1. 11 March 20031 The Portfolio Committee on Transport Presentation on SARCC’s Strategic Goals, Plans and Budget for 2003/2004 By CEO – Eddie Lekota SA Rail Commuter Corporation Ltd

2. 11 March 20032 Presentation Overview SARCC Mandate Vision Mission Corporate Strategic Objectives Major Strategic Plans Budgetary Implications (by Jakkie van Niekerk) Conclusion

3. 11 March 20033 The Mandate of the SARCC Mandate The SARCC’s mandate is to ensure that, at the request of the National Department of Transport or any sphere of government, rail commuter services are provided in the public interest, and to promote rail as the primary mode of mass commuter transportation. Primary & Secondary Objectives of the Act Primary Objective The SARCC’s mandate is to ensure that, at the request of the National Department of Transport or any sphere of government, rail commuter services are provided in the public interest, and to promote rail as the primary mode of mass commuter transportation. Secondary Objective To generate income from the exploitation of assets transferred to the SARCC by the Minister of Transport under Section 25 of the Legal Succession to the SATS Act (Act 9 of 1989)

4. 11 March 20034 To ensure The provision of rail commuter services In the public interest The Mandate of the SARCC At the request of NDOT or Transport Authority.

5. 11 March 20035 To ensure The provision of rail commuter services In the public interest The Mandate of the SARCC - Legal Succession Act – to Ensure

6. 11 March 20036 To ensure: (provision of rail commuter services) To make sure To make certain To guarantee To guarantee: (provision of rail commuter services) Offer a formal assurance Something that makes a specified condition certain To take responsibility for To undertake to protect To promise The Mandate of the SARCC - Legal Succession Act

7. 11 March 20037 To ensure The provision of rail commuter services In the public interest The Mandate of the SARCC - Legal Succession Act

8. 11 March 20038 Public Community Trade and industry Suppliers Labour Other modes Business Stakeholders Shareholder Government (Incl. TA’s) Users The Mandate of the SARCC - Legal Succession Act - Public Interest

9. 11 March 20039 To ensure The provision of rail commuter services In the public interest The Mandate of the SARCC - Legal Succession Act

10. 11 March 200310 Service Requirement Service Provision In public interest Travel Needs Available Funding Shareholder CommunityStakeholders Users The Mandate of the SARCC - Legal Succession Act – Provision…

11. 11 March 200311 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. 11 March 200312 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. 11 March 200313 Corporate Strategic Objectives 1. Utilize and develop the commuter rail provision environment to protect and promote the interest of the users, public and stakeholders. 2. Support the rail system through ITP’s and IDP’s towards the aims and requirements of policies of all tiers of government. 3. Establish the delivery policy framework for rail commuter service provision. 4. Improve (and establish where necessary) the performance compliance framework and mechanisms for funding, delivery and compliance of rail commuter services. 5. Develop and promote the provision of sustainable mass-moving rail commuter services, optimized funded enhancements and professional services towards socio-economic development. 6. Create an environment for the development of expertise and knowledge within a consultative and rail business intelligence framework.

14. 11 March 200314 Major Strategic Plans Funding and optimization of subsidy Bi-nationals and SADC Investment in assets Transformation of SARCC and commuter rail business. Safety and security of passengers and assets Promotion of rail as the mass mover.

15. 11 March 200315 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. 11 March 200316 Major Strategic Plans – Safety and Security Safety and security remains the biggest threat to the image of rail commuting 2000 2001 2002 Injured Killed Injured Killed Injured Killed Operational Safety Act 85 Violent Crime Total % of Incidents involving people 400 354 754 17 12 29 468 401 929 35 21 14 414 416 830 28 11 17 24,8% 29,3%42,1%

17. 11 March 200317 Major Strategic Plans – Safety and Security Cost of damage to assets 2001/20022002/03 Vandalism R8,7m R11,3m Arson - Buildings R20,1m R32,4m Arson - Rolling Stock - R48,0m (Insured cost) (Replacement cost = R350 m)

18. 11 March 200318 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. 11 March 200319 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. 11 March 200320 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% RobberyDecreased 53% Asset damage-Decreased 20% Burglaries-Decreased 100% Arson-Decreased 100% Cost of strategy for Western Cape = R15m per annum

21. 11 March 200321 Major Strategic Plans – Safety and Security – Other enhancements Safety Regulator SARCC’s engagement with the regulator SAPS Rail Unit Once approve and implemented, it will assist in the reduction in crime incidents and damage to assets CCTV on stations and in trains in the future

22. 11 March 200322 Major Strategic Plans – Rail Promotion as Mass-Mover Extension of Lines Several expressions of interest in unserviced areas. (Free State, Limpopo, North West). Status Total 180 new proposals identified since 1990. (New stations, interchange facilities, extensions, new lines and network/yard improvements). Conceptual design of highest priority projects undertaken. Only 3 stations proceeded for implementation and Katlehong Kwesine line re-instated. Khayelitsha line extension under design.

23. 11 March 200323 Investment Potential R10m requested for 2003/04 from internal capital programme. If approved - enable basic planning of 5 projects and initiation of 7 projects. Motivations submitted for implementing 3 top priority new stations. (Orange Farm Oakmoor/Olifantsfontein, Lebaleng). Total of 6 priority upgrade stations submitted for funding for partial or full upgrade (±R69m). (Allow for special needs passengers, ticket verification, security, PA and information systems). Repositioning of commuter rail Aggressive marketing and promotion of rail Major Strategic Plans – Rail Promotion as Mass-Mover

24. 11 March 200324 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. 11 March 200325 Major Strategic Plans - Subsidy optimisation 2) Operational efficiencies……continued Fare evasion in terms of nodal stations - close the system through major interchange. facilities. Passengers will have to enter through at least one verification point. Improve fare structure and ticket system. (Reduce the need for automatic fare collection points and equipment). Concentrate 20% of effort on 80% of activity. - 50 major nodes vs 460 stations. Major nodes highly developed within closed system paradigm. The strategy will concentrate on the customer, as well as safety and security personnel. 3) Corporate governance Internal audit & control Fraud / corruption management 4) Cross-subsidization thru alternative rail technologies

26. 11 March 200326 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. 11 March 200327 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. 11 March 200328 Stations Issues : Major developments and station upgrades limited due to other urgent funding requirements. General environment and condition of stations are critical aspects to improve safety and security, and to address the “open” system. Station master plan with re-designed corridor services and major nodal transfer interchanges required. (Co-operation of local authorities in terms of integrated public transport plans). Major Strategic Plans – Investment in assets Automatic Fare collection project (R18m allocated - Total requirement = ±R480m).

29. 11 March 200329 Major Strategic Plans – Investment in assets - Rolling Stock Fleet = 29 years old with some coaches over 40 years. 40% of fleet older than 30 years. Age Distribution 117 911 1031 803 909 538 313 0 200 400 600 800 1000 1200 11-1516-2021-2526-3031-3536-4041-45 Age Group Coaches Average age: 29 years

30. 11 March 200330 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. 11 March 200331 Rolling Stock Plan SARCC upgrade programme - rebuild of rolling stock locally. Two contracts only, valued at R615 m producing a total of 236 coaches. (Total of 4500 coaches). ±50% of current SARCC capital grant is allocated to rolling stock. Metrorail also spends ±R200m per annum on day-to-day maintenance of rolling stock. Rolling Stock Strategy Introduce full life cycle asset management philosophy - I.e. combine maintenance, general overhaul and capital refurbishment programme under single management strategy. Units due for GO with good body work will undergo necessary GO and be re-scheduled for service. Currently 260 units per annum at ±R300m Units with scrapped body structure will be refurbished/upgraded into new generation rolling stock. Requirement = 400 units at R450m per annum. (12 year cycle)

32. 11 March 200332 Rolling Stock Plan……..continued 10 Year programme of decreasing GO programme and accelerate refurbishment programme. Refurbishment programme replaces GO programme with decreasing maintenance costs. Strategy requires R1000m - R1200m per annum. Current total investment = R250m - R300m. Industry capacity can be incrementally increased as per requirement. More capital work required during GO cycles and GO strategy does not not offer a long-term solution.

33. 11 March 200333 Rm 2002/2003 Income Subsidy Operational Capital Fare Revenue (Metrorail) Rental of assets (SARCC) Property (Intersite) Interest & Sundry 3 222 2 111 1 546 565 860 66 170 % 9.3 11.0 9.6 7.9 17.7 Expenditure Operational Commuter Services Metrorail Management Fee Asset Rental Heavy Repair Property Insurance Administration and Other Capital 3 308 2 743 2 072 86 54 198 171 115 47 565 Shortfall 76 25 8.6 17.7 Rm 2003/2004 2 344 1 679 665 937 66 187 3 626 2 961 2 234 94 54 228 183 115 53 665 0 92 3 534 Rail Commuter Funding

34. 11 March 200334 Shortfall Projected: 2002/2003 R76m 2003/2004 R92m 2004/2005 R56m 2005/2006 R73m + R79 = R155 Increase in requirement Requirement Allocation Increase 98/99 - 99/00 (First year of contract) Increase 99/00 - 00/01 (Mercer) Increase 00/01 - 01/02 (Mercer) Increase 01/02 - 02/03 Increase 02/03 - 03/04 Increase 03/04 - 04/05 1 40712.8% 1 422 1,1% 1 461 2.7% 1 63111.6% 1 771 8.6% 1 930 9.0% 1 277 12% 1 372 7.4% 1 366 -0.4% 1 546 13.2% 1 679 8.6% 1 874 11.6% Inadequate MTEF Allocation

35. 11 March 200335 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 94/9595/9696/9797/9898/9999/0000/01 01/02 02/03 03/04 1990/91 Base Year 94/95 Base Year Actual Subsidy The Effect of Inflation Rand Million Operational Subsidy (Excl. Capex and Interest)

36. 11 March 200336 TOTAL 300355490565 Normal Allocation 99/00 Rm 00/01 Rm 01/02 Rm 02/03 Rm 300355 405 Additional Allocations Rolling Stock Khayelitsha extension Other 13560 20 80 Capital Expenditure Rolling Stock Stations Perway (track) Signals Electrical OH Telecommunications Information Technology 02/03 Rm TOTAL 565 296 148 25 48 19 13 16 03/04 Rm 405 100 160 665 03/04 Rm 665 404 140 28 45 20 15 13 Rail Commuter Business - Capital Subsidy

37. 11 March 200337 Actual Requirement - Backlogs and Current needs = R1 400 - R1 700 ad infinitum Actions to identify and quantify the problem: Analysed requirements since the 1990’s. SIG Consortium investigation on Rolling Stock - 1997. Audit: Capital Investment Programme - 1999. NDOT: Request investigation: Consultants investigate and verified backlog and investment needs. Utilised asset condition assessments. Proposed investment scenarios and impact on business (safety and risk) Funding level01/0202/0303/04 Base allocation355405405 Additional allocation135160260 490565665 Long Term - Inadequate Capital Investments

38. 11 March 200338 Rolling Stock 6 3861 0601 750220 40 Year threashold (Average 27 yrs). Overhaul cycle 12 yrs (Currently = 17 yrs) 45% contribution to train cancellations. 1300 coaches out of service (70% vs 95% Int nom) AssetsBacklog Requirement Realistic Solution (20 Yr Plan) 10 Yrs pa11 - 20 Yrs pa Allocation ito limitations (Annual Average) Critical Issues Signalling 1 9602502560 Obsolete system. 25% contribution to train performance. Create abnormal operational conditions. Cable theft. System capacity (less r/s) (Need less rolling stock) Capital Investments (R’m) - 2002/03 Rands

39. 11 March 200339 Stations 1 95025012580 Commuter experience. Development (socio + economic - empowerment) Station effectiveness. Security/safety. Ticket verification/control AssetsBacklog Requirement Realistic Solution (20 Yr Plan) 10 Yrs pa11 - 20 Yrs pa Allocation ito limitations (Annual Average) Critical Issues Electrical OHS 30010012520 Reliability Cable theft Capital Investments (R’m) - 2002/03 Rands

40. 11 March 200340 Perway (Track) 1225 10 Safety Operability Total (Maintain System) 10 6331 7292 094400 AssetsBacklog Requirement Realistic Solution (20 Yr Plan) 10 Yrs pa11 - 20 Yrs pa Allocation ito limitations (Annual Average) Critical Issues IT 2544 10 Efficiency Management Capital Investments (R’m) - 2002/03 Rands

41. 11 March 200341 Total Maintain System) 10 6331 7292 094400 AssetsBacklog Requirement Realistic Solution (20 Yr Plan) 10 Yrs pa11 - 20 Yrs pa Allocation ito limitations (Annual Average) Critical Issues Network Development Infrastructure Rolling Stock New Provinces 4 685 5 000 (1000) 468 500 (150) 468 500 (100) 5 Static rail system. Access to basic mobility. Development. Road based solutions. Total 20 3182 6973 062405 Capital Investments (R’m) - 2002/03 Rands

42. 11 March 200342 Investment Scenarios 051015203040 Business Survival Years 50 Investment Scenarios

43. 11 March 200343 393 427 458 498 532 569 596 629 670 723 250 288 292 317 339 356 399 429 467 504 250 300 355 405 200 300 400 500 600 700 800 94/9595/9696/9797/9898/9999/0000/01 01/02 02/03 03/04 Inflation - 1990/91 Base Year Inflation - 1994/95 Base Year Base Capital Allocation Rand Million 495 565 665 Effect of Inflation on Capital Allocation

44. 11 March 200344 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