Click to edit Master subtitle style 4/30/12 PRESENTATION BY PRASA GCEO PRASA’s Strategic Approach to the Development of Rail Transport in South Africa and its Impact on Job Creation and Poverty Reduction 24 APRIL 2012

Introduction The Transport Family Celebrated an extraordinary event last week The Honorable Minister of Transport, Dr Sibusiso Ndebele, formally Launched the RFP for the RS Renewal Programme The Minister Described the launch as a proud and significant moment for the Transport family and the Commuting Public The RS Renewal Programme is Central to Government’s Infrastructure Modernization Drive The Honourable Minister: Invited Domestic and International Manufacturers to bid to build Metro coaches at a cost of R123 Billion Announced that the programme will revitalise the local rail engineering industry, create skills, create an esitmated jobs and develop a new generation of railway workers i.e. artisans and engineers The programme will contribute to meeting Government objectives of strengthening SA’s manufacturing base and contribute to creating long term competitiveness and prosperity for the country 22Rolling Stock Fleet Renewal Programme

4/30/12 NEW ROLLING STOCK PROGRAMME IN BRIEF: New Fleet requirement 7224 procurement at ~ 360 coaches per year for two x 10 year contracts Creating ~ direct and indirect jobs Total R123.5bn over the 20 year period Long term procurement will allow local capability to evolve to above 65% of the value of a coach produced locally 33 The Programmatic procurement will result in:

4/30/12 MODERNIZING RAIL TRANSPORT TO MEET SOCIAL NEEDS AND SUSTAINABLE ECONOMIC DEVELOPMENT IN SOUTH AFRICA

Development of Rail Transport (1) PRASA’ s Rolling Stock Fleet Renewal Programme is but the first major step in the transformation of Rail Transportation in South Africa Focus should be on both Passenger and Freight Rail Transport Investment by Transnet and PRASA to serve as catalysts for the Rail Programme to be Implemented over the next 30 years. Policy Defining Rail as the backbone of the Transport System Rail critical to support Government’s Economic Development objectives 55Rolling Stock Fleet Renewal Programme

Development of Rail Transport (2) Development of Rail Transport relates to a number of Critical Factors: Efficient and Reliable Passenger and Freight Rail Operations An Industry of Suppliers Appropriate Rail Skills (Training and Development) Research and Development (Universities and Institutes of Technology) Modern Rail Technology Rail Engineering Industry with the capacity to Design, Manufacture and Export Rail Products Economics of Rail Transport 66Rolling Stock Fleet Renewal Programme

Development of Rail Transport (3) Key is the Formal adoption of the country’s Rail Strategy and Model to meet Social Needs and Economic Development Example of Rail Model is the work in the People’s Republic of China and Spain in how rail could fulfill its role as the backbone of the transport system e.g. High-Speed Rail The model seeks to address the country’s economic development and transport objectives Development objectives should be appropriately defined to include rural development, access for the rural and urban poor, employment creation and sustainable economic development Linking the developed and undeveloped regions of the country Participation of the people in the implementation of the Rail Strategy Projects should not be isolated but be informed and driven by the Overall Rail Strategy and Model 77Rolling Stock Fleet Renewal Programme

PRASA Intervention in the Development of Rail Transport Rehabilitation and Upgrade of Existing Rail Infrastructure and Fleet Investing in New Capacity (2020) Technology and Systems Modernization Expansion of the Rail Network (New Railway Lines) Revitalisation of the Rail Engineering Industry Improving Operational Effectiveness Unlocking the Value of Rail Properties Development of Skills (Cadre of Railway Workers) Linking Airports and other Transport Systems Employment Creation 88Rolling Stock Fleet Renewal Programme

Investing in New Capacity Modernization of Technology: 1. Acquisition of a New, Modern Rolling Stock Fleet 2. National Signaling Upgrade Programme 3. Modern Operating Systems: i. Traffic Control Systems ii. Speed Gates, iii. Ticketing Systems iv. Telecommunication Systems 4. Capacity Enhancement Programmes i. Bridge City ii. Mamelodi Doubling of Line iii. Station Upgrades iv. Capacity Enhancement Projects e.g. Umlazi – Durban - KwaMashu v. Accelerated Rolling Stock Programme 5. Light-Rail and High-Speed Rail 99Rolling Stock Fleet Renewal Programme

4/30/12 The RS Renewal Programme will contribute to Government’s Industrial Policy Action Plan (IPAP2) – by strengthening Local Manufacturing & Production, Skills Development and Job Creation

PRASA’s strategy to local production and local development Alignment of procurement initiatives to the Government primary objective for localization – high level local content relative to import content; Assist in creating local industries that can sustain local production – setting high local content targets; Focus on manufactured and non-manufactured areas such as engineering, technology transfer, design and components manufacturing; Long-term investment outlook – create long term certainty in the market – procure new rolling stock over a 20 year period; Set high targets for BBBEE participation in the recapitalization programme 1111Rolling Stock Fleet Renewal Programme

PRASA’s strategy to local production and local development (Cont)... Set a minimum target of 65% local content for the manufacturing – identify certain components for local manufacturing; Skills development and transfer for local labour to sustain local production; and Commitment to stimulate local economic development. 1212Rolling Stock Fleet Renewal Programme

Key areas of 65% local content Foreign currency spend on localization; Local job opportunities; Skills development and training; Technology transfer; Development of new manufacturing plants and facilities; Enhance the existing manufacturing plants and facilities; and Sourcing of locally manufactured components. 1313Rolling Stock Fleet Renewal Programme

Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level 4/30/12 Car Body Car body shell Door system Windows Seats Heating and ventilation Lighting Grab pillars and rails Interior cladding Passenger gangways Cable and wire Coupler and draft gear Bogies Bogie frame Traction motors and gears Wheels Axles Bearings Suspension Braking system Electric System Air System Auxiliary converter and batteries Electric propulsion Dynamic regenerative brake Control, diagnostic and communication system Targeted components for local production Rolling Stock Fleet Renewal Programme

Impact on the Economy Total economy wide impact on operational and capital expenditure Results Total impact - 60% local content Total impact - 65% local content Total impact - 70% local content Initial impact (Rb) R 95.6R 103.2R Economy wide GDP impact at basic prices (Rb) R R 255.2R GDP multiplier 2.5 Total employment created (no. of jobs) General government revenue (Rb) R 73.3 R 79.1R84.9 Indirect taxes R31.6R34.1R36.6 Company taxes R23.9R25.8R27.7 Personal taxes R17.8R19.2R

Economic Multipliers 40.8% employment opportunities within the Transport sector; 15.8% within Wholesale and retail trade; 11.8% within Business Services; and 9.6% Community, Social and Personnel services. 1616Rolling Stock Fleet Renewal Programme

Broad Based Black Economic Empowerment Opportunities (Cont) SPV Ring fence the cash flows; To create space for BBBEE participation; Ease of monitoring and evaluation; and Enables measurement across the entire value chain 1717Rolling Stock Fleet Renewal Programme

Broad Based Black Economic Empowerment Opportunities Equity in the SPV Equity in the supplier base as per value chain As a supplier in the value chain As an SMME/Cooperatives from which suppliers can source products 1818Rolling Stock Fleet Renewal Programme

Operational Effectiveness Changing the Nature of Operations, amongst others, through: 1. Service Excellence i. Service reliability ii. Safety & Security 2. Preventative Maintenance Programme 3. Focusing resources on High-Volume Corridors 1. Revitalisation of Long-Distance Rail Services: Increased Running Speeds – 160 km/h Prioritizing Passenger Services on Rail Network Modernization of Services 1919Rolling Stock Fleet Renewal Programme

Network Expansion Johannesburg – Durban High Speed Rail Moloto Rail Corridor (High Speed Rail) Bara Rail Link Daveyton Rail Extension Hammanskraal (Rehabilitation of Existing Rail Line) Motherwell Rail Extension Johannesburg – Queenstown – Mthatha Rail Project Cape Town International Airport Rail Link King Shaka International Airport Rail Link 2020Rolling Stock Fleet Renewal Programme

PRASA will use the Rolling Stock and Infrastructure investment to contribute to the goal of Employment Creation: Through encouraging and promoting labour-intensive methodologies, adopting Principles of the Community Based Public Works Programme and through Co-operatives Targeting Local and Surrounding Communities and Women 5 to jobs will be created in the short term through the implementation of the rolling stock and infrastructure upgrade programmes- the following programmes will yield job creation and development opportunities: – Greenview – Mamelodi Gardens Doubling of Rail Line and stations. – Bridge City rail link and station – KZN. – Signalling Project. – Refurbishment of Coaches. – Cleaning of Rail Corridors direct and indirect jobs to be created through the fleet renewal programme 2121Rolling Stock Fleet Renewal Programme Employment Creation Initiatives

Employment opportunities Employment sector break-down: Top 20 sectors -OPEX Employment sector break-down: Top 20 sectors -CAPEX Total economy wide impact of capex and opex on employment OpexCapexTotal Total employment created (no. of jobs) Direct impact Indirect effect Induced impact Rolling Stock Fleet Renewal Programme

Employment Creation…..(Cont) Wheels Refurbishment Programme: – Bringing wheels refurbishment in-house in partnership with private providers – The Joint Venture will supply PRASA and private parties such as mining houses etc with wheels refurbishment services – The programme will be set up at cost of R14 Million per annum – It will create 341 Jobs at inception during this current financial year Modernisation of Old SMEYL Coaches : 447 staged old SMEYL Coaches to be refurbished and given a new modern look and feel This programme will add an additional jobs to the current in SMEYL The programme will cost R1.3 billion 2323Rolling Stock Fleet Renewal Programme

Cleaning of Railway Stations and Corridors 50 Co-operatives to clean 75 stations in the first phase of this programme To ensure their sustenance, the Co-operatives will be supplied with cleaning materials, protective clothing, etc, by related co-operatives Households Headed by Women and Children and Households solely dependent on grants will benefit from the programme This programme will contribute to inculcating a civic and development culture in communities It will enable communities to take ownership of key rail stations whilst improving their lives for the better on a sustainable basis 2424Rolling Stock Fleet Renewal Programme Cooperatives in the Rail Sector

Cooperatives in the Rail Sector ….Cont Iketsetseng Cooperative Over 300 traders (hawkers) in key stations within Gauteng (Park Station, Germistan and PretoriaStations) have formed themselves into an organisation known as “Iketsetseng”, of which 100 later established themselves into the Iketsetse Cooperative. Iketsetseng is in the process of being registered as a Cooperative. PRASA will provide the traders with resources, training and provide space to establish their own wholesale store from which the traders will be able to buy goods sold at stations from their own company and re-invest back into their own activities Iketsetseng Cooperative intends establishing a Trust from which members and their families will grow themselves further The formal launch is expected in June Rolling Stock Fleet Renewal Programme

Skills Development Plan In the process of developing a skills development plan which will form part of the fleet renewal programme; Engagement with Higher Education regarding skills development for local production in the manufacturing; Skills development within PRASA in areas of maintenance and operations – targeting engineers, artisans and technologists; Established a comprehensive Bursary scheme aimed at young people from disadvantaged communities – 250 students – R9 million Per Annum Training of engineers, artisans and technologists by the successful bidder; and Partnership with third parties. 2626Rolling Stock Fleet Renewal Programme

Delivering With and Through the People PRASA has to date undertaken the following to ensure Community-based organizations Input into the PRASA Functioning and Transformation: Encouraged a progressive Labour Relations/Shop Floor Environment – through fruitful engagements, interactions, dialogue and support for Labour Support, engagements and dialogue with Rail Commuter Fora and Community Structures Developed a platform Marshall Programme aimed at reducing Youth Un- Employment Support and engagements with Community and Civic Structures such as the South African Civic Organisation, the South African Commuter Organisation, The South African Women in Transport, the South African Women in Construction, Hawkers Associations Launched the Women in Rail Programme 2727Rolling Stock Fleet Renewal Programme

Concluding Remarks Empowerment is a priority of PRASA Board and Minister of Transport; Empowerment issues are critical – especially Community empowerment and participation ; and Strengthening local manufacturing capacity. 2828Rolling Stock Fleet Renewal Programme

Thank You