ANNUAL FINANCIAL STATEMENTS 2020 - Transnet

1 ANNUALFINANCIALSTATEMENTS2020 Reporting formatsForward-looking informationAll references to forward-looking information and targets in the 2020 reports are extracted from the 2020/21 Transnet Corporate Plan and approved by the Board of DirectorsFeedback on this reportWe welcome feedback on our 2020 ANNUAL FINANCIAL STATEMENTS . Please provide written feedback to Kilford Gondo at 2020 Integrated Report is the Company s primary report to all 2020 ANNUAL FINANCIAL STATEMENTS include the reports of the directors and independent highlights4 Approval of the ANNUAL FINANCIAL statements5 Group Company Secretary certificate6 independent auditor s report14 Audit Committee report17 Report of the directorsAnnual FINANCIAL statements26 Accounting policies52 Income statements53 STATEMENTS of comprehensive income54 Disclosure of components of other comprehensive income55 STATEMENTS of FINANCIAL position56 STATEMENTS of changes in equity57 STATEMENTS of cash flows58 Segment information62 Notes to the ANNUAL FINANCIAL statements130 Abbreviations and acronyms131

2 Glossary of terms132 Corporate informationContents2 ANNUAL FINANCIAL statementsPerformance highlightsPerformance highlightsRevenue increased by 1,3% to R75,1 billion, due to a weighted tariff increase of 2,9%, partially offset by a 1,3% decline in rail freight volumes and a 2,4% decline in port container operating expenses increased by 1,9% to R41,1 billion, which is especially pleasing when considering that the prior year cost level had shown zero growth on the year before increased by 0,7% to R34,0 billion, with the EBITDA margin decreasing from 45,6% to 45,3%.Gearing of 47,6% and cash interest cover at 2,9 times are both within loan covenant profit decreased by 34,9% to R3,9 billion, primarily due to fair value adjustments in the prior year being R2,5 billion higher than in the current generated from operations increased by 2,1% to R35,9 investment of R18,6 billion represents a 3,5% increase compared to the prior year.

3 B-BBEE status maintained at level 2 with spend amounting to R31,31 billion or 111,82% of total measured procurement spend, as defined by DTIC codes. 2,7% of labour costs was spent on training, focusing on artisans, engineers and engineering performance of 0,73, which is the tenth consecutive year that a ratio below 0,75 has been achieved against a global benchmark of 1, (R million) 080 00070 00060 00040 00010 00062 16765 47872 88774 07075 0652016201720182019202050 00030 00020 000 EBITDA (R million) 035 00030 00020 0005 00026 25027 55732 51533 75033 9842016201720182019202025 00015 00010 000 Gearing (percent) 050301043,244,243,444,547,62016201720182 01920204020 Capital investment (R million) 035 00030 00020 0005 00029 56121 43821 78117 94118 5612016201720182019202025 00015 00010 000 Cash interest cover (times) profit for the year (R million)

4 07 0003 0003932 7654 8516 0473 938201620172018201920204 0002 0001 0005 0006 0004 Approval of the ANNUAL FINANCIAL STATEMENTS for the year ended 31 March 2020 ANNUAL FINANCIAL statementsApproval of the ANNUAL FINANCIAL statementsDirectors responsibilitiesThe Board of Directors (Board) is required by the Companies Act, No 71 of 2008 of South Africa (Companies Act) and the Public Finance Management Act, No 1 of 1999 (PFMA) to prepare ANNUAL FINANCIAL STATEMENTS which fairly present the state of affairs of Transnet SOC Ltd ( Transnet or the Company) and its subsidiaries (the Group) as at the end of the FINANCIAL year, as well as the profit or loss and cash flows of the Company and the Group for the FINANCIAL year then preparing these ANNUAL FINANCIAL STATEMENTS , the directors are required to: Select suitable accounting policies and apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed.

5 And Prepare the ANNUAL FINANCIAL STATEMENTS on the going-concern basis unless it is inappropriate to presume that the Company and/or the Group will continue in business for the foreseeable Board is responsible for the maintenance of adequate accounting records, maintenance of appropriate systems of internal control, as well as the preparation and integrity of the ANNUAL FINANCIAL STATEMENTS and related statementsThe internal audit activities undertaken during the year are in accordance with the internal audit plan approved by the Audit Committee. Transnet internal audit has executed the internal audit plan during the year and has provided assurance to the Board as to the state of the internal controls of the Company. Their assessment of the internal controls of the Company is included in the Audit Committee Audit Committee has evaluated the Company and Group ANNUAL FINANCIAL STATEMENTS and has recommended their approval to the Board.

6 In preparing the Company and Group ANNUAL FINANCIAL STATEMENTS , the Company and the Group have complied with International FINANCIAL Reporting Standards (IFRS) and the Companies Act. In addition, the Group has complied with the reporting requirements of the PFMA, except as set out in the report of the directors on page 20. The Group has used appropriate accounting policies supported by reasonable and prudent judgements and estimates. Judgements and estimates made in the application of IFRS, that have a significant impact on the ANNUAL FINANCIAL STATEMENTS , are disclosed in the notes to the ANNUAL FINANCIAL Board has every reason to believe that the Company and Group have adequate resources and facilities in place to be able to continue in operation for the foreseeable future.

7 Therefore, the Board is satisfied that Transnet is a going concern and has continued to adopt the going-concern basis in preparing the ANNUAL FINANCIAL external auditors , SizweNtsalubaGobodo Grant Thornton, are responsible for independently auditing and reporting on the ANNUAL FINANCIAL STATEMENTS in conformity with International Standards on Auditing (ISA). Their qualified audit report on the ANNUAL FINANCIAL STATEMENTS , prepared in terms of the Public Audit Act of South Africa, No 25 of 2004, appears on pages 6 to Board is of the opinion that the Company and the Group have complied with applicable laws and regulations except as disclosed in the report of the directors as set out on page Board is of the opinion that these ANNUAL FINANCIAL STATEMENTS fairly present the FINANCIAL position of the Company and the Group as at 31 March 2020, and the results of their operations and cash flow information for the year then ended.

8 The ANNUAL FINANCIAL STATEMENTS have been prepared under the supervision of the Group Chief in terms of Article 3(2)(c) of the Transparency Law of 2008 Management declares that, to the best of their knowledge, the consolidated and separate ANNUAL FINANCIAL STATEMENTS have been prepared in accordance with IFRS and give a true and fair view of the assets, liabilities, FINANCIAL position and profit or loss of Transnet . The 31 March 2020 ANNUAL FINANCIAL STATEMENTS and integrated report includes a fair review of the development and performance of the business and the position of Transnet , together with a description of the principal risks and uncertainties that Transnet faces. PS MolefeChairperson PPJ DerbyGroup Chief Executive NS DlaminiGroup Chief FINANCIAL Officer29 September 2020 JohannesburgI hereby certify that in terms of section 88(2)(e) of the Companies Act, the Company has filed with the Companies and Intellectual Property Commission (CIPC) the required returns and notices for the year ended 31 March 2020, as required in terms of this Act, and that all such returns are true, correct and up to date.

9 S BopapeInterim Group Company Secretary 29 September 2020 Johannesburg5 Group Company Secretary certificate for the year ended 31 March 20206 ANNUAL FINANCIAL statementsIndependent auditor s reportIndependent auditor s report to Parliament and the Shareholder Minister of Public Enterprises on Transnet SOC Ltd for the year ended 31 March 2020 Report on the audit of the consolidated and separate FINANCIAL statementsQualified opinionWe have audited the consolidated and separate FINANCIAL STATEMENTS of Transnet SOC Ltd and its subsidiaries (the Group) set out on pages 26 to 129, which comprise the consolidated and separate statement of FINANCIAL position as at 31 March 2020, and the consolidated and separate statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes to the consolidated and separate FINANCIAL STATEMENTS , including a summary of significant accounting our opinion, except for the possible effects of the matter described in the basis for qualified opinion section of our report, the consolidated and separate FINANCIAL STATEMENTS present fairly, in all material respects, the consolidated and separate FINANCIAL position of the Group as at 31 March 2020.

10 And their FINANCIAL performance and cash flows for the year then ended in accordance with IFRS and the requirements of the PFMA and the Companies Act of South for qualified opinionIrregular expenditureThe public entity did not have adequate systems in place to identify and account for all irregular expenses as required by Section 55(2)(b)(i) of the PFMA. Payments made in the contravention of supply chain management requirements resulted in irregular expenditure that was not always identified and reported. As in the prior year, we were unable to determine the full extent of the understatement of irregular expenditure stated in note 39 of the consolidated and separate FINANCIAL STATEMENTS as it was impracticable to do so. Context for the opinionWe conducted our audit in accordance with the International Standards on Auditing (ISAs).