1. Parliament Transport Portfolio Committee
Budget Presentation
29 May 2002

2.  Presentation Overview
SARCC Presentation
 Presentation Overview
 Challenges Identified
 Solutions - Critical Requirement

3.  Rail Commuter Business - FundingRm
2001/2002 Rm
2002/2003 %
Income
Subsidy
Operational
Capital
Fare Revenue (Metrorail)
Rental of assets (SARCC)
Property (Intersite)
Interest
2 838
2 970
4.6
1 856
1 951
5.1
1 366
490
1 386
565
744
783 60 66
151
170 27
Expenditure
Operational
Commuter Services
Metrorail Management Fee
Asset Rental
Heavy Repair
Property
Insurance
Administration and Other
2 917
3 215
10.2
9.2
2 427
2 650
1 828
1 995 79 86 48 54
163
198
147
171
120 99 42 47
Capital
490
565
15.3
Shortfall 79
245

4.  Rail Commuter Business - Capital Subsidy
Normal Allocation
98/99 Rm
99/00
00/01
01/02
02/03
300
355
405
Additional Allocations
10 M’s
Khayelitsha extension
Other
135 60 20 80
TOTAL
300
355
490
565
Capital Expenditure
Rolling Stock
Stations
Perway (track)
Signals
Electrical OH
Telecommunications
Information Technology
01/02 Rm
02/03
281 99 29 26 18 4 33
TOTAL
490
565
296
148 25 48 19 13 16

5.  Operational Subsidy ResuméRm
2001/02
2002/03
2000/01
1999/00
1998/99
Total Allocation
1 140
1 277 (12%)
1 372 (7.4%)
1 366 (-0.4%)
1 386 (1,5%)
Requested
Original Allocation
1 247
1 407 (12.8%)
1 422 (1.1%)
1 461 (2.7%)
1 631 (11.6%)*
840
845
1 322
1 266
1 386
Shortfall
Additional Allocation
407
562
100
195
245
300
432 50
Adjusted Shortfall
Savings Effected
107
130 50 95
245 23 82 28 16
Final Shortfall 84 48 22 79
245
* Increased insurance premiums (vandalism) and imported rolling stock components

6. The Effect of Inflation
 Operational Subsidy (Excl Capex & Interest)
The Effect of Inflation
1990/91 Base Year
Rand Million
94/95 Base Year
Actual Subsidy

7.  Challenges Identified
Financial/Funding Challenges
Short-term operational shortfall (Current and following year)
Long-term - Inadequate capital investments
Business Challenges
Manage capital programme as best we can.
Priorities/trade-offs between standards, service quality, an obsolete
signalling system and ageing rolling stock
Increasing pressure of maintenance cost of a deteriorating system
Dysfunctional regulatory and institutional regime
Passenger safety from crime - initiative with SAPS
Integrity of the system (assets, operations and management), in relation to accidents
Integrated public transport plan - Partnerships with local government

8.  Short Term - Immediate Operational Shortfall
2000/2001 • Subsidy Requirement = 1 777
• Take over loans = less budgeted interest = - 355
1 422
• NT further reduced allocation as a forced =
saving
1 322 (100)
• Request/Intervention for additional allocation =
1 372 (50)
2001/2002 • Subsidy Requirement = (2.7%)
(No interest and Mercer savings)
• Subsidy allocated = 1 266
• Request to TCom - Plus R100m =
1 366 (95)
Result: Base line established for MTEF in 2001/02 inadequate

9.  Inadequate MTEF Allocation
Shortfall Projected:
2002/2003 R245m
2003/2004 R295m
2004/2005 R258m
+ R79 = R324
R79m shortfall - Options submitted by NDOT (Transnet Management Fee)
Implications = BOC in default of PFM Act.
= Approve budget at end of Feb which is not finalised.
= 2002/03  Very serious service reductions and rationalisations.
Increase in requirement
Requirement
Allocation
Increase 98/ /00
(First year of contract)
Increase 99/ /01 (Mercer)
Increase 00/ /02 (Mercer)
Increase 01/ /03
Increase 02/ /04
Increase 03/ /05 %
,1% % % % % % % % % % %

10.  Long Term - Inadequate Capital Investments
Actual Requirement - Backlogs and Current needs = R R1 700 ad infinitum
Funding level 01/02 02/03
Base allocation
Additional allocation
Actions to identify and quantify the problem:
Analysed requirements since the 1990’s.
SIG Consortium investigation on Rolling Stock
Audit: Capital Investment Programme
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)

11. Realistic Solution (20 Yr Plan) Allocation ito limitations
 Capital Investments (R’m) (all figures in 2000 rands)
Assets
Backlog
Requirement
Realistic Solution (20 Yr Plan)
10 Yrs pa
Yrs pa
Allocation ito limitations
(Annual Average)
Critical Issues
Rolling Stock
5 109
850
1 400
220
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)
Signalling
1 568
200 20 60
Obsolete system.
25% contribution to
train performance.
Create abnormal
operational conditions.
Cable theft.
System capacity (less r/s)
(Need less rolling stock)

12. Realistic Solution (20 Yr Plan) Allocation ito limitations
 Capital Investments (R’m) (all figures in 2000 rands)
Assets
Backlog
Requirement
Realistic Solution (20 Yr Plan)
10 Yrs pa
Yrs pa
Allocation ito limitations
(Annual Average)
Critical Issues
Stations
1 560
200
100 80
Commuter experience.
Development (socio +
economic - empowerment)
Station effectiveness.
Security/safety.
Ticket verification/control
Electrical OHS
237 80
100 20
Reliability
Cable theft

13. Realistic Solution (20 Yr Plan) Allocation ito limitations
 Capital Investments (R’m) (all figures in 2000 rands)
Assets
Backlog
Requirement
Realistic Solution (20 Yr Plan)
10 Yrs pa
Yrs pa
Allocation ito limitations
(Annual Average)
Critical Issues
Perway (Track) 10 20
Safety
Operability IT 20 35 10
Efficiency
Management
Total
(Maintain
System)
8 504
1 385
1 675
400

14. Realistic Solution (20 Yr Plan) Allocation ito limitations
 Capital Investments (R’m) (all figures in 2000 rands)
Assets
Backlog
Requirement
Realistic Solution (20 Yr Plan)
10 Yrs pa
Yrs pa
Allocation ito limitations
(Annual Average)
Critical Issues
Total
Maintain
System)
8 504
1 385
1 675
400*
Network Development
Infrastructure
Rolling Stock
3 750
4 000
375
400 19
Static rail system.
Access to basic mobility.
Development.
Road based solutions.
Total
16 254
2 160
2 450
419
* Nominal value investments = R350 - R400m per annum

15.  Effect of Inflation on Capital Allocation
Inflation /91 Base Year
560
Rand Million
495
Inflation /95 Base Year
Base Capital Allocation

16. Business Survival Years
 Investment Scenarios
Dynamic Growth Scenario
R R2 400 m/a
Investment Scenarios
Indefinite Survival Scenario
R R1 700 m/a
Limited Survival Scenario
R950 - R1 050 m/a
Decline Scenario
R355 - R400 m/a 5 10 15 20 30 40 50
Business Survival Years

17.  Actions Taken improvements.
Divert continuing pressure for improvements/expansion.
Manage system best to ability, within constraints.
Switched to condition based maintenance.
Optimisation investigations - Reduce need for rail services and assets.
Efficiency opportunities - (Initial investment required however).
Prioritise investments - Balance between operability, critical needs, safety and
improvements.
Audits - Stations (critical safety improvements)
- Condition and integrity
- Crashworthiness
- Extend Life cycle processes
- Cost effective/alternatives as a result of limitations (10M - R2m vs R12m)

18.  Actions Taken (continue)
Rail plans in relation to Local Transport Plans (Total system optimisation
alternatives).
Alternative funding mechanisms (R1,2bn in station upgrades and developments).
Reduction in vandalism (actions and materials used) Fibreglass overhead
structures - reduce rust tendencies).
Regulatory and Business structure options to introduce incentives for effectiveness
and investment possibilities.
Involving private sector in cost effective and sustainable alternatives and funding
options with Treasury.

19.  Implications of Underinvestment
Maintain degenerating system.
Jeopardising operability and safety.
Impact on efficiency and effectiveness.
Does not assist in addressing poor
Image of the rail system.
Decreasing patronage and market share, which effects the cost effectiveness of
system and subsidy deployment.
System not corresponding with developmental changes.
Becoming technically obsolete - Availability of components and basic safety of the
system.
Increasing maintenance costs.

20.  Solutions - Critical Requirement
How could the committee assist in maintaining the current rail commuter system towards a growth and
development scenario?
Support in resolving the immediate short term operational shortfall (R79m) and MTEF
shortfalls based on an inadequate base.
Support for long term solution/intervention on the backlog and immediate investment
requirements.

21.  SARCC Budget Request to NDOTRm
2001/2002
2002/2003 %
Income
Rental of Assets
Property Development
214
236 60
154 66
170
10.3
10.0
10.1
11.5
Less Expenditure
Commuter Services
Metrorail Management Fee
Asset Rental
Heavy Repair
Property
Insurance
Administration and Other (SARCC)
2 914
3 210
1 107 79 48
164
154
1 212 86 54
198
171 99 47 42
9.5
8.9
12.5
20.7
9.6
25.3
11.9
Operational Subsidy
(1 461)
(1 631)
11.6