REINVENT

FOR GROWTH

TRANSNET FREIGHT RAIL 2023

 CONTENTS
Business overview 1
Highlights 2
Strategic context 3
Where we operate 3
Regulatory environment 6
Operational context 8
Financial and operational performance 9
Overview of Key Performance Indicators 9
Performance commentary 9
Financial sustainability 9
Revenue 9
Underperformance factors 9
Operating expenses 10
Return on invested capital 10 REINVENT
Gearing 10
Looking ahead 11 FOR GROWTH
Looking ahead on the rail network 12
Overview of operational 14
Key Performance Indicators (KPI)
Operational performance for the period 14
ended 31 March 2023
Operations excellence 14
Locomotive utilisation 14
Cycle times and wagon turnaround times 14
Density 14
On-time departures (OTD) and on-time 14
arrivals (OTA)
Looking ahead 15
Sustainable developmental outcomes 15
Risk, safety and health 16
Key risks and mitigating activities 17
Abbreviations 21

TRANSNET FREIGHT RAIL REPORT 2023 B

 TRANSNET FREIGHT RAIL

BUSINESS OVERVIEW
Transnet Freight Rail (TFR) is Transnet’s largest Operating Division. increases in theft, vandalism and sabotage of network infrastructure
The division provides rail network infrastructure and operates rail and rolling stock and contractual disputes over locomotives (resulting
services on key rail corridors to transport commodities for export, in older fleet being kept in service that cannot meet current demand
regional and domestic markets. Freight Rail operates world-class and incurs high maintenance costs).
heavy haul coal and iron ore export lines and has extended this
capability to export manganese on the iron ore and Gqeberha lines. Freight Rail is optimising existing human capital through restructuring
Freight Rail also transports a wide range of bulk and general freight with intent to flatten management layers, improve workplace conditions
commodities including mining, agricultural, manufacturing goods, bulk and develop skills, competencies and capabilities.
liquids, containerised freight, automotive parts and components.
To improve commercial viability and sustainability, TFR has
The Freight Rail network and rail services provide strategic links comprehensively assessed performance on each route and
between ports, freight terminals and production hubs and connectivity identified opportunities to improve logistics services and revenue
with Southern African Development Community (SADC) railways to on commercially viable routes. Freight Rail remains committed
support regional integration. The infrastructural connectivity, combined to working with the industry and existing customers to explore
with close cooperation between Transnet Operating Divisions and and deploy alternative, appropriate treatment models and value
collaboration with key customers and industry players, enables the propositions for underperforming routes.
delivery of freight volumes across the industry’s logistics supply chains.
Freight Rail has renewed its pricing strategy to enable full cost recovery
Freight Rail’s ability to capitalise on available addressable rail on all routes and this has been communicated to customers of the various
demand and to grow volumes, particularly in general freight, has segments. The pricing strategy will continue in the new financial year.
been impacted by past underinvestment in network rehabilitation,

1 TRANSNET FREIGHT RAIL REPORT 2023

HIGHLIGHTS
Despite a difficult trading environment, characterised by rampant theft of the state ‘s infrastructure, difficult negotiations with several OEMs
regarding rolling stock delivery and the effects of an ailing infrastructure in desperate need of funding, Freight Rail has advanced several critical
initiatives in 2022/2023. They are highlighted below as follows:

• We have become an active participant in the transformation of • Expanding our crime information gathering and analysis
the mining industry by increasing access for emerging miners on capabilities through the increased use of technology and
the national rail network, across the major commodities including innovative strategies and tactics to reduce security related
export coal and manganese. challenges by awarding new outcomes-based security contracts.
The strategies include strengthening relationships with
• We increased the capacity share of emerging miners in the export
communities along the network to create force multipliers in the
manganese sector from 12,5% to 25%, a 100% improvement year
fight against the scourge of theft, vandalism and sabotage of
on year.
railway infrastructure, rolling stock and facilities.
• We entered into a partnership with Kalagadi Manganese to provide
• Bolstered our sustainability efforts by seeking alternative energy
support to emerging miners. Kalagadi has made available its
sources for its traction energy loads across all its corridors.
advanced rapid-loading station to the emerging miners.
This will aid in the reduction of greenhouse gas emissions in line
• Following the catastrophic KwaZulu-Natal floods in April 2022, with the UN Sustainable Development Goal 13 and promotes the
Freight Rail acted decisively to restore operations on the development and use of green energy sources.
Container Corridor (a vital connection between South Africa’s
• Secured a Railway Safety Permit until 2025. We retained the
inland and the Port of Durban servicing the automotive, container,
Integrated Management System in accordance with ISO 9001;
agriculture and fuels sectors) ahead of time and within the
Quality Management System and ISO 14001; Environmental
projected budget.
Management System, and ISO 45001; Occupational Health and
• Implemented a Transformation and Digitisation Strategy to ensure Safety Management System;
the long-term sustainability, growth, and modernisation of railway
• We have already made significant strides in delivering against the
operations, predicated on strategic partnerships with national and
principles as set up through the National Rail Policy (NRP):
global leaders in critical aspects of the business, and accelerated
investments in infrastructure across all Corridors. º We opened access to the Container and Cape Corridors,
allowing third parties access to the network as a part of its
• Went to market to find alternative OEMs to supply spare parts and
commitment to work with government and the private sector to
for maintenance support to mitigate the operational disruptions
improve rail logistics, support strategic industries such as the
cause by the shortage of locomotive availability, due to
automotive industry and to increase rail volumes.
inaccessibility of spare parts.
• In June 2022 we piloted a new borderless train to Maputo to º We have also started the process to implement the accounting
separation to comply with the NRP.
service chrome and magnetite producers. This is a joint project
between Freight Rail and Portos e Caminhos de Ferro de
Mozambique (CFM).
• To further increase economic participation in the country’s
freight logistics system, Freight Rail has initiated a private sector
partnership through the leasing of the Container Corridor for a
period of 20 years.

TRANSNET FREIGHT RAIL REPORT 2023 2

 TRANSNET FREIGHT RAIL

STRATEGIC CONTEXT
Freight Rail continued its initiatives to implement segment strategies, To increase operational efficiency on all rail corridors, operating
leverage private sector participation (PSP) and promote Transnet’s models are introduced that go hand-in-hand with the maintenance
financial sustainability. of the network and rolling stock. This approach is supported by
interventions to revise the organisational design and organisational
The key strategic priority to improve business performance was culture to increase productivity, as well as individual and team
to improve the overall condition of the rail network infrastructure. performance and to improve organisational culture and employee
Network renewal is supported by interventions to secure the wellbeing.
network against theft, vandalism and sabotage and to improve safe
operational performance.

WHERE WE OPERATE
Freight Rail’s network coverage in South Africa: Musina

Louis Trichardt

Lephalale Groenbult
Polokwane Phalaborwa

CapeCor
Vaalwater
Zebediela Rail infrastructure
Steelpoort
OreCor ±30 400km of track
Modimolle Marble Hall
ContainerCor Middelwit 20 953 route km
CentralCor Nelspruit Core network:
Komatipoort
NorthCor Emalahleni 12 801 route km
NorthEastCor Mahikeng Kaapmuiden Network traction
Closed lines Vermaas - 50kV AC (861 route km)
Ermelo - 25kV AC (2 516 route km)
Lifted lines Ottosdal
Vryburg Vereeniging
Branch lines - 3kV DC (4 650 route km)
Hotazel
Klerksdorp - Diesel (12 955 route km)
Pudimoe Vrede
Makwassie
Kroonstad Vryheid Axle loading
Sishen Warden
Nakop - Main lines at 20t/axle
Veertien Virginia Harrismith
Upington - Ore line at 30t/axle
Strome Bethlehem
Ladysmith - Coal line at 26t/axle
Kimberley
Kakamas Douglas Richards Bay
Bloemfontein Bridges/structures
Belmont Koffiefontein - Bridges: 2 696
Pietermaritzburg - Tunnels: 198
Durban
Franklin Train authorisation systems
Springfontein
Harding - Signalling basic
De Aar Aliwal North stations: 2 146
Sakrivier Port Shepstone
Maclear
Noupoort Traction substations
Calvinia
Hutchinson Rosmead Mthatha - 3kV DC: 346
Hofmeyer Komani - 25kV AC: 99
- 50kV AC: 7
Beaufort West
Porterville Klipplaat Cookhouse
Saldanha Blaney East London
Prince Alfred Hamlet Alicedale
Oudtshoorn
Worcester Port Alfred
Cape Town Ngqura
Knysna Gqeberha
Mossel Bay

3 TRANSNET FREIGHT RAIL REPORT 2023

 WHERE WE OPERATE CONTINUED

The management of the rail network includes the condition

monitoring, maintenance and protection of the rail infrastructure,
the development of rail network designs managing network access,
fleet and managing, as well as the management of the Freight Rail real
estate portfolio.

Asset base and resources

Various commodities are railed on Freight Rail’s complex rail network
infrastructure of 30 400 track km (20 953 route km), which consists
of 12 801 route km core network. The main lines and core network
can carry 20 tons/axle or more. The Sishen to Saldanha and Ermelo to
REINVENT Richards Bay heavy haul lines are built to accommodate 30 tons/axle
load and 26 tons/axle load, respectively. Branch lines generally have
FOR GROWTH an axle load of less than 20 tons/axle.

The following table reflects the rail network’s asset base and key
resources:
General Export Export
Asset type freight coal iron ore

Rail network 19 395

697 861
(route km)

Infrastructure axle Main lines: 20

loading (tons/axle) 26 30
Branch lines: 18

Network 25kV AC: 2 063 25kV AC: 453

electrification
(route km) 3kV DC: 4 316 3kV DC: 334 50kV AC: 861

Diesel: 12 955

kV = kilovolt
AC = Alternating current
DC = Direct current

Train operations
Freight Rail implemented the Corridor Model to respond to rapidly
changing business and market requirements to improve business
performance and competitiveness. The characteristics of each corridor
are unique and are used to improve corridor efficiency and optimise
integrated supply chains for key Transnet commodity sector growth.

North Corridor (NorthCor)

The NorthCor consists of a diverse mix of line types and capacities that,
together, serve both domestic and export markets and carry more than
50% of total Freight Rail volumes. The most prominent line section is
the heavy haul export line between Ermelo South and Richards Bay,
which serves the coalfields of Mpumalanga via a feeder network known
as the coal backbone. The system also serves the Waterberg coalfields
via the Waterberg line and the Gauteng freight ring. The dominant flow
direction is from Lephalale towards Pyramid South and Richards Bay,
with export coal, domestic coal, Eskom coal, chrome, ferrochrome and
cement being the main commodities. The chrome and ferrochrome flows
originate from Phokeng and Pendoring and are mainly transported to
Richards Bay for export. Domestic coal originates from Mpumalanga
and Lephalale and is transported to various destinations across the
country. The corridor focuses on the efficiency of coal flows and creates
opportunities for the growth of other mining commodities.

Ore Corridor (OreCor)

The OreCor is one of the two main heavy haulage routes in South
Africa. The Iron Ore Corridor stretches 861km from Sishen in the
Northern Cape to Saldanha on the Western Cape coast. The ore line
provides a world-class platform with heavy haulage capacity (30 tons
per axle), technologies and efficiencies. The current iron ore export
operation is optimised with 348 CR13/14 wagon trains. The corridor
has developed into an international player offering a wide range of
heavy-duty logistics solutions for growing local and international
markets and has also been handling manganese exports since 2014.

TRANSNET FREIGHT RAIL REPORT 2023 4

 TRANSNET FREIGHT RAIL

The ore line operates a 375 CR17 wagon manganese train, which Container Corridor (ContainerCor)
is the longest production train in the world. The main commodities The ContainerCor is the backbone of South Africa’s overall rail
transported on the corridor are iron ore, manganese, cement and lime. freight network and its efficient and effective functioning is critical
For OreCor to meet customers’ growth demands amid fluctuating to promoting the country’s economic growth. This corridor is the
global commodity prices, logistics costs must be kept to a minimum. rail artery to the port of Durban and plays a key role in connecting
Economies of scale and density are critical for efficiency and the Port of Durban to the hinterland, as well as in connecting inland
effectiveness. freight terminals serving the Gauteng area and neighbouring
The line is currently limited to transporting 60mt of iron ore as the air countries. Containers, fuel, grain, motor vehicles and other general
emission licence is limited to this amount. Negotiations are ongoing cargo are the main commodities railed on the corridor, serving about
to obtain a new licence that will enable the logistics system on the 70 customers. These segments are considered high-value industrial
Sishen-Saldanha line to convey 67mt of iron ore. In order to obtain sectors and contribute significantly to the South African economy and
this new licence, Freight Rail will need to increase both the locomotive GDP.
and wagon fleet on the OreCor and make joint capital investments The port of Durban, which has been repositioned as a regional
throughout the pit- to- port system. This will depend on the long-term container port, anticipates significant growth in containers handled at
outlook for the iron ore market and the validation of volumes. the port and efficient evacuation and handling of containers are highly
dependent on an effective and efficient rail solution. The estimated
North-East Corridor (NorthEastCor)
rail volume will be 69 trains per day in 2023. Rail transport reduces
The NorthEastCor stretches from the Limpopo River at Beitbridge in logistics costs and carbon emissions and is a critical enabler for
Limpopo Province to Richards Bay on the east coast via Komatipoort reducing traffic on national roads and within the port area. Reliable
and from Pyramid/Rayton/Emalahleni to Komatipoort. The corridor and efficient rail service is therefore crucial to enable further
carries 14% of Freight Rail’s volumes. The NorthEastCor strategically economic benefits. The corridor runs a mix of low-density, high-value,
links the South African rail freight system with that of other SADC low-margin and time-sensitive industrial cargo from different origins,
countries, mainly via Eswatini, Zimbabwe, Mozambique, Zambia and with additional costs of transfer from road-to-rail handling costs in
the Democratic Republic of Congo. Commodities are transported the case of intermodal cargo. Most categories of cargo in the corridor
via various border posts or entry gates such as Komatipoort, Golela, are very sensitive to road competition.
Beitbridge, Livingstone and Sakania.
Poor cost recovery, inadequate infrastructure spending, the
The corridor has three prominent linear flows: increasing maintenance backlog due to funding constraints, as well
• Phalaborwa to Maputo and Richards Bay, mostly transporting as theft, vandalism and the impact of flood shave accelerated the
magnetite and rock phosphate; deterioration of service on the corridor, opening opportunities for
• Emalahleni to Maputo, mainly transporting chrome and coal; and Freight Rail to look for alternative solutions and partnerships to
• Intermodal (reefers) originating from Tzaneen, Musina and redevelop the corridor.
Bela-Bela destined for Durban.
Central Corridor (CentralCor)
High-yield general freight flows within the corridor include magnetite, CentralCor is located at the centre of the Freight Rail network and
chrome, ferrochrome and rock phosphate. The corridor provides good connects to five other corridors. Geographically, it spans three
rail connectivity to sub-Saharan Africa, enabling regional operational provinces (Gauteng, Free State and the North West). The corridor is
integration and collaboration across Operating Divisions improving key to the north-south interface through landlocked Botswana, via the
service on integrated pit-to-port flows. Initiatives on this corridor will Mafikeng to Krugersdorp and Vryburg rail lines, supporting regional
be geared towards enabling flows on the North-South Corridor which integration. The corridor is a feeder to the ports of Maputo, Richards
runs between the Democratic Republic of Congo and South Africa, Bay, Durban, Gqeberha and Cape Town.
with opportunities for investment in the revitalisation of the corridor.
CentralCor supports the network interface with the Passenger Rail
Cape Corridor (CapeCor) Agency of South Africa (PRASA) along key Freight Rail and PRASA rail
The CapeCor has the largest area footprint in Freight Rail, stretching lines in Vereeniging, Pretoria and Krugersdorp.
from Warrenton in the north-east to Cape Town in the south and from
CentralCor includes an 18 ton per axle branch line network
Hotazel in the north-west to Gqeberha in the south-east. CapeCor
serving the maize triangle in the North West province (Klerksdorp,
is the natural hinterland for the ports of Cape Town, Mossel Bay,
Lichtenburg, Coligny and Vryburg operating areas). CentralCor also
Gqeberha , Ngqura and East London. The areas of Bethlehem and
supports the manufacturing industry, especially the automotive
Kroonstad have been incorporated into CapeCor.
sector, by providing rail links and services to the automotive hub and
Corridor lines from the key mining area around Hotazel in the container terminal in Pretoria.
Northern Cape connect to the ports of Gqeberha and Ngqura in the
The corridor faces major spatial planning challenges that require
south-east, providing the primary export channel for South Africa’s
close cooperation between all stakeholders, including industry,
manganese exports. Corridor connections between these mines
PRASA, municipalities and community forums. There are informal
and the Central Corridor (CentralCor) also enable the transport of
settlements around Transnet operations where problems occur
manganese and iron ore for the domestic market. The corridor also
such as illegal electricity connections from Transnet services, illegal
includes various branch lines such as the Bellville-Bitterfontein and
dumping of waste on Transnet land, railway reserves used for ablution
De Aar-Upington lines, as well as sections of the Bloemfontein to East
purposes, which poses operational and safety risks to communities
London and Gqeberha lines, which provide rail access for agriculture.
next to the railway lines.
The corridor offers growth opportunities for the agricultural sector,
The most prevalent settlement encroachments include Sentrarand,
especially for refrigerated goods such as fruit and grain for domestic
Krugersdorp cluster, Leeuhof cluster and Isando cluster. To address
and export markets. Other growth opportunities for rail include grain,
the problem, collaboration with customers regarding security
cement and lime, as well as goods for the automotive industry. The
service provision was undertaken, commenced with the Central Hub
route connecting the Port of Cape Town to the Reef and linking to the
security initiative and knowledge sharing, a positive collaboration and
ore export line and Namibia, offers opportunities to increase cross-
relationship with communities was started as well.
border traffic to Namibia.

5 TRANSNET FREIGHT RAIL REPORT 2023

REGULATORY ENVIRONMENT
Freight Rail is accountable to all stakeholders within the applicable current access practices, to accelerate the access regime and increase
legal framework and is committed to complying with the legal learning to best meet its objectives and compliance requirements.
obligations applicable to its business and operating environment. This will further support Freight Rail’s role and its ability to benefit from
It is important to use appropriate systems and processes to manage the opportunities presented by the regulatory reforms in the transport
an ever-increasing regulatory universe and to ensure that compliance sector.
risks identified are mitigated through the development of appropriate
controls, which remains a priority and a strategic objective. It is anticipated that Freight Rail is likely to become a regulated
entity within the next 24 months following the completion of the
The rail reforms envisaged by the National Rail Policy in South Africa stakeholder engagement and consultation process.
advance Freight Rail’s initiatives to further liberalise the rail sector by
introducing measures that will result in better access for third party By supplementing the current access regime and introducing third party
rail operators that require access to Freight Rail’s network by meeting access on designated slots, the current regulatory environment will
access criteria. Through the National Rail Policy, the Department of provide Freight Rail with the opportunity to gain experience and practise
Transport has introduced the Interim Rail Economic Regulator Capacity that can inform the wider implementation of the National Access
to conceptualise and prepare the regulatory framework for the Framework.
implementation of the Economic Regulation of Transport Bill (ERT Bill) Freight Rail follows the compliance process to identify and manage
with key stakeholders such as Freight Rail and Transnet as a whole. its regulatory risks that apply to its business in relation to its policies
Freight Rail has begun the process of separating the accounting for and procedures. Legislation that has a strategic impact on the way the
the management of rail infrastructure from rail operations to provide division conducts its business is prioritised and closely monitored.
the transparency and visibility of accounting information required The relevant legislation, listed below, forms part of the operational
for regulation by the economic regulator. Progress has been made in compliance plan and will be monitored and reported on to ensure
establishing an interim access regime and charging model based on compliance:

Regulation Impact Extent of compliance Mitigation/action plans

White Paper on National High • High level of compliance • Control Plans, Monitoring and Reporting
Rail Policy • High level of compliance

ERT Bill High • High level of compliance • Impact Analysis, Control Plans, Monitoring and
Reporting

Railway Safety High • High level of compliance • Impact Analysis, Control Plans, Monitoring and
Legislation Reporting
• Implementation of a Safety Management System
• Submission of an Annual Safety Improvement Plan
• Submission of information regarding the proposed
safety permit fee model

Public Finance High • High level of compliance • Control Plans, Monitoring and Reporting
Management Act (PFMA), • Training
1999
• A PFMA Improvement Project has been established
Company-wide
• Monthly meetings relating to condonations and
disciplinary action status
• Training of employees on the PFMA
• Implementation and review of the Delegation of
Authority Framework
• Appointment of PFMA champions

Competition Act, 1998 High • High level of compliance • Control Plans, Monitoring and Reporting
• Model contract per category in compliance with the
Competition Act
• Pricing policies in compliance with the Competition Act
• Facility Policy for all PSP concessions, including
unsolicited bids
• Training material and training to drive a culture of
compliance

National Infrastructure High • High level of compliance • Transnet has submitted comments on the National
Plan, 2050 • Transnet will comply once the Draft Infrastructure Plan, 2050 during September 2021
Infrastructure Plan is approved • Impact Analysis and Reporting
• No compliance required at this stage

TRANSNET FREIGHT RAIL REPORT 2023 6

 TRANSNET FREIGHT RAIL

Environmental impact plan

Freight Rail’s historical and current activities traverse South ensuring that any likely future impacts are identified, assessed and
Africa’s complex environmental landscape, characterised by a responded to appropriately.
sensitive environmental footprint. Driven by increasing South
African environmental legislation and Freight Rail’s sustainability The table below lists the key focus areas for 2022/23 to ensure
requirements, the division continues to embrace environmental prevention and minimisation of risks related to compliance with
practices that drive the organisation to fulfil its due diligence in legislation arising from past operational activities, while ensuring that
complying with legislation and to identify and implement innovative current and future activities are compliant with legislation through
solutions to minimise its overall impact on the environment, while the implementation of key risk mitigation plans.

Environmental
aspect/exposure Legislative requirement Extent of compliance Mitigation/action plans

Asbestos land • National Environmental • High-risk asbestos-contaminated land was • Continuous ad hoc removal
contamination Management: Waste Act. declared to the Mister of the Department of and safe disposal of exposed
No 59 of 2008 Forestry, Fisheries and the Environment asbestos ores
• Scoping for further investigations is being
concluded

Hydrocarbon and • National Environmental • Bio remediation orders for refueling facilities • Bio remediation of
contamination management: Waste Act. hydrocarbon polluted land in
No 59 of 2008 refueling depots

Emissions and dust • National Environmental • Tank methods are used to calculate • Scientific monitoring and
pollution Ma11agemenl:Au-Quality Act. emissions at refueling facilities and reports reporting of emissions from
No 39af 2004 are submitted to authorities via the National refueling facilities as well as
Atmospheric Emission Inventory System multi-user facilities

Discharge of • National Water Act. • Monitoring regime comprehensively • Ground, surface, effluent and
industrial effluent No 36 of 1998 determined potable water monitoring and
reporting

7 TRANSNET FREIGHT RAIL REPORT 2023

OPERATIONAL CONTEXT
The performance of the entire logistics system was affected by In October 2022, operations on the double line were partially
the key constraints, which include the lack of locomotives, the poor restored, resulting in a total of 15 slots per day per direction.
state of infrastructure and the high number of incidents of crime,
vandalism and sabotage. The corridor has begun developing solutions underpinned by
customer-focused investments to reduce the TFR cost to serve and
The suspension of the contract for 1 064 locomotives and the ongoing grow volumes on the rail. The two solutions developed in the past year
contract disputes with CRRC have resulted in reduced locomotive are the Cato Ridge Inland Port and the Estcourt Intermodal Terminal.
availability and an increase in inoperable locomotives as an older,
less reliable fleet remains in service, causing systemic inefficiencies, Freight Rail’s strategic direction for the Container Corridor is to seek
a decrease in capacity, which impacted overall performance. partnerships with the private sector to enter a 20-year operating
lease for the corridor. The lease is primarily aimed at leveraging
Core initiatives capital and capacity for loss-making operations for a limited period.
Freight Rail will retain primary ownership of this strategic corridor for
Freight Rail negotiated with Caminhos de Ferro de Mozambique
the duration of the partnership, while continuing to drive the financial
(CFM) to allow chrome trains to run through without stopping on
sustainability of the 12 organisations.
the route to Maputo. The initiative resulted in an increase in weekly
performance of 12 trains per week in the first three months, from an Given the critical role that the Central Corridor plays as a connecting
average weekly performance of nine trains, with the best throughput hub for the major corridors, the corridor has focused on increasing
weekly performance of 13 trains in week 21. This model is adopted collaboration with customers, strengthening community relationships
as the standard for regional cooperation and will be extended to and soliciting municipal and local government support for the
other traffic flows. provision of safety services, as well as working with business forums
and other associations to identify job and training opportunities.
The successful completion of the Selati line signalling rehabilitation
in the Northeast corridor project increased slot capacity from six to The Cape corridor has a strong focus on stimulating rail activity for
12 per day on both the outbound and the return journey to Maputo. general freight commodities and will continue to pursue opportunities
to attract private sector investment in its branch line and rail siding
The Railway Safety Regulator has granted a permit to implement
network to increase volumes. The project team developed the
a 160 wagon Radio Distributed Power (RDP) train, running from
Transnet Grain Strategy in collaboration with the private sector.
Phalaborwa to Komatipoort. The certification of drivers to operate
All South African Coop silos were visited in February 2023 to jointly
these RDP trains is underway.
develop solutions for shifting grain from road-to-rail grain solutions.
The Container Corridor was significantly affected by the catastrophic
Freight Rail renewed its branch line partnership concept in 2022
floods in KwaZulu-Natal on 11 and 12 April 2022. The devastation
to offer more branch line concessions to the market. The Paarl-
resulted in the main line between Durban and Cato Ridge being
Franschhoek concession, which operates the Wine Tram, continues its
completely closed until June 2022. Repairs to the Container Corridor
growth in tourist ridership in the Western Cape. The Wolseley–Prince
following the April 2022 floods began in April 2022 and progressed as
Alfred Hamlet concession has increased its shift of reefer container
planned during the year.
freight from road to rail and its seasonal tourist passenger services
In June 2022, five slots per day per direction were restored after with great success.
single line operations between Durban and Cato Ridge resumed.

TRANSNET FREIGHT RAIL REPORT 2023 8

 TRANSNET FREIGHT RAIL

FINANCIAL AND OPERATIONAL PERFORMANCE

OVERVIEW OF KEY PERFORMANCE INDICATORS (KPIS)
leases.

Financial performance against KPIs

Year ended Year ended

31 March 2023 31 March 2022
Salient features R million R million % change

Revenue 34 810 37 812 (7,9)

General Freight 16 941 18 429 (8,1)

Export Coal 9 208 10 481 (12,1)
Export Ore 7 270 7 420 (2,0)
Other 1 391 1 481 (6,1)
Operating expense 28 088 (26 514) 5,9
Energy costs (6 009) (5 876) 2,3
Maintenance cost (2 793) (2 692) 3,8
Materials cost (799) (228) >100
Personnel cost 12 398 (13 651) (9,2)
Other costs 6 089 (4 067) 49,7

Profit from operations before depreciation and amortisation 6 722 11 297 40,5
Depreciation and amortisation (10 420) (8 821) 18,1

Profit from operations before items listed below 3 698 2 476 (>100)
Impairments and Fair value adjustments (2 610) (828) >100
Net finance costs (6 137) (4 464) 37,5
Profit before taxation 12 445 (2 811) (>100)
Total assets excluding (WIP) 144 387 150 834 (4,3)

Profitability measures
EBITDA margin* - % 19,3 29,9 (10,6)
Operating margin 10,6 6,5 (17,2)
Return on invested capital** (2,5) 1,0 (3,5)
Asset turnover (excluding CWIP)**** 0,24 0,26 (0,2)
Capital investments^ 11 288 10 037 12,5

* EBITDA expressed as a percentage of revenue

** Profit from operations before impairment of assets, fair value adjustments, net finance costs and taxation expressed as a percentage of revenue.
*** Profit from operations before impairment of assets, fair value adjustments, net finance costs and taxation expressed as a percentage of average total assets, excluding
capital work in progress.
**** Revenue divided by average total assets, excluding capital work in progress.
^ Actual capital expenditure (replacement plus expansion), excluding borrowing costs and including capitalised finance

PERFORMANCE COMMENTARY • High rates of theft and vandalism.

Freight Rail experienced a continued surge in theft and vandalism
Financial sustainability incidents throughout the fiscal year. These criminal activities not
Revenue only resulted in substantial financial losses, but also disrupted
operations and affected customer confidence. The Company
Despite the challenges faced, Freight Rail achieved a total revenue had to allocate significant resources for security measures,
of R34.8 billion during the fiscal year. This, however, represents investigations and repairs – further straining its financial position.
a 7.9% decrease when compared to the previous year’s revenue
of R37,8 billion. The decline in revenue is mainly attributed to the • Underinvestment in infrastructure.
underperformance factors discussed below: • Insufficient investment in infrastructure negatively impacted
Freight Rail’s ability to meet growing demand and maintain
Underperformance factors an efficient rail network. Aging infrastructure, inadequate
• Unavailability of locomotives due to non-availability of spare maintenance and limited capacity resulted in operational
parts. inefficiencies and frequent breakdowns. This further hampered the
Company’s financial performance.
Freight Rail faced significant challenges in maintaining an
adequate fleet of locomotives due to the non-availability of
spare parts. This resulted in reduced operational capacity and
delays in service delivery. The unavailability of locomotives led to
decreased efficiency and customer dissatisfaction, impacting the
Company’s financial performance.

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FINANCIAL AND OPERATIONAL PERFORMANCE CONTINUED

Operating expenses By implementing these initiatives, Freight Rail aims to regain its
Freight Rail implemented cost management strategies to mitigate operational strength, enhance customer satisfaction and improve
the impact on its financials by optimising operational processes, financial performance in the upcoming fiscal years.
reducing unnecessary expenses and streamlining its workforce.
Return on invested capital
Despite efforts to contain costs through austerity measures Return on invested capital decreased to -2,5% (2022: 1,6%). This was
implemented during the period, operating costs increased by mainly due to lower volumes and lower revenue performance during
6,1% to R28 billion (2022: R26,5 billion). Staff costs decreased the period, as well as increase in operating expenses, which resulted in
by 9,2% to R12,4 billion (2022: R13,6 billion), mainly due to an operating loss of R3 698 million (2022: R2 476 million).
fewer staff being employed as a result of voluntary redundancies.
Energy costs increased by 2.3% to R6,0 billion (2022: R5,9 billion) Asset turnover (excluding CWIP)
attributable to higher diesel prices partially offset by lower Asset turnover decreased to 0,24 times during the period
electricity cost due to continued power outages and load shedding. (2022: 0,26 times), in line with the decrease in revenue, mostly related
Other operating expenses recorded a 49,7% increase to R6,1 billion to non-productive assets.
(2022: R4,0 billion), mainly due to the one-off cost of clearing the
flood damage in KZN. Capacity creation
Table 2 : Freight Rail investment summary (CAPEX)
EBITDA and operating margins
EBITDA margin decreased to 19,3% (2022: 29,9%) due to lower Actual Actual
revenue and increased costs during the year. 2023 2022
Category Rm Rm Deviation
Transnet Freight Rail recognises the importance of addressing the
underlying causes of underperformance to ensure sustainable growth. Infrastructure 4 761 2 932 (1 829)
The Company has developed a comprehensive plan that includes the Locomotives 1 405 1 760 (355)
following key initiatives: Wagons 2 883 2 816 67
• Investment in locomotive maintenance and spare parts Total 9 049 7 499 (1 550)
procurement to improve availability and reduce downtime;
• Strengthening security measures through implementation of
an outcome-based security contract process and collaborating
with law enforcement agencies to effectively combat theft and
vandalism; and
• Increasing capital expenditure on infrastructure development and
upgrading to enhance operational efficiency and capacity.

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 TRANSNET FREIGHT RAIL

Looking ahead
Despite the challenges experienced in the 2022/23FY, Freight Rail remains resilient and will continue to focus on the implementation of tactical
initiatives to support its strategic focus areas, improve operational efficiency and bring about significant improvement in customer service.

At a Transnet level, the 2024 Freight Rail’s Turnaround Strategy includes:

• Efforts to restore capacity and improve operations that include price re-basing and leasing out the Container Corridor;
• A sustained growth trajectory underpinned by innovation, cost control and profit growth;
• A business mandate with increased reliability and performance of rolling stock and infrastructure assets; and
• A positive brand equity that will enhance safety and lead to objective decision-making across the operational value chain.

Project High level focus

Manganese Export Capacity Allocation (MECA III) • Enable new entrants to meaningfully and sustainably participate in
global manganese export markets as it lowers the cost of logistics
from high road charges to rail.

Project High level focus

OEMs confined tender for the repair of long-standing locomotives • Volume improvement for key commodities.
for Wabtec, Alstom and Mitsui • Securing the locomotives will also result in the use of diesel
locomotives in high theft areas, to ensure continuation of service in
areas where there are electricity shortages.

OEM long-standing locomotives (step-in OEM) open tender • Will ensure 120 locomotives back in service for coal/chrome flows
and some Arcelor Mittal South Africa volumes.
• Will result in overall volume improvements and additional revenue
for the fiscus.

Manganese

East London Manganese • In a historic move, Transnet will launch a new service to export manganese (Mn) ore through the Port of
East London.

Mamathwane Loop extension • Transnet will explore alternative channels for Mn exports to supplement capacity for the industry and will
fast track the construction of key projects that form part of its long-term manganese expansion projects to
release capacity in the short term.

Chrome and Magnetite

Borderless trains to Maputo • TFR and Portos e Caminhos de Ferro de Mozambique (CFM) implemented a new borderless train service
that will result in improved regional integration and economic development.

Longer trains to Richards Bay • TFR embarked on rail renewal, extension of loops and re-signalling on the Selati line, which will increase
and Maputo magnetite and rock phosphate volumes by an additional 6,4mtpa.

Richards Bay Coal Terminal Export Coal

Restore eroded • Restored slot capacity previously eroded by deteriorated geo-technical conditions on the heavy haul export
infrastructure capacity coal routes in collaboration with industry.
• Restore slot capacity by reducing processing times of loaded trains in Ermelo yard by replacing the tubular
track with conventional ballast line.

Containers

ContainerCor • TFR will increase the number of slots, from 15 to 42, between the Johannesburg and Durban line for
movement of containers and automotive after the refurbishment post the floods and the replacement of
the stolen overhead traction equipment cables in the Ladysmith area.

Iron Ore

Iron ore • TFR increase iron ore capacity via Saldanha by 4mtpa through re-routing iron ore emerging miner slots to
higher axle loading sites.

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FINANCIAL AND OPERATIONAL PERFORMANCE CONTINUED

Table 3: Freight Rail investment in capitalised maintenance

Revised Original budget (%) (%)

Actual Actual budget (corporate plan) Deviation Deviation
FY 2022 FY 2023 FY 2023 FY 2023 on revised on original
Category Rm Rm Rm Rm budget budget

Infrastructure 2 923 3 031 3 500 3 500 (13) (13)

Infrastructure – Durban floods – 1 730 2 040 – (15) 100
Locomotives 1 760 1 405 1 576 1 800 (11) (22)
Wagons 2 816 2 883 3 024 2 800 (5) 3
Capitalised maintenance
(locos, wagons and infrastructure) 7 499 9 049 10 140 8 100 (11) 12

Table 4: Network maintenance (including export coal, iron ore and general freight)

Actual Actual Budget Actual Deviation

KPI Measure 2021 2022 2023 2023 (%)

Km screened on the rail network km 164 103,7 200 160,6 (19,7%)

Network
reliability and Number of turnouts replaced on the rail network number 33 30 20 18 (10,0%)
efficiency Number of sleepers installed on the rail network number 284 442 144 918 100 000 139 869 39,9%
Km of rail replaced on the rail network km 42 102,08 180 182,77 1,5%

Looking ahead on the rail network

• The Ore line upgrade project resulted in the completion of two substations during the 2023FY and the remaining two substations are due for
completion in 2025.
• The KwaZulu-Natal flood damaged infrastructure restoration work is ongoing into the new financial year and will provide the required lost
slots capacity on the network.

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 TRANSNET FREIGHT RAIL

Overview of operational KPIs

Table 5: Operational performance against KPIs

Actual Actual Target Actual Target

Key performance area and indicator Unit of measure 2021 2022 2023 2023 2024

Operational excellence

Asset utilisation
General Freight business Gtkm/Ntkm 1,4 1,35 1,35 1,33 1,35
Export coal Gtkm/Ntkm 1,3 1,26 1,26 1,25 1,25
Export iron ore Gtkm/Ntkm 1,2 1,21 1,20 1,20 1,20
Loco utilisation
General Freight business GTK’000/loco/month 3 702 3 446 2 562 2 962 4 023
Export coal GTK’000/loco/month 17 052 14 161 19 252 14 220 22 503
Export iron ore GTK’000/loco/month 42 209 42 735 47 142 38 235 38 002
Cycle time
Export coal Hours 69 70,83 64,00 88,24 75
Export iron ore Hours 110 90,37 88,00 112,51 88,8
Export manganese Hours 205 187,88 127 180,19 145
Wagon turnaround time
General Freight business Days 11 13,79 9,91 15,04 11,17
Density
General freight GTK/Routekm 3,5 3,22 4,04 2,90 3,55
Natcor GTK/Routekm 5,4 4,40 5,44 2,41 2,87
Capecor GTK/Routekm 3,7 3,64 4,51 3,89 4,43
Southcor GTK/Routekm 4,8 4,90 6,12 5,69 6,12

Service delivery

On-time departure (average deviation from scheduled times)

General Freight business Minutes 17 12,61 108 (6,64) 96,96

Export coal Minutes (47) (43,06) 29 (32,48) 26,24
Export iron ore Minutes (40) 19,73 41 (38,93) 36,45

On-time arrivals (average deviation from scheduled times)

General Freight business Minutes 243 336 121 430,24 108,62

Export coal Minutes 127 327 58 363,00 52,49
Export iron ore Minutes 24 42 135 (9,57) 121,74
Rail network availability % 86,63 84,47 92 90 92

Market segment competitiveness

Volume and revenue growth

Commodity classification
General Freight business Mt 63,37 60,05 67,94 49,58 60,68
Export coal Mt 66,94 58,10 74,21 48,81 63,09
Export iron ore Mt 52,97 54,50 60,00 51,10 60,00

Total volumes Mt 183,29 172,65 202,15 149,49 183,77

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FINANCIAL AND OPERATIONAL PERFORMANCE CONTINUED

Operational performance for the period ended 31 March 2023 The cycle time for the iron ore line of 113 hours in 2023
General Freight business volumes declined by 17,44% to 49,6mt railed (2022: 90 hours) reflects an increase from the previous year.
(2022: 60,1mt) and 26,9% below the target of 67,9mt because of Turnaround times for freight wagons increased from 14 days in 2022
the prevailing weak economic climate and various operational issues, to 15 days in 2023 due to a higher number of speed restrictions on
including network, manning and resource challenges. the network due to underinvestment and disruptions caused by cable
Extreme weather conditions in KwaZulu-Natal at the beginning of theft and vandalism.
the financial year disrupted operations and impacted customers in
Density
the automotive, intermodal, cement, timber, grain and other general
freight industries. The South Coast line will still be out of service The decrease in density is relative to the lower volumes transported
for most of the 2023/2024FY as the major damage occurred on the in the period.
PRASA-owned section of the line – Illovo Bridge. On-time departures (OTD) and on-time arrivals (OTA)
The manganese business portfolio slightly exceeded the previous Delayed arrivals and train re-plans are mainly due to security
year’s result and recorded an increase of 0,82% to 14,6mt incidents (theft), locomotive failures, power outages, derailments,
(2022: 14,5mt). speed restrictions and long section authorisation and where
applicable (Maputo), customs processes.
This was offset by a decline in performance in other sectors such as
intermodal wholesale, which declined by -47,57% to 2,8mt (2022: Looking ahead
5,4mt); Mineral Mining declined by 20,9% to 4,8mt (2022: 11,6mt), Freight Rail will improve its operational efficiency through:
chrome, which decreased by 5,32% to 4,6mt (2022: 4,8mt) and
domestic coal, which decreased by 29,09% to 3,2mt (2022: 4,5mt) and • Implementing results-oriented security solutions, including the use
cement and lime decreased by 29,29% to 2,2mt (2022: 3,1mt), mainly of technology and improved information gathering;
due to the unavailability of products, equipment failures, extreme • Focusing on resolving the 1 064 contract disputes with the OEMs;
weather conditions, civil unrest that blocked train services and the • Prioritising the allocation of locomotives to economically viable
impact of infrastructure-related crimes on the Freight Rail network. flows due to the shortfall in availability to maximise the funds
generated from the operation and financing of the network;
Freight Rail transported 247,735 TEUs in the main corridors, compared
to 419,017 TEUs in the previous year (2022) excluding Eskom • Procurement of new locomotives to replace the current fleet,
containers. The number of cars transported was 13,752 units for which has reached the end of its life cycle, in order to improve
imports and 49,644 units for exports compared to the previous year’s performance in key segments such as manganese;
results of 15,682 and 91,193 units respectively. • Negotiating and implementing MRSAs with OEMs to ensure fleet
reliability and availability over a long-term period;
Operations excellence • Re-commissioning of long-standing locomotives to serve customer
Locomotive utilisation demand in key corridors;

Locomotive utilisation has fallen as a result of locomotives idling for • Ensuring that long-term contracts are put in place in a timely
manner for the successful implementation of decommissioning,
extended periods due to contract disputes, derailments and vandalism
rail network and construction crews to be integrated into the
during outages caused by cable theft.
corridors under rail network to improve maintenance execution;
Cycle times and wagon turnaround times and

The increase in cycle time for export coal to 88 hours (2022: 70 hours) • Prioritising the limited Capex budget to ensure that network
and the failure to meet the target (64 hours) is due to the high number capacity is freed up by reducing speed restrictions and
authorisations on key profitable routes.
of system disruptions due to theft and vandalism, a high number of
speed restrictions and derailments on the network.

Table 6: Overview of sustainable development outcomes against KPIs

Actual Actual Target Actual Target
Key performance area and indicator Unit of measure 2021 2022 2023 2023 2024

Human capital
Employment equity % 90,60 92,80 90,00 93,20 92,00
Female employees % 31,20 31,70 34,50 32,04 35,00
People with disabilities % 2,90 2,78 2,40 2,73 3,00
Training spend % of personnel cost 2,11 0,97 0,97 1,60 2,16
Employee turnover % 3,40 7,78 5,00 3,04 5,00
Employee headcount Permanent 25 616 23 465 25 793 22 993 24 360
Risk, safety and health
Cost of risk % of revenue 7 9,9 6,2 18,9 6,2
Disabling injury frequency rate Rate 0,81 0,77 0,88 0,74 0,80
Safety incidents Number 278 217 191 227 181
Derailments – Mainline Number 88 70 62 78 62
Number of derailments – Shunting Number 147 122 107 121 97

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 TRANSNET FREIGHT RAIL

Sustainable developmental outcomes • Total female employees represented 32,04% of the workforce,
with the percentage of female employees at the Executive
Human capital (employment and transformation)
Committee Level remaining stable at 50% and people with
• Freight Rail ended the 2022/23FY with a permanent headcount of disabilities represented 2,73% of the total employee base; and
22 993;
• The training spend increased from the previous year, being
• Headcount reduced from 23 465 in 2021/22FY to 22 993 for the recorded at 1,60% (2022: 0,97%), however, it remained below
year under review. This reflects a 2% reduction when compared to the target of 2,01%. Recovery plans are in place to address the
the previous year and is largely attributable to embedding the new training backlog, primarily due to the COVID-19 pandemic and the
people management operating model and delayered structures, management reorganisation.
while prioritising the retention of critical workforce segments to
drive the Freight Rail Strategy; Number of engineers and technicians on the employment equity
• The employee turnover rate during 2022/23FY was recorded at performance
~3,04%. This is lower than the target of 5% and lower than the Transnet Freight Rail continues to boast the continuing successes
previous year. The high turnover in the previous financial year of the Transnet Academy in providing sector-specific training and
(2022: 7,78%) was mainly attributed by the Voluntary Severance development for employees and young professionals. Learning and
Packages (VSP); development include internal and external training interventions,
• Freight Rail sustained its employment equity performance, with further studies and on-the-job training. Our moral and business
Black employees representing 93,20% (target: 90%) of the imperative ensures that we continuously upskill, train and empower
total employee base – an improvement on the previous year’s our employees as well as remain relevant to the communities within
performance (2022: 92,80%); which we operate.

Table 7: Number of engineers and technicians on the Employment Equity Performance

Actual Target Actual

Training area 2021/22FY 2022/23FY 2022/23FY

P1 and P2 learners (work integrated learning) 179 56 56

Engineering bursars 60 27 27
Young professionals in training 156 145 142
Technicians in training 196 133 147
Engineers in training 147 81 120

Table 8: Youth employment and development strategy

Actual Target Actual

Employment/development 2022 2023 2023

Youth employed as % of total permanent employees 28,0 24,50 24,89

Youth developed as % of all employees trained 37,0 76,19 77,46

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 REINVENT
FOR GROWTH

Risk, safety and health Number of shunting derailments

Cost of risk The number of derailments in shunting operations decreased by
The cost of risk was 18,9% compared to 9,9% in the previous year. 23% from 122 in 2021/22FY to 93 in 2022/23FY. The performance
The target of 6,2% was not achieved. is below the tolerance limit of 97. Most of the shunting derailments
occurred at the points as a result of not complying with rules
Lost time injuries frequency rate (LTIFR) pertaining to operation of hand operated points and trains running
Freight Rail achieved an LTIFR of 0,74 as in 2021/22FY, which is through points that are not set for intended movement.
better than the global industry benchmark of 1,00 (an index below
Train-on-train collisions
1,00 is favourable). Performance was within the tolerance limit of
0,88 and a stretch tolerance of 0,75. The number of train-on-train collisions decreased by 50% from six
in 2021/22FY to three in 2022/23. The performance is below the
Number of safety-related incidents tolerance limit of five. The train-on-train collisions were primarily
The total number of rail safety-related incidents recorded in the caused by failure to adhere to verbal authorisation protocols,
Balanced Scorecard (BSC) decreased by 11% compared to the (such authorisations are brought about by theft of cables and inability
previous year, but was slightly below the tolerance limit of -12%. to restore the service).
Train collisions decreased by 50%, shunting derailments decreased Signal passed at danger
by 23%, Signal Passed at Danger (SPAD) remained the same, the
The number of SPADs remained at 22 in both 2021/22FY and
downside was the running line derailments which increased by 9%
2022/23FY, performing above the tolerance level of 18.
with huge costs implications. The overall performance of the BSC is
below the stretch tolerance limit of 182. Further performance improvements will be achieved by continuing
to focus on improved adherence to maintenance schedules, rail
Railway safety incidents have declined linearly over the last three
replacement programmes, repair of degraded infrastructure, use and
years. Improving performance depends on addressing the underlying
deployment of technology to reduce derailments on the line.
problems related to theft and vandalism that reduces the capacity to
conduct planned routine maintenance.

Number of mainline derailments

The number of mainline derailments increased by 9% from 78 in
2021/22FY to 85 in 2022/23FY. The performance is above the
tolerance limit of 62. Mainline derailments were mainly caused by the
poor condition of the tracks due to inadequate maintenance and lack
of replacement components.

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 TRANSNET FREIGHT RAIL

KEY RISKS AND MITIGATING ACTIVITIES

Enterprise risk management ensures that Freight Rail identifies both strategic and operational risks and takes action to manage these risks
and their impact, while identifying and exploiting inherent opportunities. The strategic risks identified during the year and the actions taken to
mitigate them are shown in the table below.

The following strategic risks were identified in the reporting year with corresponding mitigation plans:

Key risks Mitigating activities

1. Funding risk: Freight Rail’s inability to • Re-prioritised capital allocation focused on key capital projects enabling volumes in line
sustain and expand its capital programme with affordability.
requirements due to funding constraints • Continuous exploration of alternative funding model options through PSPs for identified
programmes. (Sale and lease back of wagons, leasing options, terminal PSPs etc.).
• Focused debtors’ management and recovery from top 20 debtors, including recovery of
PRASA debt.
• Reviewing the pricing strategy and implementation of tariff reform/rebase process with
customers.
• Continuous engagements with development financing institutions for securing funding.
• Reallocation of unspent budgeted Copex across Transnet to TFR for Infrastructure
maintenance.

2. Rolling stock risk: Unavailability and • Delivery of 146 locomotives for the next four years from Alstom as per 1 064 locomotive
unreliability of rolling stock (locomotives) to contract.
ensure safe, reliable and sustainable provision • Implementation of the material, reliability and support agreement with service providers to
of services to business immediate and long- ensure supply of material and technical support for rolling stock maintenance. Initiation of
term requirements procurement events to repair long standing locomotives.

3. Rail network infrastructure risk: Inability • Continuous condition assessment of the infrastructure to prioritise planned maintenance
to provide a reliable and safe infrastructure intervention using technologies such as ultrasonic monitoring (UMC), infrared monitoring
for the passage of trains, threatening TFR’s of rail (IMV).
ability to achieve volumes and threatening its • Prioritising infrastructure renewal programs based on meticulous condition assessments
financial sustainability and global benchmarks (i.e. replacement schedules for rails, sleepers, ballast screening,
turnouts, overhead traction equipment components), particularly for the infrastructure
supporting heavy haul operations and high density areas of the network.

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KEY RISKS AND MITIGATING ACTIVITIES CONTINUED

Key risks Mitigating activities

4. Security risk: Increased security incidences • Implementation of outcome-based security contract.

leading to TFR’s inability to secure its assets • Partner/collaborate with customers in respect of joint security interventions (coal, chrome,
and deliver a reliable service to Customers steel) and implement results-based contracting.
• Continue to drive the reduction of security incidents across the country through the use of
more targeted security solutions as part of the security improvement plan.

5. Procurement and contract management • Focused execution of key strategic commodities to secure long-term contracts aligned to
risk: Lack of a coordinated approach in the the business demands and implementation of short-term contracts to close the gap while
management of procurement processes finalising the long-term contracts.
impacting the effective delivery of services • Established contract management office, ensuring continuous and effective rollout of
to business and poor procurement contract contract management regime across the business, thus eliminating non-compliance
management • Continued implementation of the automated procurement process, eliminating influence
within the process, with the advantage of recorded data/traceable events.

6. People risk: Poor working conditions, • Continuously improve poor working conditions, provide work equipment and work with the
lack of conducive working environment and safety authority to address unsafe conditions within the workplace.
inadequate tools of trade resulting in fatigued • Partner and collaborate with various institutions to address skills gaps, fill critical
workforce and inadequately skilled personnel vacancies, provide critical skills and continued development of feeder pipeline.

7. Information system risk: Outdated legacy • Continue to implement the Digital Transformation Programme to support critical business
systems and infrastructure resulting in processes and enable a safe, secure, relevant and resilient infrastructure through the
inability to digitally transform TFR business following strategic programmes:
and operations to achieve its objectives – Integrated Train Planning (ITP)
– Rail Operations Asset Management (ROAM)
– Commercial Systems
– Enterprise information management, disaster recovery and cyber security
– Artificial Intelligence Driven Analytics (AIDA)
• Optimal use of the current asset management system, Maximo, to enable the business to
effectively manage its assets

8. Rail reform risk: Failure to effectively • Continued implementation of an operational readiness plan that includes:
implement the Rail Reform Policy within TFR – Separating TFR Accounts into Infrastructure Management and Rail Operations.
due to lack of operational readiness.
– Determining and design of an appropriate organisational architecture and structure.

9. Revenue contract risk: Poor Contract • Establish a contract revenue management office at Corporate to oversee all contract-
Management leading to revenue leakage and related matters for TFR and liaise with business.
inadequate billing management • Establish a process for implementing the assurance function to ensure compliance with the
recording of contractual penalties and additional services to customers.
• Partner with Information and Communication Technology (ICT) to digitise all commercial
contract management processes and eliminate manual work.

10. Operational administrative approval • Continued exploration of areas for improvement opportunities to facilitate timeous
processes risk: Operational administrative approvals relating to investment projects. This will enable the business to function
approval processes resulting in failure to optimally.
implement programmes timeously • Review governance processes and Delegation of Authority in consultation with Group
to promote expeditious decision-making, including decentralisation of decision-making
powers.
• Review critical business processes to align with the needs and requirements of the
business through a gap analysis conducted by Business Improvement.

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 TRANSNET FREIGHT RAIL

FREIGHT RAIL SUSTAINABILITY In order to comply with the above regulations, Freight Rail has
identified alien and invasive plant species in its operational areas
REPORT 2023 and submitted five-year control plans to DFFE for the eradication
Freight Rail’s operations traverse South Africa’s complex and control of listed invasive and alien species in accordance with
environmental landscape and are characterised by sensitive Section 75 of the National Environmental Management: Biodiversity
environmental parameters. Driven by increasing South African Act, 10 of 2004.
environmental legislation and Freight Rail’s sustainability
Freight Rail has to date eradicated approximately 1 309,1 hectares
requirements, the Operating Division continues to embrace
of alien and invasive plant species in 2022/23FY out of 5 171,56ha
environmental practices that drive the organisation to fulfil
identified under the five-year control plan. The invasive plant species
its due diligence in complying with legislation, discovering and
control target for 2023/24 is 2 618,2ha.
implementing innovative solutions to minimise the overall impact on
the environment while ensuring that all anticipated future impacts are
identified, assessed and responded to appropriately.
Air pollution
Freight Rail owns several sidings where materials containing dust
During 2022/23FY, Freight Rail achieved the following sustainability such as coal, manganese, iron ore, etc. are handled. Air pollution
objectives: is caused by the dispersion of dust particles that rise into the
atmosphere. In addition, TFR has five diesel locomotive refuelling
Asbestos land contamination sites which have a combined storage capacity of more than one
In the past, Freight Rail transported asbestos ore and asbestos- thousand cubic metres (1 000m3). Emissions from these diesel
containing products from mines to various destinations (e.g., ports storage tanks must be monitored monthly to comply with the National
and local businesses). Spills of asbestos ore occurred along the Environmental Management: Air Quality Act, 39 of 2004 (NEMAQA).
main lines and in the marshalling yards, resulting in environmental
Freight Rail has appointed a contractor to conduct monthly dust
contamination. This has also resulted in some asbestos fibres being
and air monitoring at six multi-user facilities, namely: Rustenburg,
buried beneath the surface of the ground.
Pendoring, Steelpoort, City Deep (Kaserne), Bloemcon and Newcon;
Over the years, Freight Rail has appointed a number of competent and five refuelling sites (Millsite, Masons Mill, Wentworth, Ermelo and
asbestos abatement contractors to remove exposed asbestos iNsezi Depots), respectively.
found in operational areas as required. The division continues its
Monitoring of the multi-user facilities is required to comply with
efforts to continuously assess the risks of asbestos contamination
the National Dust Control Regulations (GN R827, published in
of properties and develop remediation plans while seeking a more
Government Gazette 36974 of 1 November 2013), under the National
sustainable solution for the removal of all asbestos contamination.
Environmental Management: Air Quality Act, 39 of 2004 (NEMAQA).
During 2022/23FY, 9,52 tons of asbestos waste was removed from The National Dust Control Regulations prescribe the general
Kimberly Mid-Fieldview, Beaufort West and Eerstelangsfontein. measures to control dust throughout the country.

The asbestos removal and risk assessment are necessary to comply with, Ballast waste
among others, the National Environmental Management: Waste Act,
Ballast refers to the specially crushed granite rock used to support
59 of 2008 and the Asbestos Abatement Regulations, November 2020
the railway track. Large quantities of ballast waste are generated
established under the Occupational Health and Safety Act, 85 of 1993.
annually during track maintenance. Track maintenance involves the
process of ballast screening, which is the removal of impurities
Hydrocarbon land contamination (i.e., crushed ballast stones) from the rail lines to maintain the
Freight Rail has 47 Fuelling stations. Diesel spillages during the fuelling required ballast stone aggregate sizes.
of locomotives has contaminated some filling station sites over time.
All contaminated sites have been reported to the Department of On average, between 1 400m3 and 1 600m3 of new ballast is replaced
Forests, Fisheries and the Environment (DFFE) in accordance with the per kilometre of track. About 40% of this is ballast waste and is
requirements of the National Environmental Management: Waste Act, removed from the track during ballast screening.
59 of 2008. The DFFE received the site assessment reports to issue
Ballast waste is defined as waste in the National Environmental
remediation orders.
Management: Waste Act, 59 of 2008, defined as waste and as such
In accordance with the requirements of the remediation orders must be removed from operational areas for disposal at approved
issued for the sites, two contractors were appointed to carry out landfills.
bioremediation at these refuelling locations.
TFR has appointed a contractor to conduct a risk assessment for the
exclusion of ballast waste and submit the application to the DFFE to
Alien and invasive plant species control plans obtain a decision on the exclusion of ballast waste from the waste
All state organs in all spheres of government are required to prepare definition. The exclusion of ballast waste from the waste definition
invasive species monitoring, control and eradication plans for the will allow TFR to use uncontaminated ballast waste for maintenance
land they manage, in accordance with the terms of Section 76 of of service roads and stabilisation of railway embankments or to
the National Environmental Management: Biodiversity Act, 10 of sell it to the construction industry for use in buildings and road
2004 and the provisions included in the Alien and Invasive Species construction.
Regulations of 2014.

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KEY RISKS AND MITIGATING ACTIVITIES CONTINUED

Water consumption (kl) Energy use and carbon emissions

Freight Rail receives most of its water supply from the municipalities. Electrical traction consumption – Total electric traction consumption
In the 2022/23FY, about 10 260 996 kl of water was consumed in for the year to date the 2022/2023FY as at end March 2023
the operational areas, compared to 9 425 727 kl in the previous year. decreased by 14,55% year-on-year, while volumes decreased by
This represents an increase in water consumption of 8,86%. 14,1% resulting in a 0,3% improvement in efficiency performance
above target. (Note: Gross Ton Kilometre (GTK) numbers are currently
Despite the implementation of water conservation and management calculated from tons moved). Traction YTD electricity cost decreased
initiatives, the increase in water consumption can be partly by 5,0% against PY while the average price increased by 11,1%
attributed to the increase in operational activities as a large number compared to the previous year.
of employees have returned to work after the end of COVID-19
lockdowns. Traction diesel fuel – Total traction diesel for 2022/2023FY as at
end March 2023 decreased by 15,0% while diesel volumes decreased
Freight Rail remains committed to raising awareness of the by 10,7%. This resulted in a 5,1% year-on-year improvement in fuel
importance of freshwater resources and advocating for the efficiency. (Note: GTK figures are currently estimated). Traction diesel
sustainable management of these resources. The impact of these fuel costs in 2022/2023FY as at end March 2023 increased by 26,6%
efforts will help reduce water waste within the company. against PY and the average price increased by 49,0% against PY.

Carbon emissions – Freight Rail’s Scope 1 and 2 carbon emissions

from rail freight for YTD January 2023 were 1 674 641 TonCO2e.

Energy efficiency performance – Freight Rail has performed well against the targets set for the year (2022/2023FY). As shown in the table below:

Energy
YTD efficiency Target
Measurement Target on PY YTD target performance gain on PY achieved

TFR Traction Electrical GTK/kWh 0,3% 68,5 67,3 (1,7%) No

TFR Traction Diesel GTK/litre 0,5% 284,2 296,7 4,4% Yes

TRANSNET FREIGHT RAIL REPORT 2023 20

 TRANSNET FREIGHT RAIL

TABLE OF ACRONYMS
AMSA Arcelor Mittal South Africa

BSC Balanced Scorecard

COPEX Capitalised Maintenance

COPEX Capitalised Maintenance

CPI Consumer Price Index

CRRC CRRC Corporation

DFFE Department of Forests, Fisheries and the Environment

EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation

ERT Economic Regulation of Transport

GTK Gross Ton Kilometre

ICT Information Communication Technology

IDC Industrial Development Corporation

KPI Key Performance Indicators

KZN KwaZulu-Natal

LTIFR Lost time injuries frequency rate

MRSA Maintenance Reliability Service Agreement

OEM Original equipment manufacturers

OTD On-time Departures

PFMA Public Finance Management Act

PRASA Passenger Rail Agency of South Africa

PSP Private sector participation

PY Per year

RDP Radio Distributed Power

SADC Southern African Development Community

SARB South African Reserve Bank

SARS South African Revenue Services

SPAD Signal Passed at Danger

TE Transnet Engineering

TFR Transnet Freight Rail

YTD Year to date

21 TRANSNET FREIGHT RAIL REPORT 2023