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

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

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. Strategy confirmation and structure

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

5. Strategy: Four-point turnaround plan Lower cost of doing business Targetedsectors • Redirect & • re-engineer • the business • Re-engineer core business • Corporate HO restructure • Operational synergies • Customer focus • Infrastructure development • Corporate governance • and risk management • Shareholders compact • Memo and articles of association • IFRS • Legal review • EWRMF 4-Point turnaround plan • 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 Economic development

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

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

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. 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. 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. 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. 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. 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. 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. HR (EE)

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

17. How do our Core BU’s look like? Transnet Representation for Black and Female Employees 61.39% of Top & Senior Mngt (101-106) 38.61% 46.71% 53.29% of Professionals (108-109) 52.23% 47.77 % of Skilled Technical Employees (610) 21.03% 78.97% of Semi skilled employees 3.19% Female Employees at Transnet 96.81% of Unskilled employees Black Employees at Transnet 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 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

18. Transnet Preferential Procurement 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. 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. 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 • Transwerk R2,6 billion • Equipment • 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) • Spoornet R31,5 billion • Coal line (R8 billion) • Ore line (R2,7 billion) • General freight (R10,8 billion) • Maintenance capitalisation (R8,1 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)

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

22. Salient features: 2006 ACHIEVING PERFORMANCE OBJECTIVES

23. Financial Results 2006

24. Financial results 2006 Consolidated income statement

25. Transnet operating profit margin(after impairment before fair value adjustment) HIGHEST MARGIN IN LAST SEVEN YEARS • Transnet Group (Including discontinued operations) Average previous6 years = 5,8%

26. Performance measures against budget * Continuing operations **Includes an amount of R681m relating to capitalised maintenance

27. Spoornet performance 2006 versus 2005 Operating profit • 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 was68,7mt (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. 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. 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. 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. 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. 12,6% SAA: Financial performance 2006 versus previous two-years: three-year view Turnover Operating profit

33. Financial results 2006 Consolidated balance sheet

34. Financial results 2006 (continued) Consolidated balance sheet (continued)

35. IFRS: Impact on 2004/2005 Financial statement prepared under IFRS with effect from 1 April 2004

36. Retirement benefit obligations Consolidated balance sheet Unfunded liabilities • Restructuring and funding plan in progress • Funding monthly including Transnet subsidy

37. Financial results 2006 (continued) 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. Funding requirements: Next five years *Includes : Promissory Note R2bn and T004 R5.5bn

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. 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. 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