1. PRASA PRESENTATION TO PORTFOLIO COMMITTEE ON TRANSPORT 15 OCTOBER 2015

2. GROUP FINANCIAL PERFORMANCE PERFOMANCE AGAINST OBJECTIVES
TABLE OF CONTENTS
LEGAL MANDATE
GROUP FINANCIAL PERFORMANCE
PERFOMANCE AGAINST OBJECTIVES
AUDITOR GENERAL FINDINGS
PRASA MODERNISATION PROGRAMME

3. Legal Mandate
The main objective and business of PRASA, in terms of the Legal Succession Act of 2008:
Primary mandate: ensure that, at the request of the Department of Transport, rail commuter services, long haul passenger rail and bus services are provided within, to and from the Republic in the public interest,
The Secondary mandate of PRASA is to generate income from the exploitation of assets acquired by it.

4. Legal Operating Structure

5. Strategic Objectives
PRASA is committed to fulfilling Govt.’s National Development Agenda by supporting:
Localization
Industrialization
Broad Based Black Economic Empowerment
Skills Development
Women Empowerment
Youth Empowerment

6. Strategic Objectives Cont…
Improve Financial Performance
Improve Operational Effectiveness
Invest in a New Capacity
Develop Human Capital
Improve performance in order to achieve sustainability

7. GROUP FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2015

8. FINANCIAL PERFORMANCE

9. ANALYSIS OF TOTAL ASSETS

10. ANALYSIS OF TOTAL LIABILITIES

11. RATIOS

12. FACTORS IMPACTING FINANCIALS
REVENUE:
No approved funding model
Level of subsidization unknown & at worst incorrect
Have an open system-not easy to control
Leads to fare evasion
Lack an appropriate fare collection system
Fare increases below CPI whilst other costs above inflation e.g. energy
Subsidy increases at rate of CPI

13. FACTORS IMPACTING FINANCIALS Cont..
COST:
Unfunded mandate of Smeyl – R800 million loss in 14/15
Old Rolling Stock – 1950 technology
Old Infrastructure
Old Technology
High Maintenance cost and Labour Intensive

14. PRASA Performance Against Pre-Determined Objectives - 2014/15

15. PERFORMANCE PER OBJECTIVE

16. OVERALL STATUS

17. PERFORMANCE ENVIRONMENT: 2014/15
Interrelationships between objectives
Key objectives into budget allocation
Operations & Capital Investment (Dark blue)
Under Performance:
Unrealistic targets (No baseline or inadequate consideration of baseline, projects not execution phase, definitions)- Planning Optimism Bias!
Poor train service delivery (Old infra & RS, delays, cancellations , vandalism & service disruptions)
Service curtailment (MLPS Subsidy)
Low demand (Autopax)
Accident increases (Mainly Autopax)
Injuries & Fatalities increases (Commuter behaviour & Illegal crossings)
Project environment require sufficient allowance for external environment (Service protests, Municipality approvals, Weather, vandalism (GO’s))
Timeous submissions for re-appropriations
Follow-through on negotiations
WIR targets ambitious (no baseline)

18. Rolling Stock and Infrastructure Performance
Availability of rolling stock: 40% of trains operate under the required capacity configuration (Vandalism has a major impact).
Train delay causes
Rolling stock 40% – 65%
Signaling 30% - 40%
Train cancellation causes
Rolling Stock 80% - 90% (Availability)
Perway (track) 5% - 10% (Poor track condition, formation and drainage (Western Cape and Durban)
Root causes
Systemic failures
Obsolete technology
Vandalism/theft
Non availability of parts and equipment
Repairs/maintenance cannot keep-up

19. PRASA Rail system age and condition benchmarking
From International Rail Suburban Benchmarking Group
PR – PRASA; AM – North and South America members (4); AU – Australian members (3); AS – Asian members (2) and EU – European members (4)

20. Infra Year On Year Condition
The Infrastructure condition has been deteriorating over the years.
The prolonged under-investment in passenger rail of almost thirty years is resulting in poor infrastructure performance that requires significant capital investment and skills capacity to address the current challenges.

21. Security of Assets and Passengers
Cable equipment theft/vandalism
Western Cape highest levels of crime and robberies against passengers
Focus: Securitisation of assets and corridors (hot spots) with fencing, walling, lighting, CCTV and patrols.

22. AUDITOR GENERAL FINDINGS

23. Unqualified Audit Opinion with emphasis of matters
INTRODUCTION
Unqualified Audit Opinion with emphasis of matters
EXCO 11 December 2008

24. TOTAL NUMBER OF AG FINDINGS IDENTIFIED 2014/15:
Business unit
Total findings 2014/15
Total findings 2013/14
Movement
SCM 43 22
HCM 25 9
Finance 29
ICT 3 6
Governance 2
Fruitless and wasteful Expenditure 5 1
AOPI 11 8
Total
118 71
EXCO 11 December 2008

25. 42% REPEAT FINDINGS: EXCO 11 December 2008 Business unit
Total findings 2014/15
Repeat findings from 2013/14
SCM 43 8
HCM 25 20
Finance 29 17
ICT 3 1
Governance 2
Fruitless and wasteful Expenditure 5
AOPI 11
EXCO 11 December 2008

26. IRREGULAR,FRUITLESS AND WASTEFUL EXPENDITURE NOTED FOR
FINANCIAL YEAR 2014/15 BY THE AGSA
Below is the summary of findings raised by the AGSA that makes up the Irregular expenditure balance disclosed in the AFS note:
Ref
Finding summary as per final management letter
1.1
Property, plant and equipment and Prepayments for Capital Expenditure – Classification of New locomotives
1.2
Appointment of a service provider to provide artificial intelligence wireless system
1.3
Changing of the weighting during the evaluation process for the tender (number: HO/ICT/134/12/2012) awarded to Softinity Consulting (Pty?) Ltd
1.4
Appointment of national accommodation service provider
1.5
Appointment of a supplier/contractor to construct new drainage
1.6
Appointment of a service provider to provide short term vehicle rentals - 894/2013/CTN/SCM
1.7
Appointment of a supplier/contractor for the upgrade of Autopax office building (MET/EC/039/07/2014))
1.8
Approval for confinements not in compliance with the SCM policy
1.9
Tax Clearance Certificate not provided – SCM PRASA Corporate
Confinement not approved by the GCEO – SCM PRASA Corporate
1.11
Contract Management – Outstanding information
1.12
Quotations received after the closing date
1.13
Emergency not ratified by the GCEO
1.14
Deviation/Emergencies were not approved as required by the SCM Policy
1.15
Woman in Rail (WIR) - Appointments for Alterations and Refurbishments at various station - NSIP 7
1.16
Request for quotations did not specify the evaluation criteria
1.17
CEO PRASA Development Foundation
1.18
Limitation of scope Irregular expenditure
2.1
GIBELA RAIL TRANSPORT CONSORTIUM RF
2.2
Invitation to participate (ITP) as BBBEE equity partners in the rolling stock fleet renewal programme
2.3
BBBEE EQUITY PARTNERS IN THE ROLLING STOCK FLEET RENEWAL PROGRAMME
EXCO 11 December 2008

27. ACTION PLAN ON AG FINDINGS:
On Irregular, Fruitless and Wasteful Expenditure:
PRASA Board has:
commissioned an investigation-PFMA
Instituted extensive reviews and procedures to prevent irregular, fruitless and wasteful expenditure
Management has developed a matrix action plan which amongst others will include:
Condonement
Disciplinary Action
Possible recovery
National Treasury has seconded an experienced CPO to address SCM challenges (policies, processes and procedures)
Reviewing and consolidating all HCM policies

28. PRASA MODERNISATION PROGRAMME

29. MODERNISATION PROGRAMME
Govt. has set aside R172 Billion over next 10 years
PRASA has embarked on extensive modernisation covering:
Rolling Stock Fleet Renewal Programme
Signaling Programme
Station and Depot Modernisation Programme
Acquisition of New Locomotives Programme

30. The Capital spend is forecasted to increase over the coming years
R 11.1bn
R 14.2bn
R 15.0bn
R 15.9bn
R 16.8bn
R 17.7bn
R 18.7bn
R 19.8bn
R 20.9bn
R 22.1bn

31. rolling stock financial close
PRASA and Gibela reached financial close in April 2014
Contract value is R59 Billion
Number of Vehicles: 600 New Trains (3600) over 10 years

32. THANK YOU