Presented by Mr Mafika Mkwanazi Group Chief Executive

Presented by: Mr. Mafika Mkwanazi, Group Chief Executive, Transnet 1

Transnet views BEE : n n Not only as a socio-economic imperative to redress imbalances of the past But also a business opportunity n n To create new suppliers to Transnet As well as new consumers of Transnet’s goods and services. 2

Challenges first faced with n n Position BEE / SMME’s to engage in our procurement activities. Formulate a Policy which allows for a bias towards BEE / SMME, whilst still enhancing the Company’s business imperatives, e. g. fairness and transparency, good quality, timeous delivery and optimum value for money. 3

Transnet BEE Policy: n n Introduced early in 1996 Guided by Government policies and guidelines at the time, e. g. n n n The Governments 10 -point plan The 12/88 points preference system Later, during 1999, due to problems experienced with, for example fronting, Transnet decided to revise our BEE Policy. 4

Transnet Divisional Tender Boards n n Old single Transnet Tender Board – restructured into 12 different Divisional Tender Boards in April 2000 Spoornet, SA Port Operations, National Ports Authority, Metrorail, Petronet, Freightdynamics, SA Airways, Protekon, Transnet Housing, Transtel, Viamax and the Group Tender Board. 5

An Industry misconception n n BEE is not necessarily small and expensive, but can also be big and well established enterprises owned and managed / operated by HDI’s, and highly competitive SMME’s are not necessarily BEE, namely those small enterprises owned and managed by HDI’s (i. e. blacks, coloureds and indians), but can also include those belonging to woman and disabled, irrespective of race, as well as white entrepreneurs 6

Focus areas of our Procurement Policy n n n n Improve customer service Support the achievement of socioeconomic objectives Improve performance of Suppliers (including BEE’s) Optimise overall cost of our materials and services Reduce cost of procurement Improve product quality Improve supplier relations 7

Role of BEE Managers n n Educate line functions (in-house) on Transnet Procurement Policies on how to promote BEE Assist line functions to achieve annual BEE Targets Identify new opportunities and guide BEE’s on Transnet’s procurement policies and practices Provide inputs and guidance to the relevant Divisional Tender Board 8

Important Statement n Our Country needs more entrepreneurs, as new entrepreneurs establish new business enterprises, which means more job opportunities. Therefore, apart from Transnet’s BEE endeavours which will remain to have a very high priority in Transnet, Transnet is also committed to supporting SMME’s across the board. 9

Transnet’s policy and structures… n n Adjusted to embrace the intervention by the BEE-/SMME policies Shifted from paying automatic premium to continuous accreditation BEE measured on genuine participation of HDI’s Often use “set-asides” and unbundling of larger jobs to accommodate BEE 10

Transnet’s policy and structures contd… n BEE Forum n Procurement Forum n Group targets as well as Divisional / Business Unit goals 11

Transnet’s BEE- target… n n n Publicly committed to achieve 50% BEE- spend by 2005 Target already reached Value of the target is a “moving” one and is adjusted annually as available spend grows 12

Transnet BEE Spend - Progress 13

New BEE- focus… The Policy now makes provision for basically any kind of BEE endeavour and not only HDI-shareholding as in the past n Creating “joint ventures” with existing local- and International suppliers in areas where BEE did not previously exist n Targeting those sectors of the economy where BEE spend is low n Ensuring empowerment of additional Groups identified by the Shareholder, i. e. - women-owned enterprises (WBE) - disabled people owned enterprises (DPBE’s) - SMME’s in general 14

Major contract awards (>R. 5 bn)… n n n n n Agency for Advertising and Marketing GLM Energy and Mineral Kagiso Security Royal Security Letshabile Technology Choice Technologies Bayete Maritime Projects Lukhanyo Transport and Logistics MA Transport Sibanye 15

Maritime BEE contracts awarded… n n n KZN Oils Afrityre-Amasondo CPS Projects Nu-quip Equipment Bond Bayete Maritime Projects 16

BEE as a strategic tool… n Transnet views SMME / BEE growth as a strategic tool to; - grow our market share; - sustain Capitalism; - eliminate poverty; and - contribute positively to enriching the lives of all South Africans 17

Acknowledgement… n n Transnet acknowledges the sustained support from across the procurement spectrum It lauds the genuine efforts of some to play their part in the BEE initiative 18

Assurance to established business… n Bias is allowed in favour of BEE but can be easily offset against genuine efforts by the supplier to promote BEE / SMME by means of; - HDI shareholding & management participation; - employment equity; - skills transfer; - joint venturing; - sub-contracting; - social investment; etc. 19

Evaluation criteria… n n Not a single criterium for evaluation Basket of criteria; - various BEE commitments; - risk; - quality; - delivery; - previous performance / references; - locality; - etc. 20

Thank you… n n Individuals and organisations who have contributed to the development of Transnet’s Procurement Policy Also the critics whose observations are invaluable in; - strengthening the Company; and - assisting it in constantly reviewing the Policy to the benefit of all concerned 21

Thank you QUESTIONS? 22