SUSTAINABILITY REPORT 2012
  Social dividends

Social
Social

South African society is profoundly inequitable, borne of a past where access to economic resources and social services were determined by race. 18 years into democracy, high levels of poverty and unemployment stubbornly persist, education and health care are inadequate, and corruption is pervasive. But South Africa is also a resilient, resourceful and culturally rich society where human potential for excellence is evident every day and where civil society’s voice is never silent. This is the society in which Transnet exists, invests and operates. Our railways, ports and pipelines are located in communities, towns and cities. Our people and our customers have families and live in neighbourhoods and villages across the land.

Ever mindful of our social context, Transnet is committed to upholding the highest standards of moral integrity and good governance in all our dealings and to leaving a profoundly transformative social legacy through our employment choices, stakeholder engagement and our honest and caring business practices.

We are focused on delivering the following social dividends:

  • Good governance, accountability and transparency.
  • Zero tolerance of fraud and corruption.
  • A truly representative workforce through employment equity targeting.
  • B-BBEE.
  • Increased safety and health focus in all workplaces.
  • CSI in rural healthcare, safety and security, rural sport, education and employee volunteer initiatives.
  • Proactive stakeholder engagement with all spheres of Government, customers and suppliers, unions, financiers, and communities from which issues are promptly addressed in action.

Good governance, accountability and transparency

Transnet strives for the highest standards of corporate governance as espoused in King III. Details of Transnet’s governance structure, Board Committees and composition, remuneration policy, delegations of authority and applicable statutory requirements on governance are provided in the Integrated Report.

Our practical approach to good governance, accountability and transparency is set out in Transnet’s Code of Ethics (the Code) which guides employee behaviour in all internal and external stakeholder relations. The Code aims to instill a culture of honesty, respect, integrity and overall ethical behaviour in Company representatives engaging with external parties. The Code is reviewed bi-annually and commits the Company’s directors and employees to exemplary ethical behaviour. All Transnet employment contracts refer to this Code. Transnet’s service providers, suppliers and trade partners are also subject to the Code. The Code was reviewed in January 2012 for appropriateness.

Areas identified for improvement by Transnet Internal Audit in the last Corporate Governance Review (2010/11) included an increasing focus on compliance and refining the manner in which the Board discharges its responsibility for maintaining the governance framework. Transnet plans on reaching a ‘leading’ position in corporate governance maturity by the end of 2013.

Compliance is an integral part of good governance, providing assurance on the effectiveness of the control environment through the Board Audit and Risk Committees. Transnet has adopted a risk-based approach to assessing, managing and monitoring compliance with regulatory requirements and has dedicated compliance functions in the Corporate Centre, all Operating divisions and Specialist units.

To promote transparency, the Declaration of Interests Policy for Employees, approved in 2009, was amended in January 2012 in accordance with the Companies Act. A similar policy for directors is proceeding through the approval process. The Declaration of Interests Policy requires employees and directors to regularly register with the Group Company Secretary, any directorships or business interests held by themselves or their spouses. Declarations of Interest must also be made by every employee involved in each case of tender adjudication.

“What corporate governance means is that people outside looking into the Company will see that the people inside who are practicing qualitative governance are making decisions on an intellectually honest basis and are applying care and skill in making business judgements.”
  Ayanda Ceba
Group Company Secretary

“Transnet is committed through its Fraud Risk Management Plan to minimise the negative impact of fraud, corruption and/ or other economic crimes within Transnet. The Tip-Offs Anonymous Hotline forms an integral part of Transnet’s anti-fraud and anti-corruption efforts. All cases reported are investigated by Transnet Internal Audit, following a clear forensics process.”
  Anoj Singh
Acting Chief Financial Officer

Tip-Offs Anonymous Hotline statistics
Tip-Offs Anonymous Hotline statistics

Zero tolerance of fraud and corruption

Fraud, corruption and other economic crimes have a debilitating impact on our business, the economy and the moral fibre of society. Every effort is therefore made to root them out in Transnet and hold the perpetrators to account. Transnet has a Fraud Risk Management Plan with a dedicated whistle-blowing mechanism. The Tip-Offs Anonymous Hotline is managed by Transnet Internal Audit and all reported cases are investigated through an established forensics process. In 2011/12, a total of 1 023 call reports were received representing an increase from 969 in 2010/11. Of this figure, 159 were founded, 398 were unfounded and 466 are being investigated.

With the advent of the MDS, Transnet has adjusted its Fraud Risk Management Plan to address new challenges, including:

  • Increased risks of procurement fraud and/or irregularities as a result of R300,1 billion accelerated spending over the next seven years; and
  • Increased risk of recruitment fraud and/or irregularities emanating from the planned increase in the Transnet staff complement over the next seven years.

The adjusted Fraud Risk Management Plan’s key initiatives are:

  • Procurement and contract management surprise audits;
  • Recruitment surprise audits;
  • Employee and third party due diligence;
  • Implementation of integrity pacts for suppliers and employees;
  • Increasing the level of fraud awareness throughout Transnet and its Operating divisions to improve adherence to Transnet’s strategy of Zero Tolerance; and
  • Tightening of enforcement and monitoring of controls.
Tip -Offs Tip-Offs Anonymous Hotline 088 0000 3056 transnet@tip-offs.com

Security management

As an economic crime, copper cable theft has had a detrimental impact on rail service delivery due to the high cost of replacing cables, the associated damage to wagons and locomotives, and the disruptions in rail service. In its efforts to combat copper cable theft, Freight Rail revised its Crime Prevention Strategy. As a result, there has been a dramatic decrease in the number of incidents from 2 091 incidents by the end March 2011 to 1 557 incidents by the end of March 2012. Cable theft cost Transnet R38 million in 2010/11 and R19 million in 2011/12.

Incidents of other economic crimes that have a detrimental impact on Transnet’s business are recorded as follows:

           
    2010/11   2011/12  
  Goods in transit theft 109   233  
  General theft 1 257   1 527  
  Copper products theft 40   31  
  Motor vehicle theft 8   7  
  Sleeper theft 27   26  
  Tarpaulin theft 114   145  
  Battery theft 294   221  

COPPER CABLE

THEFT INCIDENTS

2010/11 2011/12
2 091 1 557

A representative workforce

African employees represent 65% of the Transnet workforce as compared to the National Employment Action Plan (NEAP) target of 75% and woman employees represent 22% of the workforce, as compared to the NEAP target of 22%.

Gender diversity 2011/12   Employment equity 2011/12
Gender diversity 2011/12   Employment equity 2011/12

Transnet’s Employment equity (EE) profile per occupational category in 2011/12 is as follows:

                                             
Occupational
category*
Male   Female      
African   Coloured   Indian   White   Total   African   Coloured   Indian   White   Total   Grand
total
 
Top management 24   7   15   17   63   22   2   6   8   38   101  
Seniormanagement 155   36   76   150   417   81   21   26   31   159   576  
Professional 1 115   278   313   1 306   3 012   712   117   118   191   1 138   4 150  
Skilled technical 7 540   1 407   740   6 397   16 084   3 646   522   183   884   5 235   21 319  
Semi skilled 10 817   1 514   347   1 659   14 337   2 619   340   66   224   3 249   17 586  
Unskilled 4 918   571   39   99   5 627   1 061   91   12   22   1 186   6 813  
Grand total 24 569   3 813   1 530   9 628   39 540   8 141   1 093   411   1 360   11 005   50 545  

* Covers permanent employees only (for EE reporting purposes, the number may be different as Department of Labour requires that employees that have a fixed term contract in excess of three months be recorded as permanent).

Students at Port Simulator – Durban
Students at Port Simulator – Durban

Captain Rufus Lekala, Chief Harbour Master – National Ports Authority
Captain Rufus Lekala, Chief Harbour Master – National Ports Authority
 
“Transnet is committed to the integration of People with Disabilities into the workplace. Additional initiatives are in place to improve awareness and education of our employees on the definition and types of disabilities that could be disclosed. We also recognise that reasonable accommodation is an integral part of creating a conducive environment for People with Disabilities within Transnet. Specific targets per Operating division have been set and all Chief Executives are monitoring achievements thereof.”
  Nonkululeko Sishi
Group Executive: Human Resources

“The maritime sector used to be one that was closed off to the historically disadvantaged, including women, but this is changing and we are geared for even greater success stories like this”.
  Tau Morwe
Chief Executive: National Ports Authority

Representivity of People with Disabilities (PWDs) remains a significant challenge for Transnet with PWDs representing only 0,8 % of the Transnet workforce. One of the key challenges is the unwillingness to declare disabilities in the workplace due to a lack of understanding. Physical access constraints and attitude contribute to this challenge.

The EE focus for 2012/13 includes:

  • Achieve targets for African and women employees;
  • Intensify strategies to achieve targets for PWDs (1,3%);
  • Intensify the disclosure campaign to encourage employees to declare their disability status;
  • Engage with recruitment agencies that specialise in the placement of PWDs for current vacancies;
  • Continue with accessibility audits to improve the environment across Operating divisions;
  • Continue communication and engagement strategy on the Disability Policy which includes definitions and process for reasonable accommodation; and
  • Provide internship opportunities across Operating divisions.
  Transformation

National Ports Authority has made history by appointing Rufus Lekala as South Africa’s first black Chief Harbour Master – he became the world’s youngest harbour master when he was appointed to the Port of East London in 2002. He is now the youngest Chief Harbour Master in the world at the age of 41.

In addition, Transnet’s first black, female marine pilots graduated from the School of Ports in Durban. Precious Dube, Bongiwe Mbambo and Pinky Zungu are three of only five female marine pilots in South Africa with an open licence to navigate vessels of any size and type into South African waters.

Rail Engineering’s recently approved Women in Rail Engineering (WIRE) Programme aims to create a strong succession pool of competent female managers that can assume future positions in Rail Engineering; accelerate the development of women in Rail Engineering to meet EE targets; accelerate the engineering, operation based leadership capabilities in Rail Engineering; create a pipeline of potential successors for all management positions; and develop a structured training programme within Rail Engineering.

Safety first

Transnet is committed to providing a safe and healthy working environment for all our stakeholders. Safety is a key part of our SHEQ (Safety, Health, Environment and Quality) management system. Performance is measured against industry recognised indicators such as the disabling injury frequency rate, loss incidents, fatalities and derailments.

There has been a decrease in the DIFR over the past year from 0,82 to the level of 0,65 at year-end. This is below the target of 0,80 and the performance reflects an improvement of 20,7% compared with the prior 12 month period. The DIFR rate has dropped by more than 40% over the past six years. This is exceptional progress by international standards but is not yet good enough.

There has been a notable reduction in the number and severity of loss incidents over the past year, dropping from 1 652 in 2010/11 to 1 060 by 31 March 2012. The estimated cost of these incidents year-to-date is R432 million compared to R1,1 million for the previous year.

There were seven employee fatalities in 2011/12 compared to 12 in the prior year. Employee fatalities have dropped by more than 70% over the past six years. Four of the seven deaths resulted from motor vehicle accidents and three occurred due to non-adherence to Standing Operating Procedures. Whilst there is a significant decline in fatalities, one fatality is one too many and Transnet continuously strives for zero fatalities.

There were 100 public fatalities reported for 2011/12 compared to 151 in the prior year. The majority of these were rail-related. Trespassing into Transnet’s operational areas remains the biggest contributor to these incidents.

Running line derailments have declined from 125 in 2010/11 to 87 in 2011/12. Shunting derailments declined year-on-year from 363 to 294. However, shunting derailments at private sidings increased from 210 to 219 in the same period.

Transnet is now in the third year of its intensive Safety Culture Programme through Safety Leagues and competitions.

“Our foremost priority is reducing health and safety risks in the workplace for all our staff and contractors. In 2011/12 we achieved the best safety record in many years with a significant decrease in the disabling injury frequency rate and the number of employee fatalities. Our Operating divisions achieved various National Occupational Safety Association five-star ratings for excellent safety performance. This can be attributed to the ‘Safety Mindset’ that is evident at all levels of the business. We nevertheless acknowledge that we have more work to do as we strive towards totally eliminating injuries from the workplace. We also acknowledge that an injury-free workplace is not an end in itself; it is a standard that must be maintained through constant vigilance, evaluation and communication. We will maintain our ‘no excuses’ approach to safety, and continue to support each other in doing so.”
  Virginia Dunjwa
Chief Risk Officer
   
 
DIFR 0,65
20,7%
IMPROVEMENT
IN 2011/12
 
FATALITIES

2010/11   2011/12
12 EMPLOYEES 7
151 PUBLIC 100
 

The safety leagues

Using the competitive framework of a soccer league, Safety Leagues aim to embed safety management practices and behaviour. Teams compete for prize money, which is used towards morale-boosting facilities such as canteens and braais. Performance is measured on unplanned absenteeism, personal protective equipment usage and breathalyser statistics. There are currently three Safety Leagues involving more than 9 000 employees in 13 business units and four Operating divisions.

“We’ve gained several learnings in the GSL and two stand out. The first is that safety starts with you as local business manager. The second is that safety should be discussed continually at all forums and all platforms. This has helped us to raise greater safety awareness”.
  Pottie Potgieter
Chief Operation Officer: Rail Engineering

The Seven Golden Safety Actions  
Safety actions Safety actions
I will not perform unsafe work and put myself and
others in danger
I take responsibility for myself and my team and I don’t blame others
Safety actions Safety actions
If I don’t understand and if I have a problem, I speak up and say so No matter what my level I contribute to improving safety
Safety actions Safety actions
I always prepare, check and report unsafe acts and conditions I rest well and work safely
Safety actions
I know the standard operating procedures and safety rules, follow them and don’t take shortcuts

“Safety, including that of communities who make it possible for Transnet to run its operations throughout the country through partnerships, is one of the key elements of
our business. It is for this reason that our teams did all in their power to make sure that we deliver on our promise to ensure the safety of this community.”
  Brian Molefe
Group Chief Executive
13 September 2011
  • The Golden Safety League (GSL) has 13 sites in National Ports Authority, Freight Rail, Rail Engineering and Port Terminals.
  • The Platinum Safety League has four teams (promoted from year one of the GSL).
  • Port Terminals has an Internal Safety League.

The 2011/12 Safety League saw improvements in frequency at which sites breathalyse and a drop in employees testing positive for alcohol. Although absenteeism remains a challenge across all divisions, league sites are continuously innovating to reduce unplanned leave and sick leave with some sites managing to achieve and maintain the league target of 0,7% absenteeism rate. League sites earn points for actively promoting and embedding Transnet’s Seven Golden Safety Actions. Currrently, Rail Engineering’s Uitenhage Red Bulls team are at the top of the League.

Annual Safety Competition Day

Transnet holds an Annual Safety Competition Day in April each year, incorporating the Practical First-Aid Competency Competition, the Fire Safety Competency Competition and the finals of the Transnet Occupational Health and Safety Representative Competition. The top three divisional First-Aid and Fire Teams from Operating divisions and the top three divisional winners of the Health and Safety Representative Competition, compete on the day.

The competitions motivate, encourage and reward deserving collective and individual efforts in the field of health and safety. This annual event also helps to measure the level of skills and preparedness in the respective fields.

Several other Transnet Safety Awards, which encourage a health and safety culture are given during the year, and are acknowledged at the prize-giving function of the Transnet Safety Competition Day.

Level crossings

Accidents at level crossings pose a huge risk to safety for Transnet. Not only do level crossing accidents result in a loss of life but these accidents also damage Transnet’s assets (rolling stock), cause train delays, customer dissatisfaction, financial loss and negative publicity. In an effort to reduce the accidents between trains, road vehicles and pedestrians, Freight Rail has embarked on an awareness campaign to promote and enhance safety at level crossings through law enforcement, advertisements, media campaigns, and visiting and educating communities and schools in areas where level crossing accidents are the highest. As a result of these efforts, level crossing
accidents have decreased from 117 in 2010/11 to 81 in 2011/12.

“Safety, including that of communities who make it possible for Transnet to run its operations throughout the country through partnerships, is one of the key elements of our business. It is for this reason that our teams did all in their power to make sure that we deliver on our promise to ensure the safety of this community.”
  Brian Molefe
Group Chief Executive
13 September 2011

  Appointment of level crossing traffic officers in Rustenburg, North West

In its analysis of level crossing statistics, Freight Rail identified Rustenburg in the North West as a high risk area due to increased platinum mining, rapid urbanisation, growth of the city and increase in traffic density. In partnership with the Road Traffic Management Corporation and the North West Department of Public Safety, Freight Rail embarked on a pilot project in 2011 to reduce level crossing accidents through law enforcement. Freight Rail has committed R4,5 million to the level crossing initiative which involves education and awareness campaigns and the recruitment of 22 young railway traffic officers who man the level crossing in Rustenburg. Dedicated project managers will be employed to monitor implementation and results.


  Construction of boundary wall along railway line in Mbekweni, Paarl

Transnet’s commitment to its Level Crossing Campaign was reaffirmed on 13 September 2011 when construction started on a three kilometre wall along the railway line going through the informal settlement in Mbekweni, Paarl in the Western Cape. The construction follows a tragic incident in which two toddlers were killed when they wandered into the path of an oncoming Metrorail passenger train operated by the Passenger Rail Agency of South Africa. On visiting the site on the day of the fatalities in May 2011, the Transnet Group Chief Executive vowed to ensure that the Company prevented further loss of life by erecting an impenetrable wall along the line. This was done through an accelerated process to source the required expertise and secure regulatory approvals.

In addition to the wall construction, Freight Rail ran a rail safety awareness campaign in the community with a door-to-door education drive and a partnership with the South African Police Service (SAPS). These initiatives reached more than 1200 people, including children.


Annual Safety Competition Day
Annual Safety Competition Day
 

We remember our colleagues who tragically died as a result of injuries sustained at Transnet workplaces during 2011/12:

  • Mr Mpoisane Obed Sekome – 1 April 2011Mr Erasmus Mandla Nkambule – 25 April 2011
  • Mr Coert Nicolaas Smit – 31 May 2011
  • Miss Yolande Renchia Fries – 30 September 2011
  • Mr Bhekinkosi Sipho Mvuna – 4 October 2011
  • Mr Velile Hanabe – 19 October 2011
  • Mr Langalakhe Bernard Lushaba – 29 February 2012

 

ABSENTEEISM

DOWN
2010/11 2011/12
2,19% 1,95%

Staff wellness

Transnet is committed to ensuring the wellness of its staff. During 2011/12 Transnet focused on various initiatives to achieve this.

The Absenteeism Management Programme resulted in a decreased rate of sick absenteeism month on month, from 2,19% in 2010/11 to 1,95% in 2011/12. The Disease Management Programme achieved an increase in the number of registrations for medically uninsured employees from 86 in 2010/11 to 97 in 2011/12. The Employee Assistance Programme’s rate increased from 8,5% to 8,7% against a benchmark of 8% – 12%. Transnet plans on increasing this through sustained efforts of marketing and communication. The Executive Wellness Programme achieved 40% against a target of 75% for Executive Managers to complete a full medical assessment. The challenge remains the busy schedules of the executive cadre. In addition, Transnet piloted its Life Skills Programme within the Marine Cadet Programme assisting with social integration and adaption to life at sea. The programme targeted 50 cadets, 24 of whom participated.

The Culture Charter

Building a high performance culture remains an imperative for Transnet. November 2011 marked the most successful scoring participation by Transnet employees in the Culture Charter behaviour review since its launch in 2008. A total of 28 772 employees participated, showing an overall increase of 12 450 from 2010. This is indicative of a growing sense of ownership of the culture behaviour and a growing perception that scoring is a credible process that allows employees’ voices to be heard.

Culture charter behaviours employee scores 2011/12 (%)
Culture charter behaviours employee scores 2011/12 (%)

“The Culture Charter has in some ways improved our working environment, especially in terms of safety. It has changed the way I think and communicate. As workers we need to communicate more. When we communicate it’s easy to work together.”
  Precious Molefe
Electrician
Pipelines

Employees were asked to score the culture behaviour based on their perceptions of how well we are living the culture.

The challenge remains to convert behaviour from ‘Sometimes’ to ‘Almost always.’ Scores indicate:

  • A high awareness and belief in safety but almost a third of participants believe that we do not always comply with safety policies and procedures.
  • Overall positive scores for ‘being business focused’ although a third of participants believe that this only occurs ‘Sometimes’ or ‘Not at all’.
  • Overall, respondents believe that good communication only takes place ‘Sometimes’. This needs attention.
  • Scores on dignity and respect have improved, and issues raised by employees focus mainly on perceptions of fairness.
  • Less than half the participants believe that they are empowered to perform in their jobs. Relationships between senior managers, supervisors and employees are not always positive. Effective management will be a key focus going forward.
  • Most employees’ perception is that they are not recognised and rewarded for their good work, despite objectively fair market comparisons in Transnet’s remuneration policy.

When asked to prioritise one area, employees scored as follows:

  • 4 991: ‘Recognition and reward’;
  • 4 902: ‘Dignity and respect’; and
  • 4 717: ‘A safety mindset’.
“The Culture Charter has helped me to understand what other colleagues are thinking. It has helped me to work with people, talk to them, and know what their views are. We need to respect one another and have good communication skills.”
  Mashudu Muthivhi
Yard official
Freight Rail

“Thanks to the Culture Charter we now have a collective identity in Transnet. I’ve been part of the Culture Programme since its inception in 2007, and its been a journey of trying to find ourselves in Transnet and living our culture. Being part of this change process has enriched my life. It warms my heart to see that the culture behaviours are entrenched in our Company and that culture awareness is everywhere. I realise that change begins with me. If we want to leave a legacy for the next generation of Transnetters, we all need to live the culture behaviours.”
  Ntombekaya Mgayi
Organisational Development Manager
Rail Engineering

Broad-based black economic empowerment

Transnet’s B-BBEE policy is based on the B-BBEE Act, Act No 53 of 2003. In terms of the six pillars (management control, EE, skills development, preferential procurement, enterprise development and socio-economic development) for measurement of B-BBEE, Transnet’s B-BBEE scoring for 2011/12 is Level 5, which is unexpectedly low. This is attributed to the following challenges:

  • Skills development: there is currently no formal measurement of Transnet’s skills and leadership training of black employees and black employees with disabilities; and
  • Enterprise development: there are insufficient records and proof of specific initiatives that assist and/or accelerate the development, sustainability and ultimate financial and operational independence of black-owned beneficiary entities.

Transnet’s B-BBEE management control, employment equity, preferential procurement and socio-economic development all score well in the B-BBEE scorecard.

“We recognise the role that B-BBEE plays in the economic transformation of South Africa as it significantly increases the number of previously disadvantaged people who manage, own and control the country’s economy, as well as significantly decreases income inequalities.”
  Brian Molefe
Group Chief Executive

  Transnet appoints black-owned external audit firm

A major milestone in the transformation of the accounting and auditing profession was reached in South Africa on 20 February 2012 when the Public Enterprises Minister, Mr Malusi Gigaba, announced the appointment of SizweNtsalubaGobodo as Transnet’s external auditors. The appointment marked the first in South Africa for a locally grown and black-owned firm to handle the entire audit account of a corporate the size of Transnet.

“This reaffirms our commitment to ensuring that state-owned company(ies), as entrusted to us by the people of South Africa, are used as agents of change and transformation of our economy,” said Minister Gigaba.

SizweNtsalubaGobodo was selected out of three bidders based on technical ability, black economic empowerment and price.


“This is an honour, not only for SizweNtsalubaGobodo, but for the whole of our industry. We are delighted that a company of Transnet’s size with such an enormous responsibility in this economy has shown confidence in one of us. We are aware that our performance in the Transnet account will determine the fate of local players in future.”
  Victor Sekese
Chief Executive Officer
SizweNtsalubaGobodo

Transnet’s B-BBEE rating                        
B-BBEE scorecard pillars Total
points
allocated
  Target
(Level 3)
  Target
(Level 2)
  Target
(Level 1)
  Points
achieved
  R/A/G
status
 
Management control 10   8,5   9   10   7,53   Bullet  
Employment equity 15   10   12   15   9,31   Bullet  
Skills development 25   16   20   25   12,51   Bullet  
Preferential procurement 30   27   28   30   26,06   Bullet  
Enterprise development 15   8,5   11   15   0   Bullet  
Socioeconomic development 5   5   5   5   5   Bullet  
Overall scoring 100   75   85   100   60,41   Bullet  

Bullet No issues currently pose a threat to B-BBEE.
Bullet Issues identified which pose threats to B-BBEE. Actions to resolve the issues are in hand.
Bullet Issues identified which pose threats to B-BBEE. Solutions to be identified.

In order to improve our overall B-BBEE rating to Level 1 by 2016/17, the following initiatives have been identified for 2012/13 to achieve a Level 3 rating:

  • Skills development: design and implement a formal system to measure the contributions of Transnet towards the development of black employees and black employees with disabilities by way of skills development training and leadership programmes; and
  • Enterprise development: design an enterprise development programme for assisting and/or accelerating the development, sustainability and ultimate financial and operational independence of black-owned QSE and EME beneficiary entities, through the expansion of their financial and/or operational capacity.

Corporate social investment

The Transnet Foundation is Transnet’s custodian on CSI, which in 2011/12 spent approximately R160 million on five major programmes: The award-winning Phelophepa health care train, containerised assistance, rural and farm schools sport, teacher development, and employee volunteer initiatives.

Whilst the Transnet Foundation remains the custodian of the Company’s CSI initiatives, the Operating divisions respond proactively to the needs of vulnerable communities surrounding their operations.

The Phelophepa: Train of hope

Phelophepa is a flagship project of the Transnet Foundation. Phelophepa I made history when it became the first sustainable South African CSI initiative to receive the prestigious United Nations Public Service Award for its excellence in public service delivery on 23 June 2010. 2011 brought another major award: the Archon Award from the Honour Society of Nursing, Sigma Theta Tau International, for the train’s dedication in providing primary health care services and health education programmes in rural areas in South Africa.

March 2012 marked the unveiling of Transnet’s second ‘Train of Hope’, Phelophepa II. With the launch of Phelophepa II our Company reaffirmed its commitment to help South Africa achieve the United Nations MDG which include reducing child mortality, improving maternal health, and combating HIV/Aids, malaria and other diseases.

The introduction of Phelophepa II will more than double the number of people who benefit from the facility as both trains will run simultaneously by 2013. The beginning of September 2011 saw Phelophepa I register 59 573 patients at a remarkable rate of 1 722 patients per week – shattering the previous record of 49 314 patients achieved in 2009.

Phelophepa services include: dental, optometry, pharmacy, oral and vision screening, HIV counselling, health education and psychological counselling. In addition, the train offers South African and international final-year professional health students practical experience in nursing, dentistry, optometry, psychology and pharmaceuticals. Transnet’s partner sponsors for Phelophepa are Roche and Colgate-Palmolive South Africa.

Phelophepa combines elements of Sotho and Tswana and means ‘good, clean health.’   Cost to build Phelophepa II was R82 million and R25 million has been set aside to upgrade Phelophepa I to the same level as the second train. Phelophepa II was engineered and built at Rail Engineering’s facility in Salt River.

“When I think of the Transnet Foundation, three things immediately come to mind: caring, improving lives and making a difference. That’s why the Company is investing over R160 million in Corporate social investment.”
  Cynthia Mgijima
Head: Transnet Foundation

“What started off 18 years ago as a modest three-coach eye clinic has become an internationally well known beacon of hope, providing health care throughout South Africa especially in rural areas. The launch of Transnet Phelophepa II will allow us to reach communities that need it most and demonstrates how public-private sector partnerships can be used to transform lives of communities through social entrepreneurship.”
  Malusi Gigaba
Minister of Public Enterprises
12 March 2012

“This is an immensely important philanthropic engagement for Roche. We are proud to have continuously grown our support for the Phelophepa healthcare train during the 18 years of sponsorship, because Phelophepa has such a remarkable impact on the lives of thousands of people every year.”
  Franz Humer
Chairman of the Board of Directors, Roche

“Colgate-Palmolive South Africa is extremely proud of its long association with Phelophepa. The on-board dental clinic provides oral health services and hygiene education to communities in the most remote areas of South Africa. We must acknowledge the dedication of the academics and students who have committed their time to the clinics and look forward to our on-going partnership.”
  Bradley Farr
General Manager, Colgate-Palmolive
South Africa

“People come in their numbers – 50, sometimes 100 people – all coming from so far away, yet still willing to wait in line and even sleep outside the train as they wait to be treated. Sometimes it will rain, but patients – many of them elderly – will still sleep under our tents. They are willing to wait because they know that they’re going to get what they’re looking for. And they appreciate that.”
  Onke Mazibuko
Manager: Phelophepa I

Patients waiting in line at Phelophepa Health Train
Patients waiting in line at Phelophepa Health Train

There are 20 full-time staff on board including a manager, a financial manager, a health clinic manager, operational and technical manager, two community nurses, a dentist, dental nurse and oral hygienist, an eye clinic manager, two optometrists and an optical dispenser, a pharmacist, a psychologist, a catering manager and an assistant catering manager. They are backed up by a team of security personnel and volunteer students.

  PHELOPHEPA BY NUMBERS  
   
 
1 330 522
  people reached by Phelophepa in its first 10 years of operation.  
 
5 582 400
  people reached from Phelophepa’s inception in 1994
up until 1 September 2011.
 
 
150 000
  medicine items issued on the Phelophepa per annum.  
 
20 000
  kilometres covered by the Phelophepa per annum.  
 
14 000
  litres of diesel used on the Phelophepa train every two weeks.  
 
1332
  student volunteers who take part in the programme per annum.  
 
616
  community volunteers to whom the Foundation offers accredited primary healthcare training.  

The launch of the Phelophepa II Health Train – Mdantsane, East London
The launch of the Phelophepa II Health Train – Mdantsane, East London

Containerised Assistance

On 28 March 2012, Transnet opened a satellite security and community policing centre in Khuma township, near Stilfontein in North West reaffirming the Company’s commitment to advancing communities in which it operates. The facility is to be operated in partnership with the SAPS and the Khuma Policing Forum and is designed to strengthen security in the area. The centre will provide facilities for the Khuma Policing Forum and will also accommodate Freight Rail security officials who are tasked with protecting Transnet’s assets. In addition, SAPS will have a presence at the centre.

A total of three refurbished containers were used in constructing the centre. The environmentally-friendly building is fitted with lighting, solar energy and is kitted with all the basic essentials required in a security centre.

This centre forms part of Transnet’s Containerised Assistance Programme to address the shortage of infrastructure and capacity in under-resourced areas. Since the programme was started in 2001, Transnet has invested close to R28 million in more than 33 facilities across the country. The programme has assisted around 120 000 beneficiaries.

“The opening of the Khuma Security Centre constitutes an important step in the fight against crime in the area. It is our hope that this centre will serve as a catalyst for the upliftment of the Khuma community and assist in creating a conducive environment for business development. It is our firm belief that the success and sustainability of programmes of this nature depends on strong partnerships between communities, Government departments and the local municipality.”
  Nonkululeko Sishi
Group Executive: Human Resources

Rural and Farm Schools Sport

The Rural and Farm Schools Sport Programme covers six regions and targets 13 – 17 year olds in the poorest areas of the Free State, KwaZulu-Natal, Limpopo, North West, Northern Cape and Eastern Cape. Since inception in 2001, over 100 000 learners have benefitted and about 3 000 teachers have been trained and accredited as coaches, umpires and referees. In 2011/12 more than 5 000 learners participated in the programme with 600 teachers trained as coaches, umpires and referees.

Teacher Development

The Teacher Development Programme was launched in 2011. This three year programme will select 350 teachers in the fields of Maths, Science and English in Grades 10 – 12 and will empower them with content knowledge so that they are able to deliver and complete the curriculum and enhance their learners’ performance. Maths, Science and English were targeted as subjects that develop analytical thinking that is needed for our country’s future engineers, executives and entrepreneurs with research showing that struggling to understand the language of instruction can be detrimental to a learner’s ability to succeed in those subjects. Currently, 100 teachers have been selected for the programme from KwaZulu-Natal, Mpumalanga and Limpopo.

Employee Volunteers

The Employee Volunteer Programme gives Transnet employees the opportunity to volunteer their time in communities in selected villages in which the Company operates. ‘Volunteers for Villages’ commenced in July 2011 with Transnet employees being invited to cast their votes from a handful of needy villages to select those which will be the Transnet Volunteer villages for the next three years. Three were selected from the “hotspots” of Durban (Inanda), Port Elizabeth (Motherwell) and Johannesburg (Diepsloot). Transnet employees offer their time and services – whether it is helping to paint the walls of a classroom or providing financial and technical advice to someone who’s starting up a small business. Time spent working in the village counts towards employees’ performance appraisal as well as Transnet’s B-BBEE score.

Proactive stakeholder engagement

Transnet has a wide range of stakeholders whose relationship with the business is integral to our sustainability commitment. In 2011/12, many stakeholders were engaged in a variety of ongoing dialogues on economic, social and environmental issues.

Every major capital investment project and every significant change to an operating system involves extensive engagement with interested and affected parties – typically Government, customers, suppliers, employees, unions, financiers, media and communities. In the regulated parts of our business, there is interaction with the regulators. In all matters affecting labour, we have structured relationships with recognised trade unions. Long-term infrastructure planning is done in coordination with national, provincial and local government, other SOCs, long-term customers and other logistics service providers. Relationships with our day-to-day customers receive high levels of constant management attention. Communities in our areas of work are engaged on many issues concerning safety, local economic development, the environment and CSI. With a growing regional interest, we are increasing interaction with embassies and trade missions in Africa. Road shows are becoming a regular feature in the Group Chief Executive’s diary as we seek to better communicate our ongoing work and plans. As an SOC, there is structured interaction with our Shareholder on all aspects of the Transnet business.

We have recognised the need to monitor and analyse the outcomes of these engagements in a more systematic way in order to ensure that stakeholders’ concerns are systematically followed through to actions and that outcomes are reflected comprehensively in our sustainability reporting in years to come. Tracking all stakeholder engagements in a company as large and geographically diverse as Transnet is a challenging exercise but is receiving attention in 2012/13.

The following table summarises the material subjects of key stakeholder engagements held in 2011/12, highlighting areas of concern and Transnet’s response.

Official opening of the Port of Ngqura from left: President Jacob Zuma, Minister Malusi Gigaba, Transnet Chairman Mafika Mkwanazi and Transnet Group Chief Executive Brian Molefe
Official opening of the Port of Ngqura from left: President Jacob Zuma, Minister Malusi Gigaba, Transnet Chairman Mafika Mkwanazi and Transnet Group Chief Executive Brian Molefe

Stakeholder engagment

                 
Stakeholder group   How Transnet engages   Main area of
stakeholder concern
  Transnet's response   What Transnet hopes
to achieve
Transnet’s
Shareholder,
Government and
other SOCs
 
Shareholder’s
Compact
engagements.
Quarterly reports,
Annual report and
Corporate Plan.
SOCs CEOs,
Chairman and Chief
Financial Officer
fora.
Annual General
Meetings.
Board engagement
with the Shareholder
Minister, Deputy
Minister and the
Director-General of
the DPE.
Bilateral meetings
between the DPE,
Transnet and
Executive
management.
Provincial visits by
the GCE and Minister
of Public
Enterprises.
Business breakfasts
hosted by the
Minister of Public
Enterprises.
 
Progress against
New Growth Path
commitments.
Meeting
development state
objectives.
Infrastructure
investment to create
the required
capacity.
Operational
efficiencies.
Skills development
and job creation.
Supplier
development and
localisation.
Rural development.
Regional integration
Performance against
Shareholder’s
Compact targets.
Delivering
sustainable returns.
Lowering the cost of
doing business in
South Africa.
Policy alignment
with Government
departments.
PFMA approvals.
Financial strategy of
the Company.
Investor and funding
concerns.
 
Executing the
Quantum Leap
strategy successfully
and fulfilling the
Company’s mandate.
Participating in
achieving
infrastructure that
meets the needs of
the growing
economy.
Earning an
appropriate return
on invested capital
and maintaining a
strong financial
position.
Meeting the NGP
objectives.
Support industrial
capacity building and
job creation.
Undertaking the
MDS.
 
Greater
collaboration
thereby creating an
enabling
environment for
successful execution
of the MDS.
Regulators and other
Government agencies
 
Meetings.
Submissions.
 
Governance.
Appropriateness of
tariffs.
Access to network
infrastructure.
Productivity and
efficiency levels.
Customer service
levels.
 
Secure revenue
streams.
Closing the funding
gaps through Private
Sector Participation
(PSP).
Increased
transparency.
 
Alignment on tariff
methodology
and regulatory policy to
create regulatory
certainty.
Secure funding for
required but not
funded in the
R300,1 billion MDS.
Managing the impact
of regulation on
revenues.
Customers  
GCE road shows.
Operating division
CEO business
breakfasts.
Customer
satisfaction
feedback and
reports.
Fact sheets,
pamphlets and
newsletters.
Annual customer
satisfaction survey.
Participation in
industry forums and
Steering
Committees.
Regular direct
customer
engagement.
Consultative
matters.
Golf days.
 
Service delivery.
Innovation.
Leadership.
Reliability.
Safety.
Customer relations
and communication.
 
Integrated account
management to
optimise
opportunities across
Operating divisions
to drive volume
growth.
Transnet pricing/
tariff guidelines,
best practice
methodology and
models to sustain
capital investment
and support volume
growth.
Transparent capacity
allocation framework
and processes to
ensure fair allocation
of capacity.
Creating sufficient
capacity and
improving on
operating
efficiencies.
Growing
transshipment
volumes and
establishing South
Africa as a
transshipment hub
and increasing over
border rail volumes.
Undertaking the
MDS.
 
Alignment and
collaboration on
growth and
expansion plans,
detailed in key
account plans.
Conclusion of
long-term
take-or-pay
contracts.
Suppliers and
business partners
 
Transnet Acquisition
Council.
B-BBEE fora.
Publications and site
visits.
Stakeholder
engagement
meetings.
Supplier summits.
 
Governance.
Transparency.
     
Suppliers partnering
with Transnet to
deliver capital spend
and achieve
localisation and
empowerment
objectives.
Employees, labour
unions and pensioners
 
Strategic leadership
forum.
Transnet
Restructuring
Committee.
National Business
Committees.
Local Business
Committees.
Internet/intranet.
Memoranda from
the GCE.
Culture Charter
champions.
Correspondence with
pensioners and fund
administrators.
Engagement with the
Portfolio Committee
on Public Enterprises
together with
defined benefit
pension funds.
 
Dignity and respect.
Safety.
Training and skills
development.
Remuneration.
Culture.
Queries from former
employees on
whether they qualify
for pensions.
In November 2010,
the Portfolio
Committee on Public
Enterprises
recommended that
certain enhanced
benefits be
implemented for the
pensioners of the
Transnet Second
Defined Benefit
Fund and the
Transnet Sub-Fund
of the Transport
Pension Fund
comprising the
payment of five
months’ pension
benefits as a bonus,
an uplift of the base
pensions and
CPI-linked increases,
targeting 75%
of CPI.
 
Investing in
employee safety and
development.
Maintaining a
performance system
that supports
continuous
improvement.
Informing employees
of key strategic
initiatives, policies
and procedures that
impact the
workforce.
Social responsibility
and reputation
management.
Both funds have
provided bonuses to
their pensioners of
five months’ pension
benefits. Neither
fund will implement
a base uplift, as this
is tantamount to
adjusting the salary
of employees at date
of retirement, and
not within the ambit
of the funds. Both
funds, which have
ad hoc bonus rules,
will seek to pay
annual bonuses to
their pensioners that
result in an annual
increase in pension
received linked
to CPI.
 
Increase in labour
productivity to
deliver on volume
growth and MDS
targets.
Labour stability to
support strategy
execution and
competitiveness of
South Africa’s
freight logistics
system.
Building union
relationships to
support labour
stability.
Collaboration with
organised labour to
ensure business
success.
Investors  
Quarterly reports,
Annual Report and
Corporate Plan.
Investor road shows
and presentations.
Market feedback.
Circulate and
distribute media
statements issued
by Transnet before
the statements are
read in the media.
 
Realising poor
returns on capital
investment.
Financial
performance
– Company’s ability
to deliver on its
commitments as set
out in its strategy.
Affordability of
capital investment
plans.
Sovereign concerns
that could lead to a
downgrade of South
Africa and
consequently
Transnet. Political
instability that can
impact interest
rates and foreign
exchange rates.
Policy uncertainty.
Regulatory tariff
lower than
Transnet needs.
Volumes railed lower
than planned – thus
putting pressure on
planned cashflow
from operations
which in turn
increases funding
requirement.
 
Managing cash and
working capital
proactively.
Diversifying sources
of funding.
Seeking innovative
means for PSP.
Exploring possibility
of ‘off-balancesheet’
funding.
 
Continued support
and access to cost
effective funding to
meet requirements.
Better
understanding of
Transnet strategy.
Enable investors to
feel comfortable to
engage when they so
require.
Communities  
Partnerships,
awareness.
Campaigns.
CSI initiatives.
 
Employment
opportunities.
Environmental
impacts.
Supporting key
community
development issues.
Beneficiation.
Sustaining CSI
initiatives.
 
Fostering mutually
beneficial
relationships.
Job creation.
Supporting
communities in areas
of operation.
Demonstrating
principles of
accountability and
care.
Increasing reach of
beneficiaries.
Identify and impart
skills to potential
suppliers at
community level,
thus contributing to
the transformation
of suppliers.
 
A deeper
understanding of
community interests.
Building trusted
relationships.
Ensuring sustainable
community
development, by
building trust within
communities where
Transnet has
established CSI
programmes.

Top 20 customer survey

In October 2011, Transnet conducted a survey of its top 20 customers across Freight Rail, Rail Engineering, National Ports Authority, Port Terminals and Pipelines. Key findings included:

  • Transnet should provide a seamless service between Operating divisions;
  • Transnet should be a ‘business partner’ or ‘enabler’ working on the same side as business and towards the same goals;
  • Transnet needs to have a better understanding of customers’ businesses;
  • Transnet is a custodian of national assets and therefore a catalyst for business success;
  • Transnet’s importance to customers and the country is self-evident; and
  • Transnet should be more transparent to support customers formulation of their investment and operating plans.

Transnet was particularly commended for:

  • Freight Rail’s iron ore line performance;
  • National Ports Authority’s communication with stakeholders;
  • Port Terminals’ good operational efficiencies at Saldanha, Port Elizabeth and Richards Bay; and
  • Pockets of excellence with some customers.

Shortcomings identified included:

  • A long-standing reputation for overall unsatisfactory performance and not being world class; and
  • Unreliability, unpredictability, and operational inefficiencies.

Arising from this survey, Transnet has resolved to develop a Top 20 Customer Satisfaction Dashboard for regular tracking of customer views in order to proactively respond, at senior levels, to issues as they arise.

The 2011 customer survey has highlighted Transnet’s need to:

  • Deliver consistently;
  • Provide integrated transport solutions;
  • Ensure on time availability of infrastructure; and
  • Provide fit-for-purpose efficient services.

This resolve is embedded in the MDS.

Port Elizabeth Car Terminal
Port Elizabeth Car Terminal

Iron ore train  
  Iron ore line expansion stakeholder engagement

The iron ore line expansion project, a joint initiative of Transnet and its iron ore mining customers, now in an advanced feasibility study phase, will increase the capacity of the Sishen-Saldanha export corridor from 60mtpa to 90mtpa through rail and port infrastructure upgrades. Stakeholder engagement was identified as a priority workstream for project planning and risk mitigation in the feasibility phase, particularly given the sensitivity of stakeholders and the natural environment.

The stakeholder process began in October 2011, broadly divided into port and rail components. The port engagement involved stakeholders from the Port of Saldanha Bay and surrounding areas of Langebaan and Vredenburg. The rail stakeholders were from towns along the West Coast and in the Northern Cape situated adjacent to the railway line. The objectives included: to inform stakeholders on the background and purpose of the project, engage on the project process to be followed, engage on various development options, and to build sustainable relationships.


Key issues raised by port stakeholders included: dust, no development in Big Bay, trust that can be placed in Transnet and the mining houses, and benefits to be accrued to local communities.

Key issues raised by rail stakeholders included: noise and vibration, veld fires, community safety, wetlands protection, and trust that can be placed in Transnet and the mining houses.

Through well attended and animated community forums held between October 2011 and February 2012, a number of ‘wins’ were identified and a good foundation of trust was built on which to proceed. Transnet however, acknowledges that this foundation will be eroded if concerted efforts to address issues of concern in a structured way are not implemented. The outcomes are the following:

  • CSI will be initiated by Transnet and the mining companies in Saldanha and along the railway line;
  • Ongoing communication will be held with stakeholders throughout the project;
  • Ongoing stakeholder engagement will include a grievance mechanism;
  • Transnet and the mining companies will take specific steps to identify opportunities for local economic benefits and skills training;
  • The ‘real’ issues will be specifically addressed – dust, veld fires, safety, local benefits; and
  • The project will be designed to integrate sustainability issues throughout.
Iron ore train    

  Employee Retirement Provisions

The Transnet Retirement Fund (the Fund) is an independent legal entity established in terms of the Transnet Pension Fund Amendment Act No 41 of 2000 and is managed and governed by a Board of Trustees. The administrator of the Fund is Metropolitan Retirement Administrators. The Fund is a daily unitised defined contribution arrangement offering member choice - investment risks are carried by the members of the Fund and not the participating employers. The value of the benefits that ultimately accrues to members is determined by the accumulation of contributions directed towards retirement funding, together with investment returns, net of taxes and on-going investment management charges. The Fund provides retirement, death and withdrawal benefits for employees of the participating employers on their retirement or upon termination of service for other reasons, as well as benefits for the dependents of members in the event of their death. Members contribute at a rate of 7,5% of each member’s pensionable salary matched by the participating employers’ contributions of 7,5% of each member’s pensionable salary. In addition, participating employers contribute 4,5% of each member’s pensionable salary. These contributions are used to Fund risk premiums, administration costs and other fund expenses. The Fund offers a number of distinct investment portfolios that offer superior risk and return characteristics relative to inflation, which are appropriate for members with different time horizons to retirement. The number of members in the Fund at 31 March 2012 was 62 326 (2010/11: 60 314).

Transnet Second Defined Benefit Fund

The Transnet Second Defined Benefit Fund (TSDBF) is a closed fund of pensioners with no new members entering. This poses significant challenges to ensuring sustainable benefits for these members. The Board of Trustees of the TSDBF have had extensive engagements with members, Transnet and Parliament in recent years in order to ensure that members receive optimum benefits from available funds.

  LOOKING AHEAD

Transnet’s social dividends are being further enhanced in 2012/13 by:

Accelerated diligence on governance, risk management, compliance, and fraud and corruption prevention for MDS implementation.

Improved EE, particularly for women and PWDs.

Heightened safety efforts to achieve zero fatalities.

Level 3 B-BBEE rating in 2012/13 to achieve Level 1 by 2016/17.

Roll-out of Phelophepa II community health care train facility.

Measurable success in Transnet Foundation’s teacher development programme.

Tracking of stakeholder engagements across Transnet.