FPEF: 29 th April 2010 By: M L Brooke

1. FPEF: 29th April 2010 By: M L Brooke Citrus Rail Workshop Letsitele & Hoedspruit Region

2. Agenda • Rail Transportation – The Problem and The Solution • Intermodal & Bi-Modal Concept • Citrus Rail – 3 Mode Approach • Cost Comparison – 3 Mode Approach • Letsitele and Hoedspruit Rail Siding Map • The Way Forward • The objective of this session will be to identify what is required to increase the use of rail from Letsitele and Hoedspruit – utilizing either of the 3 Modes: • Rail Stakeholders: • Transnet Freight Rail • Growers & Packhouses • Exporters & Agents • Rail Service Providers & Partners

3. Attendance • Note: • Invitation was extended from growers indication of representation by volume • Invitations were extended to a larger audience of which there was no response

4. Why has the volume of citrus transported by rail decreased so substantially? Depletion of rolling stock – lack of service efficiency! More fruit stacked in high cube pallets – no rail option for high cube pallets up till now! Rail delays to port – up to 6 days from Letsitele to Durban! Branch lines and port delays Industry has become time sensitive – more program orientated! Cost of rail is generally higher than road transport – Perception! How do we increase the use of rail and create an efficient and cost effective solution? International trends indicate the use of intermodal solutions on main rail lines Therefore the solution is the development of inland fruit hubs Consolidated common user loading facilities – 3 Mode Approach There has to be a degree of commitment to rail Commitment from Growers to move a portion of annual breakbulk volume by rail Commitment from Exporters / Agents to load more Reefer containers at source Rail Transportation - The Problem and The Solution

5. The Intermodal Concept Flow Model Road Journey Packhouse Inland Transfer Hub Fruit transferred from Road to Rail (Breakbulk & Containers) Packhouse Packhouse Inland Facility Rail Journey Port Cold Store Port Dispersion Siding - wagons are routed directly to Receiving Point Fruit Terminal Container Terminal What is intermodal transportation? • 3 Mode Approach: • Ambient break-bulk • Packhouse stuffed Reefer Containers • Reefer Containers stuffed at inland facility Definition : Intermodal freight transport involves the transportation of freight in an intermodal container or vehicle, using multiple modes of transportation (rail and truck), without any handling of the freight itself when changing modes. The method reduces cargo handling, and so improves security, reduces damages and losses, and allows freight to be transported faster. Reduced cost and increased efficiency is achieved by utilizing this method of transportation. Main delay factor is at the port routing points

6. Mode 1 – Break-bulk Rail • How to increase the use of Break-bulk rail from Letsitele and Hoedspruit? • Introduce a viable, efficient and cost effective solution. • Letsitele and Hoedspruit options for Durban and Maputo! • Develop loading points on main rail line – Letsitele been doing this! • 40 Wagons (960 pallets) must be dispatched <36hours – 3 times per week = 2,880 pallets per week. • Citrus block trains are required to increase efficiency! • Japan fruit must be loaded on rail to Durban • Important Consideration • TFR should partner with a single entity – one stop shop • Seamless operation from packhouse to port cold store • Loading - 3 Ton double forklift trucks with extension arm, side shift and high cube pallet carriage required at the siding • Imperative that proper resources are employed • Situated in Letsitele / Hoedspruit – monitor loading • Situated in the Durban port – monitor offloading: </=4 days

7. Mode 1 – Break-bulk Rail Season 2009 • How to increase the use of Break-bulk rail from Letsitele and Hoedspruit? • Introduce a viable, efficient and cost effective solution. • Letsitele and Hoedspruit options for Durban and Maputo! • Develop loading points on main rail line – Letsitele been doing this! • 40 Wagons (960 pallets) must be dispatched <36hours – 3 times per week = 2,880 pallets per week. • Citrus block trains are required to increase efficiency! Source: PPECB

8. Mode 1 – Break-bulk Rail(Cost Comparison – packhouse to port cold store) • Notes: • It must be noted that the rail rates as reflected are a mere indication of the rail rate per commodity that is required to remain competitive • The cost of rail reflected is a full all inclusive service of road transport to siding facility and rail to port cold store – all resources must be provided

9. Mode 2 – Packhouse stuffed Reefer Containers • Is the industry satisfied with the volume of containers packed at the farm? • Approximately 711 containers loaded from Letsitele during 2009 season. • This equates to 14,220 pallets = <10% of Letsitele annual production! • 38 containers x 2 trips per week = 1,520 pallets per week • This volume should be doubled to 20% of production = 1,500 containers (30,000 plts) • What are the constraints prohibiting more containers to be packed? • Packhouse is required to accumulate specific cargo – floor space! • Fruit availability is not fixed – packing for markets varies from day to day • Weather may delay packing, etc – Inconsistency! • Shippers have volume commitments at port cold stores • Important Considerations • Would a consolidation facility in Letsitele allow more containers to be stuffed inland? • Hoedspruit packhouse container stuffing could link to the Letsitele operation • Fruit can be accumulated from different packhouses per shipper • Can be consolidated with packhouse stuffed containers • Growers have requested that containers are loaded via Letsitele station and not via Tzaneen station - Discussion

10. Mode 3 – Inland stuffed Reefer Containers • Modus operandi • Fruit is accumulated over a 4 - 7 day period – Packhouse to inland facilities in Letsitele and Hoedspruit • Hoedspruit containers may have to be transported to Tzaneen / Letsitele • Containers are stuffed ambient and railed to port <72hours • Possibility to rail to port without power – Protocol <16hours? • Containers can be pre-cooled at the port <10 days from packing • Research should be undertaken to amend the Protocol – currently being done under approval of dispensation • Important Consideration • Ambient loading applicable to Valencia, Grapefruit and Lemons? • What are the requirements? • Ambient loading facilities in Letsitele and Hoedspruit – Capital investment • 50 Containers per week (1,000 plts) x 20 weeks = 20,000 pallets p.a • Current ambient rate R80 x 20,000 p.p.a = R1.6m p.a • The total capital outlay is estimated at R1m with costs ~R400k p.a • Containers can be linked to the packhouse stuffed containers

11. Packhouse loaded Reefer Containers: Model based on the principle that MT containers are collected from Durban and transported to packhouse to be loaded and rail direct to port with power source. Full all inclusive service. Inland loaded Reefer Containers: Model based on the principle that MT containers are collected from Durban and transported to inland hub to be stuffed and railed direct to port with power source. Road Transport is done independently carting 26 H/C pallets from packhouse to Inland Hub. * Cost of Road Transport to Hub: based on assumption of cpk and daily rate. (Using 26 H/C plts per truck) ** Inland Handling Cost: based on an assumption of R80 per pallet incl. 7 days storage. *** Cost of Container Rail to Port: cost of rail should be obtained from Progressive Logistics (Using 20 plts per container H/C) **** Cost of Road Transport to Port: based on various Transport rates received. (Using 26 plts per truck H/C)

12. Reefer Container Loading Comparison(Pre-cooling and Shipping Timeframes) Port Stuffed Reefer Inland Stuffed Reefer Packhouse Stuffed Reefer Packhouse Packhouse Packhouse Container Stuffing </= 3 DAYS NIL DAYS Cold Store Inland Ambient Store Pre-cooling Temp </= 4 DAYS </= 4 DAYS </= 1 DAY Container Stuffing Cold Room or Container Stuffing Container Terminal </= 3 DAYS </= 4 DAYS >/= 6 DAYS Zero Handling and Storage Charges Pre-cooling Temp >/= 10 DAYS Pre-cooling Temp </= 8 DAYS Best for Fruit Integrity It must be noted that fruit could be </= 7 days of age before being stuffed Best Carbon Footprint Factor Best Shipping time to Markets Container Terminal >/= 10 DAYS Container Terminal </= 7 DAYS High Risk Logistics > Handling and Storage Charges < Handling and Storage Charges < Fruit Quality and Damages due to excessive handling? Better for Fruit Integrity Highest Carbon Footprint Factor Better Carbon Footprint Factor Better Shipping time to Markets Logistics Nightmare Note: this assumption is based on Letsitele - Durban average times during peak season. Medium / High Risk Logistics

13. Northern Region Rail Network Reefer Train Route to Durban via Natcor line Break-bulk Train Routed to Durban (via Swaziland) and Maputo

14. Northern Region Rail Network • Additional 30km Road Haulage Letsitele to Tzaneen • Moving the Reefer Container operation to Letsitele will allow better utilization of trucks and better efficiency of loading operations at packhouse • Hoedspruit Reefer Container operation may have to be consolidated with Letsitele

15. Letsitele Station Northern Region Rail Network Proposals for Common User Inland Reefer Container loading Shed

16. Hoedspruit Citrus Region Northern Region Rail Network Citrus Production

17. Hoedspruit Siding Northern Region Rail Network • A suitable break-bulk loading shed is required at Hoedspruit siding – TFR investment • In order for Hoedspruit region to load Reefer Containers, plug in points are required as well as a dedicated train set equipped with a diesel generator. • The Letsitele Sidelifter could be deployed to Hoedspruit once a week along with a train set. Exporters should discuss this with Progressive Logistics.

18. The Way Forward • Mode 1: Break-bulk – TFR is the driver • Competitive rail rates – seamless service • TFR & CGA road trip to Hoedspruit - Urgent • Require Hoedspruit loading shed at Hoedspruit siding - Priority • TFR partnership to include one stop shop service – Rail focused entity • Logistical resources monitoring rail traffic – Packhouse to Port • Durban Japan ambient facility must handle rail – Biggest breakbulk rail opportunity • Mode 2: Packhouse stuffed Reefer Containers – Exporters are the driver • Infrastructure at the Letsitele station – Reefer plug in points (Cost Analysis) • Hoedspruit Packhouse stuffed containers to load at Letsitele siding • Mode 3: Inland stuffed Reefer Containers – Exporters are the driver • Ambient protocols should be revisited to allow ambient trains to port < costly • Business proposal (viability and feasibility study) • Infrastructure development in Letsitele Note: The term ‘STUFFING’ a container refers to cargo being placed in a container

19. “It is not the strongest that survives, it is the most adaptable to change” Charles Darwin “The quickest way to reduce the cost chain is to reduce the cold chain” Malcolm Dodd “The future sustainability of citrus exports from Southern Africa will be determined by the growers response in adopting unconventional practices in the supply chain” Mitchell Brooke