Supplier Development (SD) Transnet Port Terminal’s Approach to Supplier Development

1. Supplier Development (SD)Transnet Port Terminal’s Approach to Supplier Development

2. Contents 1 Transnet Operating Divisions 2 Transnet Port Terminals Overview 3 Supplier development 4 Procurement Opportunities

3. TRANSNET STATE OWNED COMPANY LTD - OPERATIONAL DIVISIONS Supporting Mr Tau Morwe Mr Karl Socikwa Mr Siyabonga Gama Mr Richard Valihu Mr Charl Möller Ms Raisibe Lepule • 16 Cargo Terminals operating across 7 SA ports • Revenue 7 bn • Assets R13.5 bn • 6 324 employees

7. SUPPLIER DEVELOPMENT PROCUREMENT

8. Transnet’s Supplier Development journey Pre 2008 2008 2010 2011 2012 NIPP Initiation of CSDP within Transnet Transnet applies SD in first transactions SD begins to be rolled out to all transactions Transnet launches Market Demand Strategy with significant SD opportunities • Post tender process not offering much leverage • Investment not necessarily industry-related (30% of contract) • Penalties were negligible and often built into price • DTI programme mandatory for all SOC’simports over US$10 million • Suppliers were clear of what was expected of them at outset • Transnet was the first SOE to launch the DPE’s Competitive Supplier Development Programme (CSDP) as an initiative within the Transnet group • The first SDP developed and submitted to DPE in 2008 • Transnet designs SD structure into business procurement operating model • Plans in place to expand SD to all transactions • R5,2bn committed to local content via CSDP contracts, including: • 100 GE locomotives • Additional 43 loco’s • Long-term parts agreements for the locos • 32 Mitsui/Venus 15E locos • STS and mobile harbour cranes • Draft gear components • The experience gained in CSDP transactions enabled Transnet to refine policies, processes and procedures • In 2011 the SD concept broadened beyond CSDP • Pursuing a broader range of SD opportunities through the supply chain could lead to improved industrial capability building and economic transformation • Transnet launches its R300bn Capital expansion programme over 7 years • SD becomes a cornerstone of the overall programme • The SD strategy and SDP is updated to ensure maximum realisation of SD over the course of MDS • The revised SD Strategy and SDP is integrated into the new SCMPolicy and Framework Source: Team Analysis *New Growth Path ** National Development Plan *** Industrial Participation Action Plan

9. Government’s “New Growth Path” • The New Growth Path (NGP) is a policy developed by Government in 2010 to ensure the Government’s development objectives for South Africa are achieved (e.g. transformation, job creation, rural development). • Transnet supports this policy and plays an important role in making sure these objectives are achieved. • The manner in which Transnet purchases goods and services as an organ of state must help develop and transform the local supply base. • Transnet engages in targeted supplier development initiatives to support localisation and industrialisation and provide meaningful opportunities for Black South Africans, focusing on Youth (18-35), Black women, People with Disabilities, small businesses and rural integration.

10. Transnet’s SD approach is to leverage the MDS infrastructure programme to foster economic growthand promote transformation SD objectives SD objectives Growth Transformation • Ensuring transactions to bring HDI’s* into the economic mainstream through the advancement of HDI ownership • Address economic disparities and entrenched social inequalities through the use of: • FRC (current, future)** • Generic B-BBEE scorecard • Ownership • Management Control • Employment equity • Preferential procurement • Enterprise development • Socio economic development • Skills development • Achieving SD objectives through leveraging high-value procurement by including: • Industrialisation • Localisation • Promoting technology transfer • Job creation and preservation • Developing industry-specific skills • Enterprise development • Rural integration • MDS will also provide an opportunity to accelerate economic growth and transformation Facilitate economic Growth Drive economic Transformation (Empowerment) * HDI = Historically Disadvantaged Individuals as per the B-BBEE Act 2003 ** FRC = Further Recognition Criteria Source: Team analysis

11. Classification of SD opportunities as per DPE Framework introduced after NIPP: Transformation • ‘Programmatic’ Focus Areas: • Creating sustainable new industries • Development of new technology and innovation • Active Industrial Policy through CSDP and Programmatic policies outlined by the DPE • Investment in infrastructure and manufacturing industries • Skills development amongst scarce resources enhancing the intensity and quality of jobs available in South Africa • >R1bn value of transaction/s* • ‘Strategic’ Focus Areas: • Preference and development will be used to transform and grow local industry • Skills development amongst scarce resources, increasing the quality of jobs • Transfer of technology and innovation to local suppliers from foreign OEM’s • >R70m and <R1bn value of transaction/s* Program-matic • High Not currently a focus area Strategic Transformation • Industrial • leverage Enterprise Development Focused • Low • Low • High • Value leverage • ‘Enterprise Development’ Focus Areas: • The focus will be on providing small enterprises with opportunities and preferential trading terms • Empowering HDI’sto create their own business resulting in quality job creation • < R35m value of transactions* • ‘Focused’ Focus Areas: • Preferential Procurement and B-BBEE used to develop local industry owned and managed by HDI’s • Development of quality job creation reducing the lower income inequality and reducing poverty • R35m to R70m value of transaction/s* Source: DPE Policy * These values serve as a GUIDELINE only

12. Choosing an appropriate evaluation method • Determining evaluation criteria • Determine weightings of evaluation criteria Main Focus Areas • Determining • Evaluation criteria • New section on evaluation methods 1 and 2 • Setting of thresholds • Determining / confirming criteria and weights for • SD • BBBEE scorecard • BBBEE FRC • Quality / functionality • Price / TCO Main Amendments/ additions

13. PROCUREMENT OPPORTUNITIES PROCUREMENT

14. CAPITAL PROCUREMENT OPPORTUNITIES THAT EXIST/ ARE IN THE PIPELINE WITHIN THE DURBAN AREA

15. OPERATIONAL PROCUREMENT OPPORTUNITIES THAT EXIST/ ARE IN THE PIPELINE WITHIN THE DURBAN AREA