from stabilisation to quality travel experience - passenger rail agency of south africa...

25 February 2010 of 97

FROM STABILISATION TO QUALITY TRAVEL EXPERIENCE

CCOORRPPOORRAATTEE PPLLAANN

22001100//1111 -- 22001122//1133


Table of Contents

1 PREFACE ........................................................................................................... 5

2 PRASA Vision, Mission & Values ........................................................................ 8

Vision ...................................................................................................................... 8

Mission .................................................................................................................... 8

Values ..................................................................................................................... 8

3 BACKGROUND ................................................................................................. 10

3.1 Historical Context ....................................................................................... 10

4 PASSENGER TRANSPORT CHANGE IMPERATIVES .................................... 13

4.1 The Public Transport Challenge ................................................................. 13

4.2 Inadequate Passenger Service Provision ................................................... 14

4.3 Customer-Centric Delivery ......................................................................... 14

4.4 Delivery on 2010 FIFA Soccer World Cup .................................................. 14

4.5 Potential for Passenger Services ............................................................... 15

4.6 Government‘s Position on Public Transport ............................................... 16

5 CHALLENGES FACING PRASA ....................................................................... 19

5.1 Consolidation / Turnaround / Restructuring ................................................ 19

5.2 Sustainable Funding ................................................................................... 19

5.3 Ageing Rolling Stock and Infrastructure ..................................................... 20

5.4 Human Capital Development ..................................................................... 22

5.5 Change Management ................................................................................. 23

5.6 Leadership & Skills Development ............................................................... 23

5.7 Rail Technology Development ................................................................... 23

5.8 Asset Redistribution ................................................................................... 26

5.9 Long-term Plan Alignment (including Rail Plans) ....................................... 26

5.10 Strategic Partnerships ................................................................................ 27

5.11 Modal Integration........................................................................................ 27

6 MANDATE OF PRASA ...................................................................................... 28

6.1 Strategic Role of PRASA ............................................................................ 28

7 LEGAL AND OPERATING STRUCTURE FOR PRASA .................................... 31

8 GOVERNMENT‘S MANDATE & KEY PERFORMANCE AREAS ...................... 33

8.1 Key Performance Areas ............................................................................. 33

9 STRATEGIC OBJECTIVES & INITIATIVES (STRATEGIES) ............................ 34

9.1 Business Model .......................................................................................... 34

9.2 Business Alignment .................................................................................... 34

9.3 Strategic Objectives ................................................................................... 37

9.4 Key Strategic Initiatives (Strategies) ........................................................... 38

9.5 Alignment of Objectives, Strategies and Programs .................................... 40

9.6 Key Performance Area Alignment .............................................................. 42

10 KEY STRATEGIC INITIATIVES FOR PRASA ............................................... 56

10.1 Re-capitalization of the Asset Base ............................................................ 56

10.2 Infrastructure Re-Capitalization & Expansion ............................................. 58

10.3 Modal Integration........................................................................................ 61

10.4 Integrated Management System (ISO Related Quality, Safety & Maintenance Management) ........................................................................ 61

10.5 Rationalization and Standardization of Systems ........................................ 62

10.6 Revenue Strategy....................................................................................... 64

11 THE ROLE OF DIVISIONS AND SUBSIDIARIES ......................................... 66

11.1 PRASA Rail ................................................................................................ 66

11.2 . Autopax .................................................................................................... 71

11.3 . Intersite Property Management Services (Pty) Ltd ................................... 72


12 2010 FIFA Soccer World Cup Operational Plan ............................................ 74

12.1 Commuter Rail (METROPOLITAN TRAIN SERVICES) ............................. 74

12.2 INTER-CITY AND REGIONAL TRAIN SERVICES .................................... 74

12.3 Autopax ...................................................................................................... 75

13 BUSINESS / ORGANISATIONAL RISKS ...................................................... 76

13.1 Strategic Risks ........................................................................................... 76

13.2 Business Risks ........................................................................................... 77

13.3 Operational Risks ....................................................................................... 78

13.4 Risk Mitigation Measures ........................................................................... 79

13.5 Risk Mitigation Oversight ............................................................................ 81

14 FINANCIAL PLAN .......................................................................................... 84

14.1 Assumptions Underpinning the Financial Plan ........................................... 84

14.2 5-Year Funding Profile (Incorporating the MTEF allocation and the 2008/2009 Budget) ..................................................................................... 85

14.3 PRASA Group Income Statement .............................................................. 88

14.4 PRASA Group Balance Sheet .................................................................... 89

14.5 PRASA GROUP Cash-flow Statement ....................................................... 90

14.6 PRASA Borrowing Plan .............................................................................. 91

14.7 PRASA Materiality & Significance Framework ........................................... 91

15 CAPITAL PROGRAM .................................................................................... 92

15.1 Capital Allocation........................................................................................ 92

15.2 Summary of PRASA Key Projects .............................................................. 93

16 KEY PERFORMANCE INDICATORS ............................................................ 94

16.1 Key Performance Indicator Alignment ........................................................ 94

16.2 Key Performance Indicators & Targets ....................................................... 95

17 PRASA STATISTICS ..................................................................................... 96

17.1 Assets owned by PRASA and operated by Metrorail ................................. 96

17.2 Assets owned by Prasa and Operated by Shosholoza Meyl ...................... 96

17.3 Priority Rail Corridors as per National Rail Passenger Plan ....................... 97


GLOSSARY

ACSA Airports Company of South Africa

BBBEE Broad Based Black Economic Empowerment

BEE Black Economic Empowerment

BOC (PRASA) Board of Control

BSC Balanced Scorecard

CTC Centralised Traffic Control

DoT Department of Transport

ERP Enterprise Resource Planning

FMMS Fleet Management Maintenance System

HR Human Resources

IDP Integrated Development Plan

IRPTN Integrated Rapid Public Transport Network

IT Information Technology

ITP Integrated Transport Plan

KPA Key Performance Area

MSA Moving South Africa

MTEF Medium Term Expenditure Framework

PFMA Public Finance Management Act

PMO Programme / Project Management Office

PRASA Passenger Rail Agency of South Africa

PTIS Public Transport Infrastructure & Systems

SARCC South African Rail Commuter Corporation

SARS South African Revenue Services


1 PREFACE

The Passenger Rail Agency of South Africa (―PRASA‖ or the ―Agency‖) was established to house the operations, personnel and assets of the South African Rail Commuter Corporation (SARCC), Metrorail, the SARCC wholly owned subsidiary, Intersite Property Management Services (Pty) Ltd (―Intersite‖), Shosholoza Meyl (―Shosholoza‖), and Autopax, the bus company. Following the Cabinet decision to consolidate passenger rail in December 2004, the Legal Succession to the South Africa Transport Services (―SATS‖) Act of 1989 was amended by Parliament, and signed into law on 27 November 2008, to enable the implementation of this strategic decision. PRASA is a public passenger transport entity owned 100% by the Government of South Africa from the consolidation of Government-owned passenger rail entities, a road based passenger carrier and property asset management entities. PRASA is the culmination of a long process of policy evolution and forms a vital element in the Government‘s efforts to transform public transport in South Africa. The evolution of transport and public transport policy is important since it provides the context for the creation and mandate of PRASA. Transport policy, and specifically the Public Transport Strategy, sees rail passenger transport as the backbone of integrated mass rapid public transport networks. In this context, inter-modal facilities and services packaged into integrated public transport solutions that optimise the performance of the transport system as a whole defines the essence of PRASA. The institutional arrangements that governed passenger rail and the entire public transport system over the years did not promote efficiency, innovation and accountability. There was also a great deal of confusion between the contractor and regulatory functions implicitly embodied in the SARCC. It was essential to overcome the fragmented and dysfunctional institutional arrangements that existed in the provision of passenger services. A key Government consideration was the need to find sustainable funding solutions as part of its efforts to reverse the decline in commuter rail services. The National Rail Plan, which was approved by Cabinet in December 2006, identified the funding and investment requirements for passenger rail over the next 10 years. Consolidation has created the platform for PRASA to more effectively support Government‘s objective of modal integration. A key role will be to promote and position rail as the preferred mode of choice in high-density, high-volume movement corridors where it will be competitive in terms of its critical strength – high capacities. As part of integrated public transport solutions, PRASA where necessary will provide road-based feeder and distribution services to its rail operations in order to facilitate greater mobility and accessibility through its subsidiary Autopax. Simply put, PRASA is about mobility and accessibility – the movement of people and their access to real opportunities so that they can lead quality lives There have been a number of important drivers behind the decision to consolidate passenger rail entities into a single entity; chief among these was the critical need to address the under-performance of rail passenger services as well as the historical


under-investment in this sector. The key objectives identified by Government in addressing the challenges of passenger rail transport moving forward are as follows:

Sustainable passenger rail service delivery;

Improved performance of passenger rail services in terms of the quality and levels of services to passengers;

Improved efficiency in the delivery of services;

Improved effectiveness of asset management;

Effective targeting of subsidies to achieve desired socio-economic & transport objectives;

Improved oversight by Government; and

Improved accountability to the users.

The long-term goal of PRASA is to be a commercially-viable business capable of delivering efficient, high-quality passenger transport services on a sustainable basis. The commercial viability of the business will be measured in terms of the growing ability of PRASA to meet its own operational funding requirements. In this new direction, Government will be expected in the long-run to provide capital subsidies strictly for purposes aimed at the development of strategic infrastructure.

Whilst the subsidization of public passenger transport remains the cornerstone of Government transport policy, the medium to long-term goal is to reduce the overall subsidy requirements. By driving efficiency measures, increasing fare income through increased patronage and re-balanced fare structure and improving revenue from the property portfolio, the subsidy per passenger is expected to go down in the long run. To this end, and as part of building a viable and sustainable business, PRASA will over the next five (5) years implement a mixture of strategies aimed at ensuring that PRASA take service delivery to new heights. The next phase of evolution will be defined by the critical need for PRASA, formerly the SARCC, to make a gradual shift away from a stabilisation focus towards delivering quality services to its customers. Among the key strategies to be implemented will be Facilities Management and Total Station Management, both of which are aimed at enhancing the experience of the commuter within the PRASA ―System‖, Increase Patronage, Recapitalizing of the Property Portfolio, Maximizing Income from current & future leases and re-balancing Government‘s social objectives.

Among the critical priorities for PRASA over the next three to five years is upgrading the existing passenger railway system and championing the adoption of new railway technology best practice upgrades to meet the challenges of a modern society. PRASA will be required to implement plans for the modernization of the signalling, telecommunications systems, rolling stock and train operating systems, which should lay the foundation for a modern, efficient transport system. Its business units will focus on the delivery of high-quality services. As part of its strategy to secure the future of its business, PRASA‘s Strategy will focus on the following three (3) Strategic Areas:

1. Service Excellence within Metrorail, Shosholoza Meyl and Autopax 2. Property and Asset Development, and 3. Technology Upgrade or Modernization of its key transport systems


For PRASA to discharge its mandate and responsibilities more effectively, key strategic functions will be consolidated within the PRASA Corporate Office. The PRASA Group, through its Corporate Office, is the ―owner‖ of the asset whilst its Divisions and Subsidiaries will, on behalf of the PRASA Group, Operate, Manage and Maintain assets under their control and implement decisions, strategies and policies approved by the Board and EXCO of PRASA. The PRASA Corporate Office has an important Strategic Role to play and its Focus will be on the following Activities:

1. Develop and Drive Corporate Strategy, 2. Development of Corporate Policies (HR, Finance, IT) 3. Asset Development (Modernisation and Technology Upgrade) 4. Capital Investment Programme (Infrastructure Development) 5. Meeting Short and Long-Term Funding Requirements of the Business 6. Develop and implement Funding Models to ensure sustainability of the

Business. 7. Integrated Management System (IMS), including Universal Access. 8. Ensure PRASA Rail, Autopax and Intersite meet expectations of customers.


2 PRASA Vision, Mission & Values

Vision

A provider of integrated public transport solutions for improved mobility

Two fundamental principles underpin the vision:-

Integration – PRASA should facilitate integrating individuals and communities, enabling a better quality of life through access to socio-economic opportunities.

Mobility Solutions – PRASA should connect individuals and communities through the provision of public transport solutions that are founded on an integrated network of mobility routes.

Mission

Sustainable Public Transport Solutions through

Service Excellence, Innovation and Modal Integration

The mission reflects three key intentions:-

Service excellence – superior performance that is safe, reliable and affordable, provide a dignified travel experience that makes a lasting impression, and builds brand loyalty – both internally (employees) and externally (customers) – that adds benefit to the passenger.

Sustainability - a focus on sustainable development in business that considers not just the financial ‗bottom line‘ of prosperity and profit, but also environmental quality and social equity.

Modal Integration – reframing the basis of business delivery, favouring innovation, seamless integration and partnerships

Values

The values that will guide PRASA, underpinning the performance ethos of the organization have been derived via Group wide workshops involving all units and all levels of staff. The premise of the values is to deliver service excellence, productive staff and business growth. The values are -

Fairness and Integrity o Treating our customers and our colleagues the same as we would like

to be treated.

Service Excellence o Provide the kind of service that ensures that our customer leaves with a

smile.

Performance Driven o Developing the ability to venture into new breakthrough areas of

opportunity whilst offering quality products to our customers.


Safety o Ensuring our customers and colleagues enjoy their journey and arrive

safely and refreshed.

Communication o Sharing information with our customers and colleagues in an open and

honest way.

Teamwork o Working together with our customers to achieve a common goal and

recognising each other‘s worth.


3 BACKGROUND

3.1 Historical Context

Prior to April 1990, passenger services, road and rail based, were provided by the South African Transport Services (SATS), a state-owned entity. From 1 April 1990, these functions became, respectively, the responsibility of Transnet Limited and the South African Rail Commuter Corporation Limited (SARCC), companies created in terms of the Legal Succession to the South African Transport Services Act, (Act 9 of 1989). Commuter rail services were transferred to the SARCC but long distance (both road and rail) passenger services continued to be provided by Transnet, which created a number of operating divisions that included, inter alia, Spoornet & Autonet, the forerunner of Autopax, which was created in 2000. The assets required to operate commuter rail services were allocated to the SARCC on the basis of usage at the time. During 1992, a wholly-owned subsidiary company of the SARCC, Intersite Property Management Services (Pty) Ltd (IPMS), was formed to manage and develop the newly transferred property portfolio. Transnet operated the commuter rail assets on behalf of the SARCC, by way of a Business Agreement, through Metrorail - an operating unit of Spoornet until 1996 when Metrorail became, in its own right, a business unit of Transnet. The mutual use of these assets was governed, amongst others, by the Mutual Use and Mutual Hire Agreements between Transnet and the SARCC. Under this arrangement, the SARCC owned the commuter rail assets and retained responsibility for capital expenditure and all asset maintenance with the exception of maintenance associated with operations, which became the responsibility of Metrorail. The lack of clarity on roles between the SARCC and Metrorail was the source of some of the problems that impacted negatively on the maintenance of the commuter asset base.

3.1.1 Commuter Rail Services

The SARCC reported to the Department of Transport through a Board of Control and focused on fulfilling Government‘s social and economic obligation of providing affordable commuter rail services. Through Metrorail, it transported over 2.2 million passenger trips on weekdays in the six (6) Metropolitan Centres: Witwatersrand, Pretoria, Cape Town, Durban, Port Elizabeth and East London. These have since been structured into four regions, with Wits and Tshwane falling under Gauteng and Port Elizabeth and East London consolidated under the Eastern Cape Region. The SARCC owned 317 stations but operates 468 stations, with 151 stations belonging to Transnet. The SARCC provided commuter rail services on 3180 single track km of which it owns 2228 single track km of railway track and Transnet Freight Rail 952 single track km. The SARCC had a rolling stock fleet of 406 train sets comprising of 4,638 coaches, of which 97.5% were built between 1958 and 1985, during which period an average of 90 coaches per annum were purchased. The majority of the fleet are the ―5M2‖ generic type, which has 1950 technology in the


vehicle structure, bogies and suspension, propulsion and control system, and brake system. Only a small portion (2.5%) of the fleet comprises coaches that were purchased in the mid-eighties encompass relatively newer technology. The SARCC leased diesel locomotives to assist with yard operations and to provide the traction supply for the Eastern Cape Metrorail services. Investment capital expenditure on the commuter rail asset base, and the allocation of resources between asset classes, subject to the availability of funds, was the responsibility of the SARCC. Metrorail has focused on the delivery of commuter rail services in six major metropolitan areas while assuming full responsibility for the maintenance of the asset base on which it operated. This was done within the framework of the both the Business Agreement and funding availability that was received from the SARCC. The relationship between Metrorail and the SARCC, in terms of performance requirements, was governed by the Business Agreement between Transnet and the SARCC. The separation of asset management (SARCC) from operations (Metrorail) proved to be a major contributing factor in the failure of these entities to respond effectively to passenger demands as well as their lack of accountability for poor commuter services.

3.1.2 Long Distance Passenger Services

Shosholoza Meyl, currently services twenty-one routes between major destinations in South Africa. It carries over 3.9 million passengers per annum, many of whom are migrant workers travelling between the rural areas and the Metropolitan centres of South Africa as well as migrant workers from neighbouring countries such as Mozambique, Malawi, Zimbabwe, Lesotho & Zambia. The sitter or economy class travellers contribute 87.5% of the total revenue of the business. In addition to this core basic service, Shosholoza Meyl also provides Premier Classe trains, Tourist Class trains, baggage and car transportation. Shosholoza Meyl currently stops at 95 stations under the ownership of either PRASA or Transnet Freight Rail (TFR). Shosholoza Meyl owns 1223 rail coaches, of which some 1086 are currently used for passenger transport. The fleet is aging and 33% of the coaches are older than 30 years, while all coaches in service are older than 20 years

Shosholoza Meyl is materially reliant on Transnet Freight Rail, a division of Transnet for the provision of the railway track and support services such as train control to enable it to operate.

3.1.3. Autopax Autopax has its origins in the passenger services provided by the former South African Road Transport Services, under the names of Transtate and Translux.


During the period after 1990, these two businesses were consolidated into the Passenger Services Division of Autonet, a division of Transnet. Autonet was corporatised in 2000 into the legal entity Autopax Passenger Transport Services (Pty) Ltd. It is a well positioned road based passenger transport business operating three established brands:

Translux – a luxury long distance scheduled inter-city operator, servicing more than 100 destinations throughout Southern Africa

City-to-City Express – a semi-luxury, no-frills long-distance operator, providing regional services to various destinations across South Africa

City-to-City, providing no-frills regional services to various destinations across South Africa.

3.1.4. Property Portfolio

Intersite Property Management Services (Intersite) is a wholly owned subsidiary of the SARCC that was created in 1992. The relationship between the SARCC and Intersite was governed by a Management Agreement. Over time Intersite has taken on the responsibility for property development, property management, including leasing and facilities maintenance as well as limited project management responsibilities associated with station development and upgrading.


4 PASSENGER TRANSPORT CHANGE IMPERATIVES

4.1 The Public Transport Challenge

After many years of neglect, the existing commuter transport system, inherited from the apartheid past, has reached saturation levels and is unable to satisfy passenger demands while its infrastructure is not able to meet the requirements of a rapidly changing and modern society. The dysfunctional institutional arrangements have meant poor accountability in the provision of public transport services, which were found to be largely disempowering. Government‘s socio-economic and transport policies could not be supported adequately by such institutional arrangements. The country is seeking to move away from the current commuter-based transport provision into a more integrated public transport system that meets growing and changing passenger demands in an efficient, effective and sustainable manner. The twin challenges for public transport is to simultaneously transform through meaningful integration whilst at the same time enhancing capacity through upgrading and modernization to meet long-term needs. A transformed public transport system should facilitate greater access of both the rural and urban poor to socio-economic opportunities within a growing economy whilst contributing to productive and sustainable cities and towns. The future of passenger transport provision lies in harnessing the strengths of each mode providing public transport services to be able to contribute to the efficient and seamless movement of people in support of the Government‘s social, economic and transport objectives. In this context, transport policy seeks to position rail as the backbone of integrated public transport networks in the major metropolitan areas. Government‘s decision to consolidate passenger rail entities and road-based long-distance bus services into a single entity, PRASA, reporting to the Department of Transport are underpinned by a number of key drivers. The recognition by Government that rail consolidation was required to deal with the under-performance of rail passenger services as well as the historical under-investment in the passenger rail business. Institutional arrangements did not promote efficiency and accountability and significant change was required to overcome the inherent institutional dysfunctions that had been created. Confusion existed between the contractor and regulatory functions implicitly embodied in the SARCC/Transnet relationship.The critical need for sustainable funding to reverse the decline in commuter rail levels of service being experienced by commuters. This funding profile was captured in the National Rail Plan, which was accepted by Cabinet in December 2006, where the funding and investment requirements were identified for passenger rail over the following ten years.


4.2 Inadequate Passenger Service Provision

Passenger rail in South Africa faces many challenges as a result of a long history of inadequate investment in rail rolling stock, infrastructure and operations as well as the loss of appropriate managerial and technical (engineering) skills within the industry. The shortage of such critical skills has a direct negative impact on the delivery of services. In the urbanising metropolitan areas the provision of new rail corridors has not kept pace with the rapidly changing urban landscape resulting in limited coverage in key areas of urban expansion with the consequential loss of significant market share. Over time, commuter rail services have continued to fail to respond adequately to changing passenger demands. Although commuter rail passenger numbers have increased over the past two years, with passenger trips increasing on average by 10% per annum, a prolonged 30 year under-investment has resulted in levels of service experiencing continued decline, due to the reduced availability of reliable rolling stock where the condition of the rolling stock is deteriorating faster than the rate of overhauls being undertaken. PRASA is currently implementing an Accelerated Rolling Stock Investment Program aimed at accelerating the rate of coach overhauls and upgrading in the short-term, which is expected to improve the performance of the fleet in the near future. Long-distance rail services have had a mixed history but currently are predominantly located in the provision of economic inter-city services. Lack of sustained investment coupled with low cost airline and road based inter-city competition has undermined the ability of this service to respond adequately to the increasing demand for long distance travel. The performance of the services in terms of running times is also severely restricting the ability of Shosholoza to compete in this competitive market.

4.3 Customer-Centric Delivery

A dynamic and customer-centric public transport system is required where passengers contribute to and shape the service delivery agenda. The need for a Passenger or Quality Charter and the emergence of strong, vibrant structures championing both the interests of passengers and public transport transformation are vital to the development of a public transport system that will effectively respond to the travelling needs of passengers. The past few years has seen the emergence of vibrant, community-based structures championing public transport transformation and demanding quality services from Government and transport service providers. This movement seems to be growing and shows the determination of South Africans to participate in the construction of a transport system that will effectively respond to their demands.

4.4 Delivery on 2010 FIFA Soccer World Cup

The 2010 FIFA Soccer World Cup is a significant sporting and economic event in the history of South Africa and the African Continent. Rail services are envisaged to be the backbone of public transport services in key match locations. The upgrading of key stations, critical infrastructure, the refurbishment of 2000 rolling stock coaches, the rollout of the Railway Police and the recapitalisation of the Autopax road based bus fleet is key to the provision of passenger services in support of the event. The


legacy of the investment made in both the rail system and the road based rolling stock (coaches) will provide an important foundation for the ongoing rehabilitation of passenger transport in the longer-term.

4.5 Potential for Passenger Services

4.5.1 Commuter Rail Services

The provision of efficient and affordable public passenger transport services is integral to Government‘s drive to create employment opportunities, stimulate economic development and reduce levels of poverty. Enhanced mobility will facilitate greater access to socio-economic opportunities for the urban and rural poor whilst contributing to an efficient transport system to the benefit of all South Africans – highlighting the need for a vibrant public passenger transport network to support sustainable growth and development. Commuter rail has the potential to be the most efficient, affordable and safe mode of travel. It plays a significant role in key Metropolitan areas such as Cape Town and has the potential to become an important public transport player in all metropolitan areas, significantly contributing to an efficient and reliable public transport system in these areas. Despite the acknowledged increase in the growth of car-ownership and usage, public transport and walking continue to dominate the mobility needs of the majority of South Africans and this is likely to continue for the next decade. Metropolitan areas in South Africa are experiencing rapid urbanization. Rail is in a unique position to facilitate greater integration between land use planning and transport infrastructure provision, and providing security, to private and public sector investment, of stable long-term public transport provision. This is vital to creating sustainable communities where people's access to economic and social opportunities is improved. In this context, railway lines need to be positioned, located, aligned with evolving spatial developments and formalised within the statutory planning processes undertaken primarily by local government. The creation of PRASA and the integration of rail and road-based transport services will, over time, provide the user with public transport choices – moving away from a market of captive users to one where dignified travel choice is a real option.

4.5.2 Inter-City / Regional Passenger Services

Historically, long distance rail and road based services have not received the attention required to make them demand responsive in key market areas including migrant workers, students, tourists and occasional travellers. The Department of Transport‘s Public Transport Strategy Action Plan notes that:-

There is a significant potential for the growth in migrant worker long distance public transport provision.

The dominant generators of migrant movement are Gauteng and KZN

The increase in tourism provides opportunities for segmenting the market that build upon the strengths of both long distance rail and coach operations.

Rural areas in South Africa are undergoing a process of economic and social restructuring with a shift in emphasis towards rural trade and agro-processing.


These factors reinforce the need for a public transport service sector that responds to the emerging needs of these rural / regional development nodes since transport links between the rural trade areas and the rural regions (hinterlands) remains unreliable, rendering access to services and emerging economic opportunities extremely difficult. This lack of access will continue to trap many in the poverty cycle.

4.6 Government’s Position on Public Transport

4.6.1 White Paper on National Transport Policy (1996)

The vision of the National White Paper on Transport is to -―Provide safe, reliable,

effective, efficient and fully integrated transport operations and infrastructure which will best meet the needs of freight and passenger customers at improving levels of service and cost in a fashion which supports government strategies for economic and social development whilst being environmentally and economically sustainable”

A series of strategic objectives are articulated that formulate responses to spatial arrangements, customer needs, planning and regulatory requirements as well as operational intentions, namely :-

To encourage efficient urban land uses to correct spatial imbalances and reduce travel distances and commuting times to a limit of about 40 km or one hour in each direction;

To ensure that the passenger transport services addresses user needs, including commuters, pensioners, the aged, scholars, the disabled, tourists, and long distances;

To improve accessibility and mobility, limiting walking distances to less than about one kilometre in urban areas;

To ensure that public transport is affordable, with households spending less than about 10% of their disposable income on transport;

To promote safe and secure, reliable and sustainable passenger transport;

To provide readily accessible information for the assistance of users;

To provide institutions that allow planning, funding, regulation and law enforcement of the passenger transport system to be devolved to the lowest competent level;

To ensure that operations become economically viable, with minimum financial support;

To ensure integrated scheduling, routes and ticketing systems; To ensure environmentally sensitive, sustainable and energy efficient

transport systems.

4.6.2 Moving South Africa (1998)

Moving South Africa (MSA) gives substance to the national transport policy. Its vision is ―To provide an effective and sustainable urban transport system, planned and regulated through the lowest possible level of government, based on competition and largely private sector operation, which reduces system costs and improves customer service in order to meet customer and national objectives for user cost, travel times, choice and safety‖. This vision is guided by three thrusts that focus on ;-


Densification of corridors – noting high, moderate and low ridership thresholds applicable for each corridor.

Optimisation of modal economics and service mix – best cost / service trade-offs for each corridor through encouragement of differentiated public transport services

Improving firm-level performance – the effective regulation and enforcement of all modes of public transport.

4.6.3 Public Transport Strategy (2006)

The public transport strategy comprises two key thrusts that are played out over three phases. Key Thrusts:

Accelerated modal upgrading, being the transformation and optimisation of the bus sector, the implementation of the taxi recapitalisation program (including improved regulation and enforcement) and the consolidation of the passenger rail sector and the roll out of the national rail plan in short- to medium-term;

Integrated rapid public transport networks (IRPTN), with the aim being to have a phased operational implementation of these networks in place in twelve cities and at least six rural districts by 2014.

This Integrated Rapid Public Transport Networks (IRPTN) is not focused on particular modes or technologies but rather on total service packages covering the entire journey experience (travel chain). Phases Phase 1 (2007-2010) Accelerated Recovery & Catalytic Projects (up to 12 cities

and 6 Districts) Phase 2 (2010- 2014) Promote and deliver Basic Networks (up to 12 cities and 6

Districts) Phase 3 (2014-2020) Advance and sustain accessible networks (maximum

national roll-out)

4.6.4 Public Transport Action Plan : Phase 1 : 2007 – 2010 [2007]

Approved by Cabinet in January 2007, the public transport action plan addresses both urban and rural system requirements with an emphasis on the urban areas.

4.6.4.1 Urban Areas

The Public Transport Action Plan is a high level plan that supplements and supports the Public Transport Strategy. Phase 1 - 2007 to 2010 - ―maps out a fast track implementation program focused on the initial development of high quality integrated rapid transport networks for twelve cities and proposes a public transport network package for six rural districts‖ . The Phase 1 target is to implement :

the Rail Priority Corridors A and B in the applicable cities

two high volume Bus Rapid Transport (BRT) corridors in each of the major cities.


integrated feeder system of taxis and smaller buses as well as metered taxis and pedestrian and bicycle access in support of the Rail and BRT corridors

The following outcomes for rail are envisaged at the end of Phase 1 (by 2010) :

Service levels to be improved with increased frequencies & reliabilities

Improved rail infrastructure, including the removal of capacity limiting bottlenecks

Improved signalling capability,

Enhanced levels of security and accessibility associated with the station precincts within the A and B corridors

The refurbishing of 2000 rail coaches by 2010 Simply stated, Phase 1 envisages a city-wide planned and, where appropriate, controlled network of rapid public transport corridors supported by a fine grained feeder system of smaller buses, taxis and non-motorised transport.

4.6.4.2 Long Distance Transport

The Public Transport Strategy Action Plan acknowledges the need to:-

link the [Integrated Rapid Public Transport ] Networks to major long distance stations and terminals,

implement a phased strategy of upgrading of long distance service provision,

expand the long distance coach and rail services The long term intention (2020) is to develop a planned long distance integrated network that will include publicly planned routes, enhanced service quality and schedules, the public management of facilities, stations and terminals while providing opportunities for the current informal operators to participate in the provision of these expanded services. Long distance public transport, both rail and road based, will need to be supportive of the emerging Integrated Rural Mobility and Accessibility (IRMA) initiative that is evolving in response to Government‘s Sustainable Rural Development Program.


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Re-focus

5 CHALLENGES FACING PRASA

The consolidation process initiated by Government, seeks to integrate five companies providing public transport and related services into a coherent, effective organization that can deliver on Government‘s socio-economic and transport goals. A number of key challenges need to be addressed.

5.1 Consolidation / Turnaround / Restructuring

The sequential amalgamation, in quick succession, of the SARCC, Metrorail, Shosholoza Meyl and Autopax bring with it the normal challenges that are posed when merging disparate organizations in related but different operational arenas. A key driver in Government‘s decision to consolidate these entities into a single delivery arm of the DOT was to the effect operational and asset ―turnaround‖ of what were acknowledged to be declining businesses, albeit, some with the potential for growth. Linked with both these processes is the need to internally restructure the various businesses to align them with the new mandate given to PRASA through the amendment to the Legal Succession Act that was promulgated on 23 December 2008. The complexity of these simultaneous processes poses different challenges on a number of different levels. At a strategic level these are reflected in the diagram above. The diagram, however does not illustrate the plethora of business processes that require review, alignment and amendment to ensure that the mandate can be affected. The critical importance of change management and the role of IT in capturing business processes can not be overemphasised.

5.2 Sustainable Funding

The ability to provide the requisite level of funding (substantial) to address both the investment capital and rapidly expanding operational requirements to effect the mandate is fundamental to the successful performance of PRASA. The current approved Medium Term Expenditure Framework (MTEF) allocations, excluding any funding to support the incorporation of Autopax, is illustrated in the adjacent chart.

Figure 1: Restructuring and Turnaround of PRASA


This reflects a significant increase in the capital grant allocation over the four years depicted. This is in line with the Phase 1 requirements of stabilizing commuter rail. Figure 2: Funding allocation for MTEF

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Rm

Approved MTEF Allocation: 2009/10 - 2012/13

Operational 3,185.84 3,154.93 3,343.71 3,565.90

Capital 3,831.79 5,610.27 5,784.77 6,021.11

PTIS 464.76

2009/10 2010/11 2011/12 2012/13

The approved funding base makes no provision for the acquisition of new rolling stock. Analysis has indicated that the rolling stock refurbishment and upgrading programs are not maintaining pace with the requirements to buy time before the inevitable purchasing of new fleet becomes unavoidable. While the profile reflects a rising trend in investment funding support, the allocation of these funds to the different asset classes (Rolling Stock & Infrastructure) will need to be reviewed. A careful balance needs to be struck to ensure that the sustainability of the asset base is not compromised.

5.3 Ageing Rolling Stock and Infrastructure

The prolonged under-investment in passenger rail of almost thirty years is manifestly experienced in the deterioration of the general rail asset i.e. Rolling Stock and Infrastructure (Signalling and telecommunications, electrical systems and perway). This has resulted in a situation where services are experiencing continued decline, primarily due to poor availability and reliability of rolling stock and ageing infrastructure. The lack of investment in the asset base has also had a negative impact in the skills base of the passenger rail industry over a period of time.

5.3.1 Rolling Stock

The average age profile of commuter coaches is 40 years and has been left behind by international advancements in rail technology over the past few decades. The life expectancy of railway rolling stock is of the order of 54 years. The railway industry norms are that the coaches will be upgraded at half life (27 years) and overhauled every 9 years, so as to ensure the structural and sub-systems integrity is not compromised by metal fatigue, age, wear and tear or environmental condition. Thirty-three percent (33%) of the commuter rail fleet is already above 36 years and therefore would be uneconomical to upgrade. The age distribution of the commuter


0

20

40

60

80

Autopax: F leet ag e

Trans lux 11 8 4 8 11

E xpres s 19 18

C orridor 15 26 65 3

9 8 7 6 5 4 3

Asset Maintenance Life Cycle

Replacement

Refurbishment / Technology

replacement (EW & MW)

Routine / Condition based Maintenance

Intermediate

Overhaul (EW)

Premature replacement required

if maintenance regime not

executed

Asset condition

deteriorisation curve

rail, long-distance and bus fleet of PRASA are depicted graphically in figures below within the full life-cycle.

5.3.2 Signalling

Currently only 23 of the 162 (14%) signalling installations across the PRASA network have not exceeded their design life. Unavailability of spares makes it increasingly impossible to perform maintenance and fault finding duties within the prescribed

SARCC Coach Age Distribution within a 54 year Life Cycle Model

0

200

400

600

800

1000

1200

1400

1600

1800

0-9 10-18 19-27 28-36 37-45 46-54 55-63

Age period

Co

ach

es

G O

Upgrade

Replacement

.

Acquire New R/S

4117- 5M2A Coaches

383- 10M Upgrades

110- 6/7/8M Coaches

.

Shosholoza Meyl Age Profile

0

50

100

150

200

53 48 47 46 44 42 41 40 39 38 37 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 20

Age (Years)

Sleepers Econ Sleeper Econ Sitter Baggage Vans SHV Motor Car Diners / Lounge

Figure 4: Asset Life Cycle Figure 3: Asset Maintenance Life Cycle

Figure 5: Commuter Coach Age Distribution

Figure 6: Autopax Fleet Age: Prior to fleet acquisition

Figure 7: Long Distance Passenger Fleet Age Distribution

MAINTENANCE

STRATEGY

ASSET MANAGEMENT STRATEGY

Run-to-Fail

Maintenance Predictive

Maintenance

Scheduled

Maintenance

Construction Operate & Maintain

Planning Dispose Replace


specifications. Changes to installations to accommodate layout changes are not easy to implement and introduces an even bigger reliability risk to such installations. The current status of the signaling is summarised below:

Region Interlockings Average Age in 2009

(years) Signaling Elements

Gauteng 89 64 9365

Western Cape 43 25 4287

KwaZulu Natal 30 32 2928

Nationally 162 30 16580

The programme to replace all existing signaling interlockings, which consist mainly of obsolete mechanical and electro-mechanical systems, with electronic interlockings as the technology of choice, is to address and improve safety in the system and will enhance the ability of PRASA to reduce headways between trains. Since it is not only funds that are a constraint, operations and time play a major role in embarking on a project of this magnitude, the project is divided into stages and phases. The following advantages will be achieved by implementing the re-signaling program: (a) Safety, reliability and flexibility of the network will improve (b) Elimination of T-signals will improve safety and reduce the risk of SPAD‘s

(Signals passed at Danger (red)). (c) Number of verbal authorisations given to drivers to proceed will decrease

further improving safety. (d) The need for pilot working will be eliminated (e) The capacity of the network will increase and enable the improvement of

headways as per the National Rail Passenger plans. (f) It will allow for the planned extensions of the PRASA network to be integrated

into the existing network (g) The elimination of uni-directional lines will provide improved operational

flexibility during maintenance and fault finding activities (h) It will result in increased CTC control, thereby reducing the dependency on

human factors and improving the availability of accurate time-keeping information to management and commuters

(i) The elimination of known bottle necks will result in improved time-keeping of trains.

5.4 Human Capital Development

Human capital development is generally understated and under-rated in supporting the development of an organization. It is a multi-faceted process that requires clear understanding to enable human capabilities to be built that will be supportive of the key performance drivers of the business and ultimately the business results that can be expected from that performance. The key challenge for PRASA is to formulate human capital development processes that facilitate and fast-track the appropriate human capital capabilities at all levels within the organization that will enable delivery on the key drivers of which, in the case of PRASA are :


Increased productivity (operational efficiencies),

Improved service quality (service excellence),

Customer focus and

Innovation in the provision of integrated public transport solutions The nature of the various operational divisions, while related and providing synergistic opportunities for service co-operation and delivery, are by their very nature, different business environments, each requiring a specific set of human capabilities to perform optimally. PRASA needs to provide guidance in the process framework that delivers this requirement.

5.5 Change Management

The finalisation of the PRASA consolidation process, the turnaround and restructuring necessitate that a number of parallel change management processes are undertaken. Numerous change management processes will be identified that are needed to combine the five organizations into a consolidated organization. The very ability of PRASA to ensure effective implementation of such processes becomes critical as is the capacity of the organization (including divisions and subsidiaries) to manage them successfully.

5.6 Leadership & Skills Development

There is currently an acknowledged shortage of key skills as well as a lack of depth of skills in critical areas within the organization. For PRASA to meet the expanded mandate of supporting government‘s socio-economic and transport objectives in both urban and rural contexts, the organization will need a focused approach to human capital development, on leadership development, talent management and the progressive training of a strong base of key skills that will lay the foundation for sustaining rail passenger transport sector.

5.7 Rail Technology Development

PRASA, of necessity, will need to become a technology based organization that blends best practice policies with intelligent asset management philosophies to leverage organisational productivity and efficiency gains to provide shareholder value. PRASA recognises that technology upgrade is critical to the modernisation of South Africa‘s railways and is well aware that the capacity for technology upgrade may not be immediately available in South Africa or the African Continent as a whole. Technological obsolescence is a major factor that will inhibit PRASA from delivering on its mandate. A rail technical strategy that guides technological renewal, upgrading, replacement and development over the next 30 years is a critical requirement. The average age of the metropolitan rail commuter networks/system in South Africa ranges between 60 - 80 years and still supports 1940/50‘s technology. The system in SA is showing serious age related condition decline with increasing systemic risks and technological obsolescence.


Railway systems are designed for an extended economic life, but it is acknowledged that the current ad hoc investment flows into the ageing system in South Africa are not productive in terms of future demand, operational performance requirements and escalating maintenance costs. Global technology advancement in rail has moved beyond the limited application of heavy rail, regional and long distance passenger rail. Various new rail based technologies of alternative applications have evolved globally to ensure the competitiveness and attractiveness of rail solutions. If South Africa is serious about ensuring environmentally friendly and energy efficient transportation for its cities to counter growth in private vehicle travel, congestion and spiralling cost of fossil fuels, a selective conversion of appropriate new and improved rail based and mass transit technologies needs to be evaluated, introduced, and established in South Africa ensuring that these take their place in the hierarchy of public transport service provision. The technological needs of PRASA over the next 30 years need to be clearly articulated and incorporated into PRASA‘s long-term planning if passenger rail is to be sustained over the longer-term. The development of a rail technology strategy, together with the appropriate migration requirements over this period will assist in guiding decision-making in many critical technology upgrade or replacement areas within the organisation. The phased implementation of the strategy will be captured in each of the Business Plans roll-outs over time. The rail technology strategy will need to address, inter alia, the following areas:-

Rolling Stock (All types) o Track – Train interface o Vehicle mass options and opportunities o Construction materials o Standardised / rationalised specifications for different operating conditions &

environments o Intelligent trains – on-monitoring systems

Perway (Track & Structures) o Control & command o Signalling Technology o Power / Electrical o Track tolerances (higher speeds) o Intelligent infrastructure (track monitoring systems) o Maintenance regimes including high output systems for renewals and ballast

cleaning o Network differentiation

Stations – modular systems

Optimised Control Systems

Optimised Energy systems / alternatives

Telecommunications

Environmental performance – noise, emissions, impact on climate change

Built environment

Design philosophies that focus on crime prevention, inclusivity o Advanced manufacturing o New, adaptive and/or evolved materials o Intelligent materials o Energy supply & energy efficiency (sustainable buildings)


5.7.1 Technology Migration

A technology development and migration strategy will be developed by PRASA in order to inform policy formulation on the role of rail and rail based applications in South Africa, and will focus inter alia, on the following key opportunities:-

New age rolling stock. Fleet replacement and expansion for the rail passenger system in South Africa is not negotiable if the system is to fulfil its mass transport and social obligations in both the urban and rural contexts in South Africa. With the introduction of new age rolling stock, associated technological infrastructure upgrades such as interface signalling, and the need to establish South African supporting technology industries, will inform selected and preferred technology choices for the future.

In some instances key stand alone corridors may need a total systemic

replacement, including considering standard gauge migration, together with the associated rolling stock replacements. Corridor case studies will inform investment and business cases on a project for project basis.

Potential for high speed long distance and inter-city passenger links. High speed passenger rail technology applications have internationally been winning ground against road and air travel solutions. South and Southern Africa‘s long travel distance needs in terms of connectivity between rural development nodes, urban conurbations and links to neighbouring countries warrant the consideration of more efficient high speed and safe rail based applications.

Light rail and other rail/guided mass transit systems. Light rail‘s ability to introduce environmentally friendly electrified rail based solutions in established city urban environments offer various opportunities to modernize and expand rail systems into cities to provide expanded seamless and cost effective transportation options. The global development in light rail/tram technology is offering improved sustainable city efficiencies at competitive implementation costs. Opportunities are materializing to respond to integrated public transport networks within metropolitan areas with light rail and alternative mass transit applications, and these opportunities will be planned and evaluated together with the respective Metropolitan Transport Planning Authorities.

Optimization of the existing system and existing technology. Before pursuing total technology replacement of, or migration from, the existing system, optimization of the existing system and technology needs to be explored its fullest. Signalling improvements can be pursued to enhance operations, capacity and train performance of the current rail system. Rolling Stock improvements and/or replacement strategies need to go hand in hand with signalling technology applicability/conversion, especially on corridors where the track and general infrastructure is still in good condition.

Gauge Compatibility. The appropriate railway gauge to be used in South Africa for passenger rail services needs to be evaluated. The full implications of retaining the existing gauge or migrating to a standard gauge require


articulation and the conclusion fully motivated. The outcome will have significant implications for the rail technology strategy that is adopted.

5.7.2 Technology Application Criteria and Evaluation

PRASA has the mandate to offer the full range of integrated transportation solutions. Commuter rail, long distance passenger rail and intercity bus operations would not necessarily be the most appropriate solution for demand and integrated transport opportunities under all circumstances. PRASA will therefore develop a comprehensive application and feasibility criteria framework to assist in the adoption, evaluation and application of rail and guided transit solutions for South Africa expanding cities.

5.8 Asset Redistribution

PRASA is dependent upon a number of critical external service providers. The restructuring of these external organizations can result in PRASA being vulnerable to business decisions over which it has little or no control but which have a major impact on PRASA‘s ability to deliver. This is not in PRASA‘s best interest. The Transnet Group‘s review of core / non-core landholdings, the divestiture of Transtel from the Transnet Group, the creation of a commercial Neotel and the strategic focus of key Transnet business units on Transnet related core businesses requires to be acknowledged and mitigated against. PRASA‘s growth is also linked to the securing of future rights-of-way for new rail links and corridors, as well as landholdings to support the future expansion of staging, maintenance and accommodation facilities. The principle of ―the right of first refusal‖ needs to be entrenched in all dealings with the State Owned Entities as well as the public sector (all spheres of government) at large where land required for public transport operational purposes is first and foremost offered for public transport service provision before consideration is given to alternative uses or alienation.

5.9 Long-term Plan Alignment (including Rail Plans)

The updating and maintenance of long term plans – rail, road and land – is fundamental in understanding the future demands that will be placed on PRASA. These plans need to be aligned with, and be legitimized in, the statutory plans produced by the various Planning Authorities in terms of all current legislation. Both operating requirements as well as investment requirements must be detailed within these plans. The ability to respond timeously to Planning Authority requests for specifically urban commuter rail and regional rail services is core to establishing PRASA‘s credibility as a provider of integrated public transport services. The long-term plans need to clearly demonstrate PRASA‘s longer-term intentions while the Business Plans provide realistic delivery statements.


5.10 Strategic Partnerships

The need to recapitalize PRASA as a major player in supporting the delivery of government‘s socio-economic and transport intentions requires the identification of key strategic partners and investors. Building strategic alliances and strengthening relationships, both nationally and internationally, will assist PRASA in addressing its short-term needs while positioning the organization for longer-term growth into Southern Africa.

5.11 Modal Integration

Modal integration poses both internal and external challenges. Internally, the integration of systems across urban and regional services requires a single enterprise platform and architecture, the review of operational service synergies that can be developed between the urban and rural systems specifically in the peripheral or peri-urban areas of the metropolitan conurbations, including integrated facilities, passenger information and ticketing. Externally, strengthening the relationships with the various Planning Authorities to ensure integrated modal interchange facility, zonal systems, fares, passenger information, ticketing and service provision is essential. Integration is also required at both a planning and service provision level with Bus Rapid Transit systems being developed in the larger cities as well as wider and community based feeder service integration with existing and proposed rail services.


6 MANDATE OF PRASA

PRASA as an arm of the National Department of Transport, the shareholder, primary focus is to focus on the mandate as contained in the Legal Succession to the South Africa Transport Services (―SATS‖) Act of 1989 as amended in November 2008. The main object and the main business of the Agency are to—

(a) ensure that, at the request of the Department of Transport, rail commuter services are provided within, to and from the Republic in the public interest; and

(b) provide, in consultation with the Department of Transport, for long haul passenger rail and bus services within, to and from the Republic in terms of the principles set out in section 4 of the National Land Transport Transition Act, 2000 (Act No. 22 of 2000).

The second object and secondary business of PRASA is that the Agency, PRASA shall generate income from the exploitation of assets acquired by it. A further requirement is that, in carrying out its object and business, PRASA shall have due regard to key government social, economic and transport policy objectives.

6.1 Strategic Role of PRASA

PRASA was created by Government to advance its agenda for the transformation of the public transport system. It has the potential to contribute to the emergence of a more vibrant and efficient public transport system. The strategic role of PRASA could be defined as :

PRASA has the potential to provide integrated transport solutions through a single entity in control of commuter rail, inter-city, long distance rail and road-based long distance bus services, supported by appropriate transit oriented station and terminal developments. Modal integration lies at the heart of the DoT‘s public transport strategy and PRASA is positioned to build on the synergies that Metrorail, Shosholoza Meyl and Autopax bring to the delivery of public transport services. To this end PRASA has started the process to integrate the rail services of Metrorail and Shosholoza Meyl into the PRASA Rail arm. The services of Autopax has already in the year begin to provide any auxiliary bus services for the rail entities. As a second phase the option of reinforcing of synergies with feeder and distribution services, where appropriate and beneficial, will be explored for wider integrated public transport solutions that increase mobility and accessibility opportunities.

PRASA is the first and only government-owned entity in the area of public transport. Government will continue to subsidize and/or regulate public transport operators, while many municipal –owned bus entities have had their role reduced. With the restructuring of the former South African Transport Services, Government lacked the direct leverage to directly influence public transport service provision and relied on other providers to drive its own public transport goals. With the creation of PRASA, government is in a far better position to drive the goals of its new public transport strategy.


Finally, PRASA, will be expected to play a major role in the development of social and economic infrastructure. PRASA will also partner with Transport and Rail Authorities to plan and deliver on rail and other transport infrastructure.

The primary responsibility of PRASA is to effectively develop and manage rail and related transport infrastructure and to provide efficient rail and road based passenger transport services within, to and from urban and rural areas. It will be complemented and supported by the focused management of a property portfolio that will be developed to enhance the passenger‘s travelling experience. This will be achieved through the transformation of key station properties into transit oriented development precincts generating sustainable income streams that contribute to the funding base of PRASA. The specific functions to be performed by PRASA are to :-

Own and develop the assets under its ownership, including its property portfolio, in a sustainable manner;

Manage the total life cycle of all assets owned or acquired;

Oversee investment in major rail transport infrastructure and transit orientated facilities developments in support of Government‘s strategic objectives;

Provide affordable, accessible and integrated public transport solutions, including essential feeder and distribution services to facilitate seamless and easy commuting in line with Government‘s requests and supportive of Government‘s social, economic and transport policy objectives;

Plan and manage the delivery of commuter rail and long-distance passenger rail and bus services as per the Legal Succession Act of 2008 (as amended);

Promote and position rail as the preferred mode in high-density, high-volume movement corridors where rail should perform to its strength owing to its high capacity;

Develop plans to ensure that the long-term operational and strategic requirements of commuter and long-distance rail and buses are effectively accommodated within the statutory public transport and spatial planning processes;

Ensure continuous improvement and excellence in service provision in key priority corridors through the Integrated management System (IMS) that should underpin sustainable rail services;

Managing key strategic functions such as engineering while ensuring that the business is underpinned by appropriate shared services and enterprise-wide systems in IT, HR and Finance;

Manage the finances of its business with particular emphasis on: o Securing adequate operational and investment funding sufficient for the

needs of the consolidated business; o Efficient and effective management of the subsidy allocated to it by

Government; o Compliance with provision of the Public Finance Management Act

(PFMA) and Treasury Regulations; o Management of capital allocation and asset delivery in line with the

National Integrated Passenger Transport Plan, as amended from time to time in consultation with the Department of Transport;

o The management of operational budget requirements in line with the objectives of the organization;


o Optimizing property portfolio revenues to offset subsidy requirements; o The management of the Public Transport Infrastructure System (PTIS)

funding for 2010 related projects.

Contribute to the Rural Transport Strategy in supporting sustainable rural communities in line with Government‘s rural social, economic and transport objectives;

Sustain a professional and skilled workforce in line with the evolving needs of the organisation;

Be the custodian of all passenger rail and bus service information associated with its mandate and

Be responsible for Government relations, regulatory compliance and stakeholder management.


7 LEGAL AND OPERATING STRUCTURE FOR PRASA

The legal operating structure comprises the Board of Control, a Corporate Head Office (PRASA), two divisions (Metrorail, Shosholoza Meyl) and two subsidiaries (Autopax, Intersite). As a step towards improving efficiencies in the business the consolidation of the rail passenger entities, Metrorail and Shosholoza Meyl into a single division, PRASA Rail will be done as from 1 April 2010. Figure 8: Prasa Legal Structure

SUBSIDIARY

DIVISION

PRASA RailSUBSIDIARY

Service delivery co-operation

Exploitation / Optimisation of asset base The PRASA EXCO comprises of the Group CEO of PRASA, Group Executive in the Office of the Group CEO, Group Executives responsible for Finance, HR, IT, Strategic Asset Development, Chief Risk Officer, Company Secretary, Group Internal Audit Executive as well as the CEO‘s of PRASA Rail, Autopax and Intersite.


Figure 9: Prasa Operational Structure

Prasa

Board of Control

Group Chief Executive

Human

Resources

Chief Risk Officer

Group Internal Audit

Chief Executive

CEO

Prasa Rail

Company

Secretary

CEO

Autopax

Asset

Development

GCFO

CEO

IPMS

GCIO

Office of the

GCEO

Office Manager

Strategic Planning

Corporate Affairs

Business

Performance

EPMO

Government

Liasion

Stakeholder

Engagement

Regulatory

Compliance

Legal Service

Secretariat

Payroll & Benefits

Talent

Management

HR Relations

Transform

(Change

Management)

Corporate Security

Risk Management

Operational Safety

SHEQ

Rail

Property

Buses

Governance &

Architecture

Operations &

Customer

Special Projects

ERP

(wef 1 April)

SCM

MTEF

Treasury

Budget

Management

Accounting

Financial

Reporting

Business Manager

Engineering &

Maintenance

Bus Operations

Stores &

Warehousing

Operations

(Regions)

Property Manager

Business

Development

Property

Development

Facilities

Management

Operations

(Regions)

Support Services

Finance & SCM

COO Prasa Rail

Operations

Customer

Services

Engineering

Services

Commuter Rail

Mainline

Passenger

Services

Luxury Rail


8 GOVERNMENT’S MANDATE & KEY PERFORMANCE AREAS

8.1 Key Performance Areas

The Board of Control of PRASA will enter into a Shareholder Compact with the National Department of Transport to respond to Government‘s mandate. In carrying out its obligations to the Shareholder (Department of Transport) the Board will be guided by the key performance areas identified by Government in the Shareholder Compact. Specifically, the Board‘s focus is on a number of key performance areas: Table 1: Key programs associated with BoC Key Performance Areas

BOC Key Performance Area

Existing SARCC Program

Key PRASA Programs

1

Contribute to Government objective of affordable, accessible and reliable public transport provision

- Commuter rail service delivered in the regions

- Preventative maintenance program

- Inter-Modal integration - Service excellence on priority (commuter) / primary

(Shosholoza Meyl) corridors (Service / Quality Charters) - Drive railway technology development - Special needs passengers (―SNP‖) accommodation

2

Investment in infrastructure to contribute to growth and development

- Accelerated rolling stock program

- 2010 projects - MTEF Infrastructure

projects - Bridge City - Station Improvement

Program

- Fleet recapitalization program - Consolidation of signalling upgrading program - Station transit oriented development (―ToD‖) Program - Airport Rail Links Program - Station upgrade program - Baragwanath rail link project - Rail engineering capacity project - Special needs passengers (―SNP‖) accommodation program

3 Provision of sustainable quality services

- Consolidation of Tshwane & WITS regions

- Preventative maintenance program

- Development & management of Strategic Partnerships - Total station management - Total facilities management - Inter- modal integration - Provision of sustainable asset optimization (income/ people) - Integrated ticketing solutions - Special needs passengers (―SNP‖) accommodation

4

Financial effectiveness to maximize operational efficiencies

- Benchmarking project - Risk management

program - Insurance program

- Driving operational efficiencies in rationalizing PRASA Head office

- Enterprise Resource Planning (ERP) - Capital & Balance Sheet Structure - Strategic & private financing project - Budget costs related to medical insurance scheme and

pension fund contributions by PRASA

5

Corporate Governance & Legislative compliance

- Integrated management system (ISO 9000/ TQM/ SMS etc.)

- Establish PRASA Board Corporate governance best practice - Alignment of PRASA strategy with divisions & subsidiaries

(Executives) - Centralize Secretarial, compliance and regulatory policy

6

Contribution to achievement of Government socio-economic goals

- BEE Services Provider to SARCC

- Women in Rail Project

- Centralise Strategic Sourcing - Roll out of ―one supply chain management policy‖ for PRASA - Economies of Scale / National contracts of high value

7 Human Capital Development

- Executive leadership development - GMs

- Specialist and Technical Managers

- Succession planning - Talent management

- Performance management system (BSC) - Establishment of Pension Fund & Medical Aid - Talent Management - Leadership and Skills Development - Values and Culture - HR effectiveness through policies and information - Employee wellness and relations


Reo

rgan

ising:

Focus

is o

n bo

dy o

f the

org

anisat

ion

:

effe

ctiven

ess an

d co

mpe

titiven

ess

Ren

ewal:

Focus

is o

n th

e pe

ople side

and

spirit

of th

e or

ganisa

tion

Revitalisation:

Focus is on creating opportunities for

growth

Refram

ing:

Focus is on shfting the company's

concept of what it is and w

hat it can

achieve

9 STRATEGIC OBJECTIVES & INITIATIVES (STRATEGIES)

9.1 Business Model

The business model is based upon the 4-R model which suggests that the business be reviewed through four lenses:

Reframing – realigning the organisation to fulfil the new mandate, & to support Government‘s socio-economic and transport objectives

[SARCC PRASA]

Re-organizing – restructuring, including the balance sheet, to effect delivery on the new mandate

Revitalization – creating expanded and synergistic opportunities for growth through capital programme

Renewal – Focus on the human capital development and organizational culture

The 4-R model remains a framework which allows the various changes required in transitioning the SARCC into PRASA to be identified and dealt with in a formalized the change management process.

9.2 Business Alignment

In re-framing the response of PRASA to the new mandate, the business focus of PRASA and those of its operational divisions and subsidiaries must be aligned with one another as well as with the Department of Transport‘s policy intentions for public transport provision over the next fifteen years – a policy position that will be developed and rolled out in three very clearly defined phases.

Figure 10: 4R Business Model


Table 2: Alignment with National Department of Transport's Strategy

Organization Phase 1

2007-2010 Phase 2

2011-2014 Phase 3

2015-2020

Department of Transport

Accelerated Recovery & Catalytic Integrated Rapid Public Transport Network

Projects

Promote & deliver basic networks

Advance and sustain

accessible networks

Passenger Rail Agency of South Africa

Establishment & Positioning

Consolidation Integration & Expansion

PRASA Rail

Metrorail Stabilization Recovery Growth

Shosholoza Meyl Stabilization / Repositioning Consolidation/Repositioning Expansion

Autopax Stabilization / Repositioning Consolidation/Repositioning Expansion

Intersite Alignment Consolidation Expansion

9.2.1 PRASA Phase 1 – Establishment & Strategic positioning over the next 18 months [2009 – 2010]

The creation of PRASA necessitates a complete review of the overall functional and organizational structuring of the consolidated organization. Phase 1 will require a focus on the following:

Rapid restructuring of the business as well as redefinition and allocation of roles, functions and responsibilities;

Consolidation of assets under PRASA followed by the (re) valuation of asset base;

Development of a Borrowing Plan & Program to motivate the appropriate borrowing limits;

Formalising PRASA‘s Tax Status and its businesses with SARS;

Consolidation of Metrorail and Shosholoza Meyl into PRASA Rail Operations with a separate Head Office, with Metrorail Regions strictly treated as Operational Units rather than as Business Units in their own right;

The delivery of high-quality services in main commuter corridors in the main Metrorail operating areas;

The refocusing of the Intersite‘s mandate with a specific focus to becoming a property development specialist maximising opportunities through station upgrades and development as well as of transit oriented developments;

the creation and development of a strong PRASA identity and brand that o defines PRASA


o enables successful brand management of the operational brands [Metrorail, Shosholoza Meyl, Autopax and Intersite].

The strategic positioning of PRASA as provider of integrated public transport solutions;

The evaluation of the potential for acquiring a rail engineering company to reduce the vulnerability to third party suppliers in the rolling stock supply chain;

A strong focus on strengthening Corporate Governance through the formulation of clear group policies & procedures.

9.2.2 PRASA Phase 2 – Consolidation as the Backbone of Public Transport [2011-2014]

Phase 2 concentrates on consolidating the key thrusts initiated in Phase 1, with an emphasis on entrenching PRASA‘s role as a provider of integrated and high-quality public transport services in support of government‘s social, economic and transport intentions. Particular emphasis will be given to:

Consolidate and enhance the role of rail as the backbone of integrated urban and rural/regional public transport systems within South Africa;

Upgrading of the Rail Signalling System

The introduction of new rolling stock destined for the urban rail systems, which facilitates the strengthening of brand loyalty, provides a significantly improved quality of service while allowing differentiated services to be introduced that broadens the customer‘s access to service choice;

The ongoing recapitalization programs, initiated during Phase 1, for rural and regional systems that will enable the provision of consolidated, integrated rural and regional passenger transport services;

The provision of systems that add value to passenger mobility and accessibility – seamless modal integration (including through ticketing), service integration & choice & passenger information;

Continued technology rationalization and standardization of programs, processes and protocols that give emphasis to the optimization of the overall operational efficiency of the Group.

9.2.3 PRASA Phase 3 – Integration and Expansion [After 2015 - 2030]

Phase 3 builds on the foundations of Phases 1 & 2. The focus is geographical and public transport service integration and expansion. In urban metropolitan areas, emphasis will be given to

The provision of expanded public transport service provision with the integration of alternative rail technologies [light rail, high-speed, regional rail];

Technological Upgrades

Expansion of the Rail Network to enable better connections the Cities and Rural to the Transport Network

Public transport service coverage will ensure that no-one is more than one kilometre from a public transport route with rail continuing to be the backbone of


the public transport system, fully supporting the expanding spatial development of the urbanized metropolitan conurbation.

Rural and regional systems provision will emphasize :

Strengthening rural and regional nodal development mobility linkages;

Continuing development of sustainable public transport service provision focused on enhancing rural mobility and accessibility;

Integrating neighbouring economies through the provision of expanded integrated rural and regional public transport services

Vertical integration of PRASA across a number of key strategic industries to

Secure the upside supply chain to reduce vulnerability in total asset management;

Create opportunities for integrated product innovation that will add value to the public transport solutions that can deployed;

Strengthen an employment creation base in support of government‘s economic d transport objectives.

The phases reflect different stages in the evolution of PRASA‘s business over the longer-term. Each phase indicates subtle changes in the business context and emphasis, in each instance strengthening the impetus to locate PRASA as the backbone of integrated rapid public transport networks in both the urban and rural / regional contexts.

9.3 Strategic Objectives

Objectives set for the organization need to respond to the real challenges facing the business. The key issues identified require carefully considered policy responses that are aptly framed to enable meaningful objectives for the organization to be appropriately crafted. The objectives are supportive of the Board of Control‘s key performance areas.


Table 3: Alignment of Strategic Objectives with BoC Performance Areas

BOC Key Performance Area PRASA Strategic Objective

Contribute to Government‘s objective of safe, affordable, accessible and reliable public transport provision

Service Excellence in the provision of integrated best practice public transport solutions that are affordable, reliable, predictable and operationally safe

Investment in infrastructure to contribute to growth and development

Asset Utilisation - ensuring the productive investment in, and use of, assets and the property portfolio through the application of total life-cycle management practices, processes and procedures to all assets

Provision of sustainable quality services Service Quality & Passenger Growth - sustaining dependable and superior customer service benefit that achieves a high customer satisfaction

Financial effectiveness to maximize operational efficiencies

Financial Effectiveness - ensuring efficient and effective deployment of available resources to achieve the required results and outcomes through the productive use of all resources

Corporate Governance & Legislative compliance

Governance and Compliance - ensuring controlled compliance to statutory requirements by entrenching a culture of corporate governance practices and accountability as well as Fraud Prevention within PRASA

Contribution to the achievement of Government‘s socio-economic goals

Strategic Sourcing through an effective and efficient supply chain management process and promotion of broad-based economic empowerment and industrial policy objectives

Human Capital Development

Human Capital Development - ensuring that the appropriate knowledge and skills are acquired and maintained to sustain change and improvement for the betterment of the organization through developing human capital development processes to build human capital capabilities

9.4 Key Strategic Initiatives (Strategies)

The delivery of the vision and mission of PRASA requires the development of key strategic initiatives (or strategies) that are supportive of the objectives set for the business.

9.4.1 Key Strategic Initiatives

In assessing some of the key challenges and initiatives, the strategy is aimed at ensuring that PRASA‘s focus gradually shift from stabilisation of commuter rail operations towards delivering high-quality services to its customers. This defines the challenge for PRASA in the next 18 months. PRASA must strengthen its own internal capacity in respect of rail engineering, station management, security and maintenance. To this end, a number of key strategic initiatives have been identified, which will define the efforts aimed at changing and improving the quality and level of services to be delivered by PRASA:


Consolidation of Metrorail and Shosholoza Meyl into PRASA RAil The consolidation of Metrorail and Shosholoza Meyl into PRASA Rail Operations is the single-most important challenge for PRASA. The Board has approved the decision to consolidate these so that we enhance efficiency in our operations, improve services and ensure financial viability of the rail business.

Total Station Management The effective management of stations and proper allocation of roles and functions at station level would be key to ensuring accountability associated with station operational performance as well as improving overall commuter experience within the rail environment. PRASA Rail Operations will continue to implement Total Station Management.

Facilities Management - A key challenge facing delivery of quality services is the lack of a coherent facilities management at key stations of Metrorail and Shosholoza Meyl. A strategic decision had been taken to implement Facilities Management under the leadership of Intersite. Facilities Management will support Total Station Management and will ensure that the goals of enhancing commuter experience for the better within the entire PRASA “System” is fully realised.

Security Provision - The termination of outsourced security services, to be replaced with an increased in-house protection services presence and accountability.

Preventative Maintenance Programs – A preventative maintenance regime to be applied to rolling stock, infrastructure and facilities is to be introduced through out PRASA. Key to the delivery of quality services is the delivery of reliable and predictable services. Under the Engineering Services within PRASA Rail Operations, Preventative Maintenance will focus on delivering improved performance through ensuring appropriate levels of reliability of both the rail infrastructure and rolling stock are improved.

Restructuring of Engineering Services - Under PRASA, institutional arrangements governing the current engineering services will be reviewed and restructured to enable more effective asset management delivery. Roles and responsibilities will be allocated at the appropriate levels to ensure the asset life-cycle management philosophy is implemented optimally. Among the key interventions will be to consolidate key engineering functions rather than to disperse these. Asset Life Cycle Management, including the recapitalisation of existing rolling stock and Infrastructure, research and development (R&D) as well as introduction of new technologies, will be the responsibility of Strategic Asset Development (SAD) at the PRASA Corporate Office. The consolidation of engineering activities focused primarily on operations and maintenance activities will fall under a single engineering function within PRASA Rail Operations.


PRASA will maximise Engineering and Technology Capacity where, in a situation where there is shortage of engineering skills, centralization of engineering capacity becomes vitally important to the business as a whole creates a large pool of technical skills as it will be in the best interest of the business to be able to place and move skilled people around as humanely as possible to meet the many challenges facing struggling business units or regions. This will also ensure that there is never a time when maintenance takes a back seat whenever a new exciting project is in place. The most immediate goal is to ensure that there are no depots that are run without engineering ingenuity. To this end, the depots will be run by professional engineers in order to adequately meet the technical challenges facing the business in this area.

Rolling Stock Availability o Vertical Integration – Feasibility of Acquiring an Engineering Company :

An investigation to indicate the full implications of acquiring an engineering company to address the industry‘s inability to service the accelerated rolling stock program and reduce exposure to third party delivery constraints.

o Rolling Stock Diversification Program The acquisition of a wider range of rolling stock that provides for business continuity and caters for the needs of the broader business. This includes both electric motor units (EMUs) and diesel motor units (DMUs)

9.5 Alignment of Objectives, Strategies and Programs

The key strategic initiatives, or strategies, underpin the achievement of the objectives that have been identified for supporting the Board‘s key performance areas. The alignment is reflected in Table 4 below.


Table 4: Alignment of Key Performance Areas, Objectives, Strategies and Programs B

oar

d o

f

Co

ntr

ol

Contribute to

Government’s objective of

safe, affordable,

accessible and reliable

public transport provision

Investment in

infrastructure to

contribute to growth and

development

Provision of sustainable

quality services

Financial effectiveness to

maximize operational

efficiencies

Corporate Governance &

Legislative compliance

Contribution to the

achievement of

Government’s socio-

economic goals

Human Capital

Development

Objective 1 Objective 2 Objective 3 Objective 4 Objective 5 Objective 6 Objective 7

PR

AS

A O

BJE

CT

IVE

S

Service Excellence in the

provision of integrated best

practice public transport

solutions that are affordable,

reliable, predictable and

operationally safe

Asset Utilisation -

ensuring productive

investment in and use of

assets and the property

portfolio through the

application of total life-cycle

management practices,

processes and procedures

to all assets

Service Quality &

Passenger Growth -

sustaining dependable and

superior customer service

benefit that achieves a high

customer satisfaction

Financial Effectiveness -

ensuring funding availability

& deployment to achieve the

required results and

outcomes through the

productive and efficient use

of all resources

Governance and

Compliance - ensuring

controlled conformance to

statutory requirements by

entrenching corporate

governance accountability

within PRASA

Strategic Sourcing through

an effective and efficient

supply chain management

strategy process

Learning and Growth -

ensuring that the appropriate

knowledge and skills are

acquired and maintained to

sustain change and

improvement for the

betterment of the

organization through to

building human capital

capabilities

Strategy 1A Strategy 2A Strategy 3A Strategy 4A Strategy 5A Strategy 6A Strategy 7A

Service Excellence on

Priority corridors

Rolling Stock Life Cycle

Management

Modal Integration Balance Sheet Management Organisational Alignment Centralised Strategic

Sourcing

Enhancing leadership &

management skills

Strategy 1B Strategy 2B Strategy 3B Strategy 4B Strategy 5B Strategy 6B Strategy 7B

Stakeholder Positioning Infrastructure Life Cycle

Management

Provision of Sustainable

Asset Optimisation

Development, management

& monitoring of Strategic &

Business Plans

Integrated Management

System

Warehousing & Stock

management

Development of a high

performance culture

Strategy 2C Strategy 3C Strategy 4C Strategy 5C Strategy 7C

Transit Oriented

Developments

Accommodation of People

with Special Needs

Revenue Strategy Legislative Compliance Promotion of employee well-

being

Strategy 3D Strategy 4D Strategy 7D

Rail Technology Maintenance of the Asset

Register

Building internal capacity

Strategy 4E Strategy 7E

Roll-out of the ERP System Improving HR systems,

processes and practices

Program 1 AA Program 2AA Program 3AA Program 4AA Program 5AA Program 6AA Program 7AA

Corridor Development New Fleet Total Station Management Balance Sheet Restructuring Organisational Alignment BBBEE Leadership Development

Program 1 AB Program 2AB Program 3AB Program 4AB Program 5AB Program6AB Program 7BA

Modal Integration Refurbished Rolling Stock Integrated Ticketing

Solutions

Funding and Investment

Models

Organisational Restructuring Group SCM policy Organisational Culture

change management

Program 1 AC Program 2AC Program 3AC Program 4AC Program 5AB Program6AC Program 7BB

Product Development General Overhauls Strategic Partnerships Investment Mechanisms Restructuring of Insurance

Portfolio

Mega Project Partnerships Performance management

Program 1AD Program 2AD Program 3AD Program 4BA Program 5BA Program 6BA Program 7CA

Preventative Maintenance Preventative Maintenance Facilities Management Management of OPEX Quality Management

System (ISO 9001)

Materials Management Employee Wellness

Program 1BA Program 2BA Program 3BA Program 4BB Program 5BB Program 6BB Program 7CB

Sustainable Community

Support

Station Recapitalisation Customer Service Program Management of Capex Safety Management System

(SANS 3000)

Inventory Control Employee Relations

Program 1BB Program 2BB Program 3BB Program 4BC Program 5BC Program 7DA

Rail Steering Committees Infrastructure

Recapitalisation

Rail Technology Policy Supply Chain Management Asset Management System

(PAS 55)

Talent Management

Program 2BC Program 3CA Program 4BD Program 5BD Program 7DB

Telecommunications

Recapitalisation

Accessible Rolling Stock MTEF Business Continuity

Plan

Environmental Management

System (ISO 14001)

Learnerships

Program 2BD Program 3CB Program 4CA Program 5CA Program 7DC

Facilities Recapitalisation Accessible Railway Facilities Public Private Partnerships Legislation Review Workforce planning

Program 2BE Program 3CC Program 4CB Program 5CB Program 7DD

System and Network

Developments

Accessible Property

Developments

Fare Regime Commercial Contract

Review

Workforce training

Program 2CA Program 4CC Program 5CC Program 7EA

TOD Master Plans &

Precinct Development

Landholding Development Project Contract Review In-house funds & Schemes

Program 4CD Program 5CD Program 7EB

Borrowing Plan Internal Audit HR policy review

Program 4CE

Advertising

Program 4DA

Asset Verification

Program 4DB

Maintenance of Asset

Program 4EA

ERP Phase 1 - Corporate

Program 4EB

ERP Phase 2 - Operations

Program 4EC

ERP Phase 3 - Strategic

PR

AS

A K

ey In

itia

tive

s [S

trat

egie

s]P

RA

SA

Key

Pro

gra

ms

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9.6 Key Performance Area Alignment

9.6.1 Contribution to Government’s Objective of safe, affordable, accessible and reliable public transport

BOC KPA 1

Contribute to Government‘s

objective of safe, affordable,

accessible and reliable public

transport provision

PRASA Objective 1

Service Excellence in the

provision of affordable

integrated best practice

public transport solutions

Strategy 1A

Service Excellence on

Priority / Primary

Corridors

Strategy 1B

Stakeholder Positioning

Program 1BA

Sustainable

Community Support

Program 1BB

Rail Steering

Committees

Program 1AB

Modal Integration

BOC Committee

Safety Health &

Environment

PRASA

Metrorail

Shosholoza Meyl

Autopax

[Operations]

Ticketing Integration

Passenger Information Integration

Timetable Integration

Park & Ride

Non-motorised Transport (NMT)

Program 1AA

Corridor

Development

Program 1AC

Product

Development

Strategic

Partnerships

Program 1AD

Preventative

Maintenance

Rolling Stock / Fleet

Infrastructure

Figure 11: Service Excellence

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9.6.1.1 Key Initiatives / Strategies

Two key strategies or initiatives will be promoted. The first relates to a focus on the provision of service excellence in priority or primary corridors. This entails the progressive development of the corridor over time, continuously improving service delivery through a variety of mechanisms that enhance the passenger‘s overall travelling experience, including modal integration, total station management, a focus on the passenger‘s total travel chain experience and making all aspects of the travel chain accessible. The second supportive initiative focuses on developing and strengthening sustainable community relationships that build loyalty to rail use while supporting the development of sustainable (social, economic and environmental) communities

9.6.1.2 Key Programs

Three key programs are identified to drive delivery on this performance area :

Modal Integration - ensuring that the multiple facets of modal integration are addressed including, but not limited to :

o Timetable integration o Ticket integration o Passenger Information o Park & Ride Project

Service Excellence - enhanced levels of service delivery on both priority (commuter) and primary (inter-city / regional) corridors. While the priority corridors indicate the corridors of investment and operational emphasis, a particular focus on increased trainset capacity, reduced service headways and improved customer service through the application of total station management will be on the following four corridors :-

o Tshwane – Johannesburg o Naledi – Johannesburg o Cape Town – Khayelitsha o KwaMashu – Durban – Umlazi (North-South Corridor)

Product Development - strategic partnerships will be explored, evaluated and forged where appropriate to develop a range of service product offerings to meet passenger demands within metropolitan, inter-city and regional areas. Competitive pricing will become a key underpinning principle in these service product developments.

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9.6.2 Investment in Infrastructure to Contribute to Growth and Development

BOC KPA 2

Investment in infrastructure

to contribute to growth and

development

PRASA Objective 2Asset Utilisation - ensuring the productive

investment in, and use of, railway assets

and the property portfolio through the

application of total life-cycle management

practices, processes and procedures to all

assets

Strategy 2B

Infrastructure

Life Cycle

Management

[Including SNP]

Strategy 2C

Transit Oriented

Development

(TODs)

[Including SNP]

Strategy 2A

Rolling Stock

Life Cycle

Management

[Including SNP]

BOC Committee

Finance, Capital &

Procurement Committee

[FCP]

Program 2AA

New Fleet

Program 2AB

Refurbished

Rolling Stock

Program 2AC

General Overhaul

Regional / inter-city

Commuter Rail

Coaches

Commuter Rail

Regional / Intercity Rail

Commuter Rail

Regional / Inter-City Rail

Program 2CA

TOD Master

Planning

Program 2CB

TOD Precinct

Development

Cape Town Station

Pretoria Station

Durban Station

Park Station

Naledi Station

Eerste Fabrieke Station

Mabopane Station

Program 2BA

Station

Recapitalisation /

Upgrades

Program 2BB

Infrastructure

Recapitalisation

Signals

Electrical

Program 2BC

Telecommunications

Program 2BD

Facilities

Program 2BE

Network / System

Development

Expansion of

Existing Network

New Lines / Links

New

Stations

Operational &

Capacity

Evaluations

Integrated Communications

Depots & Yards

Maintenance Facilities

National Signal Program

Planning Reviews

PRASA Department

Asset Management

Intersite

A Eersterivier - Strand

Rural / Regional

Inter-City

Level Crossings

Program 2AD

Preventative

Maintenance

Modal

Integration

Bridges & Structures

A Rural Services

A Conceptual Studies B Feasibility C Detailed Design D Tender / Construction E Commissioned

B Primary Rural Corridors

B Luxury Rail Corridors

A Kagiso – Randfontein Link

F Operational Assessments

F Cape Town

F Gauteng

F Durban

D Cape Town

Airport Rail link

E Bridge City

C Eerste Fabrieke - Greenview E Windemere

C Cape Town Station

C Mabopane Station

C Pretoria Station

C Durban Station

C Park Station

C Naledi Station

C Eerste Fabieke Station

New Corridors

C Motherwell Line

C Moloto Corridor

B Rural Services

Fleet

Infrastructure

Perway

Figure 12: Asset Utilisation

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9.6.2.1 Strategies

Investing in infrastructure to ensure the productive use of railway assets and the associated property portfolio is essential for effecting a turnaround of the passenger rail industry. Four key strategic areas will form the focal point of these endeavours :-

Rolling stock life cycle management. This fleet recapitalisation strategy focuses on the three programs that address the acquisition of new rolling stock, the accelerated rolling stock investment program focusing on the refurbishment of existing rolling stock and normal general overhauls. The evaluation of securing rail engineering capacity is required to reduce dependencies on third party suppliers.

Infrastructure life cycle management – Five programs underpin this strategy - the recapitalisation of the rail infrastructure, with a particular focus on the national signalling upgrade program; the recapitalisation of existing stations, with an emphasis on making them accessible (mobility, sight, hearing & intellectual); the recapitalisation of facilities in the broader sense (including staging facilities, maintenance depots and support infrastructure); the recapitalisation & modernisation of telecommunications to support rail operations and finally the strategic development of networks and systems to enable the envisaged growth passenger rail services to be adequately and appropriately accommodated.

Transit oriented development – As part of the recapitalisation of existing stations, specific emphasis and focus will be given to key stations that have the potential to be developed into significant ―transit oriented developments‖ – mixed use precincts that seek to make these station precincts destinations in their own right while encouraging a substantial growth in rail patronage. Developments of this nature will also seek to secure increased & sustainable income streams to offset the envisaged reduction in DOT subsidy allocation over the next seven years

Rail Technology - A rail technology policy requires formulation to guide the development and modernisation of a range of rail and rail related technologies over the next 30 years. This will direct the life cycle management responses in rolling stock and infrastructure and will also guide the technology responses to be incorporated into transit oriented developments. An integral and guiding principle in the rail technology policy response will be that of technological sustainability.

Figure 13: Subsidy reduction over time

2009-2014

GOVERNMENT SUBSIDY GUARANTEE

AT 65%

2015 – 2016

SUBSIDY REDUCTION FROM 65% TO

50%

>2017SUBSIDY LEVEL AT 50%

5 Years

7 Years

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9.6.3 Provision of Sustainable Quality Services

BOC KPA 3


quality services

PRASA Objective 3

Service Quality and

Reliability - sustaining

dependable and superior

customer service benefit

that achieves a high


BOC Committee

Safety, Health & the

Environment

[SHE]

PRASA Departments

Asset Management

PRASA Rail

Intersite

Autopax

Strategy 3B

Provision of

Sustainable Asset

Optimisation

Strategy 3A

Inter-modal

Integration

Strategy 3C

Accommodation

of People with

Special Needs

Program 3AA

Total Station

Management

Program 3AB

Integrated

Ticketing Solutions

Program 3CA

Accessible Rolling

Stock

Program 3CB

Accessible

Railway Facitlities

Program 3CC

Accessible

Property

Developments

Program 3BA

Customer Service

Program (Income /

people)

Strategy 3D

Rail Technology

Program 3DA

Sustainable Rail

Technology Policy

Perway – Track & Structures

Stations

Rolling Stock

Control Systems

Telecommunications

Energy Systems

Environmental

Performance

Built Environment

Program 3AC

Strategic

Partnerships

Interface

Agreements

Service Level

Agreements

Program 3AD

Facility

Management

Figure 14: Service Quality and Growth

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9.6.3.1 Key Strategic Initiatives / Strategies

Four key strategies are identified. They are:

Inter-modal Integration - this is supported by two key programs o Total station management o Integrated ticketing solutions

Provision of Sustainable Asset optimisation - Related to both income and people. A customer service focus is fundamental.

The accommodation of people with special needs

Railway Technology Development - Contribution of user requirements that will affect the technology responses that will support and facilitate the delivery of service excellence.

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9.6.4 Financial Effectiveness to Maximise Operational Efficiencies

BOC KPA 4

Financial effectiveness

to maximize operational

efficiencies

PRASA Objective 4Financial Effectiveness -

ensuring funding availability

& deployment to achieve the

required results and

outcomes through the

productive and efficient use

of all resources

BOC Committee

Financial, Capital &


[FCP]

Strategy 4B

Development,

Management & Monitoring

of Strategic Plans

Strategy 4C

Revenue Strategy

Strategy 4A

Balance Sheet

Management

Program 4AA

Balance Sheet

Restructuring

Program 4AB

Funding &

Investment

Models

Program 4BA

Management of

Opex (Budgets)

Program 4BB

Management of

Capex

(Investment Capital)

Program 4CA

Public Private

Partnerships

Program 4CB

Fare Regime

Program 4CC

Landholding

Development

Financial Model

Sales Analysis Framework

Cost Analysis Framework

Financial Forecasting Framework

Project Prioritisation Framework

Capital Allocation Framework

Budget Frameworks / Guidelines

Financial Benchmarking

Strategy 4D

Maintenance of

the Asset

Register

Program 4DA

Asset Verification

Program 4DB

Maintenance of

Asset Register

Fixed Assets

Rolling Stock

Infrastructure

Landholdings

Moveable Assets

Program 4AC

Investment

Mechanisms

Capital Spend Monitoring

Program 4BC

Supply Chain

Management

Procurement

Warehousing & Stock Management

BBBEE

Strategic Sourcing

PRASA Department

CFO

PMO

Treasury

ICT

PRASA Rail

Medical / Pension Fund

Budget Allocations

Strategy 4E

Roll-out of ERP

System

Program 4AA

ERP Phase 1 -

Corporate

Program 4AB

ERP Phase 2-

Operations

Program 4AC

ERP Phase 3 -

Strategic

Finance

Human Resources

Procurement

Stations

Train

Operations

Asset

Management

Engineering

Support

Maintenance

Supply Chain

Management

Corporate

Governance

Business

Intelligence

Strategic

Enterprise

Management

ESS / MSS

CRM

Program 4CD

Borrowing Plan

Borrowing

Program

Program 4BD

MTEF Business

Continuity Plan

Program 4CE

Advertising

Income

Figure 15: Financial Effectiveness

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9.6.4.1 Strategic Initiatives

Financial effectiveness is founded on four key strategies:-

Balance Sheet Restructuring – the consolidation of the PRASA Group balance sheet that allows PRASA to leverage its substantial asset base

OPEX / CAPEX Management – appropriate funding allocation coupled with tight operational and investment capital expenditure controls to meet the mandate requirements

Revenue Strategy– The active management of funding generated by the business to increase the ability of PRASA to meet its own operational subsidy requirement.

Asset Register – the maintenance of the dynamic asset register to support balance sheet management.

Develop the Borrowing Programme for PRASA


Eight key programs will drive financial effectiveness:-

Operational Efficiencies - efficiencies derived from the rationalisation of the PRASA Head Office functions as well as merger of the PRASA Rail Operations of Metrorail and Shosholoza Meyl

The Roll-out out of the ERP System inclusive of integration and standardisation across the ICT portfolio

A focus on the budget provisions for the medical insurance and pension fund support.

Capital and Balance Sheet Restructuring

Strategic and Private Financing project

Fare Regime Framework for passenger rail

Increasing the rental income from properties through space optimisation and increased rentals.

Transit oriented development – As part of the recapitalisation of existing stations, specific emphasis and focus will be given to key stations that have the potential to be developed into significant ―transit oriented developments‖ – mixed use precincts that seek to make these station precincts destinations in their own right while encouraging a substantial growth in rail patronage. Developments of this nature will also seek to secure increased & sustainable income streams to offset the envisaged reduction in DOT subsidy allocation over the next seven years

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9.6.5 Corporate Governance and Legislative Compliance

BOC KPA 5

Corporate Governance &

Legislative compliance

PRASA Objective 5

Governance and Compliance -

ensuring controlled

conformance to statutory

requirements by entrenching

corporate governance

accountability within PRASA

Strategy 5B

Integrated

Management

System

Strategy 5C

Legislative

Compliance

Strategy 5A

Organisational

Alignment

Program 5CC

Project Contract

Review

Program 5BA

Quality

Management

System

Program 5BB

Safety

Management

System

Program 5AA

Organisational

Consolidation

Program 5AB

Organisational

Restructuring

Program 5AC

Restructuring the

Insurance Portfolio

Program 5CB

Commercial

Contract Review

Program 5CA

Legislation

Review

Incorporation of

Shosholoza Meyl

Incorporation of

Autopax

Refocusing

Intersite

Restructuring

PRASA

Restructuring

Passenger Rail

BOC Committee

Governance &

Performance

Program 5BC

Asset

Management

System

PRASA Department

Company Secretary

Internal Audit

Legal & Risk

Program 5CD

Internal Audit

Program 5BD

Environmental

Management

System

ISO 9001

SANS 3000

PAS 55

ISO 14001

Legal Register

Figure 16: Governance and Compliance

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9.6.5.1 Key Strategic Initiatives / Strategies

Good governance accountability is non-negotiable. Three strategic initiatives will focus on entrenching good corporate governance and accountability and conformance in a controlled manner within the organisation.

Organisational Alignment will enable institutional accountability, through the finalisation of the consolidation process, the restructuring of PRASA and its divisions and subsidiaries to reinforce and entrench the governance accountability required

Organisational adherence to the integrated management system that will become embedded in the culture of the PRASA. ISO compliance and continuous improvement in quality, safety, asset management and environmental systems is pivotal in driving governance accountability

Legislative compliance, including contractual compliance in the broader context, is the foundation of good governance accountability. It requires a commitment to the legal and moral obligations inherent in the legislative intent.

Underpinning these is a commitment to compliance with the PFMA and Treasury Regulations and ensuring Board effectiveness.


The following programs are considered to be key in driving this process forward :-

The establishment of PRASA Board corporate governance best practice

Alignment of the Divisions and Subsidiary strategies with those of PRASA

PFMA and Treasury Compliance and regulatory policies.

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9.6.6 Strategic Sourcing

BOC KPA 6

Contribution to the achievement

of Government‘s socio-

economic goals

PRASA Objective 6

Strategic Sourcing through an

effective and efficient supply

chain management strategy

process

BOC Committee

Financial, Capital &


Strategy 6A

Centralised &

Strategic

Sourcing

Program 6AA

BBBEE

PRASA Department

CFO

SCM

Strategy 6B

Warehousing &

Stock

Management

Program 6AB

Group SCM Policy

Program 6BA

Materials

Management

Program 6BB

Inventory Control

Program 6AC

Mega Project

Partnerships

Enterprise Development

Women in Rail

BEE Incubator

Supplier Upliftment

Figure 17: Strategic Sourcing

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9.6.6.1 Strategic Initiatives

The following key strategies or strategic initiatives support this objective.

A focus on centralised procurement that is strategically orientated.

Promotion of Broad-based Black Economic Development

Contribute to the revitalisation of the Rail Engineering Industry, a critical component of Industrial strategy for jobs, skills development, new technology development and local manufacturing capacity.


Key programs associated with Strategic sourcing within the organisation are:-

BBBEE

Effective Implementation of the Supply Chain Management Policy for PRASA as well as procurement procedures

Strategic Partnerships on key Mega Projects

Materials Management

Inventory Control

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9.6.7 Human Capital Development

BOC KPA 7

Human Capital

Development

PRASA Objective 7Learning and Growth - ensuring that

the appropriate knowledge and skills

are acquired and maintained to sustain

change and improvement for the

betterment of the organization through

to building human capital capabilities

Strategy 7C

Promotion of

Employee

Wellbeing

Strategy 7D

Building Internal

Capacity

Strategy 7B

Development of a

High Performance

Culture

Strategy 7E

Improving HR

Systems, process &

Practices

Strategy 7A

Enhancing

Leadership &

Management

Skills

Program 7BA

Organisational

Culture Change

Management

Program 7BB

Performance

Management

Program 7AA

Leadership

Development

Program 7DA

Talent

Management

Program 7DB

Learnerships

Program 7DC

Workforce

Planning

Program 7EB

HR Policy

Review

Program 7EA

In-house Funds &

Schemes

PRASA Medical Aid

PRASA Pension Fund

Program 7DD

Workforce

Training

Program 7CA

Employee

Wellness

HIV / AIDS

Life skills

Trauma Counselling

Program 7CB

Employee

Relations

BOC Committee

HR & Remuneration

Committee

PRASA Department

HR

Absenteeism

Value

Clarification &

Ownership

Medical Surveilance

Competency

Profiling

Job Grading &

Specification

Career Pathing

Recruitment

Processes

Program 7EC

HR Information

Competency

Assessments

IDP‘s

Training

Management

Junior Grades

Prasa Bargaining

Council

Employer

Organisation

Skills retention

Attraction strategy

Succession

Planning

Induction Training

Remuneration, Rewards

and Recogniton

Figure 18: Human Capital Development

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9.6.7.1 Key Initiatives

PRASA requires a range and depth of appropriate skills and knowledge to sustain change and continuous organisational improvement that adds to shareholder value. Five key initiatives are critical to this requirement :-

Leadership material within the organisation requires identification, nurturing and managed development over time to build competency and capability to ensure the sustainability of the business.

A high performance culture must be entrenched within the organisation in order to deliver efficiently and effectively on the mandate

Internal capacity, competencies and capabilities are required to be developed. Focused programs to enable this must be aggressively managed.

Improved and appropriate systems, processes and practices must become ingrained in the organisation

A high performance environment demands sound relationships and employee wellness – physically and emotionally.


The complexity associated with the process of equipping the organisation with the appropriate skills and knowledge will be guided by :-

Talent Management

Effective Performance Management

Leadership Development

Academy for Critical Technical Skills

Establishment of medical insurance and pension funds

Change Management- Customer focused improvement o Value clarification and ownership o Inculcate a culture of customer centricity o Teamwork vs. Silo operation

Capacity Building – Investing in Human Capital o Succession Planning o Training and Development o Mentoring and Coaching o Talent Management o Recognition and Reward

Communication Strategy – Making most of our Asset Value

IT Systems o Strengthen communication channels o Introduction of employee focus forums

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10 KEY STRATEGIC INITIATIVES FOR PRASA

10.1 Re-capitalization of the Asset Base

10.1.1 Fleet Capitalization – Urban Systems (Commuter Rail)

The need for fleet re-capitalization is an urgent requirement. Analysis of the profile of the current fleets clearly indicates that the refurbishment and upgrading programs merely delay the inevitable requirement to purchase new rolling stock and that these programs are, in reality, falling behind in even addressing this short-term requirement. In terms of efficient Capital Allocation within the Group, the presence of an Enterprise-Wide Program Management Office (PMO) is of strategic importance. To this end, the current PMO structures existing separately within the SARCC and Intersite will be merged into a highly efficient PMO Office located within the Strategic Asset Management Department of PRASA. The shortage of reliable rolling stock continues to undermine the ability of Metrorail to supply efficient and reliable urban rail services at the level that demand requires. To address this four key initiatives have relevance:-

The presentation of a comprehensive business case to Government for the purchase of approximately 560 new, modern coaches a year over the next ten to twelve year period to address current and future needs.

The development of policy frameworks that will enable the business to prepare for passenger demand over the longer-term (20 – 30 years) that will materialize in urban sectors of public transport provision. This evaluation should also consider the full spectrum of rail technologies that could deployed to address the demand that has been identified.

Two important processes need to be undertaken :

Working closely with relevant planning authorities in establishing the rolling stock requirements based upon an evaluation of the spatial planning policies and plans that are being adopted in the various areas, the assessment of the associated population growth & employment creation implications and the resultant impact on movement patterns and demands. Modal split scenarios will begin to inform the role that public transport will need to play and specifically that which rail will need to respond to. The appropriate rail technology assessment will enable this outcome to be translated into a high level rolling stock requirement that would need to be operationally optimized.

An operational assessment based upon the forecast rolling stock requirements to assess the full operational implications (wider than just rolling stock implications) including, but not limited to :-

o The optimized number of rolling stock train sets that are required o The associated infrastructure requirements (expansion of existing and the

need for new infrastructure) o The identification of system bottlenecks that impede the efficiency of the

current asset base

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o The requirement for expanded rolling stock and infrastructure maintenance facilities

o The extent of the landholdings required to sustain the envisaged system and service expansion.

The procurement of diesel locomotives on a lease basis to support key operations

Financing strategies to address the high capital investment required to sustain the acquisition of new rolling stock over the longer term. This will require close co-operation with Government in seeking the most appropriate funding strategy.

10.1.2 Fleet Recapitalization – Rural / Regional Systems

The nature of the long distance passenger services needs to be fully understood before synergies between the long distance rail and long distance road based bus services can materialize. It is important that the strengths of both businesses are recognized and utilized in driving operational performance and harnessing efficiency gains. Critical to this review is the need to recapitalize both businesses in a manner that benefits PRASA overall.

10.1.2.1 Mainline Passenger Services

The recapitalization strategy of Shosholoza Meyl is based upon a series of focused initiatives. It focuses on the sweating of the existing assets to obtain maximum performance from them, providing a dedicated fleet for each of the markets served, optimizing the use of the number of train sets with a small reserve fleet located in Johannesburg and Cape Town. The initiatives include :-

The acquisition of new diesel locomotives in the medium term

Power car conversion

Coach replacement

Coach conversion

General coach overall

IT Systems

Yard and Station upgrades

FY08 FYO9 FY10 FY11 FY12

New Locomotives 16 10

Coach Replacement 18 18 15 18

Coach Conversion 80 112 142 144 174

General Coach Overall 59 68 66 42 24

Power Car Conversion 4 9 9 8 8

Station Upgrades

Yard Enhancements

IT Systems

Source : Shosholoza Meyl Business Plan 2008-2012

A key initiative is to address the access arrangements with Transnet Freight Rail.

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10.1.2.2 Autopax

The recapitalization of the Autopax road based fleet is fundamental in ensuring that this subsidiary is able to deliver commercial services without recourse to subsidy support. The recapitalization process comprises two components

Capitalisation of the business.

Collaborate with the DOT on the process for the Renewal of the Bus Fleet in the context of FIFA 2010 Soccer World Cup.

10.2 . Infrastructure Re-Capitalization & Expansion

With the focus on rolling stock upgrading and refurbishing programs over the past two years, investment in infrastructure has been constrained. The condition of the existing asset base requires that this funding allocation be reviewed and that a more equitable split between rolling stock and infrastructure be entertained. This shift in funding allocation has already commenced but key infrastructure initiatives will be promoted :

The application of total life cycle management practices with a strong emphasis on preventative maintenance regimes and programs being adopted. The required shift in funding is already reflected in the current investment allocations and these will be increased with time. This investment will see an improvement in the reliability associated with both rolling stock and infrastructure

The introduction of a National Signalling Upgrade Program that improve overall system performance and efficiencies, of which the WITS CTC project is a prime example

The implementation of an Integrated Ticketing System is critical to the effective provision of integrated service provision not only within PRASA but also with rapidly developing integrated public transport networks in the urban metropolitan areas.

A number of new strategic links and corridors will be developed that will begin to address the positioning of rail within the rapidly evolving spatial densification arrangements, predominantly in the urban areas but also enabling connection between rural development nodes. This positioning must also pro-actively involve the engagement of planning authorities regarding the alignment of Bus Rapid Transit (BRT) with rail planning initiatives to ensure a clear understanding of the roles, interfaces and support areas that would be needed to be formalized.

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Major Expansion & Corridor Improvement Projects “Mega-Projects”

Moloto Rail Corridor – Responding to the need to optimize public transport provision from the former KwaNdebele areas into Tshwane, reduce the enormous cost in road infrastructure, road based subsidies and in the loss of life, PRASA will continue to assume the responsibility for the delivery of the Moloto rail corridor – a corridor in excess of 100km in length.

Johannesburg – Durban High Speed Passenger Rail Corridor. Identified for implementation over the next 12 – 15 years. This project will be based on the standard gauge and begin to implement the adopted new railway technologies to sustain the future of long-distance rail. A detailed feasibility study will be undertaken by PRASA.

King Shaka Airport Rail Link – Consultation between ACSA and PRASA for the Airports Company to make provision in the plans for the construction of an airport rail link with the City of Durban. A feasibility Study will be undertaken.

Design & Implementation

Bridge City Rail Link – Located in the Inanda, Ntuzuma and KwaMashu area in the northern region of the eThekweni Municipality, it is home to more than half a million people. It is an area with high unemployment levels which will greatly benefit from the Bridge City Development – a Presidential lead project comprising a 60 ha site earmarked for mixed use development that will house a regional hospital, magistrates court, retail, commercial and residential development supported by intermodal transport facilities. The rail and taxi / bus intermodal facility is envisaged to transport some 14 000 peak hour passengers and some 40 000 on a daily basis. This initiative completes the ―north – south ― corridor as agreed between the PRASA and the eThekweni Municipality and captured in the ITP and 2010 initiatives.

Cape Town International Airport Link – a project that ultimately will require two phases to realize the full potential of utilizing the existing network to provide this link to the Central Business District. The first phase of this project entails the building a station at the Cape Town International airport and the construction of a 4 km elevated electrified double line between the airport to link with the existing system between Lavistown and Belhar stations on the Serepta line. For completeness, an additional station will need to be constructed within the Cape Town Station precinct (with the interim location being Good Hope Concourse).

The second phase, in the medium-to-long term, requires the addition of a double electrified line between Bonteheuwel Station and Mutual Station to accommodate increased airport traffic as well as provide for the future north – south linkage of the Metro-South East with the Northern development corridor.

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Motherwell Commuter Line – Extending 20km north of Port Elizabeth CBD, and to the west of the existing Port Elizabeth to Craddock mixed use (freight / long distance rail) railway line, the Motherwell service has been identified in the Regional Rail Plan for the Nelson Mandela Metropolitan Municipality a priority A corridor and is due for implementation commencing in the 2009/10 Financial Year.

Network Operations & Capacity Analyses

Regional operations assessments o Capacity Analyses o Identification of network improvements to inform corridor strategies

Metropolitan Planning Reviews, Studies and Projects Conceptual Planning / Feasibility Studies

Capacity Enhancement : Eerste Fabriek – Greenview - The 5.5km single line between Eerste Fabriek and Greenview section in the Mamelodi area has been identified as a major constraint in accommodating the current passenger demand let alone any increased demand envisaged for 2010. To meet the rapidly developing area it is necessary to provide the following infrastructure:-

o Doubling of the line between Eerste Fabriek and Greenview (5,5km) o The introduction of two new stations on the Mamelodi Extension line in the

vicinity of Greenview [Tsamaya & Mahudi] o Access to the south at Mamelodi Gardens Station

Hammanskraal Commuter Rail Service - Linked to Phase 2 of the Moloto Rail Corridor, the detailed economic and financial feasibility Studies will be progressed to a point where the appropriate decisions regarding the re-introduction of the service can be taken.

Updating of Planning Reviews

Kagiso – Randfontein Link

Midrand – Isando Link

Fisantekraal Electrification & Doubling

Eersterivier – Strand Doubling

Integrated Planning with BRT‘s New Planning Projects

King Shaka Airport link

Rural & Regional Planning Projects

Passenger Services to Rustenburg and Sun City – Rustenburg has been identified as one of the host cities for the FIFA 2010 Soccer World Cup. In addition, the rural rail plan process has identified Rustenburg as one of seven rural municipalities warranting a public transport response. The strategic

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intention is to introduce regional (inter-city) services between Gauteng and Rustenburg. Negotiations with Transnet Freight Rail continue to bring this initiative to a successful conclusion.

Limpopo Rail Plan

Bloemfontein – Botshabello rail service feasibility

Alignment of Shosholoza Meyl & Autopax services with Rural Rail Plan strategic corridors

Station Development & Integration Projects Input into the Flagship Station Projects R & D and Strategic Projects

Passenger Rail Technology Study

Strategic Facilitation on the Role of Rail Integration with the Gautrain Rapid Rail Link The integration of the Gautrain and Metrorail services remains an on-going requirement. PRASA remains committed to the Third Party Agreement signed with the Bombela Concession Company while the Enabling Agreement with the Gauteng provincial Government is being negotiated.

10.3 . Modal Integration

Modal integration lies at the heart of the DoT‘s public transport strategy. PRASA is positioned to build on the synergies that Metrorail, Shosholoza Meyl and Autopax bring to the delivery of public transport services

10.4 Integrated Management System (ISO Related Quality, Safety & Maintenance Management)

The ability to make informed decisions regarding the business is dependent upon a responsive integrated management system where the integrity, relevancy and currency of the information accessed are above reproach. Clear policies, core procedures and integrated system procedures must guide the working level instructions to ensure ISO compliance throughout the organisation.

Policies

Quality : Core Procedures Safety : Core Procedures• Management responsibility

• Quality Management System

• Resource Management

• Product Realisation

• Measurement, Analysis & Improvement

• Control of Documents

• Control of Records

• Control of non- conformance

product

• Control of Monitoring &

Measurement Devices

• Risk Assessment Management

• Internal Audit

• Corrective Action (CA)

• Preventative Action

• Identification & Traceability

• Railway Occurrence Management

• Procurement

Integrated System Procedures

QMS MMS SMS

• Manage policy & procedures

• Operational Risk Management Review

• Human Factors Management

• Procurement of Goods & contracted

services

• Engineering & operational systems

• Interface Management

Integrated Work Instructions

ISO

90

01

-20

00

[Qu

ality

Po

lic

y]

SA

NS

30

00-1

[S

afe

ty P

olic

y]

Figure 19: Integrated Management System

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10.5 Rationalization and Standardization of Systems

10.5.1 Enterprise Resource Planning System

The Enterprise Resource Planning (ERP) system adopted for PRASA is based on SAP. The ERP system is intended to be rolled out in 3 phases over three years as follows:

ERP Phase I has been designed to accommodate a corporate or group head office and is able to integrate business units, divisions or subsidiaries as required. Phase 2 makes provision for the review of the various systems currently in use, which will result in either incorporation or integration as modules into the SAP Platform. Additional systems requiring review, development or integration include:-

The standardisation of FMMS as an asset management system is under way. It is important that all the capabilities of this system be used as a national Rolling Stock management tool with standardised reports.

The functionalities include:

o National Asset register o Condition Assessments o Job Costing o Coach performance o Develop the Capability to make investment decisions and monitor

improvement/ modification influences o Manage Non Conformances.

Best practice maintenance processes are relying more and more on asset condition monitoring processes using advanced electronic and surveillance systems to determine

ERP PHASE 1 ERP PHASE 2 ERP PHASE 3

Corporate Operations Strategic

Finance

Human Resources

Procurement

Stations

Train Operations

Asset Management

Engineering Support

Maintenance

Supply Chain Management

Corporate Governance

ESS / MSS

Business Intelligence

Strategic Enterprise Management

CRM

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optimal maintenance interventions – across all disciplines including facilities where the emerging focus is on building management systems. Rolling Stock configuration management system to be made available to Repair depots and approved and classified repair, GO and upgrade contractors in the interests of efficiency and control. The system should include:

The critical need for a scheduling module to eliminate the current manual scheduling function, which is prone to manipulation and distortions.

The incorporation of a rolling stock refurbishment costing, invoice verification, invoice payment (approval) and automated capitalisation module(s).

The capability to enable rolling stock depots to download coach data (fault and incident) directly onto a maintenance based fault analysis and warning system to improve fault finding and predictive maintenance / replacement decisions (Linked with the FMMS system)

The User requirements Specification of all non-standard trains should be standardised nationally.

10.5.2 Property Management Systems

Intersite has invested in a UK designed property management system, Manhattan. It is a highly specialised system that currently processes 4500 leases on a monthly basis including renewals, billings, collections & space utilisation. In the short-term, pending the final decision to migrate to the proposed ERP system, the system is critical for tenant management and is required to ensure timeous billings and collections of rentals. Migration to the ERP system in a phased manner will pose no risk if the migration process is managed correctly.

10.5.3 . Risk Management

The Infinity risk management suite of software has been implemented to address the identification, management and mitigation of enterprise risk within the organisation.

10.5.4 Human Capital Development

The development of human capital within the Group is fundamental to its transformation success. A clear indication of the capital development processes is required to develop the human capital capabilities necessary to enable PRASA to fulfil its mandate. Six strategic themes have currently been identified along with two human resource measurement tools. These are :-

Strategic Themes Human

Resource Tools

High Performance Culture

Enhancement of leadership and management skills linked with a [skills] retention plan

HR Balanced Score Card

HR Sustainability

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Strategic Themes Human

Resource Tools

Building internal capacity

Getting the HR Basics right

Improving HR efficiency in systems, processes and practices

Promotion of physical and mental health and employee satisfaction

Index

A number of key initiatives are required to ensure skills sustainability. The following actions are key:

Application of an approved Retention Strategy

Accelerated roll-out of the culture transformation process

Critical skills audit with consequential contracts

Audit of reasons for skilled staff wanting to leave the organization.

Skills development at both the tertiary and artisan levels.

10.6 Revenue Strategy

PRASA‘s funding and operational expenditure requirements continue to exceed the funding resources made available to it. A critical challenge is the development of a strategic investment strategy that seeks to meet the funding requirements to enable the mandate to be delivered. The investment strategy will need to address both the investment and operational funding demands. Government has indicated that the level of subsidy to PRASA will be scaled down over a period of time. A strategy aimed at ensuring that PRASA meets 50% of its operational funding requirements will be implemented to achieve this goal within a seven-year transitional period. However, Government is still expected to play a leading role in meeting the capital funding requirements to ensure that the transport objective of providing safe and affordable transport is not compromised. This objective clearly defines the timelines over which operational funding will required to be augmented. In reality this transition should incrementally be implemented over the full seven year period. The following options are being pursued to address the funding issue. Investment Funding:

Public Private Partnerships

Borrowing on the open market – A Borrowing Plan and associated Program will be developed to motivate the borrowing limits from the National Treasury.

The alignment of capital budgets with Planning Authorities is critical in optimizing public sector investment spend and to derive maximum benefit from this investment. Operational Funding:

Maximising the revenue streams from the property portfolio, including, but not limited to

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o Reviewing the existing rental strategy and tenant mix to maximize rental income

o Creation of new rental opportunities within existing developments o Creation of new rental opportunities in new station related developments o Exploration of appropriate advertising opportunities

Economies-of-scale efficiencies from strategic sourcing by the Supply Chain Management process

Renegotiated access charges associated with Transnet Freight Rail usage and rental of commuter rail facilities and infrastructure.

Additional fare revenue through increased patronage

Develop a fare regime framework for the regular review of fare structures and fare adjustments in the commuter rail environment.

South Africa is not unique in experiencing a funding ―squeeze‖ on its rail industry. The technological complexity required to ensure safe railway operations that are able to respond to demands placed upon it by rapidly urbanizing cities and the need to be supportive of sustainable rural communities, requires innovative financial responses.

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11 THE ROLE OF DIVISIONS AND SUBSIDIARIES

11.1 PRASA Rail

While developing the integration proposal of the merging of the operations of Metrorail and Shosholoza Meyl, it became clear that the sustainable solution was to develop a new PRASA Rail Operation. The opportunity offered by the formation of PRASA Rail will make way to realize following;

Enhance the synergies that exists between the two operations

Enhance efficiencies in rail operations and remove duplications

Break down the silos and territories that currently exist within the rail, property and bus operations,

Focus on value adding activities, The only way that limited MTEF resources can be allocated optimally to fulfill the PRASA mandate is to align business, recapitalization, operating and reporting objectives via operating structures that;

Improves business performance and property assets,

Increases sustainable income and better financial control, and

Improves safety and

Relationships with customers and stakeholders. To this end the following operations model was developed:

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Figure 20: Prasa Rail Model

PRASA RAIL OPERATIONS

National Rail Operations Office

Asset Maintenance

Support Functions

KZN

Metro Region

Eastern Cape

Metro Region

Western Cape

Metro Region

Gauteng

Metro Region

Prasa Rail Operations Key Activities

Business Planning

Budget Control

National Operations Coordination

Benchmarking (operational

efficiencies)

National Contracts

Programme Management

TSM

Mainline or Regional Rail

Services

LuxRail

Cross-Border Services

Premiere Classe

Business Express

Regional Key Activities

Management of Regional Operations and Maintenance of Assets

Station Operations, Liaison with Provincial Governments and municipal structures and Project Execution

The PRASA Rail Operations Model is based on a Divisional Head Office at the centre that is supported by four metro regions and possibly an additional 2 quasi regions (without a full back office structure) which include the mainline services and the cross border region, responsible for the running of the Maputo, Musina and Mafikeng corridors. The regions will focus on the operations (commuter as well as provisional of back office support to distance long regional services) within their geographical control. Each geographical region will consist of a metro plus some satellite regional offices all supported by a back office structure that resides within the regional head office to ensure that there is no duplication within the same proximity. Shunting, yard management and maintenance functions will be consolidated within each area. Ticketing and information offices will be converged including the call centres and booking offices. The geographical split of the regions has been done to enhance the regional coordination of all services while leveraging on an efficient use of facilities, assets and resources. The Station Operations structure is designed to give a one-stop interface for all rail travellers and should significantly improve the customer experience. The cross-border region and the function responsible for running regional Train Operations will not have a full back office structure but will be supported by the Gauteng Region back office structure with its head office in Johannesburg. The regional train services unit will endeavour to reduce the number of train personnel depots from twenty-five down by at least 60% to a number that will improve personnel deployment and reduce the cost of administration. The depots located in the various geographical regions will administratively be supported by the regions‘ back office structures.

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The regional ICT and Corporate Security Services structures will be configured to support all PRASA business units within the geographical area that they support as opposed to the current disparate structures located within each business unit but offering duplicated and costly support within the same area. At business unit head offices an ICT Customer Relations Manager and Divisional Security Head with minimal structures will focus on the aggregation of the business unit requirements and development of a ‗services requirement plan‘ which will inform the type of services offered by the regional operational functional unit to the various business units. The ultimate goal is to have a PRASA Rail Operations structure headed by a CEO a transitional structure as below will be put in place for a period of between 6 - 12 months. The transitional structure will be headed by a Group Executive reporting to the Group Executive Officer of PRASA and will be delegated to lead the PRASA Rail Executive team and manage day to day operations. The transitional structure will allow Prasa to deal with the most urgent and pressing positioning issues through the Office of the Group Chief Executive Officer whilst giving the new structure an opportunity to focus on immediate imperatives for a functional rail operating structure. In addition it will provide time for PRASA to build the business unit gradually through appropriate talent management interventions whilst modelling an effective cost structure. Figure 21: Prasa Rail Operations Structure

Group CEO

PRASA

CEO

Prasa Rail Operations

Support Services

Finance

COO

Prasa Rail OperationsCustomer

Services (TSM)

Engineering Services (Rail Asset Maintenance)

Infrastructure

Network

Rolling Stock

National Train

Operating Centre

Operating Safety

and Security

LuxRail

Mainline Passenger

Services

Premier Classe

Blue Train

(Anticipated)

Gauteng Metrorail

Western Cape

Metrorail

KZN Metrorail

Eastern Cape

Metrorail

Cross-Border

Services

HCM

ICT

SCM

Electrical

Signalling

Perway

Benchmarking and

Logistics (operations)

PA to CEO

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In addition to the focus areas above, other areas of focus will be:

Preventative Maintenance programs that aimed at establishing an improved maintenance regime in the operational environment. The program started in 2008/09 with strengthening in 2009/10 and will be enhanced in 2010/11 and beyond. In the rolling stock department the program are essential to stabilize the reliability of the trains and predictability of the train service;

Logistics and benchmarking to drive key operational efficiency measures in the division.

Service Excellence across Rail products. The key to Service Excellence is not only focusing on what services are provided, but how they are delivered. The central premise of the program is continuous improvement in a diverse and dynamic environment.

This program will be supported through specific sub-programs :-

o Reinforcement of the ISO 9000 program to improve service delivery as a sub-program of the Service Excellence program;

o Implementation of phase 2 of the Total Station Management program that will enhance service delivery through a single accountable entity at station level;

o Improvement of security in the rail environment through developing Rail Security and Protection into a single national outfit with capacity for tactical planning, deployment and daily management of protection functions.

Focus on the Integrated Management system for quality service and safe service provision. In the regard specific focus will be on investigation of an optimal solution for safety on trains with respect of closed doors on trains and platform marshals.

11.1.1 Commuter Rail

The Commuter Rail business of PRASA will be structured to deliver on the primary mandate of provision of train service excellence in priority corridors, compliance to regulatory and operational safety requirements as well as station and network operations. The key focus is on commuter rail operations and maintenance functions.

11.1.1.1 Focus of Commuter Rail

Provide high quality on-time rail commuter transport in urban areas with a total journey focus from any origin to destination.

The division focuses on the operationalisation of the PRASA strategy and changing commuter experience through programs of Preventative Maintenance, Service Excellence and Corridor prioritisation in terms of scheduling and resource allocation. The

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core departments in the division comprises of Technical Operations, Network Operations and Station Operations.

Commuter rail will therefore focus on the following key areas:

Service Excellence program in rail corridors that has the intent to introduce service excellence as an operational strategy for Metrorail. This operational strategy will focus on delivery of minimum service levels of increased frequencies (5 minutes headways) during the peak, on-time performance, quality stations, integration with other feeder and distribution services, personal security on the following Metrorail Corridors:

o Tshwane – Johannesburg (business express concept to be extended to all commuters in this corridor within 18 month period),

o Naledi – Johannesburg

o Khayelitsha – Cape Town

o KwaMashu – Durban - Umlazi

Focus on improved service in priority corridors through focused resourcing and implementation of the National Rail Plan. Resources and schedules will be allocated per corridor and minimum service levels will be established for all corridors. Updating of the rail plans per region for multiple five year time horizons per corridor is a critical component of this program over the next 24 months.

11.1.2 Mainline Passenger Services

Mainline Passenger Services provides PRASA with the opportunity of providing regional and inter-city passenger rail services. This services is currently serving as provider of basic long distance intercity passenger transport, regarded as ―last-resort‖ transport during high peak periods. The service operates within the borders of South Africa and requiring significant operational subsidy.

11.1.2.1 Focus of Mainline Passenger Services

Mainline passenger services will focus on the following key areas :

Improvement of train performance in order to improve on time departures and arrival

Customer service improvement.

Increased availability of trains.

Improved revenue generation

Financial prudence with increased focus on expenditure management and income improvement through increased revenue generation.

Focus on primary regional and inter-city corridors o Improved on-time performance o Enhancing the inter-city economy services travel experience

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o Introducing appropriate coaches on regional routes (less than 4-8 hour services)

Determine the feasibility and implement regional services in the medium term such as o Johannesburg - Kimberley – Bloemfontein - Johannesburg o East London – Umtata Service review

11.1.3 Luxury Rail

The focus of luxury rail will be to ensure a more focused approach per route and product service-offering tailored to the market segments within which these products operate.

11.1.3.1 Focus of Luxury Rail

The following will be key focus areas to increase market share and increase travel:

Improvement of train performance in order to improve on time departures and arrival

Customer service improvement.

Increased availability of trains.

Improved revenue generation

The introduction of Premier Services on strategic corridors, and

The introduction of differentiated travel packages

11.2 . Autopax

Autopax will over the next 18 months begin to refocus its strategic activities on the key public transport mandate. Whilst the transition would see Autopax continuing to consolidate its market share and operating on a fully commercial basis, the End-State would require Autopax to fulfil a mandate fully supportive of rail operations through effective feeder and distribution services. In addition, Autopax and PRASA Rail will collaborate in making certain public transport offerings to cities and municipalities, including district municipalities. Growth for Autopax is in the public transport arena, and to this end, Autopax will be mandated to consider participating in various bids to deliver public transport services to the cities and rural areas where there is no adequate public transport provision. This is the new mandate for Autopax following the recapitalisation of its fleet.

The following are the objectives set for the period 2010/11 – 2011/12 following the consolidation phase: 1. Service Excellence on existing services and expansion of existing routes. The new

and more reliable bus fleet will have a positive effect on passenger numbers in terms of increased income, improved travel experience for passengers, opportunity to increase fares, reduced maintenance costs and the ability to expand the current footprint of routes. In addition to this, Autopax will also consider the opportunities to

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utilize rail facilities to offer integrated transport services and various rail stations have been identified where Autopax will operate from in future.

2. Expanding business operations through new routes locally and in a network of cross-border routes. Due to limitations of the fleet, Autopax closed a number of cross-border routes in the past. These routes will form the basis for the re-introduction of cross-border services. In addition Autopax will utilise its fleet of MAN vehicles to offer services to Metrorail for feeder and distribution services, bus services in cases of service disruptions.

3. Services for 2010 FIFA Soccer World Cup that includes 50 buses for the Local Organising Committee and 420 buses for MATCH for their operations during the event.

4. Replacement of viable services identified by Shosholoza Meyl inclusive of connecting services to Shosholoza Meyl within a 50 km radius from Shosholoza Meyl subject to obtaining permits for the routes.

5. Improving operational efficiencies, especially vehicle availability and utilisation, bring driver hours of work inline with the BCEA, improve sales performance and operational controls. This will position the business for future growth strategies during the next planning phase.

6. Continuous focus on risk prevention, in terms of road safety, income protection and statutory compliance.

11.3 . Intersite Property Management Services (Pty) Ltd

Intersite’s primary roles within the PRASA Group will be Property Asset Manager, Property Developer and Facilities & Estate Manager for PRASA. In fulfilling these roles Intersite’s primary customer will be the PRASA divisions of PRASA Rail and the subsidiary, Autopax, but the ultimate customer is the passenger. With the major shift in PRASA’s strategic objectives to deliver on its vastly increased mandate. The primary role of Intersite within the PRASA Group is to develop and grow the Property Portfolio of PRASA:

Contribute to Enhancing Passenger’s Travel Experience through Station Improvement Programme and Effective Facilities Management;

Generate income from property rental and leases

Increase the value of PRASA’s Property Portfolio In response to the revised mandate, Intersite has developed a corporate real estate management model based upon world best practice to provide PRASA with Corporate Real Estate Solutions (CRES) capability. Adoption of the CRES business model necessitated a review of the Intersite’s operating and reporting structures. It is founded on the four pillars of corporate real estate management, namely, strategy and business development, real estate asset management, project and property management and facilities and estate management. Further rationalisation of shared support services,

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aligned to that provided at the PRASA Group level is fundamental and is a key factor in the implementation of the CRES operating model.

The Corporate Real Estate Solutions approach to property development delivery over the medium to long term represents an ambitious plan to reposition Intersite, while simultaneously building a strong brand within the property industry. Adoption of “CRES business model” is a prerequisite to enable the leverage of the PRASA asset and reputation base. Over the next 36 months, Intersite will focus on the realisation of the PRASA objectives. Nine key initiatives have been identified as being key in delivering on these objectives. These are :

Organisational restructuring in line with the Corporate Real Estate management practices

National Station Improvement Programme;

National Station Upgrade Programme;

Transit Oriented Developments;

Year-on-year Rental Revenue Increases

Year-on-year Space Growth;

National Station Precinct Planning Programme

Total Facilities Management for PRASA and

Financial Effectiveness.

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12 2010 FIFA Soccer World Cup Operational Plan

The 2010 operational plan covers passenger rail in its entirety (Metrorail and Shosholoza Meyl) as well as Autopax Bus Services. The plan is supported by the Prasa 2010 Project Management Team whose efforts will be directed towards the implementation of the plan before and during the games. The lessons learnt from the various simulations and the Confederations Cup has been taken into account in the preparation of the plan.

12.1 Commuter Rail (METROPOLITAN TRAIN SERVICES)

Train services in all the metros will be revised for the two months beginning in June and ending in July. The revision will ensure increased frequencies as well as extended hours of operation i.e. 18 hours of operation as a minimum. Each province will provide normal train services on match days supplemented by their allocation of the 65 dedicated train sets on all identified corridors. Key shuttle services will operate between Rissik and Pretoria Stations as well as between Durban and Moses Mabhida Stations in Durban. Ellis Park and Loftus stations (stadium facing stations within the security zone) will not be operated during match days. All stadium feeder stations will operate reduced traffic with the exception of Cape Town Station from 1.5 hours before the match kick-off hence all stadium bound services have been scheduled to arrive before the 1.5 hours cut-off point. Consideration has been made for special tickets to be used for the dedicated stadium and fan-park services to enhance security and crowd control. A contingent of Protection and Security Services personnel (permanent and contracted security) will be deployed in all the operational regions with additional deployments catered for as per the deployment table under security sub-heading and this will also cover the public viewing areas.

12.2 INTER-CITY AND REGIONAL TRAIN SERVICES

Special trains will run from Musina (connecting services from Zimbabwe), Komati (connecting services from Mozambique), Durban, Cape Town and East London. The arrival times of these trains will be linked to the Commuter Rail (Metrorail) services destined for the various stadiums or to Shosholoza Meyl and Autopax services in the case of the Bloemfontein and Rustenburg games. A total of 240 soccer dedicated trains have been scheduled for different matches.

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12.3 Autopax

The National Department of Transport has identified PRASA (Autopax) as the delivery agent identified to provide coach transport for the LOC, MATCH as well as inter-city transport for the expected high numbers of international and local supporters. The services that will be provided for the different transport needs are outlined briefly below:

The requirements of the Local Organising Committee : The responsibility of Autopax for this segment is the provision of 40 luxury buses with drivers for the duration of the event. Support staff and depot facilities to support this operation will be made available. Vehicles will fall under the Operational Control of the LOC for the full period. Services in this segment will mainly concentrate on spectators or corporate market that will buy special packages. Vehicles will be paid for by MATCH for the whole period covering the event and these vehicles will be dedicated to the exclusive use of MATCH. Autopax will also be responsible for the planning and management of this fleet on behalf of MATCH in all the areas where these buses will be deployed. Autopax has recruited and is training sufficient bus drivers for the planned services.

General Spectator requirements: The segment will remain the responsibility of the NDoT and an Operating Entity will be appointed to plan and manage this segment. Autopax will provide 110 buses with drivers for this segment. Additional requirements will then be sourced from the industry. Individual passengers will be allowed to buy tickets on these services and these services will serve all inland Host Cities.

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13 BUSINESS / ORGANISATIONAL RISKS

The major risks that can affect the business are categorised and reflected in Table 5. Table 5: Major Risks

Strategic Business Operational

Energy Supply

Global financial shocks

Climate change

Disease pandemics

Political uncertainty / instability

Lack of political support

Lack of co-operation between spheres of government

Regulatory & Compliance risks

Lack of Adequate funding

Failure to manage the consolidation and transition process

Reputational risk

Energy shortages & associated power cuts

Business continuity vulnerability to systems failure

Protection of confidential information

Fraud & corruption

Poor rail & road worthiness of PRASA assets

Aging workforce

Power Cuts

Overcrowding of trains & facilities

Commuter backlash due to poor performance

Non-compliant commuter behaviour impacting operational safety

13.1 Strategic Risks

a. Energy Shocks : Fluctuations in energy prices and access to supplies pose a clear challenge to PRASA and its respective business units. The large swing in prices triggers economic shocks that could impact all citizens, with the resultant consequences of Commuters changing their travel patterns and opting for a cost effective mode of Transport. The consequences of these changes result in the overcrowding of our Trains, a strain to our Infrastructure, train delays, and an increase on third partly liabilities claim.

b. Global financial shocks : With the 2007/2008 worldwide credit crunch provides

a real-life demonstration of how highly contagious such shocks can be across the sectors and, indeed, globally. In the future, continued financial innovation-which tends to disperse risks, and as a consequence makes detection of potential shocks more difficult, is likely to increase the potential for financial shocks. For PRASA the need to be financially innovative in the implementation of its various Infrastructure programmes cannot be overemphasized particularly where high-profile and significant project failures could lead to a loss of confidence among investors and lenders.

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c. Climate Change : Failure to anticipate and respond to the effects of the changing weather patterns has a huge impact on our assets being completely destroyed. The delivery of services could be undermined by heavy storms and infrastructure such as sub-stations being flooded or train services being disrupted following severe storms and lightning. This would require adequate and well developed business continuity plans to counter effects of this challenge. The challenge to invest in the latest technology and anticipate the consumer demand shifts on green revolution cannot be over emphasized.

d. Disease pandemic : The lingering risk of the HIV/AIDS with market, economic

and operational impacts is still significant and would have dramatic impacts in nearly every sector.

e. Regulatory and Compliance risks: The possibility of regulatory interventions in the various sectors of PRASA‘s business, could shape the competitive environment and drive fundamental changes in business models developed for the respective business units and subsidiaries of PRASA. The importance of understanding regulations and the various legislations (e.g. The NLTTA) impacting on the business of PRASA is crucial in meeting the primary mandate of PRASA as outlined in the Legal Succession Act, as amended.

f. Lack of Adequate Funding: The current and continued support by Government on funding will impact on the future expansion of PRASA‘s assets and Infrastructure. Sustained and adequate funding innovation would be required.

g. Failure to manage the consolidation & transition process : The failure to manage the consolidation processes, change management and the inability to respond to the implementation of the PRASA strategic objectives will ultimately hamper the ability of PRASA to fulfill its mandate. The transactions undertaken in response to the establishment of PRASA may fail to deliver, not because they are poorly conceived, but because of operational challenges not met. Post –merger integration is often slower than expected in respect of people, processes and technologies. Acquiring innovation and implementation of change management strategies that rapidly address synergies post- merger would require highly specialized personnel. In the context of 2010 preparations and delivery of major turnaround related infrastructure projects, the risks of these not being completed are real.

13.2 Business Risks

a. Reputational Risks as a result of failure to deliver on key projects and the mandate

will lead to serious problems for PRASA, resulting in reduced public funding levels, alternative transport solutions being sought by transport authorities in terms of their statutory mandate, as well as a loss of confidence by commuters and other stakeholders.

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b. Business Continuity Risks – A number of significant business risks, including the possibility of the disruption or collapse of various business processes such as the IT system, will continue to present major challenges. Any disruption, in whatever form, that affects business continuity will have major implications unless proper and effective contingency plans are put in place.

c. Failure to protect critical and confidential information in terms of accepted

guidelines has the potential to lead to manipulation of tender procedures and also undermine the attainment of major strategic objectives of the Government in the rail sector such as empowerment. Documentation retention to comply with legislative requirements is implicit in this.

d. Fraud and Corruption – diversion of much-needed resources from priority projects

for the improvement of rail and its performance for the benefit of commuters. e. Poor Rail and Road worthiness of PRASA Assets poses serious regulatory and

compliance infringements to the extent of PRASA losing its operating licenses. f. Ageing workforce : The need to replace an ageing workforce, can present a

challenge to PRASA which is still seeking to maintain the current skills base. PRASA could lose a competitive edge if it cannot effectively respond to this challenge and, equally, to new opportunities posed by the same- a human resource challenge. Shortages of critical skills and the evolving ―war for skills‖ is increasingly having, and will continue to have, an detrimental impact on PRASA.

13.3 Operational Risks

a. South Africa is expected to experience power cuts due to poor generation

capacity. Whilst massive public investment is currently underway, it is expected that the benefits of such investment in generation capacity will take some time to materialise. PRASA will need to develop effective strategies to mitigate against frequent power cuts, which may result in serious disruption to the delivery of rail service, loss of income, commuter backlash and loss of assets.

b. Overcrowding presents major risks within the operational environment of Metrorail. The possibility of stampede and loss of life is a feature of a rail system prone to failures where commuters take serious risks due to lack of reliability and predictability of train services.

c. Commuter Backlash due to frequency of poor rail services may result in disruption of operations, loss of assets and income.

d. Non-compliant Commuter Behaviour : The disregard that a section of the commuting public has for safe operating practices presents specific challenges relating to the perception of safe rail travel, on the one hand, while comprising safe railway operations on the other.

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13.4 Risk Mitigation Measures

Translating the key commercial business risks into tangible responses is reflected below:- Firstly, an accountability or ―assurance provider‖ map is provided. This allocates the accountability of each of the assurance providers, clearly indicating the primary, secondary and oversight and monitoring responsibilities associated with each of them. Secondly, the table on risk mitigation oversight provides a detailed audit response requirement and scope to monitor the risk areas that are material to PRASA. These are linked to the Board of Control‘s Key Performance Areas and the PRASA Strategic objectives. These tools provide appropriate mechanisms to ensure that the key risks are monitored and continuously mitigated against.

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Table 12.2 : Assurance Provider Map

Au

top

ax

Sh

osh

olo

za M

eyl

Metr

ora

il

Inte

rsit

e

Off

ice o

f th

e C

EO

Str

ate

gic

Asset

&

Netw

ork

Develo

pm

en

t

Gro

up

Hu

man

Reso

urc

es

(Develo

pm

en

t)

Ris

k &

Leg

al

Co

rpo

rate

Aff

air

s

Off

ice o

f th

e C

hie

f

Fin

an

cia

l O

ffic

er

Off

ice o

f th

e C

hie

f

Info

rmati

on

Off

icer

Off

ice o

f th

e C

hie

f

Pro

cu

rem

en

t O

ffic

er

Exte

rnal A

ud

it

Inte

rnal A

ud

it

Op

era

tio

ns C

om

plian

ce

En

terp

rise R

isk

Man

ag

em

en

t

Execu

tive M

an

ag

em

en

t

(EX

CO

)

Bo

ard

of

Co

ntr

ol

Inadequate infrastructure and key asset

maintenance practices

Inadequate investment in stock assets and

lack of funding for re-capitalisation

Poor service delivery, unsatisfied

commuters and passengers and negative

customer perception of commuter rail and

long distance rail & bus service provision

Poor safety (pure risk) and security

environment and poorly safeguarded

assets

Ineffective planning, implementation &

performance monitoring; ineffective

strategic project management

Unreliable suppliers and non-compliance

with procurement practices

Increased insurance, legal and liability

risks and reputation loss

Unsuccessful implementation of the

PRASA consolidation process

Inadequate skills & capacity; ineffective

skills management

Poor and non-effective Corporate

Governance practives

Poor, weak & ineffective management

information systems

Responsibility

Primary

Secondary

Monitoring & Oversight

Oversight

Ris

k R

ati

ng

Assurrance Provider

Key Business Risk

Business Operations Support FunctionsMonitoring &

Assurance Functions

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13.5 Risk Mitigation Oversight Table 12.3 : Proposed Risk Mitigation Oversight

BOC Key

Performance Area

PRASA Strategic

ObjectiveIdentified Risk Risk Description Risk Area

Proposed

Audit

Response

Proposed Audit Scope

Contribute to

Government's objective

of affodable, accessible

and reliable public

transport

Service execellence in the



solutions that are

affordable, reliable,

predictable and

operationally safe

Poor infrastructure

and key asset

maintenance

management

practices

Failure to maintain the infrastructure and rolling

stock, with an emphasis on rail, resulting in

accidents, reduced service provision and non-

compliance with operating legislation due to non-

availability of appropriate rolling stock

Commercial

Business Risk

Capital Asset

Maintenance

Audit

Review the adequacy and effectiveness of

preventative maintenance strategies & controls

focussing on :-

(i) Maintenance planning & scheduling

(ii) Budgeting & expenditure management

(iii) Materials management

(iv) Quality management, and

(v) Record keeping

Investment in

infrastructure to

facilitate growth and

development

Asset Utlisation - ensuring

the productive

investmentin, and use of

assets and the property

portfolio through the

application of total life-

cycle management

practices, processes and

procedures to all assets

Inadequate

investment in stock

assets and lack of

funding for re-

capitalisation

(i) Failure to provide rail rolling stock and buses

adequate to cater for the both commuter and long

distance travel resulting in the inability to provide the

required & appropriate service leading to accidents

due to overcrowding and loss of revenue due to fare

evasion.

(ii) Failure to secure and provide sufficient funds to

enable PRASA, its divisions and subsidiaries to meet

their respective objectives resulting missing DOT

targets for the business coupled with a loss of

credibility and reputation

(iii) Failure to manage corporate projects and

organisational change resulting in non-achievement

of stated objectives, financial loss and reputational

loss

Commercial

Business Risk

Capital Projects

& Investments

Audit

(i) Review the adequacy of investments made in

capital projects focusing on signals, perway,

rolling stock and facilities.

(ii) Review the adequacy of and effectiveness of

processes for capital budgeting, project

management and capital budget control.


quality services

Service Quality and

Passenger Growth -

sustaining dependable and

superior customer service

benefit that achieves a high


Poor service delivery,

unsatisfied

passengers and

negative customer

perception of the

passenger transport

services provided by

PRASA's divisions

and subsidiaries

(i) Failure to maintain day-to-day service provision

where service quality, service availability and service

continuityis affected by partial or total loss resources

including staff, equipment, systems, information,

rolling stock and infrastructure.

(ii) Failure to communicate the implementation of

and successes of safety and improved service levels

impacting on the ability to maintain and / or attract

additional passengers to PRASA's divisions and

subsidiaries as well as reputational loss.

Commercial

Business Risk

Customer

services audit

(i) Review the evaluation of present and future

customer demands and responses to meet the

demands

(ii) Evaluate the effectiveness of training ,

complaints handling processes and procedures,

customer feedback methodologies, and customer

complaints mechanisms

(iii) Check the process of brand audit and

performance evaluation

Financial Effectiveness

to maximise operational

efficiencies

Financial Effectiveness -

ensuring funding

availability and deployment

to achieve the required

results and outcomes

through the productive and

efficient use of all

resources

Ineffective planning,

implementation,

performance

monitoring and poor

strategic project

management

(i) Failure to establish, communicate and implement

plans that monitor performance resulting in poor

prioritisation of work, unclear direction, business

disruption, reduced service levels and the non-

achievement of PRASA's and DoT's objectives.

(ii) Failure to ensure the proper management of

income and expenditure within budget variation limits

leading to budget overspends & inaccurate

management information

Strategic and

Operational

Risk

Group level

Operational

performance

ausit and

strategic

projects audits

(i) Evaluation of the planning process, alignment

of budgets with corporate objectives

(ii) Evaluation of the mechanisms for

implementation & monitoring of performance

against set targets

Contribution to the

achievement of

Government's socio-

economic goals

Strategic Sourcing through

an effective and efficient

supply chain management

process and promotion of

broad based economic

empowerment and

inductrial policy objectives

Unreliable suppliers,

non-compliance with

procurement practices

and ineffective

contract managememt

practices

(i) Failure to ensure the procurement process

provides bset value resulting in reduced levels of

service provision

(ii) Failure of contractors to deliver on the agreed

contract service levels resulting in reduced levels of

service provision, increased costs and a reputational

loss

Strategic and

Operational

Risk

Tender

management

and contract

management

review

(i) Evaluation of compliance with procurement

procedures

(ii) Evaluation of the effectiveness of contract

management processes and controls

(iii) SCM strategic review and BEE compliance

(iv) Review of alignment of PRASA SCM policy

within divisions and subsidiaries

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BOC Key

Performance Area

PRASA Strategic


Proposed

Audit

Response


Contribute to

Government's objective

of affodable, accessible

and reliable public

transport

Service execellence in the



solutions that are

affordable, reliable,

predictable and

operationally safe

Poor safety and

security environment

and poorly

safeguarded assets

(i) Failure to protect staff / third parties and

passengers resulting in reduced levels of service

provision and increase insurance and liability risks

and costs

(ii) Failure to protect equipment, software, and

assets from loss or damage caused by theft, fire, and

environmental factors and other perils resulting in a

loss service.

Operational

RiskNOSA Audits As per the NOSA audit arrangements

Corporate Govrnance

and Legislative

Compliance

Governance and






and fraud prevention within

PRASA

Increased

insurance, legal and

liability costs

Reputation loss

(i) Failure to comply with the key legislation or legal

requirements resulting in loss of operating licenses or

permits, censures, financial loss and reputation loss

Commercial

Business Risk

Insurance and

claims

management

audit

(i) Review processes and procedures for the

appointment of insurers and Brokers,

(ii) Assessing the adequacy of of incsurance

cover, claims processes and execution

(iii) Review of insurance risks and insurance

contracts for validity

(iv) Review of compliance with all legal and

regulatory requirements

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA

Unsuccessful

implementation of

the PRASA

cosnoolidation

process

Failure to manage and impelement an effective

consolidation process of PRASA, its divisions

and negatively impacting on the associated

turnaround strategies, the consolidation and

integration requirements and a significant loss of

reputation

Strategic

Risk

Post

Restructuring

Review

(i) Review the effectiveness of the Corporate

Strutures for PRASA, its Divisions and

Subsidiaries includive of organisational,

financial and operating reporting structures

systems and process alignments as well as

the associated communication mechanisms

in place

(ii) Review of compliance with Corporate

Governance practice for PRASA, its Divisions

and Subsidiaries and benchmarking against

best practice

Human Capital

Resource

Development

Learning and Growth -

ensuring that the

appropriate knowledge

skills are acquired and

maintained to sustain

change and improvement

for the betterment of the

organisation through

developing human capital

development processes to

build human capital

capabilities

Inadequate skills

and capacity and

ineffective skills

management.

Failure to manage staffing resources effectively

and efficiently resulting in reduced levels of

services provision and dissatisfied customers

Operational

Risk

Skills audit

and HR

perfromance

management

audit

(i) Review of the skills gap through

establishment of unfilled critical positions,

(ii) Review of the effectiveness of

interventions in place to close the skills gap

(iii) Monitor the link between the performance

management and skills development and

retention policies and practices

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA

Poor and non-

effective Corporate

Governance

practices,

inadequate internal

controls, failure to

adhere to internal

control systems and

ineffective financial

management

practices

Failure to maintain an effective corporate

governance arrangement resulting in the

breakdown of internal controls, fraud, corruption

and non-cahievement of objectives linkwd with a

loss of credibility and reputation

Operational

Risk

Control

register

review and

half-yearly

financial

statements

audit

(i) Evaluation of the controls in the following

processes :-

# Procure to pay

# Payroll

# Fixed Assets

# Revenue

# Financial statement Close process

# Materials management

(ii) Half-year financial statements audit

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BOC Key

Performance Area

PRASA Strategic


Proposed

Audit

Response


Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA

Poor and ineffective

information

management

systems

Failure to maintain a secure information

management framework so that

(i) the confidentiallity of information is protected

from unauthorised disclosure

(ii) the integrity of the information remains

accurate, current, complete and relevant

(iii) information is accessible for disclosure in

accordance with legislation and the

organisation's policy

Operational

Risk

IT General

Controls

Review

(i) Review of IT General Controls relating to

the management of change, configuration,

capacity, and performance, operations (daily

tasks) , service level agreements, problems

and incidences, facilities (computer room),

back-up and storage, disaster and recovery

plan, logical access and security, system

development life cycles and data integrity

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA


information

management

systems










Operational

RiskMonthly CAATs

Monthly financial system monitoring in

accordance with the Accelerated

Development Solutions by Information

Management and Internal Audit that will cover

Oracle Financial, SAP HR and Empac

systems

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA


information

management

systems










Operational

Risk

ERP Post

Implementation

Review

(i) Review the applications controls following

the implementation of ERP SAP

(ii) Data migration from Oracle to SAP

functionality, output, reliability, security and

interoperability

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA

Poor and non-

effective Corporate

Governance

practices

Failure to maintain effective corporate

governance arrangements resulting in the


and non-achievement of objectives linked with


Operational

Risk

Fraud

investigation

Fraud investigations as and when requested

with scope to be determined by the nature of

the request

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA

Poor and non-

effective Corporate

Governance

practices






Operational

Risk

Control Self

Assessment

monitoring

Control Self Assessment of the

implementation of identified controls in the

various processes, namely, Procure to pay,

Payroll, Revenue, Ficed Assets, Financial

Statements Close Process and Materials

Management

Corporate Govrnance

and Legislative

Compliance

Governance and







PRASA

Poor and non-

effective Corporate

Governance

practices






Operational

Risk

Issues follow-up

tracking

management

tool follow-up

audits (including

internal audit &

AG findings)

Planned follow-up of the recommendations

made in the AG Report and Internal Audit

Reports

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14 FINANCIAL PLAN

14.1 Assumptions Underpinning the Financial Plan

The key assumptions used in establishing the level of MTEF funding requirements are:

5% growth in income per annum over MTEF period;

National Treasury inflation projection for 2010/11 of 6%;

Personnel costs to be reduced by 10% over the MTEF;

Metrorail and Shosholoza Meyl to be operated as a single integrated division from 1 April 2010. Rail Operations budget to be capped at R3.6bil. (R4.8bil);

Revenue budget growth should be in line with operational expenditure growth.

Salary increases to be based on 5% CPI;

All divisions and subsidiaries should budget for a breakeven budget and comply to PFMA and Treasury regulations;

All additional expenditure not covered by subsidy should be funded by additional rental income or fare revenue;

2010 Operational budget should be funded from revenue as no additional subsidy has been provided;

Autopax to provide service for 2010 World Cup in accordance with contract with MATCH;

Implement a Fare increase for commuter rail;

Intersite Rental Income to be increased by 20% to ensure alignment between the growth of operational expenses;

New conditions of service should be implemented by 1st April 2010. In addition the implementation of 2% sweetener versus overtime to take place. The new conditions in service should result in 70% reduction in overtime‘

Finalisation of the appointment of contract workers as full time employees;

Preventative maintenance (Rolling stock and Infrastructure) be allocated 15% of the total budget of PRASA (inclusive of internal maintenance costs of labour, material etc.);

Rates and Taxes budget controlled by Intersite;

Energy costing has been aligned to ESKOM tariff increases. (Estimated at 30% increase as compared to 2009/10 actual / forecast);

Strategic sourcing of energy, diesel other bulk products to be conducted by PRASA SCM.

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14.2 5-Year Funding Profile (Incorporating the MTEF allocation and the 2008/2009 Budget)

There has been a significant increase in the allocation of funding to the passenger rail business since the 2006/2007 financial year. The percentage increases, year-on-year, are indicated in Figure 2 below. The current approved MTEF allocation (inclusive of the 2008 Supplementary grant) is reflected in Table 8. Figure 22: Increase in MTEF Allocation Year on Year

1

MTEF Allocation: Year-on-Year increase

-20%

0%

20%

40%

60%

80%

100%

MTEF Allocation 4.6% 37.0% 29.5% 24.9% 4.1% 5.0%

Opex -17.9% 35.0% 4.5% -1.0% 6.0% 6.6%

Capex (excl PTIS) 64.7% 39.6% 61.8% 46.4% 3.1% 4.1%

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

1 Opex Subsidy increase from 200809 as result of subsidy grant for Shosholoza Meyl.

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Table 6: Approved MTEF Allocation

R'000 2009/10 2010/11 2011/12 2012/13 Total

1 2 3 4 (2,3,4)

Operational

PRASA 2,735,844 2,874,933 3,041,211 3,638,472 9,554,616

Shosholoza Meyl 450,000 400,000 424,000 824,000

Autopax - - - -

Efficiency Savings -120,000 -121,500 -72,575 -314,075

Total Operational 3,185,844 3,154,933 3,343,711 3,565,897 10,064,541

Capital

PRASA 3,831,791 4,813,273 5,784,768 6,021,106 16,619,147

Shosholoza Meyl - - - -

Autopax - 797,000 - 797,000

Total Capital 3,831,791 5,610,273 5,784,768 6,021,106 17,416,147

PRASA Group

Operational 3,185,844 3,154,933 3,343,711 3,565,897 10,064,541

Capital 3,831,791 5,610,273 5,784,768 6,021,106 17,416,147

PTIS 464,758

Total PRASA Group 7,482,393 8,765,206 9,128,479 9,587,003 27,480,688 Figure 23: Approved MTEF Allocation (December 2009)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Rm

Approved MTEF Allocation: 2009/10 - 2012/13

Operational 3,185.84 3,154.93 3,343.71 3,565.90

Capital 3,831.79 5,610.27 5,784.77 6,021.11

PTIS 464.76

2009/10 2010/11 2011/12 2012/13

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Figure 24: Distribution of Approved MTEF Allocation

Approved MTEF Allocation: 200910 to 2012/13

0% 20% 40% 60% 80% 100%

2009/10

2010/11

2011/12

2012/13

Capital 3,831.79 5,610.27 5,784.77 6,021.11

Operational 3,185.84 3,154.93 3,343.71 3,565.90

PTIS 464.76

2009/10 2010/11 2011/12 2012/13

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14.3 PRASA Group Income Statement

Table 7: PRASA Group Income Statement

2010/11 2011/12 2012/13

R '000 R '000 R '000

OPERATIONAL INCOME:

Fare Revenue 3,276,089 3,432,912 3,720,189

Third Party Income 46,287 47,039 49,391

Management Fee 98,149 103,547 108,725

Operating Leases 340,783 340,136 357,483

Subsidy 3,154,933 3,343,711 3,565,897

Insurance Recovered - - -

Rental Income 62,000 62,760 65,961

Other Income 39,702 43,829 46,061

TOTAL INCOME 7,017,943 7,373,935 7,913,708

OPERATIONAL EXPENSES:

Personnel 2,767,887 2,920,121 3,066,127

Training 38,368 40,133 42,139

Material 202,804 212,133 222,740

Energy 548,902 686,128 857,659

Rental 221,092 231,262 242,826

Maintenance 754,638 789,352 828,819

Vehicles 263,829 275,965 289,764

Communication 80,031 83,712 87,898

Insurance Claims 139,267 145,673 195,974

Insurance Premiums 113,114 118,317 124,233

Professional Services 264,420 276,583 290,412

Computer Expenses 66,128 69,170 72,629

Security 238,029 248,978 261,427

Health and Risk 131,975 138,046 144,949

On Board Services Cost of Trading Stock 33,530 35,072 36,826

Travel and Accommodation 66,769 69,840 73,332

Auxiliary Transport 15,934 16,666 17,500

Bank Charges, Penalties and Levies 13,661 14,289 15,004

Office Expenditure 7,351 7,689 8,074

Loss on sale of assets - - -

Publications, Printing and Marketing 92,813 97,083 101,937

Management Fee 98,149 102,664 107,797

Haulage Costs 300,000 313,800 329,490

Other Operating Costs 65,389 68,396 71,816

TOTAL EXPENSES 6,524,079 6,961,074 7,489,370

OPERATING SURPLUS / (SHORTFALL) BEFORE INTEREST 493,864 412,861 424,338

Finance Income 10,481 11,167 11,892

Finance Cost (324,345) (244,029) (256,230)

OPERATING SURPLUS / (SHORTFALL) BEFORE DEPRECIATION 180,000 180,000 180,000

AND AMORTISATION

Capital Subsidy Amortised 1,063,661 1,114,325 1,162,917

Depreciation / Impairment (1,243,661) (1,294,325) (1,342,917)

OPERATING SURPLUS / (SHORTFALL) (0) 0 0

PASSENGER RAIL AGENCY OF SOUTH AFRICA

INCOME STATEMENT BUDGET FOR THE PERIOD ENDING 31 MARCH

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14.4 PRASA Group Balance Sheet Table 8: PRASA Group Balance Sheet

2010/11 2011/12 2012/13

R '000 R '000 R '000

ASSETS

NON CURRENT ASSETS

FIXED ASSETS 18,562,156 23,052,599 27,730,788

18,562,156 23,052,599 27,730,788

CURRENT ASSETS

CASH AT BANK AND ON CALL 1,060,903 1,458,071 1,471,754

INVENTORIES 202,093 210,177 218,619

ACCOUNTS RECEIVABLE 520,975 503,780 710,655

1,783,971 2,172,028 2,401,028

TOTAL ASSETS 20,346,128 25,224,627 30,131,816

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

SHARE CAPITAL 4,248,258 4,248,258 4,248,258

DISTRIBUTABLE RESERVES (DEFICIT) (3,152,263) (3,152,263) (3,152,263)

1,095,995 1,095,995 1,095,995

NON CURRENT LIABILITIES

OTHER LONG TERM LIABILITIES 32,944 203,000 133,000

CAPITAL SUBSIDY AND GRANTS 16,288,141 20,958,584 25,816,773

DISCOUNTED LEASE AGREEMENTS 33,208 21,208 10,208

16,354,293 21,182,793 25,959,982

CURRENT LIABILITIES

ACCOUNTS PAYABLE 2,895,839 2,945,839 3,075,839

2,895,839 2,945,839 3,075,839

TOTAL EQUITIES AND LIABILITIES 20,346,128 25,224,627 30,131,816


BALANCE SHEET BUDGET AS AT 31 MARCH

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14.5 PRASA GROUP Cash-flow Statement

Table 9: PRASA Group Cash Flow Statement

2010/11 2011/12 2012/13

R'000 R'000 R'000

Cash flow from operating activities

Cash generated from/(utilised in) operations

(Loss)/Profit before taxation (0) 0 0

Adjusted for:

Depreciation 1,243,661 1,294,325 1,342,917

Amortisation on capital subsidy and grants received (1,063,661) (1,114,325) (1,162,917)

Investment income - Interest received (10,481) (11,167) (11,892)

Operating cash flows before working capital changes 169,519 168,833 168,108

Changes in working capital

Decrease/(increase) in trade and other receivables 12,930 17,195 (206,875)

Decrease/(increase) in inventories (28,747) (8,084) (8,442)

Increase/(decrease) in trade and other payables 100,000 50,000 130,000

84,183 59,111 (85,317)

Net cash from/(used in) operating activities 253,702 227,944 82,791

Cash flow from investing activities

Investment income - Interest received 10,481 11,167 11,892

Acquisition of property, plant and equipment (5,610,273) (5,784,768) (6,021,106)

Net cash from/(used in) investing activities (5,599,792) (5,773,601) (6,009,214)

Cash flow from financing activities

Proceeds/(repayment) of long-term liability (20,000) 170,056 (70,000)

Proceeds of discounted lease agreements (18,400) (12,000) (11,000)

Proceeds on capital subsidy and grants received 5,610,273 5,784,768 6,021,106

5,571,873 5,942,824 5,940,106

Net (decrease)/increase in cash and cash equivalents 225,783 397,168 13,683

Cash and cash equivalents at the beginning of the year 835,120 1,060,903 1,458,071

Cash and cash equivalents at the end of the year 1,060,903 1,458,071 1,471,754


GROUP CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH

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14.6 PRASA Borrowing Plan

Amendments to the legislation make provision for PRASA to exercise borrowing powers for the benefit of the business. To give effect to these powers, an appropriate Borrowings Plan will be formulated and submitted, via the Board of Control, to the Minister of Finance to motivate the relevant borrowing limits that will become applicable. The plan will be by the Balance Sheet Restructuring Initiative currently underway as well as the Revenue strategy.

14.7 PRASA Materiality & Significance Framework

To enable PRASA to identify losses, irregular, fruitless or wasteful expenditure and to evaluate these against a materiality framework as and when they occur during the financial year, a Materiality and Significance Framework has been agreed with the Board of Control and the Department of Transport. The Framework has been developed on the basis of current legislative requirements, noting the nature of PRASA‘s business, the statutory requirements, the risks associated with PRASA‘s business and identified quantitative and qualitative factors where :

Quantitative factors include the materiality figure thresholds that have been established for the PRASA Group that take into account gross income, gross expenditure, net (loss), total assets and fixed assets.

Qualitative factors include the level of exposure to public interest and scrutiny, level of compliance with applicable legislation, unusual transactions entered into, not of a repetitive nature, transactions entered into that could result in a reputation risk and the impact of political decisions on the organisation.

Significance is defined as ―extensive or important enough to merit attention‖. In the broader sense it may be interpreted as warranting review or approval by the Shareholder. The Framework must be revised and updated annually, before the start of the financial year, to ensure that all new legislative and regulatory requirements and changing circumstances are accounted for.

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15 CAPITAL PROGRAM

15.1 Capital Allocation

Table 10: Capital Allocation Programme Table 4: Proposed Capital Allocations over the 2010 MTEF

Capital Programme

2010/11

Main

2010/11 2011/12 2012/13 Total

R million MTEF

PRASA Rail 450 380 524 719 1,623

Capital Intervention projects (minor w orks, safety & SNP) 300 275 414 579 1,268

Rolling Stock facilities upgrades 150 105 110 140 355

Accelerated Rolling Stock Programme 2,304 1,867 2,710 3,121 7,698

General overhaul of Metrorail Coaches 2,139 1,666 2,500 2,811 6,977

General overhaul of Shosholoza Meyl coaches 165 100 100 193 393

General overhaul of Shosholoza Meyl locomotives - 101 110 117 328

Intersite Property Management 374 380 539 439 1,358

Station improvement programme 274 100 109 200 409

Station upgrades/transit oriented developments - 200 230 239 669

Mabopane station upgrade 100 80 200 - 280

Autopax 500 797 - - 797

Bus acquisition 500 797 - - 797

ICT 220 165 66 36 267

Enterprise Resource Planning System (ERP) 220 80 31 - 111

ICT Systems - 85 35 36 156

2010 WC Stations - 39 - - 39

Windermere Station - 2 - - 2

Nasrec Rail Intervention - 11 - - 11

Moses Mabhida - 15 - - 15

Rhodesfield Station - 11 - - 11

Infrastructure 1,480 1,360 1,946 1,707 5,013

Signaling & Telecommunications 700 620 644 708 1,972

Bridge City 203 180 202 - 382

Cape Tow n International 178 150 50 - 200

Green View - Pienaarspoort project 120 120 155 - 275

Khayelitsha Rail Extension - 15 - - 15

IP Platform - 70 - - 70

Replacement of 3 KV Sw itching Systems - - 250 265 515

Overhead Traction Equipments and Small Parts Steelw ork - - 270 286 556

Multi-modal: Footbridges and Structures - - 100 106 206

Perw ay, bridges and electrical 279 205 275 342 822

Less: amounts to settle outstanding payments - -622 - - -622

Total Allocations by PRASA Group 5,328 4,988 5,785 6,021 16,794

2010 MTEF Allocation as per Shareholder 5,610 5,785 6,021 17,416

Medium-Term

Expenditure Framework

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15.2 Summary of PRASA Key Projects Table 11: Key Projects

Responsible Department

Sub-Dept Project Timeframe

Strategic Asset Development

(SAD)

Rolling Stock

Accelerated Rolling Stock Refurbishment Program Mar 2011

Enhancing PRASA‘s Rail Engineering Capacity

Fleet Renewal Program

Procurement of locos for Shosholoza Meyl

Procurement of new fleet Metrorail (Delivery to start)

Infrastructure & Facilities

National Signalling (Stage 1) – Construction start

Railway Extension – Doubling of lines – Greenview

Strategic Infrastructure Projects

Office of the Group CEO

Strategic Network

Development

Feasibility study for Border Tech station

Naledi – Luipaardsvlei – Randftn proposed corridor

Hammanskraal Rail Feasibility Study

Bloemftn – Botshabelo – Re-introduction of services

Limpopo Passenger Rail Plan

Railway Technology and Gauge Study

Moloto Rail Corridor

Rail Plan Strategic Facilitation Project

Light Rail Study (Incl Bara-Link)

Gautrain Integration

Cape Town Airport Rail

PRASA Strategic Plan

PMO Enterprise Programme Management

PRASA merger – Integration Structures

Finance Finance

Statutory Financial Reporting

PRASA Management Accounts and Costing Model

Tax and Balance Sheet Restructuring Project

Alternative sources of finance

Materials Management

Strategic Sourcing

Human Resources

Talent Management t

Change Management

Leadership development

PRASA Pension Fund and Medical Scheme

Risk Management

Risk Internal Audit

Enterprise Risk Management Framework

PRASA Insurance Policy

Fraud Prevention Plan

Operational Safety

SNP implementation

Occupational Health and Safety

Safety Management System (SMS)

Environmental Management System

Integrated Management System

Corporate Security

Corporate Security Strategy Information Security Operational Security Plan Liaison with SAPS Rail Police

Information Communications Technology (ICT)

Rollout of the new ERP System – Phase 2

Integrated Communication System

Development of IT Governance & Structure Knowledge Management Initiative Integrated Ticketing System

Corporate Affairs Develop and implement PRASA Group Corporate

Affairs Strategy; incorporating the Group Brand Development, Positioning and Communication

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16 KEY PERFORMANCE INDICATORS

16.1 Key Performance Indicator Alignment

The key performance indicators are premised on the assumption that the Board‘s Compact, PRASA‘s objectives, strategies and key performance indicators must be aligned. The key performance indicators are premised on the assumption that the Board‘s Compact, PRASA‘s objectives, strategies and key performance indicators must be aligned. The choice of key performance indicator must reflect the level of interest and level of measurement required within the organization. The illustration alongside reflects the ideal alignment that is required. In addition, the KPI‘s are necessary within each of the Board of Control‘s performance areas to measure the organisation‘s performance within each of these area. A series of three indicators are proposed The following table reflects the KPI‘s and the associated targets that are applicable at the PRASA and operating entity level, subject to the approval of budgets and capital allocations. . The following table reflects the KPI‘s and the associated targets that are applicable at the PRASA and operating entity level, subject to the approval of budgets and capital allocations.

Station KPI’s 8

Corridor KPI’s 7

Discipline / Department KPI’s 6

Operating Entity KPI’s 5

PRASA KPI’s 4

PRASA Strategies 3

PRASA Objectives 2

BOC Performance

Areas 1

Figure 25: Key Performance Indicator Alignment

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16.2 Key Performance Indicators & Targets

The key performance targets associated with PRASA, its divisions and subsidiaries are as reflected in the Estimates of National Expenditure are reflected in the table below: Table 12: Key Performance Indicators

Indicator Programme/Activity Past Performance Current* Projections

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Percentage of Metrorail trains on time arrivals (0-5 minutes)

Metrorail operations 86.6% 86.4% 87.7% 87.0% 90% 90.5% 91%

Percentage of Shosholoza Meyl trains on time arrivals (0-30 minutes)

Shosholoza Meyl Operations

-

33%

32%

34%

60%

75%

85%

Percentage of Metrorail trains cancelled

Metrorail operations 2.3% 1.8% 1.8% 2.0% 1.8% 1.4% 1.3%

Number of rolling stock coaches refurbished each year Metrorail Shosholoza Meyl

Metrorail and Shosholoza Meyl operations

310

-

489

-

709

-

531

30

450

40

450

50

450

60

Customer service index Agency as a whole Metrorail Shosholoza Meyl Autopax

Metrorail, Shosholoza Meyl and Autopax operations

-

-

-

-

-

71%

-

-

-

73%

-

-

72%

72%

81%

83%

75%

75%

81%

83%

75%

75%

81%

83%

75%

75%

81%

83%

Lease and rental income growth: Intersite

Revenue strategy - - - 0% 20% 30% 40%

The detail Key Performance Indicators will be provided following the approval of the Operational Budget, Capital Allocations and Budget as well as the Business Plan.

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17 PRASA STATISTICS

17.1 Assets owned by PRASA and operated by Metrorail

Region

Stations Single Line Track Km Coaches

PR

AS

A

Ow

ned

TF

R O

wn

ed

To

tal U

sed

PR

AS

A

Ow

ned

TF

R O

wn

ed

To

tal

Op

era

ted

On

Op

era

tio

nal

Co

ach

es

Eq

uiv

ale

nt

12-C

oach

Tra

insets

Gauteng 175 46 221 1254 264 1518 2077 173

Western Cape 86 32 118 610 304 914 899 75

KZN 56 44 100 364 305 669 627 52

Eastern Cape 0 29 29 0 79 79 140 12

Total 317 151 468 2228 952 3180 3743 312

TFR Risk 32% 30% [16]

Source : SARCC Network Operations [ ] Locomotives Owned by TFR SARCC Rolling Stock [13-11-2008] TFR: Transnet Freight Rail

17.2 Assets owned by Prasa and Operated by Shosholoza Meyl

Region

Stations Track Km Coaches

PRASA Owned

TFR Owned

Total Used

PRASA Owned

TFR Owned

Total Operated

On

PRASA Owned

Premier Classe 3 8 11 280 1972 2252

Tourist Class 12 36 48 648 5782 6430

Economy Class 14 84 98 1056 9591 10647

Total

1223

(Active Fleet)

Note Source Shosholoza Meyl Excludes Cape Town – PE Service

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17.3 Priority Rail Corridors as per National Rail Passenger Plan

A summary of the rail priority corridors, where 58% of the corridors (A & B) are supportive of the public transport strategy, is reflected below:

Regions Corridor

Total %

Total A&B Corridor Definitions

A B C %

Gauteng 7 6 5 18 55 72 A

Ideal Corridors for Rail, high quality service Western Cape 2 2 3 8 24 50

KZN 1 0 5 6 18 6 B

Important role for rail, 2000 service levels Eastern Cape 1 0 1 2 6 50

Total 11 8 14 33 C Role of Rail uncertain,

investigation required % 33 25 42 100

% [A&B] + C

58 42 100

Source: Strategic Network Planning

R‘000 1 2 3 4

2007/08 2008/09 2009/10 2010/11 Total 1,2,3,4 Total 2,3,4

Operational Subsidy

R 2,259,119 R 2,485,031 R 2,683,650 R 2,844,669 R 10,272,469 R 8,013,350

Additional for SARCC

0 R 18,559 R 30,307 R 36,096 R 84,962 R 84,962

Additional for SM 0 R 994,759 R 370,000 R 320,000 R 1,090,000 R 1,090,000

Additional for Autopax

0 8,791 52,631 54,337 115,759 115,759

Total Opex R 2,259,119 R 3,507,140 R 3,755,844 R 3,944,495 R 13,665,598 R 11,207,479

Personnel 9700

11000 (13.4%)

11500 (4,5%)

12000 (4,3%)

Opex Cost per Head

232.900 263.960 268.170 266.730

Capital Grant R 1,696,078 R 2,267,686 R 3,484,144 R 3,693,193 R 11,141,101 R 9,445,023


0 R 100,000 R 200,000 R 700,000 R 1,000,000 R 1,000,000

Additional for SM 0 R 100,000 R 80,000 R 80,000 R 260,000 R 260,000


0 0 77,414 69,108 R146,522 R146,522

Total Capex 1,696,119 2,467,686 3,841,558 4,049,873 12,055,195 10,851,545

Personnel 9700

11000 (13.4%)

11500 (4,5%)

12000 (4,3%)

Cost / Head 174,858

Overall Total R 3,955,197 R 5,371,276 R 6,848,101 R 7,673,958 R 23,848,532 R 19,893,335

Personnel 9700 11000 11500 12000

Capex Cost per Head

407.750 488.300 595.490 639.500

PTIS R 476,000 R 210,000 R 450,000 R 1,136,000

Overall Total R 4,431,197 R 5,581,276 R 7,298,101 R 7,673,958 R 24,984,532 R 19,893,335

R‘000 1 2 3 4

2007/08 2008/09 2009/10 2010/11

Total 1,2,3,4

Total 2,3,4

Operational Subsidy

R 2,259,119

R 2,485,031

R 2,683,650

R 2,844,669

R 10,272,469

R 8,013,350


0 R 18,559 R 30,307 R 36,096 R 84,962 R 84,962

Additional for SM

0 R 994,759

R 370,000

R 320,000

R 1,090,000

R 1,090,000


0 8,791 52,631 54,337 115,759 115,759

Total Opex R 2,259,119

R 3,507,140

R 3,755,844

R 3,944,495

R 13,665,598

R 11,207,479

Personnel 9700

11000 (13.4%)

11500 (4,5%)

12000 (4,3%)

Opex Cost per Head

232.900 263.960 268.170 266.730

Capital Grant R 1,696,078

R 2,267,686

R 3,484,144

R 3,693,193

R 11,141,101

R 9,445,023


0 R 100,000

R 200,000

R 700,000

R 1,000,000

R 1,000,000

Additional for SM

0 R 100,000

R 80,000 R 80,000 R 260,000 R 260,000

Additional for 0 0 77,414 69,108 R146,522 R146,522