Strategic focus areas
  • Financial sustainability
  • Capacity creation and maintenance
  • Industrialisation
  • Operational excellence
  • Human capital management
  • Organisational readiness
  • Sound governance and ethics
  • Constructive stakeholder relations
  • Sustainable developmental outcomes
Socio-economic developmental outcomes (SDOs)
  • Environmental stewardship
  • Skills development
  • Investment leveraged
  • Regional integration
  • Health and safety
  • Community development
The capitals
  • Financial Capital
  • Manufactured Capital
  • Intellectual Capital
  • Human Capital
  • Social and Relationship Capital
  • Natural capital
Performance key
  • Improvement on prior year performance
  • Decline on prior year performance
  • Target achieved
  • Target partially achieved
  • Equivalent performance to prior year
  • Target not achieved
Material clusters
  • Ensure financial stability and sustainability in a tough economy
  • Promote Industrial development in the Developmental State
  • Improve operational performance in the core business
  • Ensure our activities result in sound Socio-economic Developmental Outcomes (SDOs)
  • Create and maintain capacity to support growing demand for transport infrastructure
  • Build a resilient business

Integrated Report 2019


Economic considerations

Transnet’s economic performance, in so far as it relates to volume growth, is directly linked to the performance of the global and domestic economy. At the same time, Transnet is a key enabler of the domestic economy through its provision and maintenance of logistics infrastructure and freight solutions.

Global financing conditions have tightened in the wake of weakened growth. Industrial production has moderated, with intensified trade tensions resulting in some large emerging market and developing economies (EMDEs) losing momentum and experiencing significant financial market stress. The global economy is currently characterised by volatility and high levels of uncertainty. With the stubborn recovery of the global economy and persistent vulnerability of EMDEs to market swings and increasing protectionism in advanced economies, global trade movements are constrained. In this climate, the organisation has had to revise its capital expenditure and infrastructure investment approach from the previous accelerated Market Demand Strategy, which relied on growing global and domestic aggregated demand. In the short to medium term, Transnet is shifting its emphasis towards capital expenditure based on validated demand, and prioritising spend on sustaining capital rather than capital expansion.

Downside macroeconomic risks have become more acute and include the possibility of unpredictable financial market movements. Furthermore, an escalation of trade disputes and debt vulnerabilities in EMDEs have increased, particularly in low-income countries. Also, slower than projected growth in China and the Euro Area, which have strong trade and investment links with sub-Saharan Africa, will adversely affect the region through lower export demand and investment.

In South Africa, economic growth remains weak due partially to continued policy uncertainty. According to the Bureau of Economic Research1, South Africa is projected to recover slower than previously expected in 2019 to 0,7%, before rising to 1,9% in 20212. The International Monetary Fund (IMF)too has revised South Africa’s growth rate downward to 0,7%3. High unemployment and slow growth in household credit extensions are expected to constrain domestic demand in the near term, while fiscal consolidation is likely to limit Government spending. That said, a higher rate of growth in the country’s economy is expected in 2020.

An improved outlook from 2020 stems from the expectation that Government’s structural reform agenda will gradually gather speed, and help to boost investment growth, as policy uncertainty recedes and investor sentiment improves. The IMF cutting its January 2019 growth outlook for the country is due to the view that policy uncertainty has only modestly reduced since the May 2019 national election and, additionally, structural pressures remain. This is best demonstrated by the economy shrinking more than it has in a decade during the first quarter of 2019 due to the nation experiencing the worst power outages since 2008.

Commodity outlook

The haulage of commodities has traditionally been the cornerstone of the organisation’s shipping activities. As such, the global commodity outlook is a significant factor in considering the organisation’s economic prospects.

Agricultural prices were roughly flat in 2018 but declined appreciably in the second half of the year, with developments varying by commodity. Agricultural prices are projected to remain broadly stable in 2019 and 2020.

Energy prices fluctuated markedly in the second half of 2018, mainly reflecting supply factors, with sharp falls toward the end of the year. Prices of most metals and, to a lesser extent, agricultural commodities also weakened, largely due to concerns about the effects of tariffs on global growth and trade. Oil prices are expected to average $67/bbl4 in 2019 and 2020. However, this forecast remains highly uncertain. While growth in oil demand is expected to remain robust in 2019, the estimated loss in momentum across EMDEs could have a greater impact on oil demand than anticipated. Excessive demand on road freight transport poses an input cost risk to South African economic participants when oil and, by implication, fuel prices face volatility. Reducing the dependence on road and providing intermodal solutions is ever more critical with the high cost of freight services, rendering prices uncompetitive for suppliers in certain commodities.

After increasing in the first half of the year, prices of metals fell sharply in the second half, following the imposition of broad-based tariffs by the United States on China’s imports. Heightened trade tensions involving these economies have raised market concerns about global trade and investment prospects, and as a result, they have clouded the outlook for commodity demand.

Supporting local commodity exporters and importers through our infrastructure and freight solutions requires continued investment in infrastructure maintenance and improvements. That said, operational efficiency gains and stringent cost reduction will buffer unpredictable or slow growth in commodities in the near term.

Capital investment outlook

Transnet plans to spend R153,5 billion on capital investment over the next five years, of which 71,3%(R109,4 billion) will be spent on sustaining capital. A significant portion of capitalised maintenance (R73,2 billion) will be spent on permanent ways and rolling stock (locomotives and wagons) while the remainder is planned for port and pipeline fleet and equipment respectively.

Funding outlook

Apart from the initial share capital of circa R12,7 billion at the time of the establishment of Transnet, debt capital (local and foreign bonds and loans) is the only source of external funding that has been used to finance Transnet. Less than 3% (R3,5 billion) of Transnet debt is supported by government guarantees and the current funding plan assumes no further reliance on government guarantees.

Funding initiatives to satisfy the funding needs for the new financial year are already well advanced and there is every indication that the aspiration to not only reduce our total debt levels, but to also reduce the weighted average cost thereof, is achievable in the short term.

While the short-term funding requirements are likely to be sourced from the traditional sources of debt funding, we continue to explore all other sources of funding (e.g. asset leases, project finance and private sector participation) and will utilise these sources where more appropriate.

Vigilant management of the risk factors associated with our debt book is a central feature of our financial risk management framework.


2 Source: Bureau for Economic Research, June 2019.



The performance framework depicting the performance outlook for our KPIs is depicted below.

Table 36: Medium-term planning horizon

year ahead
Financial sustainability          
Revenue (million) 72 887 74 070 83 670 96 280 111 424
Net operating expenses 40 372 40 320 45 755 52 014 59 236
EBITDA (million) 32 515 33 750 37 915 44 266 52 188
EBITDA margin (%) 44,5 45,6 45,3 46,0 46,8
Net profit after tax (million) 4 851 6 047 6 089 7 287 11 144
Capital investment 21 781 17 941 28 911 33 861 28 225
Gearing (%) 43,5 44,5 45,1 46,0 42,2
Cash interest cover (times) 3,0 2,9 2,8 2,7 3,0
Cash flow from operations (million) 22 958 21 930 23 300 27 453 33 587
ROIC 6,4 7,2 5,2 5,8 6,9
Capacity creation (R million)          
Freight Rail 17 598 14 818 20 358 19 200 13 623
National Ports Authority 1 054 941 2 706 5 414 7 261
Port Terminals 1 365 1 515 2 877 5 170 4 966
Pipelines 1 544 326 1 418 2 681 1 054
Engineering 275 301 510 457 468
Operational performance (mt)          
Rail volumes (mt)          
General Freight business 90,8 84,7 96,6 104,6 115,0
Export coal 77,0 72,0 77,4 77,5 77,5
Export iron ore 58,5 58,4 60,0 60,0 60,0
Port volumes          
Containers (‘000 TEUs) 4 664 4 534 4 863 5 112 5 356
Bulk (mt) 83,1 82,4 85,6 89,2 93,9
Break bulk (mt) 19,1 19,8 21,7 24,9 27,9
Vehicles (units) 704 052 743 350 724 141 725 087 802 090
Total petroleum products (Mℓ) 16 345 17 825 17 204 17 575 17 989
Market share competitiveness (%)          
General Freight          
Rail addressable market share (RAMS) 31,4 29 32 32 33
Intermodal rail addressable market share (RAMS) 23,6 20 26 26 26

Within the current economic environment, it is critical that Transnet focuses on that which it can control and on mitigating internal and external risks to its financial sustainability. As previously stated, the Company is transitioning from an accelerated capital investment approach towards a less capital-intensive approach. In 2020, the Company will prioritise operational efficiency, reliability and visibility, thus improving the customer experience.