PRESENTATION OF SARCC ANNUAL REPORT AND FINANCIAL RESULTSFOR 2006/07 TO PORTFOLIO COMMITTEE ON TRANSPORT

24 October 2007

Scope of Presentation

1. Background 2. Business Performance 3. Group Annual Financial Statements4. Current Challenges5. Current Initiatives6. Conclusion

Accelerating the Momentum for Change

Background

1. Successful transfer of Metrorail to SARCC in May 2006

2. Cabinet approval of Rail Plan in December 20063. Unqualified Audit Report for two years in

succession4. Increased Capital funding for Rolling Stock and

Infrastructure5. Preparations for 2010 FIFA World Cup6. Approval of new Public Transport Strategy in

February 2007

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

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

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)

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 Restructuring3. Spearhead Rail Development and Implementation4. Enforce compliance to the required Level of Service5. Reduction/Elimination of aspects contributing to poor

reliability, safety and financial losses6. Rationalisation of services and optimisation of Government

Funding7. Seamless transfer of Metrorail into the SARCC8. Roll out and extend new rail service networks where

required within external constraints 9. Performance in terms Capacity Building

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”

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)

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)

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

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

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

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

Crime Index Cont..

0.7030.566

0.429 0.4160.526

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

2002/03 2003/04 2004/05 2005/06 2006/07

Total: Crime Index

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

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

Fare Revenue

609.95686.78

751.89 777.76842.54

913.61973.27

1,019.60 1,059.66

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

(Rm

)

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Metrorail: Total Fare Revenue

Subsidy

0.09 0.09 0.09 0.100.11

0.00

0.02

0.04

0.06

0.08

0.10

0.12

2002/03 2003/04 2004/05 2005/06 2006/07

Total: Subsidy per Passenger kilometer

Passenger Kilometer

0

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Total: Passenger kilometer

Compliance to the Required Level of Service

Train Statistics: Total

68,62964,043

77,018 76,72973,105

84,535 85,51680,525

93,933

6,301 3,942 5,836

25,783

12,14617,129 16,366

25,229

16,333

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Delays Cancellations

Train Statistics Cont…

TRAINS RUN, SCHEDULED,DELAYED and CANCELLEDTotal

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07Delays 68,629 64,043 77,018 76,729 73,105 84,535 85,516 80,525 93,933Cancellations 6,301 3,942 5,836 25,783 12,146 17,129 16,366 25,229 16,333Run 787,713 736,711 745,472 739,583 738,313 737,322 719,744 706,645 700,141Scheduled 793,996 740,653 751,328 765,366 750,439 757,038 736,129 731,866 716,446

Train Statistics Cont…

Train Statistics: Total

787,713

736,711745,472

739,583 738,313 737,322

719,744

706,645700,141

793,996

740,653751,328

765,366

750,439757,038

736,129 731,866

716,446

640,000

660,000

680,000

700,000

720,000

740,000

760,000

780,000

800,000

820,000

1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Run Scheduled

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%

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

MTEF Allocations

2006/07 2007/08 2008/09 2009/10

Operational Subsidy 2,771,274 2,259,119 2,485,031 2,683,650- SAPs Pilot Project (20,000)

2,751,274 2,259,119 2,485,031 2,683,650

Capital Grant 1,029,598 1,696,078 2,267,686 3,484,144

TOTAL 3,780,872 3,955,197 4,752,717 6,167,794

Infrastructure Fund Ringfenced 180,000 476,000 210,000 450,000

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)

Current Initiatives

1. Improved punctuality levels and reducing overcrowding2. 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 Operations6. Intensifying roll out of the Railway police7. Legacy Projects: Cape Town station revitalization,Cape Town

International Airport Rail Link, Bridge City development, Moloto Rail corridor & others

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.