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

The risks and opportunities arising from material aspects

  Material aspects Risks and opportunities
Build social trust through ethical leadership and corporate citizenship

Ethics management within Transnet

  • Practices that lead to Government intervention to rebalance infrastructural disparities can lead to ethical transgressions within our stakeholder relationships. Perceptions of potentially anti-competitive behaviour and corruption negatively impact reputation and investment sentiment.
  • Sound corporate governance and a track record of ethical leadership can attract local and foreign investment and promote a strong reputation.
 

Responding to stakeholder issues

  • Negative stakeholder sentiment could adversely impact beyond the business – affecting international investor confidence.
  • Our ability to engage stakeholders positively encourages positive contribution from stakeholders to support Transnet’s MDS, supports customer retention, counters competitive resistance, and attracts critical scarce talent and investor confidence.
 

Managing our environmental impact

  • Environmental risks relate to the adverse impacts of secure supply of energy, water shortages and adverse weather patterns on the business.
  • We can set leading precedents in the management of waste and pollution within operations, particularly in view of our cross-border expansion strategy. This leadership may extend to the implementation and sharing of innovative conservation models with regional partners.
 

Partnering communities to build mutual value

  • Risk of adverse impacts on communities could lead to reputational risks and challenge our social licence to operate.
  • Transnet has many opportunities beyond simply investing in CSI initiatives to improve the lives of communities, e.g. localised procurement and employment where feasible, Enterprise Development, collaboration on safety and the environment, and targeted investment in social services.
Unlock organisational value by attracting talent, fostering innovation and building unity
 

Promoting health and safety

  • Major safety risks relate to employees’ adherence to standard operating procedures within our highly industrial operating environment and public safety at level crossings.
  • Improving staff adherence to standard operating procedures improves the safety environment
    Company-wide. Employees gain greater understanding and accountability for their operational impacts on colleagues, the environment and communities while reducing business interruptions.
 

Having the right skills at the right time

  • Risk of operational staff not skilled for future operations, and lack of scarce skills in the job market means we compete with other engineering firms and SOCs.
  • As an employer, Transnet can attract scarce technical skills in demand, resulting in improved staff retention, which in turn results in sustained productivity.
 

Operational efficiency

  • Low productivity levels due to absenteeism, strike action or operational inefficiencies lead to unreliable services, reduced asset performance and adverse impacts on service delivery levels.
  • Operational efficiencies have both financial and market impacts. Our efficiency gains improve operational efficiency of the freight logistics system. Logistics productivity and reliability are critical determining factors in shaping the country’s ability to compete globally.
 

Investing in emerging technologies

  • Digitalisation enables the organisation to move into markets previously not considered due to legacy business models and associated processes. The organisation can now harvest its data and provide its customers with end-to-end value chain logistics capabilities.
  • The business model of the digital organisation is different to current business models and will require Transnet to re-imagine itself in the digital economy.
 

Business continuity

  • The risk that essential business functions are interrupted during or after a disaster, operational incident or challenges, such as load-shedding or inadequate ICT infrastructure, which extends to cybersecurity failures.
Ensure long-term financial stability in a tough economy
 

Capital investment and progress on major projects

  • The risk of Transnet not realising the benefits from its capital investments, with lower economic activity both locally and internationally, leading to a lack of market demand.
  • Through the MDS, we facilitate broad-scale opportunities by delivering major infrastructure benefit to the country and promoting the localisation of supply on mega-projects, thereby building industrial capability.
 

Funding and liquidity

  • Inadequate liquidity can negatively impact the Company’s going-concern status and impact our credit rating, cost of funds and investment plans. The high cost of funds impacts the cash interest cover.
  • Private Sector Participation (PSP) enables Transnet to broaden the available finance pool and expedite infrastructure development and capacity creation, and encourages foreign direct investment in South African and regional infrastructure.
 

Pricing and tariffs

  • Unless the relationships with Regulators are strategically managed, tariff decisions could impact negatively on investment decisions, investor confidence and ultimately on the execution of the Company’s strategy.
  • To justify tariff increases (resulting in improved service pricing), Transnet must provide infrastructure service reliability and technical innovation commensurate with tariff increases. Through operational efficiency and R&D activities, we enhance infrastructure reliability, as well as our technical expertise. Efficiency and productivity gains also strengthen our market position.
Ensure customer-centricity and build partnerships for sustainable growth
 

Volume and revenue growth

  • The risk of not attracting and sustaining additional volumes as new capacity is created and to protect current volumes against new entrants.
  • Opportunity to capture greater market share in the domestic transport market through the road-to-rail strategy and extending the Company’s footprint across the border into the rest of the African continent and the Middle East.
 

Expanding Transnet’s business on the continent

  • Regional risks associated with regional expansion include socio-economic and political instability in operating countries and operational risks around planning, staffing and operationalising of the regional business.
  • While economic growth forecasts for developing countries are muted, the region is in need of significantly improved infrastructure connectivity, which Transnet can help to facilitate through its Africa expansion strategy.
 

Fostering lasting customer relationships

  • The risk that poor client service delivery results in strained relationships with customers.
  • Mutually beneficial customer relationships facilitate long-term planning of commodity performance with customers, including global planning around commodity demand and South Africa’s global market position – particularly valuable in the current macroeconomic climate.
 

Facilitating private-sector investment in logistics

  • Collaborative partnerships with customers and private-sector partners can support end-to-end logistics service solutions. These partnerships will become increasingly critical as Transnet moves from its current status as a third-party logistics (3PL) service provider to fourth-party logistics (4PL) service provider.
Promote transformation and growth in the wider South African economy
 

Promoting transformation

As a SOC, Transnet is expected to deliver on Government’s socio-economic, developmental imperatives (job creation, skills development, transformation and localisation). As one of South Africa’s largest single employers and one of the country’s largest infrastructure investors and network operators, Transnet is well placed to promote social value creation through employment equity in the Company and black economic empowerment through our suppliers. Transnet promotes training, skills development and local technology transfer, particularly through our relationships with OEMs in our locomotives acquisition programme. The scale and scope of our procurement expenditure will create and empower local black business in many sectors, and lead industry through new technological innovations.

 
 

Localisation of supply

 
 

Creating and sustaining jobs


Internal sources of risks

(aspects of business activities)

(Click on the image to enlarge.)

Internal sources of risks
Internal sources of risks
Internal sources of risks