department of public enterprises date - 6 october 2015 page 1 rail restructuring presenter:dpe...

Department of Public Enterprises DATE - April 19, 2023

Rail Restructuring

Presenter:DPE TransportVenue: ParliamentDate : 20 March 2002Time : 11h00


DPE Mission

Mission

The Department of Public Enterprises works

to maximize the value and benefit that state

owned enterprises deliver to the government

and to all the people of South Africa.


DPE Strategy

• To fulfill its mission, the Department of Public

Enterprises is committed to:

– Improving SOE financial and social performance

through monitoring, evaluation and reporting

– Ensuring high standards of governance through

board selection and training

– Communicating government’s expectations through

board participation and regulatory reform

– Increasing black economic empowerment and

empowerment of HDI’s through SOE joint venture

ownership and procurement


DPE Strategy cont…

- Strengthening the competitiveness of SOEs through

restructuring and strategic equity partners

- Realising asset value through sales and transfers

- Creating a business climate that promotes

investment and creates jobs


• Objectives of rail restructuring process:

– Enhance the efficiency of rail transport

infrastructure for the safe and cost effective

movement of goods and people

– Incremental developmental approach to the

restructuring of the rail industry

– Retain and enhance the strategic role that rail plays

in the Southern African Economy

– Develop space for the participation of women(in

particular rural women), disabled persons and BEE

entities in the industry

Restructuring of the Rail Industry


Restructuring of the Rail Industry cont…

– Enhance shareholder value

– Raise the economic value-add of the rail industry

– Support the National Land Transport Strategic

Framework of The Department of Transport,

currently in draft form

– Integrate the initiatives of all Government

Departments into the restructuring process

– Raise the the level of competition in the sector

– Support the movement of appropriate cargo from

road to rail


Status Overview 2002 March

• Process of Restructuring Model development

– March 2001 the NFA Transport Sector establishes a

Task Team comprising Labour, NDOT and DPE

– Task Team sets up Technical Working Group(Task

Team representatives and Spoornet Management)

– The Technical Working Group develops

recommendations for the restructuring of Spoornet

– Government and Labour agree on a common model

for rail restructuring

– Cabinet approves model December 2001

– Joint statement released to press 27 March 2002


Status Overview 2002 March cont…

• Adopted Rail Restructuring Model:

– Spoornet General Freight Business and CoalLink

shall remain an integrated freight company

– Luxrail shall be concessioned to a hospitality entity

– Shadow incorporation of all discrete entities shall

occur

– Halcrow Turnaround Strategy to be implemented by

Spoornet Management

– Internal Restructuring and transformation of all

entities


Status Overview 2002 March cont …

- Efficiency drive by all divisions and entities in the rail

sector

- NDOT to develop policies that support appropriate

road to rail transfer of cargo

- 8 000 employer induced retrenchments to occur in

the period to 2006

- Job Loss Mitigation Strategies to be developed and

implemented

- OREX remains a division of Spoornet, pending the

investigation of restructuring options

- Passenger Rail Transport is to be integrated


Status Overview 2002 March cont…

– Network option shall be 15 800km extended volumes

to 2020

– An investigation into a two tier system of

Management for high and low density lines


Rail Entities

• Spoornet GFB/CoalLink• Luxrail• LDL’s• Metrorail/Shosholoza Meyl• OREX


GFB/CoalLink

• Model– Integrated FreightCo

• Lead Agency– DPE

• Issues– Profitability– Client focus– Inefficiency– Structure– Lack of financial transfer transparency

• Processes to occur– Halcrow Turnaround Strategy to be implemented– Shadow incorporation of Business Units to allow

financial transparency


GFB/CoalLink cont…

– Internal restructuring and transformation – Efficiency drive– Implementation of the Job Loss Mitigation

Strategies that will attempt to reduce the amount of induced retrenchments

– Implementation of the Spoornet Social Plan for the resulting retrenchments


High and Low Density Lines

• Model

– Not determined as yet

• Lead Agency

- Department of Public Enterprises

• Issues

- Most low and light density lines are unprofitable

- They are strategic infrastructure corridors for rural

areas


High and Low Density Lines cont…

• Processes to occur

– Investigation into a dual management structure to

manage Linkrail and GFB/Coallink

– Multiple stakeholder(Provincial and local authorities,

Private Sector, communities, National Departments)

low and light density line viability assessment

process by Spoornet, under guidance of DPE with

the oversight of the NFA


Metrorail/Shosholoza Meyl

•Model

-To be integrated with SARCC into a state owned and

subsidised passenger rail company

•Lead Agency

-National Department of Transport

•Issues

-Huge subsidy every year

-Low service levels

-Safety standards


Metrorail/Shosholoza Meyl cont…


- Inter-departmental working group investigating

possible structural options

- Development of integrated restructuring plan

- Subsidy level investigation


Luxrail

•Model

-Luxrail to be concessioned to hospitality industry

entity

•Lead Agency

-DPE

•Issues

-Loss-making operation(R 15 mil/yr)

-Brand destruction occurring

-Not a strategic asset


Luxrail cont…


- Engagement with Spoornet and Luxrail management

to develop timetable for concessioning

- Commencement of legal and financial processes in

preparation for concessioning

- Transaction marketing and Communication


OREX

• Model

- OREX shall operate as a division of Spoornet

pending the formulation of a model that suits the

development of the region

• Lead Agency

- DPE

• Issues

- Need to integrate port and rail operations

- Need to develop model that forms integrated

solution with DTI and DME initiatives in region

- Capex needed for expanded mining output


OREX cont…


- Divisionalisation and shadow incorporation shall

occur to ensure transparency of transfer pricing in

group

- Interdepartmental technical team(DPE, DME, DTI)

to develop integrated solution to OREX base case

needs for regional development

- Development of a government OREX restructuring

plan with base case developed by technical team

- Engagement with Labour in NFA on the proposed

government restructuring model

department of public enterprises date - 6 october 2015 page 1 rail restructuring presenter:dpe...

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