An introduction to Transnet 18 October 2004

Agenda Results Strategy Key stats on human resources

Financial results summary Turnover+6%to R43,6bn EBITDA-37%to R7,4bn Operating profit-96%to R187m Cash flow from operating activities-9%to R3,1bn Capital and reserves-49%to R8,9bn Total debt to equity increased to 7,1:1

Consolidated income statement 2004 R million 2003 R million Turnover Expenses(43 450)(36 190) Operating profit Finance costs(2 211)(2 637) Other income Fair value adjustments(4 529)(7 074) Minority interest and taxation(213)204 Loss after tax and minority interests(6 332)(421)

Key factors that impacted the income statement  SAA aircraft: R3,5bn  Transtel: R526m  Propnet: R134m  SAA hedge book: R4,5bn (2003: R5,3bn)  Embedded derivatives in two long term service contracts: R0.6bn  Continued weak global aviation sector  High cost structure  Significant increase reflects R1,5bn credit in 2003 from change in valuation basis AC128 asset impairments of R4,2bn (2003: R493m) AC133 fair value adjustment of R4,5bn (2003: R7,1bn) SAA operating loss of R0,3bn (2003: R0,5bn) Retirement funding expense of R1,7bn (2003: R347m)

Consolidated balance sheet 2004 R million 2003 R million % change Assets Non-current assets % Current assets % Total assets % Equity and reserves Shareholder’s equity (49%) Non-current liabilities % Current liabilities % Total equity and liabilities %

What impacted the balance sheet? Reported loss of R6,3bn AC133 fair value liability opening adjustment of R4bn –primarily service contract embedded derivatives Shareholder’s equity impacted by R14,2bn relating mainly to SAA’s hedge book, of which R4,5bn incurred in 2004 Hedge book closed out by 30 June 2004 at a cost of R5,9bn Increase in current liabilities driven by Interest bearing borrowings increased from R22,6bn to R27,8bn Recapitalisation of SAA by R6,1bn Borrowings Unfunded obligation of R7,6bn (2003: R7,2bn) relates mainly to Transnet’s Second Defined Benefit Fund Post-retirement benefits

Key factors for Transnet’s underperformance Unfocused conglomerate Disparate businesses Lack of synergies SAANet losses of R15bn over past 2 years People / Skills Need to align skills with changes required by new strategic direction Excessive head office structureBloated structure that costs R600m per annum Poor risk management Significant gaps in financial management procedures Hedge losses, embedded derivatives and pension fund deficits Corporate governancePoor regulatory compliance Resulting in congestion and service delays at ports and rail networks Outdated infrastructure

4-Point Turn-Around Plan 1.Redirect the business 2.Restructure the balance sheet 3.Implement and adopt strict corporate governance principles 4.Adhere to a vigilant risk management process

Strategy

Cape TownPort Elizabeth Durban Saldanha Richards Bay East London Maputo Sishen Beitbridge Gauteng There are significant shifts in the SA economy that warrant a closer examination of the supply chains necessary to support the economy. SA needs to reduce logistics costs by one third to sustain our competitiveness.

Aligning Strategic Focus with the Economy PE East London Maputo Richards Bay Durban Cape Town Coega Heavy Manufacturing zones Mining zones Micro-economic strategy: Support SA’s export-led growth strategy Reduce the cost of doing business SA’s economy: 1.Mining (6%) 49% 2.Manuf. (20%) 45% 3.Agriculture (4%) 6% Why Strategic corridors? Majority of export/ import traffic (excl. containers) is typically bulk and heavy manufacturing on rail Majority of road haulage is for domestic distribution To support the export strategy and economic growth for current key sectors, connectivity between inland transportation systems and ports are critical Create efficient export systems for growing sectors Freight Typology: Up to 70% of economy is bulk, heavy-haul, long distance and low to medium value traffic Production location of key sectors Transnet Strategic Direction Focus on Rail and Ports (Operations & Infrastructure) Focus on improving key corridors/ clusters Transnet Focus

The Role of Transnet Contribute to the sustainable economic development of South Africa by providing the best connected and efficient transport network run by world-class rail, pipeline and port operators

Transport Portfolio Pipeline Network Pipeline Operations Transnet Business Portfolio Rail Infrastructure Rail Operations Port Infrastructure Port Operations Holding Co Investment Portfolio Aviation Other Independent Regulators

Transnet into the future Transport Portfolio Transnet Infrastructure Transnet Operations Holding Co Rail Infrastructure NPA Rail Operations SAPO Pipeline Infrastructure Pipeline Operations

Operational integration with private sector (port and rail) Partnerships (local and global) established for growth Deliver the Mandate 2004/ /072005/06 Implement New Business Model Operational synergy between SAPO, NPA & Spoornet Restructured portfolio Operational efficiency Vertical separation Corporate office Restructuring Divestment Building a Solid Foundation Migration Path for Transnet Integrated, Inter-modal Transport Solution

Transnet Strategy Effective & Efficient National Logistics System Effective & Efficient National Logistics System Economic Growth Strategic Corridors Strategic Corridors Strategic Clusters Strategic Clusters Change Management Financial Strategy Freight Railways Ports Pipelines Vertical Separation Infrastructure Planning Head Office Restructuring Divestment Operational Synergies Vertical Separation Infrastructure Planning Head Office Restructuring Divestment Operational Synergies

Human resource stats

Overall Transnet Workforce

Race gender breakdown

Trained Employees per Occupational Category training and development is structured through our workplace skills plan, and based on company and individual needs As at 31 March 2004

Historical Picture CategoryLevelsActualTargetActualTargetActualTargetActualTargetActual Black Managers %70%61%70%65%70%67%75%73% %42%37%44%50%55% 60%55% %36% 37%40%44%43%52%44% Females %25%18%25%16%18%22%29%24% %20%15%21%26%30%23%33%23% %17%9%20%21%25%35%32%24% FemalesAt All levels13%15%9%15% 25%17%20%17% DisabilityAll levels0.8%1.5%1%2%1%2.0%1%2.0%1,5%

Challenges A restructured organisation Managing disability in the workplace Subtle diversity issues in regions Recruitment of females in senior management and technical positions

Thank you