LAYING THE
FOUNDATIONS OF A
WORLD CLASS
TRANSPORT SYSTEM
Page 0
CORPORATE
PLAN
2014/15 –
2016/17
CONTENTS
1
2
3
4
PRASA Vision, Mission and Values ........................................................... 4
1.1
VISION ..................................................................................................................................... 4
1.2
MISSION .................................................................................................................................. 4
1.3
Values ...................................................................................................................................... 5
Key Issues in PRASA Strategy: 2014/15 – 2016/17.................................... 6
2.1
Major Success ......................................................................................................................... 7
2.2
Major Weaknesses and Risks .................................................................................................. 8
2.3
Towards New Strategic Priorities for 2014/15 – 2018/19 ...................................................... 9
Legislative Mandate .............................................................................. 10
3.1
Legislative mandate of PRASA .............................................................................................. 10
3.2
Other Legislation ................................................................................................................... 10
PRASA Legal and Operating Structure .................................................... 14
4.1
5
6
Operating Structure .............................................................................................................. 15
PRASA Strategy alignment with DOT outcomes ..................................... 16
5.1
PRASA National Strategic Plan .............................................................................................. 16
5.2
PRASA medium term strategy............................................................................................... 17
5.3
PRASA Strategic Phases......................................................................................................... 18
Challenges facing PRASA........................................................................ 21
6.1
State of the existing Rolling Stock ......................................................................................... 21
6.2
Signaling ................................................................................................................................ 23
6.3
Deployment of new trains .................................................................................................... 24
6.4
Mainline Passenger Services Turnaround ............................................................................. 27
6.5
Human Capital Development ................................................................................................ 28
6.6
Devolution of Subsidy to Provincial / Metropolitan Transport Authorities.......................... 29
6.7
Sustainable Funding .............................................................................................................. 30
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7
6.8
Asset Redistribution .............................................................................................................. 32
6.9
Long-term Plan Alignment (including Rail Plans) .................................................................. 32
6.10
Strategic Partnerships ........................................................................................................... 33
6.11
Modal Integration ................................................................................................................. 33
Risk Management .................................................................................. 34
7.1
TOP 10 STRATEGIC RISKS ...................................................................................................... 34
6. PRASA Strategic Initiatives ..................................................................... 43
8
9
7.2
Strategic objectives ............................................................................................................... 43
7.3
Creating a new business ....................................................................................................... 44
7.4
Modernisation....................................................................................................................... 46
7.5
MLPS Turnaround: ................................................................................................................ 61
7.6
Real Estate Strategy .............................................................................................................. 63
7.7
Commercialisation of non-core assets.................................................................................. 69
7.8
Operational Efficiencies ........................................................................................................ 71
7.9
Strengthen Financial position ............................................................................................... 74
7.10
Building capacity ................................................................................................................... 76
7.11
National Governmental Strategic Initiatives ......................................................................... 81
7.12
Long term strategic initiatives .............................................................................................. 82
Divisions and Subsidiaries ...................................................................... 85
8.1
Roles of divisions and subsidiaries ........................................................................................ 85
8.2
PRASA Rail Operations .......................................................................................................... 86
8.3
PRASA Corporate Real Estate Solutions ................................................................................ 90
8.4
PRASA TECHNICAL ................................................................................................................. 93
8.5
Intersite Asset Investments (SOC) LTD.................................................................................. 94
8.6
Autopax (SOC) LTD ................................................................................................................ 95
Financial Plan......................................................................................... 97
9.1
PRASA Subsidy Allocation ..................................................................................................... 97
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9.2
PRASA Cost Drivers: .............................................................................................................. 98
9.3
Budget assumptions:............................................................................................................. 98
9.4
Financial Statements ........................................................................................................... 100
10 Capital Programme .............................................................................. 104
10.1
Budget Framework.............................................................................................................. 104
10.2
Projected financial commitments into the 2014/15 financial year .................................... 105
10.3
Capital Funding ................................................................................................................... 106
11 Performance Plan ................................................................................ 109
11.1
Performance Plan 2014/15 ................................................................................................. 109
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1 PRASA Vision, Mission and Values
1.1 VISION
To be South Africa’s Leader in Passenger Transport Solutions.
1.2 MISSION
To strive for Service Excellence, Innovation and Modal Integration in the
Delivery of Quality Passenger Services
Five Principles underpin the PRASA Vision and Mission:
Mobility – PRASA shall contribute to sustainable public transport solutions by providing highquality passenger services founded on an integrated network of mobility routes.

Accessibility – PRASA shall provide quality rail, bus and property management services that
enable individuals and communities to access socio-economic opportunities and contribute
to a better quality of life of the people as a whole.

Modal Integration –PRASA seeks to reframe the basis of its business model in a manner that
delivers seamless integration and efficiency between different transport modes.

Service Excellence – a deep commitment to superior performance that is safe, reliable and
affordable, provide a dignified travel experience that makes a lasting impression, and builds
brand loyalty – both internally (employees) and externally (customers) – that adds benefit to
the passenger.

Sustainability - A focus on sustainable development in business that considers not just the
financial ‘bottom line’ but driven by a deep commitment to outcomes that are primarily
aimed at improving the socio-economic conditions of citizens, environmental quality and
social equity.
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1.3 Values
The values that guide PRASA, underpinning the performance ethos of the organization have been
derived from the outcome of workshops carried out across the Group. The premise of the derived
values is to deliver service excellence, productive staff and business growth.
The values are –
 Fairness and Integrity - Treating our customers and our colleagues the same as we would
like to be treated.
 Service Excellence - Provide the kind of services that meet and exceed customer
expectation.
 Performance Driven - Developing the ability to venture into new breakthrough areas
of opportunity whilst offering quality products to our customers.
 Safety - Ensuring our customers and colleagues enjoy their journey and arrive safely
and refreshed.
 Communication - Sharing information with our customers and colleagues in an open
and honest way.
 Teamwork - Working together with our customers to achieve a common goal and
recognising each other’s strengths and contribution.
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2 Key Issues in PRASA Strategy: 2014/15 – 2016/17
This year, 2014 is a momentous year for Democratic South Africa. South Africa will celebrate 20
years of Freedom and Democracy. PRASA will be an integral part of these celebrations.
The 20th Year Of Freedom and Democracy will enable Government, various organs of State, and the
people of South Africa and the World to reflect on what a free, united and democratic South Africa
has meant to the lives of ordinary South Africans, its efforts to forge a common nationhood,
contribution to the revival of Africa, lessons from South Africa transition's to democracy and how
this has contributed towards resolving historical and intractable conflicts in many parts of the World.
PRASA will be an integral part of the 20 year Celebrations and will use the celebrations to share with
South Africans the important work we have been doing over the years, the lives we have changed
and the foundations we have laid for a modern and efficient transport system for our country.
In the transport sector, South Africa has more reasons to celebrate. Through our collective work, the
transport sector has been able to build and deliver new modern Airports to connect our country
with Africa and the World. ACSA invested over R20 billion on modernizing and upgrading the airports
under its control. SANRAL is today managing a modern (national) road network that links many
regions of our country and contribute to economic development. The transport revolution in South
Africa had seen over R150 billion invested on improving public transport for the citizens. Today,
there are many different transport systems in place such as Bus Rapid Transits (BRT), the Gautrain
Rapid Rail Link, Business Express Trains and Modern Stations and others that were unimaginable
before April 1994. Democratic South Africa has continued to expand social services and millions of
South Africans continue to participate in meaningful economic activity as a result of over R6 billions
of transport subsidies that Government provides to bus operators and rail so that working people
have access to affordable public transport.
For the passenger transport sector, we have put together a large and vibrant public entity called
PRASA that is championing the agenda of a quality public transport for all and meaningful economic
participation. PRASA has begun to unlock the value of the assets that it manages on behalf of the
people of South Africa. The Value of the Assets has increased from R7bn in 2008/09 to over R33bn
by 2013/14.
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2.1 Major Success
PRASA has laid the foundation of a modern public transport that will serve South Africa for the next
40 years. The acquisition of 600 new, modern metro trains, 70 modern locomotives to sustaining our
long-distance rail services, the rollout of the new, electronic interlocking signaling system, new
generation stations, speed gates and their related security systems, Digital Radio Communications
between our trains and train control and operating centers.
On the financial side, the review and resolution of the amortization issue in the PRASA Financial
Statements was a critical management intervention to address immediately the going-concern issue
raised by the Office of the Auditor- General. Most importantly, the R2.7bn posted has been critical
to the very financial survival of PRASA over the past three years.
The Balance Sheet Restructuring Initiatives undertaken over the past three years were vital to
sustaining PRASA operations, and its two subsidiaries, Intersite and Autopax. The valuation of key
investment properties had been a major factor for PRASA to be able to absorb the major losses of
the past years, including the over R800 million losses of MLPS. It is the valuation of investment
properties that not only further strengthened the PRASA Balance Sheet but has contributed to
reducing losses that would not have been sustainable within a short period of time.
Financial Performance has improved significantly and this was mainly driven by the aggressive
revenue collection in the rail and property management divisions as well as the reduction in
operational expenditure due to cost-containment initiatives. Commercialization Initiatives have been
slow but have been a significant part of PRASA’s strategic plan and these have started bearing fruit.
PRASA has over the past 3 years adopted an aggressive stance and challenged pricing structures that
defined Capital Expenditure, in particular the area of rolling stock refurbishment. We have been
successful in forcing some of the companies to abandon their predatory pricing practices in favour of
more sustainable model. We were able to introduce a price book that reduced the costs of critical
elements of our Capital Programme by over 50%.
There has been a lot of innovation to sustain rail operations. PRASA developed and implemented key
strategies that such as the 5 Point Plan for Metrorail, which were contributing to delivering quality
rail services and buying some level of efficiency within the constraints imposed by an outdated,
inflexible and highly costly system.
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The Preventative Maintenance Programme has been important to also sustain current rail
operations. This, together with investment in new depot equipment and changing the way
maintenance is done, has been critical factors that allowed PRASA to deliver on some of our
promises.
The Accelerated Rolling Stock Programme as well as provision for technical support by rolling stock
contractors played an important role to restore the availability of the Metro coaches to acceptable
levels and those seen in 2009 and the first quarter of 2010.
These successes came as a direct result of the aggressive drive by Government to change public
transport. In addition, the PRASA Board adopted a new strategy in September 2010 that focused the
business on three critical tasks for the 2010/11 – 2012/13 MTEF period:
 Shift from stabilizing Metrorail services towards finding a Model to Deliver Quality
Passenger Services
 Urgent need to unlock the value of assets
 Shift from refurbishment to replacement of operating rail assets
2.2 Major Weaknesses and Risks
Despite these successes, there are still many weaknesses in the organisation of PRASA. The lack of
effective co-ordination in the implementation of Initiatives supporting the PRASA Strategy has the
potential to compromise qualitative transformation in the long-term.
Poor planning still remains a major issue in the delivery of key strategic and capital projects. The
risks associated with poor planning are that key projects are not delivered on time and capital
spending is not in line with projections. The result are many scope changes with project costs always
on the rise.
The poor control environment had seen officials at a lower level continuing to make financial
commitments on behalf of the business. In most cases, these liabilities are not known until very late.
This has affected the ability of the business to meet its obligations and brings with it huge
operational risks.
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Lack of effective cash management strategies across the business had resulted in key suppliers not
being paid, with suppliers with invoices of R1million or less being the worst affected. Costly
litigations have increased with reputational damage to the PRASA Brand.
Irregular and unauthorized Expenditure and payment of interest on PRASA debts is a major concern
in Government and Parliament.
2.3 Towards New Strategic Priorities for 2014/15 – 2018/19
Whilst the overall strategy and the strategic goals being pursued remain valid, there is a need over
the next MTEF period to change or shift emphasis on a number of key interventions of our Strategy:
2.3.1
Creation of a New Business
The creation of a new business and quality passenger services requires management to put in place
a detailed Operational Plan and Deployment Strategy that effectively identifies and prioritizes
corridors, sequence infrastructure modernization in key corridors and integrates the numerous but
separate investments undertaken over the past three years.
Whilst the acquisition and delivery of new trains, new signalling and other new assets and facilities
remain a necessary condition and a catalyst for the modernization and transformation of commuter
rail services from 2015. However, this on its own, will not be sufficient or lead to the delivery of
quality passenger services. The contract for the new rolling stock had been signed but failure to
develop a suitable Operational Plan and Deployment Strategy will affect the realisation of the
strategic objectives that PRASA has set itself. Many of the integrated transport plans or IRPTNs of
municipalities are dependent on or have created the expectations of a new fleet of new trains in
their respective areas. This is probably the biggest risk to the successful delivery of the PRASA
Strategy and its Modernization Drive.
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3 Legislative Mandate
3.1
Legislative mandate of PRASA
3.1.1 Legal Succession Act
PRASA, a public entity reporting to the Minister of Transport, derives its mandate from the Legal
Succession to the South Africa Transport Services (“SATS”) Act of 1989 as amended November 2008.
The main object and the main business of the Agency are to—
(a) ensure that, at the request of the Department of Transport, rail commuter services are
provided within, to and from the Republic in the public interest; and
(b) provide, in consultation with the Department of Transport, for long haul passenger rail and
bus services within, to and from the Republic in terms of the principles set out in section 4 of
the National Land Transport Transition Act, 2000 (Act No. 22 of 2000).
The second object and secondary business of PRASA is that the entity shall generate income from
the exploitation of assets acquired by it.
A further requirement is that, in carrying out its object and business, PRASA shall have due regard to
key government social, economic and transport policy objectives.
The Legal Succession Act does not make adequate provision for the Separation of Assets between
PRASA and Transnet as a result of the transfer of Metrorail, Shosholoza Meyl and Autopax e.g.
transfer of some stations, CTCs, bus depots and other related properties that are necessary for the
operation of the business. Negotiations with Transnet shall be pursued to ensure the required assets
are transferred to PRASA and vice versa.
3.2 Other Legislation
The crafting of the PRASA strategy and business plan takes cognisance of the legislative environment
with specific reference to:

The National Land Transport Act (Act 5 of 2009) as government’s transport policy
driver as well as the Public Transport Strategy and Green paper on Rail.

National Railway Safety Regulator Act of 2002, as amended 2003

Labour Relations Act, Employment Equity Act and Conditions of Employment Act

National Development Plan as the platform for 2014/15 – 2016/17 Platform.
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3.2.1
National Development Plan
The National Development Plan (NDP) sets the “common focus for action for all sectors and sections
of the South African society” to eliminate poverty and reduce inequality by 2030 utilising a multidimensional framework to drive a virtuous cycle of development with integrated approach where
progress in one area supports advances in others. The NDP has 12 main chapters covering various
actions to which PRASA as a public entity and public transport provider contributes or is impacting
the Group.
Figure 1: Multi-dimensional development framework of NDP
The economy and employment chapter deals with increasing employment and labour force
participations the will increase commuter and passenger numbers for the passenger transport
entities in PRASA as well as lead to changes in passenger demographics. Metrorail, providing
commuter services, plays a major role in reducing costs of living through affordable rail fares. The
plan indicates in the diagram below the minimum standards of living. This clearly shows the role of
transport where PRASA contributes. In addition PRASA also addresses clean environments in its
stations and transport carriers of rail and bus as well as safety and security of passengers. PRASA
also contributes to employment as well as development of skills as well as education towards
specific fields of importance for rail and bus transport. PRASA through its division CRES and
subsidiary Intersite, also contributes to housing as part of its real estate strategy, supported by other
chapters of the NDP around densification of cities to enable better public transport services.
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Figure 2: Adapted elements of a decent standard of living from NDP
It is expected that the proportion of people using public transport for regular trips or commutes will
expand as projected in the NDP. The requirement of public transport infrastructure is to be userfriendly, less environmental damaging, cheaper and integrated by 2030. The action is to consolidate
and selectively expand transport and logistics infrastructure with specifically for PRASA the renewal
of the commuter rail fleet supported by enhanced links with road-based services. PRASA’s strategic
plan echoes these requirements with especially the expansion of rail infrastructure aligned with the
strengths of rail and spatial development plans of provincial and local authorities.
Environmental sustainability and resilience addresses how PRASA and its entities need to approach
new developments and upgrades to reduce greenhouse gas emissions and to approach stations and
commercialisation projects with the aim of zero emissions on buildings by 2030. Rural economic
growth will impact transport services required to and from these areas for long distance buses and
trains. Focused regional integration will also drive increased requirements for interregional
passenger transport. PRASA has therefore already mooted cross border services with neighbours in
the SADC region.
Transforming human settlements through densification of cities and settlements with substantial
investments in safe, reliable and affordable public transport supported by spatial development
frameworks that balance location of jobs and people are at the heart of PRASA’s 20 year strategy
where developments for commuter rail are based on demand patterns and spatial plans.
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Skills development and training for PRASA employees as well as future employees are close to the
heart of the rail business. PRASA through various initiatives support development of learners
towards engineering fields for rail, development and training of rail specific artisans and other
transport related skills. In addition the organisation supports transport, engineering, public service
management development through partnerships with South African universities such as UCT,
University of Stellenbosch, Wits Business School and UNISA. PRASA also uses its modernisation
programmes to illicit the support of the private sector in skills development and employment to
address social protection as contained in the NDP.
The objectives and actions of the chapter on building a capable and developmental state is the nexus
for objective of corporate governance at PRASA. PRASA’s public mandate of providing public
transport is the first object of PRASA’s legislative mandate. PRASA also aim to ensure that staff at all
levels have the authority, experience, competencies and support to ensure safe, clean, efficient and
effective transport for all South Africans; that we build careers of choice in the public rail transport
sector; that we build sound relationships at local, provincial and national government and fight
corruption at all levels of the organisation.
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4 PRASA Legal and Operating Structure
Figure 3: PRASA Legal Structure
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4.1 Operating Structure
Figure 4: PRASA Operating Structure
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5 PRASA Strategy alignment with DOT outcomes
5.1 PRASA National Strategic Plan
PRASA’s Strategic Plan provides a transformational, integrated and holistic approach to developing rail and
other public transport services up to 2050. It builds on the 2006 National Rail Plan and widens the scope to
include all PRASA’s entities. It provides a road map for PRASA’s individual rail, bus / coach and real estate
businesses to combine to improve the service provided to the travelling public and seeks to capitalize on the
opportunity provided by government investment in new rolling stock, new signalling, stations and
Modernization Corridors demonstrating the impact of an integrated approach to investment on rail
corridors.
The National Strategic Plan combines the strategic Plans prepared for the most populated provinces of
Gauteng, the Western Cape, KwaZulu-Natal and the Eastern Cape, and the long distance passenger market.
The plan was developed with a cooperative approach with national, provincial, city and municipal
stakeholders to ensure alignment with parallel planning processes such as Provincial Land Transport
Frameworks, Integrated Public Transport Networks and Integrated Rapid Public Transport Networks.
The key points within the Strategic Plan are:
 A prioritized list of rail services and network expansion interventions that provides more
capacity to accommodate forecast growth, transforms the rail product on many corridors,
seeks to make better use of the network and proposes corridor extensions to new or
growing settlements.
 Clear proposals for improving integration between rail and other public transport modes to
make it easier for passengers to use railway services as part of the wider integrated
transport systems.
 The proposals include enhanced city distribution, improved intermodal interchange, use of
Autopax to feed into and complement rail services and priority hubs on the network.
 A review of the corridor classification in the 2006 National Rail Plan to reconfirm priorities.
 The identification of key redevelopment sites to contribute funding for the implementation
of the Strategic Plan
 Identified actions needed to deliver the Strategic Plan.
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5.2 PRASA medium term strategy
PRASA’s medium term strategy addresses the public interest mandate of the entity and is geared to
modernisation of the public transport system over the next two decades with the replacement of the fleet as
well as supporting infrastructure such as signalling but also depot modernisation, electrical infrastructure
and track infrastructure.
The modernisation drive of PRASA is requiring the organisation to create a new rail business to deliver
decent, integrated and quality public transport. Whilst preparing for the delivery of new trains PRASA has to
develop new ways of doing business through overhauling the organisation, culture and systems to support
and sustain the modernisation drive. This also entails development of staff and appropriate skills and
attitudes to fit the requirements of the new public rail system.
The matrix below indicates the alignment of PRASA Strategic Objectives with the Outcomes of the National
Department of Transport: 2010/11 – 2013/14:
PRASA Strategic Objectives
STRATEGIC Outcomes of the Department of Transport
Strengthen
Improve Financial
Financial Position
Performance
An efficient & integrated
infrastructure network that
serves as a catalyst for social &
economic development
√
A transport sector that is safe
and secure
Improved rural access,
infrastructure and mobility
√
Improve
Operational
Efficiencies
Invest in new
Build human
capacity to meet capital technical
passeger demand
capacity
√
√
√
√
√
Increase contribution of
transport to environmental
protection
√
√
√
√
√
Efficient and effective
management and support
√
√
Figure 5: Alignment with DOT Strategic outcome oriented goals
In terms of government’s outcomes, PRASA objectives contribute as follow:
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√
√
Improved public transport
systems
Increased contribution to job
creation
√
Good Corporate
Governance and
economic
development
√
SA Government 12 Outcomes
PRASA STRATEGIC
OBJECTIVES
Outcome 1:
Basic
Education
Outcome 2:
Health
Outcome 3:
Safety
Outcome 4:
Employment
by economic
growth
Outcome 5:
Skills
Outcome 6:
Infrastructure
Outcome 7:
Rural
Communities
Outcome 8:
Human
Settlements
Outcome 9:
Local
Government
Outcome 11:
Better SA &
better world
Outcome 10:
Environment
Outcome 12:
Public
Service
Human Capital
Management
Modernisation and
Capacity Enhancements
Operational Efficiencies
Strengthen Financial
Position
Improve Financial
Performance
Corporate Governance
Principles
Direct
Indirect
Figure 6: Alignment with Government outcomes
5.3 PRASA Strategic Phases
The PRASA strategy is based on a phased approach. Phase 1 with the establishment and strategic
positioning of PRASA has been completed. PRASA in now in Phase 2, that seeks to establish PRASA as the
backbone of public transport. This is to be established through its modernisation drive and creating a new
business to support the new technology investments. Phase 3 will focus on geographical public transport
integration and expansion.
The phases reflect different stages of the evolution of PRASA’s business over the longer term. Each phase
has subtle changes in business context and emphasis that strengthens the aim of establishing PRASA as the
backbone of integrated rapid public transport in urban and rural or regional contexts.
The PRASA strategy is based on a phased approach with Phase 1 largely completed with establishment and
strategic positioning; Phase 2 to establish PRASA as the backbone of public transport in progress and Phase 3
Integration and expansion in planning for execution.
5.3.1 PRASA Phase 1 – Establishment & Strategic positioning
The creation of PRASA necessitated a complete review of the overall functional and organizational
structuring of the consolidated organization.
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Phase 1 required a focus on the following:
Status
 Rapid restructuring of the business as well as redefinition and allocation of roles,
Completed
functions and responsibilities
 Consolidation of assets under PRASA followed by the (re) valuation of asset base
Completed for
selected
assets
 Consolidation of Metrorail and Shosholoza Meyl into PRASA Rail Operations with
a separate Head Office, with Metrorail Regions strictly treated as Operational
Completed.
Units rather than as Business Units.
 Intersite’s revised mandate with a specific focus to becoming a property
development specialist maximising opportunities through developments including
Completed
transit oriented developments
 the creation and development of a strong PRASA identity and brand that
o
defines PRASA
o
enables successful brand management of the operational brands
Completed
[Metrorail, Shosholoza Meyl, Autopax and Intersite
 The strategic positioning of PRASA as provider of integrated public transport
In progress
solutions
 The evaluation of the potential for acquiring a rail engineering company to reduce
Evaluation
the vulnerability to third party suppliers in the rolling stock supply chain
completed
 A strong focus on strengthening Corporate Governance through the formulation
In progress
of clear group policies & procedures
5.3.2 PRASA Phase 2 – Consolidation as the Backbone of Public Transport
Phase 2 concentrates on consolidating the key thrusts initiated in Phase 1, with an emphasis on entrenching
PRASA’s role as a provider of integrated and high-quality public transport services in support of
government’s social, economic and transport intentions. Particular emphasis will be given to:
Status:
 Strengthening the financial position of the organization by restructuring and
In progress
leveraging the assets of PRASA, strengthen the Balance Sheet for the Group for
future expansion and growth and development of property portfolio that will
provide further funding streams for the future.
 Consolidate and enhance the role of rail as the backbone of integrated urban and
In progress
rural/regional public transport systems within South Africa;
 Upgrading of the Rail Signaling System
In progress
 Introduction of new rolling stock destined for the urban rail systems, which
In progress
facilitates the strengthening of brand loyalty, provides a significantly improved
quality of service while allowing differentiated services to be introduced that
Page 19
Status:
broadens the customer’s access to service choice;
 Delivery of high quality services in main commuter corridors;
In progress
 Borrowing plan for PRASA
 The provision of systems that add value to passenger mobility and accessibility –
In progress
seamless modal integration (including through ticketing), service integration &
choice & passenger information;
 Continued technology rationalization and standardization of programs, processes
In progress
and protocols that give emphasis to the optimization of the overall operational
efficiency of the Group.
5.3.3 PRASA Phase 3 – Integration and Expansion
Phase 3 will build on the foundations of Phases 1 & 2. The focus for this phase will be geographical and
public transport service integration and expansion.
In urban metropolitan areas, emphasis will be given to
 The provision of expanded public transport service provision with the integration of alternative rail
technologies [light rail, high-speed, regional rail];
 Technological Upgrades
 Expansion of the Rail Network to enable better connections the Cities and Rural to the Transport
Network
 Public transport service coverage will ensure that no-one is more than one kilometer from a public
transport route with rail continuing to be the backbone of the public transport system, fully supporting
the expanding spatial development of the urbanized metropolitan conurbation.
Rural and regional systems provision will emphasize:
 Strengthening rural and regional nodal development mobility linkages;
 Continuing development of sustainable public transport service provision focused on enhancing rural
mobility and accessibility;
 Integrating neighboring economies through the provision of expanded integrated rural and regional
public transport services
Vertical integration of PRASA across a number of key strategic industries to
 Secure the upside supply chain to reduce vulnerability in total asset management;
 Create opportunities for integrated product innovation that will add value to the public transport
solutions that can deployed;
 Strengthen an employment creation base in support of government’s economic and transport
objectives.
Page 20
6 Challenges facing PRASA
The prolonged under-investment in passenger rail of almost thirty years has manifested in the deterioration
of the general rail asset i.e. Rolling Stock and Infrastructure (Signaling and telecommunications, electrical
systems and perway). This lead to a situation, where services experienced a decline, primarily due to poor
availability and reliability of rolling stock and ageing infrastructure. The lack of investment in the asset base
has also had a negative impact in the skills base of the passenger rail industry over a period of time. A need
for rapid change was identified and PRASA is leading the way to modernise the public transport system and
transform South African’s mind set towards using it.
The challenges that exist that PRASA is addressing though its modernisation program are as follow:
6.1 State of the existing Rolling Stock
The average age profile of commuter coaches is 40 years and has been left behind by international
advancements in rail technology over the past three decades. The life expectancy of railway rolling stock is
of the order of 54 years. The railway industry norms are that the coaches will be upgraded at half life (27
years) and overhauled every 9 years, so as to ensure the structural and sub-systems integrity is not
compromised by metal fatigue, age, wear and tear or environmental condition. Thirty-three percent (33%) of
the commuter rail fleet is already above 36 years and therefore would be uneconomical to upgrade. The life
expectancy of railway rolling stock is of the order of 54 years.
Commuter Rail Fleet Age Profile (Years) and Service Entry Year
Avg Age Motor Coaches
Avg Age Trailer Coaches
Target Avg Motor Coaches
Target Avg Trailer Coaches
300
C
o
a
c
h
e
s
250
200
150
100
50
0
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
52 51 50 49 48 47 46 45 44 43 42 41 40 39 38 37 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 20
Motor Coach
Figure 7: Age profile of Commuter Rail Fleet
Page 21
Trailer Coach
Figure 8: Age profile of Mainline Passenger Service Coaches
PRASA has since embarked on a programme to invest significantly in new rolling stock over the next 20
years. A detailed feasibility which focused mainly on the Rolling Stock Fleet Renewal Programme was
completed in June 2011. The study results were considered and approved by the PRASA Board, Minister of
Transport and Cabinet effectively giving PRASA a green light to start with the full implementation of the
programme. Based on the feasibility study results, 7 224 new vehicles are required nationally to satisfy
forecast passenger demand, which includes operational spares. Funding for the programme was approved
by the National Treasury.
PRASA has made a considerable progress with the appointment of Gibela Rail Transport Consortium (Gibela)
as preferred bidder to supply 3600 new Metro Rail coaches at a cost amounting to R51 billion over a 10 year
period (2015 – 2025). Overall, the Rolling Stock Fleet Renewal Programme will deliver 5256 vehicles to
satisfy existing rail passenger demand on the current network until the year 2020, 456 vehicles to satisfy
growth in rail passenger demand to the year 2030 on the existing network and a possible further 1512
vehicles to satisfy long term rolling stock needs on new corridors to be constructed as part of a possible
future expansion of the existing network and the development of a new network.
The PRASA Fleet Renewal Programme is the catalyst for the transformation of Metrorail services and public
transport as a whole. It is the beginning of the rollout of the Government’s Comprehensive Rail Programme
over the next two decades. Whilst the urgent challenge to improve passenger services remains primary, the
Rolling Stock Fleet Renewal Programme has been designed to achieve a number of key Government
objectives such as the delivery of quality services to citizens, revitalization of South Africa’s rail engineering
industry through local manufacturing and ensuring local content (65% minimum local content is set) as part
Page 22
of the Government’s Industrial Policy Action Plan (IPAP2), employment creation and skills development as
well as Broad-Based Black Economic Empowerment.
PRASA appointed the B-BBEE Equity Partners on the 1stAugust 2013. A separate procurement process for
identification of the Current Active, Current New Entrant and Investor B-BBEE categories were concluded
with the appointment of three BBBEE participants:
 Current Active B-BBEE shareholder - Khiphunyawo Rail
 Current New Entrant B-BBEE shareholder- Community Rail Services (Pty) Ltd
 Investor B-BBEE shareholder - Elgin-Identity Rail Corporation
PRASA further achieved contract signature on the 14th of October 2013 with Gibela on the following
two agreements for the phase of the Programme:
 Manufacture Supply Agreement (MSA): this agreement entails the supply of 3600 vehicles
over a 10 year period (2015 – 2025) for a contract value of R51 billion (excluding adjustments
for forex movement and indexation).
 Technical Support and Spares Supply Agreement (TSSSA): this agreement entails the technical
support and maintenance of vehicles supplied by Gibela and is contracted for an 18 year period
(2015 – 2033).
6.2 Signaling
The current signaling system is no longer suitable for a safe movement and monitoring of traffic. It is
unreliable and has contributed to accidents in the recent past. Of the current system, 85% of the signaling
installations have become obsolete, and the remainder not able to fully support modern and safe railway
operations. The current railway signaling system also consists of a mixture of technologies from the 1930’s;
50’s; 70’s and 80’s. Upgrading the system will replace the practice of mechanical interlocking or the manual
changing of signals by pulling a leaver.
Unavailability of spares also makes it increasingly impossible to perform maintenance and fault finding
duties within the prescribed specifications. Changes to installations to accommodate layout changes are not
easy to implement and introduces an even bigger reliability risk to such installations.
The current status of the signaling is summarised below:
Page 23
Region
Interlockings
Average Age in 2009 (years)
Signaling Elements
Gauteng
89
64
9365
Western Cape
43
25
4287
KwaZulu Natal
30
32
2928
Nationally
162
30
16 580
Through PRASA’s planned railway signaling replacement initiative, train signal changes will be automated.
The new Railway Signaling System and the construction of the Train Control Nerve Center will enhance
operational capacity and allow higher flexibility, improved safety, reduce train delays and reduce human
factors in the operation of trains and lay the foundation for the introduction of new modern rolling stock.
PRASA has embarked on a process to replace all existing signaling interlocking, which consist mainly of
obsolete mechanical and electro-mechanical systems, with electronic interlocking as the technology of
choice. Since it is not only funds that are a constraint, operations and time play a major role when embarking
on a project of this magnitude, hence the whole project is divided into stages and phases. The first phase is
the Gauteng Nerve Center (GNC), which has commenced and is currently 26% in progress. This also includes
the Kaalfontein – Leralla – Tembisa re-signalling project.
Phase two includes the re-signalling projects in Durban (awarded to Bombardier), Western Cape (awarded to
Thales/Maziya), and Gauteng Stage 2 (awarded to Siemens). The scope of the Gauteng Stage 2 project will
include re-routing of services and eliminate bottle neck sections where possible; re-signalling the network
using fully bi-directional signalling to increase operational flexibility; increase signalling headway capacity;
and increase service speed in the A and B corridors. The schedules for Gauteng 1 and Gauteng 2 will be
aligned into a corridor implementation approach.
The signalling programme is one of the key priorities of PRASA in the coming financial years. Currently, the
programme has been allocated an amount of R3.260 billion, including telecommunications, with
R814 million in 2013/14, R855 million in 2014/15 and R1, 591 billion in 2015/16.
6.3 Deployment of new trains
The contract between PRASA and the Gibela Rail Consortium was signed in October 2013. The country
expects new trains to be delivered from June 2015. Passengers expects new trains on their routes, with local
and provincial authorities also expecting new trains to be deployed to support their transport plans . The
Page 24
reality is that, at most, 360 coaches will be delivered in the first and in each subsequent year; and that it will
take at least 10 years before the number of new trains is equal to the number currently in service.
This means that in the first few years, very few current train passengers will experience the benefits of the
new trains. It is therefore necessary that the deployment be based on a transparent prioritisation process
that has undergone widespread public consultation.
The simplest way of deploying the new trains would be on an ad hoc manner. However this would not
achieve any objective, except to satisfy the strongest / loudest requests; with no resultant benefit to
passengers.
Another way would be to deploy the new trains to the regions in proportion to existing conditions; e.g.
passenger numbers, fleet size, etc. If the deployment is based on regional fleet size, then the first year’s
trains would be deployed as shown Table 1
Table 1: Proportional deployment methodology impact in 1st year
% passengers
Number of new trains
Western Cape
30
9
KwaZulu Natal
13
4
Gauteng
53
16
Eastern Cape
4
1
100
30
TOTAL
The question arises “What can a region do with 11 trains?” It could distribute them across all its services to
advertise what the new trains will look like. But besides the trains being new, the passengers would not
enjoy the benefits of the new trains, such as shorter travel times resulting from faster acceleration and
deceleration and higher cruising speed. Nor would passengers enjoy any improved reliability because the
new trains would be mixed with existing trains and when any of the old trains fail, any new train that was
following will also be delayed. The new train operating in a fleet of new trains would also prompt some
passengers who would have taken an earlier train to wait for it and some passengers who would have
travelled on a later train to come early. This would result in the overcrowding of the new train, with its
potential for increased wear and tear, vandalism and crime; and the under-utilisation of the other existing
trains, thereby reducing the effective capacity of the service.
Page 25
There might be a desire to show off the reduced travel time achievable by the new train. This is shown in
Figure 9 which compares the time distances of a fleet of old trains and a fleet of old trains with one new
train. What is obvious not only does the new train destroy the regular clock face scheduling over the period
but also could reduce the number of train trips that could be provided safely (depending on the difference in
travel time between existing and new trains and the train frequency).
Figure 9: Effect of mixing new trains with existing trains
It is for these reasons that it is proposed that the new trains be deployed as meaningful fleet to service a
corridor or route. Here all the trains would be new, having better acceleration and braking rates and cruising
speeds than the old trains. Besides the trains being new, passengers would experience all the benefits of
using new train services.
The corridor deployment strategy will have the following implications:
1) Only two corridors in the country can be provided with a new fleet of trains in each year;
because major services such as Mapobane, Naledi, KwaMashu, Chris Hani, etc. require
between 12 and 18 trains of 12 coaches. A region could wait two years before receiving its
first fleet and another two for its second fleet.
2) As such, pressure can be expected from political and community groups for the new fleet to
be deployed in a specific region; and even on a specific corridor.
3) Regardless of where a fleet is deployed, PRASA will be subjected to strong, negative and
even defamatory public criticism about its decision.
4) Within a region, passengers on routes not benefitting from the new trains could consider
the fact that anotherroutes had received a new fleet of trains to be unfair. This could be
used to stir up civic protest that could result in anti-social behaviour and even vandalism
and violence. (The PRASA Rail 5-Point Plan will be used to improve existing services on routes
that do not immediately benefit from new trains initially.)
Page 26
6.4 Mainline Passenger Services Turnaround
Modern rail systems are important for the modernisation of the economy and to ensure sustainable longterm growth. High capacity and well maintained passenger and cargo rail networks are an integral part of a
modern transportation network. Affordable, comfortable, sustainable and safe travel opportunities for all
social groups can be provided by well executed passenger rail services. In addition a good rail network
maximise opportunities for trade and tourism and ensure equal distribution of economic benefits to all
corners of the country. Long distance passenger rail is necessitated by the geography and socio-economic
structure in South Africa. However the current long distance rail services, Mainline Passenger Services
(MLPS) face a number of challenges that prevent it from executing this critical role.
MLPS are not able to cover its costs consistently with current operating revenues covering only 26% of its
operating expenses. Haulage and personnel costs contribute 73% towards overall expenses and are the main
cost blocks to be reduced.
Figure 10: MLPS historical operating expenses
The current problems of MLPS have its origins in the transfer agreements with Transnet of 2008.
 Access costs to the network are too high
 The network lacks quality especially in terms of frequencies and speeds.
 Locomotives are unreliable due to the age of the assets received from Transnet in addition to
reactive maintenance procedures.
 Inflexible labour agreements and
 Poor levels of staff motivation and qualifications.
In addition MLPS underperforms its competitors in terms of availability and reliability as indicated in the
analysis below.
Page 27
Figure 11: MLPS comparison with competitors
Management has already taken critical initial steps for a turnaround namely
 Investment in new locomotives for long distance passenger transport
 Conditions of service have been evaluated and implemented changes from 5-day to 6-day
weeks as well as 45 hour working weeks in 2013.
 The TFR commercial agreement has been interrogated.
 An internal efficiency programme has been launched for onboard services, energy and training.
 Route evaluation is ongoing.
However costs will remain significantly higher than revenues in the short-term but will decrease in the
future. Therefore it is necessary to invest in track maintenance, construction of new track as well as new the
technologies to help transform Mainline Passenger Services (MLPS) into an effective provider of longdistance rail services for all South Africans.
6.5 Human Capital Development
The strategic intent of PRASA’s Human Capital Management (HCM) department is to ensure that the
business performs in a stable environment that is conducive to the achievement of its objectives, through
the relevant guidance, policy making, standard setting, facilitation and leadership. This can be achieved,
amongst others, by recruiting, developing, nurturing and rewarding a model PRASA employee with the
necessary attributes, who will be able to rise to the challenges of a modern organisation capable of
discharging its primary responsibilities. The challenges identified for human capital management in the
Group is indicated on three tiers :
Page 28
Operational
Strategic
Transformation
Ensuring that the proper day-to-day operational
functioning of HCM occurs within PRASA, that is, a “Backto-Basics” approach.
e.g. to ensure that all positions are profiled, evaluated and filled
expeditiously
Ensuring that PRASA pursues and implements HCM best
practices.
e.g. ensuring that a strategic HCM Plan for PRASA exists,
which informs HCM processes (recruitment, reskilling etc.)
Ensuring that HCM strategies and initiatives, aimed directly
at addressing transformation towards consolidating the
entity, are addressed
e.g. a change management programme to facilitate the
complete consolidation of PRASA and its entities. This will be
complemented by a HCM strategy that addresses issues of
ring-fencing, employee transfers, organisational design and
systems support
Figure 12: Three tier model of HCM challenges
6.6 Devolution of Subsidy to Provincial / Metropolitan Transport Authorities
The National Treasury initiated a process for the devolution of rail subsidies to provincial or metropolitan
authorities late in 2010. The intention is to devolve only rail operational subsidies to the MTA’s. Proponents
of this approach are using legal argument in terms of the second National Land Transport Regulations, 2010
Section 7 (1):
“Every municipality must establish an intermodal planning committee (IPC) within six months after
promulgation of the Regulations, unless the Minister grants written permission for it to be established later
on application by the Municipality with the provision of reasons” and Section (2)(a) &(b) of the second
National Land Transport Regulations, 2010
(1) The IPC must−
(iii) conclude contracts with operators of metropolitan bus services, subsidized bus services,
passenger rail services and taxi services to establish IPTNs;
(iv) ensure rail plan corridor alignment and implementation parameters;
(b) provide for holistic integration of─
(i) rail passenger services in the area with road based public transport services;
PRASA believes that further debate on the appropriateness of the devolution of rail subsidies to
Metropolitan Transport Authorities at this stage in the development of our Public Transport System is
crucial. From a PRASA perspective, rail is currently a national function and its success requires crosssubsidisation within the national rail system as a whole. Rail is also important from the point of view of
Page 29
economic unity, establishing links between different cities and between rural areas and metropolitan centres
of the country as well as overcoming regional unevenness and underdevelopment.
A number of challenges exist in terms of the regulations and implementation thereof:
1. Provincial involvement should be secured where appropriate (e.g. the complexities of Gauteng
where rail services are provided across a number of metro’s) as well as City Treasuries.
2. Political buy-in at all spheres of Government needs to be ensured including Executive Mayors
and MMCs.
3. From a governance perspective the relationship between Metros and PRASA Board and
representation within Board, needs to be clarified.
4. Service levels are currently constrained by available operational rail subsidy and additional
services demand will not be viable. Supply driven versus demand driven service provision
should be reconciled.
5. Clarifying and strengthening various stakeholder relationships i.e. Labour, PRASA Management,
Metro Management etc.
In order to address these challenges PRASA in cooperation with SA Local Government Association
(SALGA) is embarking on a study to establish the viability and suitability of the devolution of rail to
municipalities. The study has the following objectives:

To locate the devolution of rail function within the existing constitutional policy and
legislative environment and outline the regulatory framework for the devolved function

Identification of national norms and standards that would apply to the devolved function

To provide a description of the function to be devolved and clarify roles and responsibilities
at the local government level and in relation to other institutions (institutional framework)

To outline the fiscal framework to support devolution (financial framework)

To outline the planning framework (national to local level plans)

To outline the essential support and monitoring framework

To determine the potential impact of devolution on different types of municipalities

To identify mechanisms for devolution of the function

To outline the process (including phases) for devolution (including targeted municipalities)

To make overall recommendations on devolution
6.7 Sustainable Funding
Due to long-distances and low-densities that contribute to low passenger numbers and low fare structure,
passenger rail services are not able to generate the necessary financial resources to meet its obligations. The
need for changes in the way rail services are funded from the national fiscus requires a major review. The
Page 30
ability to provide the requisite level of funding to address both the investment capital, operational
requirements and increasing demands for rail services in growing cities is fundamental to the success of
PRASA. The current approved Medium Term Expenditure Framework (MTEF) allocations are illustrated in
Figure 13.
This reflects a significant increase in the capital grant allocation over the four years depicted. This was in line
with the Phase 1 requirements of stabilizing commuter rail and going forward starting to provide for the
expansion of rail to meet passenger demand.
The approved funding base makes little provision for key activities that need to be accommodated:
 Funding for long-distance rail operations under the auspices of Mainline Passenger Services, an
operating unit that remains materially dependent upon Transnet Limited in terms of network access,
haulage and other technical support.
 Impact of statutory increases such as rates and taxes by municipalities as well as energy
increases for electricity as approved by the National Energy Regulator of South Africa.
 High levels of material cost and maintenance costs, inclusive of personnel to carry out
maintenance on old infrastructure and rolling stock to maintain the asset base in working
condition.
Page 31
Figure 13: MTEF allocations against Revenues and Expenses
6.8 Asset Redistribution
PRASA is dependent upon a number of critical external service providers. The restructuring of these external
organizations can result in PRASA being vulnerable to business decisions over which it has little or no control
but which have a major impact on PRASA’s ability to deliver. This is not in PRASA’s best interest.
The Transnet Group’s review of core / non-core landholdings, the divestiture of Transtel from the Transnet
Group, the creation of a commercial Neotel and the strategic focus of key Transnet business units on
Transnet related core businesses requires to be acknowledged and mitigated against.
PRASA’s growth is also linked to the securing of future rights-of-way for new rail links and corridors, as well
as landholdings to support the future expansion of staging, maintenance and accommodation facilities. The
principle of “the right of first refusal” needs to be entrenched in all dealings with Transnet as well as the
public sector (all spheres of government) at large where land required for public transport operational
purposes is first and foremost offered for public transport service provision before consideration is given to
alternative uses or alienation.
6.9 Long-term Plan Alignment (including Rail Plans)
The updating and maintenance of long term plans – rail, road and land – is fundamental in understanding
the future demands that will be placed on PRASA. These plans need to be aligned with, and be legitimized
in, the statutory plans produced by the various Planning Authorities in terms of all current legislation.
Page 32
Both operating requirements as well as investment requirements must be detailed within these plans. The
ability to respond timeously to Planning Authority requests for specifically urban commuter rail and regional
rail services is core to establish PRASA’s credibility as a provider of integrated public transport solutions.
The long-term plans need to clearly demonstrate PRASA’s longer-term intentions while the Business Plans
provide realistic delivery statements.
6.10 Strategic Partnerships
The need to recapitalize PRASA as a major player in supporting the delivery of government’s socio-economic
and transport intentions requires the identification of key strategic partners and investors. Building strategic
alliances and strengthening relationships, both nationally and internationally, will assist PRASA in addressing
its short-term needs while positioning the organization for longer-term growth into Southern Africa.
6.11 Modal Integration
Modal integration poses both internal and external challenges. Internally, the integration of systems across
urban and regional services requires a single enterprise platform and architecture, the review of operational
service synergies that can be developed between the urban and rural systems specifically in the peripheral
or peri-urban areas of the metropolitan conurbations, including integrated facilities, passenger information
and ticketing.
Externally, strengthening the relationships with the various Planning Authorities to ensure integrated modal
interchange facility, zonal systems, fares, passenger information, ticketing and service provision is essential.
Integration is also required at both a planning and service provision level with Bus Rapid Transit systems
being developed in the larger cities as well as wider and community based feeder service integration with
existing and proposed rail services.
Page 33
7 Risk Management
Fraud Risk Management is the primary focus of the ERM Department. The Implementation of the Fraud
Awareness Campaign as per the ERM Fraud Awareness plan is well under way.
As the risk assessments for PRASA Corporate Departments has been concluded, the focus point for ERM
Department going forward is monitoring the effectiveness of the risk mitigation plans and ensuring they add
value to the business by improving the achievement of PRASA objectives and the ERM Tool remains key to
the process.
7.1 TOP 10 STRATEGIC RISKS
The dashboard on the PRASA Group Strategic risks is presented below. Mitigation plans are drafted,
reviewed and monitored with the strategic risk owners and ERM.
Risk
Risk
Number
Description
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
Page 34
Fraud
Commuter backlash and loss of
assets due to commuter agitation
Inability to unlock the value of
the property portfolio.
Failure to achieve financial
sustainability
Increasing employee benefit costs
( liabilities on the balance sheet)
Inadequate return on
investments
Unproductive Assets
Loss of revenue and poor liquidity
position (financial viability).
ICT ineffectiveness
Inability to raise funding from the
market
Strategic Risk
Risk Owner
Progress 2013/14
1. Fraud
Group CFO
According to the PRASA Fraud Hotline only 8 fraud cases were reported from September 2008 to date.
ERM’s view, based on these Statistics, is that the current controls and Mitigations to deal with Fraud are
effective and fraud is not prevalent within PRASA. Group Security Department has been approached to
consolidate all Reported Fraud Cases in an attempt to validate the current information, quantify the Risk
of Fraud and to be able to effectively monitor the success of Fraud initiatives.
ERM met with the GCFO and agreed that ERM, Security, Internal Audit and Finance Departments need to
meet and discuss ways of further improving Fraud Management.
Furthermore ERM has embarked on the following to reduce the risk of Fraud:


Awareness and education on Fraud Risks through Fraud Risk Management presentations
across PRASA with the assistance of Deloitte as the administrators of the Fraud Hotline.
Fraud Prevention Posters are being sourced to be distributed in key areas around across
the organisation
Fraud articles on the Ontrack Magazine starting with the October/November issue
2. Commuter backlash CEO Prasa Rail
Prasa Rail has developed a five Point Plan that will be aligned and incorporated with current operational
and loss of assets Action Owner (CEO
due to commuter Prasa Tech)
effectiveness program (Rail Program of Action) and corridor modernisation change management
agitation
Service Redesign This involves
processes. Key elements of the plan are:




Introduction of inner/outer services with intermediate station connections for increased
shuttle services and express services, offering improved frequencies and managing
crowding.
Reorganizing rolling stock deployment through appropriate set configuration.
Improve availability of rolling stock from maintenance program.
Further decentralization of the staging of trains to respond to optimum service
Page 35
Strategic Risk
Risk Owner
Progress 2013/14



deployment.
Short distance traveling of trains to maximize asset utilization
Communications to customers.
Introduction of user friendly Time-Table (introduction of user friendly and
comprehensible timetable operating at regular intervals)
Acceleration of Infrastructure improvements and rehabilitation (addressing infrastructure issues affecting
service delivery, especially speed restrictions and capacity bottlenecks)
Security of passengers and assets which involves








3. Inability to unlock CEO PRASA CRES
the value of the Action Owners (CEO
property portfolio.
Prasa Cres GCFO)
Page 36
Private security personnel to be under direct command of Prasa security.
Ensure that the mobile Task Team members lead the deployments particularly in
Gauteng.
Ensure optimum security deployment in trains through creation of more mobile teams
particularly during off peak services.
Integrate Platform Marshalling responsibilities within security to ensure enforcement of
safety compliance.
Deploy security for zero tolerance compliance in the operational environment and within
trains.
Deploy security to protect key installations, i.e. vulnerable signaling installations.
Protection of trains through focused teams on key corridors
Operational Safety (intensify operational safety interventions and manage human factors
affecting rail operations)
PRASA CRES Real Estate Strategy was approved by the PRASA Board of Controls in November 2012. The
strategy seeks to provide a framework to assist PRASA to effectively unlock the value of the Property
Portfolio by implementing the following programs which are currently in progress:
Strategic Risk
Risk Owner
Progress 2013/14


The acquisition of high income yielding Development Leases
The sale agreement for The Bridge Shopping Centre and Umgeni LOT 421 & 422 is
awaiting approval by GCEO.
Below are the projects relating to Commercialisation and with the Project Status
Region
Project Name
Progress to date
NGR (6)
Silverton Station – Light
Contractor has been
Industrial Park
appointed
Hatfield Office
Preliminary designs completed. Await building plan approval and a
Development (PRASA
presentation of the proposal is to be made to the GCEO during the
House)
month of October for the relocation of Prasa House to the new
building. Tender to be advertised during November 2013.
Pretoria Station (Luxury
Professional team appointed. Busy with designs & scoping.
Coach Facility)
Saulsville Mini Retail
Existing professional team only appointed up to stage 4 for
intermodal. New team to be appointed for the commercial and
further stages.
SGR (9)
Pretoria Station- pay on
Site handed over to contractor, civil works to commence in
foot system
September and completion set for 30 November 2013
Signal House Upgrade
Gautrain proclaimed the property and the project will proceed.
Tembisa: Cambridge Stores
This will be last station to be granted final approval. The SDP’s are
pending a traffic study that the Ekurhuleni Metro has made a
requirement.
Leralla: Cambridge Stores
Site development plans (SDP’s) submitted in July 2013 have been
approved. Awaiting submission of building plans for approvals from
Cambridge so they can move on site.
Vereeniging: Cambridge
Page 37
Site development plans (SDP’s) submitted in July 2013 have been
Strategic Risk
Risk Owner
Progress 2013/14
Stores
approved. Awaiting submission of building plans for approvals from
Cambridge so they can move on site.
Park Station -Pay on Foot
Appointment of service provider in progress. Expect completion is end
November 2013
Park Station – Bus Pay on
Consultation with operators in progress. Look to implement the phase
Use
1 beginning November2013
Park Station Precinct: Lab
Tender Evaluation Committee has completed its evaluation and a final
Building - Student
report has been sent to the Central Adjudication Committee for
Accommodation
consideration
Park Station Food Court
Construction in progress (90% progress) Expected completion is Mid
October 2013
Park Station – Banking Mall
Construction in progress (66% progress ) Expect completion by end
November 2013
KZN(5)
Park Station Precinct :
Tender Evaluation Committee has completed its evaluation and a final
Metro park - Hotel
report has been sent to the Central Adjudication Committee for
Development
consideration
Metrorail Space Mezzanine
Lease with Mr Price signed.
- Office Space
Metrorail Space Ground
Offer to lease to Ethekwini Municipality accepted by both parties.
Floor - Office Space
Lease effective from October 2013
Rovis Marketing /PRASA
Tender delayed due to uncertainty on whether Checkers or Spar will
CRES Space – Office Space
be taking the space provided. The decision on the prospective client
will inform the specifications on the space created
Umngeni Storage -
Project is at Design stage
Conversion to retail)-
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Concourse Vacant Space –
Offers to lease concluded for Pharmacy and Internet Cafe. Potential
Retail and Commercial
tenant for offices and ATM being engaged. Occupation Dates
Strategic Risk
Risk Owner
Progress 2013/14
expected 1st November 2013
WCR(3)
Lentegeur Station - KFC
Project delayed
development
CTS: Parade Concourse -
Spar indicated an interest on 2000m2 as an anchor - superstar.
Retail development
Continuing with the leasing of the additional space.
(4000m2)
CTS: Forecourt – Retail
Additional retail Glass Kiosks being developed. Expect completion in
March 2014
As part of the Real Estate Strategy a list of non-core assets have been identified for disposal. Business
cases for individual assets identified for disposal have been developed. A motivation for PFMA Section 54
application has been prepared and submitted to group for approval. This program aims to reduce the
property holding costs and associated risks for PRASA CRES portfolio.
Non-core assets have been identified for disposal. Business cases for individual assets identified for
disposal have been developed. A motivation for PFMA Section 54 application has been prepared and
submitted to DoT for approval. This program aims to reduce the property holding costs and associated
risks for PRASA CRES portfolio.
CFO
Financial Sustainability is in its nature broad and covers most of the risks identified. The risk owner has
financial
Action Owners (CSO &
committed to engage with all risk owners and action owners to review targets, timeframes and establish
sustainability
CEO Intersite)
status of mitigation plans. The following are measures to mitigate the risk:
4. Failure to achieve


Page 39
R650 Million has been approved by the Treasury department to assist with the running of
Shosholoza Meyl which will alleviate the risk of financial sustainability.
Non-core assets have been identified for disposal. Business cases for individual assets identified
Strategic Risk
Risk Owner
Progress 2013/14


for disposal have been developed. A motivation for PFMA Section 54 application has been
prepared and submitted to DoT for approval. This program aims to reduce the property holding
costs and associated risks for PRASA CRES portfolio.
Increase in security and fencing to counteract fare evasion
Robust debt collection initiatives have been put in place
Introduction of the Automated Metering Program that is aimed at managing electricity consumption and
to increase the electricity recovery rate within the current commercial areas is underway
5. Increasing employee Group HCM Executive The risk has been partially mitigated by the implementation of the new Leave Policy which states that
benefit
liabilities
costs
on
( Action Owner (GCFO)
the
balance sheet)
Managers can no longer accumulate leave days. Leave not utilised at the end of the leave cycle is
forfeited without any option to have the leave paid out.
The Bargaining Grades Leave still presents a risk as bargaining grades employees are still allowed to
accumulate leave as follows:
1. 5 day worker can accumulate up to 43 days leave and
2. 6 day worker 51 days leave.
This leave cannot be forfeited and the excess is paid out to the staff at the end of their leave cycle. HR is
currently developing ways to manage the risk further.
The leave rectification project for PRASA Rail has also been implemented which will assist in the
mitigation of the risk. ICT is also targeting the 2013/14 financial year to introduce ESS with the view to
effectively manage leave and address the risk.
6. Inadequate return SAD Head
on investments
EPMO is currently developing a Project Management Framework to guide Benefit Tracking. ERM
Action Owner (Project
Department is still awaiting a date from SAD Department to discuss progress with the management of
owner)
return on investment.
Page 40
Strategic Risk
7. Unproductive
Assets
Risk Owner
Progress 2013/14
PRASA Rail, CEO
This risk relates to Assets in excess of operational requirements. Finance has no assets that are in excess
Action Owner s
currently and the organisation through the rationalisation of the MLPS and the disposal of unproductive
(GCFO, SAD,
assets is satisfied that its assets are being optimally utilised.
Executive)
8. Loss of revenue GCFO
The following are initiatives that are mitigating the risk of liquidity:
and poor liquidity Action Owners (CEO
position (financial Prasa Rail, CEO Prasa
viability).
Cres, CEO Autopax)



PRASA Rail has instituted plans to rationalise MLPS business operations which includes focusing
operations on profitable routes. MLPS have further reduced services to 44 trains per week from
66 trains per week that will curtail Operational Expenditure
R650 Million has been approved by the Treasury department to assist with the running of
Shosholoza Meyl which will alleviate the risk of financial sustainability. Management has
Implemented cost containment measures and greater focus on operational efficiencies.
Introduction of the Automated Metering Program that is aimed at managing electricity
consumption and to increase the electricity recovery rate within the current commercial areas is
underway. The Challenge still remains lack of quantification of the revenue lost. This challenge
makes it impossible to accurately quantify the magnitude of the risk and to effectively monitor
the success of the mitigation strategies. Increase in security and fencing to counteract fare
evasion
To reduce loss of revenue the following initiatives are in place:
9. ICT
ineffectiveness

Robust debt collection initiatives have been put in place, Of the R24 million handed over to MBD
four months ago. The current records reflect that to date a total of R6.4 million has been
collected over the last six months against the R 24 million that was handed over.

Increase in security and fencing to counteract fare evasion.

Robust debt collection initiatives have been put in place.
CIO
The recent events on the ICT environment have highlighted the need to re-assess the mitigation strategies
Action Owners (All
employed for the risk. ICT Project risk management remains a key factor in managing the projects geared
Page 41
Strategic Risk
Risk Owner
Group Executive)
Progress 2013/14
towards the mitigation of this risk. ERM has scheduled a meeting with ICT to improve on the effect of the
mitigations presented.
10. Inability to raise CEO Intersite
funding
the market
from
The MOU between PRASA and DBSA to cover suitable and the possible funding requirement of PRASA was
returned with proposed amendments. These have been addressed and accepted by the DBSA. The final
document was forwarded to Group Legal for sign-off and submission to the GCEO.
Page 42
6. PRASA Strategic Initiatives
In order to achieve the vision of building a sustainable company by 2015/16 the following features need to
be incorporated:
 The right kind of capacity
 Provide quality passenger services
 Modern stations and trains supported by modern infrastructure i.e. modern signaling,
upgraded electrical infrastructure and perway etc.
 Modern Bus fleet with recognisable livery to support the Autopax marketing strategy
 Business generating enough financial resources from operations to fund its own shortfalls
after subsidy
 A business capable of recapitalising itself
 Support Government infrastructure investment through the SIPs, especially SIP7 which
PRASA is co-ordinating on behalf of Government.
7.2 Strategic objectives
The strategic objectives for PRASA aligned to the strategic themes and initiatives are:
Table 2: Strategic Objectives
Strategic Objective
Short description
Strengthen the financial position of PRASA through restructuring of the
Strengthen financial
balance sheet and assets by 2015/16.
position
Improve the financial performance of PRASA by managing costs and
Improve financial
increasing revenue to ensure breakeven by 2016/17
performance
Service excellence in the provision of integrated best practice public transport
Improve operational
solutions that are affordable for public and government, with 90% passenger
effectiveness
performance, predictable train frequencies of 5 minutes in peak and
operationally safe with annual reduction of 5% in accidents, fatalities and
injuries with current cost baseline by 2015/16.
Modernisation of the asset base that ensures a balance between investment
Invest in new capacity to
and maintenance of assets (rolling stock, infrastructure and property
meet passenger demand in
portfolio) through the application of life-cycle management practices,
the medium to long term
processes and procedures to all assets through capital programme of R32
billion over the 2013 MTEF.
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Bridge the gap between the strategic focus and employee management and
Build human capital internal
performance to achieve the strategic goals with specific focus on skills
capacity
development to meet the skills set required through PRASA’s modernization
programme.
Improve performance and sustainability through effective implementation
Corporate Governance and
and adherence to good corporate governance principles and risk
economic development
management
7.3 Creating a new business
7.3.1
Preparing for the new fleet of trains
Current train services have been criticised because of delays, poor customer service, condition of the
coaches and railway facilities, etc. Operational changes are essential to ensure that the new trains can
operate to their potential and thereby provide passengers with a modern train service. The acquisition of
new rolling stock, accompanied by the major investment to improve perway, electric traction systems,
signalling, security systems and stations will result in improved reliability and shorter travel times. However,
capital investment must be accompanied by change in human behaviour in train operations, rolling stock
and infrastructure maintenance, service to the customer services, including timeous communication of
changes in time schedule or platform, etc. At the same time, passenger behaviour will also need to change;
e.g. train doors cannot be kept open to wait for a friend or for any other reason (because trains cannot move
if a door is open), vandalism needs to be eliminated, appropriate fares must be paid, tracks cannot be
crossed to board trains from the opposite side of the platform, etc. Furthermore, the behaviour of the
community along the corridors also needs to change insofar as they must refrain from inappropriate
behaviour (e.g. crossing the railway tracks instead of using overhead bridges or subways) and can assist to
reduce criminal behaviour by members of their community and from outside (e.g. by reporting crime, and
vandalism and theft of railway property and infrastructure).
Unfortunately we cannot wait until the new trains are deployed to change behaviour, because this requires a
long time period of communication, encouragement, motivation, enforcement and recognition. If the new
trains are deployed without behaviours having changed, the infrastructure will soon deteriorate and the
quality of service will soon revert to that currently being delivered.
7.3.1.1 The PRASA Rail 5-Point Service Improvement Plan
The 5-Point Service Improvement plan has been summarised as:
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 Service redesign
 Change to clock face timetable
 Acceleration of infrastructure improvements
 Improved safety and security of assets
 Improved operational safety.
Its purpose was to galvanise PRASA as a whole to create improvements in the train service across the
country over a short term. However, many of the potential improvements are thwarted by other
components of the service. For example the improvements from the service redesign and clock face
timetable can only be achieved once the reliability of the rolling stock, the quality of the infrastructure have
improved, the vandalism and theft of railway property is reduced significantly, and staff, passenger and
community behaviour have changed so that much fewer trains are delayed or cancelled. The upgrade of
rolling stock and infrastructure across any region will take years and not months; as will changing human
behaviour.
7.3.1.2 The PRASA Rail 5-Point Service Improvement Plan as precursor to the deployment of the
new trains
If one applies the 5-Point Service Improvement Plan as a medium term programme to prepare a corridor for
the deployment of new trains then the following are required:
a) The perway, traction, signalling and even the stations will be improved to match the
requirements of a new train service; as part of the Infrastructure Modernisation Programme.
This means that the components of the Infrastructure Modernisation Programme will be
implemented in corridors within a time schedule to match the deployment of the new trains.
b) During this period, construction will require occupations that will make the delivery of the
scheduled services difficult. As such it is essential that not only must occupations be minimised
(e.g. more than one element of infrastructure will be upgraded during an occupation), but train
schedules will need to be repeatedly revised during this period. Scheduling competency will be
developed at both national and regional levels. Every change in service will be communicated
timeously (and effectively) to passengers and supported by a communication programme that
explains why the changes are necessary.
c) Every effort will be made to maximise the reliability of the service even during the period of
occupations. This will require that the most reliable rolling stock in the region will be assigned to
the corridor. Furthermore, every department will deploy its best personnel on that corridor, i.e.
the most competent technicians from rolling stock and infrastructure, the most effective staff
from protection services, and the most courteous and informed staff from customer services,
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etc. These actions will set the bench mark for staff across the region (and the country) into the
future.
d) A change management plan will be devised for each corridor. This will be driven nationally but
be based on specific needs of the corridor and the lessons learnt from corridors where new
trains have already been deployed. Budget will to be provided for the change management
process; and hopefully a sizable proportion of these cost can be capitalised. At this stage, two
years remain until the deployment of the first fleet of trains. This seems a reasonable time to
begin inculcating the changes, and with on-going reinforcement the changes should become
self-sustaining.
NEW ROLLING STOCK DEPLOYMENT REQUIREMENTS
Depots
Staging yards
Perway / Track
Electrical high tension
cables
Communication
systems
Stations
Ticketing systems
Systems, processes &
procedures
PRASA Staff
Passenger behaviour
Secure rail corridors
INFRASTRUCTURE
OPERATING ENVIRONMENT
National or Regional
Interdependent
projects
Occupations on
current system
Legislative
requirements and
approvals
MODERNISATION PROJECTS
Figure 14: Rolling stock deployment interactions required
7.4 Modernisation
Since the 2012 MTEF capital budget framework reflects a rising investment outlook in support of PRASA’s
strategic initiatives. The Group capital spending will reach R26 billion over the next three years. This
allocation allows PRASA to start with the implementation of the Rolling Stock Fleet Renewal Programme and
further support the national signaling programme, new depots, station modernisation and infrastructure
such as track and electrical substation upgrades. PRASA is mindful that a careful balance is maintained
between different asset classes such as infrastructure, rolling stock and property assets. As operational
subsidy is decreasing in real terms, PRASA has with its strategy established in 2010, embarked on revenue
generation through its properties to improve the ability of these properties to generate rental income in
Page 46
support of the rail business going forward. A further enhancement on this is the restructuring of the business
entities to enable the unlocking of the capital allocations and enable execution of capital projects.
7.4.1
New Rolling Stock for Suburban/Commuter rail service
PRASA has intensified its effort to procure approximately 7 224 new rolling stock with projected
investment of R123 billion over an estimated period of 20 years. The procurement of new rolling
stock is a critical component of PRASA’s mandate to provide for modernization and growth. PRASA
has since made a considerable progress to achieve this objective where Gibela Rail Transport
Consortium (Gibela) was appointed as preferred bidder to supply 3600 new Metro Rail coaches at a
cost amounting to R51 billion over a 10 year period (2015 – 2025).
Overall, the Rolling Stock Fleet Renewal Programme will deliver 5256 vehicles to satisfy existing rail
passenger demand on the current network until the year 2020, 456 vehicles to satisfy growth in rail
passenger demand to the year 2030 on the existing network and a possible further 1512 vehicles to
satisfy long term rolling stock needs on new corridors to be constructed as part of a possible future
expansion of the existing network and the development of a new network.
The PRASA Fleet Renewal Programme is the catalyst for the transformation of Metrorail services
and public transport as a whole. It is the beginning of the rollout of the Government’s
Comprehensive Rail Programme over the next two decades. Whilst the urgent challenge to improve
passenger services remains primary, the Rolling Stock Fleet Renewal Programme has been designed
to achieve a number of key Government objectives such as the delivery of quality services to
citizens, revitalization of South Africa’s rail engineering industry through local manufacturing and
ensuring local content (65% minimum local content is set) as part of the Government’s Industrial
Page 47
Policy Action Plan (IPAP2), employment creation and skills development as well as Broad-Based
Black Economic Empowerment.
PRASA achieved contract signature on the 14th of October 2013 with Gibela on the following two
agreements for the phase of the Programme:
 Manufacture Supply Agreement (MSA): this agreement entails the supply of 3600 vehicles over
a 10 year period (2015 – 2025) for a contract value of R51 billion (excluding adjustments for
forex movement and indexation).
 Technical Support and Spares Supply Agreement (TSSSA): this agreement entails the technical
support and maintenance of vehicles supplied by Gibela and is contracted for an 18 year period
(2015 – 2033).
7.4.1.1 Salient Features of the first phase
Gibela will deliver the following (non-exhaustive list):
 ~8,088 direct jobs created through the Programme over the 10 year period;
 30% Ownership for B-BBEE Equity Partners, plus 9% shareholding through New Africa Rail;
 Total Skills Development spend of ~R892 million:

with spending of ~ R797 million on B-BBEE skills development initiatives;
 Total commitment of up-skilling ~19 527 individuals, including but not limited to:

~6 766 Artisans

~5 211 Engineers
 Preferential procurement:

~R28.8 billion to be spent on subcontracting to black empowered entities;

~R5.3 billion to be spent on subcontracting to Qualifying Small Enterprises and
Exempted Micro Enterprises (SMMEs);

~R1.6 billion to be spent on subcontracting to entities owned by black women;
 Spending of ~R746 million on the development of enterprises in the rail sector;
 Spending of ~R273 million on socio-economic development contributions;
 Build a local factory for train production (which will be operational by July 2016 and handed
over to PRASA at the end of the MSA agreement):
Page 48
 Local Content of 67% on the new trains by year 2 of delivery and an un-weighted average of
77% Local Content for the TSSSA; and
 Provide a Product Evolution Facility operating as the on-going design authority for the new
trains:

This facility will be handed over to PRASA at the end of the agreement;

The facility will have, at a minimum, an 80% local employee base by January 2020.
 The following technical features will be supplied on all trains (this is not an exhaustive list):
 1344 passengers per 6-car train (Metro)
 1184 passengers per 6-car train (Metro Express)
 CCTV
 Real time diagnostic data for maintenance planning (Traintracer)
 Passenger counting for operations planning
 Automatic doors
 Real-time Passenger Information System (RTPIS)
 Wi-Fi (on Metro Express)
 Crashworthiness designed to raise later the top-speed to 160 km/h
 Automatic Train Protection / ERTMS level 2
 Infotainment (on Metro Express)
 UHF and GSM-R train radios
 Passenger Air conditioning
 Universal Access:

2x Universal Toilets (on 73 3 kV DC Metro Trains)

Fixed locations on platforms for wheelchair users to board the train

Wheelchair position with call-for-aid and anchor points compliant to
standards

72 priority seats in every 6 car train
7.4.1.2 Next Milestones
Strategic Activity
Responsibility
Due Date
Current Status
Reach financial close
PRASA/Gibela
February 2014
80%
Delivery of test trains
Supplier
First quarter 2015
0%
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Delivery of operational trains
Supplier
Fourth quarter 2015
0%
Local factory operational
Supplier
June
2015 2016
0%
7.4.2
National Signaling Upgrade Programme:
The signalling programme is one of the key priorities of PRASA in the coming financial years. Currently, the
programme has been allocated an amount of R3.260 billion, including telecommunication, with R814 million
in 2013/14, R855 million in 2014/15 and R1, 591 billion in 2015/16. Even though spending in the past three
years was significantly low, it is expected that the expenditure will increase in the period ahead. This is
anticipated due to the appointment of Bombardier Africa Alliance Consortium and Thales/ Maziya
Consortium for KwaZulu Natal and Western Cape respectively. The budget allocation for 2013/14 has now
been increased to R1.203 billion.
Figure 15: Gauteng Stage 1 Progress
The scope of work in the first phase of the project includes the construction of Gauteng Nerve
Centre (GNC), installation of interlocking systems in the Gauteng Region. The estimated
duration for the project is 5 years, with a total cost amounting to approximately R1 billion
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(excluding yearly escalations). The work commenced in the first quarter of 2011/12 financial
year and scheduled for completion by 2016.
Figure 16: Envisaged GNC view of signaling network
Figure 17: GNC Columns casted and wrapped for curing
The Kaalfontein – Leralla – Tembisa re-signalling project forms part of the Gauteng stage 1
project. The works commenced in the first quarter of 2012/13 financial year and scheduled for
completion by 2014. The programme is scheduled to be completed in six months after the
finalisation of the detailed designs. The validation of the SICAS 7 Interlocking is currently in
progress scheduled for commissioning by the end of February 2014. The commissioning of
Midway - Lenz Station is also expected to happen at the end of March 2014.
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7.4.2.1 Contractual obligation over the next five years
Appointed Companies
Total Contract
Contract Period
Value
Bombardier – Durban
R1.3 billion
Gibb and other consultants
R0.086 billion
Thales/Maziya – Western Cape
R1.8 billion
TLF and other consultants
R0.108 billion
Siemens – Gauteng Stage 1
R1.1 billion
Siyayadb and other consultants
R0.091 billion
Siemens – Gauteng Stage 2
R2.7 billion
Siyayadb and other consultants
R0.123 billion
Total
R7.3 billion
25/03/2013 to 24/05/2019
01/03/2013 to 01/03/2016
08/02/2012 to 30/04/2017
15/10/2013 to 15/10/2018
Corridor Modernization Programme
7.4.3
Priority corridors were identified taking into consideration the following:
 Detailed demand assessments and service requirements (Passenger forecasts).
 Detailed capacity analysis, with perway and related infrastructure capacity analysis including
signalling.
 Stations capacity and also taking into consideration how to schedule trains, where to start, stop,
connect and end trains, with what train. The first test train will be deployed in Gauteng
between Braamfontein and Kaalfontein and the Braamfontein Depot and associated
infrastructure have been prioritized for upgrade to achieve this milestone.
Identified priority corridors include the following:

Gauteng: Mabopane – Pretoria – Johannesburg – Germiston – Naledi;

Western Cape: Khayelitsha / Kapteinsklip – Cape Town;

KwaZulu Natal: KwaMashu – Durban – Umlazi (Including extension to Bridge City).
Page 52
7.4.4
120 km Perway Programme
Figure 18: Perway ballast replacement
PRASA’s current infrastructure allows for section speeds of up to 90km/h. In anticipation of the new rolling
stock fleet, infrastructure upgrades need to be undertaken to increase section speeds to 120km/h. The
programme includes re-railing, re-sleepering, replacement of turnouts sleepers (universal type),
replacement of single & double slips, replacement of scissors & diamond crossings, drainage upgrading,
ballast screening, refurbish rails via grinding, re-alignment of track via continuous tamping and
refurbishment of track sub-structure via screening.
PRASA Rail and PRASA Technical are currently busy assessing the impacted rail corridors in order to
determine the full detail scope of the project (Bottlenecks, curves for realignment etc.). In parallel with this
process they have also started with the development of technical specifications for Perway Material
(Turnouts) and for On Track Machines that will assist in getting the track ready for the higher speeds. It was
envisaged that this assessment process will be completed by end August 2013. The process is currently at
65% (December 2013). Following the conclusion of this process the next phase of the project will entail the
compilation of detail design specification in order to enable PRASA to call tenders for the
construction/implementation of the project.
7.4.5
Station Modernisation programme
This programme focuses on the modernisation of stations in the A Corridors of the Rail network. A
134 stations were initially prioritized for Modernisation. However, six stations were included in the
programme, these being; Leralla, Germiston, Roodepoort, Vereeniging, Berea and Phillipi. This
takes the number of stations in the programme to 140.
Page 53
PRASA has concentrated on stations which have a high volume of commuters and have the
potential to increase business revenue. Any improvements on these stations will translate into real
benefit for commuters, improving the overall customer experience and adding value to the whole
trip chain for commuters. The enhanced experience and service offering will also translate into
operational profits for PRASA.
The Station Modernization programme has been allocated R1 billion over the 2013MTEF cycle, with
R310 million allocated for the 2013/14 financial year, R308 million for the 2014/15 financial year
and R423 million for the 2015/16 financial year.
Figure 19: Envisaged station modernisation
From the overall 140 stations identified as priority stations, 27 projects are at various stages of
development in the current year, including 4 third party co-funded projects, Berea, Phillipi and
Umlazi.
A Developer was appointed by Intersite late 2012 for Umlazi Station. As a result of such
appointment, infrastructure related work has to be aligned with the scope of work of the
Developer. Work is scheduled to commence around July 2014.
7.4.6
Depot Modernisation Programme
PRASA need to design and construct full-functional modern maintenance depots for the existing metro trains
up to full fleet deployment of new fleet in 2034. New metro trains will start arriving by April 2015 and this
Page 54
programme need provide for the maintenance demand of the new increased fleet. The conceptual design of
depots commenced in January 2012.
The detailed design process for the priority sites (Braamfontein, Salt River and the Springfield admin
building) is progressing well with design reviews currently taking place at the Depots in KwaZulu Natal,
Western Cape and Gauteng regions for necessary client input and sign offs anticipation of finalizing the
design process.
Long lead items have been identified by appointed professional teams with PRASA Technical SCM currently
looking at possible procurement strategies considering current PRASA Rail contracts
7.4.6.1 Status of Building Surveys:
 Geotechnical Investigation: a preliminary geotechnical investigation report has been issued for
Braamfontein and Springfield.
 Services Identification: All 5 depots are done and complete, reports issued to PRASA except for
Durban yard.
 Topographical surveys: All 5 depots are done and complete and reports issued to PRASA.
 Town Planning process is progress at Springfield depot with consolidation of the ERF however it
is to be noted that there is still a need to appoint additional sub cons (Conveyance for the
registration the Notarial Tie and consolidation registration) with budget implications.
7.4.6.2 Braamfontein Proposed Master Plan
The upgrade of the existing staging yard and associated maintenance and administrative buildings also
provides an opportunity to improve the site layout and operational functionality. It will be a prerequisite of
the project that current operations are maintained during the construction and servicing of the new Depot
facility. The project will be approached in a phased manner that meets with PRASA’s internal
operational management approval.
The work that is envisaged to be executed at the existing Braamfontein maintenance depot site is as follows:
 The existing running shed will be refurbished in a phased manner to enable maintenance
activities to continue during this process. One of the existing running shed bays will be
refurbished for maintenance of the new fleet and remaining two running shed bays will be
refurbished for continued maintenance of the existing rolling stock fleet.
 The existing lifting shop will similarly be refurbished through phased construction if
practical. The lifting shop will be upgraded in its entirety to accommodate both the new
fleet and the existing fleet.
Page 55
 The existing component work shop will be refurbished to store components for both the
existing and the new rolling stock fleet.
 The existing administrative building, training centres, and C&W maintenance shed will be
refurbished.
 A new train operations building will be constructed.
 New structures will include a external train washer plant, intensive cleaning shed, facility for
Controlled Emissions Toilets clearing and tanking, a under floor wheel lathe facility, a
turntable for single-vehicle turning, and a new shunting diesel locomotive maintenance
shed.
Figure 20: Artist impression of new Braamfontein depot
7.4.6.3 Salt River Proposed Site Layout
The concept level of the required works at the Salt River Depot in order to stage and maintain the new
rolling stock fleet whilst continuing to stage and maintain the existing fleet, is completed.
Work planned for this depot:
 The existing running shed will be refurbished in a phased manner to enable maintenance
activities to continue during this process. One of the existing running shed bays will be
refurbished for maintenance of the new fleet and the remaining running shed bay will be
refurbished for continued maintenance of the existing rolling stock fleet.
 The lifting shop will be upgraded in its entirety to accommodate both the new fleet and the
existing fleet. It is unlikely that a phased approach will be possible.
 The existing component work shop will be refurbished and extended to store components
for both the existing and the new rolling stock fleet.
 The existing administrative building will be refurbished and extended at its entrance.
Page 56
 New train operations and shunting operations buildings will be constructed
 The training centre will be moved to the Firgrove facility.
Figure 21: Artist impression of main admin building: Salt River
7.4.6.4 Springfield
The Springfield rolling stock maintenance depot, the Durban Yard staging facility, and the Durban Yard lifting
shop are existing PRASA facilities in the Durban region. The erven making up the Springfield site is owned by
PRASA and is zoned as a Transport Zone. The erven making up the Durban Yard staging facility and the
Durban Yard lifting shop is owned by PRASA and Transnet respectively and is zoned as a Transport Zone.
Some areas within the Durban Yard precinct are zoned as an Existing Street Zone.
The upgrade of the Springfield depot railway infrastructure provides an opportunity to improve the site
layout, modernize technology, and improve operational functionality and integration with the mainline
operations. The upgrade of the Springfield depot railway infrastructure will include:
 Construction of new depot Admin building and inclusive of that will be consolidation of the
erf. As part of the development process since the proposed design stretches over various
erven within the depot precinct.
 Running shed maintenance staging lines and lifting shop maintenance staging lines will be
modernised
 A turn table line to be introduced
 An intensive cleaning facility line
 All rail infrastructure will be automated and signalled
 New rail electrical infrastructure will be installed.
Page 57
Figure 22: Artist impression of the Main admin building : Springfield
In addition to the three prioritised depots above, the Durban Yard and Wolmerton will also be modernised.
7.4.6.5 Durban Yard:
Figure 23: Aerial view of Durban Yard with Moses Mabhida stadium in the north west.
The upgrade of the existing Durban Yard staging facility railway infrastructure provides an opportunity to
improve the site layout, modernise technology, and improve operational functionality and integration with
the mainline operations. The upgrade of the Durban Yard railway infrastructure will include:
 External train washer line
 Controlled emission toilet cleaning and tanking facility line
 Train reverse lines
 Access tracks to the main line
7.4.6.6 Wolmerton
The concept level of the works is progress for the Wolmerton Depot that is to stage and maintain the new
rolling stock fleet whilst continuing to stage and maintain the existing fleet. The upgrade of the existing
staging yard and associated maintenance buildings also provides an opportunity to improve the site layout
and functionality. It will be a prerequisite of the project that ongoing operations are maintained during the
Page 58
construction and servicing of the new depot facility in a phased manner that meets with PRASA’s internal
operational management approval. The work will include:
 The existing running shed will be extended by 2 roads to include a new maintenance road
and a new forklift access road. The existing running shed will be refurbished in a phased
manner to enable existing maintenance activities to continue during this process.
 A new lifting shop will be constructed.
 A new wheel lathe shed will be constructed.
 A new component repair, workshops area will be constructed between the lifting shop and
the running shed.
 A new main store and component store areas will be constructed.
 New intensive cleaning, external wash and CET facilities will be constructed.
 A new shower block and new shunters/drivers resting facility will be constructed.
 A new administration building will be constructed.
 A new Train Operations (DOCC) building will be constructed.
 The existing staging yard will be remodeled / refurbished to provide staging for 60 new
generation trains.
 The length of the remodelled staging lines will be 300m for 12-car trains and 150m for 6-car
module.
 New railway lines will be provided for reversing of trains at the western and western
extremities of the depot site.
 The access lines to/from the existing main line will be remodelled.
 The entire staging yard will be signed to allow for centralized train control for train
operations within the depot area.
Figure 24: Aerial view of Wolmerton depot
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7.4.7
Digital Signaling Radio Network:
PRASA has been using the MPT 1327 trunking / trunked Radio system, which is owned by Transnet, primarily
for voice communications for the management of trains in various regions. The MPT 1327 trunking / trunked
radio system will be replaced in the Gauteng, KwaZulu/Natal and Western Cape regions with a digital radio
system for signalling, the GSM-R system, incorporating voice and data communications.
This technology together with the new signaling system, will provide automatic train protection and semi –
automatic train driving, that will increase the capacity of the network and minimizing the possibility of the
accidents due to the driver human error. GSM-R, Global System for Mobile Communication - Railway or
GSM-Railway is an international wireless standard for railway communication and applications. A sub-system
of European Rail Traffic Management System (ERTMS), is used for communication between train and railway
regulation control centers. GSM-R is the main stream in railway communication, which has been accepted as
the standard and widely commercially used all over the world. The system is based on GSM and EIRENE MORANE specifications which guarantee performance at the speed up to 500 km/h (310 mph), without any
communication loss.
The new digital radio system will be used for:
 Train Operations (Dispatching of trains)
 Service operations and maintenance (trackside and electrical)
 Signalling maintenance
PRASA appointed a supplier as well as a consultant during 2013/14 and progress to date has been:
 The Huawei radio network design has been subjected to a detailed review by the radio
experts of the Siyaya/Quattron consultant and numerous recommendations for adjustments
have been made. These recommendations were prioritised and Huawei will submit a
proposal for these various options by end of February 2014.
 The site surveys were conducted and completed at the end of January 2014 for
o the line segment selected for the “new train trial operation” in June 2014, as well as
o the regions Gauteng, Cape Town and Durban. The purpose of the site surveys is to
ensure correct radio frequency planning and placement of radio sites.
 The Pretoria North Core Site equipment room is being prepared and progress is satisfactory.
Completion is expected by end of June 2014.
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7.5 MLPS Turnaround:
MLPS need to act on several fronts and will require the support of government at policy, institutional and
funding levels in order to improve its current situation:
Table 3: MLPS Turnaround elements
The MLPS Turnaround will be based on a market, institutional and organisational plan that is being
developed with the help of International Consultants.
 Exploit market potential and enhance revenues by using customer-focused marketing
initiatives such as exploiting positioning on safety; optimizing network and schedules,
technical train functionality, dynamic pricing, designated sales teams and marketing
activities.
 Increase the reliability of rolling stock and responsibility of staff that is paramount for solid
operations.
 Target cost drivers around crew turnaround, training, maintenance and workforce
reduction.
These actions would result in a subsidy requirement of R532m per annum but require government action for
a future viable business. Optimisation of the workforce is the medium term is required for sustainability of
the business and employment in the long term.
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In addition reform of rail transportation is required to prevent the break down of MLPS. Clear separation
between infrastructure and users (Passenger and freight) must be ensured to allow for non-discriminatory
access and pricing. Public infrastructure and service providers should be under control of the Department of
Transport. Proper definition and implementation of SLA’s to ensure fair business relations between rail
business stakeholders is required in addition to the recommendation above. In the short to medium term
MLPS need to pay 50% less on access based on international comparisons and status of the quality of the
network. In the long term access fees is to be based on network maintenance with fair market prices of all
users.
Figure 25: MLPS Workforce scenarios
The strategic thrust of the MLPS turnaround plan for the rendering the mandatory public service for South
Africa over the short, medium and long term is summarised below:
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Figure 26: MLPS Turnaround phases
The focus of the Turn-around strategy is to manage MLPS to at least the same activity and service levels as
prevailed in 2009/10, with improved efficiencies and a reduced subsidy requirement. This process will take a
period of 3 years to achieve, with indicative subsidy requirement of R550m to R600m per annum, not taking
into account market growth potential through additional routes and serving new markets with appropriate
technology investments.
The medium to long term strategic framework for long distance and regional passenger rail in Southern
Africa has to include the migration to higher speeds, with possible specialized networks to serve the
appropriate technology application.
7.6 Real Estate Strategy
The Real Estate Strategy as approved by the PRASA Board of Control on 29 November 2012 is based on 4 key
pillars:
 Develop the portfolio by increasing the retail and commercial sectors of the portfolio in order to
grow the revenue to R1bn in 2018 whilst meeting the needs of the commuters and the
communities in which stations are located;
 Build the required capacity in the areas of Planning and Land Use Management, Asset
Management and Development Facilitation in order to drive the strategy;
 Optimise the current portfolio and re-engineer current processes in the areas of lease
administration and utilities management to ensure efficient operations and strategic sourcing
and reduce costs;
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 Foster integrated planning in particular with Intersite, PRASA Strategic Network Development
and Municipalities and Provinces.
A total of R5,5bn investment is required to drive the real estate strategy with the aim of earning R1bn per
annum in revenues from 2018 and R2bn per annum post 2023. The key revenue programmes as per the Real
Estate Strategy are:
 Acquisition of high Income yielding development leases which addresses the issue of land
space currently locked in long-term development leases. These leases range from from
Industrial Parks, Retail Shopping Centres, Motor Dealerships, Hotels, Offices and Mixed used
developments.
 Commercialization and optimization of vacant and under utilised assets to a lettable state.
 The Disposal Program
 Investment in Third Party Development facilitated by Intersite
Figure 27: Real Estate Strategy projected revenues
7.6.1
Development leases:
The total number of development leases are 120. PRASA CRES has identified 95 of these leases for
acquisition. The acquisition of these leases is subject to successful negotiations, due-diligence studies and
Board approval.
Below is the summary Regional spread for the targeted development leases:
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REGION NAME
NUMBER OF LEASES
Gauteng North
3
Gauteng South
4
Western Cape
9
KZN
79
TOTAL
95
The capital for acquisition of leases for 2013/14 is estimated at R492,8 million with a projected return of
R40.296m in 2014/15. A further R303m is required for the planned buy-backs in 2014/15. The capital
required overall per initiative of the real estate strategy is:
Figure 28: Capital requirements for Real Estate Strategy
PRASA CRES will be using an outsourced model to manage the properties acquired through the lease buyback programme. This outsourced property management scope is an end to end property and facilities
management .
7.6.2
Commercialisation
A number of commercialisation projects are in progress to enhance PRASA’s ability to generate revenues
from key strategic property assets. During December 2013, PRASA launched the new Park station food court
as well as banking mall. Other developments in progress are:
 the conversion of Metrorail Park and Lab Building in Johannesburg to a hotel and student
accommodation in conjunction with a developer,
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 development of Limindlela and Leralla stations with Cambridge Foods Store,
 development of Silverton mini industrial units
 Pay-parking for Pretoria station
 Construction of offices next to PRASA House in Hatfield.
 Durban station development with Ethekwini Muncipality
 Parade concourse and infill deck at Cape Town station.
7.6.3
Disposal programme
A number of development leases are “Owner Occupier Leases” where the owners want to hold onto the
properties couple and some may not have good yields. The strategy in this regard is to dispose these leases
and realise value now. Typical these will include
 Development leases to owner/occupiers
 Dispose directly to an Leaseholder where the property is land locked
 Development Leases where Rental was paid upfront and Leaseholders NOT willing to Sell.
These disposals will be subject to
 Section 54 PFMA approvals – in progress, although the process is slow
 Approval by SCM/Board for the confinement of these transactions
 A full Due Diligence undertaken prior to disposal.
In addition the disposal programme also includes disposal on non-core property assets that assures
additional income for the Group but also reduce risks of illegal occupation and improved image and social
responsibility for PRASA.
7.6.4
Property development through Intersite.
The focus of Intersite is to facilitate commercial property developments on PRASA’s properties in
partnership with the private sector. These developments are planned to harness transit oriented
developments and will generate sustainable revenue and capital growth for PRASA and also contribute to
city economic regeneration. As a result these developments are planned and will be prioritized in line with
the City Government development vision. Intersite then receives facilitation fees for concluding these
transactions and seeks to secure the option for PRASA to invest capital in each of the developments, thereby
enhancing PRASA’s long-term returns.
The experience of implementing the National Station Precinct Development Plan (NSPDP 1) through public
tendering proved not the best method to achieve our goals. The new direction in implementing the real
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estate strategy, is to adopt multi prong processes that will enable PRASA to engage investors through
approved strategic partnerships process which will be supported by appropriate “fit for purpose” funding
strategy that is either through non-recourse or recourse funding.
7.6.4.1 Non-Recourse Funding
Intersite’s focus will be on quantitatively or qualitatively large enough developable sites to support potential
project financing from the Development Bank of Southern Africa (“DBSA”) or another funder that will allow
PRASA to take up its 50% stake in the income generated from the investment after payment of the project
financing. This strategy is buttressed by Senior Counsel Opinion confirming that these transactions are not
classified as Public Private Partnership in terms of Treasury Regulations, and can largely be implemented on
strategic partnering within the regulatory framework applicable to PRASA and Intersite.
Project financing of this nature will not impact on PRASA Group balance sheet as no security will be sought
from PRASA and the projects are considered to be large enough to fund themselves. It is submitted that
there will therefore be no section 66 requirements in terms of the PFMA or breach of the current borrowing
restriction on PRASA.
To obtain project finance the developer is required to have sufficient standing so that the funder is
comfortable with the ability of the developer to deliver in every respect of the project. The typical types of
developments/projects that could attract the project financing mentioned above include:
 Park station precinct;
 Cape Town station;
 Pretoria station;
 Umgeni Business Park; and
 Naledi station.
Legal advice has been sought in this regard, which confirms that the investment transactions can be
implemented along the new strategic direction i.e. strategic partnering. An opportunity exists to also cluster
together a number of properties and land to make them sufficiently sizeable to attract interest from
developers so that they can be project financed.
These developments could be termed flagship developments / investments and receive due priority focus.
The developers would be granted “exclusive development rights” for those sites. Intersite will therefore
focus on flagship developments in which PRASA wishes to participate that require a co-development partner
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and project financing to achieve increased income and value on its “whole” stations or precincts. PRASA
CRES will then focus on commercializing of its properties outside of those identified above be developed
with development partners and utilise PRASA capital (commercialisation, NSIP, NSUP or modernisation) to
achieve greater value and income generation. Intersite will ensure that PRASA CRES has the option to
acquire the developments, whether in part or in whole, if the developer intends to dispose of same. PRASA
is entitled to acquire a profit/revenue share from the developments.
7.6.4.2 Recourse Funding
Intersite is investigating the opportunity to leverage funding for medium to small developable sites, to invest
in certain developments. To achieve this, the selected properties will need to be let by PRASA to Intersite on
a long term basis. Funding for the development of these leaseholds could be sought from DBSA or other
funders.
Intersite will develop these leases and pay PRASA CRES appropriate land values. Intersite will appoint a
credible developer on a Joint Venture basis and may take pre-tax profit of up to 50%. PRASA CRES will be
required to obtain the development rights for these selected sites so that they are ready for development.
The key element for achieving this, is procuring the master plans / development frameworks.
7.6.4.2.1
National Station Precinct Development Programme
The focus with the NSPDP 2 will be to create a Key Development Investment Property portfolio in line with
the new funding direction. Intersite will receive appropriate investment focus as opposed to precinct
planning roles which is allocated to PRASA CRES. One possible criterion to consider is that there must be a
difference between investment property versus station upgrade. An exercise is being undertaken to solidify
these key sites developments.
The other main area of focus is securing an investment by Strategic Partner/s for key sites. A strategic
partner has been allocated for Cape Town station and planning is underway and will be completed by end of
2013/14 financial year. Park and Pretoria stations comprise the next phase of implementation .
The intention is to achieve early engagement with a potential partner/s for these sites. When the illustrative
master plans are completed for these sites, it is envisaged that a framework agreement will then be
negotiated and agreed with the potential partner/s with a view to obtain the development rights for these
sites. The illustrative master plans will comprise of high level architectural designs and identify investment
potential for these sites.
In preparation for income for the 2014/15 financial year, the following interventions are taking place:
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1. NSPDP I – planning for these developments continues with Intersite assisting the developers to
complete their planning to expedite the developments.
The status of the developments and
milestones for 2014/15 are set out in Appendix 2 marked as RAG status.
2. NSPDP II – A Special Purpose Venture structure will be developed as a vehicle for the development of
the sites identified under the NSPDP 11. The goal is to identify agreed terms and conditions with
development partners who/which have credibility, established BBEEE status and credentials, for the
development of key projects, on long term lease basis.
3. Implementing the investment framework and guideline to expedite property and asset investments.
4. Discussions with and agreed terms and conditions with DBSA and securing of funding to enable
PRASA to invest in key Development Investment Projects.
5. Discussions with PRASA Cres for investment in certain developments where planning has been
completed or 80% near completion.
These interventions will secure the achievement of these developments and concomitantly Intersite’s
income going forward, as well as sustainable contributions to PRASA’s income and capital growth.
7.7 Commercialisation of non-core assets
Commercialisation of business opportunities from non-core assets and excess assets present an additional
source of revenue for PRASA. The process has embarked with the identification of the PRASA business
opportunities universe in terms of noncore or excess capacity in assets. Finance partners for this initiative
have being identified such as the Development Bank of South Africa’s Jobs fund and the Department of
Trade and Industry’s Employment Creation Fund. Specifically PRASA is interested in credible technical
partners with their own cash resources and proven record to implement to exploit these commercialization
opportunities. PRASA see this as a no risk revenue opportunity from annuity income to the Group. In
addition the initiative is to promote and support socio-economic transformation and welfare through
promoting passenger transport, BEE, job creation, SMMEs as well as others.
One of such opportunities is the PRASA network of Fibre Optic cabling currently in rollout in major cities and
metropolitan areas in South Africa. The Fibre Optic network has the potential for additional data
communications through connection to SEACOM. Firstly the fibre optic network need to be linked to one
another in national network and thereby create value when all stations are interconnected and in addition
provide connectivity to people on the stations. Negotiations with a third party backbone service provider is
in progress. Possible potential sources of value to PRASA are:
 Reduce internal communication costs (estimate of 50% of office communications costs)
 Provide redundancy to other carriers (e.g. Neotel, DFA, Telkom) for a fee
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 Provide high speed value added services
 High speed Internet Services
 High speed wifi zones
 High speed cell phone connection (4G) (Cellphone towers – wireless backhaul –PRASA fibre
network)
 Cellular/WiFi data uploading and offloading ring network at the Top 40 PRASA station precincts
 Last mile services (wireless service) – create ring around Prasa stations precincts or further
 Smart card use of commuters of PRASA, present an opportunity to increase understanding
psychographics’ patterns and improve service delivery to passengers.
7.7.1
Status on Commercialisation of Optic Fibre Project
One of the opportunities identified is the PRASA network of Fibre Optic cabling currently in rollout in major
cities and metropolitan areas in South Africa. The Fibre Optic network has the potential for additional data
communications through connection to SEACOM. Firstly the fibre optic network need to be linked to one
another in national network and thereby create value when all stations are interconnected and in addition
provide connectivity to people on the stations. PRASA issued an expression of interest (EOI) to licenced
telecoms operators interested in leasing optic fibre capacity from PRASA in October 2013. The market were
then engaged to solicit views on views on issues consider important and critical prior to issuing the RFP. It is
planned to issue the tender before year-end after which partners will be selected. More than one partner
will be considered to maximise revenue from leasing capacity. Leasing agreements will be long term.
7.7.2
Status of the Schools CSI project:
A 2009 report of the World Bank has established that for every 10 percentage-point increase in the
penetration of broadband services in developing countries can see an increase in economic growth
households have access to internet. As part of its work to commercialise non-core assets PRASA is enabling
access through provide broadband services to schools as part of PRASA’s CSI project in partnership with the
Gauteng Department of Education (initially) and the National Department of Education.
The programme will enable free internet access by 2015 to
 51 schools in Johannesburg
 45 schools in Pretoria and
 43 schools in KwaZulu Natal
Currently PRASA has installed a network for broadband in two target schools in SOWETO as a pilot. This The
pilot will run for a max of 6 months whilst various parameters are being assessed prior to PRASA doing a
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national rollout. The total cost of the pilot project was R1.17m and includes survey, equipment installation,
and provision of computer equipment. The targeted schools are those within a 5km radius of PRASA stations
and previously disadvantaged.
7.8 Operational Efficiencies
7.8.1
Preventative Maintenance
One of the opportunities for PRASA is to improve business performance by consciously addressing
maintenance inadequacies. PRASA Rasil Operations through its Engineering Department investigated a
maintenance engineering solution together with the University of Stellenbosch that improve maintenance
and asset performance with the ultimate goal that such engineering solutions will be integrated in the
overall development of PRASA.
In September 2008, a seven point plan was adopted to standardise and raise the level of maintenance within
the business, particularly in Infrastructure and Rolling Stock. Subsequently, PRASA performed a full
maintenance assessment to validate the assumptions of 2008 and undertook the following:
 Assessment of the current condition;
 Assessment of the estimated lifespan;
 Suitability or matching of current maintenance practices to current asset condition;
Maintenance,
 execution and work management processes applications;
 Infrastructure workforce configuration to suite current condition of infrastructure
Prioritization of required skills;
7.8.1.1 Value of Preventive Maintenance
One of the misconceptions in general is that preventative maintenance is costly. This logic dictates that it
would cost more for regularly scheduled planned maintenance than it would normally cost to operate
equipment until repair is absolutely necessary. This is not true as one should compare not only the
immediate costs but the long-term benefits and savings associated with preventive maintenance. Without
preventive maintenance, for example, costs for failure from unscheduled equipment breakdown will be
incurred. Also, preventive maintenance will result in savings due to an increase of effective system service
life. This approach has resulted in a huge cost saving for Prasa. Long-term benefits of preventive
maintenance include:
 Improved system reliability.
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 Retraining of Technical personnel to understand asset care
 Decreased cost of replacement.
 Decreased system downtime.
 Better spares inventory management.
Long-term effects and cost comparisons usually favuor preventive maintenance over performing
maintenance actions only when the system fails. The reliability and cost reduction was based on the actvity
costing and time study which resulted into changing work parctices and work flow management systems in
all PRASA depots. PRASA has improved maintenance in the Rolling Stock environment that results in
maintenance schedule attainment of more than 70%.
7.8.2
General Overhaul Program Approach-
One-time investments do not require equal time period for the alternatives, hence the General Overhaul
Program was reviewed to be condition based and focus on reliability of assets as opposed to stripping the
coach regardless of the status. Cyclic investments require equal time period for the alternatives. A
recommended one-time investment with a time period of 5 years is not necessarily recommended if the
asset life period is 20 years therefore condition based is best with intervention reliability program. Examples
follow:
 Transformers
 Turn-outs
 Motor Coaches
Preventive maintenance, unlike corrective maintenance, is the practice of replacing components or
subsystems, before they fail in order to promote continuous system operation. The schedule for preventive
maintenance is based on observation of past system behavior, component wear-out mechanisms and
knowledge of which components are vital to continued system operation. This is what Prasa has put in place
since 2009.
Availability which translates into reliability and cost is always a factor in the scheduling of preventive
maintenance. In many circumstances, it is financially more sensible to replace parts or components that
have not failed at predetermined intervals rather than to wait for a system failure that may result in a costly
disruption in operations.
The deterioration of the commuter rail assets, specifically Rolling Stock and physical rail infrastructure, has
been identified for some time as a critical issue to obtain more funds for investments in these areas.
Accelerated efforts in upgrading and overhauling of the rolling stock fleet have provided and still provide
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some relief in ensuring availability of rolling stock, however enhancements in strategic maintenance
management lagged behind.
Preventive maintenance program is the organized, planned and scheduled performance of maintenance
activities in order to prevent an asset (train set or system or infrastructure) or in-service failures or failures
from occurring. This has been seen with the implementation of planning offices within all Prasa Depots,
which are sustaining the gains. However with the real time monitoring system currently installed in our
trains as part of the continuous improvement where we can track our trains real time and be pro-active
before the fault happens. The figure below indicating the improvement in Rolling Stock:
Number of Train Sets in Service vs. Regional Requirements
400
Number of Train Sets In Service:
# Sets Requiremed for Daily Traffic
350
300
250
Total Train Set Demand
200
150
100
50
0
Mrc
11
Apr
11
May
11
Jun
11
Jul 11
Aug
11
Sep
11
Oct
11
Nov
11
Dec
11
Jan
12
Feb
12
Mch
12
Apr
12
May
12
Jun
12
Jul 12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
Jan
13
Feb
13
Number of Train Sets In Service:
258
256
257
252
251
261
268
275
280
284
287
277
276
278
284
284
289
289
297
289
292
291
295
287
# Sets Requiremed for Daily Traffic
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
299
Total Train Set Demand
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
339
Figure 29: Rolling Stock availability improvement
Reflecting on the reliability of the fleet based on the investment and changing work practices as was
envisaged with Preventive maintenance which gave us the return on investment with improved reliability
based on Mean Distance Between Failures that is the benchmark widely used also by DB Rail and Gautrain.
Example DB and Gautrain
Punctuality
93%
Delays
3 min from starting station, meaning 6 trips delays out of 100 per month
Availability
97,5%
Reliability
54000 km between service affecting failures (Target), based on baseline
design criteria 64000 km per month.
The PRASA performance is consistent as indicated below.
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MDBF - Mean Distance (km) Between Failures (Set level)
1 200
1 000
800
600
400
200
Jan 12
Feb 12
Mch 12
Apr 12
May 12
Jun 12
Jul 12
Aug 12
Sep 12
Oct 12
Nov 12
Dec 12
Jan 13
Feb 13
Mar 13
Apr 13
May 13
Jun 13
Jul 13
Aug 13
Sep 13
Oct 13
Nov 13
Dec 13
Figure 30: MDBF for Rolling Stock
In addition, remarkable improved train set and infrastructure availability is realized through the preservation
and increased life expectancy of an asset. Engineering is now pursuing IRIS as part of mission directed work
teams, which forms part of the Partnership with the University of Stellenbosch Rail Chair. These are the main
objectives:
 to become the 1st IRIS certified Railway Operator in the world - for the scope of maintenance
 to establish world class standards and proven BEST PRACTICES of the rail industry in PRASA RAIL’s
Head office, Regions & Depots in order to prepare for the modernization projects,
 to integrate, harmonize and standardize user-friendly business processes within PRASA RAIL, robust
and fully accessible for all employees,
 to facilitate process thinking & team work, and to develop a quality culture within PRASA RAIL (long
term objective),
 to improve effectiveness and efficiency of maintenance services as well as the financial performance
of PRASA RAIL through reduction of failure cost,
 to initiate quality improvements along the supply chain in South Africa.
7.9 Strengthen Financial position
7.9.1
Balance Sheet Restructuring.
The initial phases of the Balance Sheet Restructuring Program had delivered value for PRASA. PRASA has
been able to address the solvency issue as well as put its subsidiaries, Intersite and Autopax into a strong
financial position. The Balance Sheet Restructuring Program is aimed at creating an optimal capital structure
that will support the business. It is important that PRASA changes the manner in which assets under its
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control are managed. PRASA should continue to take steps to change this and ensure that the assets
contribute effectively to building a sustainable business capable of recapitalizing itself. The current
inefficient capital structure and the huge costs of ownership are proving to be major contributors to the
poor financial position of PRASA. Among the key interventions would be the valuation of PRASA’s
investment properties, disposal of non-core, non-operational assets that are costing millions of rand every
year. An integral part of the financial strategy for PRASA this year is to ring-fence certain of the properties
and assets into a special purpose vehicle and secure a strategic equity partner or dispose of the entity
altogether. This is vital to ensuring that the objective of injecting capital into PRASA, initially estimated to be
between R780 million and R1 billion into PRASA, is fast-tracked and concluded during the 2013/14 Financial
Year. This is important to addressing negative cash position that PRASA finds itself and is able to meet its
obligations going forward.
PRASA has pursued the drive of operational efficiencies in the past two years. However the focus on revenue
earning potential as opposed to driving operational efficiencies as sole source of operational funding,
present better opportunities for the Group. A number of initiatives on funding restructuring in the Group has
been or are in the process of being undertaken.
Initiatives
Results or progress
Restructuring of divisions within PRASA to provide clear emphasis on
Completed 2013/14.
operational and capital activities and the funding thereof. To this end PRASA
Released R178m to
Technical’s mandate has been amended to focus solely on the execution of
operational expenses
infrastructure and rolling stock capital projects.
The second initiative is the restructuring of the debt of Autopax, related to the
Completed 2012/13
2010 Bus transactions to enable sustainable cash flows in this business.
Disposal of excess assets to alleviate the cash shortages and reduce
In progress
maintenance costs
Strategic Equity Partner process:

In progress
Unlocking the value of the Property Portfolio through co developing
properties with third party developers;

Borrowing programme partnership proposed with DBSA to fund
participation in developments.
Acquisition of development leases as part of the new Real Estate strategy
In progress. An amount of
R54m in additional rental
income is projected for
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Initiatives
Results or progress
2014/15
Revaluation of properties identified as investment properties
In progress
7.10 Building capacity
PRASA is embarking on a number of skills development programmes to link strategic business investments to
human capital investment. These key programmes are in the areas of Signaling, Telecommunications and
Energy; Rolling Stock and Depot Modernisation. This requires the management of the relations between
entities of PRASA and is depicted below:
Figure 31: Relationship of modernisation across organisation
7.10.1 Future Priority Skills Programme:
The aim of the Future Priority Skills Programme in PRASA is to provide technical skills to match the
modernisation programme as well as to address change within the business, with employees and for
customers. The illustrative number of technical skills required over the period of the MTEF is:
Page 76
Figure 32: Technical skills requirement of modernisation
A number of departments are impacted with the change over the next 20 years to 2024 namely
Op e
ratio
n s,
M
Te od
le er
co n
m Sig
s& n
a
En ling
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gy
k
oc
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Train
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Infra
struc
ture
,
w
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Future
Priority
Skills
od
M
s
M
od
n
io
at
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Fa
cil
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er
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De
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; Tra
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tock Service
ng S
r
Rolli ustome
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Managers
re
tu
uc
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ras
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Figure 33: Impact across organisation of FPS
The programme includes a number of elements:
 The first part requires reviewing the Rail business and skills priorities and to prepare and
validate the main technical job families (and job profiles) across engineering, operations and
Page 77
maintenance. This will be followed by quantitative research into the size of the current
establishment, employee profile in terms of age, gender and race, as well as a review of
vacancies and attrition rates.
 The second part requires a skills gap analysis comprising the development of Focus Group
and interview guides as well as facilitator guides, skills planning model. This will be followed
by data analysis and preparation of reports.
 Then a Training gap analysis, which will first involve compiling information on training
programmes currently offered to rail maintenance, Train Drivers and Metro Guards,
Infrastructure signalling and telecoms. This will be followed by a review of these
programmes and preparation of curricula frameworks to address the skills gaps identified
above.
7.10.2 Learnerships:
The table below provides the progress up to quarter 3 on all learnership-type initiatives within PRASA. There
are challenges regarding learners in Signalling. Once the access to budget is finalised as well as the learner
profile, then these learners can be engaged.
TRAINING AREA
Quarter 3
Learnership
1 105
Bursaries
365
Artisans
29
Technicians
23
Engineers
1
Technologist
0
TOTAL
1 523
7.10.3 Project Sakhisizwe
PRASA is also embarking on a programme to train unemployed youth. This has led to the development of the
PRASA Technical Sakisizwe Youth Development Programme. The programme will see 600 youth from
disadvantaged areas given meaningful qualification and work experience of which 100 will be from the
presidential poverty nodes. Candidates will be between the ages of 18 and 30, with a minimum of grade 10,
and must pass the NQF 2 literacy and numeracy selection profile. The candidates will be source from all
provinces, approximately 62 candidates per province.
7.10.4 Customer Operations Training (My Station Programme)
The My Station programme is progressing well. Since November 2011 till now a total of 1 847 PRASA Rail
employees have participated in the My Station programme. An additional 700 employees well undergo the
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My Station programme intervention in 2014/2015. This forms a key part of the Change Management
Programme to prepare frontline staff for the major changes anticipated as a result of modernization
initiatives.
Other customer services excellence interventions are being explored and it is likely that another overseas
exposure programme may be implemented within the business.
7.10.5 Bursaries
Preparations for the process of issuing bursaries for 2014 have commenced. A selection panel and interview
committee was set up and 11 bursaries have been awarded for full-time studies at various institutions. These
are mainly in the field of engineering. A national advert will be placed advertising full-time bursaries for 2014
and beyond. This will mean that in total of another 500 full-time bursaries will be awarded.
PRASA has also awarded 5 bursaries to disabled people pursuing full-time studies. Another blind child at
school has also been granted a sponsorship in 2014. More bursaries will be awarded to disabled people.
PRASA is involved in the Kutlwanong programme which develops maths and science among secondary
school learners. There are currently 7 learners that participated in this programme being sponsored by
PRASA at a tertiary level.
A woman in rail project was developed within PRASA to improve on the gender representation within the
organisation as well as the rail/commuter transport sector as an employer. Under this programme 104
young ladies at school in the senior years of secondary school are being supported by providing financial
support, career guidance, mentoring, career exposure and counselling. It is hoped in this way is to create
interest among these future employees to take up careers within PRASA.
7.10.5.1 Woman in Rail:
The Women In Rail Phase II Programme was successfully launched by the Minister of Transport, and was
attended by key stakeholders from PRASA Group and Business Units to Women Organized groups (South
African Women In Transport (SANWIT), South African Women In Construction (SAWIC), South African
Women Business Council of Cooperatives (SAWBCC), the Women arm of the South African National
Commuter Cooperation (SANCO), International guests from (Ghana, Uganda, Malawi, Kenya, Germany and
Sweden), Industry (Siemens, Alstom and Huawei, Identity Partners, Bombardier, Commuter Transport
Engineering (CTE)) and Government agencies (CIDB, SEDA, Eskom, RAF and Transnet) as well as Academia
(Wits Business School and the University of Johannesburg).
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PRASA has successfully enlisted 540 entities in the Women In Rail Database which will participate in the
Women In Rail Programme for the next 5 years (2013 – 2018) in the industries that are key to the PRASA
business:
 Rail Engineering – 189 successful entities : Rail Technology Rolling Stock maintenance,
Component Supply, Perway and Infrastructure activities
 Property and Construction – 226 successful entities: Construction, Facilities Management
and Professional Services
 Professional Services – 125 successful entities: Design and architecture services, Project
Management and Legal services.
The entities were categorized according to capability (number of years of industry practical experience,
complexity of previously delivered projects, accreditation, employee base and financial standing) and
according to this the PRASA funded projects to the value of R1bn to be delivered by the respective WomenOwned Entities were identified. The table below provides a summary of the categorization and value of
projects.
Categorisation
Tier 1
Criteria



Tier 2



Tier 3



Value of project to WIR
Complies
with
all
statutory
requirements,
0 – 2 years of practical industry
experience, and
has minimal general business
experience
Complies
with
all
statutory
requirements
> 2years < 5years of practical
industry experience, and
has satisfactory general business
experience
Complies
with
all
statutory
requirements
≥ 5years of practical industry
experience
Is deemed to be an industrialist
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0 – R1m, the lowest band in this
tier will only be offered training
>R1m ≤ R20m
> R20m
7.11 National Governmental Strategic Initiatives
7.11.1 SIP 7: Integrated urban space and public transport programme
The PICC approved seventeen (17) Strategic Integrated Projects (SIPs) to:
 support economic development; and
 address service delivery in the poorest provinces.
Each SIP consists of large number of specific infrastructure components and programmes. Specifically SIP 7
aims to strategically use infrastructure to support urban development, overcome spatial apartheid, build
integrated and sustainable communities (economic, residential and social), reduce commuting costs and
time and promote green urban development.
The initial phases of SIP 7 concentrate on the twelve major urban areas where most of SAs urban population
resides (Johannesburg, Cape Town, EThekwini, Tshwane, Buffalo City, Ekurhuleni, Mangaung, Mbombela,
Msunduzi, Nelson Mandela and Polokwane). A key component is strategic shifts towards integration of
previously separate and racially based settlement patterns, housing densification, mass transportation and
environmentally sustainable designs and community participation.
Figure 34: SIP7 Project footprint
SIP7 is a major responsibility for PRASA and require specific changes to address this major project.
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7.12 Long term strategic initiatives
7.12.1 PRASA in the SADC region
Long distance passenger transport is constrained within the borders of South Africa. In order to increase
revenues in these areas Autopax and Mainline Passenger Services operations will be expanded to cater for
cross border services.
Specifically in the case of Autopax cross border services are needed to increase revenues and bus utilisation.
Mainline Passenger Services has the opportunity to expand services to Maputo, Zimbabwe, Zambia, Namibia
and Swaziland. Lease agreements to these countries for excess coaches from MLPS are an opportunity to
increase revenue on unproductive assets.
PRASA has been approached by a number of SADC countries regarding the possibility of acquiring unused
and/or obsolete rolling stock. The following table shows the countries, assets required and status of lease
agreements.
Clients
5 Year Lease
10 Year Lease
Status
SNCC (DRC)
No. of
train sets
2
R49m/a
N/A
RTE (Lesotho)
2
R37,2m/a
R24m/a
RTE
(CFM/Mozambique)
Total
2
R48m/a
R31,2m/a
Awaiting their
approval
Ready to sign
L/A date to be
notified
Collaborating
with RTE
6
R134,2m/a
R55,2m/a
7.12.2 Rail Expansions
PRASA, in line with its long term growth strategy, is investigating a number of rail expansion projects that are
aligned with the PRASA Strategy plan that covers a period of 40 years. Rail expansions look at integrated
multi-modal transport systems that can service as a spine and catalyst for economic development such as
the Moloto Rail corridor; expansion of access by rail from areas of Soweto areas through the BARA Link;
enhancing the role of rail in the Nelson Mandela Metropolitan area through the Motherwell rail link;
addressing future traffic congestion due to airport traffic growth in Cape Town through the Cape Town
Airport link as well as the King Shaka Airport Rail Link to meet demands driven by the Dube Trade Port in
KZN.
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7.12.2.1 Moloto Corridor
The Moloto Rail Corridor involves a new integrated multi-modal transport system that is to serve as
a spine and a catalyst for economic development connecting Gauteng, Mpumalanga and Limpopo.
The Moloto Corridor is situated in the western region of Mpumalanga. Its name is derived from the
R573 (Moloto Road) which connects Tshwane Metro to Nkangala, Sekhukhune and Metsweding
districts. The road suffers from a systematic deterioration due to the movement of large numbers
of people to Gauteng. Increased commuting patterns result in traffic congestion, long travel times
and loss of life through accidents. The Minister of Transport gave a mandate for the project in 2006
and also indicated that it must be treated as part of the priority corridor strategy of the National
Passenger Rail Plan.
The project is a joint inter-governmental initiative consisting of the Department of Transport(DOT),
PRASA, and the provincial governments of Gauteng, Limpopo and Mpumalanga. The district
municipalities of Nkangala, Sekhukhune and Metsweding and Tshwane Metro are also part of the
initiative.
In 2008 a feasibility study was commissioned by the Mpumalanga Province Department of Roads
and Transport and subsequently approved by the Cabinet. However, the project was not
implemented due to lack of funding. In addition, it was felt that the study did not consider all the
options. Consequently, the DOT called for proposals in July 2012 to carry out a rigorous feasibility
study which would comply with the requirements of the Public Private Partnership (PPP) guidelines.
The project was identified as a flagship project in the Department’s strategic plan for 2013/14. Its
high profile status in Government planning is seen by inclusion in the Strategic Infrastructure
Project number 1 (SIP 01) of the Presidential Infrastructure Coordinating Committee (PICC).
The Rail option was selected as the preferred option and has been approved by the relevant
Political Oversight Committee comprising of but not limited to the following:
 Ministers of Transport, Finance, Economic Development, Rural Development and Land
Reform, Human Settlement, Water and Environmental affairs, Public Enterprise and
National Planning,
 Premiers of Gauteng, Mpumalanga and Limpopo,
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 Mayors of Tshwane, Nkangala and Sekhukhune.
7.12.2.1.1 Current activities - For completion 2014/15






Technical Analysis, i.e. gauge option etc.;
Environmental Assessment;
Examining Funding Options;
Stated Preference Surveys;
Finalisation of Project Programme for Implementation;
Setting up of Governance Structure (Comprising of Political Oversight, Steering and Project
Management Committees); and
 Legal due diligence (Covering Institutional Authority and Funding of the Project,
Procurement Process, Statutory and Contractual Arrangements as well as Proposed
Structures for Implementation of Intermodal Transport Solution).
It has since been decided that PRASA will implement the project. The DOT is handing over the
project to PRASA for the implementation. Through the Strategic Asset Development (SAD), PRASA
will be establishing Project Implementation Management Office (PIMO) to oversee the delivery of
the project.
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8 Divisions and Subsidiaries
8.1 Roles of divisions and subsidiaries
PRASA is a Group of Companies comprising of three Divisions and two subsidiaries coordinated and managed
through a Corporate Office. The PRASA Group is based on an Operating Model that seeks to ensure effective
coordination in the delivery of its mandate and strategy, as well as ensure efficiency in operations by
allocating key roles and responsibilities as well as delegating authorities at the appropriate level of its
organisation.
8.1.1
PRASA Corporate Office
The PRASA Group, through its Corporate Office, is the “Owner” of the Assets transferred to it by the Minister
under the Legal Succession Act (as amended) and therefore performs a major asset management function.
The performance of PRASA Corporate Office is one of the Critical Success Factors for the new strategy.
The key Functions of the PRASA Corporate Office are as follows:
(1)
Develop and Drive Corporate Strategy
(2)
Develop Group Corporate Policies (Finance, HR, ICT, Supply Chain)
(3)
Develop the Budget and Plans to Meet Funding Requirements of the PRASA Group
(4)
Develop Funding Models and a Borrowing Plan to Meet Long-Term Funding and Investment
Requirements of the PRASA Group
(5)
Evaluate Projects and Prioritise Capital Allocations for the PRASA Capital Programme
(6)
Plan Capacity Requirements to meet Long-Term Passenger Demands
(7)
Asset Development and Life-Cycle Asset Management
(8)
Develop the Integrated Management System (SHEQ and Universal Access)
(9)
Ensure Good Corporate Governance (Enterprise Risk Management, Systems of Internal
Controls, Financial Reporting, ICT Governance and ICT Security as well as Security of Assets)
(10) Stakeholder Management
8.1.2
PRASA Business Units (includes divisions and subsidiaries) –
Business Units (PRASA Rail Operations, PRASA Corporate Real Estate Solutions and PRASA Technical as
Divisions of PRASA as well as Intersite Asset Investments and Autopax as Subsidiaries) will, on behalf of the
PRASA Group, Operate and Maintain assets under their control as well as implement decisions, strategies
and policies approved by the Board and EXCO of PRASA.
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The Head Offices of Business Units (PRASA RAIL, PRASA CRES, PRASA Technical, Intersite and Autopax) play a
critical role in these institutional arrangements. They are responsible for a number of Functions:
(1)
Ensure that quality passenger and related (Facilities Management) services are delivered.
(2)
Develop Operating and Maintenance Systems and Procedures
(3)
Develop suitable strategies for the management of financial, human and related resources
(4)
Define and Set Service Standards
(5)
Provide Support for Operations
(6)
Ensure Safety in Operations
(7)
Monitor and Evaluate the performance of their respective operations.
8.1.3
Operating Units
The operating units (i.e. Metrorail Regions, PRASA CRES Regions, Mainline Passenger Services, Translux and
City-to-City) are responsible for the following:
(1) Plan and Manage Day-to-Day Operations
(2) Scheduling of passenger services
(3) Manage People under their Control
(4) Implement Maintenance Procedures
(5) Collect Fare and/or Rental Income
(6) Provide Security for Passengers
(7) Implement Operational Safety Plans
8.2 PRASA Rail Operations
PRASA Rail Operations is the Rail Operating Division of PRASA which manages urban (metro) commuter and
Mainline Passenger Services (Regional, long- distance or inter-city and cross-border rail services). PRASA Rail
Operations is mandated and authorised to operate the Metrorail and Mainline Passenger Services
operations and maintenance functions, providing predictable, high quality Rail Commuter and Passenger
services in high volume key corridors.
8.2.1
Strategic Priorities:
The following areas have been confirmed for accelerated attention by PRASA Rail and for moving into the
critical preparatory period of modernization readiness during the next two years in the build up to the
delivery of the first new trains in 2015/16:
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 Drive an Operational Plan (5-Point Plan) as pre-condition and Readiness Strategy for the
modernization of Rail and Change Management in preparation of new trains and signals in
2015/16 through the overhaul and upgrade of train services on certain defined corridors,
service designs, improving on punctuality and cleanliness as well as the upgrade infrastructure.
 Responsible for the Management of Rolling Stock and Infrastructure Maintenance Depots and
Related Facilities.
 Develop and Maintenance of the PRASA Preventative Maintenance Programme.
 Conclude interface Agreements with Transnet Freight Rail and other Rail Operators.
 Review of service conditions key to achieving efficient operations and managing costs.
 Responsible for Configuration Management
 Ensure efficiency in Energy Utilisation and Manage Costs of Traction Energy.
 Ensure the Protection of Assets
 Manage the Capital Intervention Programme (CIP) and Safety Critical Projects in Rail
 Ensure Personal Security within its Rail Environment
 Ensure Proper Controls are in place through regular reviews and suitable Mitigating Plans.
8.2.2
PRASA Rail Objectives
During the strategy review PRASA Rail regarded the modernization readiness focus of importance enough to
add an additional objective to its current set of objectives to ensure the necessary action plans and
processes are being managed towards modernization alignment, operational readiness and change
management:
Table 4: PRASA Rail Objectives, measures and risks
PRASA Rail Objectives
Measures
Risk Indicator
To improve quality of service (meet
Surveys/train
customer expectations)
performance/patronage
To improve financial performance.
Subsidy dependency
Business viability
To improve operational safety and
Safety/crime indexes
Increased incidents, loss of
security.
Loss in business
assets and patronage.
To improve human capital management
Review of Conditions of
Unproductive and
practices.
Service to ensure
demotivated staff.
efficiency in
Operations.Training of
Staff
To improve customer relations.
Consultations with
Page 87
Unrealistic stakeholder
Commuter Organizations
expectations.
as well as
Operational
Communications with
Commuters
To manage modernisation readiness
Customer Service Index
Quantum service
improvement not realized.
8.2.3
Modernisation Readiness
Significant work has been completed on modernization readiness through the Corridor Modernisation
Master Plans for the identified 3 corridors with valuable lessons/directives from this process, serving as input
into the Corporate initiative of developing a Deployment Strategy for the new trains. The Corridor Master
Plans assisted in developing a set of minimum requirements from an operational point of view before new
trains can be deployed on any of the identified corridors, together with an infrastructure readiness
assessment of the respective sub-corridors of the identified modernization corridors. Recommendations on
a deployment strategy and required number of train sets to operate a significant improved service per
region are also included. PRASA Rail has also established its own readiness committee and framework for
developing a master modernization plan over the short, medium and longer term from a PRASA Rail
perspective.
The process has however highlighted serious shortcomings in the planning alignment and coordination of
capital projects towards a focused vision of a modernized service by 2015/16.
Some of the decisions and considerations for PRASA Rail are:
 Program management structures required at National and regional level to align project
implementation, especially occupation management to ensure continuity of service delivery
during construction.
 An early decision by the organization on a definite deployment plan for the new trains, in
order to focus capital projects and operational readiness, especially change management,
around a specific target.
 Dedicated operational and infrastructure planning units to align capital projects with
operational needs and to commence with the planning and design of modernization of the
rest of the network. This will need to include the creation of specific professional capacity
and the necessary simulation tools.
Page 88
 Budget review on the operational costs associated with the modernization process, in order
to capitalise the various operational costs for planning, alignment and change management
requirements as a result of the modernization process.
 Dedicated management teams to ensure the alignment of operational readiness, change
management and communication.
Figure 35: Modernisation readiness elements
8.2.4
PRASA Rail Business Model.
PRASA Rail is the nexus between PRASA and commuters or passengers. In addition the division has key
relations with PRASA Technical with regard to the modernisation drive and PRASA CRES for facilities
management at stations. This model and relations are depicted below:
Page 89
Figure 36: PRASA Rail business model
8.3 PRASA Corporate Real Estate Solutions
PRASA Corporate Real Estate Solutions (CRES), formally established in October 2010 as a Property
Management Division has the mandate and responsibility to manage and oversee the maintenance of the
organisation’s vast Rail property portfolio. In managing the portfolio, the Division seeks to Improve,
Maintain and Unlock property value in line with PRASA efforts to Modernise and create a financial
sustainable entity. In addition, PRASA CRES has been given the responsible for Facilities Maintenance at all
the PRASA-Owned Rail Station and Loading facilities for Autopax.
The portfolio has a national footprint which extends to just over 4 500 hectors with a total of 4 700 land
parcels. This land has about 6 848 buildings and structures with an estimated total space of about 2 million
square meters (m²)1. In terms of space utilisation almost 1.5 million m² (75%) of the portfolio is allocated for
PRASA operations whilst around 542 000 m² (25%) is and or can be commercialised. The portfolio assets are
grouped into four main categories namely, Land, Stations, Residential, Depots and PRASA office buildings.
1
Portfolio data is currently being verified through a Property Data project with 225 stations completed
Page 90
CRES funding structure is comprised of Capex2 and Opex3. Capex funds are channelled mainly towards facility
improvements and value unlocking initiatives. These include the Acquisition and or buy back of high yielding
Development leases and Commercialisation of prioritised areas aimed at improving quality of services and
growing the portfolio. To this effect, at least three (3) Development leases worth R126 million have been
acquired ( Bridge Shopping Center , Umngeni LOT 421 and 422) and four (4) commercial initiatives
completed (Park Station : North Food Court , Banking Mall , Bus Billing and Pretoria: Pay on Foot parking).
Improvement of 69 stations has so far been completed. The positive contribution of these initiatives is
observable.
Opex funds in a form of rental income and subsidy allowance from PRASA supports mainly Maintenance and
Municipal (Utilities, Rates & Taxes) related initiatives. For the past few years allocation in this regard has
been insufficient with a cost coverage bordering between 75% and 82%. Cost optimisation programmes
(Energy efficiency and Automated metering) have recently commenced to ensure sustainability of services
and benefits realised in this regard due to timing are still at a very small scale.
In line with PRASA objectives CRES has adopted a programme based approach to its operations. Using value
drivers with key programmes have been developed and at implementation to give effect to set objectives as
illustrated in the table below:
Table 5: PRASA CRES value drivers, objectives and programmes
Value Drivers
Unlock Value
Improve
Maintain
Objective
Improve Financial Performance
Modernisation and Capacity Enhancement
Operational Effectiveness
Programmes &
1)Revenue Generation Programme
3) Station / Facility Upgrade Programme
(5) Facilities Management
Sub-programmes
-
Acquisition of Development
Leases
Commercialisation
2) Financial Management
-
Objective
Programme
National Station Improvement
National Station Upgrade
Workplace Improvement Programme
4) National Speed Gate ( ISAIMS )
Automated Metering
Energy Efficiency
Debtors Management
Programme
-
Repairs
Maintenance
Cleaning
Horticulture
6) Capital Intervention
and
and
7) Supply Chain Management &
implementation
Improved Human Capital Management
8) Development and Training
9) Internship
Objective
Good Corporate Governance
Programme
10) Risk and Compliance
Operations are supported by a high level organisational structure of four Regional Managers (Western Cape,
KwaZulu Natal, Gauteng South and North) which are responsible for programme implementation and four
2
3
Funding source - PRASA group
Funding source – Rental Income and Subsidy from PRASA group
Page 91
executives at Head Office providing strategic leadership to implementing units mainly through policy and
programme development.
8.3.1
CRES Mandate
CRES has to ensure effective management and maintenance of the PRASA Property portfolio. It therefore has
its vision to ensure:
“PRASA has efficient and well-maintained rail property portfolio, extended to its clients and stakeholders, so
they can all access a package of innovative, safe, reliable and affordable services”
The mission of CRES is:
To enhance commuter experience by improving, maintaining and unlocking value, of property infrastructure
in stations and long distance bus terminus whilst providing property related solutions to the organisation.
8.3.1.1 Functional areas and service offerings
The four Regional Offices (Gauteng South and North, KZN and Western Cape) implement most of the
programmes whilst CRES Head office provides leadership and guidance in the delivery of services through
coordinated and integrated planning with various stakeholders. CRES Head Office further develops policies
and strategies to create an enabling environment and ensure effective and efficient provisioning and
management of services.
8.3.1.1.1 Service Offerings
CRES provides services relating to the following key programmes:
Programme
Service
Client
Condition Assessments
Internal & External
Station / Facility
Facility renovations
Internal
Improvement & Upgrade
Station renovations
External
Office space accommodation to client
Internal
Condition Assessment
4
departments within PRASA
Revenue Generation
Rental Space selling
External
Utilities Management
Internal & External
Debtors Collection
Internal
Security Services (Park Station)
Internal & External
Repairs & Maintenance
Internal & External
Disposals
Internal
&
Financial Management
Facility Management
Disposals
4
5
5
Programme not prioritized for the financial year
Programme is managed by Intersite Investment
Page 92
The delivery of these programmes follows a high level Value Chain process depicted below:
1. Assess the condition of
the assets in the portfolio
(Condition Assessment
Programme)
2. Upgrade & improve
assets into functional &
safe levels (Station &
Facility Upgrade
Programme)
3. Rent-out vacant and
Non-operational Space.
4. Maintain assets for
functionality, safety and
cleanliness levels (Facilities
Management)
5. Dispose surplus assets
(Disposal Programme)
Figure 37: CRES Value Chain
As reflected above milestone 1 which conducts Asset Condition Assessments identifies properties which
require upgrade / improvement & based on level of contribution to PRASA operations and Rental revenue,
they will be prioritised at milestone 2. It is important to note that the delivery of milestone 2 is key to CRES
performance as it ensures creation of additional space for rentals and provides functional facilities for overall
PRASA operations.
Milestone 4 impacts mainly on 1 and 3, as it provides ongoing maintenance for all Assets regardless of the
condition. The programmes are driven by different Programme coordinators located at Head Office. As
illustrated in Figure 37 the programmes are generally characterised by interdependencies and thus require a
great level of integration both at Planning and Implementation phase. It is important to note that the
Condition Assessment has not been prioritized for the period and Disposal programme is managed by
Intersite Investments.
8.4 PRASA TECHNICAL
PRASA Technical was established in 2012 as a Division within the PRASA Group, with the key mandate being
to develop and drive the Strategic Infrastructure Programme of PRASA. The management of capital projects
will support PRASA’s Rail Technology Modernization drive, Standardization and Asset life- cycle management
principles.
The Division is responsible to:
 Manage the Implementation of Key Strategic Infrastructure (Capital) Projects
 Manage the Accelerated Rolling Stock Investment Programme.
 Manage the Construction of Capacity-Enhancing or Integrated Projects like Bridge City and
Motherwell
Page 93
 Construction of Transit Orientated Developments (TODs)
 Asset Administration
 Capital Project Performance and Reporting
 Modernise and expand asset base capacity to meet passenger demand in the medium to
long term by focusing on the:

acceleration of the planning and implementation of Strategic Infrastructure projects

detailed Capital Expansion Programme per discipline
 Collaboration with SCM for effective implementation of strategic sourcing
 Total Cost of Ownership to be applied to major projects
 External Capacity to expedite capital execution programme
 Reduction of the hockey stick effect on the CAPEX programme (on budget and on schedule)
The following three major capital programmes are for execution by PRASA Technical:
 Accelerated Rolling Stock Program
 Modernization of Rolling Stock Maintenance Depots and Staging Facilities, and
 Modernization of Infrastructure
 Integrated Strategic Projects – Bridge City, Motherwell, Hammanskraal, Eerste-Frabrieke Greenview
 Commuter Rail Extensions
8.5 Intersite Asset Investments (SOC) LTD
Intersite’s mandate is to leverage PRASA Group’s large asset base and is responsible for property and asset
development, as well as to drive the commercialization of select and approved PRASA assets including
through facilitating for private sector investment in PRASA’s assets.
Being the property and asset investment arm of PRASA, Intersite’s objective is to provide property and asset
investment solutions to PRASA through a range of innovative and entrepreneurial solutions. In addition
Intersite undertakes project services to third parties to enable PRASA and Intersite to derive maximum
economic and financial benefit.
The mandate of Intersite will be realised through:
 The facilitation of investment by strategic partners;
 Facilitating the sale of select and approved properties and assets;
Page 94
 Facilitating property developments and investments;
 Procuring the developments on PRASA properties;
 Facilitate the buy-back of third party real estate development leases on PRASA land;
 Undertaking project services for select third parties; and
 Creating a shared services model for the Group.
The Intersite business is specifically targeted at leveraging the PRASA assets to procure sustainable revenue
for the PRASA group. The critical success factors include, amongst others, the adoption of a sound
commercial approach to property development and asset investments.
Intersite undertakes project services for third party clients as an implementing agent for transport related
projects particularly related to intermodal facilities, mainly undertaken by various Government
Departments. As a result, Intersite is poised to partner with Government to assist Government in service
delivery, through ensuring the successful implementation and exploitation of certain build programmes
relating to intermodal facilities.
The above has necessitated a phased implementation of the strategy for Intersite into the following:
 Establishment phase (October 2010 – March 2011)
 Build-up phase
(April 2011 – March 2015)
 Growth phase
(April 2015 – ongoing)
The build-up phase entails long term strategic planning, identifying potential properties and assets,
identifying potential strategic partners, marketing of Intersite within PRASA Group and the market,
implementing historical projects, developing new strategic direction for property development and
investments.
8.6 Autopax (SOC) LTD
Autopax Passenger Services (SOC) Ltd has its origins in the passenger services provided by the former South
African Road Transport Services, under the names of Transtate and Translux. During the period after 1990,
these two businesses were consolidated into the Passenger Services Division of Autonet, a division of
Transnet. Autonet was corporatised into the legal entity Autopax Passenger Transport Services (Pty) Ltd.
Autopax Passenger Services (SOC) Ltd is a wholly owned subsidiary of the Passenger rail Agency of South
Africa (PRASA). Autopax operates two bus services, the luxury brand- Translux and semi luxury brand-City to
Page 95
City. In an effort to diversify revenue streams Autopax now also operates a tailor made bus hire solution
known as Autopax Charters.
 Translux – a luxury long distance scheduled inter-city operator, servicing more than 100
destinations throughout Southern Africa
 City-to-City, providing no-frills regional services to various destinations across South Africa and
Mozambique.
The mandate of Autopax is to consolidate its market share, and operating on a fully commercial basis, run a
profitable inter-city bus company. In addition, it will support rail operations through effective feeder and
distribution services and also to offer services to cities and municipalities in small towns and rural areas.
Page 96
9 Financial Plan
9.1 PRASA Subsidy Allocation
Page 97
9.2 PRASA Cost Drivers:
Figure 38: PRASA Key Cost drivers
9.3 Budget assumptions:
9.3.1
PRASA Corporate
 Travel and accommodation costs capped to a maximum of R250 000 per department,
except for departments that travel is an integral part of the department.
 Provision has been made for additional legal issues for the Group including large cases such
as the advertising portfolio case;
 Professional services are decreasing as compared to the prior year;
 Security – The decrease in security services is offset by the increase in personnel above;
however the security costs have increased for the Group show an increase, which is mainly
due to catching up with the PSIRA rates.
 Insurance premium is expected to increase by between 7.5% and 10% based on PRASA’s risk
profile.
 The insurance claims are set at a similar amount as previous years.
9.3.2
PRASA Rail
 Fare revenue real growth of 2.55% due to reduction in fare evasion through the
implementation of capital projects such as fencing and fare improvement initiatives. In
addition an inflationary increase will be implemented during the financial year.
 Savings on energy through review of the Eskom contract and account as well as energy
regenerative braking project to offset some of the estimated electricity increase of 8% in
year 1.
 Lease costs for locomotives for Metrorail remain in place for 2014/15.
Page 98
 MLPS to receive 20 new locomotives for their fleet thereby reducing its leasing cost from
Transnet;
 Fuel to is estimated to increase by 15% based on a weaker currency;
 Headcount in Metrorail and MLPS to remain constant for 2014/15 and an increase in
employee costs of CPI + 1% in line with the National Treasury Guidelines..
9.3.3
PRASA CRES
 The rental revenue for the 2014/15 budget is anticipated to be 15% more as compared to
the forecast. This is mainly due to the new business and the realisation of income from
development leases to be acquired in the 2014/15 financial year;
 Renewal of leases with market related rentals and attracting national or blue chip clients to
enhance the image of the portfolio and thereby increasing the revenue potential.
 Recoveries on Electricity and Water consumption within the portfolio to lower the cost of
energy and water within the stations that has commercial components to it.
 Municipality costs for the current year are expected to be within budget.
 Health & Risk is expected to increase by significantly due to increased and additional
cleaning of stations, trains and offices.
 Finance costs relates to the finance charges on long outstanding municipality liability and
Transnet liability;
Page 99
9.4 Financial Statements
9.4.1
High level budget per business entity
Table 6: High level budget per entity
Page 100
9.4.2
PRASA Income Statement
Mar-14
Mar-15
Mar-16
Mar-17
R'000
R'000
R'000
R'000
7 753 932
7 740 855
8 130 869
8 582 597
454 752
534 575
567 623
617 433
Fare revenue
2 970 156
3 317 898
3 497 064
3 683 474
Government subsidy
4 328 003
3 887 342
4 066 160
4 281 666
1 020
1 040
22
24
189 895
114 211
118 071
124 875
10 799
12 000
12 600
13 300
179 096
102 211
105 471
111 575
Revenue
Operating leases rental income
Management fee third party
Advertising income
Other income
Operating expenses
8 603 905
8 478 608
8 934 569
9 406 506
Audit fee - external
16 121
17 093
18 009
18 957
Audit fee - internal
7 500
18 900
19 921
20 976
Auxiliary transport
76 411
43 212
45 545
47 959
Bank charges, penalties
41 040
43 086
45 298
47 609
139 274
126 732
133 574
140 652
Claims
Communications
Computer expenses
Employee benefits
68 940
78 208
82 421
86 779
144 260
114 565
120 698
127 052
4 592 407
4 196 212
4 423 977
4 658 834
Energy expenses
928 816
982 161
1 033 959
1 087 784
Haluage and access costs
246 155
223 014
235 057
247 515
Health and risk
135 899
170 333
179 508
189 003
Insurance premiums
92 589
96 661
101 840
107 207
Legal fees
35 489
34 547
36 412
38 342
228 017
406 665
428 330
450 798
Maintenance expenditure
Marketing and publications
Material expenses
Office expenditure
On board services cost
Operating lease expenses
Printing
68 373
61 557
64 866
68 291
205 284
218 215
229 832
241 882
13 666
9 517
12 332
12 987
32 316
12 858
13 552
14 271
233 189
227 836
239 658
252 256
16 645
27 238
28 694
30 204
Professional fees
188 884
216 867
228 603
240 765
Rates, refuse
308 982
339 708
358 040
377 007
Security
540 394
551 018
580 706
611 430
Training fees
75 290
93 165
98 016
103 201
Travel expenses
48 578
34 949
36 832
38 776
Travel expenses - staff
36 688
39 996
42 031
44 161
Other expenditure
86 844
91 481
96 202
101 129
Loss before investment income and finance
cost
Finance cost
Finance income
Loss before taxation
Taxation
Loss before amortisation and depreciation of
assets
Capital subsidy and grants amortised
Depreciation and amortisation
Loss on disposal of assets
Impairment losses recognised/(reversed)
Actuarial loss
Loss and total comprehensive income for the
year
( 660 078)
( 623 543)
( 685 629)
( 699 034)
( 34 915)
( 12 658)
( 4 538)
( 1 472)
214 995
( 479 998)
-
8 151
( 628 049)
-
2 542
( 687 624)
-
2 601
( 697 905)
-
( 479 998)
( 628 049)
( 687 624)
( 102 951)
( 88 493)
( 104 274)
( 697 905)
( 121 182)
1 390 769
1 330 500
1 379 091
1 429 590
(1 451 241)
(1 403 287)
(1 457 290)
(1 513 465)
( 42 401)
( 19 379)
( 26 075)
( 37 307)
( 78)
-
( 582 948)
Page 101
-
-
-
3 673
0
0
( 716 541)
( 791 898)
( 819 087)
9.4.3
PRASA Balance Sheet
Mar-14
Mar-15
Mar-16
Mar-17
30 735 415
30 727 931
7 483
40 024 082
40 016 225
7 858
48 222 657
48 214 407
8 250
56 866 967
56 858 304
8 663
4 252 009
351 455
241 126
3 659 428
3 585 543
397 003
228 195
2 960 345
2 909 193
445 355
216 578
2 247 260
2 405 375
497 916
204 528
1 702 930
34 987 424
43 609 626
51 131 851
59 272 342
1 747 405
4 248 258
-2 500 853
1 030 864
4 248 258
-3 217 395
238 966
4 248 258
-4 009 293
( 580 121)
4 248 258
-4 828 380
30 178 908
92 759
584 981
17 261
29 483 906
39 544 984
48 264
614 230
18 124
38 864 365
47 830 793
644 942
19 030
47 166 821
56 629 071
677 189
19 982
55 931 900
3 061 111
3 061 111
3 033 778
3 033 778
3 062 092
3 062 092
3 223 392
3 223 392
34 987 424
43 609 626
51 131 851
59 272 342
ASSETS
Non-current assets
Property, plant and equipment
Defined benefit plan assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Total equity attributable to equity holders of the Entity
Share capital
Accumulated loss
Non-current liabilities
Loans and borrowings
Provision for claims
Employee benefit obligations
Capital subsidy and grants
Current liabilities
Trade and other payables
Total equity and liabilities
Page 102
9.4.4
PRASA Cash flow Statement
Mar-14
Mar-15
Mar-16
Mar-17
-660 434
-1 898 599
-2 559 033
-34 915
-2 593 949
-620 244
-59 950
-680 194
-12 658
-692 851
-686 022
-8 422
-694 443
-4 538
-698 981
-699 447
120 789
-578 657
-1 472
-580 129
Cash flow from operating activities
Operating cash flows before working capital changes
Changes in working capital
Cash (utilised)/generated from operations
Finance cost
Net cash (used)/generated from operating activities
Cash flow from investing activities
Acquisition of property, plant and equipment
214 995
8 151
-5 760 801 -10 710 959
2 542
2 601
-9 681 547 -10 194 669
Net cash used in investing activities
(5 545 806)
(10 702 808)
(9 679 005)
(10 192 068)
-46 252
27 856
6 831 110
-43 632
29 249
10 710 959
-47 358
30 712
9 681 547
952
32 247
10 194 669
6 812 714
10 696 576
9 664 901
10 227 868
Investment income - interest received
Cash flow from financing activities
Repayment of other financial liabilities
Repayment on insurance claims
Capital subsidy and grants received
Net increase in cash and cash equivalents
(1 327 040)
Cash and cash equivalents at the beginning of the year
4 986 468
3 659 428
2 960 345
2 247 260
3 659 428
2 960 345
2 247 260
1 702 930
Cash and cash equivalents at the end of the year
Page 103
( 699 083)
( 713 085)
( 544 330)
10 Capital Programme
A total of 61 capital funding requests, with a total value of R43.5 billion over the 2014 MTEF, was proposed
by the business. The evaluation team has assessed all the funding requests received. The technical analysis
of the results is attached as Annexure A and B. In general, the team verified the following: whether the
business case is in line with the prescribed guidelines, the likely financial impact of the project, return on
investment, associated risks, implementation readiness, strategic intent, operational impact, and needs and
options analysis. In addition, an analysis was conducted to verify the proposed project/programme impact
on operational efficiency, modernization, improvement of the financial position and service sustainability.
Crafting PRASA’s response to the approved capital allocation from government, the evaluation team
prioritized projects/programmes in line with the following:
 Supporting the urgent priorities of PRASA to achieve modernization objectives;
 Initiatives to increase revenue, improve and sustain the current service;
 Priority given to projects and programmes already committed for finalization to avoid any
financial losses or cost overruns; and
 Priority given to projects and programmes demonstrating readiness to spend.
With the above considerations, PRASA crafted a capital programme which demonstrates sustained capital
growth over the period ahead. Further, ensured that the capital investment is sustainable going into the
future.
The sections below outline the budget framework, projected financial commitments into the 2014/15
financial year, general observations and funding recommendations.
10.1 Budget Framework
The total PRASA Group capital baseline amounts to about R40.2 billion over the next three years as shown in
Table 7 below. The 2014 Budget from Government allocates an additional R1 billion over the baseline to
adjust for the forex movement on the Rolling Stock Fleet Renewal Programme between bid submission and
financial close. The adjustment for the forex movement is aligned with contract term and therefore, will go
beyond the 2014 MTEF period. There is no additional funding approved for the new projects in the capital
Page 104
programme. However, the capital programme shows a significant growth in the first two years of the MTEF
due to increase in funding of the signalling programme.
Over the medium term, PRASA’s capital expenditure is expected to reach R11 billion in 2014/15, R14.2 billion
in 2015/16 and R15 billion in 2016/17 bringing the total to R40.2 billion. Overall growth in capital
expenditure has increased by 25.5 per cent when compare the 2013 MTEF (R32 billion) with 2014 MTEF
(40 billion).
The budget framework further reflects a projected financial commitment of R9.8 billion carried forward into
the 2014/15 financial year. The budget framework made provision for these financial commitments before
new allocations are considered.
Table1:
Budget
Framework
Table
7: Budget
Framework
over theover
MTEFthe 2014 MTEF
Budget Fram ew ork
R thousands
2013/14
Adjusted Budget
2014 MTEF Baseline (inc additions)
6 831 110
2014/15
2015/16
11 058 959
348 000
Deviation
61.9%
Year-on-year increase
Total
Medium -Term Expenditure
Fram ew ork
10 710 959
2014 MTEF Baseline (exc additions)
2016/17
MTEF
14 203 547
15 010 421 40 272 927
13 865 547
14 600 421
39 176 927
338 000
410 000
1 096 000
28.4%
5.7%
338 000
410 000
New m oney
348 000
Forex Adjustment for New Rolling Stock
1 096 000
Financial liabilities
Accruals
Projected commitments into the 2014/15
6 831 110
Available budget
-
-
-
9 889 471
-
-
11 058 959
14 203 547
15 010 421 40 272 927
10.2 Projected financial commitments into the 2014/15 financial year
Table 8 below shows the projects that are already committed into the new financial year. The total projected
financial commitment amounts to R9.8 billion. Taking into account these commitments, the budget
framework make provision for these projects before allocating to other areas of priority for the business.
Page 105
Table
8: Projected
financialFinancial
commitments
into 2014/15
Table
2: Projected
Commitments
into the
Projects and Programmes
2014/15 MTEF
2014/15
R thousands
Rolling Stock Fleet Renewal Programme
5 447 974
Signalling and telecommunications Programme
General overhaul of Metrorail Coaches
854 784
1 000 222
New Locomotives
945 030
Bridge City - Dalbridge
70 000
Metrorail/Gautrain Stray Current Mitigation
107 000
Green View - Pienaarspoort Project
100 000
Total
8 525 010
10.3 Capital Funding
The capital budget over the next three years is reflected in Table 9 below. The allocations are in line with the
priorities of PRASA as part of the introduction of the new rolling stock and improving its service offering to
the customer. These include signaling, 120km/h perway programme, and additional electrical capacity in the
substations, Overhead Lines, station improvement programme, accelerated rolling stock programme, safety
projects and related infrastructure.
Planned spending on the Rolling Stock Fleet Renewal Programme will be the largest category and will
continue to grow strongly over a 10 year period ahead, together with further investment in accelerated
rolling stock programme, new locomotives, signaling, station improvement, upgrades and other related
infrastructure. The robust growth in infrastructure development and upgrade is in line with PRASA’s priority
to modernize the infrastructure, which will be compatible with the new rolling stock for the Metrorail
service.
Page 106
Table9:3:
Proposed
Capital
Allocations
over the 2014 MTEF
Table
Capital
Allocations
for 2014/15
to 2016/17
Capital Programme
2014/15
2015/16 2016/17 Total MTEF
R thousands
Rolling Stock Fleet Renew al Program m e
5 447 974
4 793 475
5 802 490
16 043 939
Corridor Modernization Program m e
1 187 284
2 818 739
2 284 085
6 290 108
854 784
1 590 973
1 148 677
3 594 434
Signalling and telecommunications Programme
Station Modernization Programme (140 stations)
120km Perw ay Programme
National Speed Gates Programme
Asset Protection Programme
-
535 988
447 181
983 169
200 000
260 000
233 370
693 370
-
250 653
264 676
515 329
132 500
181 125
190 181
503 806
1 515 573
1 308 851
1 371 151
4 195 575
Capital Intervention Programme (minor w orks, safety & SNP)
300 473
384 496
403 721
1 088 690
Rolling Stock Facilities
120 070
147 073
154 427
421 570
New Locomotives
945 030
562 282
583 004
2 090 316
PRASA Rail
Rolling Stock Adhoc Condition Work
150 000
215 000
230 000
595 000
1 716 660
3 209 628
3 125 460
8 051 748
1 000 222
1 799 634
1 805 591
4 605 447
Refurbishment of Smeyl Coaches
100 000
122 329
103 750
326 079
Depots Infrastructure & Equipments
301 403
836 378
744 305
1 882 086
Electrical Programme: Substation, New Overhead Lines & OHTE
208 170
323 579
342 087
873 836
Footbridges, Level Crossings and Structures
106 865
122 708
129 727
359 300
PRASA Technical
General overhaul of Metrorail Coaches
Metrorail/Gautrain Stray Current Mitigation
PRASA Corporate Real Estate
-
5 000
-
5 000
913 001
1 207 211
1 376 136
3 496 348
Station Improvement Programme
215 639
334 432
370 572
920 643
Station upgrades/transit oriented developments
204 524
367 000
385 350
956 874
Upgrade of Park Station
72 000
349 500
456 121
877 621
Developmental Leases
300 000
-
-
300 000
Workplace Improvement Programme (incl facilities)
120 838
156 279
164 093
441 210
Inform ation and Com m unication Technology (ICT)
148 467
298 587
305 626
752 680
111 717
260 000
264 832
636 549
ICT Systems
36 750
38 587
40 794
116 131
Rail Netw ork Extensions
Enterprise Resource Planning (ERP)
130 000
567 056
745 472
1 442 528
Bridge City - Dalbridge
70 000
-
-
70 000
Green View - Pienaarspoort Project
-
111 006
117 356
228 362
Queenstow n - Umtata
-
106 050
112 116
218 166
60 000
350 000
516 000
926 000
Total
Motherw ell Rail Extension
11 058 959
14 203 547
15 010 421
40 272 927
2014 MTEF Allocation
11 058 959
14 203 547
15 010 421
40 272 927
0
Unallocated
Year-on-year grow th
Page 107
-
-
0
65.0%
28.4%
5.7%
Figure 39: Percentage share of allocation per programme
Figure 40: Infrastructure and Rolling Stock investment over the next three years
Page 108
11 Performance Plan
11.1 Performance Plan 2014/15
Strategic
Programme
Performance Indicator
Actual Performance
Performance
Objective
Medium Term Targets
Responsible
Estimated
2010/11
Patronage
Number of annual
increase
passengers
Metrorail
471.7
2011/12
516 million
million
Improve operational effectiveness
MLPS
Autopax
2012/13
528.2
2013/14
544.39 million
million
1.54
1.49
1.263
million
million
million
2.71
2.7 million
3.15
2.9
million
million
million
Increase rail share of public
transport with 15% over 5
0.950 million
2014/15
2015/16
2016/17
564.02
586.6
610.17
million
million
million
1 million
1.1
1.21
million
Million
3.1
3.3
3.5
million
million
million
Rail
Rail
Autopax
Increase by
Increase
Increase
Rail &
4%
by 5%
by 6%
Autopax
years
New routes Autopax
4
MLPS Regional Services
6
Changing
Customer Satisfaction index
customer
based on survey results
72%
72%
65.25%
72%
Autopax
2
73%
MLPS
74%
Rail, Autopax
and CRES
experience
Page 109
Strategic
Programme
Performance Indicator
Actual Performance
Performance
Objective
Preventative
2011/12
2012/13
Train Reliability6
2013/14
2014/15
2015/16
2016/17
95%
95%
96%
97%
Rail
Effectiveness
Maintenance
medium to long term
Improve operational
Responsible
Estimated
2010/11
Invest in new capacity to meet passenger demands in
Medium Term Targets
Mean Distance Between
866km
767km
813km
917km
930 km
975 km
1025 km
Rail
0.78
0.94
0.96
1.16
1.1
1.0
0.9
Risk
13
59
Corporate &
20
20
20
Rail
Tech
Failures (MDBF) Rolling Stock
Employee
Disability Injury Frequency
Safety
rate7 (DIFR)
Rolling Stock
New Train sets delivered
Renewal
Introduction of MLPS locos
Multi-modal
Rail extensions with multi-
1
1
1
1
Expansions
modal facilities completed
(Bridge City)
Green-
KWT –
Mother-
view
Dimbaza
well
(End Qrt 3)
Creating new
MOU Agreements in support
business
of IRPTN’s
4
SAD
4
Projects identified in support
SAD
of IRPTN’s identified
Signalling
New regional signalling
1
Traffic Control Centres
(GNC)
6
8
1
1
(KZN –
(Gauteng
Ross-
Region
100% less (% trains cancelled due to Rolling Stock and Infrastructure)
Disability Injury Frequency Rate is the number of disabling employee injuries over 200 000 hours worked calculated over a 12 month period.
8
GNC = Gauteng Nerve Centre;
7
Page 110
Tech
Strategic
Programme
Performance Indicator
Actual Performance
Performance
Objective
Medium Term Targets
Estimated
2010/11
2011/12
2012/13
2013/14
2014/15
Depot
Depots modernisation
Modernisation
completed9
2016/17
burgh)
Control)
2
Tech
SaltRiver,
Infrastructure
Number of projects
modernisation
completed and
4
24
17
7
Tech
commissioned10
Commerciali-
Station Upgrades
sation
completed11
Capacity
Metrorail Coaches
Enhancement
completed
5
3
8
10
11
30
36
CRES
334
510
579
552 estimate
500
500
500
Tech
22
3
50 estimate
50
50
50
Tech
204
207
207
HCM
1400
1700
1700
HCM
capacity
MLPS Coaches completed
Capital Internal
2015/16
Braamftn
demands in medium to long term
Invest in new capacity to meet passenger
completed
Build Human
Responsible
Capacity
Technical skills created (RS,
53
building
Signals, Telecomms, Energy)
(End Qrt 3)
Enhancing the
Learnerships in progress and
internal
completed
774
576
1651
1105
(End Qrt 3)
9
The projects are multi-phased with completion of minimum requirements only due in 2014/15, whereafter phased construction will commence.
This includes Electrical as well as Perway and Stuctures. Projects. The number of projects to be completed is subject to Capex budget allocations.
11
These are multi-year projects with projected completion dates.
10
Page 111
Strategic
Programme
Performance Indicator
Actual Performance
Performance
Objective
Responsible
Estimated
2010/11
Internal capacity
capacity to
2011/12
293
Bursaries
2012/13
425
business
2013/14
365
2014/15
2015/16
2016/17
400
425
450
HCM
700
500
500
HCM
Approve
Construc-
Training
Concept
tion
commence
R3.78bn
Per
Per
budget
budget
(End Qrt 3)
support a new
1847
My Station programme
12
Rail Academy
Revenue
Operationally Generated
Generation
Revenue (Excl. Subsidy and
R2.79bn
R3.12bn
R3.647
R4.978bn
bn
(Forecast)
HCM
Finance
Internal Transfers)
Improve Financial performance
Build Human Capital
Medium Term Targets
Financial
Net surplus or (loss)
(R796m)
(R28.9m)
(R156.7m)
Management
Capital
R2.96bn
Capital spend
R3.48bn
R6.329bn
(R407.7m)
(R716.5
Per
Per
Finance
(Jan 2014)
million)
budget
budget
R6.8bn
R11.05bn
R14.20bn
R15.01bn
SAD
5
5
5
5
SCM
8.68
11.74
13.72
15.12
Finance
programme
Contract Costs
Top Contracts re-negotiated
Optimization
for inclusion in SCM Price
12
n
Positio
Balance Sheet
ial
Financ
then
Streng
book
Restructuring
Net Asset to Liability Ratio
(Excludes Capital subsidy
This figure represents the number of people since November 2011.
Page 112
5.27
7.62
5.76
Strategic
Programme
Performance Indicator
Actual Performance
Performance
Objective
Medium Term Targets
Responsible
Estimated
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
deferred income)
Concluded strategic partner
5
2
Section 54
Due
approvals
diligence
Intersite
agreements
Disposal of assets13
R33.5m
R33.5m
Intersite
6
6
6
Corporate
stations
stations
stations
exercise
Valuation of investment
5 stations
properties (Identified
stations)
Real Estate
Concluded major station
Strategy
development agreements
Completed lease-buy-back
1
2
Intersite
6
5
6
7
CRES
75%
80%
80%
80%
SCM
R1.2bn
R1.4bn
Business
Corporate Governance
& Economic
Development
agreements 14
13
14
Economic
BBBEE recognition spend
Development
Value of projects awarded
to Women in Rail
The estimated value is R109m over three years.
Agreements completed whether successful or not.
Page 113
R1bn
Development
Strategic
Programme
Performance Indicator
Actual Performance
Performance
Objective
Medium Term Targets
Responsible
Estimated
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
Localisation of content on
Strategy
70%
70%
Rolling Stock Renewal
approved
SAD
Program
Strategy
Corporate Governance and Economic Development
Enterprise development
Corporate
approved
Sustain Employment through
5 000
5 000
5 000
Tech
Unquali-
Unquali-
Unquali-
Finance
fied
fied
fied
contracts
Audit –
Financial Audit
Administration
of PRASA
Audit on Pre-determined
objectives
Unquali-
Unquali-
Unquali-
fied
fied
fied
No
1 Finding
No
material
material
findings
findings
Unqualified
No material
No
No
No
CSO
findings
material
material
material
findings
findings
findings
No
No
No
Internal Control
material
material
material
environment
findings
findings
findings
4
4
4
Board effectiveness and
Audit Committee Meetings
4
4
4
4
Legal
Company
Secretary
15
Enterprise Risk
Cost of Risk as % of
Management
Turnover15
14.2%
15%
13.6%
11.6%
(End Qrt 3)
Cost of Risk includes costs for Insurance, Claims, Audit, Legal, Security and Health and Risk expressed as percentage of turnover.
Page 114
Per approved budget
Risk