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

MATERIAL ASPECTS IMPACTING OUR STRATEGY

Identifying and managing material aspects

Build social trust through ethical leadership and corporate citizenship

Material aspect cluster
Build social trust through ethical leadership and corporate citizenship


How is it material to value creation?

To be sustainable, corporate ethics must align with the desire for profitability. In this way, ethics management becomes a source of value creation. Without social trust, Transnet cannot guarantee its social licence to operate. Visibly ethical leadership is, therefore, fundamental to building social trust and extends to fostering ethical relationships with our stakeholders and ensuring ethical stewardship of the natural environment within which we operate. Our stakeholder engagement practices are key to enabling our strategy and the quality of our relationships impact our ability to generate revenue, grow brand equity, ensure reliable service delivery, maintain positive community relations and build employee morale. Our mandate is to be an influential, long-term partner in broad economic value creation for the entire country, partnering with Government, local suppliers, private-sector partners and the communities to build mutual value.

Key elements of our management approach

  • A robust governance framework and practices to guide ethical behaviour in executing our business, cultivating positive stakeholder relationships and managing our environmental footprint.

  • The Shareholder’s Compact provides a monitoring framework for our strategic planning, and sets annual and long-term performance targets. Importantly, our performance against the nine SDOs is monitored through this framework. Transnet’s main tool of engagement with the Shareholder is quarterly reports, which reflect our performance against the Shareholder’s Compact.

  • The Board of Directors has delegated the leadership for ethics performance and sustainability-related matters to the Remuneration, Social and Ethics Committee, which advises the Board of Directors on responsible corporate citizenship and sustainability.

  • Sections 51 and 55 of the PFMA impose certain obligations on the Company relating to the prevention, identification and reporting of fruitless and wasteful expenditure; irregular expenditure; expenditure that does not comply with operational policies; losses through criminal conduct; and the collection of all revenue. To comply with the PFMA’s obligations, the Board of Directors has a materiality framework, which is approved by the Shareholder Representative, subject to certain conditions.

  • As signatories to the UN Global Compact, Transnet undertakes initiatives to promote greater environmental responsibility, i.e. mapping biodiversity hotspots to ensure future projects’ ecological sustainability.

  • Our commitment to community development is expressed through the Transnet Foundation, with a strong focus on rural communities and investment in projects with strong community impact.
Unlock organisational value by attracting talent, fostering innovation and building unity

Material aspect cluster
Unlock organisational value by attracting talent, fostering innovation and building unity


How is it material to value creation?

The continuing success of the MDS – and our long-term sustainability as an organisation – depends on our ability to unlock organisational value to meet the rapidly emerging paradigm of the 4th Industrial Revolution. This new paradigm will require new skills competencies in the context of emerging technologies and new business models to enhance our operational efficiency and service reliability, while also opening new avenues for generating revenue. Critical to our success will be our ability to protect our people and to guard the integrity of our intellectual capital. Data-centricity is a major feature of the new industrial paradigm, which brings both opportunities and risks in the common usage of the internet environment. Our ability to protect our data and our privacy as an institution and as individuals will play a vital role in growing the business and competing globally in years to come. The 4th Industrial Revolution will require a new type of employee and we must attract talent suited to the tasks set by long-term expansion goals and the emerging realities of the times. This includes building a culture of unity to sustain a shared, positive vision of our collective future.

Key elements of our management approach

  • Transnet’s talent management and development programme aims to retain top talent and to ensure robust succession plans for priority and critical positions. Leadership programmes target specific management levels, while coaching and mentoring programmes are also provided.

  • Health and safety committees offer employees a platform for engagement on health and safety issues. Approximately 247 formal joint management-worker health and safety committees have been established, with 1 611 representatives. Recognition agreements with trade unions also ensure a safe working environment, while various policies and internationally recognised safety systems are implemented to improve safety across the business.

  • The Transnet Value Chain Coordinator (TVCC) co-ordinates oversight of operational activities within the value chain and streamlines task flows. Business continuity interventions are in place in the event of energy disruptions or cyber threats.

  • A pillar of the four MDS strategic thrusts is ‘Unity’ – we will work together to build a unified culture, through a unified vision of our future, a single-minded approach to our goals, care and responsibility for ourselves, our colleagues and all our stakeholders that travel this exciting journey with us
Ensure long-term financial stability in a tough economy

Material aspect cluster
Ensure long-term financial stability in a tough economy


How is it material to value creation?

Our strategic commercial imperatives and developmental outcomes rely on our financial stability, agility and intelligent approach to market fundamentals. We must adapt to – and thrive within – the external economic, regulatory and socio-political contexts within which we operate. As new risks and opportunities within these contexts impact our business, we need to adjust our spending and project investment expectations accordingly. Insufficient liquidity will negatively impact the Company’s going-concern status and its credit rating, which, in turn, affects the cost of funds and our investment plans. Approximately 21% of our revenue is impacted by economic regulation. If not well managed, tariff decisions could have a significant negative impact on investment decisions, investor confidence and ultimately on the execution of the Company’s strategy. Exorbitant and unpredictable escalation in Railway safety permit fees charged by the Railway Safety Regulator are critical considerations for the Company’s revenue-planning activities.

Key elements of our management approach

  • We constantly review our finance and funding strategy and aim to respond deftly to business and market conditions. We continue to maintain our standalone investment-grade credit rating.

  • Positive engagement with financial capital providers ensures that our good borrowing track record, robust strategy and sound corporate governance reflect a responsible and profitable organisation. Transnet has facilities from various sources for bridging finance to meet short-term maturing obligations, while long-term funding is being concluded.

  • Transnet has introduced a capital governance framework, in line with its new operating model and integrated assurance framework, to assist oversight authorities within the appropriate internal governance structures to ‘challenge’ project, programme and portfolio delivery; to provide assurance to the Board of Directors and the Shareholder that corporate plans are being successfully achieved. The chief purpose of a governed capital environment is to provide a structure for the leadership and management to be directed and held to account.

  • Transnet’s Group Commercial function has developed a pricing strategy for its non-regulated entities to ensure that pricing methodologies, tools, governance and performance measures inform business decisions.

  • Ongoing engagements with the Shareholder, Government policy departments and Regulators for the development of national sector policies and regulatory approaches.

  • Revenue risk management strategies mitigate policy, and economic and reputational risks in the regulatory environment.

  • Proactive engagement with Government policy departments and Regulators facilitate common understanding and impact of national sector policies, tariff risks and market requirements.

  • We actively manage national sector policy processes, tariff modelling and tariff benchmarking to ensure a fair return on investment, cash flow and to minimise Railway safety permit fees.

  • We ensure monitoring prudency in regulated activities and potential anti-competitive business practices.
Ensure customer-centricity and build partnerships for sustainable growth

Material aspect cluster
Ensure customer-centricity and build partnerships for sustainable growth


How is it material to value creation?

Transnet’s ability to meet future demand for freight logistics services is dependent on volume and revenue growth to finance investments. Enhanced connectivity of the regional freight system will promote volume growth, and is a strategic priority for long-term business sustainability. Enhanced regional connectivity will boost investment on the continent, and will open new commercial horizons for Transnet and its customers and partners. By understanding and attending responsibly to the commercial needs of our customers, we will build lasting customer relationships, a key source of relationship value in tough economic conditions, and a strong contributor to market sector competitiveness, both for Transnet and the broader economy.

Key elements of our management approach

Key elements of our management approach to ensuring customer-centricity and building partnerships for sustainable growth include the following:
  • We base our volumes targets and alignment on inputs from customers, financial plans, funding requirements, operational plans, capital investments and risk management strategies across the Company;

  • Transnet’s Africa expansion strategy outlines the intention to extend our business beyond the South African borders and become the leading logistics service provider in sub-Saharan Africa. Transnet International Holdings will direct all activities outside the borders of South Africa;

  • Strategic commercial partnerships will play a crucial role in enabling our regional integration strategy. In one instance, Transnet is pursuing agreements with various port authorities to develop regional shipping services, thus boosting inter-Africa trade. Concession opportunities are also being pursued;

  • Engineering continues to strengthen partnerships with original equipment manufacturers to enhance existing know-how and create new market opportunities. Engineering intends to increase its external revenue by extending its advanced manufacturing capabilities in Africa, the Middle East and South America;

  • To maintain a customer-centric focus, we are enhancing key account management abilities and implementing integrated customer planning through innovative digital platforms. We are also designing transparent capacity allocation processes. Our long-term strategy requires collaboration with customers and private-sector partners that supports end-to-end logistics service solutions; and

  • Transnet aims to contain price increases to our customers through efficiency improvements in all areas of operations which will be practically enabled by the Transnet Value Chain Co-ordinator (TVCC).
Promote transformation and growth in the wider South African economy

Material aspect cluster
Promote transformation and growth in the wider South African economy


How is it material to value creation?

A transformed economy is an inclusive economy, with growth and economic opportunities available to the entire population. As one of South Africa’s largest single employers, Transnet supports Government initiatives aimed at addressing the socio-economic legacy of the past. Our long-term social value success lies in being committed to the transformation of our society through employment equity and black economic empowerment. We commit to upholding the principles of the UNGC with respect to equity and anti-discrimination, and seek to create an organisation that reflects the diversity of South African society.

Transnet’s Supplier Development (SD) aims to develop skills, create jobs, transfer intellectual property, and localise supply and industrialisation through contractually obligated SD plans. Our Enterprise Development (ED) interventions assist and accelerate the development, sustainability and independence of small, medium and micro-businesses in the country.

Key elements of our management approach

  • Transnet’s Employment Equity Policy supports the Employment Equity Act, No 55 of 1998. In the wider South African context, we have implemented a B-BBEE policy and strategy to address economic transformation. Additionally, Transnet adheres to the following Acts:
    • Promotion of Equality and Prevention of Unfair Discrimination Act, No 4 of 2000;
    • Labour Relations Act, No 65 of 1995; and
    • Skills Development Act, No 97 of 1998.

  • Apropos the wider transformation agenda of Government, our broad Supplier Development Plan is guided by Government’s Competitive Supplier Development Programme with a monitoring unit checking its operations.

  • Our Human Capital Strategy approaches job creation within the framework of strategic workforce planning to ensure the recruitment and retention of the top-quality employees in all employment groups.

  • Transnet has established ED hubs in Johannesburg, De Aar, Saldanha Bay and Mdantsane which provide a ‘one-stop’ facility for potential suppliers. The hub provides resources relating to business development and registration, procurement advisory services, tax registration and compliance, financial support and guidance on black economic empowerment.