1. Infrastructure & Operational Efficiency and Port Productivity Management in African Ports (South African Perspective) THE 7 TH PAPC CONFERENCE 2008 15 TH December 2008 DJIBOUTI

2. 1 3. Stakeholders objectives on efficiency and productivity of ports Next steps 1. Emerging story 4. Complementary port strategic objectives on efficiency and productivity 2. Developments that support efficiency and productivity management CONTENTS

3. 2 EMERGING STORY Market potential Past and future economic growth of South Africa is enabled by strong growth in containerised import/export gateway traffic through the South African Ports and railroads, presenting most promising growth opportunities for Transnet, that could amount to around 20 million TEU in 2038. In addition South African ports system faces an opportunity to attract additional coastal and transhipment business, building on steady growth of the Sub-Saharan economies as well as the South-South Trade lanes. These could potentially add between approximately 8 and 34 million TEU in 2038 with further transhipment potential from south-south interline volumes. The nature of the port productivity on commodities e.g. coal and iron ore has and it will remain a collaboration between the port system and the private sector regardless of the current economic condition Self and Competitor landscape Capturing these opportunities (market potential) is time-critical as current productivity levels are low couple with capacities are reaching their limits within the short-term future. In addition, competing ports in the region envision to establish themselves in the transhipment market, in partnership with global terminal operators Objectives and criteria for Operational Efficiencies In order to inform a decision on the future productivity improvement, the analyses done focused on two triggering criteria, (a) optimisation of the total logistic cost for the country, and (b) value creation for port users. These triggering criteria aggregate a multitude of input factors such as skilled personnel, measurable performance indicators, productivity management etc.

4. 3 $62m investment to increase capacity Plans to increase capacity to 1m TEU Walvis Bay (APM & Namport) R4.2m upgrade to expand capacity to 1.4m TEU Expected capacity of 4.5m TEU $130m investment on current port Zaire Uganda Gabon Kenya Equatorial Guinea Congo Rwanda Tanzania Mozambique Angola Zambia Burundi Malawi Madagascar Botswana Zimbabwe Namibia South Africa Lesotho Swaziland Tomasina Maputo (DPW &Grindrod) Durban (TPT) Ngqura (TPT) Cape Town (TPT) Luanda (APM) Dar-es-Saalam (HPH) Port Elizabeth (TPT) R1.2bn investment to increase capacity to 500 000 TEU Current plans to increase to 4.3m TEU $30 million investment in terminal modernisation 1m TEU by 2015 Building a new port at Dande Bay at double capacity Mombasa REGIONAL SCENARIO THAT SUPPORTS ELEMENTS OF OPERATIONAL EFFICIENCIES Source:Dynamar; press search; Mauritius Presentation; UNCTAD; www.ports.co.za A lot of these ports being operated by global operators who without doubt could bring strong operational efficiencies to the region ports Transnet would need to improve overall operating efficiency in order to effectively compete with these ports Global operators are willing to invest in African port expansions and could gain first mover advantage If other ports develop a hub part in the region, SA ports could be relegated to a feeder part status if there is no improvement in efficiencies Introduction of new players and prudent infrastructure investment could contribute to productivity level Mauritius

5. 4 Changing demand for freight New markets conditions (reliance on global supply chains). Tertiarization of the South African economy (gradual shift from manufacturing to services). Changing supply of freight Development of intermodal transportation systems. Integration of freight transport services (third party logistics). Higher level of supply chain management. Public policy Converging and diverging policies. Investment, zoning, security and safety regulation. Shift from a modal to multi-modal surface transportation policy. Increased environmental accountability. ELEMENTS OF CO-EXISTENCE WITH PORT PRODUCTIVITY MANAGEMENT

6. 5 Source: Efficiency and Port Producvity Management Cargo owners Minimise logistic cost Dispose of approximate capacity Investors Invest port infrastructure Maximise ROI Shipping lines Make calls at port with predictable services 3PL/freight forwarders Partner with T/Os on lowering cost structures Rail/trucking companies Collaborate with r port service providers with predictable service Private port terminal operators Improve productivity levels to serve the customer and meet regulations Transnet Reduce logistic cost for the country Be sustainably profitable Provide service that is satisfactory to customers Efficient transport action system serving identified corridors DOT Reduce cost of doing business DPE Positive social impact Community Reduce environmental damage Cities/local government Maximise workers, benefit Promotes jobs Trade union StakeholdersObjectives Stakeholders Overall economy Govern- ment Civil society Trans- porters/ logistics players MULTIPLICITY OF STAKEHOLDERS WITH DIFFERENT OBJECTIVES TO SUPPORT EFFICIENCY AND PORT PRODUCTIVITY MANAGEMENT Transnet Vulindlela Team 2007 Transnet National Ports Authority

7. 6 ANALYSIS OF THE MULTICRITERIA IMPORTANT ELEMENTS Criteria Attractiveness to operator NPV (Port) Possibilities to expand Capacity of connecting land infrastructure Attractiveness to community Network efficiency Road congestion Economic benefit (value added) Economic benefit (employment) Land use Visual intrusion Energy use Pollution (C0 2, NO x, SO 2 ) Complementary Port System NPV Total logistic cost Additional discriminating factors Attractiveness to lines Location/Centrality index (markets and routes) Draft Berth availability Port costs Service availability/reliability (incl.. Nautical services) Working hours Port reputation Speed of vessel turnaround Dock worker relationships Potential for a dedicated terminal Cargo volume Cargo profitability Import/export cargo balance Feeder connections Inland truck and train services

8. 7 Sustained infrastructure capacity provision, ahead of growth demands Integrated planning for port infrastructure Safe and secure world-class port system, preserving the environment Competitive and efficient port system that drives volume growth Growing, productive and committed workforce Initiatives currently underway to enable the safe, efficient and effective functioning of the productive port system 2009 - 2012 1. Improve vessel and cargo turnaround 2. Provision of Port Infrastructure ahead of demand 3. Improve productive use of assets 4. Increase the Market 5. Enterprise-wide Risk Management 6. Develop human capital and skills to achieve objectives Strategic Goals 2007/2008 STRATEGIC GOALS SUPPORTING EFFICIENCY AND PRODUCTIVITY INITAITVES

9. 8 I THANK YOU