1. UNIDO
Presentation on TPT’s SD Plans
26th of July 2012

2. Contents
SD : Background and Objectives
SD : Proposal vs Final plan
Tender gateways : SD and BBBEE
TPT Equipment acquisitions
2

3. A lack of investment in infrastructure has impacted the capacity and
capability of the local industry to do business in South Africa and
subsequently economic growth
Historical Background Impact on industry
 There has been a significant decline in SA
local industry over the past years largely due
to a lack of consistent investment in
infrastructure  The overall impact both from the lack of
investment in infrastructure and the
Ratio of Gross Fixed Capital suppression of a large percentage of the
Formation to GDP (1970-2009) population from partaking in the economy
had a significant impact on local industry:
30
25  Loss of key skills and key capabilities
20  Decrease in manufacturing
capabilities and thereby export
15
potential
10
 Lack of job creation opportunities
5  Increase in the costs of doing
0 business due to higher transportation
1974 1982 1990 1998 2006 costs and longer lead times
Furthermore, due to significant historical
political and social imbalances a large portion
of the SA population were unable to
participate meaningfully in the economy
thereby creating a gap in wealth distribution
Source: SARB Quarterly Bulletin 3

4. The key difference between CSDP and NIPP is that CSDP allows for the
investment to take place in a related industry
NIPP CSDP
Effective Date • Prior to February 2008 • February 2008 Onwards
Transaction target • 30 % > R100 million • 30 % > R100 million
Focus • Non Related Industry • Related Industry
Reporting &
• DTI • SOE  DPE
Tracking
• Not Part of Evaluation Criteria
Part of
• Not part of SOE responsibility – • Part of Evaluation
Negotiation
Done by DTI and the Supplier Criteria
Spend is channeled into relevant industry development which Transnet can influence
4

5. Transnet will use its sphere of control to contract with OEM’s as tier-1
suppliers
Transnet’s CSDP phase one Strategic Approach will be to focus on Tier 1 suppliers to
assist them in engaging local Tier 2 suppliers
Supplier Development
Category
Supplier Base
Sphere of Control
Transnet’s CSDP
CSDP Development:
Focus
Port Equipment
Tier 1
Systems –
Subsystems
CSDP Focus
Suppliers’
Transnet’s ED and
Tier 2
s
PP Focus
Assemblies
Suppliers’ Focus
Tier 3
Components
Sphere of Influence BBBEE Focus
Other
ED Development
**ED – Enterprise Development / PP – Preferential Procurement
5

6. Transnet will apply their influence and current resources to actively align
their existing SD activities with the objectives of NGP as reflected below
iSCM/Supply Chain
Quantum Leap Focus New growth path
• Increase productivity • Increase employment
intensity of the
and efficiency economy
• Volume growth
• Reduce the cost to
• Capital investment improve infrastructure
Regulatory and address
• Financial stability
competiveness
Increase
• Funding Volume
productivity
growth • Balanced spatial
• Human capital & efficiency
development of rural
Improving
• SHEQ Human areas and poorer
SHEQ customer Resources
• Regulatory provinces’
service
• Improve customer Financial Capital • Reduce the carbon
sustainability investment intensity of the
service
economy
Funding
• Create opportunities in
changing regional and
global environments
• Increase black
ownership and
entrepreneurship
6
Source: Transnet Corporate Plan 2011/12

7. A shared aspiration for SD was created by merging Governments and
Transnet’s objectives
Government’s Objectives Transnet’s Objectives
• Volume and Revenue Growth
• Increase the percentage of the population • Creating Capacity
Objectives
Corporate
involved in quality formal employment • Operational Efficiency
Vision
opportunities • Financial Strength
• Address wealth distribution disparities in the • SHEQ
country by ensuring the participation of
previously disadvantaged groups in the • Promote the
economy 1) Empowerment of previously
Objectives
SD
• Maintain a healthy balance of payments position Principles disadvantaged groups
SD
by reducing the reliance of South African 2) Increase in local content
industries on imports 3) Improvement of skills and create
• Increase the participation of public enterprises in opportunities for sustainable jobs
increasing levels of real fixed capital
Guiding Principles
formation Values • Security of Supply
Supply Chain
• Develop key skills and capabilities required • Reduction in Costs
for specific industries where these do not exist • Reduction in Working Capital
• Enhanced Preferential Procurement
and Enterprise Development
External Analysis Internal Analysis
Source: Transnet Corporate Plan, NGP, B-BBEE, CSDP

8. Supplier Development (SD)
• Supplier development refers to the improvement in the socio-
economic environment by creating competitive local suppliers via
Competitive Supplier Development and other initiatives. This results in
a local supply base that can eventually be competitive to market its
goods on the international market leading to increased exports
• Transnet’s SD strategy aims to holistically satisfy all of Government’s
legislation and requirements in respect of identifying and undertaking
opportunities through specific initiatives
8

9. CSDP opportunities are generally triggered for transactions equal or
exceeding USD10 million for all tenders after February 2008
Trigger for a CSDP transaction: Criteria to be considered to initiate a CSDP
transaction:
• To avoid capital leakage;
• When an opportunity to develop a local industry
within Transnet’s supply chain; and / or
• When a limited local supply base exists but the
potential to develop existing suppliers is evident; and
/ or
• Where there is a strong opportunity for IP and
skills transfer to local suppliers and / or Transnet for
• SOE influences OEM/multinational for CSDP which the capacity does not presently reside in South
transactions . Africa
• The following will trigger a CSDP transaction which
involves the purchase of services and goods:
- Single New Contract with an imported content Tender Process:
portion that is equal to or exceeds USD 10
million*; • All contracts sent to the market equal or exceeds
- Contract with a renewable option clause, should R70million* will include a CSDP obligation as part
the option be exercised, the total value of the of the tender,
imported content would be equal to or exceed • A CSDP Proposal must be submitted as part of
USD 10 million* the tender
•A CSDP Plan must be signed submitted within 30
- No CSDP obligations (after Feb 2008) may be claimed for a
NIPP – Double Counting days to Transnet after signing the Letter of Intent
All CSDP obligations will be considered as standalone -obligations (LOI) and be agreed and signed within 15 days
for each specific tender; thereafter by both parties
- Where a CSDP obligation has not been mutually agreed between
Transnet and the Supplier after February 2008 a CSDP
Reconciliation Plan (to date) must be submitted by the Supplier to
Transnet and agreed and signed off by both parties.
* Total Value planned to spend with a Supplier - (USD 10 million ~ R70 million.
** All CSDP Capability and capacity building in SA efforts initiated by the Supplier since the award of the contract to date must be included into the plan.
9

10. The IC3 Matrix is used as the basic framework to plot the SD opportunities
identified in its appropriate SD initiative bucket
IC3 Supplier Development Classification Matrix2 Not currently a focus area
High
Programmatic1
Industrialisation
Strategic Importance to Transnet
The IC3 supplier development
classification matrix assists in
Strategic categorising opportunities
Industrial leverage
according to their industrial
leverage, value leverage and
Capability and strategic importance to
capacity Transnet
building in SA
and Supplier Once opportunities are
Development identified it will be possible to
Small
identify the tools that should
Enterprise Focused be implemented to maximise
the full supplier development
Development
potential from the
Skills opportunities
Low
Development
Low High
Value leverage
Value Leverage refers to transactions where the financial scale of the transaction allows the buyer the opportunity to negotiate supplier
development.
Industrial Leverage refers to transactions whereby the nature of the procurement is such that the scale and the industrial complexity of the
item being purchased allows for local supply chain development around a particular industry.
Strategic Importance to Transnet refers to the extent to which the product to be procured has a impact on Transnet’s core business.
1 This could be further refined in the future through the DPE Programmatic Policy
2Adapted from the DPE Supplier Classification Matrix focused on Increased Competitiveness, Capability and Capacity.
10

11. Strategic objectives within each quadrant have been identified
IC3 quadrant Strategic Objective Key Outcomes
• Assist Government achieve their industrialisation • Industrialisation
objectives through development of local supplier base to • Technology transfer
Programmatic
increase the cost efficiency of fleet procurement, support • Job creation/preservation
and maintenance • Skills Development
• Downstream Supplier Development
• Increased exports
• Reduction in capital leakage
• Influence multinational organisations toward initiatives • Capability and capacity building in
that lead to the development of local downstream SA
Strategic suppliers through large-scale SOE procurement in order to • Increased Technology transfer
develop a competitive local supplier base focusing on • Job creation/preservation
Rolling stock, Port Equipment and Infrastructure • Skills development
• Assist local suppliers to improve their performance, • Job Creation/preservation
enhance their existing production & skills capabilities by • Empowerment
Focused
placing increased emphasis on benefiting previously • Skills Development
disadvantaged individuals and rural development • Rural Development
• Provide a platform through which local suppliers can test
their local innovations for export promotion
• Assist local suppliers to improve their skills by placing • Empowerment
Small increased emphasis on benefiting previously • Rural Development
Enterprise disadvantaged individuals and rural development in line • Skills Development
Development with the BBBEE strategy • Job Creation/preservation
Transnet has to develop an internal policy to support product development and funding as the current innovation policy drafted by the DPE only allows for testing
local products in the Transnet operating environment
Source: Team analysis
11

12. Figure 2: Transnet value capture through supplier influence
Programmatic Strategic Focused Small ED
Decreasing
• Industrialisation emphasis on
evaluation
Programmatic criteria
• localisation • Localisation
categories
• Technology • Technology Sphere of
transfer/ transfer/ influence
sustainability sustainability
Strategic
• Job creation/ • Job creation / • . Job creation/
preservation preservation preservation
• Skills • Skills • Skills
development development development
Focused
• Small business • Small business • Further
promotion promotion recognition*
• Rural
• Further • Further
development
recognition* recognition* • Further
and regional
Small Enterprise recognition*
integration
Development
• Rural • Rural
development development • Small business
• Job
and regional and regional promotion
preservation
integration integration
*Points allocated in further recognition of certain components of BBBEE in line with Transnet and government objectives
** Indicative and varies on business and Macro Economic need
12

13. The recommended SD categories are based on the alignment with
government objectives
Category Description
• Developing local capability and efficiency through : investment in plant, increasing the number
Capability and of products bought locally and qualifying suppliers to meet international standards.
capacity building • This criterion refers specifically to industrial capability building that focuses on value-add
in SA activities of the local industry through manufacturing or service-related functions.
Technology
• Refers to process, know-how and Intellectual Property associated with developing a
transfer/
competitive local supplier post the current transaction
Sustainability
• Refers to skills transfer with an emphasis on the accumulation of knowledge and experience
Skills • Generally targeted toward sector specific skills development with a focus on artisan and
development technical skills
• Refers to an increase or preserve in the number of jobs due to the award of business from
Job creation/ Transnet
preservation • Favouring more labour intensive methods for job creation
• Jobs include both skilled and unskilled
Small business • Encourage the growth and expansion of small businesses and start ups through procurement
promotion and support mechanisms
Source: Team Analysis
13

14. SD and BBBEE Requirements
Contents
SD : Background and Objectives
SD : Proposal vs Final plan
Tender gateways : SD and BBBEE
TPT Equipment acquisitions
14

15. Summary: SD Process
Successful SD plan to be
Compile proposal Transnet tenderer to agreed upon by
as part of SD plan evaluates supplier compile SD Transnet and
SD proposal plan supplier
Responsible
Supplier Transnet Supplier & Transnet Supplier& Transnet
• Only a successful bidder
• The supplier is expected to • SD (Proposals) will be required to • Once the SD plan has
formulate a SD proposal responses will be complete a detailed SD been finalised with
to identify the evaluated on their ability Plan and deliver it to Transnet, the supplier
opportunities that the to leverage Transnet’s Transnet in 30 days after will initiate the plan
supplier will pursue long term procurement in signing the LOI • The supplier will be
• The SD Proposal should order to promote • Both the Supplier ad required to report
address the main areas Capability and capacity Transnet must agree and quarterly on the
 Capability and building in SA in order to sign the final SD plan 30 progress being made
capacity building in SA; increase the capability and days thereafter against the plan, the
 technology capacity, responsiveness • The SD Plan will have to attainment of milestones
transfer/sustainability; and competitiveness of outline the: and the reasons (if any)
 skills development; South African supplier – Type of Capability and that goals are not being
capacity building in SA
 small business industries effort that will be
met
promotion • The SD Programme’s pursued, • Transnet will supply
 job ability to promote skills – Anticipated investment, guidelines to the
– Description of products to
creation/preservation transfer, Capability and be produced,
reporting format required
capacity building in SA – Skills transfer ,as well as for the quarterly reports
and the sustainability of – Processes, systems,
NOTE: the venture will all be
technologies and
• Both a SD Proposal and SD equipment required
taken into account during
Plan must be completed . 15
evaluation

16. SD Plan: Capability and capacity building in SA
Summary – Supplier (x/x)
Example
Category Description Sub-initiative Key KPI
A Total Summary • 1.0 xxx • R xxx.xm
Capability and • 2.0 xxx • R xxx.xm
capacity • 3.0 xxx • R xx.xm
building in SA
• Total Capability and capacity building in SA Value • R xxx.xm
1.0 xxxx • xxxx • Rx.xm
2.0 xxxx • xxxx • Rx.xm
3.0 xxxx • xxxx • Rx.xm
Transnet Authorised Signatory Date Supplier Authorised Signatory Date
Name / Title Name / Title 16

17. SD Plan: SD Capability and capacity building in SA Initiative (x/x)
Initiative Description: Target KPI
Detailed Description Transnet Lead:
R x.x* ZAR
TPT Lead:
# of reports Supplier Lead:
x
completed Supplier Lead:
TBD at # of Start Date:
selection components
meeting selected End Date:
Reporting Frequency: Quarterly (xx May CY, xx, xx
(one month prior to DPE August CY, xx November CY
report) and February (following Year)
xx)
Transnet Authorised Signatory Date Supplier Authorised Signatory Date
Name / Title Name / Title
17

18. SD Plan: SD Capability and capacity building in SA Initiative (x/x)
Year 2011 2012 2013
Activity 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Transnet Authorised Signatory Date Supplier Authorised Signatory Date
Name / Title Name / Title
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19. SD and BBBEE Requirements
Contents
SD : Background and Objectives
SD : Proposal vs Final plan
Tender gateways : SD and BBBEE
TPT Equipment acquisitions
19

20. A three step evaluation strategy will be used in the evaluation of the
equipment proposals
Evaluate for Evaluate for Evaluate for Evaluate per
> Threshold >Threshold >Threshold weighting
1 2 2 3
SD / BBBEE Eligibility Technical Price Award tender to
SD successful supplier
BBBEE
Minimum Minimum Minimum
SD/BBBEE Eligibility Technical
criteria criteria criteria
Equipment SD / BBBEE Eligibility Technical Evaluation weighting (%)
threshold threshold threshold 3
Price SD BBBEE
Main offer and main (Scorecard and
1 2 2 Further
offer plus options recognition
criteria)
RTG Cranes (Proposal A), 40% 100% 80% 60 20 20
STS Cranes (Proposal B) and
RTG Cranes and STS Cranes
(Proposal C)
Note: The tender indicates that the SD commitment is aimed at achieving at
least 30% of the supplier’s tender value as part of the tender bid
If no tender passes the 2nd stage technical evaluation, the threshold will be
reduced from 80% to 70%
20

21. SD and BBBEE Requirements
Contents
SD : Background and Objectives
SD : Proposal vs Final plan
Tender gateways : SD and BBBEE
TPT Equipment acquisitions
21

22. 7 Year Capital expenditure plans
• Transnet’s capital investment over the next 7 years (2012/13 to 2018/19)
totals R300billion
• Transnet Port Terminals will be undertaking R33billion (11%) of these projects
over the next 7 years
• TPT’s 7 year investment plan will comprise mainly of the following
acquisitions:
o Ship to Shore Cranes
o Rubber-Tyred Gantry Cranes
o Straddle Carriers
o Ship Loaders
o Ship Unloaders
o Mobile Harbour Cranes
o Haulers
o Trailers
o Reach Stackers
o Empty Container Handlers
22

23. Equipment acquisitions : currently in procurement cycle phase
Item Project
1 4 x STS Cranes – Ngqura
2 18 x RTG Cranes – Ngqura
3 DGPS (Digital Global Positioning System) - Durban
4 Supply and installation of a monitoring system for refrigerated containers (Reefers)
at Cape Town (CTCT & CTMPT), Port Elizabeth (PECT), Ngqura (NCT) and Durban
Container terminals (Pier1 and Pier2).
5 Manufacture, supply, delivery and commissioning of 74 Fifth wheel haulers for RBY
6 Manufacture, supply, delivery and commissioning of forklifts – RBY
(3x42T;6x32T;10x18T;11x8T); EL (4x7T) and NGQURA (2x2T)
7 Manufacture, supply, delivery and commissioning of 6 Reachstackers – 2 RBY;2
NCT;1 Pier 1 and 1 CTNMPT
23

24. Equipment acquisitions : SD plans being finalised
Item Project
1 1 x Mobile harbour crane for CTN
2 Design review services
3 Manufacture, supply, delivery and commissioning of 14 haulers – 4 Saldanha;10
Pier 1
4 Manufacture, supply, delivery and commissioning of 9 empty container handlers – 2
CTN;2 NCT; 5 DCT
5 Manufacture, supply, delivery and commissioning of 48 haulers for Ngqura
24

25. Equipment acquisitions : SD plans committed
Item Project SD value SD committed
committed (R’m) %age of
Contract value
1 1 x Ship unloader 15.52 12%
2 28 x Straddle Carriers 23.00 10%
3 7 x Tandem lift STS Cranes 47.00 6%
4 6 x Mobile Harbour Cranes 58.29 23%
5 33 x Haulers 4.07 9%
6 8 x Reachstackers 18.12 16%
25

26. Equipment acquisitions planned for the remainder of this year (to Mar
2013)
Item Project
1 Ship unloaders for Bulk terminals
2 Rail Mounted Gantry Cranes for Container Terminals
3 Wharf Cranes
26