1. PRESENTATION OF SARCC ANNUAL REPORT AND FINANCIAL RESULTS FOR 2006/07 TO PORTFOLIO COMMITTEE ON TRANSPORT 24 October 2007

2. Scope of Presentation 1.Background 2.Business Performance 3.Group Annual Financial Statements 4.Current Challenges 5.Current Initiatives 6.Conclusion Accelerating the Momentum for Change

3. Background 1.Successful transfer of Metrorail to SARCC in May 2006 2.Cabinet approval of Rail Plan in December 2006 3.Unqualified Audit Report for two years in succession 4.Increased Capital funding for Rolling Stock and Infrastructure 5.Preparations for 2010 FIFA World Cup 6.Approval of new Public Transport Strategy in February 2007

4. Some Basic Facts about SARCC SARCC delivers commuter rail services in major metropolitan centres –Wits (JHB & Ekurhuleni) –Tshwane –Port Elizabeth –East London –Cape Town –Durban

5. Some Basic Facts about SARCC Cont… Owns 2 200 kilometres of rail network Owns rail assets with book value of R7.1bn More than 470 stations & other properties Owns a fleet of 4 600 coaches Undertakes almost 2.2 million passenger trips every weekday Employs over 10 000 people

6. Some Basic Facts about SARCC Cont… Mandate of SARCC Primary Object:“ 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 Object: to generate income from the exploitation of assets, transferred to the SARCC by the Minister of Transport under section 25 of the Legal Succession act to the SATS ACT (Act 9 of 1989)

7. Performance Against Objectives 1.Generate Income from the Exploitation of Assets Transferred by the Minister under section 25 of Legal Succession Act 9 of 1989 2.Actively contribute to Commuter Rail Restructuring 3.Spearhead Rail Development and Implementation 4.Enforce compliance to the required Level of Service 5.Reduction/Elimination of aspects contributing to poor reliability, safety and financial losses 6.Rationalisation of services and optimisation of Government Funding 7.Seamless transfer of Metrorail into the SARCC 8.Roll out and extend new rail service networks where required within external constraints 9.Performance in terms Capacity Building

8. Business Performance Report – Key Highlights Increased Passenger trips Improved punctuality levels Increased fare revenue Introduction of new services: –Soweto Business Express –Additional service in Malmesbury Increased investment in Rolling Stock New 2 year operating permit issued by Railway Safety Regulator (RSR) Completed interface agreement with Transnet Freight Rail (former Spoornet) i.t.o. “Mutual use of assets and related services”

9. Business Performance Report – Key Highlights Cont… Improved training & development Increased momentum for Roll out of railway police Building of contact points at key stations 2010 preparations Streamlining procurement policies and adoption of New Supply Chain Management Policy Introduced ISO 9001 Quality Management System (all regions certified)

10. Business Performance Report – Major Challenges & shortcomings Post Merger Integration and continuous performance improvements Significant decline in number of trains scheduled and ran Poor availability & lack of reliability of rolling stock remains the single biggest challenge (contributes 38% to poor performance of train service) Number of train cancellations & delays unacceptably high Accessibility to rail services and facilities for people with special needs remains a major challenge Shortage of technical skills Railway fatalities largely due to suicides and people crossing railway lines in front of trains Huge operational risks (overcrowding, stampede etc)

11. Performance against Objectives Seamless Transfer of Metrorail into SARCC SARCC now both custodian of Commuter Rail Assets & Operator of Metrorail services Establishment of a single Head Office Establishment of a Single Executive Team Integration of SARCC & regional Metrorail offices Review of various policies governing the Corporation and Operations

12. Performance against Objectives Cont… Active Contribution To Restructuring Accelerated Rolling Stock programme: –Well resourced for first time –Aim is to build capacity in industry, –Creation of certainty through 3 - 5 year contracts with Rolling Stock Suppliers –Emphasis on better Pricing, Quality & Timeous delivery –Penalties introduced for the first time in these contracts

13. Performance against Objectives Cont… Spearhead Rail Plan Development and Implementation Implementation of Rail Plan through focusing investment on priority corridors Regional Rail Plans finalised Formal technical groups, rail liaison committee and working group meetings established to advance rail plans

14. Crime Index Crime index represents numbers of crimes per 100 000 passenger trips Crime dropped steadily from 02/03 to 05/06 It increased in 06/07 due to the protracted national security strike in first quarter of the year Crime is back on a downward trend

15. Crime Index Cont..

16. Elimination of Aspects Contributing to Poor Reliability Rolling Stock contributes 38% & Signalling 11% to poor train performance (Delays, Cancellations, Overcrowding, etc) The huge backlog of coaches to be repaired is causing major reliability and availability problems. The GO/Upgrade allocations were increased from 189 early in 2006 to 388 in the second half of 2006 310 coaches completed at a cost of R715 million R299 million was invested in infrastructure

17. Rationalization of Services and Optimization of Govt. Funding Subsidy Per Passenger will need to be carefully managed A Steady Increase in Fare Income from R1 042bn to R1 060bn No fare Increase for the past 4 years Passenger Journeys increased from 511 908 904 to 527 283 088 (3% increase) Have reduced fare evasion

18. Fare Revenue

19. Subsidy

20. Passenger Kilometer

21. Compliance to the Required Level of Service

22. Train Statistics Cont…

24. Contribution to Socio- Economic Development SARCC continues to spend significant amounts on BEE. Below are some examples of BEE spend within SARCC group: Wits: –Total spend is R336.9m –Total BEE spend is R111.4m –Percent of BEE spend is 33%. Cape Town –Total spend is R375m –Total BEE Spend is R116m –Percent of BEE spend is 52%

25. Contribution to Socio-Economic Development Cont… Total number of people staff trained was 2 309 –1 776 males –533 - females External recruits trained was 25 – 17 male –8 female In total SARCC invested a total R22.8 million which equates to 1.6% of payroll

26. MTEF Allocations

27. Capital Allocations 91% of the Capital allocation was spent in 06/07 financial year Additional R1,3 billion has been allocated to the SARCC over 3 years for the 2010 World Cup Preparations About R40 million had already been spent on 2010 projects (with the bulk of spending going to the construction of contact points)

28. Current Initiatives 1.Improved punctuality levels and reducing overcrowding 2.Improving on train reliability and availability –Accelerated Rolling Stock Programme –Increasing maintenance levels & quality –Revisiting working hours so that trains not taken out of service for maintenance during peak periods (considering night & weekend working hours) –Acquisition of new generation modern fleet –Consolidating signaling projects into one national programme 3.2010 preparations – bringing projects to construction phase by Jan 2008 – finalising appointment of contractors 4.Shosholoza Meyl – the transfer of Shosholoza will present major challenges to the SARCC 5.Enhancing Safety in Passenger Rail Operations 6.Intensifying roll out of the Railway police 7.Legacy Projects: Cape Town station revitalization,Cape Town International Airport Rail Link, Bridge City development, Moloto Rail corridor & others

29. Conclusion Solid foundation for Turn Around laid during 06/07 Financial Year Great expectations have been created: –Commuters gaining confidence in rail –Investment in passenger rail has increased significantly - the focus is now on the quality of investments and ensuring that it is directed in areas that would support change With 2010 preparations & new PT strategy, there are great expectations & the passenger rail sector must live up to the Challenge.