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Engineering 2018

Highlights• Revenue increased by 19,9% to R11,3 billion (2017: R9,4 billion).• EBITDA, after the impact of incentives, improved by more than

70% from a loss of R457 million in 2017 to R139 million in 2018.• Transnet Engineering exceeded the Shareholder’s Compact

targets as summarised below:

Target ActualKey performance indicator 2018 2018

Volume lost due to traction 7% 0,1%

Train delays due to traction 40 minutes 3,2 minutes

Train cancellations 6% 2,3%

Business overviewTransnet Engineering (Engineering) is an advanced manufacturing division of Transnet SOC Ltd, with a rich and proud heritage spanning more than 150 years. Over this period, Engineering established extensive capabilities for the research, design, testing, manufacture, remanufacturing, maintenance and services of railway rolling stock, including locomotives, freight wagons, passenger coaches and ports equipment.

With more 11 600 employees countrywide, 143 depots and six main factories, Engineering is ideally positioned to serve its key customers locally and globally. Through its Vision 2021, Engineering aims to be the preferred brand in rail and related engineering solutions in Africa and across the world. This entails strategic imperatives of becoming:• A preferred maintenance, remanufacturing and overhaul

partner for rail and related equipment on the continent;• An original equipment manufacturer (OEM) of world-class

rolling stock and logistics equipment;• A leading enterprise in driving economic development and

growth in sub-Saharan Africa; and• A Centre of Excellence for technical and engineering skills

development in Africa.

Internally, Engineering continues to focus on improving operational efficiencies and a safe working environment through various interventions such as continuous improvement and process automation.

Engineering will continue to forge and strengthen partnerships with OEMs, with the aim being to enhance the existing skills and know-how and to create new market opportunities.

As Transnet transitions from the Market Demand Strategy to the Transnet 4.0 Strategy, Engineering continues to invest heavily on its research and development (R&D) initiatives to ensure that it has cutting-edge technologies and capabilities to deliver world-class products and services.

Skills, enterprise, rural and supplier development continue to be focus areas of Engineering, with particular attention given to the most disadvantaged sectors of our society, youth and women. Over the years, this Operating Division has identified and implemented specific programmes to address the challenges of women and the youth, in line with key developmental objectives outlined in the National Development Plan.

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Transnet Corporate CentreJohannesburg

Durban

East London

Port Elizabeth

Mossel Bay George Knysna

Oudshoorn

TouwsrivierKalbaskraal

DalJosafat

Worcster

Malmesbury

Klawer Calvinia

Liebendal

Copperton

Beaufort West

Klipplaat

Avontuur Patensie

Uitenhage New Brighton Port Alfred

Alicdale

BeaufortFort

Blaney

Stormberg

Sterkstroom

Queenstown

Stutterheim

Umtata

Maclear

Burgersdorp

Dreunberg

Barkly East

Aliwal NorthSpringfontein

De Aar

BelmontKoffiefontein

Bloemfontein

SannasposMaseru

Kokstad

HardingPort Shepstone

Richmond

Franklin

UnderburgCato Ridge Stanger

Pietermaritzburg

GreytownCedaraEstcourt

LadysmithDanskraal

Vryheid

GolelaPiet RetiefDundee

Newcaslte

VolksrustErmelo

HarrismithBethlehem

Gunhill

KroonstadMakwassie

OrkneySasolburg

VereenigingKlerksdorpOttosdal

Warrenton

Pudimoe

VryburgVermaas Welverdiend

Coligny

KrugersdorpLichtenburg

Mafikeng

MacmullinsMagaliesburg

Pendoring

Rustenburg

Northam

Thabazimbi

Ellisras

Musina

Beit Bridge

Pienaarsrivier

Pretoria North Pyramid South

Roossenekal

RaytonPretoria

MaydaleBethal

DelmasOgies

Komatipoort

KaapmuidenNelspruit

GraskopSteelpoort

BelfastWitbak

Marble Hall Hoedspruit

Phalaborwa

Tzaneen

SoekmekaarMakhado

Polokwane

Naboomspruit

Nylstroom

SentrarandTrichardt

EmpangeniBergvilleMarseillies

Theunisen

Kimberley

Posmasburg

Sishen

Erts

Hotzal

Boksputs

Prieska

Kakamas

Upington

Nakop

Cookhouse

Cradock

Rosmead

Noupoort

Hutchinson

Somerset East

Bredasdorp

Cape Town

Atlantis

Kraaifontein

BellvilleCaledon

Saldanha Bay

Richards Bay

Machadodorp

Bitterfontein

Johannesburg

Northcor

Capecor

Southcor

Natalcor

R. Baycor

N. Westcor

Eastcor

N. Eastcor

Sishen-Saldanha

Sentracor

South East Cor

Westcor

Free State

Namibia

Central Region

Eastern Region

Western Region

Transnet Engineering factories

EngineeringKoedoespoort, Germiston, Bloemfontein, Durban, Uitenhage, Salt River

Figure 1: Transnet Engineering’s geographic spread

Regulatory environmentRegulatory universeEngineering currently adheres to compliance with approximately 70 legislations, various applicable regulations and supervisory requirements. These legislations impose strict engineering, governance, health and safety, environmental, labour and procurement compliance obligations and requirements. The legislations include the National Safety Regulator Act, No 14 of 2002 (as amended by Act 69 of 2008), which provides for the establishment of a Railway Safety Regulator whose mandate is to issue operating licences and oversee safety in the railway industry. Like other rail operators, Transnet complies with stringent application requirements of annual safety permits, which include the establishment and maintenance of the Safety Management System.

Rail Safety Bill, 2016The Department of Transport (DOT)published the new Rail Safety Bill in 2016, which intends to bring substantial changes to the rail industry. These include giving powers to the inspector to search any premises, arrest any person and seize documents without a search warrant; multiple safety permits and licences; licensing of safety critical grades; and major changes on rail occurrence investigations. Transnet Engineering’s Compliance and Regulatory Affairs is part of the Transnet team that has been attending the

DOT ’s engagement workshops on the Bill where agreements have been reached on some of the contentious issues and changes which will be reflected in the final Act.

Broad-Based Black Economic Empowerment (B-BBEE) 2016 and 2017 draft codesEngineering also complies with the Broad-Based Black Economic Empowerment Act, No 53 of 2003 (as amended) and its applicable codes. The Department of Trade and Industry (DTI) has published the 2016 draft Transport Rail Sector Codes and the 2017 proposed amended Transport Rail Sector Codes. According to the Transnet Internal Audit B-BBEE review audit, both the 2016 and 2017 draft codes provide strict measures that will negatively impact Engineering’s current B-BBEE level status. However, Engineering has started implementing recommendations of the Mock Audit in that action plans and projects are being initiated to improve the scores on employment equity, skills development and enterprise and supplier development in case the codes are gazetted.

The African marketsTransnet Engineering’s Vision 2021 is an enabling framework to support its product and service expansion into the rest of Africa. To date, various memorandums of understanding have been signed with partner countries for advanced manufacturing solutions,

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thereby evidencing the growing interest in Transnet’s products and services. The Operating Division’s expansion into Africa requires an understanding of the various compliance regulatory requirements and risks in the countries where it will be operating. The expansion will require international compliance with international standards and laws, tax agreements, country-specific legislation, regulations and other supervisory requirements.

Accordingly, compliance analyses are being conducted in these countries to establish and mitigate potential risks to the successful penetration of these markets. The analyses are being conducted on trade restrictions, exchange controls, taxes, fines and penalties, statutory tariffs, import and export duties and investor-focused legislation, quality standards that need to be complied with during the manufacturing process and/or exportation of rail-related products, commissioning of service workshops and servicing of rail rolling stock.

Performance contextIn executing Vision 2021, Engineering continues to implement an operating model that allows it to become a preferred supplier of rolling stock engineering solutions for rail and ports equipment across the continent and globally.

In a move that entrenched Engineering as an independent OEM for freight wagons, the wagons business in four centres (i.e. Uitenhage, Durban, Germiston and Bloemfontein) were officially accredited by the Association of American Railroads with AAR5000 certification, the highest ranking quality standard in the world. This accreditation enables the Operating Division to compete qualitatively with other

OEMs worldwide. This milestone is the first of its kind in Africa and Engineering is proud to have been recognised and awarded this world-class certification.

A key highlight that further demonstrates Engineering’s commitment to OEM status and the development of rail and logistics solutions tailored for Africa was the successful launch in April 2017 of the TransAfrica Locomotive, a locally researched and designed locomotive.

Another highlight was the transaction in February 2018 through Transnet International Holdings to revitalise the National Railways of Zimbabwe and the Zambian Railways.

Operational performanceCore initiatives for 2018• Extend Engineering’s maintenance services to other Transnet

Operating Divisions to ensure that they leverage on the available technical knowledge embedded in Engineering.

• In order to provide an enhanced service to Transnet Freight Rail, maintenance depots will be aligned with the key Transnet channels as an enabler to achieve Transnet’s volumes.

• Engineering will focus on expanding its maintenance footprint in Africa by marketing its maintenance capability and forging closer collaboration with Transnet International Holdings.

• The continuous improvement team has identified a potential to reduce production inefficiencies within the manufacturing and maintenance operations.

Overview of key performance indicators

2017 2018 2018 2019Key performance area and indicator Unit of measure Actual Target Actual Target

Financial sustainability

EBITDA margin % 4,9 (5,3) (1,2) 0,9Operating profit margin % (9,5) (9,1) (9,5) (3,6)Gearing % 73,7 86,8 88,4 92,8Net debt to EBITDA times (32,6) (20,7) 45,9 110,2Return on average total assets % 6,6 (6,7) (0,9) (2,4)Asset turnover times 0,7 0,7 0,7 0,8Cash interest cover times (1,0) (0,6) (3,6) 2,6Total revenue R million 9 380 9 508 11 250 10 871

– External R million 1 622 2 962 2 467 4 065– Internal 7 758 6 546 8 783 6 806

Capacity creation and maintenance

Capital expenditure R million 945 860 275 748Planned maintenance R million 203 196 223 209

Operational excellence

Train cancellations due to traction % 5,0 6,0 3,4 6,0Net volume lost due to traction mt 7,0 7,0 2,3 7,0Traction delays % 6,5 40,0 12,7 40,0

Human capital

Training spend % of personnel cost (3,4) 1,4 2,6 1,4Employee turnover % 5,4 6,0 8,5 6,0Employee headcount permanent 11 731 10 310 10 838 10 962Revenue per employee R million 0,80 0,89 0,96 1,00

Transformation

Total blacks % 80,2 88 80,8 89Total females % 22 30 23 32Total people with disabilities % 1,4 3,1 1,6 3,2

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2017 2018 2018 2019Key performance area and indicator Unit of measure Actual Target Actual Target

Skills development

Apprentice trainees headcount 250 200 200 200Technician trainees headcount 43 30 87 30BEng trainees headcount 22 20 12 20Sector specific headcount 514 250 570 250Training spend % 3,6 (3,0) 2,57 3,0

Risk, safety and health

Cost of risk % of revenue 1,9 4,3 1,05 4,0DIFR rate 0,61 0,73 0,66 0,70

Regional integration

Africa sales revenue R million 227 1 250 254 1 979

Industrial capability building

R&D costs R million 185 267 147 300

Financial performance reviewYear ended Year ended

31 March 31 March2018 2017 %

Salient features R million R million change

Revenue 11 250 9 380 20

– Internal 8 783 7 758 13– External 2 467 1 622 52

Operating expenses (11 369) (9 837) 9,2

– Energy costs (231) (213) 8,5– Maintenance (223) (203) 9,9– Materials (4 398) (3 584) 22,7– Personnel costs (5 809) (5 033) 15,4– Other (728) (784) (7,1)

Profit from operations before depreciation, derecognition, amortisation , short-term incentives (STI) and items listed below (EBITDA) (139) (457) 69,6Depreciation, derecognition and amortisation (447) (437) 2,3Profit from operations before items listed below (586) 894 34,5Impairments and fair value adjustments (52) 2 (100)Net finance costs (1 116) (715) 56

Profit before taxation (1 754) (1 607) 9,1

Total assets (excluding CWIP) R million 18 687 15 289 22,2

Profitability measuresEBITDA margin1 % (1,2) (4,9) 3,7Operating margin2 % (9,5) (9,5) –Return on average total assets (excluding CWIP)3 % (2,4) (6,59) 4,2Asset turnover (excluding CWIP)4 times 0,60 0,69 (13)Capital investments5 R million 275 945 (70,9)

EmployeesNumber of employees (permanent) number 10 838 11 731 (8,2)Revenue per employee R million 1,04 0,80 30

1 EBITDA expressed as a percentage of revenue, excluding the impact of STI.2 Profit from operations before impairment of assets, fair value adjustments, net finance costs and taxation expressed as a percentage of revenue.3 Profit from operations before impairment of assets, fair value adjustments, net finance costs and taxation expressed as a percentage of average total assets,

excluding capital work-in-progress (CWIP).4 Revenue divided by average total assets, excluding CWIP.5 Actual capital expenditure (replacement plus expansion), excluding borrowing costs.

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Performance commentaryFinancial sustainabilityEngineering’s total revenue for the year is R11,3 billion, which is 19,9% higher than the R9,4 billion achieved in the prior year. Revenue from Freight Rail increased to R8,8 billion (2017: R7,8 billion). In spite of the deteriorating economic outlook, both in the country and in the rest of Africa , external revenue rose by 52% to R2,5 billion (2017: R1,6 billion).

The resultant EBITDA , after STI, reflected a loss of R139 million for the year (2017: loss of R457 million).

Looking ahead• Engineering expects to increase external revenue by 65% to

R4,1 billion (2017: R2,5 billion).• Engineering has a comprehensive Reshaping the Core Strategy

incorporating revenue and cost-saving interventions to enable the achievement of the 2019 EBITDA target.

Capacity creation and maintenance• Capital expenditure for the year was R273 million, 68% below

the budgeted R860 million due to project optimisation and savings.

• Maintenance (including financing) for the locomotive, wagon, RM wheels and plant, equipment and machinery maintenance included:

– Pure capital – R4,7 million – Rotables increase – R69 million

Looking ahead• Engineering will look to diversify its customer base in the

African market to optimise revenue from this market segment. External revenue as a percentage of total revenue is forecasted to increase from 17% in 2016 to 38% in 2019.

• Further develop the control tower app, a fleet monitoring application based on the Intelligent Real-time Information Services (IRIS) platform. The control tower app is the first in a suite of maintenance applications that Transnet will be deploying as it continues its path towards predictive maintenance of rolling stock assets.

• Engineering will conduct research into the concept of a smart wagon.

Market segment competitiveness• As an OEM of various wagons, Engineering continues to develop

and build various wagons fit for the African environment. The following products were developed in this past financial year: Jumbo Grain Wagon, Double Stack Container Wagon, Jumbo Timber Wagon and Manganese Lightweight Wagon.

• To continue its journey of becoming an OEM of locomotives, the TransAfrica Locomotive has been built and is undergoing various tests.

• Engineering has developed a standard gauge bogie to enter and compete in the standard gauge rolling stock market.

• Engineering is developing a traction motor for rugged African conditions.

• The Operating Division has formalised the design and development of the Transnet Port Hauler.

• Engineering has entered the manufacturing of ports handling equipment by partnering with international manufacturer to locally produce straddle carriers.

Looking ahead• Engineering will pursue the development of the multi-trailer

concept to improve port terminal efficiencies.• The design and development is under way of a standard gauge

bogie for passenger coaches to give Transnet a competitive edge in the standard gauge market.

• Engineering plans to research, design and develop locomotive propulsion and traction system technologies to further localise critical intellectual property for locomotive technology.

• The Operating Divison will research variable gauge bogie technologies and potential applications in the African rolling stock market.

• Engineering proposes researching and developing hybrid gas-power systems for locomotive applications to take advantage of the growing liquefied natural gas and Compressed Natural Gas gas market, and to further diversify Transnet’s product offering.

• Engineering is building the Baluleka coach which is a top line executive coach.

Operational excellenceEngineering will roll out a Locomotive Condition Monitoring System (LCMS), a breakthrough condition monitoring and field processing edge computer that allows for real-time processing and monitoring of locomotive data. This in-house designed product is already running in select Freight Rail locomotives and will be rolled out in 2018.

Looking ahead• Research and development of composite material applications

in rolling stock and other commodity-handling equipment.• Pursue the feasibility of a Dynamic Kinetic Energy Recovery

System application in the rail sector.• Roll out an advanced multi-model wagon build line (M Cubed) to

increase flexibility of the production line.

Human capital• Engineering achieved a permanent employee headcount of

10 838 against the 10 310 target.• Black employees represented 80,8 % of the total employee base

(target: 88%).• Female employees represented 23% of the total employee base

(target 30%).• People with disabilities represented 1,6% of the total employee

base (target 3,1%).

Organisational readiness

High-performance cultureEngineering’s drive to reduce costs and improve productivity and efficiencies has led to the adoption and implementation of the strategic flexible workforce model that will develop a workforce that is multi-skilled, flexible and responsive to market demand.

Skills development• Training spend as a percentage of labour costs: 2,57% has been

spent against the 3% target.• Artisan trainees: A total of 200 apprentices were recruited

against the target of 200.• Engineering trainees: In total, 12 full-time bursaries were issued

against the target of 20.• Technician trainees: Some 87 P1 and P2 students were recruited

against the target of 30.

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• Sector-specific training: 570 employees were trained against the target of 250.

• Employees trained against the Industrial Development Plan: 46,19% of employees against the target of 33%.

Health and safety• The Operating Division’s health and safety management system

complies with OHSAS 18001:2014 requirements and is certified. The system is integrated into occupational health and safety as well as the railway safety management system aligned to SANS 3000-1:2016.

• Engineering continues to perform better than the target year on year in terms of the disabling injury frequency rate (DIFR) performance. The performance for 2018 was 0,66, lower than the target of 0,73. There were no fatalities in the previous financial year. Some of the highlights are as follows:

– A total of 991 employees attended safety, health and environment (SHE) legal liability training across the country, focusing on senior and operational levels of management.

– As part of vehicle safety management, 1 250 sonic repeller devices were installed on vehicles that are a travelling where there is a risk of colliding with animals. These devices emit sound that can only be heard by animals.

– Engineering embarked on a project to conduct functional capacity assessments in order to determine the level of fitness required for an employee to perform a specific task based on their functional capability. Phase one of this project resulted in the completion of a functional capacity guideline. Going forward, the focus will be on implementation.

– Some 93 level C and D senior managers were subjected to executive medicals.

– The Confined Space Management Standard and Hazardous Chemical Management Standard were finalised.

– The e-Learning SHE induction was completed. – Completed capacity building and training on SANS 17020

requirements and Occupational Hygiene Legal Knowledge. – Commenced with the registration for Occupational

Technologists and Assistants. – Engineering completed designs for internal fall protection

solutions, i.e. Cantilever Swing Arm, Double Tier Platform and Fixed Single Tier Platform.

Governance and ethics

Transnet Engineering Governance ModelIn compliance with 2021 Vision, Engineering aims to secure annual revenue of R20 billion by March 2021, a sustainable EBITDA exceeding R2 billion and NPAT exceeding R1 billion. To support this endeavour a new Transnet Engineering Operating Model and Governance model have been developed and implemented.

The Transnet Engineering operating modelThe organisational structure that is based on the Transnet Engineering operating model has been developed and implemented. Engineering’s operating model speaks to how the organisation plans to do business with due consideration of new geographies, an untested competitive environment and significant expectations regarding foreign-based earnings.

Governance structuresProper governance structures with clear mandates in support of the current operating model and King IV Report have been established to provide strategic direction and monitor performance.

The Governance Structures Effectiveness Assessment is performed annually in terms of King IV and the Companies Act, No 71 of 2008.

Declaration of interestIn terms of section 75 of the Companies Act, all directors, prescribed officers and relevant employees of the Operating Division are required to disclose any personal financial interests to Transnet’s Board of Directors. Transnet’s Declaration of Interest, Related Parties’ Interest Policy and Declaration of Gifts Policy are meant to assist management in complying with this legislation.

More than 90% of Engineering’s employees at management level have declared their interest in the 2017/18 financial year as per Transnet Internal Audit’s report.

Delegation of authorityThe Chief Officer: Advanced Manufacturing has consistently been complying with the Transnet Delegation of Authority Framework by delegating to his Executive Committee members within 30 days, as stipulated in the framework.

Code of ethics and business conductEngineering is committed to instilling a culture of good ethics and to proactively identifying and addressing any fraud and corruption risks that may impact on the Market Demand Strategy. Fraud awareness training has been conducted in all the centres during the 2017/18 financial year; and all instances of fraud and corruption are being investigated and disciplinary actions meted out against all instances of wrongdoing. A Fraud and Corruption Strategy has been developed and implemented, and all cases are tracked by the Fraud Working Group.

Environmental stewardshipTransnet Engineering has managed to maintain its Environmental Management System ISO 14001 certification. The next surveillance audit, which will include the transition audit from 2004 to 2015 new standard, is planned for June 2018. Engineering has also started implementing the Transnet Integrated Management System procedures that were recently signed off as part of an integrated approach.

Waste managementWaste minimisation and recycling has progressed well in all the main centres, but at a slow pace. The appointed waste contractors have been managed to ensure they comply and assist the organisation to reduce the amount of waste that goes to landfill, ultimately reducing waste costs. Bloemfontein started the recycling initiative during the 2017/18 financial year and already realised a significant reduction of waste to landfill site. Germiston has widened its scope for recycling to cover some of its maintenance depots.

Energy-efficiency programmeEngineering commenced with the replacement of sodium lighting with energy-efficient lighting in Bloemfontein, and will continue in the new financial year.

There is a plan for the new financial year to:• implement solar lighting on perimeter fencing in all centres and

depots, but this will be depend on budget availability; and• upgrade old substation equipment to energy-efficient and safe

equipment.

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Water management• A desktop assessment on significant water users within

Engineering’s operations was concluded during the 2017/18 financial year. The remaining challenge is the existence of water meters in some areas. Best possible sustainable solutions such as rain water harvesting, recycling and reuse of water from other operational activities have been recommended. Implementation of some these solutions will be explored and executed in the 2018/19 financial year.

• Assessment for the installation of boreholes in water-stressed depots was concluded. Based on the outcomes, the Plant, Equipment and Machinery Maintenance Department has started implementing the project, with the Western Cape being a priority due to the water crisis.

• Engineering forms part of the recently formulated Western Cape water crisis team which will drive the implementation of water conservation initiatives in the province.

Pollution management• In an effort to deal with historic pollution, a service provider was

appointed to drill and install monitoring wells in areas that were previously identified as potentially contaminated. This exercise was completed in all six regions and reports were submitted to Engineering with recommendations.

• A total of 20 boreholes will be monitored at least twice a year for two years and seven boreholes at least once a year to determine whether there are any changes in the concentration of contaminants.

• The Germiston site where hydrocarbon pollution was previously discovered is being remediated. The clean-up process was unfortunately delayed due to more pollution being discovered and as a result of no funds being available. The funds have since been sourced and a new service provider has been appointed to conclude the remediation process.

• Remediation solutions are still being sought to deal with the buried asbestos in Koedoespoort.

Social accountabilityAt the heart of the Operating Division’s corporate social investment is the commitment to make conditions and life better for all communities, particularly those closest to our operations. We believe that well-structured, impactful social investment will contribute positively to nation building and drive positive change in the surrounding communities. We align our social development projects with national developmental imperatives, underpinned by a need to make a measurable impact through investment that empowers the nation to reach its social development and economic upliftment goals.

In line with Transnet’s philosophy, the Operating Division’s drive for social transformation finds expression in the empowerment and upliftment of those who are most vulnerable, especially those in areas of the greatest need.

Highlights for the reporting period include a donation of sanitary packs and toiletries to learners at Mason Lincoln Special School and Mzingezi High School in KwaZulu-Natal.

To maximise the impact of our community investment, Engineering only gets involved in the following areas of focus: education, employee volunteering, socio-economic infrastructure investment and health initiatives.

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The following table details Engineering’s top five risks and the key mitigation activities.

Key risks Mitigating activities

Poor competitiveness due to poor performance management and poor quality of rolling stock products leading to failures in achieving the strategic goals and objectives, and loss of market share and customers

• Finalise the Shared Services Operating Model with respect to support requirements of the customer-facing businesses

• Conduct the cost of poor quality management awareness through the screens pop-ups• Hold Exco accountable for implementing the Performance Management System in their

respective functional areas• Human Capital (HC) to train the extended Exco on the Performance Management System• Conduct poor performance management training to address the culture of accountability

for performance (levels B to G)• Conduct quality management awareness campaigns• Develop and roll out the quality management curriculum• Introduce the new operating model• Fill vacancies in the quality management structure• Develop the R&D Strategy in line with Engineering’s new operating model

Reliance on non-existent or privately owned intellectual property (i.e. locomotives, wagons and coaches) due to the misalignment between market intelligence and Product Development’s product planning needs or expectations (i.e. inadequate market intelligence driving the product development); and inadequate skills and knowledge regarding product development initiatives or innovations (i.e. re-active approach to the market) leading to poor analysis of product portfolio risk and inadequate understanding of the setting up

• Develop and roll out future Market Intelligence/Segmentation Roadmap to guide future product development innovations

• Hold regular workshops between Product Development and Business Development to determine information required, frequency and format of the market intelligence

• Benchmark with other external corporations (e.g. Denel) to leverage on their existing market intelligence capabilities and skills

• Manufacturing the first prototype of the TransAfrica Locomotive• Manufacture the second prototype of the TransAfrica Locomotive• Market, sell and manufacture Africa Wagons that have been designed and prototyped.• Revise Product Development’s process flow to meet the requirements of Engineering’s new

operating model• Develop and roll out Engineering’s Collaboration Strategy to partner with other suitable

service providers• Source the benchmarked methodology to consolidate the market intelligence into the

Research and Development Strategy

Lack of organisational market intelligence to inform the business concept feasibility and viability, which could potentially lead to poor investment decisions and penalties/fines

• Appoint four Regional Business Development Executives (SADC, West Africa, East Africa and North Africa/Middle East)

• Ensure deployment of resources in markets/countries with the greatest opportunities• Develop marketing operational plan for each country of focus• Find credible partners which will advance Engineering’s strategy in the target market

Volatile market conditions due to changes in the macroeconomic environment leading to a negative impact on revenue- generating contracts and thus not meeting set objectives and strategic targets

• Transform Engineering’s cost base from fixed to variable costs to respond better to market conditions

• Develop and roll out the Shared Services leg of Engineering’s new operating model

Inflexibility of Transnet’s supply chain management process

• Apply to the DTI for exclusions/exemptions/lowering the set requirements from the DTI in terms of legislation, including the long-term partnership with suppliers

• Workshop the long-term contracting processes• Obtain demand plan for work currently executed and for future demand to secure long-

term procurement• Engage with Product Development and Business Development to determine which products

and where to determine suppliers for relevant components and develop suppliers (Supply Chain Development Plan)

• Engage with the DTI on ways to implement and excute the National Treasury’s supply chain policies without hampering deliveries and thus further developing industry capacity and capability

• Develop and roll out the Supply Management Change Management Plan.

OpportunitiesZambia Zambian Railways Ltd Support TIH on rolling stock and maintenance

Zimbabwe National Railways of Zimbabwe (NRZ) Revitalisation of railways in Zimbabwe

Guinea Rusal, CBG and ONCFG Supply of locomotives and wagons

Senegal Ministry of Transport Remanufacture the current locomotive and wagon fleet

Uganda Uganda Railways Support for technical and rolling stock

Nigeria Nigerian Railway Corporation Supply 100 wagons and five locomotives

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