An introduction to Transnet

1. An introduction toTransnet 18 October 2004

2. Agenda • Results • Strategy • Key stats on human resources

3. Financial results summary • Turnover +6% to R43,6bn • EBITDA -37% to R7,4bn • Operating profit -96% to R187m • Cash flow from operating activities -9% to R3,1bn • Capital and reserves -49% to R8,9bn • Total debt to equity increased to 7,1:1

4. Consolidated income statement

5. Key factors that impacted the income statement • SAA aircraft: R3,5bn • Transtel: R526m • Propnet: R134m AC128 asset impairments of R4,2bn (2003: R493m) • SAA hedge book: R4,5bn (2003: R5,3bn) • Embedded derivatives in two long term service contracts: R0.6bn AC133 fair value adjustment of R4,5bn (2003: R7,1bn) • Continued weak global aviation sector • High cost structure SAA operating loss of R0,3bn (2003: R0,5bn) • Significant increase reflects R1,5bn credit in 2003 from change in valuation basis Retirement funding expense of R1,7bn (2003: R347m)

6. Consolidated balance sheet

7. What impacted the balance sheet? • Reported loss of R6,3bn • AC133 fair value liability opening adjustment of R4bn • primarily service contract embedded derivatives Shareholder’s equity impacted by • R14,2bn relating mainly to SAA’s hedge book, of which R4,5bn incurred in 2004 • Hedge book closed out by 30 June 2004 at a cost of R5,9bn Increase in current liabilities driven by • Interest bearing borrowings increased from R22,6bn to R27,8bn • Recapitalisation of SAA by R6,1bn Borrowings • Unfunded obligation of R7,6bn (2003: R7,2bn) relates mainly to Transnet’s Second Defined Benefit Fund Post-retirement benefits

8. Key factors for Transnet’s underperformance Unfocused conglomerate • Disparate businesses • Lack of synergies SAA • Net losses of R15bn over past 2 years Outdated infrastructure • Resulting in congestion and service delays at ports and rail networks People / Skills • Need to align skills with changes required by new strategic direction Excessive head office structure • Bloated structure that costs R600m per annum Poor risk management • Significant gaps in financial management procedures • Hedge losses, embedded derivatives and pension fund deficits Corporate governance • Poor regulatory compliance

9. 4-Point Turn-Around Plan • Redirect the business • Restructure the balance sheet • Implement and adopt strict corporate governance principles • Adhere to a vigilant risk management process

10. Strategy

11. There are significant shifts in the SA economy that warrant a closer examination of the supply chains necessary to support the economy. SA needs to reduce logistics costs by one third to sustain our competitiveness. Beitbridge Maputo Gauteng Richards Bay Sishen Durban Saldanha East London Cape Town Port Elizabeth

12. Aligning Strategic Focus with the Economy Maputo Richards Bay Durban East London Coega Cape Town PE • Micro-economic strategy: • Support SA’s export-led growth strategy • Reduce the cost of doing business • SA’s economy: • Mining (6%) 49% • Manuf. (20%) 45% • Agriculture (4%) 6% • Why Strategic corridors? • Majority of export/ import traffic (excl. containers) is typically bulk and heavy manufacturing on rail • Majority of road haulage is for domestic distribution • To support the export strategy and economic growth for current key sectors, connectivity between inland transportation systems and ports are critical • Create efficient export systems • for growing sectors Production location of key sectors Freight Typology: Up to 70% of economy is bulk, heavy-haul, long distance and low to medium value traffic Transnet Focus Heavy Manufacturing zones Mining zones • Transnet Strategic Direction • Focus on Rail and Ports (Operations & Infrastructure) • Focus on improving key corridors/ clusters

13. The Role of Transnet Contribute to the sustainable economic development of South Africa by providing the best connected and efficient transport network run by world-class rail, pipeline and port operators

14. Transnet Business Portfolio Holding Co Investment Portfolio Rail Operations Port Operations Pipeline Operations Aviation Other Rail Infrastructure Port Infrastructure Pipeline Network Transport Portfolio Independent Regulators

15. Transnet into the future Holding Co Transport Portfolio Transnet Infrastructure Transnet Operations Pipeline Infrastructure Pipeline Operations NPA Rail Infrastructure Rail Operations SAPO

16. Migration Path for Transnet Integrated, Inter-modal Transport Solution Deliver the Mandate Implement New Business Model • Operational integration with private sector (port and rail) • Partnerships (local and global) established for growth Building a Solid Foundation • Operational synergy between SAPO, NPA • & Spoornet • Restructured portfolio • Operational efficiency • Vertical separation • Corporate office Restructuring • Divestment 2004/05 2005/06 2006/07

17. Transnet Strategy Pipelines Freight Railways Ports Effective & Efficient National Logistics System Financial Strategy • Vertical Separation • Infrastructure Planning • Head Office Restructuring • Divestment • Operational Synergies Strategic Corridors Strategic Clusters Change Management Economic Growth

18. Human resource stats

19. Overall Transnet Workforce

20. Race gender breakdown

21. Trained Employees per Occupational Category As at 31 March 2004 training and development is structured through our workplace skills plan, and based on company and individual needs

22. Historical Picture

23. Challenges • A restructured organisation • Managing disability in the workplace • Subtle diversity issues in regions • Recruitment of females in senior management and technical positions

24. Thank you