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MONTHLY COMMERCIAL GM FORUM

CONFIDENTIAL. MONTHLY COMMERCIAL GM FORUM. 18 April 2008. INTRODUCTORY STATEMENTS FROM LAST WORKSHOP SHOULD GUIDE DISCUSSION. “As TRE we focus on rail; we would like to identify other learnings” – Thoba.

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MONTHLY COMMERCIAL GM FORUM

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  1. CONFIDENTIAL MONTHLY COMMERCIAL GM FORUM 18 April 2008

  2. INTRODUCTORY STATEMENTS FROM LAST WORKSHOP SHOULD GUIDE DISCUSSION “As TRE we focus on rail; we would like to identify other learnings” – Thoba “Transnet is not hungry enough. How can Group Commercial optimise asset utilisation for maximum benefit?” – Irvindra “How do we work together” – Leon “What is expected of us as Group Legal. We have a job to do and, therefore, need to understand what Commercial will require of us” – Saaks “We need to focus our strategy and not confuse it further” – Leon “Budgets and business plans have been submitted, therefore how are we going to change?” – Lauriette “As a team we need to be clear about what our value add is going to be, what our different roles and responsibilities are going to be and what the nature of the matrix working is going to be. There should be no holy cows” – Ravi “TPT is very much about logistics, that’s why supply chain management is part of Commercial with TPT. There will, therefore, be differences and our challenge will be to build strategy together so that there is buy in, and aligned reporting” – Nosipho “We need further clarity on solid and dotted reporting lines” – Leslie Source: Team analysis

  3. Establish monthly Commercial GM forum • Continue discussion from first workshop on shaping Transnet Commercial team • Align on detailed interaction routines between Group Commercial (GC) and commercial GMs for key commercial tasks (including reporting) • Finish setup phase of GC and agree on concrete action steps OBJECTIVES OF TODAY’s GM FORUM Source: Team

  4. 08h00-08h30 • Welcome, workshop objectives and recap of discussion so far • 08h30-09h00 • Overview on organisational setup of GC • 09h00-12h30 • Interaction routines for first commercial tasks • 09h00-09h45 • Corporate account management • 09h45-10h00 • Tea break • 10h00-10h45 • Market research • 10h45-11h30 • Pricing processes and tools • 11h30-11h45 • Tea break • 11h45-12h30 • Capability building • 12h30-12h45 • Branding/advertising • 12h45-13h00 • Contracting • 13h00-16h15* • Monthly GM forum • 13h00-15h30 • Corporate accounts: Review of critical areas and identification of cross-OD integration needs • 15h30-16h00 • Private sector partnership • 16h00-16h15 • GC SPOs • 16h15-16h30 • Closing SUGGESTED AGENDA • Timing • Topics • 12h30-13h00 • Outlook on other commercial tasks * Including working lunch Source: Team

  5. 106.7 RECAP: AN INTEGRATED COMMERCIAL APPROACH IS IMPERATIVE TO ACHIEVE TRANSNET’s FOUR-POINT GROWTH STRATEGY • Strategy dimensions • Growth through • Re-engineering – integration, productivity and efficiency • Capital optimisation and financial management • Safety, risk and effective governance • Human capital execution • Strategyelements • Priority corridors • Cross-divisional operational integration • Efficient asset utilisation • Cost-effective procurement • Shared services • Integrated capital, operations and financial customer planning • Focused investment for growth • Capital portfolio optimisation • Strategic asset/ liability management • Funding strategy • Delivery on safety performance • Highest standards of corporate governance • Risk management • Enterprise performance management (EPM) • Implementation of HC strategy • Talent management • Remuneration based on perfor-mance value and culture • Enablers of/by GC • Increase in share of wallet through cross-business coordination • Group-level optimisation and decision making • Integrated key account planning • Consistentpricing strategies • Management of key risk areas for Transnet (e.g., legal, pricing) • Standardisationof contracts • Attracting and retaining commercial capabilities and skills to accelerate commercial transformation • Develop best-in-class capabilities and skills Source: Team analysis

  6. RECAP: IN LAST WORKSHOP, KEY TASKS HAVE BEEN PRIORITISED TO FUEL TRANSNET‘s COMMERCIAL TRANSFORMATION • Initialpriorities 1 3 • Leadership aspirations and conviction • Capability building and actions • Capturing increased share of wallet by accelerating volume growth • Delivering on the integrated promise • Upgrading commercial capabilities F • Ensuring cross-pollination of best practices 2 • Commercial enabling elements • Corporate account management and development A 4 • Mindsets and behaviours D • Market research • Pricing processes and tools • Group-level optimisation (e.g., profitability) • Collaborative culture across ODs and with centre • Speeding up commercial decision making – ensuring commercial has a voice in Group decision making B • Establish corporate contracting standards C • Branding – corporate communications around large events E • Further alignment needs • Branding • Advertising • Corporate strategy 5 • Transformation acceleration • Clear mandates/roles and interaction routines/protocols between GC and ODs (including single point of contact for customer) as well as relevant corporate stakeholders Source: Commercial GM Workshop, 5/6 Mar 2008

  7. Current focus • Filling positions within Group Commercial ROADMAP FOR ESTABLISHING GC DEVELOPED CONSIDERING IMMEDIATE PRIORITIES • Integrating pricing • Shaping first corporate accounts • 16 Jun-19 Sep (3 months) • Setting up for success • Development of consistent pricing strategy and tool across ODs for 3 accounts (including conceptual foundations, data gathering, tool programming) • Training a group of practitioners across ODs that can roll out the tool • Phases • 14 Apr-13 Jun (2 months) • Execution of interim organisation setup/filling in for corporate account executives for 3 accounts* • Roadmap and plan for taking over all identified corporate accounts • Timeline • 18 Feb-11/18 Apr (1.5 months) • Focus • Setting up GC • Organisational design • Interim operating model with ODs • Developing and facilitating 2 GM workshops * Depending on nature of support required, i.e., consolidation of reports/information vs leading role in corporate account management (including account planning and execution) Source: Team

  8. RECAP: WITH END OF THE DESIGN PHASE REACHED, ROLES AND RESPONSIBILITIES DETAILED WITH CHAMPIONS • Today’sfocus • Suggested approach for detailing interaction routines • Overall idea • Key steps and timeline • ‘Champions’ assigned to individual tasks • Corporate account management (Karl) • Pricing processes and tools (Ravi) • Establish corporate contracting standards (Lauriette) • Market research (Nosipho) • Branding – corporate communications around large events (Thoba) • Interaction blueprint circulated up front • Discussion focused on critical tasks • Identification of immediate next steps and concrete actions • Preparation of drafts as discussion starter by team • Discussion with GMs on • ‘Championed task’ • Other areas of concern • Update of interaction routines with GM feedback by team • Distribution of interaction blueprint manual to GMs and GC as pre-read • GMs and GC to highlight critical areas for individual tasks • Discussion of critical elements led by individual ‘champions’* • Discussion of examples and best practices • Finalisation and alignment on routines • 17-20 Mar • 25 Mar-4 Apr • 8 Apr • 11 Apr (18 Apr) * Corporate account management, market research, pricing, capability building discussed in detail; other 2 key tasks (contracting standards, communication around large event) to be discussed in detail in subsequent session Source: Team

  9. A • Corporate account management • Conceptualisation of deals • Internal account review • Karl • Workshop, 18 Apr 2008 C • Establish corporate contracting standards • Developing contracting standards • Lauriette • Overview, 18 Apr 2008 • Detailed discussion in following workshop (May 14) D • Market research • Setting of research agenda • Stocktaking • Nosipho • Workshop, 18 Apr 2008 B • Pricing processes and tools • Pricing philosophy • Pricing tools • Pricing governance • Ravi • Workshop, 18 Apr 2008 E • Branding – corporate communications around large events • Sharing of event calendar • Coordination of activities • Thoba • Overview, 18 Apr 2008 • Detailed discussion in following workshop (May 14) F • Capability building • Assessment of skills • Development of training curriculum • Leslie • Workshop, 18 Apr 2008 CRITICAL AREAS FOR THE FIRST TASKS WILL BE DISCUSSED TODAY; OTHERS TO FOLLOW • Tasks • Critical areas • Champion • Discussion slot Source: Team

  10. 08h30-09h00 • Overview on organisational setup of GC • 09h00-12h30 • Interaction routines for first commercial tasks • 09h00-09h45 • Corporate account management • 09h45-10h00 • Tea break • 10h00-10h45 • Market research • 10h45-11h30 • Pricing processes and tools • 11h30-11h45 • Tea break • 11h45-12h30 • Capability building • 12h30-12h45 • Branding/advertising • 12h45-13h00 • Contracting • 13h00-16h15* • Monthly GM forum • 13h00-15h30 • Corporate accounts: Review of critical areas and identification of cross-OD integration needs • 15h30-16h00 • Private sector partnership • 16h00-16h15 • GC SPOs • 16h15-16h30 • Closing SUGGESTED AGENDA • Timing • Topics • 08h00-08h30 • Welcome, workshop objectives and recap of discussion so far • 12h30-13h00 • Outlook on other commercial tasks * Including working lunch Source: Team

  11. ORGANISATIONAL BLUEPRINT DEFINED TO REFLECT OVERALL TRANSNET STRATEGY • Provide one face to the customer while incorporating OD-specific expertise • Ensure organisational efficiency/do not duplicate structures Four design principles • Offer ODs support to leverage existing capabilities • Create collaborative change-oriented environment Source: Team

  12. CORPORATE ACCOUNT MANAGEMENT AND BUSINESS ENABLEMENT AS KEY PILLARS • Group Executive Commercial • Corporate Account Executive (Coal) • Business enablement manager • Adminis-tration and reporting manager • Pricing manager • Contracting manager • Knowledge and best practice manager • Talent and capability manager • Marketing manager • Corporate Account Executive (Other bulk*) • Corporate Account Executive (Liquid bulk) • “Foster inter-OD standards and best practices around commercial issues in Transnet” • Corporate Account Executive (Container/Automotive) • “Deliver on integrated promise for corporate accounts and increase Transnet’s share of wallet” * Iron ore, manganese, cement Source: Team

  13. 08h00-08h30 • Welcome, workshop objectives and recap of discussion so far • 08h30-09h00 • Overview on organisational setup of GC • 09h00-12h30 • Interaction routines for first commercial tasks • 09h00-09h45 • Corporate account management • 09h45-10h00 • Tea break • 10h00-10h45 • Market research • 10h45-11h30 • Pricing processes and tools • 11h30-11h45 • Tea break • 11h45-12h30 • Capability building • 12h30-12h45 • Branding/advertising • 12h45-13h00 • Contracting • 13h00-16h15* • Monthly GM forum • 13h00-15h30 • Corporate accounts: Review of critical areas and identification of cross-OD integration needs • 15h30-16h00 • Private sector partnership • 16h00-16h15 • GC SPOs • 16h15-16h30 • Closing SUGGESTED AGENDA • Timing • Topics • 12h30-13h00 • Outlook on other commercial tasks * Including working lunch Source: Team

  14. 60.7 • Challenge: Transnet is not capturing full potential with their customers • Durban port volume distribution • Mt (FY 07) RECAP: INTEGRATED MANAGEMENT TO ADDRESS CURRENT KEY CHALLENGES • Challenge: customers are dissatisfied with current Transnet experience • ‘Transnet business units close their eyes to the rest of the supply chain’ • ‘Transnet needs to look at the big picture of the customer, at the whole chain of influence’ • ‘Transnet does not understand our business’ • ‘There is no relationship at a strategic level’ • ‘Poor interaction with the customer’ • ‘They do not listen to us; we really need to work together’ • Interaction with different unaligned business units • Establishment of integrated corporate account management to overcome challenges • 60.7 • 4.9 • 22.8 • With realisation of . . . • 33.0 • 10.0 • Already on rail • Increased operating profit R600m x • 30%** = • 6.9 mt = • 23.0 • Potential • Volume TPT • Trans-shipped cargo • Liquid* fuel • Sui-table for rail *Conveyed by Transnet Pipelines (formerly Petronet) **Kwazulu-Natal GGP as a percentage of GDP is about 20% Source: Argil (number of respondents = 12); Group CE (Presentation to Board of Directors, 14 Feb 2008); Team

  15. OUT OF THE TOP TEN STRATEGIC ACCOUNTS PER OD, 9 HAVE INITIALLY BEEN SELECTED • Suggested initial selection • Multinational or multi- commodity account • Revenues with Transnet greater than R0.8bn • Multi-OD relationship • Transnet strategic accounts • Corporate • accounts • ArcelorMittal • Xstrata • BHP (incl. Samancor Manganese) • Anglo (incl. Kumba) • Assmang • Foskor • Afrisam • Samancor Chrome • Eskom • Sasol • PPC • Holcim • Total • Shell • Engen • BP • Chevron • Maersk • MSC • MOL • COS • SAFCOR Panalpina • ISS Voigt • GM Arcache Shipping • Rennies Ships • TAS Express • UTI • Rohlig – Grindrod • Toyota • ArcelorMittal • Xstrata • BHP Billiton • Anglo • Assmang • Sasol • Maersk • MSC • Special • nominees • Toyota • PPC • Total • BP • Shell • MOL • Initial selection to be reviewed continuously, e.g., based on new insights Source: Transnet; team

  16. OTHER LOGISTICS COMPANIES HAVE SUCCESSFULLY INTRODUCED CORPORATE ACCOUNT MANAGEMENT • Case example – • Solution – Integrated key account management • Starting situation • Company profile • Leading logistics company with multiple divisions (air and ocean, rail, trucking, intermodal, contract logistics) • 59 000 employees, EUR 14bn revenue in 2007 • 1 500 offices in 150 countries • Ambitious growth plans; sustain last year’s growth rate of 24% • Significant importance of large customers • Key account management challenges • Silo mentality between individual operating divisions preventing integrated supply chain offers to customers • Lack of cross-divisional coordination of activities with key customers • Objective – establish new division for management of corporate accounts • Setup approach • 1-year design/setup plan • Selection of 70 corporate accounts, piloting of new organisational setup/process with 5 accounts • Complex organisational setup; organisation reflecting structure of individual customers (e.g., geographies, commodities) Source: Schenker website, Deutsche Bahn annual report 2007, McKinsey

  17. Plan account • Execute plan • Review account • Strategic • Transactional/day-to-day • Reinforce account management through relationships CORPORATE ACCOUNT MANAGEMENT ENCOMPASSES SEVERAL CRITICAL COMMERCIAL TASKS • Main tasks II I III b a IV • Sub-tasks I IIa IIb III IV • Develop and align integrated key account plans* • Conceptuali-sation/detailing of deals • Negotiations • Implementation of operational improvement levers • Ramp-up of targeted volume growth • Strategic crisis management • Day-to-day account management (CRM) • Day-to-day customer service • Proactive crisis management • Internal performance reviews (monthly/quarterly) • Customer satisfaction review (annually) • Manage formal relationships • Top management • Transactional • Day-to-day customer service • Direct marketing * Including volume growth, pricing, operational improvements Source: Team analysis

  18. Plan account • Develop and align integrated key account plans* • Lead • Input/consulted • Group Strategy • Operations • Execute plan – strategic • Conceptualisation/detailing of deals • Negotiations • Implementation of operational improvement levers • Ramp-up of targeted volume growth • Strategic crisis management • Lead • Lead/joint • Lead/joint • Lead/joint • Lead • Input/consulted • Consulted • Joint/informed • Joint/informed • Consulted/informed • Group Finance • Group Legal, Operations, etc. • GCE/COO • CopCos/ OpCos • CopCos/ OpCos • GCE/COO • Review account • Internal performance reviews (monthly/quarterly) • Customer satisfaction review (annually) • Execute plan – transactional/day-to-day • Day-to-day account management (CRM) • Day-to-day customer service • Proactive crisis management • Lead • Lead • None • None • Consulted/ informed • Lead • Lead • Lead • Input • Input • Group Strategy • - • - • - RECAP: HIGH-LEVEL ROLES AND RESPONSI-BILITIES ALIGNED AT LAST WORKSHOP FOR CORPORATE ACCOUNT MANAGEMENT • Role • Sub-tasks • GC • OD • Other • Overall idea • Corporate account executives working closely together with key account counterparts in ODs on strategic issues (incl. strategic crisis management)** • Corporate account executive coordinating different ODs to ensure integration and to capture additional volume • ODs developing plan/execution based on integrated approach • OD counterparts responsible for transactional/day-to-day activities • Reinforce account management through relationships • Manage formal relationships • Direct marketing • - • Corporate and Public Affairs • Lead/none* • Joint • Informed/lead* • Joint * Depending on management level/nature of relationship **Activities covered within process step II-a within the overall corporate account management Source: Commercial GM workshop 5/6 March; team

  19. CORPORATE ACCOUNT EXECUTIVES WILL WORK CLOSELY WITH COUNTERPARTS IN ODs • Account contacts • Group Commercial • ODs • TFR • TPT • Group Executive Commercial • GM Sales and Marketing • GM Sales, Logistics and Commercial • Corporate Account Executives • Business Enable-ment • Market Exe-cutives - sectors* • ME Marketing • Sales Exe-cutives - sectors** • Supply Chain Executive • Com-mercial • T Pipelines • TNPA • TRE • Commercial Manager • GM Com-mercial*** • GM • Strategy and Marketing • Tariff and Pricing Manager • Customer Manager • Business Develop-ment Manager • CRM • New Business Develop-ment • Regu-latory Affairs • Commu-nications Manager • Marketing Manager • Contracts Manager * I.e., energy, automotive, minerals and mining, agriculture and FMCG and timber ** Mining, container and cars, liquid bulk and agriculture *** Additional functions – real estate, procurement Source: Team analysis

  20. CORPORATE ACCOUNT EXECUTIVES SHOULD BE SENIOR PEOPLE WITH DEEP INDUSTRY EXPERTISE PRELIMINARY • Responsibilities/activities • Strategic account management • The corporate account executive is responsible for the development and maintenance of strong professional relationships at top management level for a group of key customers. He has a profound understanding of the customer, its business needs and the market environment. Based on this knowledge he develops an integrated account strategy and plan in cooperation with ODs to provide one face to the customer and identify new or underdeveloped revenue opportunities. Furthermore, he outlines in cooperation with ODs, GS and knowledge and best practice manager the research agenda • Account performance management • The corporate account executive is in charge of the overall account performance across all ODs. He is responsible for meeting performance objectives, monitoring customer satisfaction, reviewing the monthly account reports and addressing performance issues with specific ODs. He also establishes strategic crisis management and consults the OD when managing concrete crises • Coaching of account executives • The corporate account executive coaches and helps to develop skills of the key account managers at OD level. This includes setting up guidelines for customer negotiations and sharing knowledge about changes in market environment • Skills/background • Several years (+15) experience in relevant sectors either in purchasing, strategic management, finance, logistics, operations • Strong communication and interpersonal skills • Familiarity with industry in relevant commodity sector and thorough understanding of business processes involved • At least 5 years of training, group leader and account management experience Source: Team

  21. THIS SETUP HAS PROVEN SUCCESSFUL WITH OTHER COMPANIES FOCUSING ON SIMILAR OBJECTIVES • Corporate key account management – Schenker AG Over 15 years of experience in inter-national account management and planning • Current position – Global Key Account Management • Background • 2001-05 – Regional Key Account Management, Europeand Middle East at Schenker AG • 2000-01 – Regional Sales Management at Schenker AG • 1998-2000 – Key Account Management Sales at Schenker AG • 1995-98 – Route Development USA/Canada east-west bound at Schenker AG • 1989-95 – Route Development USA east bound at Kühne & Nagel • 1987-89 – Line Management Western Hemisphere at Senator Line • Michael • Renner, Germany Source: Xing

  22. FOUR ACCOUNT PORTFOLIOS ALLOCATED TO DEVELOP DEEP INDUSTRY EXPERTISE • Corporate • accounts • Special • nominees • Commodity 1 • Coal • Criteria • Link commodities broadly together with customers • Balance the portfolio of the strategic account managers according to complexity of customers* 2 • Other bulk** 3 • Liquid bulk • Containers/automotive 4 * Complexity of a customer is defined by revenues generated, products offered and subsidiaries to deal with ** Iron ore, manganese, cement Source: Team

  23. Plan account • Develop and align integrated key account plans* • Lead • Input/consulted • Group Strategy • Operations • Execute plan – transactional/day-to-day • Day-to-day account management (CRM) • Day-to-day customer service • Proactive crisis management • None • None • Consulted/ informed • Lead • Lead • Lead • - • - • - • Detailed interaction routines developed and codified in overall interaction handbook • Reinforce account management through relationships • Manage formal relationships • Direct marketing • Corporate and Public Affairs • Lead/none* • Joint • Informed/lead* • Joint DETAILED INTERACTION ROUTINES DEVELOPED FOR ALL TASKS; FOCUS TODAY ON CRITICAL ONES • Focus of next slides/ • afternoon • Role • Sub-tasks • GC • OD • Other 1 • Execute plan – strategic • Conceptualisation/detailing of deals • Negotiations • Implementation of operational improvement levers • Ramp-up of targeted volume growth • Strategic crisis management • Lead • Lead/joint • Lead/joint • Lead/joint • Lead • Group functions** • GCE/COO • CopCos/OpCos • CopCos/OpCos • GCE/COO • Input/consulted • Consulted • Joint/informed • Joint/informed • Consulted/informed • Lead • Lead • Input • Input • Review account • Internal performance reviews • Customer satisfaction review • - • Group Strategy 2 * Depending on management level/nature of relationship ** Incl. Group Finance, Group Legal, Operations Source: Commercial GM workshop March 5/6; team

  24. Target role • Scoping of deal • Lead responsibility • Consulted • Group Finance, Group Legal, Operations, Risk, etc – Consulted • GC to align on deal outline with customer and relevant Transnet stakeholders • Memorandum of understanding • Work plan • Developing work plan for detailing deal • Lead responsibility • Input • . . . • GC to develop work plan • Work plan • Establishing team and working rhythm • Lead responsibility • . . . • . . . • GC to identify key stakeholders and resource requirements • GC to establish working mode/ interaction structure • Team organisation • Meeting schedule • Detailing of deal* • Lead responsiility • Input • Group Finance, Group Legal, Operations, Risk, etc – Input • Key stakeholders to prepare deal components • GC to consolidate and coordinate 1 CONCEPTUALISATION OF DEAL; TARGET INTERACTION ROUTINES DEVELOPED, INTERIM SETUP REQUIRED • Sub-tasks • GC • OD • Other • Interaction routines • Enabler • Conceptualisation of deals/individual transactions * Including commercial arrangements, contracting terms, financial implications, service-level agreements, infrastructure implications Source: Team

  25. A New initiative (e.g., based on integrated key account plans) B Ongoinginitiative 1 IN THE INTERIM, INTERACTION MODELS SHOULD BE DISTINGUISHED FOR INDIVIDUAL PROJECTS • Current challenges preventing immediate implementation of target interaction routines • Suggested approach for implementing cross-divisional initiatives with corporate accounts* • Corporate account executives not in place yet • Key customer relationship man-agement primarily within ODs • Many projects ongoing within established structures (at times multiple years) • Implementation of new interaction routines with GC in leadership role • Prerequisites – resources and capabilities available within GC • Review of initiatives as part of corporate account review • Case-by-case alignment on immediate GC roles and responsibilities, (e.g., project management, support, informed) • Cross-business integration need • Customer relationships • Capabilities within GC/ODs • Alignment on migration path towards final interaction routines * Relevant for various sub-tasks, i.e., conceptualisation of deal, ramping up volume, implementing operational improvement measures Source: Team

  26. Contracting partners • Stakeholders involved 1 SASOL IS AN EXAMPLE OF AGREEMENT ON INTERACTION ROUTINES FOR ONGOING INITIATIVES • Situation overview • Conceptualisation of wagon PPP deal • Sasol wants to purchase speciality wagons to meet their growing demand • TFR-led initiative, started 1.5 years ago; targeted completion date end-Apr 2008 • Potential from cross-divisional integration with TRE request-ed to build/maintain wagons • Sasol identified as a corporate account; involvement of GC to be clarified TFR assets,TFR wagons TFR wagons Sasol • Sale of existing fleet • Development of new wagons and IP sharing arrangement • Maintenance contract • Access and haulage arrangement TRE TRE wagons TRE wagons, TFR infra, TFR NOC TFRNOC TFR NOC, TFR infra,TFR safety Source: Team

  27. Content expertise • Design of structured transactions • Preparation for negotiation • Etc. • Project management • Coordination support • Stakeholder involvement/ alignment • Content alignment (if required) • Development partner • . . . • TFR • GC • GC • TRE • Expertise from restructuring (e.g., out-sourcing services, drafting service-level agreements) • Legal arrangements likely required within deal • Business interest • . . . • Time frame of project • Established structures/relationships • ‘Guardian’ of overall Transnet interest 1 SUGGESTED INTERIM INTERACTION ROUTINE FOR SASOL EXAMPLE • Role • Responsibility • Rationale • All stakeholders to be invited/present in key meetings • Critical information to be shared • Stakeholders being consulted within negotiation preparation Source: Team

  28. 2 PERFORMANCE REVIEW DATES FOR THE REST OF THE YEAR ARE SET • Suggested accounts for detailed discussion* • Discussion leader per account • Monthly GM meetings • Approach • Critical areas of all 14 corporate accounts discussion at monthly forum • As of May detailed discussion of first set of 2-4 accounts; other accounts to follow in subsequent months • In absence of corporate account executives, discussion will initially be led by members of ODs • Quarterly strategic account review with commercial GMs, COO and CEs (optional) • 14 May • MSC, Maersk, Toyota, MOL • Nosipho • 10 Jun • Sasol, BP, Shell, Total • Leslie • 11 Jul • ArcelorMittal, XStrata • Ravi • 13 Aug • Anglo, Assmang, BHP Billiton • Paulo • 12 Sep • PPC, Branding/Advertising • Thoba • 16 Oct • tbd • CAE • 10 Nov • tbd • CAE • 2 Dec • tbd • CAE • Quarterly reviews with COOs to be scheduled * Depending on decision on including special nominee accounts ** If position filled; otherwise interim champion within Group Commercial Source: Team

  29. Get organisational structure approved by GCE (direct reports) • GC (completed) • Advertise corporate account executives • Group HR • Communicate GC organisational setup to key stakeholders across Transnet • GC • Commercial GMs • Prescreen applications and conduct interviews • GC/HR • Conduct monthly account reviews according to schedule/process (including classification of ongoing projects) • GC • Commercial GMs • Follow interim interaction routines for Sasol (as an example) • All stakeholders; led by TFR • Identify and secure resources for developing integrated account plans for first set of 3 corporate accounts* • Identify FY08/09 volume targets for corporate accounts in priority corridors • GC • Commercial GMs • GC IMMEDIATE NEXT STEPS – MANAGING CORPORATE ACCOUNTS • AGREED • Immediate actions needed • Lead responsibility • Organisational setup • Corporate account management * Anglo, Assmang, BHP Billiton Source: Team

  30. GC WILL NOW START TO TAKE A LEADING ROLE FOR THE FIRST 3 CORPORATE ACCOUNTS • FOR DISCUSSION • Apr • May • Jun • Corporate account • management • 14 • 15 • 16 • 17 • 18 • 19 • 20 • 21 • 22 • 23 • 24 • 25 • 26 • Week • Corporate account management - Getting started • Selection of 3 accountsfor pilot of integrated key account approach* • Identification of interim GM sponsors for other corporateaccounts • Alignment on contribution/interaction for other corporate accounts • Development of integratedkey accounts for selected clients • Vision objective, components ofplan • Process for development • Roll-out of process • Support for dealing with priorityissues by selected pilot accounts • Identification of issues and required actions • Prerequisites for success strong participation of ODs • Decision for ownership for specificissues • Implementing support * Current thinking: Anglo, Assmang, Maersk Source: Team

  31. 08h00-08h30 • Welcome, workshop objectives and recap of discussion so far • 08h30-09h00 • Overview on organisational setup of GC • 09h00-12h30 • Interaction routines for first commercial tasks • 09h00-09h45 • Corporate account management • 09h45-10h00 • Tea break • 10h00-10h45 • Market research • 10h45-11h30 • Pricing processes and tools • 11h30-11h45 • Tea break • 11h45-12h30 • Capability building • 12h30-12h45 • Branding/advertising • 12h45-13h00 • Contracting • 13h00-16h15* • Monthly GM forum • 13h00-15h30 • Corporate accounts: Review of critical areas and identification of cross-OD integration needs • 15h30-16h00 • Private sector partnership • 16h00-16h15 • GC SPOs • 16h15-16h30 • Closing SUGGESTED AGENDA • Timing • Topics • 12h30-13h00 • Outlook on other commercial tasks * Including working lunch Source: Team

  32. 08h00-08h30 • Welcome, workshop objectives and recap of discussion so far • 08h30-09h00 • Overview on organisational setup of GC • 09h00-12h30 • Interaction routines for first commercial tasks • 09h00-09h45 • Corporate account management • 09h45-10h00 • Tea break • 10h00-10h45 • Market research • 10h45-11h30 • Pricing processes and tools • 11h30-11h45 • Tea break • 11h45-12h30 • Capability building • 12h30-12h45 • Branding/advertising • 12h45-13h00 • Contracting • 13h00-16h15* • Monthly GM forum • 13h00-15h30 • Corporate accounts: Review of critical areas and identification of cross-OD integration needs • 15h30-16h00 • Private sector partnership • 16h00-16h15 • GC SPOs • 16h15-16h30 • Closing SUGGESTED AGENDA • Timing • Topics • 12h30-13h00 • Outlook on other commercial tasks * Including working lunch Source: Team

  33. MARKET RESEARCH IS TYPICALLY CENTERED AROUND GENERATING CUSTOMER INSIGHTS • Customer insight research wheel • Key questions • What are current customer demands and how will they develop? • How satisfied are customers with products/ services currently offered? • How should products/ services be priced with respect to competition and the customer’s willingness to pay? • How should products/services be promoted Identify opportunities Define value proposition 3. Identify most attractive segments 2. Identify unsatisfied needs 4. Define brand strategy and service offering 1. Identify white spaces and trends 5. Develop granular product/ service offer 9. Measure commun-ication effective-ness Customer insight • Competitor intelligence likewise central to create competitive advantage 6. Define pricing and promotions 8. Develop communication 7. Select Refine and deliver value proposition delivery Communicate value proposition channels Source: Team analysis

  34. OFTEN IT IS NOT SUFFICIENT TO SOLELY UNDER-STAND THE DIRECT CUSTOMER – ALCOA CASE • Common belief • Distinctive insights • Business actions/results • In B2B business, product specifications are provided by the B2C client • Alcoa identified lost drinking opportunities as current Coca­Cola multi-pack size does not fit in fridges • Actions • Partnered with a carton design firm to develop a narrower pack that better fit the ‘dead space’ at the back of the fridge • As a consequence • Results • Coca-Cola purchase cycle reduced from 10 to 7 days • Total can volume grew 10% over 3 months of introduction • Strongly improved business relationships with Coca-Cola • Customers only refrigerate a few cans at a time • Only cold cans are consumed • Customers do not always remember to keep replenishing the fridge • This causes a loss in per capita consumption • Customer • Learning for Transnet • Example coal: It is not sufficient for Transnet to understand it’s direct customers (e.g., on the coal line) but to understand the underlying demand trends (e.g., world demand for coal) Source: Press search; team analysis; McKinsey PAC practice

  35. THE COMPETITOR INTELLIGENCE PROCESS IS SETUP WITH REFERENCE TO SPECIFIC QUESTIONS ON COMPETITION • Strategy 1 • Identify • users • Define user • needs and • identify sources • Key questions 2 • Who are our main competitors • What kind of comparative economics do the competitors have • What is our current positioning with regard to competitors (e.g., market shares, market segments) • What is the expected competitor conduct and sources of advantage ? • Gatherdata CI organi-sation andknowledgemanagement 5 3 • Dis-seminate and share • intelligence • Analyse dataand codifyinsight 4 Source: McKinsey

  36. CASE EXAMPLE DPWN – THE MRSC PROVIDES MARKET RESEARCH SERVICES FOR ALL DIVISIONS • In 64 countries across more than 100 units . . . • . . . the MRSC provides market research information on MRSC* • Markets and market developments (market intelligence) • Brand performance and develop-ment (brand assessment) • Customer satisfaction • Advertising effectiveness • Product development Mail Express Logistics Finance • 30 market researchers that create insights on global express, air and ocean, mail, logistics and finance • In total ~100-150 units * Market Research Service Centre Source: DPWN website; team analysis

  37. CURRENTLY, MARKET RESEARCH IS FRAGMENTED AND CONDUCTED ON GROUP AND OD LEVEL NOT EXHAUSTIVE • Current information • Transnet Group level • Information on macroeconomic trends (global and domestic) • Research on key commodities such as iron ore, coal, manganese, steel, vehicles and containers • High level competitor analysis, primarily profiles of key logistics players • Collection of general reports covering global and domestic topics (e.g., World Bank Logistics Performance Index, State of logistics, Barlow Supply Chain foresight,) • Rail freight • Mostly research on key commodity markets, primarily • Coal • Iron ore • Chrome • Manganese • Cement • Steel • Terminals • Detailed information on commodity markets, primarily • Containers • Cars • Pipelines • Mostly information on commodity markets, primarily • Gas • Liquid fuels Source: Team analysis

  38. 46 PROPOSAL AROUND ROLES AND RESPONSIBILITIES FOR MARKET RESEARCH • AGREED • Analysis of results and development of actions • Execution of actions and progress review • Definition of research agenda • Conduct of market research • Research topics • Roles • GC • Informed • Jointresponsibility • Jointresponsibility • Industry trends • Instituted process • Deep knowledge of commodities that customers operate in and macroeconomic data • ODs • Joint responsibility • Informed • Group Strategy • Lead responsibility • Consulted • Informed • GC • Lead responsibility • Lead responsibility • Customer insights • Jointresponsibility • Jointresponsibility • Deep understanding about customer demands with reference to products/services • ODs • Strong involvement • Informed • Work in progress • Group Strategy • Consulted • Informed • Consulted • Informed • Competitor information • GC • Strong involvement • Informed • Joint responsibility • Jointresponsibility • Insights about competitors, their markets and current/future competitive conduct • ODs • Lead responsibility • Lead responsibility • To be initiated • Group Strategy • Consulted • Informed • Consulted • Consulted • Consolidation of existing information to start immediately; setup of customer insights and competitive intelligence agenda in September

  39. 08h00-08h30 • Welcome, workshop objectives and recap of discussion so far • 08h30-09h00 • Overview on organisational setup of GC • 09h00-12h30 • Interaction routines for first commercial tasks • 09h00-09h45 • Corporate account management • 09h45-10h00 • Tea break • 10h00-10h45 • Market research • 10h45-11h30 • Pricing processes and tools • 11h30-11h45 • Tea break • 11h45-12h30 • Capability building • 12h30-12h45 • Branding/advertising • 12h45-13h00 • Contracting • 13h00-15h30 • Corporate accounts: Review of critical areas and identification of cross-OD integration needs • 15h30-16h00 • Private sector partnership • 16h00-16h15 • GC SPOs • 16h15-16h30 • Closing SUGGESTED AGENDA • Timing • Topics • 12h30-13h00 • Outlook on other commercial tasks • 13h00-16h15* • Monthly GM forum * Including working lunch Source: Team

  40. TNPA • TFR • TPT RECAP – INTEGRATING PRICING IS PIVOTALIN MANAGING TRANSNET’S RISK AND IMPROVING PROFITABILITY • Inconsistent pricing approaches within and across ODs . . . • . . . led to, at times, incomprehensible pricing decisions from customer perspective • Regulated pricing in 2 ODs • Market/value-based pricing increasingly applied in 2 ODs • Degree of freedom/ regulation • Assmang as major client in manganese sector does not receive any loading/offloading incentives for its smaller iron ore flows • Price increase philosophy • Price increase based on CPIX for some accounts (e.g., TPT); multi-dimensional (e.g., value based) price increases for others (e.g., TFR) • Average annual price increase • %, planned • Profitability perspective • Portfolio perspective on sector or account profitability for some accounts, stand-alone profitability targets set for others • Price strategies • Sliding price scales employed only for some accounts • Price based on weight mass for some accounts, dry mass for others • 9 • 9 • Price structure • Demurrage charges applied to some accounts • 2008/09 • 09/10 • 10/11 • 11/12 • 12/13 • 12 Source: CFO presentation to Board, Feb 2008; team analysis

  41. GROUP COMMERCIAL WILL LEAD THE DEVELOPMENT OF OVERARCHING PRICING ELEMENTS • CONCEPTUAL • GC with leading role • Transnet pricing philosophy/strategy • GC: Lead • ODs: Consulted • Integrated pricing strategies (for corporate accounts) • GC: Lead • ODs: Consulted • OD-specific pricing strategies • GC: Consulted • ODs: Lead • Pricing tool/ process • GC: Lead • ODs: Consulted • Costing tool/ process • GC: Consulted • ODs: Lead • Pricing governance (e.g., monitoring/control of pricing levers; performance measurement) • GC: Lead • ODs: Consulted • Detailed interaction routines developed Source: Team

  42. BASED ON TRANSNET’ PRICING PHILOSOPHY, PRICING STRATEGIES TO BE DEVELOPED CONSIDERING VARIOUS DIMENSIONS • Potential dimensions for pricing strategy • Corridors b • Customers a • Suggested approach • Transnet pricing philosophy (e.g., fair return on investment) • Customer-based pricing as primary focus within GC a • Pricing strategy b • Other dimensions reflected within strategies for individual accounts c d • Sectors (e.g., containers) • Commodities (e.g., manganese) c d Source: Team

  43. Objectives • Approach for initial accounts • Overall idea • Pricing recommendations across all Transnet business units • Cross-business-unit governance • Activities • Pricing tool developed and tested to incor-porate a cross-business unit perspective • Pricing concepts • Develop a multi-year business unit strategy • Consider interdependencies between business unit strategies • Develop cross-business-unit governance • Capability building • Develop a common understanding about Transnet’s strategies and interdependencies • Train tool users INITIALLY, GC WILL TAKE THE LEAD IN DEVELOPING INTEGRATED PRICING TOOL • Rollout approach • Development of pricing tool for 3 selected corporate accounts • Covering different strategic commodities • Covering different ODs • Providing short- and long-term potential for Transnet; commitment to implement • Prerequisites • Organisational design of Group Commercial including interim operating model with ODs • Training of practitioners that can roll out the tool • Access to data • Key account plans developed for selected accounts • Tool can be used in upcoming negotiations in short-term • Resource commitments (for initial accounts) • ODs: • 1 pricing expert (80%* per OD) • 1 account expert (20% per OD/account) • Group Commercial: 1 pricing expert (80%) • Technical expert (for tool development): 60% • Consultant support • Timing • Preparation: Mid-Apr to mid-June • Tool development (3 pilots): Mid-June to mid-September * TPT and TFR; less resources likely required for TNPA and Transnet Pipelines Source: Team

  44. THE PRICING TOOL DEVELOPED WITHIN TFR CAN SERVE AS A STARTING POINT • Key account pricing tool – example TFR Price of next best alternative Flow-specific profitability view as well as overall account view Suggested add-on – multi-year modelling of customer profitability based on different volume and pricing scenarios Minimum requirements –1-year customer profitability analysis Source: TFR

  45. THE PRICING PHILOSOPHY AND INTEGRATED TOOL WILL TRANSFORM THE WAY PRICING IS BEING DONE WITHIN TRANSNET • Holistic modelling of customer profitability • Ex-post view on customer profitability based on actual performance • Multi-year forward looking modelling based on key account plans • System support to base pricing decisions on comprehensive information • Considering multiple dimensions within pricing, i.e., costs, next best alternatives, customer ability to pay • Portfolio perspective, i.e., flow-based pricing decisions as well as overall account perspective • Incentives for improved asset utilisation and virtuous customer (e.g., reducing customer cancellations) • Standardisation and professionalisation of pricing processes across accounts; clear escalation and authorisation guidelines • Comprehensive fact base to prepare for annual negotiations and to have win-win dialogues with customers Source: Team

  46. Set rules • Define strategy • Execute • Measure performance GC WILL TRACK PRICING TO IMPROVE TRANSNET’s PRICING PERFORMANCE • Example on next slide • Pricing governance elements • Examples of monitoring and control levers • Quality of pricing principles • Pricing authority and responsibility levels • Business assump-tions about price • Rigour of analytic processes • Approval systems • Exception processes  • Measurement of pricing performance at multiple levels • Aggregate business • Customer seg-ment/product group • Sales region or rep • Future perspective on Transnet’s pricing strategy definition and controlling • Ongoing review of principles • Sophisticated tiered pricing authorities • Prescriptive for pricing decisions • Few degrees of freedom below senior management • Specific price analyses required as part of strategy development • An approval system could preclude deviation at multiple levels • Monthly monitoring of price perfor-mance by key markets and segments • Combination of frequent routine and exception reports Source: McKinsey

  47. EXAMPLE – MEASURING PERFORMANCE OF THE PRICING STRATEGY Each business unit should prepare specific analyses for overall customer base TPipelines TNPA • Review by top management/ cross-business unit review committee • To ensure consistent overall approach to pricing • To probe/ensure quality on price planning • To optimise pricing on cross-business unit customers TPT TFR – Pricing strategy planning module Suggested revisions to business unit Price/value map Price waterfall Percentage of list price Pocket/net margin Percentage of volume Price TPipelines 1. 2. 3. TNPA 1. 2. 3. TPT 1. 2. 3. Value • Planned action steps regarding price • . . . • . . . Implementation Source: McKinsey

  48. PRICING MANAGER WORKS CLOSELY WITH COUNTERPARTS AT ODS • Responsibilities/activities • Development and monitoring of pricing guidelines • The pricing and product manager (PPM) defines general pricing guidelines encompassing a set of factors that have to be considered at pricing decisions (e.g., competition intensity, customer ability to pay) • The PPM assists corporate account managers and ODs in translating the general pricing standards in individual pricing strategies per customer • The PPM is also in charge of continuously monitoring pricing decisions by ODs and ensuring appropriate price points are in place for individual products and customers • Relevant factors on pricing decisions over time (such as effects of regulatory decisions, competitors pricing) must be tracked and, if necessary, appropriate measures coordinated with the ODs • Development of pricing tools • In addition to guidelines, the PPM manages the development of IT-based pricing tools, which facilitate OD’s overarching pricing decisions. He, therefore, analyses pricing tools employed across ODs and determines best practices. The PPM coordinates the implementation of the tool across all ODs and is in charge of regular updates and maintenance • Skills/background • Hands-on experience with pricing processes and strategies • Leadership experience (+3 years) as pricing manager • Good understanding of logistics and transportation business • Strong analytics • Excellent communication skills Likely 2 FTEs required within GC Source: Team

  49. Global Yield Systems Support Manager at DHL Express UK REAL LIFE EXAMPLE PRICING MANAGER • Current position (since 2003) – Manager, Global Yield Management Systems • Background • 2001-03 – Global Costing Manager at DHL Worldwide Express • 1996-2001 – Costing and Pricing Expert at DHL Worldwide Express • Education • Bachelor in Economics • Pelin Baysal, • UK Almost 10 years of experience in pricing Source: LinkedIn

  50. Key next steps • Lead responsible • Timeline • Selecting pilot accounts for tool developments • Advertising GC pricing manager positions • Starting strategy/tool development • Obtaining ExCo approval for approach for developing integrated pricing and suggested timelines • Taking stock of pricing practices across Transnet • Collecting data for selected accounts • Identifying pricing experts within ODs and freeing up required capacity • ODs • GC • ODs • GC/Group HR • Commercial GMs • GC/ODs • GC • GC • Commercial GMs • Mid-June to mid-Sep • May • April • April • April • Mid-April • May IMMEDIATE NEXT STEPS HAVE BEEN AGREED WITH REGARDS TO PRICING • AGREED Source: Team

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