11 March 2003 1

11 March 200311 March 200311 March 200311 March 2003

The Portfolio Committee on The Portfolio Committee on TransportTransport

Presentation on SARCC’s StrategicPresentation on SARCC’s Strategic

Goals, Plans and Budget for 2003/2004Goals, Plans and Budget for 2003/2004

ByBy

CEO – Eddie LekotaCEO – Eddie Lekota

SA Rail Commuter Corporation Ltd

11 March 2003 2

Presentation Overview

• SARCC Mandate

• Vision

• Mission

• Corporate Strategic Objectives

• Major Strategic Plans

• Budgetary Implications (by Jakkie van Niekerk)

• Conclusion

11 March 2003 3

The Mandate of the SARCC

Mandate

The SARCC’s mandate is to ensure

that, at the request of the National

Department of Transport or any

sphere of government, rail

commuter services are provided in

the public interest, and to promote

rail as the primary mode of mass

commuter transportation.

Primary & Secondary Objectives

of the Act

Primary Objective

The SARCC’s mandate is to ensure that, at

the request of the National Department of

Transport or any sphere of government, rail

commuter services are provided in the public

interest, and to promote rail as the primary

mode of mass commuter transportation.

Secondary Objective

To generate income from the exploitation

of assets transferred to the SARCC by the

Minister of Transport under Section 25 of

the Legal Succession to the SATS Act

(Act 9 of 1989)

11 March 2003 4

To ensure

The provision of rail commuter services

In the public interest

The Mandate of the SARCC

At the request of NDOT or Transport Authority.

11 March 2003 5

To ensure

The provision of rail commuter services

In the public interest

The Mandate of the SARCC - Legal Succession Act – to Ensure

11 March 2003 6

To ensure: (provision of rail commuter services)

•To make sure

•To make certain

•To guarantee

To guarantee: (provision of rail commuter services)

•Offer a formal assurance

•Something that makes a specified condition certain

•To take responsibility for

•To undertake to protect

•To promise

The Mandate of the SARCC - Legal Succession Act

11 March 2003 7

To ensure

The provision of rail commuter services

In the public interest

The Mandate of the SARCC - Legal Succession Act

11 March 2003 8

Public

Community•Trade and industry

•Suppliers•Labour•Other modes

Business Stakeholders

ShareholderGovernment (Incl. TA’s)

Users

The Mandate of the SARCC - Legal Succession Act - Public Interest

11 March 2003 9

To ensure

The provision of rail commuter services

In the public interest

The Mandate of the SARCC - Legal Succession Act

11 March 2003 10

Service RequirementService Requirement

Service ProvisionService Provision

In public interestIn public interest

Travel NeedsTravel Needs Available FundingAvailable Funding

Shareholder

CommunityStakeholders

Users

The Mandate of the SARCC - Legal Succession Act – Provision…

11 March 2003 11

Vision

To establish rail as the preferred mode of public transport and to be the recognized champion in ensuring the

provision of quality commuter rail services for all transport authorities in South Africa, in the public interest

11 March 2003 12

Mission

To ensure the movement of people through the provision

of safe, reliable, affordable and sustainable commuter

rail services; and to develop the rail assets, using

best practices in the interest of all stakeholders.

11 March 2003 13

Corporate Strategic Objectives

1. Utilize and develop the commuter rail provision environment to protect and

promote the interest of the users, public and stakeholders.

2. Support the rail system through ITP’s and IDP’s towards the aims and

requirements of policies of all tiers of government.

3. Establish the delivery policy framework for rail commuter service provision.

4. Improve (and establish where necessary) the performance compliance framework

and mechanisms for funding, delivery and compliance of rail commuter services.

5. Develop and promote the provision of sustainable mass-moving rail commuter

services, optimized funded enhancements and professional services towards

socio-economic development.

6. Create an environment for the development of expertise and knowledge within a

consultative and rail business intelligence framework.

11 March 2003 14

Major Strategic Plans

• Funding and optimization of subsidy

• Bi-nationals and SADC

• Investment in assets

• Transformation of SARCC and commuter rail business.

• Safety and security of passengers and assets

• Promotion of rail as the mass mover.

11 March 2003 15

Major Strategic Plans - Transformation

• Internal Transformation

•Management and employee representativity

•Black Economic Empowerment

•Tender Policy and suppliers’ / consultants’ workshop

•Skills development and exchange programmes

•Information resource and business intelligence

•External focus – new structure incorporating public participation

•External Transformation

•Public participation – Batho-Pele

•Public meetings / road shows thru appropriate structures

•Community sense of ownership of commuter rail

•Informal business development

•Provision of community facilities at stations

•Attractive, accessible service to ALL

11 March 2003 16

Major Strategic Plans – Safety and Security

• Safety and security remains the biggest threat to the image of rail commuting

2000 2001 2002

Injured Killed Injured Killed Injured Killed

Operational Safety Act 85

Violent Crime

Total

% of Incidents

involving people

400

354

754

17

12

29

468

401

929 35

21

14 414

416

830 28

11

17

24,8% 29,3% 42,1%

11 March 2003 17

Major Strategic Plans – Safety and Security

Cost of damage to assets

2001/2002 2002/03

•Vandalism R8,7m R11,3m

•Arson - Buildings R20,1m R32,4m

•Arson - Rolling Stock - R48,0m (Insured cost)

(Replacement cost = R350 m)

11 March 2003 18

Major Strategic Plans – Safety and Security – Court Case

• Court case in Western Cape has serious implications.

• Costs to address the issue of the “open system” as is required by the outcome of the

court case.•Closing-off the system = R1,2bn once-off capital•Operating costs R1,4bn per annum.

11 March 2003 19

Major Strategic Plans – Safety and Security Plan in Progress

• SARCC investigated increase in crime on the rail commuter system since

March 2002.

• Developed total safety and security strategy with feasibility pilot study in

Western Cape.

• Project involves alarms on cables, helicopter surveillance, dedicated armed

response teams and development of intelligence capability with existing forces.

• Pilot successful and has been implemented on the entire Western Cape

system since October 2002.

11 March 2003 20

Major Strategic Plans – Safety and Security Plan in Progress

Results since October - December - Western Cape

•Serious crime related incidents - Decreased 63%

•Serious liability incidents - Decreased 60%

•Murder - Decreased 63%

•Attempted murder - Decreased 63%

•Assault - Decreased 58%

•Robbery Decreased 53%

•Asset damage - Decreased 20%

•Burglaries - Decreased 100%

•Arson - Decreased 100%

Cost of strategy for Western Cape = R15m per annum

11 March 2003 21

Major Strategic Plans – Safety and Security – Other enhancements

• Safety Regulator

•SARCC’s engagement with the regulator

•SAPS Rail Unit

•Once approve and implemented, it will assist in the reduction in crime incidents and damage to assets

•CCTV on stations and in trains in the future

11 March 2003 22

Major Strategic Plans – Rail Promotion as Mass-Mover

Extension of Lines

• Several expressions of interest in unserviced areas. (Free State, Limpopo,

North West).

Status

• Total 180 new proposals identified since 1990. (New stations, interchange

facilities, extensions, new lines and network/yard improvements).

• Conceptual design of highest priority projects undertaken.

• Only 3 stations proceeded for implementation and Katlehong Kwesine line

re-instated.

• Khayelitsha line extension under design.

11 March 2003 23

Investment Potential

• R10m requested for 2003/04 from internal capital programme.

• If approved - enable basic planning of 5 projects and initiation of 7 projects.

• Motivations submitted for implementing 3 top priority new stations. (Orange Farm

Oakmoor/Olifantsfontein, Lebaleng).

• Total of 6 priority upgrade stations submitted for funding for partial or full

upgrade (±R69m). (Allow for special needs passengers, ticket verification, security, PA and information systems).

Repositioning of commuter rail

•Aggressive marketing and promotion of rail

Major Strategic Plans – Rail Promotion as Mass-Mover

11 March 2003 24

Major Strategic Plans - Subsidy optimisation

•SARCC believes metropolitan rail systems can be more efficient if totally rationalised/

optimised in terms of a metropolitan rail plan.

Categories of efficiency proposals

1) Institutional and regulatory efficiencies

•Improving the current regulatory regime between SARCC and Metrorail (Concessioning

Agreement).

•A review of the incentive and budget framework of the contractual agreement.

2) Operational efficiencies

•Managing peak demand to improve utilisation of the system and decrease operational cost.

(System at its peak for 5 hours a day whereas all equipment and resources are deployedat full for 24 hours a day).

•Rationalisation of services - more optimum modes with modal integration. Rail services not economical for 60 - 100 passengers per hour - eg night services.

•Nodal transfer and rail corridor management in association with other transport modes

11 March 2003 25

Major Strategic Plans - Subsidy optimisation

2) Operational efficiencies……continued

•Fare evasion in terms of nodal stations - close the system through major interchange.

facilities. Passengers will have to enter through at least one verification point.

•Improve fare structure and ticket system. (Reduce the need for automatic fare collection points and equipment).

•Concentrate 20% of effort on 80% of activity. - 50 major nodes vs 460 stations.

•Major nodes highly developed within closed system paradigm. The strategy will concentrate on the customer, as well as safety and security personnel.

3) Corporate governance•Internal audit & control•Fraud / corruption management

4) Cross-subsidization thru alternative rail technologies

11 March 2003 26

Major Strategic Plans – Bi-Nationals and NEPAD

• Sharing of ideas with other countries and identification of investment opportunites

• Aim to turn Intersite into a rail consultative service provider beyond property business

• Stations such as Park Station could be turned into an African economic & business hub

11 March 2003 27

Major Strategic Plans – Investment in assets

• Perway (Track) = Good condition

Issues:

• Encroaching informal settlements (Dangerous operating environment)

• Passengers, women and children crossings tracks - open system.

• Security (Cable theft and train robberies)

• Signalling

Issues:

• Ageing signalling technology.

• Commenced with limited replacement.

• Need to accelerate replacement to achieve other operational

efficiencies - less rolling stock by increasing system capacity through bi-directional signalling.

11 March 2003 28

• Stations

Issues:

• Major developments and station upgrades limited due to other

urgent funding requirements.

• General environment and condition of stations are critical aspects to

improve safety and security, and to address the “open” system.

• Station master plan with re-designed corridor services and major

nodal transfer interchanges required. (Co-operation of local authorities in terms of integrated public transport plans).

Major Strategic Plans – Investment in assets

• Automatic Fare collection project (R18m allocated - Total requirement =

±R480m).

11 March 2003 29

Major Strategic Plans – Investment in assets - Rolling Stock

• Fleet = 29 years old with some coaches over 40 years.

• 40% of fleet older than 30 years.

Age Distribution

117

911

1031

803

909

538

313

0

200

400

600

800

1000

1200

11-15 16-20 21-25 26-30 31-35 36-40 41-45

Age Group

Co

ach

es

Coaches

Average age: 29 yearsAverage age: 29 years

11 March 2003 30

Rolling Stock Age Distribution

• Mean Time Between Failures = 35 days (International norm = 600 - 700 days)

(Once every two years).

• Average of 1300 coaches are constantly out of service.

• Roadworthy condition single biggest factor in service reliability (40% of causes

of poor punctuality relates to availability of rolling stock).

• General Overhaul (major service) extended to 16 years (Specification

require 9 year overhaul cycles).

• SARCC provides ±R200m per annum from operational subsidy to this programme.

(Additional funds from capital allocation, ±R100m per annum transferred to this

programme to prevent cycles beyond 16 years).

11 March 2003 31

Rolling Stock Plan

• SARCC upgrade programme - rebuild of rolling stock locally. Two contracts

only, valued at R615 m producing a total of 236 coaches. (Total of 4500 coaches).

• ±50% of current SARCC capital grant is allocated to rolling stock.

• Metrorail also spends ±R200m per annum on day-to-day maintenance of rolling

stock.

Rolling Stock Strategy

• Introduce full life cycle asset management philosophy - I.e. combine maintenance,

general overhaul and capital refurbishment programme under single management

strategy.

• Units due for GO with good body work will undergo necessary GO and be

re-scheduled for service. Currently 260 units per annum at ±R300m

• Units with scrapped body structure will be refurbished/upgraded into new

generation rolling stock.

• Requirement = 400 units at R450m per annum. (12 year cycle)

11 March 2003 32

Rolling Stock Plan……..continued

• 10 Year programme of decreasing GO programme and accelerate refurbishment

programme.

• Refurbishment programme replaces GO programme with decreasing maintenance

costs.

• Strategy requires R1000m - R1200m per annum. Current total investment =

R250m - R300m.

• Industry capacity can be incrementally increased as per requirement.

• More capital work required during GO cycles and GO strategy does not not offer

a long-term solution.

11 March 2003 33

Rm2002/2003

IncomeSubsidy

•Operational•Capital

Fare Revenue (Metrorail)

Rental of assets (SARCC)

Property (Intersite)

Interest & Sundry

3 222

2 1111 546 565

860 66

170

%

9.3

11.0

9.67.9

17.7

ExpenditureOperational

•Commuter Services•Metrorail Management Fee•Asset Rental•Heavy Repair•Property•Insurance•Administration and Other

Capital

3 308

2 7432 072

8654

19817111547

565

Shortfall 76

25

8.6

17.7

Rm2003/2004

2 3441 679 665

937 66

187

3 626

2 9612 234

9454

22818311553

665

0

92

3 534

Rail Commuter Funding

11 March 2003 34

Shortfall Projected:

2002/2003 R76m

2003/2004 R92m

2004/2005 R56m

2005/2006 R73m

+ R79 = R155

Increase in requirement Requirement Allocation

• Increase 98/99 - 99/00

(First year of contract)

•Increase 99/00 - 00/01 (Mercer)

•Increase 00/01 - 01/02 (Mercer)

•Increase 01/02 - 02/03

•Increase 02/03 - 03/04

•Increase 03/04 - 04/05

1 407 12.8%

1 422 1,1%

1 461 2.7%

1 631 11.6%

1 771 8.6%

1 930 9.0%

1 277 12%

1 372 7.4%

1 366 -0.4%

1 546 13.2%

1 679 8.6%

1 874 11.6%

Inadequate MTEF Allocation

11 March 2003 35

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

2800

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

1

01/

02

02/

03

03/

04

1990/91 Base Year

94/95 Base Year

Actual Subsidy

The Effect of Inflation

Ra

nd

Mil l

ion

Operational Subsidy (Excl. Capex and Interest)

11 March 2003 36

TOTAL 300 355 490 565

Normal Allocation

99/00Rm

00/01Rm

01/02Rm

02/03Rm

300 355 355 405

Additional Allocations

•Rolling Stock

•Khayelitsha extension

•Other

135 60

20

80

Capital Expenditure

Rolling Stock

Stations

Perway (track)

Signals

Electrical OH

Telecommunications

Information Technology

02/03Rm

TOTAL 565

296

148

25

48

19

13

16

03/04Rm

405

100

160

665

03/04Rm

665

404

140

28

45

20

15

13

Rail Commuter Business - Capital Subsidy

11 March 2003 37

Actual Requirement - Backlogs and Current needs = R1 400 - R1 700 ad infinitum

Actions to identify and quantify the problem:

•Analysed requirements since the 1990’s.

•SIG Consortium investigation on Rolling Stock - 1997.

•Audit: Capital Investment Programme - 1999.

•NDOT: Request investigation:

•Consultants investigate and verified backlog and investment needs.

•Utilised asset condition assessments.

•Proposed investment scenarios and impact on business (safety and risk)

Funding level 01/02 02/03 03/04

Base allocation 355 405 405

Additional allocation 135 160 260

490 565 665

Long Term - Inadequate Capital Investments

11 March 2003 38

Rolling Stock 6 386 1 060 1 750 220

•40 Year threashold

(Average 27 yrs).

•Overhaul cycle 12 yrs (Currently = 17 yrs)

•45% contribution to train cancellations.

•1300 coaches out of service (70% vs 95% Int nom)

Assets Backlog

Requirement

Realistic Solution (20 Yr Plan)

10 Yrs pa 11 - 20 Yrs pa

Allocation ito limitations

(Annual Average)

Critical Issues

Signalling 1 960 250 25 60

•Obsolete system.

•25% contribution to train performance.

•Create abnormal

operational conditions.

•Cable theft.

•System capacity (less r/s) (Need less rolling stock)

Capital Investments (R’m) - 2002/03 Rands

11 March 2003 39

Stations 1 950 250 125 80

•Commuter experience.

•Development (socio +

economic - empowerment)

•Station effectiveness.

•Security/safety.

•Ticket verification/control

Assets Backlog

Requirement

Realistic Solution (20 Yr Plan)

10 Yrs pa 11 - 20 Yrs pa

Allocation ito limitations

(Annual Average)

Critical Issues

Electrical OHS 300 100 125 20 •Reliability

•Cable theft

Capital Investments (R’m) - 2002/03 Rands

11 March 2003 40

Perway (Track) 12 25 25 10 •Safety

•Operability

Total

(Maintain

System)

10 633 1 729 2 094 400

Assets Backlog

Requirement

Realistic Solution (20 Yr Plan)

10 Yrs pa 11 - 20 Yrs pa

Allocation ito limitations

(Annual Average)

Critical Issues

IT 25 44 44 10•Efficiency

•Management

Capital Investments (R’m) - 2002/03 Rands

11 March 2003 41

Total

Maintain

System)

10 633 1 729 2 094 400

Assets Backlog

Requirement

Realistic Solution (20 Yr Plan)

10 Yrs pa 11 - 20 Yrs pa

Allocation ito limitations

(Annual Average)

Critical Issues

Network Development

•Infrastructure

•Rolling Stock

•New Provinces

4 685

5 000(1000)

468

500(150)

468

500(100)

5

•Static rail system.

•Access to basic mobility.

•Development.

•Road based solutions.

Total 20 318 2 697 3 062 405

Capital Investments (R’m) - 2002/03 Rands

11 March 2003 42

Inve

stm

en

t S

ce

nar

ios

0 5 10 15 20 30 40

Business Survival Years

50

Investment Scenarios

11 March 2003 43

393

427

458

498

532

569596

629

670

723

250

288292

317339

356

399

429

467

504

250 250 250 250

300 300

355 355

405 405

200

300

400

500

600

700

800

94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

Inflation - 1990/91 Base Year

Inflation - 1994/95 Base Year

Base Capital Allocation

Ra

nd

Mil l

ion 495

565

665

Effect of Inflation on Capital Allocation

11 March 2003 44

Conclusion

•A business with great opportunities to improve public transport mobility and service

delivery, especially safety of passengers

• Envisaged institutional reform -

• Government to decide the framework for public service monopoly provision.

(Inside/Outside Transnet, with or without economic regulator).

• SARCC proposes stronger regulatory control and re-alignment of current

dysfunctional arrangements.

• Rail plans and improvement of services impossible without re-alignment of functions,

roles and responsibilities in the industry.• Co-operation between Transnet (Metrorail) and the SARCC