a road-to-rail modal shift intransportation becomes more urgent, and the demand for rolling stock and associated maintenance will increase. Engineering already operates in this space and is well positioned to meet increased demand. Capacity of its extensive manufacturing facilities is easily increased by initiating additional shifts. The development of the TransAfrica Locomotive is expected to satisfy a market need at a competitive price.;
The basis of Transnet’s geographic expansion for the ports sector lies in port concessions, which remain lucrative in the region. The low incidence of distressed or cancelled contracts demonstrates that this route has achieved the desired outcome. Excluding South Africa, approximately 69% of all containers are shipped through terminals operated by the private sector. While port concession opportunities are limited, Transnet is well positioned to compete in this arena.
The discovery of new oil and gas reserves in Africa has resulted in a significant demand for new infrastructure capacity and new-build project opportunities. Oil and gas commodity prices remain low and, in some instances, below project hurdle rates, placing a damper on new-build plans. Numerous new-build opportunities are likely to reach final investment decision in 2018, and will be issued to the private sector on concession. This signals a strong political desire to drive oil revenues and provide frontier economies an opportunity to enter the global oil and gas sector. Transnet is well placed to participate in such concessions.
As custodian of the South African ports, rail network and pipeline infrastructure, enhanced connectivity of the regional freight system is a priority, and is embedded in the Statement of Strategic Intent and the Shareholder’s Compact. Transnet International Holdings (TIH) will co-ordinate all activities beyond the borders of South Africa. TIH was approved by the Transnet Board of Directors, DPE and the Minister of Finance. It is envisaged that TIH will be operational during the financial year.
Key initiatives to support Transnet’s focus on product and service innovation include:
- Introducing portfolio management to develop solutions from ideation to concept launch;
- Supporting the growth of the natural gas sector in South Africa by developing and implementing a business case for Transnet’s role as a national LNG and gas infrastructure developer and operator;
- Encouraging PSPs through a combination of efforts such as separating the terminal and rail haulage business; creating digital track-and-trace; and sharing asset utilisation with the private sector;
- Intensifying Transnet’s footprint regionally and globally with competitive supply chains on corridors;
- Creating and enhancing logistics ecosystems to accelerate economic growth through our property portfolio;
- Establishing Transnet as Africa’s own rail, ports and transport OEM; and
- Driving property/spatial development and innovation.
- Pursuing digital solutions and other exponential growth opportunities in the context of the 4th Industrial Revolution.
We intend to expand the scope of our manufacturing capabilities as well as seek new markets for existing products. Engineering will soon launch a shunting locomotive targeted at the African market and, additionally, develop a mainline locomotive. The Operating Division has also expanded into the ports sector, focusing on the maintenance and enhancement of cargo-handling equipment.
Digitally enabled growth
The above three converging growth areas will be underpinned by the optimal use of technology to drive service proficiency and reliability. Transnet 4.0 requires that we become a multi-faceted and service-oriented manufacture-driven, digital organisation. The rapid incorporation of leading technologies into new and existing products and processes will be a key characteristic as Transnet moves forward.