Spoornet Strategy, Business Turnaround and Investment Plan 18 May 2005 Portfolio Committee on Public Enterprises
Strategic Intent A Freight Railway that satisfies the needs of our Customers Enabler of Economic Growth Facilitates Trade Growth by increasing South Africa’s competitiveness Reduces the cost of doing business by transferring traffic from road to rail Develop Skills
Strategic Direction Strategic Rail Track Map 2010 Desired Future SPOORNET 2005 Current State of SPOORNET Stabilise the Business Improve Operational Efficiency & Customer Service Improve Business Performance Volume & Market Share Growth Sustainable Business Position in Rail Industry Separate Infrastructure & Operations Regain Credibility Strategic Investment Divestment of Non-Core Non-Freight Business Activities
Major Business Turnaround Network Extensive and complex export lines, main lines and feeder lines Shrunk network focussed on core corridors Volumes 88mv General Freight 75mv Coal 32mv Iron Ore 160mv General Freight 86mv Coal 41mv Iron Ore Revenue R14 billion R35 billion Operating Margin Declining margins 6.2% Vastly improved margins Return on Net Assets Extensive assets with low returns 0.0% Shrunk asset base, focussed investment with improved returns Return on Equity Poor returns 0.1% Improved returns and shareholder value creation 11.5% Spoornet NowSpoornet in 2010
Strategy Wheel Freight railway that satisfies the needs of our Customers Leadership & Employee Capability Development Skills Profile Audit Training Strategy – Feeder Channel Core technical and operational skills Change Leadership Customer Service Orientation Embed Structures Retention Strategy Output based remuneration Increase volumes & Customer Satisfaction Meet & exceed Customer demands Joint planning with customers Corridor Optimisation Projects Collaboration Projects Customer Segmentation Value Propositions for Commodities, Clusters & Corridors Customer Care Centre Market Capture Strategy Clear strategic direction Business Planning & performance management World-class brand Significant cost reduction and new pricing model Divestment & Private Sector Participation Risk Management & Corporate Governance Procurement & BEE Capacity expansion to precede future demand Fleet Plan – Standardisation, reliability & availability of rolling stock Right technology & methods of working Rail Operators licence & Rail Safety Management System Safe working & operating environment Scheduled Railway Optimising & Stabilising Train Plan Standard operating practices & processes Comprehensive cross-functional Operations Plan
Market Plan Commodity Flows and Road–Rail Share Projected Growth 2003 to % RoadRailRoadRail 73%27%73%27% Dominant Commodities Maize Processed foods Coal Includes Gauteng-Polokwane& Gauteng-Beitbridge Projected Growth 2003 to % RoadRailRoadRail 90%10%90%10% Dominant Commodities Processed foods Chemicals & Fertilizer minerals Gold & Uranium Maputo Beitbridge Gauteng Lobatse WalvisBay Cape Town Port Elizabeth Durban East London Projected Growth 2003 to 2020:38% RoadRailRoadRail 82%18%82%18% Domestic Export/Import Domestic Export/Import 84%16%84%16% Dominant Commodities Stone Quarrying Limestone Processed foods Fuel & Petroleum products 2003 corridor stats: Projected Growth 2003 to 2020:31% RoadRailRoadRail 91%9%91%9% Domestic Export/Import Domestic Export/Import 90%10%90%10% Dominant Commodities Processed foods Maize Chemicals Wood and wood products 2003 corridor stats: Projected Growth 2003 to 2020 :39% 2003 corridor stats: RoadRail 92%8%92%8% DomesticExport/Import 90%10%90%10% Dominant Commodities Processed Food Maize Chemicals Iron Steel andferro-alloys Railway equipment Motor Vehicles Projected Growth 2003 to % RoadRailRoadRail 77%23%77%23% Dominant Commodities Maize Fuel & petroleum products Projected Growth 2003 to 2020: 40% RoadRailRoadRail 85%15%85%15% Domestic Export/Import Domestic Export/Import 90%10%90%10% Dominant Commodities Processed foods Coal Chemicals Beverages Fruit produce 2003 corridor stats: 53 (57) 19 (15) 17 (12) 3 (6) 5 (9)
Resource and Investment Plan Iron Ore Export Line 04/0505/0606/0707/0808/0909/10 Demand (Mv) Locomotive Requirements Wagon Requirements Locomotives (9E, Diesels and New) And Wagons
Resource and Investment Plan Coal Export Line 04/0505/0606/0707/0808/0909/10 Demand (Mv) Locomotive Requirements Wagon Requirements Locomotives (11E, 7E, 10E, Diesels And New) And Wagons
Resource and Investment Plan General Freight Lines 04/0505/0606/0707/0808/0909/10 Demand (Mv) Locomotive Requirements Wagon Requirements
Resource and Investment Plan General Freight Lines *This figure is based on demand of 110Mv. The impact of the increase to 160Mv is currently being analysed
Thank you “One Team One Vision”