PRESENTATION TO PORTFOLIO COMMITTEE ON TRANSPORT

21 October 2010Cape Town

From Stabilisation to Quality Travel Experience

PRESENTATION TO PORTFOLIO COMMITTEE ON TRANSPORT

21 October 2010Cape Town

From Stabilisation to Quality Travel Experience

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INTRODUCTION

Financial Year 2009/10:

• Significant in many respects for PRASA

• Represented conclusion of stabilisation phase (1 April 07 – 31

March 2010) - During past 3 Years former SARCC Mandated to:

1. Arrest decline and possible collapse of commuter rail services

2. Consolidate Passenger Rail Entities into a Single Public Entity – PRASA;

3. Prepare Rail for 2010 FIFA World Cup™

• PRASA Has Successfully Delivered on this Mandate.

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2009/10 – Challenging Economic Environment

Financial Year 2009/10

• A difficult year due to global economic downturn

Characterized by massive job losses in economy

Increased Energy Costs

Increased Labour Costs

Decline in Patronage in rail environment

Decline in Revenues in commuter rail

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Key Highlights of 2009/10

Despite the difficult economic and operating environment, PRASA achieved the following key successes:Successfully concluded Stabilisation Phase of Turn-Around

Strategy with transfer of Autopax and Shosholoza Meyl into PRASA

Increased value of assets by 37% from R11,6 billion to R15.9billion (Rolling Stock and Infrastructure Upgrades and transfer of additional assets)

Increased income by 34% from R4.2billion to R5.6.billionCompleted improvements to 111 stations under the Station

Improvement Programme

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Key Highlights of 2009/10Cont…..

• Built 3 new stations (Rhodesfield, Moses Mabhida, Century City)• Upgraded 50 Stations (including Nasrec, Cape Town, Orlando,

Doornfontein, Durban, Rissik, Loftus)• Upgraded 505 coaches which ensured that PRASA exceeded

the target of 2000 coaches for the period 1 April 2007 - 31 March 2010• Successful delivery of transport services during the 2009

Confederations Cup - which laid the foundations for the successful role played by PRASA during the 2010 FIFA World Cup

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Key Highlights of 2009/10Cont…..

• Accident rate in Metrorail reduced by 14%

• Injury rate in Metrorail reduced by 17%

• Revenue increase for Shosholoza Meyl and Autopax despite decline in patronage

• Spending to BBBEE at 77.2%

• More than 1000 learnerships for 2009/10 (Security, technical, drivers)

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Passenger Rail & Bus Services during the 2010 FIFA World Cup™ -

PRASA Objectives for World Cup:• Contribute to the Success of the tournament• Position Rail and Other Transport Products within PRASA•Move Significant numbers to strengthen position of Rail as Mass

Mover• Reward Loyal Customers

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Passenger Rail & Bus Services during the 2010 FIFA World Cup™ Cont…

PREPARATIONS:Rolling Stock• 100 Train sets upgraded• 65 sets dedicated to service 2010 SWC schedulesINFRASTRUCTURE• 0ver 50 stations upgraded• Platforms and platform seating and shelters• Access control speed gates and specific stations• Train operations and monitoring system

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Passenger Rail & Bus Services during the 2010 FIFA World Cup™ Cont…

Integrated Communication System• Public address system• Help points• Information boards• Bulk sms messaging

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Summary of PRASA 2010 Train services & Passenger numbers

Overall train performance 2010 FWC 11 June - 11 July 2010

RegionNumber of

trainsTrains

delayedOn time

performanceCommuter numbers

WESTERN CAPE 944 94 90.0% 1,005,000.00

GAUTENG (DEMAND DRIVEN) 567 142 75.0% 302,379.00

KWA ZULU 730 6 99.2% 92,814.00

EASTERN CAPE 12 0 100.0% 47.00

SHOSHOLOZA MEYL 13 0 100.0% 1,510.00

TOTAL 2266 242 89.3% 1,401,750.00

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Challenges identified during 09/10 Audit

• Funding Shortfall of R1 Billion – presented in 2009/10 to Government with request to fund shortfall• Shortfall was caused by the following:Depreciation: R738 Million (08/09) and R1 036 Million (09/10)Shosholoza Meyl funding shortfall of R558 Million – due

diligence of Smeyl indicated a requirement of R1.4 Billion – only allocated R450 Million plus R492 Million in Fare Revenue

Liabilities (pension, medical, statutory contributions) associated with transfer of Metrorail, Autopax and Smeyl remain largely unfunded

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Challenges identified during 09/10 Audit – Cont…

Increases of 33% (R100 million per annum) in electricity tariffs not funded

Fare increase of 10% amounting to R134 Million not approved An allocation of R210 Million from PTIS did not materialise

despite PRASA having committed funds for infrastructure upgrades in preparation for the World Cup

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New Strategic Direction

• Having looked at PRASA’s Shortfall and considered its cash flow projections for the next three years:The Office of the Auditor-General confirmed that PRASA remains a ‘Going

Concern’That it is unlikely that given the un-equal spatial settlement patterns of SA

Government would stop subsidizing public passenger transport

• In order to strengthen its financial position a new strategic direction has been approved by the Board which includes:Recapitalizing the business within the next 12 months through a

programme of asset restructuringBalance Sheet Restructuring exercise already underway Finding a Strategic Equity Partner in order to unlock value of assets after

valuing them properly

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New strategic direction

• Other Aspects of new strategy include:Modernising conditions of service, Engendering a culture of performance and Investing in employee wellness programmes

THANK YOU