Transport Solutions(Funding Criteria)

The information contained in this document is confidential, for internal use only and may not be distributed outside the Standard Bank Group.

Kathy Bell

Transport is the lifeblood of

SA … moving people,

moving goods

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moving goods

What we finance

Definition

• Definition of Industry Sector: Road transport or transportation is the

movement of goods and people from one place to another. Industries which

have the business of providing transport services are important to our unit.

• Our main focus is:

• Truck and Trailer

• General Road Freight Transport

• Liquid / Dry Bulk Transport (General and Hazardous Goods)

• Agricultural related Transport

• Food and Beverage Transport

• Construction, Mining and Commodity Transport

• Waste removal

• Forestry

• Bus / Coach (Commuter, bus-train, semi-luxury & luxury)

Asset Types

• Trucks: Medium, Heavy and Extra Heavy

• Buses: Commuter, Luxury, Semi-luxury

• Trailers: Side-tippers, flatdecks, etc.

• Tractors / Harvesters, etc.

Information requirement

- New Ventures

Business plan which should include, Services offered (transport of e.g. Livestock, Food, Beverages, Wood, Furniture, Parcels, etc), Customer Segments (e.g. Mining, building), Management (shareholders), Feasibility study (is your target market untapped or is there potential for growth), Budget forecasts, cashflow projections for growth), Budget forecasts, cashflow projections

Founding documents

Surety and deposit offerred depending on financeable amount

Copy of contract if finance is contract based

Motivation on why Standard Bank should consider becoming a partner in your business, e.g. competitive edge, marketing strategy, etc.

Profile of Transport Management Company

Fundamentals of Contract Assessments

The information contained in this document is confidential, for internal use only and may not be distributed outside the Standard Bank Group.

Contract Analysis

• Term: Is the term aligned to the Finance Period? The suitability of the prime

mover and trailer must be taken into account regarding kms and age relative

to the life cycle considered when assessing funding periods and contract

terms.

• Track Record: Is it a brand new contract or is there a relationship? If so, the

sub-contractor would have gone through the ‘learning curve’ and the risk is sub-contractor would have gone through the ‘learning curve’ and the risk is

lessened. We recommend direct contracts:

– SPAR with direct contractor delivering finished goods.

– UNITRANS with contract with service provider where Unitrans/Barloworld

has an Illovo Sugar direct contract (This is the only sub-contract that we

recommend.

• Product: The product been transported has a bearing on the depreciation of

an asset and therefore revenue.

Contract Analysis

• Rates of the Contract: There is a concerted drive in the industry to ensure

that volumes or tons per kilometre as well as fixed costs are set out in the

agreement to ensure viability to the transporter. This relates specifically to:

– Quantity/Volume/Tonnage to be delivered;

– Number of Loads to be delivered;

– Routes, in terms of kilometres, to be utilised.

• Payment Terms: Supplier payment terms can have an effect on a

transporters Cash Flow. Payment terms can ranges from 14 to 30 and at

times 45 days.

• Obligatory Performance Clauses: Clauses that form the basis of the client

specific performance on the contract:

– Quarterly Meetings to discuss with the Transporter any compliance or

remedies of operational/safety/legislative requirements to ensure

continuity and quality control and reduce shortfalls/losses that may accrue.

Contract Analysis

• Risk [Monetary] Clauses: Clauses that may affect the Transporters Cash

Flow due to penalty clauses for non-compliance/non-performance/non-

delivery.

• Termination: Clauses that allow grounds for the termination of an agreement.

Added to this is the Breach and/or Arbitration Clauses.

• Miscellaneous Clauses: Clauses that can have a bearing on the clients • Miscellaneous Clauses: Clauses that can have a bearing on the clients

performance:

– Additional Loads, Routes, Quantities [Does the client have spare capacity]

– Breakdown of Vehicles: Use of a third party by Contractor where costs are

borne by the Transporter.

– Fluctuation of Loads, Quantities attributed to Market Conditions: Supply &

Demand by the Contractors clientele [Non-Guaranteed Clause].

Contract Analysis

• Rate Escalation: An important factor in any contract. No contract is a contract

if it does not contain this clause.

– Fixed Rate Contracts are risky if the Rate is fixed for the life of the contract

[Municipal/Road Works]. Clients must factor CPI costs in said instances.

• Fuel Adjustment Clause: Pivotal for any transporter.

– Escalation clauses for Fuel must be adjusted as per increases or

decreases.

• Automatic Renewal Clause: Does the contract allow for a renewal after the

primary period? What time frame is allowed for the renewal or new tender

process?

• Exit or Hardship Clause: Does the contract have an ‘notice period’ in favour

of the contractor which allows exit should the market change, demand

decrease, irrespective of performance. Are there penalties involved? What is

the contractors options regarding the asset?

Owner Drivers

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OWNER Finance

Principal

Supplier

ContractMaintenance / Service

Agreement

Effective Owner Driver partnership

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OWNER

DRIVER

Finance House

Supplier

ManagementCompany

Management of

Contractors business Management

Agreement

MENTOR AND SUPPORT SERVICES

• Management Support Company

menu:

• Mentorship

• Skills transfer

• Financial Assessment and advisory

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• Obtaining economically viable

contracts

• Costing based on results of

optimisation and supply chain

integration

• Optimum vehicle configuration

• Operational services

• Administration - regulatory