Transnet Online Integrated Report 2018

Market Demand Strategy (MDS) themes
  • Financial sustainability
  • Capacity creation and maintenance
  • Market segment competitiveness
  • Operational excellence
  • Human capital
  • Organisational readiness
  • Sound governance and ethics
  • Constructive stakeholder relations
  • Sustainable developmental outcomes
Sustainable Developmental Outcomes (SDOs)
  • Employment
  • Skills development
  • Industrial capability building
  • Investment leveraged
  • Regional integration
  • Transformation
  • Health and safety
  • Community development
  • Environmental stewardship
The Capitals
  • Financial Capital
  • Manufactured Capital
  • Intellectual Capital
  • Human Capital
  • Social and Relationship Capital

Abridged governance


Remuneration philosophy

Transnet’s human resources strategy, including the reward strategy, is designed to facilitate and support the achievement of strategic objectives, as well as help align organisational behaviour with the strategic thrusts of being ‘agile’, ‘admired’, ‘digital’ and ‘united’. Further, the reward strategies aim to entrench a performance-driven culture. Reward-related concerns raised by the Shareholder are attended to by the Board of Directors, which considers the issue and endeavours to mitigate any emerging risk.

Transnet’s remuneration philosophy is designed to achieve the following:

  • Align the remuneration strategy and practices with Transnet’s mandate, vision and business strategy.
  • Ensure an integrated approach for remuneration management across Transnet that attracts, motivates, engages and retains the talent required to achieve Transnet’s business objectives, and specifically to:
    • Contain remuneration-related cost;
    • Support a high-performing organisation through the recognition and reward of superior performance;
    • Accommodate flexibility and responsiveness to changing business requirements;
    • Achieve optimal return on expenditure;
    • Adhere to legal, statutory, ethical and best-practice standards;
    • Ensure the long-term sustainability of the business;
    • Comply with corporate governance and citizenship;
    • Comply with employment and tax legislation; and
    • Endeavour to ensure that remuneration and incentive policies and practices are concise and easy to understand.

The remuneration philosophy considers three employment levels informed by complexity, decision-making and judgement:

  1. Executive and management levels.
  2. First-line managers, specialists and technicians (grade level G) form part of the bargaining unit.
  3. Junior employees (grade levels H to L) form part of the bargaining unit.

Guaranteed pay

Transnet strives to align guaranteed remuneration with the market median. Annual salary increases are approved by the Remuneration, Social and Ethics Committee of the Board. Annual increases for management levels are informed by individual performance ratings.

In determining the annual mandate for guaranteed pay increases, the following factors are considered:

  • The national economic and business outlook.
  • External market predictions and history of market movements and increases granted.
  • National and internal staff turnover rates.
  • External parity (market benchmarks) based on market median;
  • Internal parity.
  • Affordability.

Transnet concluded a three-year wage agreement with the recognised labour unions, which expires at the end of the 2018 reporting period.



It is compulsory for all permanent employees to join the Transnet Retirement Fund, which provides for retirement funding, risk cover and a death benefit.

The total contribution to the Transnet Retirement Fund is 19,5%, consisting of an employer contribution of 12,0% (which covers the risk and death benefit portion) and an employee contribution of 7,5%.

Variable pay

Transnet has implemented both a short-term and a long-term incentive scheme.

The short-term incentive scheme was redesigned during the reporting year to drive the achievement of stretch business targets and to reward employees for this effort. It is applicable to all employees and is governed by detailed ground rules, approved by the Remuneration, Social and Ethics Committee of the Board.

The long-term incentive scheme is applicable to executive and selected senior managers.

Annual incentive payments must clearly relate to performance achieved against annual objectives consistent with long-term value for the Shareholder. Individual and corporate performance targets, both financial and sustainability-related, are tailored to the needs of the business and reviewed regularly to ensure they remain appropriate.

The detail of the short- and long-term incentive schemes are described in more detail in Annexure B.

Individual performance management

Transnet has an overall performance framework, which is aligned with the Statement of Strategic Intent and the Shareholder’s Compact. The framework is translated into an annual Transnet scorecard, as well as the scorecard of the Group Chief Executive, and is then cascaded to all managers.

Performance management for the Group Leadership Team (GLT)

Each GLT member has an individual scorecard with objectives and measures, which are derived from the overall Transnet performance scorecard, as translated from the Transnet Performance Framework. Performance objectives are aligned with the business strategy, and GLT members are rewarded for their contribution to Transnet’s success. GLT members undergo rigorous quarterly performance assessments to track progress and to address deviations from their performance plans.

The graph below depicts performance ratings for the GLT members over the past three financial periods, compared to the overall performance rating of the Company.


Note: Chief Financial Officer and Chief Corporate and Regulatory Officer resigned.

Remuneration for the GLT

Seven principles underpin Transnet’s approach to remunerating senior and executive management:

  • Utilisation of talent management as a strategic business driver to build individual capability in response to organisational capacity requirements.
  • A differentiated approach to attract and retain key talent, to ensure high-quality people in high-leverage/mission-critical positions.
  • Developing leadership competency.
  • Redeployment opportunities in line with succession plans.
  • Supporting individual growth and career path development.
  • Ensuring equitable remuneration.
  • Rewarding people for superior performance.

Annual guaranteed pay increases for GLT members are informed by market movement. Transnet uses Deloitte’s ‘SA Guide to Executive Remuneration and Reward’1 to benchmark executive remuneration with the external market.

The graph below depicts the actual guaranteed remuneration of the GLT against 75% of the market median. According to the graph, GLT remuneration is lagging the market median. Transnet
is following a phased approach to ensure that the guaranteed remuneration is gradually aligned with the market median
over time.

Guaranteed pay of the Transnet GLT for the 2018 financial period is contained on the full remuneration report attached as Annexure B.


Note: Chief Financial Officer and Chief Corporate and Regulatory Officer resigned.

1A national remuneration survey published annually by Deloitte Consulting.

Executive remuneration – variable

GLT members are eligible for payments in respect of the short-term incentive (STI) scheme. The quantum of the STI payment is based on the bonus pool generated by the achievement of EBITDA and the impact of the primary and secondary modifiers. Individual bonus percentages are further modified according to individual performance assessment ratings.

The eligibility percentages linked to specific business performance achievement are indicated in the table below:

Employment category Grade level eligibility  
Leadership committee A 60%  
Group executives, chief executives A 50%  
Members of extended leadership teams B 40%  

Short- and long-term incentive payments

The STI payment for the 2018 financial year was based on the achievement of the annual EBITDA as well as the impact of the primary and secondary modifiers at Group and Operating Division levels. The 2014/15 conditional award in respect of the Transnet long-term incentive (LTI) scheme vested at the end of the 2018 financial period. The members of the Transnet GLT were eligible for payment in respect of the LTI scheme based on the ground rules of the scheme and took place at the end of April 2018.

STI and LTI payments for the Transnet executives are contained on the full remuneration report attached as Annexure B.

Remuneration structure for non-executive directors

Non-executive directors are appointed by the Shareholder Representative for a three-year term. Transnet’s Memorandum of Incorporation, however, requires that the non-executive directors be submitted for re-election for each of the three years at the Company’s annual general meeting.

The Shareholder Representative approves the fees payable to non-executive directors in advance. The non-executive directors are paid an annual retainer as well as an additional retainer fee for committee membership. They are not paid for attendance of meetings. Fees paid to non-executive directors are differentiated based on their appointments to the various committees of the Board.

Remuneration for the Transnet non-executive directors for the financial period are contained on remuneration report attached as Annexure B.