introduction

1

Table of Contents

List of Tables and/or Figures

List of Tables and/or Figures

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Figure 1:

The Long Term Planning Framework Development Process

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Acronyms and Abbreviations

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Figure 2:

Development of the Long Term Planning Framework

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1. Introduction

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Figure 3:

The Planning Hierarchy

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Figure 4:

Planning Process Alignment

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2. Long Term Planning Framework Development Process

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3. Long Term Planning Framework Evolution

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4. Planning Principles and Outputs

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5. The Transnet Planning Hierarchy

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6. The Transnet Planning Cycle

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7. The Ltpf 2015

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4

7.1

Rail Development Plan

7.2

Port Development Plan

7.3

Pipeline Development Plan

7.4

Africa Transport Demand and Infrastructure Planning

7.5

Gas Infrastructure Planning

7.6

Capital Planning

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Foreword

Acronyms and Abbreviations

CP

Corporate Plan

CPRC

Central Port and Rail Corridor

EPRC

Eastern Port and Rail Corridor

FSRUs

Floating Storage and Regasification Units

While the Corporate Plan articulates the MDS and intent intent for the next seven to 10 years, the Long Term Planning Framework (LTPF) recognises the fact that large infrastructure investments often require a longer term planning horizon and therefore it maps the capacity expansions and interdependencies over a longer term horizon of 30 years. It also recognises that Transnet’s assets have a very long productive life and some benefits can only be appreciated and realised by considering the transportation system as a whole, over a longer period of time.

GBP

Gauteng Basin Plan

HDSA

Historically Disadvantaged South Africans

LNG

Liquefied Natural Gas

MDS

Market Demand Strategy

MPP

Multi-product Pipeline

The benefits of long term planning will take time to materialise and are unlikely to be felt in the short- to medium term. However, a lack of planning is felt when it’s too late, affecting future generations. The ability to understand long term benefits and impact of planning scenarios based on short term decision making is an important role of long term planning. It ensures decisions made today are sustainable in the long term.

NIP

National Infrastructure Plan

OEM

Original Equipment Manufacturer

PICC

Presidential Infrastructure Coordinating Commision

PRC

Port and Rail Corridor

Sometimes good investments have an element of luck to them, but the value of planning is not measured in the accuracy of ‘predicting’ the future. Instead, the value lies in the alignment and ability to guide various components of an organisation to move in the same direction.

SRL

Swaziland Rail Link

TE

Transnet Engineering

The LTPF offers such and alignment framework for Transnet to plan towards the same future. Over the past nine years, the LTPF has evolved to become a reference source for planners and strategists within Transnet and various stakeholders outside.

TFR

Transnet Freight Rail

TIP

Transnet Infrastructure Plan

TNPA

Transnet National Ports Authority

TPT

Transnet Port Terminals

WPRC

Western Port and Rail Corridor

The ability to plan ahead is a common characteristic shared by many successful organisations throughout history. As a large and complex organisation, the need for forward planning in Transnet is even more critical, to ensure allignment, integration and coordination in a continuously changing environment.

Group Planning

Disclaimer This is a Transnet SOC Ltd document published by Transnet Group Planning. This publication is Transnet’s Long Term Planning Framework, which projects an unconstrained 30-year view of the demand and capacity requirements to meet future freight demand. This document is used as a resource tool by the Transnet planning community. This document is the property of Transnet SOC Ltd Group Planning. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means including photocopying, recording, or other electronic or mechanical methods, without the express or prior written permission of Transnet SOC Ltd, except in the case of brief quotations embodied in critical reviews and in certain non-commercial uses permitted by copyright law. Enquiries: Enquiries on content of this chapter can be made to the office of the Executive Manager: Planning Integration in Group Planning on 011 308 1102. 6

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1. Introduction

Transnet’s Long Term Planning Framework (LTPF) provides the Transnet business and broader stakeholder community with a planning framework within which the long term development of South Africa’s freight transportation network and the expansion of Transnet’s operational footprint can be executed. Driven by freight demand projections for the next 30 years, the LTPF provides the capacity development and investment opportunities that are needed to ensure Rail, Port and Pipeline capacity is developed in an integrated manner ahead of demand. The LTPF is not an operational planning blueprint, but rather a long term unconstrained framework that identifies the movement of freight locally and regionally and considering this demand, projects the infrastructure and capital requirements needed to meet that demand. As a framework, the objective of the LTPF is to guide strategic investment decisions and offer an impartial view of capacity requirements not impacted by affordability, profitability and other business constraints. The LTPF thus provides guidance, direction and context within which Transnet’s short term seven-year business plan (Corporate Plan) is prepared alongside the Market Demand Strategy (MDS). The Corporate Plan differs from the LTPF in that it considers business risk, capital availability, implementation constraints and market commitments in determining what will be executed in the next seven-year period. Further, the LTPF is extensively shared with Transnet’s Shareholder, thereby acting as an important link between national developmental strategies, policies and corporate capital plans. The LTPF is then positioned to provide Government with sound future projections, which may then inform strategic countrywide decisions. The LTPF 2015 contains the following improvements and enhancements from the previous edition: • Energy demand forecasts: Energy demand forecasts have been added in Chapter 2 to show how Transnet’s energy profile will potentially change in the future. Energy demand for Transnet Freight Rail (TFR) in particular is recognised as a major driver for long term infrastructure development and as such, needs to form part of the LTPF. A direct mapping of energy demand and capacity is envisaged for inclusion in the 2016 edition of the LTPF. 8

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2. L  ong Term Planning Framework Development Process

• Improvements and additions in the rail chapter: The view of rail as corridors has been further developed and refined in this edition, providing inputs on yards and terminals requiring upgrades as a result of improvements or changes in operational philosophy along the rail line. The rail chapter also has a new embedded structure to improve its usability as a reference document. All core network systems have the same structure in the document so a user can quickly access information required. A standardised view of the network has been promoted, incorporating the necessary infrastructure reconfiguration to allow for the new dual voltage locomotive fleet in the short term leading to conversion to 25kV AC traction strategy in the medium- to long term. The distributed power technology is adopted for most corridors where it provides the most optimal operating model. The supporting infrastructure includes compilation yards and the consolidation of loops strategically positioned to facilitate efficient operations and maximise network slot utilisation.

The LTPF is updated annually and the development process stretches over a 15- to 18-month planning cycle. Figure 1 provides a visual representation of the long term planning logic adopted. LTPF Development Process Current network infrastructure

Installed capacity (current)

• Expanded gas infrastructure chapter: The gas chapter has been expanded to include potential port and pipeline gas infrastructure across South Africa. The drivers for natural gas in South Africa are comprehensively updated, including feedback and alignment with Government’s energy war room and Operation Phakisa initiatives. Gas energy for electricity generation has been included in the infrastructure options, along with the potential use of power barges. Gas infrastructure has focussed on three key regions, namely the Western Cape (Port of Saldanha Bay), Eastern Cape (Port of Ngqura) and KwaZulu-Natal (Port of Richards Bay). • Enhanced Africa transport demand and infrastructure planning chapter; The Africa chapter has been updated with a regional infrastructure assessment study completed early 2015. A notable improvement is the addition of a ranking of infrastructure projects on the continent, allowing Transnet to develop specific strategies around areas of interest. A condition and capacity assessment was conducted of railways outside the borders of South Africa, leading to opportunities being identified for Transnet’s involvement.

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Capacity required

Capacity gaps

(future)

Energy needs

• Interventions • Development potential • Scenario planning

• Improvements and additions in the ports chapter: The LTPF 2015 port chapter includes new introductory sections such as a maritime economic review, summary of potential new port sites along South Africa’s coastline and a deeper reflection and response to key Government strategies. Sustainability across the existing port system, as well as within proposed expansion plans, has also been reflected in more detail. New emerging technologies now also include vessel navigation, port security and new initiatives in port maintenance. The demand forecast includes an updated beneficiation scenario with an added Original Equipment Manufacturer (OEM) vehicle plant. Property planning has also been added as a new section.

• Improved pipeline development chapter: The pipeline chapter has largely been updated based on the current work being undertaken to develop Transnet’s liquid fuels master plan. The latest new MPP expansion plans have also been incorporated, as well as a proposed fuel import terminal in Durban. Updates in Government and industry plans have been reflected in the timing of key projects, such as the development of new refining capacity and implementation dates on Clean Fuels 2 requirements.

(30 years)

Capacity development initiatives

The capacity creation process adopts the MDS programmes to alleviate capacity constraints in the initial phases of capacity planning and subsequently roll out new interventions to further provide capacity to match the forecast demand. A view is also provided of how these interventions add to capacity.

The individual port plans now include major project lists across the port system, along with more detailed capacity planning with alignment across the berth, terminal and external transport modes, as well as a more detailed assessment of importing Liquefied Natural Gas (LNG) through the port system.

Freight demand forecast

(future)

Project plans

MDS demand

(most likely)

Capital requirements

(30 years unconstrained)

Aligned

1.  Introduction (continued)

(7 years)

Capital requirements gap

Corporate Plan (7 years)

Figure 1: The Long Term Planning Framework Development Process

On the left hand side of Figure 1 is the current installed capacity of the network and the infrastructure for rail, ports and pipelines. The implication is that with the current infrastructure the organisation has certain capacity that allows it to handle up to a specific capacity of freight on the various rail networks, the ports as well as the pipelines. On the right hand side, the primary input is the 30-year freight demand forecast as published in the Transnet Demand Book every April. This forecast is used to determine how much capacity will be required in future. By comparing installed capacity with future capacity needs, it is easy to see when capacity will run out and how much new capacity would need to be created, and when it will be required. Capacity planning specialists then produce a range of possible key capacity development initiatives (also known as KCDIs) to ensure capacity is provided marginally ahead of demand. These intervention options are evaluated and ranked and the most likely interventions are selected for inclusion in the LTPF. In producing the 30-year capital requirements, Group Planning also takes all current capital projects into consideration. There will necessarily, be differences between the unconstrained capital needs produced in the LTPF and the fundable and constrained capital plans of the Corporate Plan. This difference is called the “Capital Requirements Gap” and by analysing in detail how the two plans differ, it is possible to ensure longer-term guidance and alignment. This intelligence is thus used for the continuous improvement of the annual capital budgeting process. An outflow of this process is the energy needs of Transnet in the future that is derived from the volumes to be transported as well as the infrastructure and equipmentment that will be utilised.

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3. Long Term Planning Framework Evolution

Originating in 2006 as a simplified long term plan, the then publication focussed on Port and Rail corridor development plans. In subsequent editions (called the NIP and TIP) the focus was mainly on infrastructure capacity development and alignment between port, rail and pipeline plans. The framework evolved over time by progressively broadening and deepening its scope to become more holistic, to the point where the first LTPF was released in 2012. This evolution is depicted in Figure 2. Port and Rail Corridor (PRC) development plans

National Infrastructure Plan (NIP)

• Port and rail infrastructure status quo analysis on eastern, central and western freight corridors

• First integrated port, rail and pipeline development plan

• Five-year freight demand • No capital plan

• Rail plan based on scientific 30-year demand analysis • First five-years based purely on Transnet Corporate Plan • Approved by Cabinet

Transnet Infrastructure Plan (TIP) • Desktop-published update • Further refinement of freight demand model • Port fleet and rolling-stock plan added • Intensive stakeholder engagements with infrastructural response • Integrated environmental planning identified as critical • Property and sustainability modules added

2006 - 2007

2008

2009-2010-2011

Long-term Planning Framework (LTPF) • Greater integration with Corporate Plan • New focus on Transnet’s developmental role • Fully integrated long term port, rail, pipeline and property plans • Added sustainability chapter and energy forecast • Integrated planning, Africa and natural gas chapters added

• Re-organisation of chapters • Improved chapters: > Gas > Africa > Pipelines • Sustainability specific to infrastructure capacity development plans • Systems approach for capacity planning

Transnet and the planning community are now accustomed to the Long Term Planning Framework, which is produced and printed annually in July. The LTPF has continued to evolve as business needs come to the fore. Major improvements to the LTPF over the past four years include: • • • •

Alignment of the plan with the National Planning Commission’s National Development Plan; Inclusion of sustainability principles in infrastructure development planning; Alignment of the plan to Transnet’s Shareholder Compact and Corporate Plan; Incorporation of regional freight demand and capacity planning, considering the Southern African Development Community and the overall Africa status quo; • Introduction of gas; and • The first Transnet-wide energy demand forecast. It is envisaged that the LTPF will continue to evolve but remain focussed on the main purpose of showing long term capacity expansion options. The LTPF executive summary (this publication) only shows the most likely, summarised results extracted from the full body of knowledge of the LTPF. From 2015, the planning team aims to distribute a series of corridor-focused system reports that goes deeper into specific developments and options for clustered supply chains such as the ore line, coal system, Durban – Gauteng system, etc. In addition, the team has planned specific business-related forward-thinking papers, such as an intensive deep dive into the rail gauge challenge locally and regionally.

• National Beneficiation Scenario added

2012-2013-2014

Long Term Planning Framework

2015

Figure 2: Development of the Long Term Planning Framework

Port and Rail Corridor Development Plans The early 2006 and 2007 development plans launched included the Eastern, Central- and Western Port and Rail Corridor studies (EPRC, CPRC and WPRC) to assess overall infrastructure investment needs across the rail and ports network. Shortly afterwards a Gauteng Basin Plan (GBP) was added, as well as the first 10-year view of freight demand. The initial development plans excluded a total capital cash flow view but did include detailed capital estimates for individual projects.

National Infrastructure Plan 2008 saw the first cross-divisional integrated port, rail and pipeline development plan. Included in this edition was the first five-year capital plan which was based on the Transnet Capital Programme as well as a comprehensive 30-year plan for the entire rail network based on a scientific analysis of local freight demand. The NIP was presented to the Shareholder and to the Parliamentary Committee on Transport. A road-show followed to all major regions.

Transnet Infrastructure Plan The Transnet Infrastructure Plan (TIP) was the first desktop published version which was circulated both within the business and to Transnet’s Shareholder. The TIP included the first unconstrained 30-year capital plan, integration of environmental planning as well as alignment with the national New Growth Path. In addition to port fleet and rolling stock fleet development plans, the TIP incorporated the rail-asset condition impact in the development plans.

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5. The Transnet Planning Hierarchy

4. Planning Principles and Outputs A set of planning principles is followed in the development of the LTPF and is fundamental to the use of the framework. The 10 main principles adopted are: 1. Provide capacity marginally ahead of demand to enable and promote economic growth in South Africa and in the region; 2. Adopt sustainability principles as part of development plans, including improved energy efficiency and reducing carbon emissions; 3. Integrate rail, port and pipeline planning within Transnet; 4. Pursue alignment with national road and electricity supply planning; 5. Assume that operational efficiency is optimised first, then consider infrastructure-based capacity solutions; 6. Target rail suitable freight to shift from road-to-rail; 7. Benchmark internationally on world class handling services, new technologies and best practices; 8. Plan to improve South Africa’s global competitiveness by reducing the total cost of freight transport and logistics; 9. Identify opportunities in Africa and leverage the economies of scale in global trade; and 10. Provide responsive infrastructure that meets South Africa’s economic needs in line with the New Growth Path and the National Development Plan.

Planning within Transnet takes place at various levels. While each level will address capacity planning in a different way, it is important to ensure that planning efforts are fundamentally aligned and aim towards the same future objectives. The LTPF provides an important link between national and provincial masterplans and policy; and the corporate strategy or MDS. The influence goes both ways in that the LTPF both informs and reacts to both levels of planning. Level 1 NATIONAL AND PROVINCIAL PLANNING: Where: National and Provincial Government What: National and Provincial Government Plans, PICC, etc Purpose: Developmental strategies and enablement Timescale: 10 to 50 years

It is important to understand that the LTPF is not constrained by fundability, affordability and commercial viability. It is also not concerned with the ultimate ownership and regulatory regimes to govern infrastructure ownership in the future. This approach is intentional and consistent with framework planning best practices.

Level 2 LONG-TERM PLANNING: Where: Transnet-wide What: Long-term Planning Framework (LTPF) Purpose: LT capacity and sustainability planning Timescale: 30 years

Level 3 CORPORATE STRATEGIC PLANNING: Where: Operating Divisions and Transnet Corporate What: MDS and Corporate Planning Purpose: Strategic target, integration and funding Timescale: 7 to 10 years rolling

Level 4 BUSINESS PLANNING: Where: Operating Divisions What: Business Plans, Operating Divisions Strategic Plans Purpose: Resource planning and strategic enablement Timescale: 7 to 10 years rolling

Level 5 OPERATIONAL PLANNING: Where: Operating Divisions What: Operational Plans Purpose: Resource allocation and fulfilment Timescale: Day-, week-, month-, months ahead

Figure 3: The Planning Hierarchy

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Level 1: National and Provincial Planning The planning frameworks typically associated with this level include the national development plan, national transportation masterplan (NATMAP), the PICC’s SIPs and a variety of provincial and local masterplans. The focus of these plans is typically developmental and may stretch as far as 50 years into the future. Transnet formally interacts with the associated planning structures and in many cases assists in formulating plans or provide essential inputs for planning. There are also many informal or ad hoc interactions with stakeholders who assist in formulating the LTPF or see the LTPF as a source of information.

Level 2: Long Term Planning Framework The MDS’s capital plans are framed by the 30-year LTPF (Long Term Planning Framework). The LTPF is produced annually by Group Planning, with support from both the operating divisions and key external stakeholders. It provides the business and broader stakeholder community with a planning framework within which the long term development of South Africa’s freight transportation network and the expansion of Transnet’s operational footprint can be executed. The LTPF is clearly an important input to the Transnet Corporate Plan. It uses an aligned (not matched) seven-year and an unconstrained 30-year view of demand. It is therefore a framework to guide strategic investment decisions and offers a neutral view on capacity requirements not impacted by affordability, profitability and other business constraints. The LTPF and Corporate Plan will inevitably differ, since the Corporate Plan considers affordability, funding and commercial constraints.

Level 3: Transnet Corporate Plan Transnet’s Corporate Plan is prepared on an annual basis by the Transnet Group Executive Committee and is approved by the Transnet Board. The Corporate Plan: • Aligns the defined strategy, objectives and plans with the requirements of the Shareholder as agreed in the Shareholder’s Compact; and • Outlines Transnet’s strategy, objectives and plans, and details the initiatives that will be implemented to achieve the Company’s strategic objectives, thereby enabling it to deliver on its mandate in the next financial year as well as the following six years. The preparation of the Corporate Plan follows a robust and structured process involving, inter alia, the Board of Directors and the Group Executive Committee of Transnet, and flows from a culmination of various activities, initiatives and processes within Transnet. 15

6. The Transnet Planning Cycle

7. The LTPF 2015

Figure 4 illustrates the planning cycle and the alignment that takes place in the process. This process stretches over an entire financial year.

7.1 Rail Development Plan

Quarter 1 LPTF Sustainability Plan Corporate Plan 1 April

Align freight demand with Corporate Plan

Final published LTPF

Quarter 4

LTPF vs CP analysis and capacity plans alignment Initiate next demand update cycle

Corporate Plan

The Swaziland Rail Link (SRL) has been shown in utilisation charts for the first time, showing the capacity of SRL as well as the effect on the surrounding affected systems, thus expanding the understanding around the effects of this new system.

7.2 Port Development Plan

Receive Demand Updates

Market demand research Sustainability Performance review

The rail development plans have a new element of reliability; rolling stock models have been upgraded and refined to provide a better representation of journey times, dwell times and turnaround times.

Train authorisation has also been reviewed in the emerging technology section. While Transnet is not currently implementing in-cab signalling, research on this technology is currently underway.

Sustainability report

Draft LTPF

A brief description of highlights in the various chapters is given below.

Board strategy workshop

Update sustainability KPIs

Capital budgeting

Publish Unconstrained Demand

Quarter 2

Update port, rail and pipeline BOKs

Highlights of the port chapter include an overview of potential new port sites along South Africa’s coast, a sustainable response for future port development, interesting new emerging technologies, an update to Durban’s container capacity planning, as well as a more comprehensive assessment of import options for natural gas through the port system. 7.3 Pipeline Development Plan The pipeline chapter includes highlights such as identified new pipeline, terminal and storage investment opportunities in South Africa. A key highlight is also the improved planning across the liquid fuel system, from better engagement with key stakeholders such as Government, oil majors and Historically Disadvantaged South Africans (HDSA) players.

Sustainability-LTPF alignment

OD engagement on capital budget. Develop unconstrained capital investment requirement

7.4 Africa Transport Demand and Infrastructure Planning The Africa chapter includes an assessment and ranking of rail, port and pipeline projects on the continent, indicating the appetite Transnet would have for specific projects. Information was also extracted on possible threats to South African operations by developments elsewhere on the continent.

Quarter 3

Figure 4: Planning Process Alignment

7.5 Gas Infrastructure Planning

The LTPF planning cycle is divided into the following four quarters:

Highlights in the gas chapter include an update to the fast-evolving gas energy landscape, drivers for natural gas use, as well as Government initiatives. The chapter includes a new section on potential port and pipeline infrastructure required to import and distribute gas in South Africa, including Floating Storage and Regasfication Units (FSRUs), power barges and land-based gas power generation.

1st quarter: April – June

2nd quarter: July – September

• Long Term Planning Framework is completed and published. • Demand Book (Aligned) is published.

• Receive demand updates from several sources and process. • Produce Demand Tables (Unconstrained) for next planning cycle. • Develop early capacity options for port, rail and pipeline development based on Demand Tables (Unconstrained). • Update the installed capacity of port, rail and pipeline networks.

3rd quarter: October – December

4th quarter: January – March

• OD engagement on demand target setting and alignment. • OD engagement on unconstrained capacity plans and capital budgeting. • Finalise unconstrained content chapters towards LTPF draft.

• Compile the final draft LTPF and circulate to internal stakeholders. • Analysis of capital submissions in Corporate Plan vs. LTPF seven-year plan. • Initiate demand update process for the next cycle.

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7.6 Capital Planning The capital planning chapter includes an analysis to illustrate how the rolling 30-year plans have evolved over the last few years, in line with global and domestic economic expectations. An analysis was also added to show the possible long term capital requirements of the Presidential Infrastructure Coordinating Commission’s (PICC) associated Strategic Integrated Projects. The gas infrastructure requirements were also singled out as an independent commodity although the details of these projects are included as part of port and pipeline infrastructure requirements.

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Notes

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