Presented by: Dr. Brian Gowans and Keith MacHutchon at the 2009 Railways and Harbours Conference in Cape Town.

1. Draft Opportunities for Future Expansion of Ship Repair Business in South African Ports Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Presented by Dr. B. Gowans and Mr. K.R. MacHutchon

2. Outline of Presentation Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

11. Introduction Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Ship Repair in South Africa: Number of Ships undergoing ship repair in SA Ports Annually 1 780 Number of people Employed directly 4 250 8 % management and Technical 27 % skilled 56 % semi skilled or unskilled 9 % administration and support Indirect employment (x4) = circa 15 000 Annual Income of the Sector R 1.8 billion

12. Introduction (contd) Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Existing facilities in South Africa Nil Ngqura Nil Saldanha Bay 13.7 7.9 6.0 45.0 20.7 15.0 360 161 61 120 000 17 000 1 800 Cape Town Sturrock Dock Robinson Dock Synchrolift 3.0 12.0 30 200 Mossel Bay Slipway 4.5 12.0 60 1 200 Port Elizabeth Slipway 10.0 24.0 200 30 000 East London Graving Dock 12.5 6.0 6.3 33.0 23.0 23.5 352 109 140 70 000 4 500 8 500 Durban Graving Dock Floating Dock EBH Floating Dock Nil Richards Bay Draft (m) Beam (m) Length (m) Capacity (Tons) Facility

13. Recent and On-going Developments in the International Ship Repair Industry Background Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

14. Increased Ship Sizes to gain greater transport efficiency Recent and On-going Developments in the International Ship Repair Industry Background (contd) Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

15. Increased Ship Sizes to gain greater transport efficiency Increased complexity of Modern Vessels , requiring: Increased regular attention and maintenance Increased level of skill from Service Providers Recent and On-going Developments in the International Ship Repair Industry Background (contd) Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

16. Increased Ship Sizes to gain greater transport efficiency Increased complexity of Modern Vessels , requiring: Increased regular attention and maintenance Increased level of skill from Service Providers Requirement for Investments in Equipment and Processes to ensure: Higher levels of Safety, and High Environmental Standards Recent and On-going Developments in the International Ship Repair Industry Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

17. Increased Ship Sizes to gain greater transport efficiency Increased complexity of Modern Vessels , requiring: Increased regular attention and maintenance Increased level of skill from Service Providers Requirement for Investments in Equipment and Processes to ensure: Higher levels of Safety, and High Environmental Standards Introduction of tougher International Quality Standards and Safety Regulations requiring: Guarantees for Steel Quality of Material and Workmanship Recent and On-going Developments in the International Ship Repair Industry Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

18. Typical Ship Building Split of Cost Materials (60%) Labour (20%) Overheads (20%) Typical Industry Ratios and Percentages Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

19. Typical Ship Building Split of Cost Materials (60%) Labour (20%) Overheads (20%) Typical Ship Repair Split of Cost Overheads (20%) Labour (60%) Materials (20%) Typical Industry Ratios and Percentages Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

20. Underwater Work (5%) Typical Cost/Value Split of Work in Ship Repair Yards Dry Dock Work (30%) Alongside Quay Work (70%) Typical Ship Building Split of Cost Materials (60%) Labour (20%) Overheads (20%) Typical Ship Repair Split of Cost Overheads (20%) Labour (60%) Materials (20%) Typical Industry Ratios and Percentages Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

21. Typical Ship Repair Yard Selection Model Quotation for the work Subcontractors costs Exchange Rate risks Internal Cost of Repair Ship Repair Contractor Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

22. Typical Ship Repair Yard Selection Model Quotation for the work Subcontractors costs Exchange Rate risks Location of The Yard Deviation Time Duration of Repairs Effective Cost of Repair Ship Repair Contractor Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

23. Typical Ship Repair Yard Selection Model Quotation for the work Subcontractors costs Exchange Rate risks Location of The Yard Deviation Time Duration of Repairs Quality of the Work Trade and Age Of the Vessel Effective Cost of Repair Acceptance of the Quotation Ship Owner/ Ship Yard Relationship Ship Repair Contractor Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

24. Developed Economy Shipbuilding Business Developing Economy Ship Repair Business Type of Economy Ship Conversion Business Sensitivity to Location : Shipping Lanes and Ports of Origin and Final Destination Ship Building and Ship Repair Industry Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Background (contd)

27. Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Plot of Ship Beam and Dry Dock Width Dimensions

28. Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports SA Graving Dock Capacities and Sizes of Vessels Docked in Year 2007

29. Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Durban Graving Dock East London Graving Dock CT: Sturrock Graving Dock CT: Robinson Graving Dock Frequencies of Occupation of SA Graving Docks in Year 2007 16 vessels max. 6 vessels max. 10 vessels max. 37 vessels max.

30. Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Durban Graving Dock CT: Sturrock Graving Dock Actual and Preferred Frequencies of Occupation in Durban and Cape Town (Sturrock) Docks

37. Shipping Lanes Passing South Africa Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

38. Empty Leg Shipping Lanes Passing South Africa Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

39. Shipping Lanes Coming to, and Leaving, South Africa Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

40. Major Countries for Ship Repair and Conversions Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

41. Minor Countries for Ship Repair and Conversions [Either High Cost, Domestic Orientation or Lacking in Expertise] Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

42. Major and Minor Countries for Ship Repair and Conversions Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

43. Opportunities for Future Expansion of Ship Repair Business Opportunities for Future Expansion of Ship Repair Business Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

44. Possible New and upgraded Ship Repair Dock faculties in South Africa Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports Durban H H East London Ngqura Port Elizabeth Cape Town Saldanha Bay Richards Bay Upgraded Ship Repair Facilities: Upgraded and New Ship Repair Facilities: For the fishing fleet Upgraded Ship Repair Facilities: New Ship Repair Facilities: 2 No. Graving Docks 1 No. Floating Dock New Ship Repair Facilities: 1 No. Graving Docks 2 No. Floating Dock New Ship Repair Facilities: 2 No. Graving Docks 1 No. Floating Dock

45. Advantages of Expansion of the SA Ship Repair Business : Larger facilities More space for lay-down Greater efficiency of operation More flexibility of operation Increased employment in low employment zones Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

46. New facilities : Additional quay space for ship repair activities Floating Docks Simplified and shallower Graving Docks Roof Covers Semi automated dock block arrangements Simplified Dock Gates Faster water removal pumping systems and penstocks Faster moving cranes for light lifts Mechanical handling for dock work and painting Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

47. Funding : A new Graving Dock will cost in the order of a R 1 billion Requires review of the present industry Requires investment from International Ship repair Groups Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

48. Potential : Increase in direct work force by up to 5 times = approximately 21 250 Increase in indirect work force by up to 5 times = approximately 45 000 In areas where employment is needed Can result in up-skilling of workforce Increase in income for the sector = approximately R 8.4 billion Increase in foreign investment Increase in foreign income Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa Opportunities for Future Expansion of Ship Repair Business in South African Ports

49. Draft Railways and Harbours Conference and Exhibition: Ports 2009 Cape Town, South Africa