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CONFIDENTIAL
DocumentDate
This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.
Working Draft Last Modified 17/09/2008 09:19:19 South Africa Standard TimePrinted 17/09/2008 08:28:20 South Africa Standard Time
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Transnet Cable Theft Analysis
2008/09 – 2011/12 Jan YTD
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THE EFFECT OF CABLE THEFT ON TRANSNET
Theft and vandalism has a dramatic effect on Transnet Limited (“Transnet”) operations, its customers and business
Transnet has implemented a number of initiatives directed at reducing cable theft. Despite the security effects it has become evident that the number of incidents are increasing with a dramatic increase in length of cable stolen.
The cancellation of slots does impact the economy directly, negatively affecting
strategic commodities such as iron ore exports, Fast Moving Consumer Goods (“FMCG”), coal exports, local coal supplying Eskom power stations, lime to the Rand Water Board for water purification, supply of fuel to ORTIA, fuel & FMCG to neighbouring countries.
The higher incidents of cable theft, has in most cases rendered the railways less reliable, thereby diverting traffic to road which leads to the further pressure and deterioration of the road infrastructure.
This impacts the National Budget.
Transnet Pipelines cable theft has minimal operational disruptions but major consequential damage. The majority of cables stolen are connected to the cathodic protection system for the prevention of electrolytic corrosion of the buried steel pipelines. Failure to detect and replace the missing cables will lead to corrosion leaks with the consequential costs related to repairs, environmental damage, loss of income, etc.
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CABLE THEFT INCIDENTS; RAND VALUE LOSSES AND REPLACEMENT VALUES
FINANCIAL YEAR
CABLE THEFT INCIDENTS
RAND VALUE LOSS
REPLACEMENT COSTS
2008/09
2009/10
2010/11
2011/12 Jan YTD
1432
2014
2091
1380
R12, 000,000
R27,100,000
R38,600,000
R17,800,000
R30,000,000
R67,600,000
R96,500,000
R44,500,000
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TRANSNET CABLE THEFT INCIDENTS & RAND VALUE LOSSES COMPARATIVE STATISTICS
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PREVENTATIVE INTERVENTIONS
Enhanced In House security is in the process of being introduced to protect key installations.
The school of security has been established to administer special training
interventions.
Joint operations with state security agencies has been established and
disruptive operations are conducted as per available intelligence
Transnet nerve centres has been established and cable theft incidents are
analysed, geographically
Exploring appropriate security technologies for deployment in open
infrastructure including acquisition of UAVs
Conducting awareness campaigns through CPFs (Transnet Foundation assist
in building of community centres)
Ongoing judicial awareness campaigns to empower the prosecution
regarding veracity of cable theft
Sharing of intelligence/information with SSA, CI and other SOC
Participation in SA Chamber of Business to spread awareness through their
network
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CONCLUSION
The consequential rand value loss due to cable theft far exceeds the cost of loss for Transnet. The cost of loss comprises of train delays / cancellations, demurrage costs, cost to replace equipment e.g. locomotive pantographs, labour costs, safety and injury to our personnel, etc. This excludes customer dissatisfaction, loss of business, negative media coverage and the enormous negative impact on the logistics chain of South Africa and SADC as a whole.
The industry’s biggest problem relating to non ferrous theft has always been the bucket shops, the scrap yards, the general metal market and the smelters and recyclers. Most stolen copper is for the export market and South Africa does not have sufficient measures / scanning equipment at Ports to scan all containers, hence a lot of stolen copper and associated material leave the country illegally.
Cable theft & vandalism remains one of the biggest challenges to Transnet and South African business in general.
During the past five years, security efforts has increased dramatically, however, the cable theft challenges are still increasing despite a downward trend in the current financial year.
A committee has been established comprising Transnet Freight Rail Security, SAPS Organized Crime Unit, the National Prosecuting Authority and the SAPS (Hawks). Various meetings have taken place to highlight the challenges faced by TFR as well as formulating solution to that effect.
The proposed legislative initiatives are required in order to assist the police and courts with enforcement and harsher punishment in order to serve as a deterrent for the theft of copper cable.