parliament transport portfolio committee budget presentation

Parliament Transport Portfolio Parliament Transport Portfolio CommitteeCommittee

Budget PresentationBudget Presentation

29 May 200229 May 200229 May 200229 May 2002

SARCC Presentation

Presentation Overview

Challenges Identified

Solutions - Critical Requirement

Rail Commuter Business - FundingRm

2001/2002Rm

2002/2003

IncomeSubsidy

•Operational•Capital

Fare Revenue (Metrorail)

Rental of assets (SARCC)

Property (Intersite)

Interest

2 838 2 970

1 856 1 9511 366 490

1 386 565

744 783 60 66

151 170

%

4.6

5.1

10.29.2

15.3

ExpenditureOperational

•Commuter Services•Metrorail Management Fee•Asset Rental•Heavy Repair•Property•Insurance•Administration and Other

Capital

2 917 3 215

2 427 2 6501 828

7948

163147

42

490

1 9958654

1981719947

565

Shortfall 79 245

27 0

120

Rail Commuter Business - Capital Subsidy

TOTAL 300 300 355 490 565

Normal Allocation

98/99Rm

99/00Rm

00/01Rm

01/02Rm

02/03Rm

300 300 355 355 405

Additional Allocations

•10 M’s

•Khayelitsha extension

•Other

135 60

20

80

Capital Expenditure

Rolling Stock

Stations

Perway (track)

Signals

Electrical OH

Telecommunications

Information Technology

01/02Rm

02/03Rm

281

99

29

26

18

4

33

TOTAL 490 565

296

148

25

48

19

13

16

Operational Subsidy Resumé

* Increased insurance premiums (vandalism) and imported rolling stock components

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 50 100

Adjusted Shortfall

Savings Effected

107 130 50 95 245

23 82 28 16

Final Shortfall 84 48 22 79 245

Rm2001/02

Rm2002/03

Rm2000/01

Rm1999/00

Rm1998/99

Total Allocation 1 140 1 277 (12%) 1 372 (7.4%) 1 366 (-0.4%) 1 386 (1,5%)

Operational Subsidy (Excl Capex & Interest)

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03

1990/91 Base Year

94/95 Base Year

Actual Subsidy

The Effect of Inflation

Ran

d M

illi

on

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

Short Term - Immediate Operational Shortfall

Result: Base line established for MTEF in 2001/02 inadequate

2000/2001 • Subsidy Requirement = 1 777

• Take over loans = less budgeted interest = - 355

1 422

• NT further reduced allocation as a forced = - 100

saving

1 322 (100)• Request/Intervention for additional allocation = + 50

1 372 (50) 1372

• Subsidy allocated = 1 266

• Request to TCom - Plus R100m = 100

1 366 (95)

2001/2002 • Subsidy Requirement = 1 461 (2.7%)

(No interest and Mercer savings)

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 98/99 - 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

1 407 12.8%

1 422 1,1%

1 461 2.7%

1 631 11.6%

1 771 8.6%

1 930 9.0%

1 277 12%

1 372 7.4%

1 366 -0.4%

1 386 1.5%

1 477 6.6%

1 672 3.2%

Long Term - Inadequate Capital Investments

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 level 01/02 02/03

Base allocation 355 405

Additional allocation 135 160

490 565

Capital Investments (R’m) (all figures in 2000 rands)

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)

Assets Backlog

Requirement

Realistic Solution (20 Yr Plan)

10 Yrs pa 11 - 20 Yrs pa

Allocation ito limitations

(Annual Average)

Critical Issues

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)


Stations 1 560 200 100 80

•Commuter experience.

•Development (socio +

economic - empowerment)

•Station effectiveness.

•Security/safety.

•Ticket verification/control

Assets Backlog

Requirement




(Annual Average)

Critical Issues

Electrical OHS 237 80 100 20 •Reliability

•Cable theft


Perway (Track) 10 20 20 10 •Safety

•Operability

Total

(Maintain

System)

8 504 1 385 1 675 400

Assets Backlog

Requirement




(Annual Average)

Critical Issues

IT 20 35 35 10•Efficiency

•Management


Total

Maintain

System)

8 504 1 385 1 675 400*

Assets Backlog

Requirement




(Annual Average)

Critical Issues

Network Development

•Infrastructure

•Rolling Stock

3 750

4 000

375

400

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

Effect of Inflation on Capital Allocation

393

427

458

498

532

569

596

629

670

250

288 292

317339

356

399

429

467

250 250 250 250

300 300

355 355

405

200

250

300

350

400

450

500

550

600

650

700

94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03

Inflation - 1990/91 Base Year

Inflation - 1994/95 Base Year

Base Capital Allocation

Ran

d M

illi

on

495

560

Investment ScenariosIn

ves

tme

nt

Sc

en

ario

s

0 5 10 15 20 30 40

Business Survival Years

50

Actions Taken

•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)

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.

Implications of Underinvestment

•Maintain degenerating system.

•Jeopardising operability and safety.

•Impact on efficiency and effectiveness.

•Does not assist in addressing poor

•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.

•Image of the rail system.

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.

SARCC Budget Request to NDOTRm

2001/2002Rm

2002/2003%

IncomeRental of Assets

Property Development

214 236

60

154

66

170

10.3

10.0

10.1

Operational Subsidy (1 461) (1 631) 11.6

11.5Less Expenditure•Commuter Services•Metrorail Management Fee•Asset Rental•Heavy Repair•Property•Insurance•Administration and Other (SARCC)

2 914 3 210

1 1077948

16415479

1 2128654

198171994742

9.58.9

12.520.79.6

25.311.9

parliament transport portfolio committee budget presentation

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