1. Annual Report 2006 Presentation to Portfolio Committee on Public Enterprises October 10 2006

2. 2 Contents of presentation Strategy confirmation and structure Strategy implementation Financial results 2005/2006 Discontinued operations Pension fund update Post-balance sheet events Conclusion and questions

3. 3 Strategy confirmation and structure

4. 4 Strategy confirmation and structure Non-core portfolio TRANSNET COMPANY Strategy Structure Enabling economic growth Focused freight transport company Delivering effective and competitive services Spoornet RAIL Transwerk PORTS National Port Authority SA Port operations Petronet PIPELINE Operational divisions (continued businesses) SAA Viamax V & A (26%) Autopax Metrorail freight dynamics Equity Aviation VAE Perway Discontinued businesses Other to be sold Propnet – non-core portfolio Housing assets SA Express “C” class preference share

5. 5 Strategy: Four-point turnaround plan 4-Point turnaround plan Corporate governance and risk management Shareholders compact Memo and articles of association IFRS Legal review EWRMF Human capital development Skills audit and matching Recruitment and retention Skills and training Performance management Career management Succession planning Balance sheet restructuring Pension fund deficit Transfer SAA to government Disposal of non-core businesses Redirect & re-engineer the business Re-engineer core business Corporate HO restructure Operational synergies Customer focus Infrastructure development Lower cost of doing business Targeted sectors Economic development

6. 6 Strategy implementation: Progress made Redirect and re-engineer the business Balance sheet restructuring Corporate governance and risk management Corporate governance and risk management Human capital development Progress summary –Major re-engineering program – “Vulindlela” underway –Commenced with roll out of R64,5 billion investment plan –Disposal of non-core assets –Established governance structures and risk programmes implemented –Comprehensive HR strategy Progress summary –Major re-engineering program – “Vulindlela” underway –Commenced with roll out of R64,5 billion investment plan –Disposal of non-core assets –Established governance structures and risk programmes implemented –Comprehensive HR strategy

7. 7 Strategy implementation (continued) Restructuring the balance sheet Exit of non-core assets –PFMA approval obtained for the disposal of non-core assets –Businesses sold BusinessBuyerEffective dateSale price SAA Government (DPE) 31 March 2006 subject to fulfillment of suspensive conditions R2 billion (no cash flow) Metrorail SARCC (Dept of Transport) 1 May 2006: Effective date 20 December 2005: Risk and rewardR1,00 (cash) Transtel: Full service network (Metro fibre and electronic assets) SNO (Neotel) 3 May 2006 R256 million (equity) V&A Waterfront L&R Consortium18 September 2006R7.04 billion (cash) Sale process started Viamax, freightdynamics, TPFA, Equity Aviation, VAE Perway, Non-core Property Future Plan Sale of Housing Assets, SA Express, Autopax, “C” class preference share

8. 8 SAA (suspensive conditions) PFMA approval International air services council approval Air services licensing council approval Third party contractor approval Listing of SAA as schedule 2 public entity in terms of the PFMA Passing of special resolution by Transnet –Amendment of Articles of Association –Share buy back

9. 9 V&A Waterfront sale Sold to L&R Consortium for R7.04 billion (cash) Black & Cape-based investors hold 23.1% 2% set aside for V&A black staff Winner selected from 9 short-listed bidders Selection based on: - Price 85 points - BEE 10 points - Employee retention 5 points

10. 10 V&A sale (what it means) L&R committed to: further development; more investment & jobs in the Waterfront L&R pledged to guarantee existing jobs for at least two years Process regarded as “fair and reasonable” by KPMG, independent process advisers Process outcome welcomed by unsuccessful bidders as being good for SA Sale subject to Reserve Bank and Competition authority approval

11. 11 Viamax, freightdynamics & TPFA Following businesses are on the market – RFPs are underway –Viamax - to be completed end-October 2006 –freightdynamics - list of recommended bidders approved –TPFA – data rooms are being created

12. 12 Strategy implementation (HR) The successful implementation of Transnet’s turnaround strategy lies fundamentally in creating a work environment where our people can excel Human capital strategy Completed redesign and staffing of corporate centre Introduced a talent management programme Begun capacity building exercise for operational requirements and skills demand study for medium term Introduced a new reward and performance management system and the roll out has begun Introduced a leadership development programme Redefined partnership with labour for the transformation of Transnet

13. 13 Strategy implementation (HR) Transnet supports all transformation instruments of Government Transformation is a business imperative We are committed to implementing the initiatives of EE & BBBEE Acts Transnet submitted their EE Reports to the Department of Labour for the 2005 Reporting Period as required DoL acknowledged receipt of the 2005 reports, and provided feedback to the business units by indicating their overall score- card rating as well as progress made to date on EE targets Transnet has copies of the reports submitted, and the acknowledgment of receipts

14. 14 Strategy implementation (EE) Transnet complied with the EE Act and its regulations when it submitted its reports (in the 2005 reporting year there was no requirement for a consolidated EE report for the group – this has only been introduced for the 2006 reporting year) Transnet has made significant progress in achieving equitable representation across its divisions EE is a strategic initiative driven by the Transnet EXCO and is intimately aligned with the organisational transformation process

15. 15 HR (EE) EEA2 Reports as @ Jun 06MaleFemaleTotal AfricanColouredIndianWhiteAfricanColouredIndianWhiteTotal Transnet Top & Sen Management (101-106)10426461245441432404 Professionals (108-109)147427031091252238745 Skilled Technical (610)626208182150733789561313136 Semi Skilled15778735699263423444620236123035998 Unskilled6518645301163077013134783348116

16. 16 African 56.96% White 20.71% Coloured 18.88% Indian 3.45% Male 85.56% Female 14.44% Note: Data is for Transnet’s Core Business Units, NPA, Spoornet, Petronet, Protekon, Transwerk, Corporate Centre, Transnet Foundation, Esselenpark and Transtel SS 0.22% of Employees at Transnet are living with a disability Note: Data is for Transnet’s Core Business Units, NPA, Spoornet, Petronet, Protekon, Transwerk, Corporate Centre, Transnet Foundation, Esselenpark and Transtel SS Note: Data is for Transnet’s Core Business Units, NPA, Spoornet, Petronet, Protekon, Transwerk, Corporate Centre, Transnet Foundation, Esselenpark What does Transnet look like? Current EE representation – June 06 Profile of Transnet Employees June 2006 (n=48116) 22.5% of females are White

17. 17 78.97% of Semi skilled employees 47.77 % of Skilled Technical Employees (610) 53.29% of Professionals (108-109) 61.39% of Top & Senior Mngt (101-106) 96.81% of Unskilled employees 38.61% 46.71% 52.23% 21.03% 3.19% Female Employees at Transnet Black Employees at Transnet Transnet Representation for Black and Female Employees How do our Core BU’s look like? Note: Data is for Transnet’s Core Business Units, NPA, Spoornet, Petronet, Protekon, Transwerk, Corporate Centre, Transnet Foundation, Esselenpark and Transtel SS Note: Black is the collective term for African, Coloured and Indian employees Note: Data is for Transnet’s Core Business Units: NPA, Spoornet, Petronet, Sapo, Protekon, Transwerk, Corporate Centre, Transnet Foundation, Esselenpark Note: Black is the collective term for African, Coloured and Indian employees

18. 18 Transnet Preferential Procurement PROCUREMENTAVAILABLETOTAL SMME TOTAL DIVISIONSPEND "DISCRETIONAR Y"PROCUREDWBE%DPBE%(all races)%BEE SPENDVALUE WBEVALUEDPBEVALUESMMEVALUE% 1 SPOORNE T R 1,533,280,000.001,533,280,000.00 4,095,640,000.0 054,220.000%13,390.000%728,370.000%R 805,000,000.0053% 2 NPA R 2,455,200,000.002,755,000,000 2,455,200,000.0 0N/A **unav ailable R1,178,496,000.0048% 3 SAPO 611,224,004 901,993,000.00 24,687,0448.00% 1,086,0010% **unavailab le R 309,294,675.0051% 4 PETRONE TR 153,168,854.29153,168,854.29 1,077,406,157.0 0**unavailable R 51,905,942.8334% 5 TRANSW ERK R 2,316,000,000.00N/A 2,316,000,000.0 059,000,000N/A415,000 **unavailab le R 714,000,000.0031% 6 PROTEKO N R 590,814,000.00R 590,814,000.0 976,243,000.00 R 184,350,000.0031% TOTALS R 7,659,686,858.35 643 486 858.29 11,822,482,157. 0R 83,741,264.03.00%R 1,514,391.00.05% R 728,370.048.00% R 3,243,046,617.8342% (1,3,5,only) (1,3,6 only)(1 only) (All) 83741264 / 2760474872.8= 3% 1514391/2760474872.8 = 0.05% Based on 1 only = 48%, otherwise 3243046617.83/ 7659686858.3=42% Not all Units were able to report on WBE, DPBE and SMME due to different Financial Systems being used. Efforts will be made to enable split reporting in future “Discretionary Spend" fluctuates due to budgetary considerations / available spend and types of "BEE-able" commodities / services procured, etc.

19. 19 Strategy implementation Corporate governance and risk management Shareholder compact completed and approved by Board awaiting approval from Shareholder Revised articles of association approved by Board awaiting Shareholder approval Litigation and material contracts due diligence completed Enterprise Wide Risk Management Framework completed –Key risks identified and monitored for each operating division –Internal audit (outsourced) now fully functional focusing on Control environment /compliance reviews Transaction audit (a comprehensive payroll audit completed) Assessment of major projects and special investigations –Developed and completed a fraud prevention plan, core values, ethics statements and contracts for all employees

20. 20 Transwerk R2,6 billion Equipment Capex spending five-year plan Planned spending over next five years (core businesses): R64,5 billion Petronet R4,9 billion Multi-product pipeline DJP (R4,2 billion) Gas line upgrading (R0,4 billion Sapo R6,3 billion Mainly capacity increases Durban (R1,5 billion) Richards Bay (R1,0 billion) Ngqura (R1,2 million) Cape Town (R0,9 billion) Saldanha (R0,6 billion) NPA R18,6 billion Upgrade and expansion Durban (R8,7 billion) Cape Town (R3,9 billion) Ngqura (R2,5 billion) Richards Bay (R1,4 billion) Spoornet R31,5 billion Coal line (R8 billion ) Ore line (R2,7 billion ) General freight (R10,8 billion ) Maintenance capitalisation (R8,1 billion)

21. 21 Transnet core businesses five years gross capital investment budget Financial years

22. 22 Salient features: 2006 Results 2006: Continuing operations 2006 R million % change Turnover 26 346+7 Operating profit 8 478+57 Operating margin % (before impairments) 32,2+51 Capital and reserves 27 706+31 Cash generated from operations 11 233 28 Gearing % 47,1-24 ACHIEVING PERFORMANCE OBJECTIVES

23. 23 Financial Results 2006

24. 24 Financial results 2006 for the year ended 31 March 2006 % change 2006 R million 2005 R million Turnover726 34624 706 Notional revenue on embedded derivatives14554 Net operating expenses excluding impairments(10) (17 882)(19 846) Profit from operations before net finance costs and impairments 578 4785 414 Impairment of assets and fair value adjustments3184 023 Profit from operations before net finance costs8 7969 437 Net finance cost14(2 395)(2 107) Taxation25(1 978)(1 582) Income from associates3362 Profit for the year from continuing operations4 4565 810 Profit from discontinued operations115754 Net profit for the year4 5716 564 Operating margin %32,221,4 Consolidated income statement

25. 25 Transnet operating profit margin (after impairment before fair value adjustment) HIGHEST MARGIN IN LAST SEVEN YEARS Transnet Group (Including discontinued operations) Average previous 6 years = 5,8%

26. 26 Performance measures against budget Total TransnetSpoornetNPASAPOPetronet Operating margin Operating margin – Actual (%)28.511.868.725.456.4 Operating margin – Budget (%)26.19.765.728.153.5 Revenue Growth* Tariff - Actual3.43.81.74.23.1 Volume - Actual3.00.79.35.10.7 Total Actual Revenue Growth*6.54.511.09.33.8 Tariff - Budget2.61.81.75.74.5 Volume - Budget5.54.79.05.33.2 Total Budget Revenue Growth *8.26.610.911.37.8 Infrastructure investment % of capital expenditure spent (%)100.7147.2**45.386.765.1 Gearing* Gearing – Actual (%)47 Gearing – Budget (%)59 Cash flow return on investment* Actual (%)5.8 Revised budget (%)4.1 * Continuing operations **Includes an amount of R681m relating to capitalised maintenance

27. 27 Operating profit Spoornet performance 2006 versus 2005 Financial Turnover increased by 4% to R14,4 billion Capex spending R3 809 million in 2005/2006 and R31,5 billion over the next five years Operational Total volumes transported increased by 0,5% to 182mt Iron-ore line volumes achieved: 29,6mt (increase of 5% over 2004/2005) Coal line volumes transported was 68,7mt (increase of 2,7% over 2004/2005) General freight volumes decreased by 2,7% to 83,8mt over the year 121% * Includes a net amount of R681m for capitalisation of maintenance under IFRS *

28. 28 NPA performance 2006 versus 2005 Financial Turnover increased by 11% to R5,5 billion Capex spending R783 million in 2005/2006 and R18,6 billion over the next five years Operational Bulk volumes increase 6% due to increased demand for coal, iron-ore (China) and other commodities Full container imports grew 9% while exports did not reflect growth due to currency strength, competition and quality issues All ports were accredited as being ISPS code compliant 19%

29. 29 SAPO performance 2006 versus 2005 Financial Turnover increased by 9% to R3,6 billion Capex spending R776 million in 2005/2006 and R6,3 billion over the next five years Operational Container volumes increased by 7% and is expected to further increase by 8% in 2005/2006 Breakbulk volumes dropped 5% due to competition and the trend towards containerisation Volumes in automotive sector reflected strong growth due to the rand’s stability and local manufactures securing export contracts A record 28,8mt was exported through the Saldanha iron-ore terminal 4%

30. 30 Petronet performance 2006 versus 2005 Financial Turnover increased by 4% to R1,1 billion Capex spending R224 million in 2005/2006 and R4,9 billion over the next five years Operational Petronet successfully complied with the “clean fuels” requirements in January 2006 ‘De-bottlenecking’ project became operational in October 2005 resulting in an 18% improvement on the constraints Existing refined products pipeline (DJP) is running at close to capacity while crude line feeding Natref is operating at 75% 31%

31. 31 Transwerk performance 2006 versus 2005 Financial Turnover increased by 28% to R3,8 billion Capex spending R189 million in 2005/2006 and R2,6 billion over the next five years Operational Output achieved during the year which entails refurbishing, upgrading, building and modifying –7 213 wagons –316 locomotives –550 coaches –2 113 traction motors –62 830 wheel pairs 46%

32. 32 SAA: Financial performance 2006 versus previous two-years: three-year view TurnoverOperating profit 12,6%

33. 33 Financial results 2006 at 31 March 2006 R million 2005 R million ASSETS Non-current assets49 13159 442 PPE and other47 11256 725 Long-term loans and advances2 0192 717 Current assets28 20217 609 Inventories, receivable assets and cash7 58813 700 Derivative financial assets3 8743 909 Assets classified as held for sale16 740– TOTAL ASSETS77 33377 051 Consolidated balance sheet

34. 34 Financial results 2006 (continued) at 31 March 2006 R million 2005 R million EQUITY AND LIABILITIES Capital and reserves27 70621 106 Non-current liabilities22 99630 717 Borrowings and provisions17 72423 421 Post-retirement benefit obligations4 3487 238 Deferred taxation92458 Non-current liabilities26 63125 228 Payables and other13 69925 288 Liabilities classified as held for sale12 932– TOTAL EQUITY AND LIABILITIES77 33377 051 RATIO’S Gearing (%)4762 Return on total assets (%)11,07,0 Consolidated balance sheet (continued)

35. 35 IFRS: Impact on 2004/2005 for the year ended 31 March 2005R million BALANCE SHEET PPE deemed cost (land and buildings)4 183 Other(65) INCOME STATEMENT Mainly depreciation(98) Financial statement prepared under IFRS with effect from 1 April 2004

36. 36 Retirement benefit obligations Retirement fund obligations 2006 R billion 2005 R billion Transnet Pension Fund (fully funded) Transnet Second Defined Benefit Fund (a)1,64,3 Post-retirement Medical Benefits (b) SATS pensioners1,6 Transnet employees0,8 Other0,30,5 Total4,37,2 Consolidated balance sheet (a)Restructuring and funding plan in progress (b)Funding monthly including Transnet subsidy Unfunded liabilities

37. 37 Financial results 2006 (continued) for the year ended 31 March 2006 Deviation %2006 R million 2005 R million Cash generated from operations (note 1) 11 11 23310 089 Cash flows from investing activities Capex - expand(1 745)(3 678) Capex - maintain(4 856)(1 963) (6 601)(5 641) Aviation adjustments–(1 849) (74)(6 601)(3 792) Cash flow from financing activities(4 001)2 437 Decrease in bank and cash(615)(2 018) Abridged consolidated cash flow statement Note 1: Effective 28% increase after adjustment for the decrease in SAA operational cash flow of R1,7 billion

38. 38 Funding requirements: Next five years Cash flow Adjusted Budget 2006/07 R billion Projections: Excluding non-core 2007/08 R billion 2008/09 R billion 2009/10 R billion 2010/11 R billion Gross capex spend(11.5)(15.3)(14.7)(12.0)(11.1) Cash available from operations Other investment 7.8 0.9 8.8 (0.8) 12.3 0.1 15.7 0.1 18.2 0.1 Cash (shortfall/surplus)(2.9)(7.3)(2.3)3.87.2 Loan redemptions(0.9)(1.1) * (8.6) (0.9)(4.7) Gross funding requirement(3.8)(8.4)(10.9)2.92.5 * Includes : Promissory Note R2bn and T004 R5.5bn

39. 39 Post-balance sheet events SAA – sale agreement signed Metrorail sale agreement signed Sale process launched for Viamax, TPFA and freightdynamics Second network operator (Neotel) – Telecommunications assets to be sold SAX – overall PFMA approval (conditions being discussed)

40. 40 Summary Sound financial performance for the year R64,5 billion investment program underway Vulindlela project underway that will deliver significant improvement in efficiencies, profitability, productivity, cost reductions and customer service Disposal of non-core entities has begun and will be complete by December 2006

41. 41 Conclusion Progress to date is pleasing but still significant challenges ahead The sustainability of the turnaround achieved to date and future improvements can only be achieved through relentlessly driving the implementation of the strategies Our optimism for the future is based on the commitment of management and staff to focus on priorities and work as a team to deliver WE THEREFORE MOVE INTO THE FUTURE WITH CONFIDENCE

42. Thank you