SPEECH BY THE MINISTER OF TRANSPORT, MS DIPUO PETERS, MP, ON THE ANNUAL GENERAL MEETING OF THE PASSENGER RAIL AGENCY OF SOUTH AFRICA (PRASA) ON 29 SEPTEMBER 2014 AT HATFIELD, PRETORIA Chairperson of the Board; Chief Executive Officer of PRASA, Mr Montana; Board Members; Acting Director General; Management Team from PRASA; Officials from the Department; Ladies and Gentlemen; The ANC government has put aside September month for us as a country to celebrate our heritage, tourism and as public servants to put pride in our work as we serve our people with diligence and honesty. 1
We need to start touring our country and see our heritage sides and celebrate our African inheritance. We need to have pride in our dress code, languages, and food as South Africans and teach our children and the world. In accordance with the ANC programme of action and the National Development Plan Vision 2030, our top priority remains the evolution and transformation of our transport system to meet the demands of the growing economy. We have a great responsibility as the Department of Transport and PRASA by facilitating the movement of some 2.2 million commuters to and from work every day. We also have a responsibility to improve the life conditions of our people and to make sure that the economic growth is progressing rapidly. Over the Medium Term Strategic Framework (MTSF), the National Department of Transport undertakes to improve access to economic opportunities, social spaces and services by bridging geographic distances affordably, reliably and safely as spelled out in the National Development Plan (NDP). We undertake to invest in improved passenger transport systems as spelled out in the ANC Election Manifesto 2014. 2
Following the Cabinet approval of the National Rail Plan in 2006, the Passenger Rail Agency of South Africa (PRASA) was instituted in 2009. The purpose of the National Rail Plan was to identify funding and investment for the country s obsolete passenger rail, ahead of the 2010 FIFA World Cup to be hosted in South Africa. The establishment of PRASA led to the consolidation of all passenger rail entities, namely the former South African Rail Commuter Corporation (SARCC), Metrorail, Autopax and Shosholoza Meyl under one entity. The ultimate aim of this new entity was to comprehensively address the under-performing rail passenger services. Customer centricity, modernisation, state-of-the-art technology, efficiency and punctuality became the key objectives of PRASA. Today PRASA operates in six cities across South Africa. It owns approximately 4000 trains and employs some 18 000 personnel. It manages more than 370 railway stations and its Metrorail services carry more than 2 million passengers daily. Furthermore close to a million passengers are transported through its main line passenger service annually. 3
Ladies and Gentlemen, In line with the call from the National Development Plan of 2012, PRASA has embarked on an intensive capital expenditure programme to revitalise and modernise its railway infrastructure, rolling stock, national operating and signalling systems in order to meet world class standards of reliability, safety, punctuality and affordability. The main achievements of PRASA since its inception in 2009 are: As part of the preparation for 2010 FIFA Soccer World Cup, more than 50 world class universally accessible stations were built, upgraded, refurbished and train operating and monitoring systems were completed on time for the soccer world cup event; More than 2600 coaches were upgraded and refurbished through the accelerated rolling stock programme and created more than 2000 direct and indirect jobs; The asset value and investment in properties have increased to more than R33 billion; Around 500 million passenger trips are conducted by the Metrorail unit of PRASA annually, making PRASA a critical contributor to productivity and hence to economic growth; 4
PRASA is the project manager for the Integrated Urban Space and Public Transport programme (namely SIP 7); A contractual agreement has been signed with Chinese ICT service provider for a new digital signalling radio system to replace the current inefficient train radio communication system. The revamp system includes a 1200 kilometer fiber optic backbone for faster and more efficient communications between drivers and the control centres; and A Public Private Partnership plan for the Moloto Rail Development Corridor has been designed, with the ultimate goal of addressing the socio economic development and job creation along the corridor. Key Challenges facing PRASA Against the backdrop of several capital-intensive programmes such as the rolling stock fleet renewal programme, the Capital Intervention Programme, and the National Station Improvement Programme, a lack of capacity may result in the non-attainment of service delivery objectives. Another challenge related to the provision of long distance passenger rail is the sustainability of capital investments to make long distance passenger 5
rail operate optimally. Investment in this area is crucial for effective service delivery. The decision to terminate the operational subsidy for Shosholoza Meyl during the 2010/11 financial year puts PRASA in an untenable position. Financial support must be provided for long distance passenger rail services to allow for its continuation. The termination of long distance passenger rail service will result in severe and devastating socio-economic consequences regarding the livelihoods of many rural, migrant workers and the poor who depend on the services of Shosholoza Meyl for their mobility. The current institutional arrangement of the commuter rail industry provides for almost no accountability to the customers in the area of operations. Accountability needs to be introduced for enhanced governance over the deployment of public funds and assets. 6
Key Achievements Ladies and Gentlemen; Noteworthy achievements since the inception of PRASA in 2009, is the decline in injuries due to rail-related accidents, from 399 in 2012/13 to 24 injuries and zero fatalities during 2013/14. The much-anticipated capital infrastructure programme of more than R100 billion in the rolling stock fleet renewal programme has created a lot of foreign investment interest in South Africa. It is expected that this huge capital injection into our economy will undoubtedly resolve our public transport requirements and ultimately lead to sustainable job creation and black economic empowerment. Annual Report Achievements The annual report of 2013/14 indicates that PRASA has achieved 70% of its targets and of these 42% were over achieved compared to planned targets. 7
The significant achievements in the year under review are: The growth in fixed asset value by 17%; The launch of the Bridge City Rail link in October 2013, followed by service becoming operational in February of 2014; Improvements of 80 stations as per the National Station Improvement Programme; In general, passenger transport safety index has improved between 5% and 13%; Khayelisha and Bridge City Rail extensions were completed and commissioned; Completion of the initial phase of the acquisition of locomotives to the value of R994 million in line with the Turn-around plan to revitalise the mainline passenger services; and Crime incidents against passengers transported have dropped in 2013/14. To sustain its current rail operations, PRASA has engaged into a number of interventions, namely; 8
R1,9 billion was spent to refurbish 566 metro coaches, against a target of 500 coaches for the 2013/14 financial year; and A total of approximately R800 million was allocated to the Capital Intervention Programme to arrest the deterioration of the perway and related rail infrastructure. We commend PRASA for its relentless effort to improve the public transport services. Broad Based Black Economic Empowerment and skills development Of note in 2013/14, is the launch of phase 2 of the Women in Rail Programme. The main objective of this programme is to empower women in the technical areas of rail engineering, rail infrastructure projects and opportunities and thus enhancing women owned enterprises in the railway sector. As part of the rolling stock fleet renewal programme, PRASA and Gibela Rail Transportation are expected to do the following: 9
Build a R1 billion manufacturing plant that would produce some 580 trains in South Africa; and Train more than 500 South African technicians, engineers and other professionals as part of the strategy to augment local skills and competencies to build modern trains. Within the contractual agreement with Gibela consortium, PRASA will ensure that; R977 million are invested on BBBEE Skills Development initiatives; R892 million are spent on the development of enterprises in the rail sector; R323 million are spent in socio-economic developments; R1,7billion of services are procured from Woman Owned Entities; and Some 8088 (eight thousand and eighty eight) direct jobs are created. Regarding human capital development, we have observed with satisfaction that the target for bursary allocation and learnerships were exceeded. 10
430 bursaries were awarded and a total of 2252 (two thousand two hundred and fifty two) learnerships are in progress. However, the programme to develop signalling skills in the organisation did not progress at all in 2013/14. Out of a planned target of 50 learners in signalling programme, none have been trained. The rolling stock skilling programme has also underachieved by 36%. Since rolling stock and signalling are core technologies for the smooth functioning of any railway network, it is imperative that the entity should invest meaningfully in such training. The department would like to be appraised on this training programme on a regular basis so as to provide assistance where possible. Whilst we applaud the remarkable investment in human capital development, the Department request for a detailed breakdown of the gender and race of those benefitting from such programmes. 11
Gender equity remains our priority as government; it is critical that development programmes, especially technical ones, focus on the empowerment of young girls. We need to ensure that the young girls of today are afforded the opportunities to become the future railway engineer, signalling engineers and train drivers. Annual Report targets not achieved Ladies and Gentlemen, To address the drop in passengers on the Mainline Passenger Services (MLPS), PRASA established a turn-around strategy. In fact the number of MLPS passengers has decreased from 3 million per annum in 2009/10 to below 1 million currently. Concurrently, the number of operational trains decreased from 6000 per annum to below 3000 currently. 12
This decline in passengers resulted in a significant loss of R700 million per annum. The effort of PRASA to turn around this dismal situation has been noted. The Department request that PRASA submits quarterly detailed report on the progress of the MLPS turn-around plan. The areas of under-performance that I would like to highlight are as follows: Metrorail passenger trips per annum this target was missed by 5,4%; Mainline passenger services per annum only 0,9 million passengers travelled on this line against a target of 1,4 million; and Delay and cancellation in train performance was 5% below the planned target of 85% We also note that due to vandalism and theft of rolling stock, some 500 coaches were out of service. 13
This has put an impact on availability of trains and service performance; the Department is therefore looking forward to the implementation of the proposed Asset Protection Security Strategy. Financial analysis For the financial year ending 2013/14, the total revenue of the Group increased by 21% to R10,2 billion. The operating revenue rose by 14,2% mainly due to an increase of 4% in fare revenue and 17% in lease income. The total assets increased by 13,4% in 2014 compared to the previous financial year. Total liabilities also increased by approximately 11,8%. We have observed that the entity posted a profit of R336 million in 2013/14, which is an increase of 315% compared to last year s performance. Regarding PRASA Capital Programme, it is noted that around 92% of the capex or R6,8 billion was spent on infrastructure investment. 14
This amount was spent mainly on upgrading and maintenance of the rolling stock, infrastructure and station developments. Auditor General review Concerns raised by the Auditor General refer to a contract of R3,5 billion for the purchase of locomotives, whereby the evaluation criteria was not fully aligned with the request for proposal. For this, PRASA is deemed to have contravened the supply chain management policy and section 51 of the PFMA. Furthermore, fruitless and wasteful expenditure were incurred to the value of R19 million due to interest and penalties on late payments of creditors. The entity also incurred irregular expenditures to the amount of R38 million. Out of this amount, R9 million was due to unauthorized contract extension. Going forward, the entity is expected to put in place internal control measures to address deficiencies in the procurement and financial management procedures. 15
As per the PFMA requirements, the entity is expected to take correction actions to address any breach of the policy. We applaud PRASA for receiving an unqualified audit opinion for the 2013/14 financial year. PRASA is expected to play a critical role in reviving the integrated public transport network, so as to improve mobility of the masses in both the urban and rural areas, in a most reliable, safest and cost-effective manner. Rail transport as a mass mover, is in effect crucial in addressing the congestion on our roads and the subsequent scourge of road accidents. Ladies and Gentlemen, I welcome you to the Annual General Meeting of the Passenger Rail Agency of South Africa. Thank you. 16