The Portfolio Committee on Transport

1
SA Rail Commuter Corporation Ltd
The Portfolio Committee on Transport Presentation
on SARCCs Strategic Goals, Plans and Budget for
2003/2004 By CEO Eddie Lekota
11 March 2003
2
Presentation Overview

• SARCC Mandate
• Vision
• Mission
• Corporate Strategic Objectives
• Major Strategic Plans
• Budgetary Implications (by Jakkie van Niekerk)
• Conclusion

3
The Mandate of the SARCC
Primary Secondary Objectives of the
Act Primary Objective The SARCCs mandate is to
ensure that, at the request of the National
Department of Transport or any sphere of
government, rail commuter services are provided
in the public interest, and to promote rail as
the primary mode of mass commuter
transportation.
Mandate The SARCCs mandate is to ensure that,
at the request of the National Department of
Transport or any sphere of government, rail
commuter services are provided in the public
interest, and to promote rail as the primary mode
of mass commuter transportation.
Secondary Objective To generate income from the
exploitation of assets transferred to the SARCC
by the Minister of Transport under Section 25
of the Legal Succession to the SATS Act (Act 9 of
1989)
4
The Mandate of the SARCC
To ensure
The provision of rail commuter services
In the public interest
At the request of NDOT or Transport Authority.
5
The Mandate of the SARCC - Legal Succession Act
to Ensure
To ensure
The provision of rail commuter services
In the public interest
6
The Mandate of the SARCC - Legal Succession Act
To ensure (provision of rail commuter services)

• To make sure

• To make certain

• To guarantee

7
The Mandate of the SARCC - Legal Succession Act
To ensure
The provision of rail commuter services
In the public interest
8
The Mandate of the SARCC - Legal Succession Act -
Public Interest
Public
9
The Mandate of the SARCC - Legal Succession Act
To ensure
The provision of rail commuter services
In the public interest
10
The Mandate of the SARCC - Legal Succession Act
Provision
Service Requirement
Service Provision
In public interest
11
Vision
To establish rail as the preferred mode of public
transport and to be the recognized champion in
ensuring the provision of quality commuter rail
services for all transport authorities in South
Africa, in the public interest
12
Mission
To ensure the movement of people through the
provision of safe, reliable, affordable and
sustainable commuter rail services and to
develop the rail assets, using best practices in
the interest of all stakeholders.
13
Corporate Strategic Objectives

• Utilize and develop the commuter rail provision
  environment to protect and promote the interest
  of the users, public and stakeholders.
• Support the rail system through ITPs and IDPs
  towards the aims and requirements of policies of
  all tiers of government.
• Establish the delivery policy framework for rail
  commuter service provision.
• Improve (and establish where necessary) the
  performance compliance framework and mechanisms
  for funding, delivery and compliance of rail
  commuter services.
• Develop and promote the provision of sustainable
  mass-moving rail commuter services, optimized
  funded enhancements and professional services
  towards socio-economic development.
• Create an environment for the development of
  expertise and knowledge within a consultative and
  rail business intelligence framework.

14
Major Strategic Plans

• Transformation of SARCC and commuter rail
  business.

• Safety and security of passengers and assets

• Promotion of rail as the mass mover.

• Funding and optimization of subsidy

• Bi-nationals and SADC

• Investment in assets

15
Major Strategic Plans - Transformation

• Internal Transformation
• Management and employee representativity
• Black Economic Empowerment
• Tender Policy and suppliers / consultants
  workshop
• Skills development and exchange programmes
• Information resource and business intelligence
• External focus new structure incorporating
  public participation
• External Transformation
• Public participation Batho-Pele
• Public meetings / road shows thru appropriate
  structures
• Community sense of ownership of commuter rail
• Informal business development
• Provision of community facilities at stations
• Attractive, accessible service to ALL

16
Major Strategic Plans Safety and Security

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

2000
2001
2002
Injured
Killed
Injured
Killed
Injured
Killed
Operational Safety Act 85
17
468
14
414
17
400
Violent Crime
21
11
354
12
401
416
35
28
754
29
929
830
Total
of Incidents involving people
29,3
42,1
24,8
17
Major Strategic Plans Safety and Security
Cost of damage to assets

• 2001/2002 2002/03
• Vandalism R8,7m R11,3m
• Arson - Buildings R20,1m R32,4m
• Arson - Rolling Stock - R48,0m
  (Insured cost)
• 
  
  (Replacement cost R350 m)

18
Major Strategic Plans Safety and Security
Court Case

• Court case in Western Cape has serious
  implications.

• Costs to address the issue of the open system
  as is required by the outcome of the
• court case.
• Closing-off the system R1,2bn once-off capital
• Operating costs R1,4bn per annum.

19
Major Strategic Plans Safety and Security Plan
in Progress

• SARCC investigated increase in crime on the rail
  commuter system since
• March 2002.

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

• Project involves alarms on cables, helicopter
  surveillance, dedicated armed
• response teams and development of intelligence
  capability with existing forces.

• Pilot successful and has been implemented on the
  entire Western Cape
• system since October 2002.

20
Major Strategic Plans Safety and Security Plan
in Progress
Results since October - December - Western Cape

• Serious crime related incidents - Decreased 63
• Serious liability incidents - Decreased 60
• Murder - Decreased 63
• Attempted murder - Decreased 63
• Assault - Decreased 58
• Robbery Decreased 53
• Asset damage - Decreased 20
• Burglaries - Decreased 100
• Arson - Decreased 100

Cost of strategy for Western Cape R15m per annum
21
Major Strategic Plans Safety and Security
Other enhancements

• Safety Regulator
• SARCCs engagement with the regulator
• SAPS Rail Unit
• Once approve and implemented, it will assist in
  the reduction in crime incidents and damage to
  assets
• CCTV on stations and in trains in the future

22
Major Strategic Plans Rail Promotion as
Mass-Mover
Extension of Lines
Status

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

• Total 180 new proposals identified since 1990.
  (New stations, interchange
• facilities, extensions, new lines and
  network/yard improvements).

• Conceptual design of highest priority projects
  undertaken.

• Only 3 stations proceeded for implementation and
  Katlehong Kwesine line
• re-instated.

• Khayelitsha line extension under design.

23
Major Strategic Plans Rail Promotion as
Mass-Mover
Investment Potential

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

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

• Motivations submitted for implementing 3 top
  priority new stations. (Orange Farm
• Oakmoor/Olifantsfontein, Lebaleng).

• Total of 6 priority upgrade stations submitted
  for funding for partial or full
• upgrade (R69m). (Allow for special needs
  passengers, ticket verification, security,
• PA and information systems).
• Repositioning of commuter rail
• Aggressive marketing and promotion of rail

24
Major Strategic Plans - Subsidy optimisation

• SARCC believes metropolitan rail systems can be
  more efficient if totally rationalised/
• optimised in terms of a metropolitan rail plan.

Categories of efficiency proposals

• 1) Institutional and regulatory efficiencies
• Improving the current regulatory regime between
  SARCC and Metrorail (Concessioning
• Agreement).
• A review of the incentive and budget framework of
  the contractual agreement.

• 2) Operational efficiencies
• Managing peak demand to improve utilisation of
  the system and decrease operational cost.
• (System at its peak for 5 hours a day whereas all
  equipment and resources are deployed
• at full for 24 hours a day).
• Rationalisation of services - more optimum modes
  with modal integration. Rail services
• not economical for 60 - 100 passengers per hour
  - eg night services.
• Nodal transfer and rail corridor management in
  association with other transport modes

25
Major Strategic Plans - Subsidy optimisation

• 2) Operational efficienciescontinued
• Fare evasion in terms of nodal stations - close
  the system through major interchange.
• facilities. Passengers will have to enter
  through at least one verification point.
• Improve fare structure and ticket system. (Reduce
  the need for automatic fare collection
• points and equipment).
• Concentrate 20 of effort on 80 of activity. -
  50 major nodes vs 460 stations.
• Major nodes highly developed within closed system
  paradigm. The strategy will concentrate
• on the customer, as well as safety and security
  personnel.
• 3) Corporate governance
• Internal audit control
• Fraud / corruption management
• 4) Cross-subsidization thru alternative rail
  technologies

26
Major Strategic Plans Bi-Nationals and NEPAD

• Sharing of ideas with other countries and
  identification of investment opportunites
• Aim to turn Intersite into a rail consultative
  service provider beyond property business
• Stations such as Park Station could be turned
  into an African economic business hub

27
Major Strategic Plans Investment in assets

• Perway (Track) Good condition

Issues

• Encroaching informal settlements (Dangerous
  operating environment)

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

• Security (Cable theft and train robberies)

• Signalling

Issues

• Ageing signalling technology.

• Commenced with limited replacement.

• Need to accelerate replacement to achieve other
  operational
• efficiencies - less rolling stock by increasing
  system capacity through
• bi-directional signalling.

28
Major Strategic Plans Investment in assets

• Stations

Issues

• Major developments and station upgrades limited
  due to other
• urgent funding requirements.

• General environment and condition of stations
  are critical aspects to
• improve safety and security, and to address the
  open system.

• Station master plan with re-designed corridor
  services and major
• nodal transfer interchanges required.
  (Co-operation of local authorities in
• terms of integrated public transport plans).

• Automatic Fare collection project (R18m
  allocated - Total requirement
• R480m).

29
Major Strategic Plans Investment in assets -
Rolling Stock

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

• 40 of fleet older than 30 years.

Average age 29 years
Age Distribution
30
Rolling Stock Age Distribution

• Mean Time Between Failures 35 days
  (International norm 600 - 700 days)
• (Once every two years).

• Average of 1300 coaches are constantly out of
  service.

• Roadworthy condition single biggest factor in
  service reliability (40 of causes
• of poor punctuality relates to availability of
  rolling stock).

• General Overhaul (major service) extended to 16
  years (Specification
• require 9 year overhaul cycles).

• SARCC provides R200m per annum from operational
  subsidy to this programme.
• (Additional funds from capital allocation,
  R100m per annum transferred to this
• programme to prevent cycles beyond 16 years).

31
Rolling Stock Plan

• SARCC upgrade programme - rebuild of rolling
  stock locally. Two contracts
• only, valued at R615 m producing a total of 236
  coaches. (Total of 4500 coaches).

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

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

Rolling Stock Strategy

• Introduce full life cycle asset management
  philosophy - I.e. combine maintenance,
• general overhaul and capital refurbishment
  programme under single management
• strategy.

• Units due for GO with good body work will
  undergo necessary GO and be
• re-scheduled for service. Currently 260 units
  per annum at R300m

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

• Units with scrapped body structure will be
  refurbished/upgraded into new
• generation rolling stock.

32
Rolling Stock Plan..continued

• 10 Year programme of decreasing GO programme and
  accelerate refurbishment
• programme.

• Refurbishment programme replaces GO programme
  with decreasing maintenance
• costs.

• More capital work required during GO cycles and
  GO strategy does not not offer
• a long-term solution.

• Strategy requires R1000m - R1200m per annum.
  Current total investment
• R250m - R300m.

• Industry capacity can be incrementally increased
  as per requirement.

33
Rail Commuter Funding
Rm 2002/2003

Rm 2003/2004
3 222
9.3
3 534

• Income
• Subsidy
• Operational
• Capital
• Fare Revenue (Metrorail)
• Rental of assets (SARCC)
• Property (Intersite)
• Interest Sundry

11.0
2 111
2 344
8.6
1 546 565
1 679 665
17.7
860
937
66
66
170
187
25
0

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

3 308
3 626
9.6
7.9
2 743
2 961
2 072
2 234
86
94
54
54
198
228
171
183
115
115
47
53
17.7
Capital
565
665
Shortfall
76
92
34
Inadequate MTEF Allocation
Shortfall Projected
2002/2003 R76m 2003/2004 R92m 2004/2005
R56m 2005/2006 R73m
R79 R155
35
Operational Subsidy (Excl. Capex and Interest)
The Effect of Inflation
2800
2600
2400
2200
2000
1990/91 Base Year
Rand Million
1800
1600
94/95 Base Year
1400
Actual Subsidy
1200
1000
800
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
03/04
36
Rail Commuter Business - Capital Subsidy
99/00 Rm
00/01 Rm
01/02 Rm
02/03 Rm
03/04 Rm
Normal Allocation
300
355
355
405
405

• Additional Allocations
• Rolling Stock
• Khayelitsha extension
• Other

135
60
100
20
80
160
TOTAL
300
355
490
565
665
02/03 Rm
03/04 Rm
Capital Expenditure
Rolling Stock Stations Perway (track) Signals Elec
trical OH Telecommunications Information
Technology
296
404
148
140
25
28
48
45
19
20
13
15
16
13
TOTAL
565
665
37
Long Term - Inadequate Capital Investments
Actual Requirement - Backlogs and Current needs
R1 400 - R1 700 ad infinitum
Actions to identify and quantify the problem

• Analysed requirements since the 1990s.

• SIG Consortium investigation on Rolling Stock -
  1997.

• Audit Capital Investment Programme - 1999.

• NDOT Request investigation
• Consultants investigate and verified backlog and
  investment needs.
• Utilised asset condition assessments.
• Proposed investment scenarios and impact on
  business (safety
• and risk)

38
Capital Investments (Rm) - 2002/03 Rands
39
Capital Investments (Rm) - 2002/03 Rands
40
Capital Investments (Rm) - 2002/03 Rands
41
Capital Investments (Rm) - 2002/03 Rands
42
Investment Scenarios
Investment Scenarios
0
5
10
15
20
30
40
50
Business Survival Years
43
Effect of Inflation on Capital Allocation
800
723
700
670
665
629
600
565
596
Inflation - 1990/91 Base Year
495
569
532
Rand Million
500
504
498
467
458
429
427
405
405
400
Inflation - 1994/95 Base Year
399
393
356
355
355
339
300
317
300
300
288
292
250
250
250
250
250
Base Capital Allocation
200
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
03/04
44
Conclusion

• A business with great opportunities to improve
  public transport mobility and service
• delivery, especially safety of passengers
• Envisaged institutional reform -

• Government to decide the framework for public
  service monopoly provision.
• (Inside/Outside Transnet, with or
  without economic regulator).

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

• Rail plans and improvement of services
  impossible without re-alignment of functions,
• roles and responsibilities in the
  industry.
• Co-operation between Transnet (Metrorail) and
  the SARCC