Rail : The Track to Efficiency

Transport Forum

Special Interest Group : 4 June 2015

PAGE

Contribute to RSA Competitiveness by Reducing the Cost of Logistics

Deregulated Freight Transport and

Logistics Industry – Modal Imbalance

: Focus

Road to Rail shift – Efficient Operations

Modal Collaboration and Intermodalism

Enabling the shift from a mining-based

to a networked economy

Enabling global competitiveness of

shippers and downstream industries

Preparing for mineral beneficiation

development

Providing capacity against long-term

investment returns

Rail Turnaround on Track

Total logistics cost (2012)* = 12.8% of GDP

Transport costs are high – driven by high fuel

prices. Rail contributes only ~11% to the

transport costs

Inventory Carrying Cost

12%

Mngmnt & Admin 12%

Warehousing 15%

Transport

61%

* 9th Annual State of Logistics Survey

PAGE

MDS – Turnaround driving volumes back to rail

60

62

64

66

68

70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

1986 : Decline in volumes following deregulation

1990s : Lack of investment compromises service and leads to less utilisation of Rail - loss of market share to Road

Business in decline – loss of skills and market reputation

2000s : Inadequate and ageing capacity. Unable to capitalise on economic growth and commodity boom

2005 : Re-engineering Programmes to improve efficiencies and refocus the business

2009 : Economic Recession interrupts growth path – Affordability constrains capacity creation

2012 : Market Demand Strategy

2012 : Market Demand Strategy

Decisive action leads to Rail Turnaround

Road to Rail shift through General Freight growth

General Freight Million Tons

PAGE 3

To create capacity ahead of demand

To maintain, upgrade and modernise the rail system

Market Demand Strategy

Market Development

To improve performance productivity and operational efficiency

To contribute to a reduction in the cost of logistics

Operational Efficiency

Capital Investment

To develop skills

To create sustainable employment opportunities

To transform the business to a high performance culture

People

To build market reputation & credibility

To increase market share

To develop a customer centric culture

To build and maintain a healthy and safe working and operations environment

Safety

To develop an integrated Regional rail system with economic growth opportunities

Regional Integration

Goal : Top 5 Railway - Financially sustainable, Integrated Logistics Service Provider, Innovative, Employer of Choice, World Class Customer Service, Gold Standard Operations and Capital Execution

Core Strategies and Objectives

Core Strategies

Objectives

PAGE

Growth through investment and efficiencies

Back to Rail - Capturing Growth Opportunities

Operational Efficiency Capital Investment

Improved Operations and Train Planning

Bimodal Technology Standardise systems Entrench operational

discipline and adherence to operating procedure

Develop rail operational skills

Operations philosophy to optimise existing assets

Detailed capacity planning: Wagons Locomotives Network slots

New rail technologies & modernisation of Locos, Wagons and Network

Strategic Expansion Develop Engineering &

Project Management Skills

Invest to maintain the system and create new capacity

Market Responsiveness

Reliability On Time In Full

Productivity Partnerships for logistics solutions

Superior Customer Service

PAGE

Capital investment analysis

5,7% +11,8%

2015

33,6

2014

31,8

2013

27,5

2012

22,3

2011

21,5

Port

containers 9%

Export

iron ore 1%

Bulk 3%

Export coal

12%

GFB 60%

Other

Piped products

8% 5%

43%

57%

Expansion vs replacement

Capital investment by commodity R billion

Replacement: R19,0 billion

Expansion: R14,6 billion

PAGE

Efficiencies achieved since start of Locomotive Modernisation Programme

6

Loco Type

Corridor / Flow Key Commodities Efficiency Improvements

19E Export Coal heavy haul line Coal Locomotives cycle time improved from 58 to 41 hours

15E Export Iron ore heavy haul line

Iron Ore Improved number of locomotives per 342 wagon train from 9 to 6 locomotives per train with better energy usage

50 “Like New”

Steelpoort – Ermelo Lephalale - Thabazimbi

Chrome / Ferrochrome Coal

Sustained current flows with better delivery rate

43D

Phalaborwa – Richards Bay Magnetite; Rock Phosphate

Wagon cycle time improved from 84 to 56 hours

Eskom Power Stations

Coal

Ensured Camden, Thuthuka and Grootvlei power stations are provided with uninterrupted train service

Sishen – Saldanha Iron Ore Reduction in diesel fuel consumption

20E Hotazel – Port Elizabeth Manganese Wagon cycle time improved from 90 to 65 hours

AMSA Flows (ex-Sishen) Iron Ore Sustain AMSA Iron Ore flows

Reliable locomotives – a primary element in the system - contribute to improved cycle times. This in turn raises service reliability and market capture prospects

PAGE

Improved Cycle Times

7

Corridor

Locomotives Wagons

Previous hours

Achieved hours

% Improvement

Previous hours

Achieved hours

% Improvement

Phalaborwa – Richards Bay 96 56 42 142 96 32

Coal RBCT 58 41 29 65 48 26

Manganese PE 90 66 27 120 90 25

North - South Corridor 160 72 55 720 336 53

Efficiencies achieved on key corridors

PAGE

A railway fit for the future is a responsive railway

A responsive railway meets the unique logistics

needs of the economy

▪ Optimally maintains, utilises and densifies

existing infrastructure

▪ Invests to create capacity ahead of demand

▪ Reduces the cost of logistics

▪ Reduces the cost of externalities to the

economy

▪ Strives for regional connectivity

▪ Attracts and retains rail friendly traffic on rail

▪ Collaborates for intermodal solutions 8

A sustainable railway contributes to the competitiveness of a developing nation

PAGE 9

“The recent upswing in the rail

share has occurred more rapidly

than anticipated. The modal

shift objectives of increasing

bulk exports of coal and iron

ore; recapturing both export and

domestic bulk markets for other

ores; and making first

attempts to increase the high-

value and corridor market

shares are beginning to bear

fruit. The modal shift strategy of

increased rail investment and

improved service levels should

receive further support”

Source: 9th Annual State of Logistics Survey for South Africa 2012

Conclusion Accelerating Rail Market Share Growth

20 Thank You