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Proposed Durban Dig-Out Port:

DISCUSSIONDOCUMENTFEBRUARY 2013

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A key stakeholder is an individualor group:

with a vested interest in theoutcome of the proposed project;and

who may be significantly impactedby the proposed project.

IntroductionTransnet SOC Ltd is a State OwnedCompany that has been mandated byGovernment to be the custodian of rail,port and pipeline infrastructure and isresponsible to assist Government withgrowing the economy. As part ofTransnet’s responsibility to providecapacity in the ports to handle the importand export of more goods, the proposedDurban Dig-Out Port (DDOP) has beenidentified as one of the projects requiredto provide that capacity ahead of demand.

Purpose of theDocumentThis document has been prepared toshare information on the proposed DDOPfor discussion with stakeholders and toencourage initial comments and inputs.

The purpose of this request for input andcomment is to:

Identify initial material issues forconsideration in the proposedDDOP planning process; and

Develop the foundation for futurestakeholder engagement to takeplace within the later planningphases of the proposed DDOPprogramme.

Aim of StakeholderEngagement

Transnet has contracted WSPEnvironment and Energy (WSP) tofacilitate engagement with stakeholdersearly in the planning process and to useinputs from stakeholders to develop aSustainable Port Development Framework(SPDF) that could guide the furtherdevelopment of this programme.

Transnet has highlighted stakeholderengagement as a critical requirement forthe development of the SPDF as it

recognises that sustainability relatedissues associated with the development ofthe port and operation thereof are ofconcern to a full spectrum of stakeholders.Targeted stakeholder engagement istherefore integral to refining theidentification and assessment of materialissues for incorporation into the SPDFguidelines.

This early engagement is being initiatedwell in advance of the statutoryEnvironmental Impact Assessment (EIA)that will have to be done. Should theproposed project proceed as planned, anEIA will be conducted in accordance withall legal requirements.

WHY: NationalDriver for theProposed DurbanDig-Out PortThe New Growth Path published by theGovernment sets a goal of five million newjobs by 2020; it recognises structuralproblems in the economy to be overcomein order to create jobs, and it identifiescertain job drivers (opportunities inspecific sectors and markets). PresidentJacob Zuma highlighted the key initiativesin his State of the Nation Address in 2012.Infrastructure development was identifiedas a significant job driver and in thisregard, Transnet was mandated toimplement several projects. The

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Government then adopted the NationalInfrastructure Plan in 2012 to improveGovernment’s service delivery, stimulatejob creation and accelerate economictransformation. Cabinet also establishedthe Presidential InfrastructureCoordinating Commission (PICC) tointegrate and coordinate the NationalInfrastructure Plan.

In response to infrastructure gaps, thePICC identified 18 Strategic IntegratedProjects (SIPs) covering all 9 provinces.The SIPs represent corridors of proposedinfrastructural development which havethe following core functions (PICC, 20121):

Promote balanced economicdevelopmentTo unlock economic opportunity;To transform the economiclandscape;To create new jobs;To strengthen the delivery of basicservices; andTo support the integration ofAfrican economies.

Each SIP consists of a large number ofspecific infrastructure components andprogrammes.

SIP2: Durban-Free State-Gauteng Logistics andIndustrial Corridor

SIP2 is one of the geographically focusedSIPs identified in the 2012 NationalInfrastructure Plan. The objective of thisstrategic project is to improve logisticsand economic integration between themain economic centres of Durban andGauteng, and raise the efficiency of exportoperations.

1 PICC Report 2012 – Summary of the South AfricanNational Infrastructure Plan

The main components of SIP2include:

Development of cargo nodes inHarrismith, Cato Ridge, TamboSprings, and Dube Trade Port;Upgrade of City Deep, Pyramid,West Rand and Sentrarand cargonodes;Expansion of rail capacity androlling stock to meet forecastdemand;Development of the EkurhuleniAerotropolis (surrounding ORTambo International Airport) as aservice, manufacturing and cargonode;Upgrade of roads, principally theN3 route as well as feeder roadsand the N2;Expansion of the current DurbanPort;Development of the proposedDurban Dig-Out Port (DDOP), andDevelopment of CornubiaIntegrated Human Settlements.

The proposed DDOP therefore forms a keypillar in SIP2 for long term economicgrowth as a node within the proposedDurban to Gauteng freight corridor. Thecorridor is vital in facilitating economicgrowth for the country and the SouthernAfrican region. It also seeks to improveaccess by currently isolated industrial andlogistics hubs as well as marginalised ruralproduction centres to the country’sprimary general freight export and importcorridor.

SIP2 was launched by the Minister ofPublic Enterprises, Malusi Gigaba, on 6December 2012 where he indicated thatthe proposed DDOP forms a centralcomponent of the success of SIP2.

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Transnet Long-TermPlanning Framework

Transnet’s Long-term Planning Framework(LTPF) defines Transnet’s long-term port,rail and pipeline infrastructure capacityinvestment plans. The LTPF is based on a30 year integrated freight demandforecast and is closely aligned with theNational Development Plan ofGovernment. This plan is updated on anannual basis.

The LTPF provides a framework forunconstrained capital investmentrequirements to meet the predicteddemand.

The final demand planning is informed byusing three sets of models:

the Freight Demand Model (FDM)(how many tons of goods needs tobe transported countrywide);

the Transportation Model (wheredo these goods need to betransported to); and

the Market Share Model (splitbetween road and rail allocation).

Due to the current world-wide economicsituation, as well as local socio-economicand environmental realities, this forecastwill be constantly re-evaluated during theplanning phases of the proposed DDOP.

The LTPF is based on principles such ascreating capacity ahead of demand;ensuring long-term sustainability;integrating port, rail and pipelineplanning; benchmarking internationally;regional integration and reducing the totalcost of the South African freight transportand logistics.

Figure 1: National Freight Demand Projections (Transnet LTPF 2012)

- 200 400 600 800

1,000 1,200 1,400 1,600 1,800 2,000

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

Mill

ion

ton

spe

ran

nu

m Light break bulk

Automotive (ro-ro)

Refrigerated Freight

Containerised Freight

Palletized Goods

Agricultural dry bulk

Heavy break bulk

Liquids

Open Skip bulk

The Freight Demand Model is forecasting overall freight handled in SA will grow from the current 762mtpa to 1 927mtpa by 2041

Freight on rail will grow by more than three times the current volumes (212mtpa – 689mtpa)

General freight on rail is expected to grow by an average of 6% annually

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It is clear from the FDM (Figure 1), thatdemand for all forms of freight will growover the next 30 years, includingcontainers.

Due to the complementary port systemused in SA, other ports such as RichardsBay and Ngqura were considered forcontainer expansion, but the focus ofthese ports is mainly on exports of coaland manganese, respectively, hinterlandcontainers and automotive imports andexports. Durban, due to its role as thepremier gateway to Gauteng and SouthernAfrica for containers, as well as Durbanand the KwaZulu-Natal (KZN) hinterland,is best placed for major container handlingexpansion.

Transnet Market DemandStrategy

The Transnet Market Demand Strategy(MDS) will expand and modernise thecountry’s ports, rail and pipelineinfrastructure and improve operatingefficiencies over the next 7 years.Transnet manages its capital investmentspend according to a 7 year businessplanning cycle, using the Long TermPlanning Framework (LTPF) as anoverarching forecast, but at the same timetaking cognisance of short-term forecastsand demands, which are based on thecurrent economic situation.

R300bn has been allocated in the MDS forinvestment in infrastructure developmentand maintenance. The MDS will allowTransnet to transport goods in a reliable,efficient and cost-effective manner. Insupport of Government’s drive to expandinfrastructure, Transnet will, through theMDS, create an estimated total of 288 000additional jobs in the economy, increasecontainer capacity by approximately 71%by 2019, spend some R7.7bn on training,skills development and bursary grants by2018/2019, and increase its own

headcount by approximately 25% over thenext 7 years.

The proposed DDOP will generatesignificant opportunities for the people ofDurban and surrounding areas, as theproposed project forms part of theplanning for this area.

WHAT: ProposedDurban Dig-Out PortOpportunities

Need for the ProposedDurban Dig-Out Port

Nationally, South Africa’s container cargovolumes have increased fivefold over thepast 30 years. They are currentlyexpected to increase by roughly the sameorder of magnitude over the next 30years, from around 4 million twenty-footequivalent units (TEUs) per year in 2010to approximately 20 million TEUs per yearby 2040. In that period, Durban isexpected to handle about 70% of thecountry’s container cargo volumes.

The Port of Durban is currently Africa’sbusiest port, playing a critical role inservicing the import and export needs ofDurban and KZN, as well as Gauteng andthe greater Southern African region.Almost two thirds of South Africa’scontainers, equating to approximately 2.7million TEUs per annum, as well assignificant liquid fuel and vehicle cargoesmove through Durban. The demand forcontainer capacity in Durban is currentlyexpected to exceed 12 million TEU’s overthe next 30 years. There is alreadypressure on the existing Port of Durbanand associated infrastructure toaccommodate the required increases involume. Transnet, as a key economicenabler for South Africa, must thusexpand its existing port operations toaccommodate these growing freight

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VISION:Largest container port inAfricaWorld class portGreen port

volumes and support the growing SouthAfrican economy.

Another major driver that South Africa isexperiencing is the demand for deepwater berth capacity, as shipping lineslook for benefits of scale in theiroperations. This is not only in terms offinancial efficiency, but a crucial means ofreducing the carbon footprint per TEUtransported by these lines. It is a fact thatthe size of container vessels has grownsignificantly, and ships that canaccommodate 15 000 TEUs, with a draft2

of -16m, are already in operation on theWorld’s major trade routes. Plans arealready afoot for the production of 18 000TEU container ships, and the proposedDDOP will have to be designed toaccommodate these large ships if SouthAfrica is to remain competitive and retainits position as Southern Africa’s generalfreight gate and transhipment hub. Linkedto the increasing vessel size is the needfor larger equipment to handle thesevessels and containers.

2 “Draft” is simply defined as the depth of a vesselat any given time (defined as the distance betweenthe vessel’s waterline and the lowest point of thevessel, usuall the keel).

Vision and Overview of theproposed Durban Dig-OutPort

Transnet’s vision for the proposed DDOPis a port defined by the following keycharacteristics:

The largest container port inAfrica;

A world class port in terms ofefficiency; supply chain, securityand sustainability.

A green port that balancesenvironmental challenges witheconomic demands and providessocio-economic opportunities tosurrounding communities

It is likely that the proposed DDOP will bedeveloped in a phased manner between2016 and 2050. Initial indications are thatthe first phase container terminal isscheduled for commissioning by 2020. Thecompletion of all future phases will bedependent on projected national growth incargo and container handling demand.

The proposed fully developed port couldconsist of:

A 16-berth container terminalwhich would provide in excess of 9million TEUs in container handlingcapacity;

An automotive terminal;

A liquid bulk handling facility;

Construction of road and railaccess capacity and supportingback-of-port logisticsinfrastructure; and

Construction of key infrastructureincluding a breakwater and anentrance channel.

The proposed DDOP will complementTransnet’s container handling capacity atits ports in Durban, Ngqura, Port Elizabethand Cape Town.

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WHERE: Proposed LocationThe old Durban International Airport (DIA) site has been identified for the proposeddevelopment (Figure 2). The South Durban Basin, in which the old DIA site is located, is akey industrial centre within the eThekwini Municipality.

Figure 2: Proposed Durban Dig-Out Port Location (Department of RuralDevelopment and Land Reform, National Geospacial Information, 2009, withGoogle Earth insert)

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As indicated (Page 5), site options inRichards Bay and the Eastern Cape wereconsidered but were not deemed feasiblefor the construction of a suitable port, onthe basis of logistics and proximity toJohannesburg.

Transnet acquired the DIA site on 1October 2012, with the official hand overfrom the Airport Company South Africa(ACSA) to Transnet occurring on 6December 2012.

HOW: Transnet’sPlanning Process

Initial Research Studies

As indicated before, the 30 year long-termplan for freight demand is updated on anannual basis. Once certain programmesand proposed projects have beenidentified and included in the seven yearMarket Demand Strategy, then an initialstudy is conducted, called a Front EndResearch (FER) study.

A typical FER study will consist of thefollowing aspects:

Market intelligence gathered andconsideration of demand scenariosrelated to the proposal;

Alignment with national policyobjectives (such as the NationalInfrastructure Plan);

High level assessment of capacityin the national system (forexample: containers);

High level specialist researchstudies (for example: impact ofvessel size on proposal; energyrequirements, socio-economicimpacts etc.); and

Alignment with the broader Long-term Planning framework (LTPF).

Once the FER study has been completedand reviewed by the company for furtherinvestigation, then the next phase of theplanning process commences, inaccordance with Transnet’s ProjectLifecycle Process (PLP), consisting of FrontEnd Loading (FEL) phases 1-4.

Project ImplementationPhases

The PLP consists of four Front EndLoading (FEL) phases (Figure 3).Between each of these phases a gatereview is held to determine if the specificphase has addressed all the criteria forinvestigation required and that there issufficient certainty that the proposalwould be viable and sustainable.

Figure 3: Project Lifecyle Process (FEL-1 to 4)

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Transnet is currently involved in the firstphase of the PLP, or the FEL-1 phase forthe proposed DDOP, which is focused onthe generation of conceptual designoptions. Transnet realises the value ofconsidering sustainability elements(including environmental, social andeconomic considerations) and stakeholderengagement in the early stages of theproject lifecycle. This aspect of theproposed DDOP development is beingaddressed through a specific and specialistSustainability Workstream that has beenformed, alongside a number of otherworkstreams that have been initiated byTransnet as part of the overall proposedDDOP programme. The workstreamsinclude:

Engineering workstream: taskedwith the design of the proposedport, port operations andsupporting logistics infrastructureat a FEL-1 level and in accordancewith international best practice;

Communication and CorporateAffairs workstream: tasked withpresenting the proposed DDOP tointernal and external stakeholders;

Legal workstream: tasked with thepromulgation of the proposed portin terms of the National Ports Act;

Property Acquisition workstream:tasked with acquisition ofproperties required for theproposed DDOP;

Property Management workstream:tasked with management ofacquired properties;

Port Funding Model: tasked withdevelopment of a funding modelfor the development; and

Sustainability workstream: taskedwith stakeholder engagement anddevelopment of a Sustainable PortDevelopment Framework.

The process of moving from the currentconcept (FEL-1) phase, through the pre-feasibility (FEL-2) and feasibility (FEL-3)phases, and finally to actualimplementation or construction (FEL-4) isanticipated to take approximately 4 years,and will follow due legislative andregulatory process.

Sustainability andCommunity FocusedApproach

Sustainable Port DevelopmentFramework

To ensure that the proposed DDOP isdeveloped and operated sustainably, aSustainable Port Development Framework(SPDF), will be developed and it isessential that stakeholders form part ofthis process. The SPDF aims to achievethe following objectives:

Promote long-term portsustainability;Integrate environmental and socialprinciples into the planningprocess;Support construction andoperational excellence;Protect sensitive naturalenvironmental and localcommunities; andAddress environmental and socialrisks and legal requirements earlyon during the project lifecycle.

To meet these objectives, thedevelopment of the SPDF will requirecollaboration with specialists across theother programme workstreams.

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The development of the SPDF consists of the following steps (Figure 4):

Figure 4: Sustainable Port Development Framework (SPDF) DevelopmentProcess

Material Issues Identification(Step 1)All material issues associated withthe proposed port and planningprocess will be identified forincorporation into the SPDF.Stakeholder engagement will assistwith the identification of a widerange of material issues. Inaddition, a number of specialiststudies are being carried out withinFEL-1 phase. These include acontaminated land assessment, andbiodiversity assessments (fauna andflora including potential relocation ofchameleons). These studies will bereviewed to understand the currentsite characteristics, and identify criticalissues associated with the DDOP site.

Issues Assessment (Step 2)All material issues identified will beassessed.

Risk and OpportunityAssessment (Step 3)Alignment with the engineeringteam will ensure that identifiedsustainability criteria followingfrom the stakeholder engagementsare built into the risk andopportunity assessment and designoptions of the proposed DDOP.During this step, it is critical todiscuss the socio-economic and

environmental risks andopportunities that the project holdsfor communities and otherstakeholders.

Sustainable Port DevelopmentStrategy (Step 4)A high level sustainability strategywill be generated to guide thefurther development of theproposed port. This strategy willcomprise goals, objectives andtargets for incorporatingsustainability criteria into thedesign of the proposed DDOPduring FEL-2 and FEL-3, should theproject proceed.

Sustainable Port DevelopmentFramework (Step 5)The SPDF will consist of a high-level strategic road map outliningpriority milestones to be completedin order to ensure effectiveimplementation of thesustainability objectives of theproposed DDOP.

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Stakeholder Engagement

Approach to stakeholderengagement during FEL-1

A distinction must be made betweenstakeholder engagement during FEL-1(early conceptual phase), andengagement which will be conductedduring the EIA process (FEL-3 andbeyond). Stakeholder engagement duringthe EIA phase will be all inclusive,extending to the broader public andconducted within the legal requirementsof an EIA process.

The objective of stakeholder engagementduring this phase (FEL-1) is to shareproject information, open lines ofcommunication between Transnet and keystakeholders, and actively engage keyrepresentatives of the various stakeholdergroups with the view to initiating dialogue.This dialogue will facilitate stakeholderinput and comment and allow for theinclusion of key issues and expectations(material issues) in the decision makingprocess of the project early in itsdevelopment and inform the SPDF.

Proposed Focused EngagementStrategy

Discussion sessions will be held with keyrepresentatives of the various stakeholder

groups where information pertaining tothe proposed DDOP will be shared inorder to allow stakeholders to raise anddiscuss their particular issues; and makerecommendations for future stakeholderengagement.

Your involvement

You are invited to submit yourinitial comments, queries andissues relating to the proposedDDOP to WSP before 10 APRIL2013. See attached CommentForm.

Key stakeholders andrepresentatives of stakeholdergroups will be invited to attendfocused, constructive, discussionsessions.

All comments raised (in writing and atdiscussion sessions) will be incorporatedinto a Comment and Response Reportwhich will be used as a mechanism tofeed stakeholder issues into the SPDF andthe other streams of the FEL-1 study.

Feedback mechanisms will be discussed tofacilitate on-going dialogue with keystakeholders.

Acronyms used in this document

ACSA Airport Company South Africa LTPF Long Term Planning FrameworkDDOP Proposed Durban Dig-Out Port MDS Market Demand StrategyDIA Durban International Airport PICC Presidential Infrastructure Coordinating CommissionEIA Environmental Impact Assessment PLP Project Lifecycle ProcessFDM Freight Demand Model SIP Strategic Integrated ProjectsFEL Front End Loading SPDF Sustainable Port Development FrameworkFER Front End Research TEU Twenty-foot equivalent unitKZN KwaZulu-Natal WSP WSP Environment & Energy

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Comment Form

To ensure that your input, comments and queries regarding the proposed DurbanDig-Out Port are accurately documented and addressed, please complete this formby 10 April 2013 and return it to:

Please insert your personal details below:

Name:

Organisation & Designation:

Address:

Tel:

Fax:

E-mail:

Please list your interest in the project and comments below:

Bathabile MsomiWSP Environmental (Pty) Ltd

Address: WSP House, 1 on Langford, Langford Road, Westville, 3629Tel: 031-240 8860Fax: 031-240 8861

Email: DDOP@wspgroup.co.za