2017-2020 CORPORATE PLAN - Presentation PCoT- 3 May 2017 DRAFT

Structure and Format: 2017- 2020 Corporate Plan The 2017/18 – 2019/20 Corporate Plan for PRASA will cover the following The PRASA Mandate Legislative Mandate Statement of Purpose Vision, Mission, and Values Group Operating Structure National Government Imperatives National Development Plan Alignment with DoT Strategic Plan (MTSF) 2015 – 2020 Alignment to SONA PRASA’s National Strategic Plan Driving the Corporate Plan Strategic Outcome Oriented Goals Strategic Objectives / Targets Budget and Capital Programme AGSA recommendations and findings 2015/16 DRAFT

THE PRASA MANDATE DRAFT T

PRASA Mandate PRASA, as the implementing arm of the National Department of Transport, the sole shareholder, is primarily focused on the mandate contained in the Legal Succession Act of South African Transport Services (SATS) Act of 1989, as amended. The main objective and main business of PRASA is to: 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 Provide, in accordance 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 objective and secondary business of PRASA is that: PRASA shall generate income from the exploitation of assets acquired by it, which include real estate and property portfolio. A further requirement is that, in carrying out its objectives and business, PRASA shall have due regard for key Government, social, economic and transport imperatives and policy objectives. DRAFT

PRASA Mandate As a public entity, the PRASA Corporate Plan finds expression through legislation, government policies and strategies such as: National Transport Policy National Development Plan Legislation such as the National Land Transport Act Public Finance Management Act National Rail Policy Green Paper Public Transport Strategy Economic Strategy and Job creation initiatives DRAFT

Legal Operating Structure DRAFT

RAIL: THE BACKBONE OF PUBLIC TRANSPORT DRAFT

Responding to the Rate of Urbanisation Urbanisation progressing at breakneck speed, particularly in developing countries 3% of earth’s population lived in Cities in the 1800s 30% by 1950 50% today 60-65% (two out of three people) by 2030. Additional 2 billion people Effective / sustainable transport, energy etc. solutions required Rail as the backbone of public transport address Need for safe, efficient, reliable, affordable and customer focused public transport; Reduction of congestion on SA roads and encourage modal shift toward rail; Expand passenger rail and bus services and Develop a modern integrated public transport service DRAFT

Benefits of Rail Rail benefits cannot be ignored; capacity, environmental, less land required, reduce car & fuel reliance etc. DRAFT

National Government Imperatives DRAFT

Responding to the National Development Plan (NDP) The Corporate Plan also responds to NDP which calls for Integrated, holistic, long-term perspective on all transport networks informed by growth priorities, the environment, inclusivity and access. PRASA has noted from the NDP the following strategic focus areas and planning priorities focusing on the creation of workable urban transit solutions that will streamline an effective urban transport system, thus contributing to: Increasing investment in public transport and resolving existing public-transport policy challenges Provision of affordable, faster, reliable and safe transport Transport plans that are aligned with spatial development Devolving transport management to local government Providing incentives for public transport use Renewing the commuter train fleet Broadband Connectivity DRAFT

Aligning with DoT 2015-2020 National Strategic Plan (MTSF) The PRASA Corporate Plan is aligned to the White Paper on National Transport policy which seeks to provide safe, reliable, effective, efficient, and fully integrated transport operations and infrastructure which will best meet the needs of passenger whilst improving levels of service and cost in a fashion which supports Government strategies for economic and social development whilst being economically and environmentally sustainable. The Corporate Plan also contributes to resolving prevalent problem areas as identified by the DoT within its next Medium Term Strategic Framework (MTSF), as identified below: Improving the level of integration of transport infrastructure network and operations Decreasing accidents and incidents (and fatalities) across all transport modes. Improving infrastructure, access and mobility in rural and peri-urban areas. Ensuring reliability, affordability, accessibility, efficiency, effectiveness and safety of public transport. DRAFT

Aligning with SONA (2017) PRASA identified the following as its contribution to the SONA (2017): Employment: Around 17 000 employees employed by PRASA Job Creation: ± 8 088 jobs (combination of Local Factory and Suppliers) expected to be created through the Rolling Stock Fleet Renewal Programme over 10 years. Local Factory will directly employ approximately 1 500 employees of which 99% of the labour force will be South Africans, with a target of employing 85%; historically disadvantaged South Africans and 25% females. Progress to date, jobs created Overall 1010 Jobs for Citizens; Of which, 905 Jobs for Black Citizens; Of which 520 Jobs for Skilled Black Citizens; Of which 210 Jobs for Women; and Of which 711 Jobs for Youth. DRAFT

Aligning with SONA (2017) PRASA identified the following as its contribution to the SONA (2017): Local Content and Industrialisation: Rolling Stock Fleet Renewal Programme targets for Localization exceed the 65% minimum as designated by the Department of Trade and Industry. DRAFT

Aligning with PRASA National Strategic Plan The Corporate Plan continues to advance PRASA’s National Strategic Plan which is aligned with the National Transport Masterplan 2050 and has a long-term horizon that is implemented on various phases of the MTEF Period(s). The implementation and the roll-out of PRASA’s National Strategic Plan is dependent on agreements to be signed the relevant transport authorities as articulated in the National Transport policy/ It focuses on the following. A prioritized list of rail service and network expansion interventions that: provide more capacity to accommodate forecast growth, transform the rail product on many corridors, seek to make better use of the network, and propose corridor extensions to new or growing settlement. DRAFT

Driving the Corporate Plan DRAFT

PRASA Strategic Outcome Oriented Goals At the heart of the 2017 – 2020 Corporate Plan is the Turnaround Strategy and Action Plan in pursuit of the following strategic outcome oriented goals that seek to: Deliver on the mandate of public transport through providing safe, reliable, clean, affordable and sustainable services resulting in customer satisfaction of more than 80% in five years. Exploit PRASA’s assets that increase the patronage of the public transport mandate by bringing communities to stations and increasing income from real estate and other assets to R1.071 billion by 2020. DRAFT

MTEF Strategic Objectives The development of the Corporate Plan for MTEF 2017/18 – 2019/20 is aligned with PRASA’s Strategic Plan which outlines the key priorities and steps to that will delivery and execution of the mandate, The steps that need to be taken to commence the journey to the implementation of the plan are as follows: Improve the Customer Experience. A customer-centric superior performance that is safe, reliable; and provides a dignified travel experience based on end-to-end customer journey. Improve Rail System performance. The realisation of the National Strategic Plan of is built on the assumption that operational performance is at acceptable levels and meets customer expectations. Realign support functions to achieve an efficient Rail and Bus business. The alignment of various business units, including departments and subsidiaries in the delivery of the mandate is the foundation of the National Strategic Plan Modernise the Rail System through investment programme of R173 billion investment programme for the Rolling Stock Fleet Renewal, Re-signalling, and modernization corridors and station investment. Expand Rail network and services in line with the National Strategic Plan. Exploit assets to support the primary mandate DRAFT

Re-organising the Corporate Plan for 2017-2020 DRAFT

Aligning the Corporate Plan with Turnaround The 2017-2020 PRASA Corporate Plan is spread across three (3) distinct but overlapping phases: The first phase focuses on getting the organisation back to the desired levels of performance and is driven by a Turnaround Phase – focusing on the next 12 months. Significant improvement in the operational service and restored to 2008/09 performance levels Improving the reliability, resilience, safety, security, and efficiency of the network Ensuring organisational alignment and integration through effective planning, management and operation of assets The second phase, the Stabilisation Phase for the next 24 months, is to maintain and improve on the desired performance level. Predictable, safe and more frequent transport service for passenger Accelerated journey within the integrated PRASA network The last phase, which is medium to long-term, is Growth and Expansion whish also continues with Modernising the Rail System and Expanding Networks and Services to ensure that PRASA remains relevant becomes the backbone of public transport. DRAFT

Turnaround Key Focus Areas At the heart of the PRASA Corporate Plan is the implementation of the Turnaround Plan, which focuses on: curbing further decline in passenger patronage and is aimed at regaining confidence of our customers by committing to provide acceptable performance levels of service. The Turnaround Plan also notes that retaining existing customers and in particular the commuters will be measured against stringent performance deliverables, which is: a marked improvement in positive customer service experience, a rail operation that is efficient, reliable and safe, and is supported by a reliable long distance bus and feeder service, as well as a robust real estate strategy. DRAFT

Turnaround Key Focus Areas At the crux of the turnaround strategy is a dedicated focus on: Addressing operational inefficiencies and improving service delivery, Improving the financial position and reducing the cost of doing business, Operational Performance Human Capital Management Support Systems and Processes (ICT And SCM) Real Estate Solutions Finance And Funding The full implementation of the Turnaround Strategy should improve the financial position of PRASA based on the projected cost reduction of R1.285 billion and a project revenue increase of R555 million for the next financial year. DRAFT

Objective 1: Improving Customer Experience Improving the performance of the rail system and ensuring that PRASA remains relevant in its endeavour to grow and expand its networks and services is centered on the ability to meet if not exceed customer expectations The turnaround strategy and plan focuses on ensuring on a marked improvement in customer experience as measured against customer satisfaction and driven through the following Action Plans: Functional communication platforms such as Integrated website(s), Prasa Smartphone Applications (APPs), Social Network, Public Address systems and Loudhailers Integration of Railcom / ISAMS to provide commuters with real time service level information Establishment of Customer Desks at Key Stations Integration of Call Centers for Metrorail/MLPS and Autopax Driving the total station management programme that ensures accountability at a frontline level for service performance. DRAFT

Objective 2: Improve Rail System Performance The successful execution of Rail Operations’ turnaround plan should be able to reverse the current operational performance and improve service offering to the users of the rail system. Marked improvement in operational performance levels to restore to the 2008/09 levels through : Service Predictability by introducing a Regular/Clock-face timetable for peak/off-peak service, introducing inner / outer services. Marked improvement in financial performance and sustainability through Fare revenue collection by monitoring revenue budgets for high level corridor / stations, and reviewing the ticketing / tariff regime. Fare evasion is being addressed by increasing the closure of the rail system through walling and fencing of stations and corridors, automation of ticketing and verification. Marked improvement in passenger safety through Reduction in crime related incidents involving passenger Reduction in the number of passenger injuries and fatalities through improved service availability, reliability and predictability that addresses overcrowding on trains as well as order on stations. DRAFT

Objective 2: Improve Rail System Performance The Engineering Turnaround has been developed to improve Reliability, Availability, Predictability and Safety of the service. The Engineering Turnaround Plan will be measured against the following:  Arresting the decline in the operations by improving infrastructure reliability Raising performance levels through interventions focused on improving service reliability Improving rolling stock availability Reducing infrastructure contribution to train delays and cancellations Rolling Stock The Rolling Stock target is to increase the number of coaches from 2 702 to 3 500 coaches in service (out of a total fleet of 4 500 coaches); equivalent to 291 fully configured 12 coach set. The focus areas are: Improve availability by recovering coaches that are out of service. Improving reliability to prevent further loss of in-service fleet. Infrastructure The Infrastructure Target is to improve performance through the improvement of Infrastructure Availability, Reliability and kilometers under speed restriction DRAFT

Objective 3: Re-align Support Functions to Achieve an Efficient Rail Business ICT is currently driving and implementing 22 projects that are meant to drive alignment across the organisation, whilst improving operational and organisational efficiencies and effectiveness. The ICT turnaround strategy and action plan has been developed to enhance the organisation decision-making process as well as provide technology support in the procurement of goods and services, management of human capital, business communication, as well as business continuity and access to efficient and reliable record-keeping. The focus areas for the ICT turnaround interventions are: Enterprise Resource Planning (ERP) Ticketing Programme IT Systems Programme ICT Governance and Compliance ICT Innovation DRAFT

Objective 3: Re-align Support Functions to Achieve an Efficient Rail Business SCM Turnaround Strategy is to ensure that the procurement of goods, services and works happen in a structured and focuses on driving down operational costs and maximizing efficiencies. A well-executed SCM strategy will results in value creation across the spectrum. Adoption of a single SCM Strategy aligned to the PRASA strategy and business objectives (Completed) Procurement plans aligned to the business demand plans through demand management. Efficient contract management lifecycle Effective application and implementation of business procurement processes through improvement in the efficiency of procurement from bid specification to contract award. Achieve a SCM architecture that enhance business through Proactively partnering with ICT to help the business to innovate and achieve the strategic objectives DRAFT

Objective 3: Re-align Support Functions to Achieve an Efficient Rail Business The turnaround plan focuses on the Human Capital Management’s intervention and support in ensuring that the Turnaround Strategy and Plan takes into account the following: Business Modernisation Workforce Planning Performance Management HCM Governance and Controls HCM Information System Change Management Leadership Development The focus of Human Capital Management (HCM) turnaround strategy is premised against the need ensure that people with the right skills and competencies and with the right attitude are available and capable to carry out the Mandate of PRASA, in the most productive and efficient manner. DRAFT

Objective 3: Re-align Support Functions to Achieve an Efficient Rail Business The Turnaround Strategy to improve the financial position of PRASA is based on the projected cost reduction of R1.285billion and a project revenue increase of R 555m for the next financial year. The achievement of the above targets is based on implementation of the following measures: A reduction in personnel costs A reduction in energy costs A reduction in security costs A reduction in haulage costs Increase in Fare Revenue Increase on Other Revenue Streams Furthermore, the Turnaround Plan also focuses on: Improving spending on Maintenance and Material Improve Treasury Management Project Management Identification of other funding sources DRAFT

Objective 4: Modernise the Rail System through investment programme of R173 billion At the centre of PRASA creating a modern public entity is the modernisation readiness delivered through: Infrastructure readiness Rolling Stock Fleet Renewal Deployment Corridor strategy Future Skills and Capacity development Marketing and communication of PRASA’s modernisation program Stakeholder Engagement and Managing Expectations DRAFT

Objective 5: Expand Rail network and services in line with the National Strategic Plan For PRASA to maintain relevance in public transport solutions it has to focus on: Delivering on the Modernisation Program Expanding PRASA Networks and Services Delivering on National Government Imperatives Integrated Network Planning aligned with other Transport Authorities Growing the Revenue base A viable Funding Model and appropriate Operating Model DRAFT

Objective 6: Exploit assets to support the primary mandate The second objective is that PRASA shall generate income from the exploitation assets acquired by the organisation through Increase operating revenue by 10% in the first year and 15% in the subsequent years through Real Estate Facilities Management Commercialisation Acquisition of development leases Development of PRASA properties 3rd Party Real Estate Development and Investment Station Improvements and Upgrades Telecommunications Infrastructure Commercialisation Leasing of Optic Fibre Commercialisation of Telecoms Towers Provision of Value Added Services ICT Value Added Services Wi-Fi Solutions Alternative Energy Generation Renewable Energy exploitation DRAFT

Budget and Capital Programme DRAFT

Revenue Streams DRAFT

Expenditure DRAFT

Expenditure DRAFT

Expenditure: 2017/18 Original budget expenditure of R10.9 billion - resulted in a shortfall of R1.9bn before finance income & cost, depreciation & amortisation of Capex subsidy. A cut of R1.1 billion on costs initiated through the Turnaround strategy: Employee cost – R579 million – no process has started as yet; an independent external expert to be called to assist, employees still to be identified and processes to be followed i.t.o. LRA Energy saving of R210 million – Negotiations with Eskom for new terms and rates & NERSA negotiations to be exempted on the rural subsidy levied on the energy rate. R184 million on security through efficiencies & a new tender process. Haulage cost of R53 million to be negotiated with Transnet on service delivery & rates. Maintenance costs on “old” assets were increased by 48% to ensure lack on maintenance assets will be addressed. New trains for 2017/18 will not add to a significant increase in revenue. Ticket price stays the same for the new trains, only through efficiencies will revenue show positive trend. The new trains however add additional R221million to maintenance cost for the year. HCM Turn-around Engineering, turnaround Moderni-sation If savings/cuts not realised PRASA will once again face a negative bottom line, leading to serious cash flow constraints. DRAFT

Capital Allocation Programme: DRAFT

2015/16 Audit Outcomes: High Level Action Plans DRAFT

AG ACTION PLANS Introduce and implement proactive assurance in key processes SCM policy in line with Treasury regulation Forensic investigations on irregular expenditure Accounting expert appointed to advise on matters Re-align current existing organisational structures to increase efficiencies and enhance control environment, SCM and Payroll moved to Finance HCM policies are being reviewed SOP for performance reporting enhanced and strengthened, expert to review annual performance report Initiate ICT governance structure, policies to be reviewed DRAFT