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CORPORATE PLAN MTEF 2017-2020

Corporate PlanMTEF 2017 - 2020

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TABLE OF CONTENT

04 Legislative Mandate05 Statement of Purpose06 Vision, Mission and Values08 Legal Operating Structure09 Organisational Structure10 Contributing to the National Development12 Other National Government Imperatives15 Aligning with Department of Transport Strategic Plan for 2015-202016 Market Development and Industry Overview 17 PRASA’s National Strategic Plan19 Driving The Turnaround Strategy76 Human Capital Investment: Building Capacity80 Employment Equity83 Fraud and Prevention Plan85 Enterprise Risk Management and Plan87 Materiality and Significance Framework91 Financial Position 95 Capital Expenditure Programme: MTEF 2017/18 – 2019/2096 Performance Plan Over the MTEF

BE MOVED

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LEGISLATIVE MANDATE

PRASA, as the implementation arm of the National Department of Transport, the sole shareholder, is primarily focused on the mandate contained in the Legal Succession Act of South African Transport Services (“SATS”) Act of 1989 as amended.

The main objective and main business of PRASA is to:

AEnsure 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

Bprovide, in consultation with the Department of Transport, for a 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 objective and secondary business of PRASA is that PRASA shall generate income from the exploitation of assets acquired by it.

A further requirement is that, in carrying out its objectives and business, PRASA shall have due regard for key Government, social, economic and transport policy objectives.

As a public entity, Government initiatives remain the strategy driver for PRASA. This is manifested through legislation, government policies and strategies such as:

• National Transport Policy• National Development Plan• Legislation such as the National Land Transport Act• Public Finance Management Act• Green Paper on Rail• Public Transport Strategy• Economic Strategy and Job creation initiatives

Legislative & Regulatory Environment

The crafting of the PRASA strategy and 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 [No 16 of 2002]• Labour Relations Act, Employment Equity Act and Conditions of Employment

Act

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STATEMENT OF PURPOSE

The launch of the Passenger Rail Agency of South Africa (PRASA), in March 2009 brought forth a new era in passenger transport that saw the former South African Rail Commuter Corporation (SARCC) transformed into PRASA. Metrorail, Shosholoza Meyl, Autopax (the subsidiary company operating Translux and City to City bus services), as well as Intersite Asset Investments (formerly under SARCC and Transnet) are now part of PRASA. The consolidation of entities followed a decision of the Cabinet of 1 December 2004. The consolidation of these entities was done to offer integrated passenger services that prioritise customer needs, provide better mobility and accessibility to transport by masses of the South African population in need of safe and affordable transport.

As a wholly owned Government public entity, reporting to the Minister of Transport, PRASA’s main responsibility is to deliver commuter rail services in the Metropolitan areas of South Africa, long-distance (inter-city) rail and bus services within, to and from the borders of the Republic of South Africa. This mandate is implemented in consultation with and under the guidance of the Minister of Transport.

The focus of the Corporate Plan is to ensure that, in the medium to long term, PRASA remains a leader in passenger transport solutions and that, as a modern public entity, it continues to deliver high quality passenger services in a safe and secure environment which is underpinned by its commitment to delivering Public Value.

PRASA’s strategic outcome oriented goals derived from its mandate are therefore to

Deliver on the mandate of public transport by providing safe, reliable, clean, affordable and sustainable services resulting in customer satisfaction of more than 80% in five years.

Exploit PRASA’s assets that increase the patronage of the public transport mandate by bringing communities to stations and increasing value from other assets to R1.071 billion by 2020.

A

B

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VISION, MISSION AND VALUES

Vision - To be the backbone of public transport.

Mission -To provide safe, reliable, affordable and clean passenger rail and bus services.

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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.

Safety Ensuring the safety of all our stakeholders

Communication Sharing information with our stakeholders in an open and honest way.

Teamwork Working together with our stakeholders to achieve a common goal and recognizing

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LEGAL OPERATING STRUCTURE

Divisions Subsidaries

RAIL DIVISION

Mainlinepassenger

service

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ORGANISATIONAL STRUCTURE

* As approved 31 July 2014* PRASA is engaged in the process of re-alignment which forms the basis of this Corporate Plan, this re-alignment will culminate in the development of a new corporate structure

PRASA Board of Control

INTERSITE CEO PRASA RAILOPERATIONS

PRASA TECHNICAL

PRASACRES

GROUP HUMAN CAPITAL MANAGEMENT

GROUP FINANCE

GROUP LEGAL RISK AND

COMPLIANCE

GROUP STRATEGIC

ASSETDEVELOPMENT

GROUPICT

GROUPSTRATEGY

GROUPSTRATEGIC

PROJECTS (SIP7)

PRASA DEVELOPMENT

FOUNDATION

AUTOPAX CEO

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CONTRIBUTING TO THE NATIONAL DEVELOPMENT PLAN

For the National Development Plan, mobility is one of the key dimensions of human capacity. Transportation cuts across the economy, environmental sustainability, spatial transformation, global connectivity, state capability, social cohesion and health. To function optimally, South Africa needs reliable, economical, and smooth-flowing corridors linking its various modes of transport (road, rail, air, sea ports and pipelines).

The National Development Plan calls for Integrated, holistic, long-term perspective on all transport networks informed by growth priorities, the environment, inclusivity and access.

Where people live and work matters. Apartheid spatial planning has led to the majority of South Africans living far from places of work, with poor access to basic services and low levels of participation in the economy. The need for people to live closer to their places of work and with better quality public transport allows them to access work opportunities and in the most affordable manner.

The National Development Plan assumes that by 2030, investment in the transport sector will:

a. Bridge geographic distances affordably, foster reliability and safety so that all South Africans can access previously inaccessible eco-nomic opportunities, social spaces and services.

b. Support economic development by allowing the transport of goods from points of production to where they are concerned. This will also facilitate regional and international trade.

c. Promote low-carbon economy by offering transport alternatives that minimize environmental harm.

The NDP notes that currently outdated, malfunction-prone railway technology and poor intermodal linkages dominate these corridors. PRASA is aware of the need for reliable, economical and smooth-flowing corridors linking various modes of transport (road, rail, air, sea ports and pipelines). In realising the objectives outlined in the NDP, PRASA plays a crucial role in providing suitable public transport solution that is safe, efficient, reliable and cost-effective.

The development and deployment of the total transport network, which will help improve transport efficiency and accessibility while reducing the overall environmental, social and economic costs is key to attainment of the NDP imperatives.

PRASA has noted the NDP strategic focus areas and planning priorities which focuses on creation of workable urban transit solutions that will streamline an effective urban transport system, particularly – as it pertains to PRASA, through:

• Increasing investment in public transport and resolving existing public-transport policy issues

• Devolving transport management to local government

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• Providing incentives for public transport use• Renewing the commuter train fleet• Property Development• Broadband Connectivity

PRASA also takes into account the multi-dimensional aspect of the NDP regarding, employment, housing, environment and skill development and training.

Employment:PRASA, plays a major role in reducing costs of living through affordable rail fares for people travelling to and from places of employment. An effective public transport system that contributes to the movement of people facilitates employment and labour force participations thereby increasing commuter and passenger numbers and social demographics.

Environment:PRASA also addresses clean environments in its stations, rail operations, bus services as well as safety and security of passengers. Environmental sustainability is key to the development and upgrades of PRASA facilities as well as the reduction of greenhouse gas emissions with the aim of zero emissions on buildings by 2030.

Housing: PRASA’s approach to integrated transport planning taking into account future human settlements and transport corridors and cities’ urban planning and densification strategy. PRASA’s current and future network expansions are informed by the organisation’s National Strategic Plan that supports investments in safe, reliable and affordable public transport supported by spatial development frameworks that balance location of jobs and human settlements. This is at the heart of PRASA’s 20-year strategy where developments for commuter rail are based on demand patterns and spatial plans. 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.

Education: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.

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A

BE HONESTBE FOCUSEDBE SAFEBE EFFICIENT

OTHER NATIONAL GOVERNMENT IMPERATIVES

INDUSTRIAL POLICY ACTION PLAN (IPAP2)

Driving Industrialisation

The rail industry is a key component of any functioning industrial economy. From transportation of peoplcognie to moving goods and services as parts of a logistics chain it is integral to any economy. The rail industry has been identified as being critical to the future of South Africa and Industrialisation.

PRASA’s current procurement of 600 train sets, coupled with rail industrialisation contractual obligations, will attempt to stem the tide and reindustrialize the sector. However, such measures, although critical to reasonable start are not sufficient to sustain a rail industry in the long term. Sustainability requires an industry that does not only rely on demand from South Africa but has export potential. This means the ability to be part of a global supply chain.

Under the auspices of the Ekurhuleni Metropolitan, PRASA’s reindustrialisation plan is premised on restoring the once dominant role of rail manufacturing to Gauteng’s East Rand – a role that the services sector has replaced, becoming the major contributor to the regional economy. The reIndustrialisation plan will include improved support for and responsiveness to manufacturing enterprises and upgraded infrastructure networks.

Amongst others, the acquisition of New Rolling Stock has been established to achieve the following: 1. A high proportion of the number of the train originating from South

Africa and in line with the Government’s Local Content objectives, a target of over 65% local content by the end of the 10 year pro-gramme has been set;

2. The creation of a sustainable and competitive Local rolling stock manufacturing sector;

3. A strong focus on Job Creation and Job Retention;4. The transfer and development of Rail Related Skills to the South

African labour force;5. Meaningful Black equity ownership at the contractor and sub-con-

tractor level;6. The use and enhancement of existing entities/plants and work-

force where possible, and7. A high priority on safety and reliability of the procured rolling

stock.Numbers

PRASA has leveraged the procurement to ensure that industrialisation and transformation objectives can be met. PRASA developed a localisation and transformation strategy within the procurement where Gibela has committed to various obligations. These obligations include:

a. Local Content Percentage commitments based on the expenditure on the new trains;

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B

C

BE TRANSFORMEDBE EMPOWEREDBE AFFORDABLEBE OPEN

BE EXCITEDBE SURPRISINGBE PROUDBE POSITIVE

b. Skills Development commitments based on contract value as well as commitments on number of individuals skilled; and

c. Transformation commitments including job creation, enterprise development and other transformation elements based on Broad-Based Black Economic Empowerment criteria

The demand for rail is set to continue globally and South Africa’s budding rail industry can play a critical role in global supply chains. Thus, the need to revitalize the industry and to use the current PRASA rolling stock programme to drive Industrialisation has been recognized.

ECONOMIC EMPOWERMENT AND SKILLS DEVELOPMENT

In enabling the Government national agenda guided by the National Development Plan vision 2030, BBBEE ACT, Skills Development ACT and Employment Equity ACT; PRASA will implement a number of developmental programmes aimed at reversing the triple challenge of unemployment, poverty and inequality.

PRASA in collaboration with Academia, Government departments and agencies and the Private sector will, in the next 5 years, ensure economic empowerment and skills development of four (4) key focus groups:

• Women• Youth• People living with disabilities and• Military veterans

PRASA, through its Capital Programme, Human Capital Management and corporate social investment will ensure that the key focus groups identified mainly participate in the core technical areas of the business namely; Rail Engineering, Property and Construction. Other key areas of participation will include Information Communication Technology, Professional Services, general services and bursary awards.

PRASA amended the Supply Chain Management Policy to include the empowerment of the key focus groups. Chief to this amendment is the pronouncements on preferential procurement, developmental programmes, enterprise and supplier development.

CONTRIBUTING TO REGIONAL TRANSPORT REQUIREMENT (SADC)

PRASA will align with the government’s policy statements and the pronouncement by the African Union towards the creation of a manufacturing hub to service the Continent. The entity will further engage the Department of Transport in this regard.

AutoPax Contribution to SADC and African Union Imperatives

As part of its growth and expansion strategy for bus services and as part of supporting the SADC and African Union imperatives, Autopax is exploring the provision of long distance road transport operations to selected countries in the SADC region. A study has been conducted to investigate the feasibility of expanding services to six (6) countries; Democratic Republic of Congo (DRC), Namibia, Malawi, Mozambique, Zambia, and Zimbabwe.

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Country Total Population travelling to RSA

Population travelling to RSA by Road

Populations travelling to RSA by Bus

Total 3 437 185 3 259 832 400 109

Zimbabwe 1 847 973 1 823 282 166 318

Mozambique 1 076 753 1 064 685 104 445

Namibia 200 841 112 689 6 025

Zambia 169 555 139 035 57 649

Malawi 142 063 109 389 61 087

DRC 32 582 10 752 8 602

The potential market value is markedly higher at approximately R2.8 billion and therefore the value of current cross border bus business represents only 16% of potential value, suggesting non-optimal utilization of the available market by current cross border bus service providers.

Market research indicates that there is an appetite for Autopax bus services with more than 56% of travellers expressing likelihood to use City to City bus services if they were introduced. The DRC has 66% of travellers willing to utilize City to City bus services, followed by Malawi at 65% and Zimbabwe and Zambia at 56% and 50%, respectively.

Six (6) out ten (10) travellers have expressed willingness to utilize Translux bus services in the DRC at 70% and with Malawi at 69%, whilst Zimbabwe has close 63% likelihood.

In Mozambique, 43% of travellers, currently not utilising City to City bus services are open to switch, whilst 52% of are also willing to switch to Translux bus services.

On average, a single cross border bus traveller uses a bus to and from South Africa up to 7 times in a year, with Zambia, Mozambique at 10,4 and 8.8 repeat travel rates, respectively, followed by Zimbabwe at 7.2 and DRC and Namibia being the lowest at 4.6 and 2.3 repeat rates, respectively.

Based on the 2012 South African Tourism figures, the estimated total travelling population to South Africa from the six target countries was 3.44 million, of which 3.28 million (95%) arrived by road. Of the 3.2 million cross border travellers 0.4 million travelled by bus, representing 12.3% of the total road travelling population.

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ALIGNING WITH DEPARTMENT OF TRANSPORT STRATEGIC PLAN FOR 2017 -2020

The PRASA Corporate Plan is aligned to the White Paper on National Transport policy which seeks to provide safe, reliable, effective, efficient, and fully integrated transport operations and infrastructure which will best meet the needs of freight and passenger customers at improving levels of service and cost in a fashion which supports Government strategies for economic and social development whilst being economically and environmentally sustainable.

The Corporate Plan also contributes to resolving prevalent problem areas as identified by the DoT within its next MTEF, as identified below:

a. Improving the level of integration of transport infrastructure net-work and operations

b. Decreasing accidents and incidents (and fatalities) across all transport modes.

c. Improving infrastructure, access and mobility in rural and peri-ur-ban areas.

d. Ensuring reliability, affordability, accessibility, efficiency, effective-ness and safety of public transport.

Department of Transport: Strategic Objective Alignment

Strategic Objective of the Rail branch: Contribution from PRASA Objectives:

Enhance performance, efficiency and reliability of the Transport Sector

a. Improving Rail System operational performance.b. Re-align the support Divisions and Subsidiaries to achieve

an efficient Rail business.c. Modernise Rail through the R173 billion investment pro-

gram, over ten yearsd. Expanding PRASA networks and servicese. Exploit assets to generate additional revenue

Regulate and enhance transport safety and security

Improve the customer experience Modernise Rail through the R173 billion investment program.

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MARKET DEVELOPMENT AND INDUSTRY OVERVIEW

South Africa has been at risk of a recession as the global economic slowdown and commodity slump, together with domestic constraints, translated into an industrial recession, and so slowing real disposable income growth and weakening consumer demand. A mere 0.7% in economic growth in the last quarter has however saved the South African economy from tipping into a recession. The largest contributors to the growth were the manufacturing industry, finance, real estate and business services, wholesale, retail and motor trade as well as the catering and accommodation industries.

The inflationary effect the drought could have on food prices would be of concern. The weakening of the rand is likely to continue, especially with the increased need to import food as a result of the drought. Eskom’s announcement that there will be no load-shedding until April has prompted concerns that slowing electricity demand is directly linked to slowing economic activity. The reduction in energy demand will most likely reveal a severe effect on economic growth.

The global economy is suffering from the effects of economic recession. The effect of Quantitative Easing by the United States Federal Reserve Bank, may limit foreign direct investment in the rand i.e. bond market. At stake will the funding for major state owned key infrastructure suppliers. The depressed economic growth presents challenge, which may impact on investments. Growth of the South African economy is expected to be slow, further compounded by the electricity crisis, the inflationary impact caused by increases in administered prices (electricity, toll roads, fuel levy, municipal rates, interest rate hikes, etc.). This will affect the household consumption, which may adversely impact economic growth.

The weak economic performance which had caused, and may continue to cause, downgrading of the Government credit worthiness by credit rating agencies, this will burden the ability of Government to raise money in the capital market. The negative investor sentiments, particularly in the mining industry, may inhibit investment appetite and the loss of income and jobs, which will have an impact on the spending power in the economy. Government backed initiatives to support infrastructure projects and urbanisation, which are envisaged to create jobs.

The property sector in South Africa, and indeed world wide, has been the best performing asset class over the last ten years, significantly outperforming equities, bonds and cash. The market in South Africa is showing signs of slowing down, but is still expected to outperform inflation and other asset classes. There are signs of slight recovery in the economy judging by household and private sector spending. There is an indication of positive growth in the construction sector based of the approved building plans. The Real Estate Investment Trust structure, which has aligned South African property structure to internationally recognised standard, gives impetus to foreign direct investment into the economy.

Government funding for state entities will be prioritised to meet key economic challenges, including alleviating energy supply challenges and improving the competitiveness of our economy. Investment in transport and communication

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PRASA’S NATIONAL STRATEGIC PLAN

infrastructure has grown. Cities are looking to create special economic zones to spur investments.

The growth of Cities, the middle class and resultant urbanisation is a catalyst for socio-economic growth.

The current listed property market indicates a return well in excess of equities and bonds.

The Passenger Rail Agency of South Africa (PRASA)’s Strategic Plan (insert hyperling) provides a transformational, integrated and holistic approach to developing rail and other public transport services in South Africa over the next forty years 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 planned Government investment in new rolling stock, new signaling, stations and three prioritised Modernisation Corridors demonstrating the impact of an integrated approach to investment on rail corridors.

The National Strategic Plan brings together a set of individual 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. It describes the changes and investment that will need to be made in the future if passenger rail is to achieve the exciting future strategic vision that PRASA and its stakeholders have identified. It identifies how the Strategic Plan can be delivered. There has been significant interaction between PRASA and national, provincial, city and municipal stakeholders in the preparation of this plan to ensure alignment with parallel planning processes such as Provincial Land Transport Frameworks, Integrated Public Transport Networks and Integrated Rapid Public Transport Networks.

At the core of the National Strategic Plan is:

• A prioritised 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, 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.

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Aligning the Corporate Plan to the National Strategic Plan

The development of the Corporate Plan for MTEF 2017/18 – 2019/20 is aligned with PRASA’s Strategic Plan which outlines the key priorities and steps to delivery and execution of the mandate.

The steps that need to be taken to commence the journey to the implementation of the plan are as follows:

• Improve the Customer Experience. A customer-centric superior performance that is safe, reliable; and provides a dignified travel experience based on end-to-end customer journey.

• Improve Rail System performance. The realisation of the National Strategic Plan of is built on the assumption that operational performance is at acceptable levels and meets customer expectations.

• Realign support functions to achieve an efficient Rail and Bus business. The alignment of various business units, including departments and subsidiaries in the delivery of the mandate is the foundation of the National Strategic Plan

• Modernise the Rail System through investment programme of R173 billion (over ten years) investment programme for the Rolling Stock Fleet Renewal, Re-signaling, and modernisation corridors and station investment.

• Expand Rail network and services in line with the National Strategic Plan.

• Exploit assets to support the primary mandate

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DRIVING THE TURNAROUND STRATEGY

PRASA presents this Corporate Plan at the time when the organisation finds itself at an unprecedented crossroads since its inception, where for the first time the performance and service offering is at an all-time low. The service is poor, unreliable, unpredictable and unsafe, thus resulting in the decline customer and stakeholder confidence on PRASA’s capability to deliver on its Mandate. The support systems and processes are not geared to support the organisation to render an efficient and effective public transport service.

The PRASA Corporate Plan provides a strategic road map for the organisation’s individual rail, bus/coach and real estate businesses that are designed to improve the service provided to the travelling public. Strategic goals are anchored on PRASA’s ability to offer reliable, safe and secured service to the customer.

Impacting on PRASA’s strategy execution is the challenges facing Rail Operations. Rail performance has over the years seen a sharp decline in passenger patronage from 634 million passenger trips recorded in 2010 to 472 million by 2012: a 161 million or 34% drop in performance. The financial year ending 2016/17 projects a drop to drop to 380 million passenger trips.

PRASA Rail Operations also do not generate adequate revenue from its operations, resulting in a huge funding gap that impacts negatively on the financial and cash position of the Group as a whole, and planning assumes that this funding gap will remain for the next 5 years at least.

The increasing levels of underperformance cannot remain unattended to. In order for PRASA to continue to drive a long-term strategy that will make rail a mode of choice for public transport, it has developed a turnaround strategy and plan that will first deal with the systematic challenges as highlighted above.

However, the Corporate Plan does not depart from PRASA’s strategy, which seeks to create a modern public entity that will be able to deliver high quality passenger services on a more sustainable basis and position rail as the backbone of public transport.

At the heart of the 2017 – 2020 Corporate Plan is the Turnaround Strategy and Action Plan in pursuit of the following strategic outcome oriented goals that seek to:

Deliver on the mandate of public transport through providing safe, reliable, clean, affordable and sustainable services resulting in customer satisfaction of more than 80% in five years.

Exploit PRASA’s assets that increase the patronage of the public transport mandate by bringing communities to stations and increasing income from real estate and other assets to R1.071 billion by 2020.

A

B

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The successful execution and achievement of the above is dependent on the following:1. The successful implementation of the Turnaround Strategy and

Plan2. The existence of supporting Business Plans of the Business Units,

Subsidiaries, and respective Divisions/Departments3. A budget and resources for the execution of the Corporate Plan

In pursuit and consideration of the above, a Turnaround Strategy and Execution Plan has been developed to improve the performance of the organisation to desired levels and to ensure availability and reliability of PRASA’s transport service and infrastructure.

The Turnaround Strategy also seeks to improve the financial position of PRASA is based on the projected cost reduction of R1.285billion and a project revenue increase of R 555m for the next financial year.

The 2017-2020 PRASA Corporate Plan focuses on three (3) distinct phases. The phases are broken down as follows:

The above phases are also anchored on PRASA being able to drive and deliver on the Secondary Mandate. The pursuit of the secondary mandate is to ensure that PRASA generates income from the exploitation of the entity’s assets whilst maintaining a focus on enhancing and strengthening the primary mandate. The harvesting of property and commercial income through innovative solutions, focussing on property development and facilities management around stations, station precincts and development of vacant land, are some of the strategies in sweating PRASA assets to the benefit of public transport.

The first phase focuses on getting the organisation back to a desired level and is driven by a Turnaround Phase – focusing on the next 12 months. The Stabilisation Phase lasting around 24 months and will ensure the organisation maintains the desired performance level and does not regress. Both these two (2) Phases, which are driven by a Turnaround Strategy, should bring comfort and confidence to the customer that Rail can become the preferred mode of transport, capable of delivering Public Value. The last phase, which is medium

12 Months

12 Months

36 Months + Growth and Expansion Phase

Stabilization of Phase

Turnaround Phase

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to long-term, is the Growth and Expansion that should ensure that PRASA remains relevant as a preferred mode of transport to allow for the moving towards achieving our vision to be the backbone of public transport.

At the heart of this Corporate Plan is the implementation of the Turnaround Plan, which focuses on curbing further decline in passenger patronage and is aimed at regaining confidence of our customers by committing to provide acceptable levels of service. The Turnaround Plan also notes that retaining existing customers and in particular the commuters will be measured against stringent performance deliverables, which is:

I) A marked improvement in positive customer service experience, II) A rail operation that is efficient, reliable and safe and III) Is supported by a reliable long distance bus and feeder service. The exploitation of PRASA assets including non-operational assets across the rail infrastructure and station precincts is there to contribute to PRASA’s income generation programs, thus reducing the cost of doing business. The real estate turnaround need to ensure that Stations are not for only travel purposes

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Coaches out of service: 1 827 coaches or 40% of the fleet not in service- 62% of this is in maintenance (own and contractors)

Train Set Shortage Only 248 train sets provided per day against a requirement of 287. Of these 56% have short formations i.e. less than 12 coaches per train set.

Train Cancellations: 10% of peak trains are cancelled - this is a loss of 2.6 million “seats” per month or 117 200 “seats” per day

Train Delays: On average late train have 5 types of delays that result in average minutes of a train delay by the end of Quarter 3 2016/17 as 21 Minutes (Western Cape), 31 Minutes (KZN) and 45 Minutes (Gauteng).

Infrastructure contribution to train delays increased:

Of the around 21-20% trains late, infrastructure is responsible for 6.8% or nearly a third of all train delays (first six months of 16/17). This is double the number of infrastructure train delays experienced in 2010/11 (3.3%).

Track quality Index Deterioration:

Track condition as measured by Track Quality index is showing a deterioration across all regions, leading to increased speed restrictions for safety of commuters.

Train Accidents: An increase in accidents and train fires – 2 major accidents in 2015/16 and 2016/17

Increase in Security Incidents:

Increase in security incidents on assets by 16% year on year and incidents involving passengers showing an increase of 53% year on year for the first six months of 2016/17.

Loss of Passengers: Metrorail lost a quarter or 73 million of its passengers in the first six months of 2016/17 against the same period in 2014/15.

MLPS Decline: MLPS lost 83% of the 3.8 million passengers it once transported in 2008/09 as a result of 73% service reduction.

but are converted into spaces where customers shop, eat, bank, work, access government services and meet, in line with international trends.

SITUATIONAL ANALYSIS

PRASA presents this plan at the time when the organisation finds itself at an unprecedented crossroads since its inception. For the first time the performance and service offering is at an all-time low. The concerns raised in the Strategic Plan became a reality. The service is poor, unreliable, unpredictable and unsafe, thus resulting in the decline customer and stakeholder confidence on PRASA’s capability to deliver on its Mandate. The support systems and processes are not geared to support the organisation to render an efficient and effective public transport service.

Impacting on PRASA’s strategy execution is the challenges facing Rail Operations. Rail performance has over the years seen a sharp decline in passenger patronage from 646 million passenger trips recorded in 2009 to 472 million by 2012: a 161 million or 34% drop in performance. The financial year ending 2016/17 projects a drop to 380 million passenger trips.

The table below indicates the level of decline:

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Background to the decline in performance

The decline in rail performance is a combination of many factors, which include, amongst other issues:

i) The aging rolling stock, with obsolete technology, compounding by the time it has taken to upgrade the infrastructure;

ii) The open nature of the system leading to theft, vandalism and operational incidents;

iii) Availability of spares and equipment due to the age of the system; and

iv) High levels of community unrest, and dissatisfaction with slow speed of service delivery

Over the last four years PRASA has suffered a total of 8 345 incidents, with more than 2 000 incidents per annum, relating to theft and vandalism on rolling stock and Infrastructure, train fires – commuter backlash and service delivery protests:

History of asset related distraction: 2013 - 2016

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Incidents 2013 102 140 125 107 113 155 193 226 132 102 84 142

Incidents 2014 200 283 260 205 169 262 237 241 142 153 192 224

Incidents 2015 185 200 207 123 143 133 84 70 103 166 163 196

Incidents 2016 144 -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ 133 79 114

0

50

100

150

200

250

300

Na#onal Incidents (The2 and vandalism on Rolling Stock and Infra, Train fires – commuter backlash/strikes)

Incidents 2013 Incidents 2014 Incidents 2015 Incidents 2016 2 per. Mov. Avg. (Incidents 2015)

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Coaches are burnt at station or in service and are catastrophic for the train and infrastructure. Burnt coaches require 6 to 12 months to recover

Coaches are vandalised in the depot or in service and target is copper cable and other copper rich equipment which leads to total failure of the train. Vandalised coaches require 6 to 16 weeks to recover

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Infrastructure Vandalism

Theft of signal cable and signal equipment remains the highest asset related security risk, and affects the colour light signaling train control system. A train carrying 1,800 during peak causes a major incovenience to passengers.

The risk of unsafe train movement is highest when done under abnormal conditions where trains must be manually authorised

Impact of Crimes on PRASA Operations and Services:

a. Theft of Signal CableTrain delays, driver forced to proceed on sight, train not protected by othe signals. History shows high potential for rear end collisions and signals passed on danger.

b. Theft of Perway EquipmentRisk of train derailments and consequential disastrous impact.

c. Theft of Rolling Stock Equipment/componentTrain delays and cancellations, trains departs with doors not functioning which have a direct impact on railway safety.

d. Vandalism of signal cables Train delays, driver forced to proceed on sight, train not protected by other signals. History shows high potential for rear end collisions and signals passed on danger.

e. Theft of Signal EquipmentTrain delays, driver forced to proceed on sight, train not protected by other signals. History shows high potential for rear end collisions and signals passed on danger.

f. Root cause for commuter backlash and possible burning of trainsTrain delays and cancellations

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BE FOCUSED

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TURNAROUND ACTION PLAN

PRASA’s Strategic Plan provides a strategic road map for the organisation’s road to be the backbone of public transport in South Africa. The first step in this roadmap is to drastically improve the service levels of the transport operations in PRASA that attend to the basic needs of its passengers in the short term to medium term.

The increasing levels of underperformance cannot remain unattended to. In order for PRASA to continue to drive a long-term strategy that will make rail the backbone for public transport, it must deliver this quantum improvement that set the foundation to deliver on the Strategy plan.

The Turnaround Plan of PRASA for the next 12 months has been developed to radically improve the performance of the organisation from an operational perspective that addresses availability, reliability and predictability of the operations, bring an integrated and effective planning and management approach to the Group that deliver strong governance and controls that are responsive to the challenges of the operations, continue with the investment program to modernize the rail system as well as plan for the future.

Having identified the key areas that present the most challenge (Operations, Engineering, Finance, Human Capital and Governance) Management set about to develop specific and tailored interventions to reverse the decline in these areas. These are articulated comprehensively in the Turn Around Strategy, below are but two graphs that illustrate the impact of the interventions, and the scenario if nothing is done.

Increasing Revenue with Interventions: Fare RevenueBE FOCUSED

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Increasing Revenue with Interventions: Operating Leases

Increasing Revenue with Interventions: Energy Costs

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Increasing Revenue with Interventions: Security Costs

Increasing Revenue with Interventions: Haulage Fees

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The following strategic objectives will be pursued for the MTEF:

1. Improve the Customer Experience focusing on:a) Safety and security of commuters and passengersb) Customer satisfactionc) End-to-end passenger journey

2. Improve Rail System performance a) Increase revenue by R1.16bn over the 2018-2020 MTEF b) Increase train performance in peaks to on time performance to

88%, c) Reduce the number of trains cancelled to less than 6% in peak

periodsd) Improve customer satisfaction to 80% by 2019/2020

3. Realign support functions to achieve an efficient Rail and Bus business through integration ofa) Divisions, departments and subsidiariesb) Long-distance transport servicesc) Reducing expenses by R3.49bn over the 2018-2020 MTEF

4. Modernise the Rail System through the R173 billion investment programme focusing on:a) Rolling stock fleet renewal programmeb) Infrastructure upgradesc) Corridor modernisation

5. Expand Rail and Bus networks and services through:a) Regional/provincial corridor expansionsb) Introduction of new services

6. Exploit assets to generate revenue through a) Real estateb) Other non-core assets

The pursuance of the above strategic objectives takes into account the following:

I) The successful implementation of the Turnaround Strategy and Plan

II) The existence of supporting Business Plans of the Business Units, Subsidiaries, and respective Divisions/Departments

III) A budget and resources for the execution of the Corporate Plan

OBJECTIVE 1: IMPROVE THE CUSTOMER EXPERIENCE

1. Customer Service

Positioning Rail as a backbone of public transport, support by an efficient bus service is premised against a deep commitment to customer-centric superior performance that is safe, reliable; and provides a dignified travel experience based on end-to-end customer journey.

Improving the performance of the rail system and ensuring that PRASA remains

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relevant in its endeavour to grow and expand its networks and services is centered on the ability to meet if not exceed customer expectations.

Driving customer centricity throughout the organisation means placing the customer at the centre of all Prasa’s activities, through all our Initiatives, Projects, Interventions and Interactions with internal and external stakeholders.

What this means to the organisation;

• Customer focused leadership• Addressing customer issues fully and resolving them• Able to design the experiences that will delight customers• Empower frontline staff to be able to make decisions at the point of contact

with the customer• Measuring what matters to the customer – customer touchpoints• Continuous improvement driven by customer feedback

It is about unlocking the true potential of customer value and making the customer a partner in our organisation. It means proper alignment and prioritisation of our Initiatives, Projects, Interventions and Interactions to benefit the customer. It means alignment to the business towards improved customer service experience and revenue collection.

The turnaround strategy and plan focuses on ensuring a marked improvement in customer experience as measured against customer satisfaction and driven through the following Action Plans:

a. Functional communication platforms such as Integrated web-site(s), Prasa Smartphone Applications (APPs), Social Network, Public Address systems and Loudhailers

b. Integration of Railcom / ISAMS to provide commuters with real time service level information

c. Establishment of Customer Desks at Key Stations d. Integration of Call Centers for Metrorail/MLPS and Autopaxe. Driving the total station management programme that ensures

accountability at a frontline level for service performance.

OBJECTIVE 2: IMPROVE RAIL SYSTEM PERFORMANCE

1. Rail Operations

PRASA Rail as the rail operating division of PRASA is true custodian of the mandate to deliver commuter rail services in the Metropolitan areas of South Africa, long-distance (inter-city) rail services within, to and from the borders of the Republic of South Africa. As a division, PRASA Rail operates the Metrorail and Main Line Passenger services.

As mass public transport carrier, PRASA Rail is entrusted with the responsibility of ensuring that the organisation:

• Deploys a safe, predictable, reliable rail commuter and passenger services• Provides quality rail network and services • Positions passenger rail services as the backbone of public transport and

a mode of choice• Gears itself for the deployment of a train system of the future

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Stabilising the passenger rail system requires drastic interventions. Rail Operations has identified key interventions that will stabilitse service performance levels and offer customers a more predictable and reliable service, including improved communication to customers on status of services and improvements over the turn-around period.

A number of issues are affecting the rail service in the main urban centres, many owing to the age and condition of the asset including:

1) Delivering transformational timetable changes in terms of speed and frequency to strengthen rail’s role in the integrated transport network, and better response to demand growth and the needs of users;

2) Introducing new rolling stock with an appropriate on-train environ-ment to the journey being made by passengers;

3) Introducing a more user-friendly and comprehensible timetable operating at regular intervals and including off-peak services;

4) Providing more flexible ticketing and a revised premium offer; 5) Strengthening passenger safety and security; 6) Introducing network extensions to support urban growth or to fill

gaps in the current network, but only where rail is the most appro-priate mode to meet the transport need.

Rail Operations Turn-around Plan

The Rail Operations’ turnaround strategy and action plan focuses on two areas: curbing further decline in passenger patronage whilst endeavouring to recover lost customers. Its execution is premised on the successful implementation of the Engineering Unit’s turnaround plan that addresses the improvement of availability and reliability of both rolling stock and infrastructure.

The successful execution of Rail Operations’ turnaround plan should be able to reverse the current operational performance and improve service offering to the users of the rail system.

It is envisaged that the successful execution of Rail Operations’ turnaround plan will translate to PRASA able to transport between 400 to 500 million passenger trips in 2017/18 with at least 291 train sets at full capacity configuration with 12 coaches with a target of 88.1% on time performance. The medium to long-term objective is for Rail Operations to have 3 840 to 4 600 coaches in service and increase its on-time performance to above 90% and availability in excess of 95% in order to fulfil the current travel demand.

Turnaround Action plans by Rail Operations will contribute to the following:

1) Marked improvement in operational performance levels to re-store to the 2008/09 levels through:

a) Service Predictability by introducing a Regular/Clock-face timetable for peak/off-peak service, introducing inner/outer services to facilitate shorter traveling times from the outer ends of the commuter rail network and procurement of sched-uling software to enable dynamic changes to the schedules.

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2) Marked improvement in financial performance and sustainability through:

a) Fare revenue collection by monitoring revenue budgets for high level corridor / stations, and reviewing the ticketing / tariff regime.

b) Fare evasion is being addressed by increasing the closure of the rail system through walling and fencing of stations and corridors, automation of ticketing and verification.

3) Marked improvement in passenger safety through:

a) Reduction in crime related incidents involving passenger b) Reduction in the number of passenger injuries and fatalities

through improved service availability, reliability and predictabil-ity that addresses overcrowding on trains as well as order on stations.

2. Rail Engineering

Rail Engineering is crucial in ensuring the availability, reliability and safety both the rolling stock and infrastructure.

Supporting rail operations means Engineering must focus on:

a) Providing a reliable overhauled and refurbished Rolling Stock fleet.b) Improving and Upgrade Rolling Stock Maintenance Depots facili-

ties to be compatible with the technology of the new Rolling Stock fleet.

c) Enhancing the capacity, efficiency and safety in the fleet Staging Yards, passenger stations and rail network.

d) Modernise passenger stations and rail infrastructure.e) Extend existing rail networks.f) Build Human Capital to cater for current and future technical

requirements.

Rail Engineering Turnaround Contribution: The Engineering Turnaround focuses on improving Reliability, Availability, Predictability and Safety of the service. The key interventions are aimed at addressing low performance levels of infrastructure and rolling stock.

In summary the following are the deliverables and actions for this unit in implementing the Turnaround Plan:

1) The Rolling Stock recovery plan covers two areas namely the recovery of coaches out of service due to the refurbishment program, vandalism, wrecks or due to maintenance and the im-provement of the reliability of the coaches in service.

a) Recover 798 coaches back into service, to increase the number of coaches from the current 2702 to 3500 in 12 months; this is equivalent to 291 fully configured (12 coach) sets. This will be

34


achieved through:i) Using the General Overhaul contractors and rotating ma-

chine contracts to recover coaches.ii) Deliver coaches from the refurbishment programme back

into service.

b) Improve reliability of the maintenance of the fleet by:i) Revising the maintenance regime at depots nationally; and

revising the Condition-based Maintenance (CBM) in the General Overhaul programme

ii) Re-establish a modern, integrated maintenance manage-ment system through the implementation of SAP Plant Maintenance system for Rolling Stock (New and Old) and infrastructure

2) Reduce Signaling and Telecoms Faults by 15%: from 1960 average per month to 1670 average per month (250 Faults for Signaling), through:

a) Signaling recovery through: i) Contractors in Gauteng, the region with the most dire per-

formance, to supplement the internal maintenance capacity for points, track circuits, signals, interlockings, cables and panels on the old signaling network.

ii) Migrate from copper to optic fiber on the control system on all regions.

iii) Reconditioning or replacing back-up power supply in Gauteng.

iv) Provide safety critical spares for rehabilitation though internal and external capacity.

v) Vandal proof signal equipment especially in Western Cape

b) Telecommunication recovery through: i) Where the signal and telecommunication services used

overhead fiber, this will be migrated to newly installed underground fiber cables as Primary communication and to provide resilience the overhead fiber will be used as the secondary ring feed.

ii) Appoint a fiber maintenance contractor while internal capacity is been built.

3) Reduce Electrical Overhead Traction Equipment (OHTE) and Sub-station faults by 25%: from 4800 to 3600 by end of the 12 month period by:

a) OHTE rehabilitation through Rail Road Vehicles through RMEb) Appoint private contractors to rehabilitate OHTE and Signaling

substations and power supply ring feeds. c) Mobilize Metrorail personnel to recover OHTE material d) Increase traction substation reliability through replacement

of components that have reached their end-of-life or obsolete through private contractors.

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4) Reduction of Perway faults by 15% from 121 to 102 average per month by end of the 12 month period by

a) Fast tracking the procurement of rails and rail components for the track.

b) Rehabilitate track foundation and the drainage system

5) Reduction of Perway speed restrictions by 56% from 135 km to 75 km by end of the 12 month period

a) Fast tracking the procurement of on-track machine resources to reduce perway related train delays.

b) Assess track condition through IM 2000c) Test for rail defects using a Ultrasonic Measuring Card) Re-align the track geometry through tamping. e) Clean ballast by employing a screener package.

6) Initiatives that cut across the engineering disciplines.

a) Improve process effectiveness and quality through the imple-mentation of ISO Quality Management System

b) Provide fencing for corridors, depots, yards and stations for the protection of both rolling stock and infrastructure assets.

OBJECTIVE 3: RE-ALIGN SUPPORT FUNCTIONS TO ACHIEVE AN EFFICIENT RAIL BUSINESS

1. Information and Communication Technology (ICT)

ICT is currently driving and implementing 22 projects that are meant to drive alignment across the organisation, whilst improving operational and organisational efficiencies and effectiveness.

The ICT turnaround strategy and action plan has been developed to enhance the organisation decision-making process as well as provide technology support in the procurement of goods and services, management of human capital, business communication, as well as business continuity and access to efficient and reliable record-keeping.

The focus areas for the ICT turnaround interventions are:

1) Enterprise Resource Planning (ERP)

a) Enhancement of HCM governance and controls through:i) Automated leave managementii) Workforce planning and rosteringiii) Performance management and evaluation

b) Rebuild Data management i) Cleansing of EMPAC and FMMS data in order to migrate to

SAP Plant Maintenance

c) Implement Plant and Linear Asset Maintenancei) Enhance Rolling Stock and Infrastructure maintenance

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management systems

d) Implement Real Estate and Land Use Managementi) Enhance the management of real estate portfolio and land

parcels for Prasa Crese) Implement Contract Lifecycle Management

i) Automate contract tracking, compliance and performance through a central repository

2) Ticketing Programme

a) PRASA Automated Fare Collection (AFC)i) EMV compliant ticketing solution with integration to other

transport entities

b) Speed-Gate Automationi) Acquire and Implementation of EMV certified readers in the

speed-gates

c) ITIX VERIFIERSi) Acquire additional mobile verifying devices for stations

without gates

d) Vending Machines (TVM)i) Acquire and deploy future-proof vending machines.

3) IT Systems Programme

a) Review and Upgrade underlying ICT server/storage back-end Infrastructure (data center)i) Refresh of server/storage infrastructure and implementa-

tion of DR capability

b) Review and Upgrade underlying ICT Network Infrastructure. i) Refresh unsupported network equipment on the PRASA in-

ternal MPLS network that provides connectivity to stations

c) Review and Upgrade Intra-regional and remote sites Connec-tivity i) Appointment of an internet service provider (ISP) to provide

PRASA with connectivity to regional and remote sites and internet services.

d) Implementation of Unified Communications and Collaborative platformi) Implementation of IP telephony, video conferencing and

Call Centre integration

4) ICT Governance and Compliance

a) Establish ICT Governance and Enterprise Architecture Commit-teesi) Establish ICT Governance and Enterprise Architecture

Committees

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b) Software analysis (duplication and additions) i) To develop a transition road-map guiding the future appli-

cation deployment

5) ICT Innovation

a) Upload of travel information into Passenger Display Boards i) Operationalisation of automated Station-based passenger

information – Visual and Audio

b) Roll out Wi-Fi at Stationsi) Extend passenger Wi-Fi to the rest of PRASA stations

c) Implementation of Big Data (EIS, BI and MIS) and Development of common Application Program Interface i) Implement Executive Information Management System

2. Supply Chain Management (SCM)

Supply Chain turnaround strategy defines how supply chain should operate in order to fulfil the business requirements that will assist to achieve its business strategy. It focusses on ensuring that the procurement of goods, services and works follows a clearly defined process with strict governance procedures whilst timeously responding to the urgent needs of the business necessary for the delivering on the Mandate. It is an iterative process that must evaluates the cost benefit trade-offs of operational components across the spectrum.

Implementation of the SCM turnaround must support the corporate strategy for PRASA to achieve its medium to long term goals and objectives. The supply chain strategy is paramount, it operationalizes and supports the corporate strategy across the spectrum.

SCM Turnaround Strategy is to ensure that the procurement of goods, services and works happen in a structured and focuses on driving down operational costs and maximizing efficiencies. A well-executed SCM strategy will results in value creation across the spectrum.

The SCM Turnaround Strategy seeks to resolve the challenges that have resulted in the organisation unable to fast track procurement. These challenges are:

1) Lack of strategic alignment of supply chain management with the overall business objectives of the organisation

2) Ineffective and disconnected governance structures across PRASA with SCM operations occuring within the business

3) Ineffective and poor SCM service delivery to the business4) Lack of contract lifecycle management and performance assess-

ment5) Poor application and implementation of procurement processes 6) Lack of training on SCM practioners7) Lack of capacity and competence in SCM

Actions of the SCM Turnaround Plan

a) Adoption of a single SCM Strategy aligned to the PRASA strategy and business objectives (completed)

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b) Procurement plans aligned to the business demand plans through demand management

c) Efficient contract management lifecyclei) Validate and verify contract data on the system (SAP)ii) Reminders to business units way in advance of contract expiry

dates to enable uninterrupted business operations.

d) Effective application and implementation of business procurement processes through improvement in the efficiency of procurement from bid specification to contract award.

e) Achieve a SCM architecture that enhance business throughi) Contractual fulfilmentii) Commodity cost benchmarks and variancesiii) Completed deliverablesiv) Contribution to socio-economic imperatives

f) Proactively partnering with ICT to help the business to innovate and achieve the strategic objectives

3. Human Capital Management

The focus of Human Capital Management (HCM) turnaround strategy is premised against the need ensure that people with the right skills and competencies and with the right attitude are available and capable to carry out the Mandate of PRASA, in the most productive and efficient manner.

Human Capital Management’s intervention and support addresses the following:

1) Business Modernisation

a) The consolidation of Real Estate Activities under one entity in order to:i) Achieve alignment and integration of the execution of the

Primary Mandateii) Achieve economies of scale in the exploitation of non-oper-

ational assetsiii) Drive a uniform real estate and property investment policy

and strategy

b) Design and develop an organisational structure and operating model that delivers on the mandate through business rationali-sation that right sizes Prasa by:i) Consolidation of certain functionsii) Workforce planningiii) Creation of Shared Servicesiv) Skills Audit and matchingv) Review of the benefits model across the organization

addressing pay scales, review of job grades and profiles aligned to the market, standard insured benefits (medical aid, pension / provident fund, funeral cover), conditions of service

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2) Bring about organisational effectiveness through performance management that lead to increased productivity by:a) Implement and automate Performance Management Systemb) Introduction of a Recognition and Reward System

3) Address governance, risk and compliance in the Human Capital environment through controls by:a) Using effective HCM policies, processes and practices that

support the operations, engineering, real estate and project environments.

b) Automating HCM processes that improve controls, compliance and effectiveness:i) Implement Employee Self Serviceii) Automation of leave managementiii) Automation of Job Profiling and Evaluation

4) Ensure stakeholder and organisational buy-in that minimize resistance in the implementation of the turnaround through Change Management by:a) Change Management Consultation Forum

5) Facilitate Leadership Development by: a) Establishing a Leadership Development Steer Committeeb) Select managers for the mentorship Programc) Create a Coaching Modeld) Select Executives for the coaching Program

4. Financial Efficiencies

The Turnaround plan from a financial and funding perspective is to improve the financial position of PRASA with efficiencies of R7.9 billion over the MTEF period as per the table below:

2018 2019 2020 Total MTEF

Efficiencies from

Income 555 1020 1586 3161

Expenses 1285 1595 1905 4785

1840 2615 3491 7946

The achievement of the above targets is based on implementation of the following turnaround action plans:

a) A rationalisation of employee positions at management levels. b) A reduction in energy costs through

i) Renegotiate the Eskom contract with regards to network charge, payment terms and penalties.

ii) Key account manager to manage the Energy Contractiii) Reduction in energy costs through implementation of alterna-

tive energy solutions.

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c) A reduction in security costs: i) Effective deployment of security staff to achieve efficienciesii) Implementation of technology to augment and streamline secu-

rity functionsiii) Actioning dedicated areas as national key points.

d) A reduction in haulage costs through Transnet tariff negotiations

e) Increase in Fare Revenue from the operational turnaround such as fencing project, rolling stock recovery and increase in passenger trips.

f) Rental income to grow through rental increase of at least 10% and increase in income through new developments on commercial projects

OBJECTIVE 4: MODERNISE THE RAIL SYSTEM THROUGH THE R173 BILLION INVESTMENT PROGRAMME

The Modernisation Programme is well underway, with a number of key strategic projects having entered the implementation phase. These include the Rolling Stock Fleet Renewal Programme, Signaling, Depots Modernisation, Station Modernisation and 120km/h Perway Programme, amongst others. In the past three quarters of the current financial year, the Modernisation Programme has progressed well on many of the key projects, with PRASA having already received 18 new trains from Brazil and currently undergoing testing, 6 stations already commissioned with new signaling interlocking system in Gauteng and the first phase of Wolmerton depot complete. Works is progressing to refocus implementation of the Depot programme as well as the Station Modernisation Programme, which experienced some delays due to the reprioritization of the scope on these programmes. Subsequent to initial processes, the 120 km/h programme is expected to gain momentum towards detail design and construction phase.

At the heart of the turnaround strategy and plan is the rolling out the train system of the future in order to modernise improve passenger travel experience through the R173 billion investment programme, which focuses on:

a) Rolling stock fleet renewal programmeb) Infrastructure upgradesc) Corridor modernisation

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1. Rolling Stock Fleet Renewal Programme

1.1 Train Manufacturing Activities

The Rolling Stock Fleet Renewal Programme has entered its most exciting phase, with the launch of PRASA’s New Service scheduled for the end of February 2017. The Provisional Acceptance process has been accelerated with a target of achieving 9 New Trains aligned to end of February 2017. To date, PRASA has provisionally accepted 4 train-sets. Manufacturing activities in Brazil are nearing completion, with 18 trains delivered to Wolmerton Depot (including those which have been provisionally accepted by PRASA.

To be manufactured

Production line

Ready for Shipment

Delivered at Wolmerton

(Under Gibela)

Provisional Acceptance

( Under PRASA)

Total

Trains 0 0 1 15 04 20

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1.2 Testing and Commissioning

PRASA and Gibela have been working in conjunction with the Railway Safety Regulator (RSR) towards achieving the operational schedule date (end of February 2017). The testing and commissioning of trains have progressed well, with 04 New Trains provisionally accepted, with a plan to accept a minimum of one train a week until the end of February 2017. Overall progress towards Provisional Acceptance (commercial use) is as follows:

• Track-worthiness on the 1st test train was achieved on the 21st April 2016;• The 1st train undertook speed tests and passed the 132 km/h speed test

on the 2nd May 2016• The platform height tests were conducted along all 18 of the Pienaarspoort

line stations and were confirmed to all be within the specifications for the test train to proceed through safely and without incident;

• RSR Submission to secure approval for Train Certification was received on the 30th November 2016; and

• PRASA is working with the RSR to receive “no-objection” for operations by mid-February 2017

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1.3 Local Factory Manufacturing

PRASA obtained all the required approvals as per the contract to allow Gibela to take over the site and start construction. On the 8th December 2015, PRASA provided Gibela with access to the Factory Site for construction. Factory construction has progressed well with the training centre building nearing completion. Manufacturing activities of the Local Factory are targeted to begin in July 2017.

PRASA has been requested to submit an offer to purchase 78ha of the Dunnottar Park Site (covering the Local Factory and Supplier Park only). PRASA is currently packaging the sale offer for the land, with the view to purchase additional 200ha from EMM once the development plans are finalized. PRASA is still negotiating the sale of the rest of the 288ha with EMM.

The table below captures the significant milestones and the date of achievement:

Milestone\Activity Date achieved

PRASA and the City of Ekurhuleni signed the Head Lease agreement for the Local Factory Site located at Dunnottar Park.

27th February 2015

The Council Approval for Township Establishment was obtained. February 2015

Initial Environmental Authorization 27th March 2015

• Approval of the General Plan;• Approval of Conditions of Establishment; and• Gibela has developed the Site Development Plan.

August 2015

Amended Environmental Authorization (complying with requirements due to wetlands)

17th of August 2015

Signed Sublease and access agreement between PRASA and Gibela 27th November 2015

Water Use License 1st December 2015

Next Milestones Targeted Date

Purchase of the 78ha land from EMM August 2017

Signing SLA with EMM May 2017

Local Factory operational July 2017

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1.4 Supplier Park Manufacturing

As part of the Local Factory handover process, PRASA and Gibela are currently finalizing the sublease agreement for the Supplier Park that is to be developed within the Factory Site. PRASA has engaged with the Public Investment Corporation (PIC) to support the Supplier Park with the view to participate with PRASA and Ubumbano (the 30% shareholder in Gibela) from an equity and funding perspective. PRASA has been engaging commercial banks and the IDC for the funding of the supplier park. The funding will be for the Special Purpose Vehicle (SPV), not for PRASA. PRASA is merely playing a facilitator role to ensure speedy finalization of the funding arrangements.

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1.5 Job Creation and Skills Development

Approximately 8 088 jobs (combination of Local Factory and Suppliers) are expected to be created through the Rolling Stock Fleet Renewal Programme over a 10 year period. This is based on a target to achieve a minimum of 65% local content on the new trains. As part of the first phase of the Programme, the Local Factory will directly employ approximately 1 500 employees of which 99% of the labour force will be South Africans, with a target of employing 85% historically disadvantaged South Africans and 25% females.

Progress to date, Gibela has created the following jobs:• Overall 1010 Jobs for Citizens;• Of which, 905 Jobs for Black Citizens;• Of which 520 Jobs for Skilled Black Citizens;• Of which 210 Jobs for Women; and• Of which 711 Jobs for Youth.

Skills Development is critical to enable the creation of meaningful sustainable jobs and as such the Rolling Stock Fleet Renewal Programme has a strong focus on Skills Development. Overall, Gibela is contracted to up-skilling 19 527 individuals during the implementation of the Programme. The breakdown is as follows:

19 527

6 766

4 615

3 444

1 9571 535

596 461 153

Total Artisans Other Engineers

Other TradeWorkers

EngineeringTechnicians

Gibela Staff ProfessionalEngineers

Technologists Designers

There is strong focus on skilling artisans and engineers as a result of the train manufacturing process. By the end of the Programme, Gibela would have, at minimum, achieved to train 6 766 Artisans, 1 957 Engineering Technicians and 596 Professional Engineers. To enable this, Gibela is expected to spend 1.75% of the Contract Value (approximately R928 million) towards Skills Development. This will include the development of training centers as well as providing bursaries across the different disciplines. Gibela has started the process of training and up-skilling newly appointed employees.

Approximately 110 Engineers and 170 Artisans are receiving training through Alstom in Europe and Brazil. Furthermore, Gibela has initiated a bursary drive for the various disciplines with institutions of Higher Education nationally, which includes Technical and Vocational Education and Training (TVET) colleges. The below table indicates significant progress already made towards improving the level of education nationally through the Bursary Scheme.

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In early October 2016, Gibela launched Mathematics, Science and English classes in the Duduza Community. Gibela, through a three-year partnership with Mathematics Centre and with the assistance of the Department of Basic Education, is assisting 450 learners from 17 schools in Nigel, Duduza and Kwa-Thema with mathematics, science and English classes on Saturdays. The classes are intended to provide extra support to learners in Grade 10, 11 and 12. There are 50 learners in each class, with one educator per class. Through the Rolling Stock Fleet Renewal Programme, the costs of teaching aids for the educators and learning aids for the students estimated at R6.7 million over the three-years are fully covered.

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1.6 Local Content and Localization

Rolling Stock Fleet Renewal Programme targets for Localization exceed the 65% minimum as designated by the Department of Trade and Industry. The following table highlights Gibela’s contractual commitments over the life of the Programme:

Delivery Year 1 and 2 3 4 5 6 7 8 9 10 11

Local Content% 43.3% 67% 69% 69% 69% 72% 72% 72% 72% 75%

Contract Year 1 2 3 4 5 6 7 8 9 10

Local Content% 50% 85% 92% 89% 87% 84% 81% 78% 77% 76%

Contract Year 11 12 13 14 15 16 17 18 19

Local Content% 76% 74% 73% 72% 72% 72% 71% 71% 71%

• Local Content1) is measured throughout the supply chain, i.e. up to the raw materials used within a component.2) measures South Africa value add on components, i.e, if the raw materials is foreign, but has

local manufacturing, then the local manufacturing portion will only count as Local Content• Gibela will thus require companies within its supply chain to have Local Content commitments on their products

Manufactureand Supply

Maintenance

• Gibela has committed to localisation targets for both the supply and maintenance of the new trains:

Gibela has already localized 38 components on the trains currently being manufactured in Brazil.

1.7 Economic Development (ED) Monitoring

PRASA and the South African Bureau of Standards (SABS) have since engaged Gibela to start the process of monitoring Gibela’s Economic Development obligations. This includes a review of Gibela’s Local Content Plan. The Local Content Plan provides the plan on how Gibela will be meeting localization targets. Furthermore, the plan will provide detail on the localized components. The SABS started the process of reviewing Gibela’s Economic Development Obligations at the end of December 2015, with the following activities having taken place since then:

• On the 19 January 2016, the SABS presented its review of Gibela’s Local Content Plan, requiring Gibela to provide a complete update of the plan to reflect detailed supplier development plans per component, timelines and quantum of localization commitments per component and overall mapping of Gibela’s supply chain.

• In the beginning of February 2016, the SABS deployed the audit team to Gibela to perform a full audit on Gibela’s B-BBEE commitments for the 1st contract year.

• In the beginning of March 2016, the SABS began the local content audit

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process of the 1st Advance Payment that was paid to Gibela in May 2014.• SABS issued the final B-BBEE report for Contract Year 1 (FY2014/15) PRASA

and Gibela are in the process of reviewing the findings. • SABS have since started the audit process for Contract Year 2 (FY2015/16)

and 3 (FY2016/17) with Gibela. • In September 2016, the SABS initiated reviews and audits on Gibela’s Local

Content and Skills Development commitments. These reviews are being conducted to establish the baseline for Gibela’s overall commitments.

1.8 Mock-up Train

Milestone Responsibility Delivery Targets Date

Stauts

1 Gibela update of Local Content Plan Gibela June 2016 Completed

2 B-BBEE audit report – Contract Year 1 (2014/15)

SABS September 2016 Completed

3 Audit Report – Local Content on Advance Payment 1

SABS June 2017 Ontrack

4 B-BBEE audit report – Contract Year 2 (2015/16)

SABS March 2017 Ontrack

5 Finalization of Gibela Local Content Plan and related Economic Development Plans

SABS/Gibela June 2017 Ontrack

As part of the Manufacture Supply Agreement (MSA), Gibela is also contracted to provide a mock-up train to PRASA for the purpose of commuter education on the new trains. The full scale mock-up train would allow commuters to start learning and experiencing the New Train. PRASA displayed the mock-up at Pretoria Station on the 07th July 2016. The mock-up train is now open to the public for viewing.

1.9 Overall Programme – Progress and Next Milestones

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2. Signaling Programme

Strategic Activity Responsibility Due Date Current Completion

First Five Design Reviews PRASA/Gibela October 2015 100% Complete

Gibela Start of Factory Construction PRASA 08 December 2015 100% Complete

Delivery of first Test Train Gibela 17 December 2015 100% Complete

Design Review 6 PRASA/Gibela May 2016 100% Complete

Provisional Acceptance of the first Train Gibela December 2016 100% Complete

9 New Trains Provisionally Accepted Gibela February 2017 22% Complete

Local factory operational Gibela July 2017 70% Complete

1st New Train from Local Factory Gibela November 2018 0% Complete

Background

PRASA has embarked on a modernisation programme to replace all existing signaling interlocking, which consist mainly of obsolete mechanical and electro-mechanical systems, with electronic interlocking as the technology of the future. In the Gauteng region, Stage 1 and 2 have been integrated into one overall programme (awarded to Siemens). In the Durban and Western Cape regions, the signaling contracts were awarded to Bombardier and Thales/Maziya, respectively. PRASA is expected to spend approximately R7 billion over a five year period to implement the programme. Accompanying these interlocking replacements is the construction of central control centres across the three regions.

In addition, PRASA has embarked on a procurement process to appoint suitable companies to rollout the Automatic Train Protection (ATP) across the three regions as part of enhancing operational safety of the Metrorail service. These allow PRASA to deploy trains with high safety features which rely on technology intervention as opposed to drivers or train control officers.

2.1 Gauteng Region

The scope of work of the project in Gauteng includes the construction of Gauteng Nerve Centre (GNC) and the installation of new interlocking systems across Gauteng to improve capacity, safety and operational flexibility.

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2.2 KwaZulu Natal Region:

The scope of work of the project includes the establishment of the Durban Central Traffic Control (CTC) at Rossborough and the installation of new interlocking systems from KwaMashu – Durban – Umlazi, Isipingo- Unbogwintini, Pinetown line and Crossmoor line.

2.3 Western Cape Region:

The scope of work of the project includes the establishment of the Cape Metrorail Control Centre (CMCC) at Bellville and the installation of new interlocking systems. In addition, the scope of work includes telecoms, power supply, OHTE and Perway adjustments.

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2.4 Provide Automatic Train Protection (ATP) and PRASA In Cab Signaling (PICS)

The scope of work of the project includes the provision and implementation of the necessary equipment between the newly installed interlocking systems, through the Global System for Mobile Communications – Railway (GSM-R) network to the new PRASA trains to facilitate Automatic Train Protection and InCab signaling functionality.

2.5 Digital Railway Signaling Radio Network:

The scope of work of the project includes the establishment of a GSM-R network (one in each region Gauteng, Western Cape and KwaZulu Natal). The GSM-R network architecture includes the following subsystems:

• 3 Core Equipment Centres? (one in each town Gauteng, Cape Town and Durban)

• Total 147 Base Station sites? locations will be deployed to ensure the coverage of the line to ensure compliancy to EIRENE coverage requirements

• Transmission network (including its management system). • Dispatching system• Network Element Management system for the management of Huawei’s

Radio GSM-R network.

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3. Depot Modernisation

Background

PRASA is in the process of replacing the existing rolling stock with more modern rolling stock. To that end, PRASA has identified Braamfontein depot, Wolmerton depot, Salt River depot, Springfield and Durban depots as key service depots for modernisation in preparation for the maintenance of the new rolling stock. The modern fleet is destined to replace the current aged rolling stock and will bear the capacity of transporting more than 2.2 million passenger trips every weekday. PRASA has budgeted to spend R3 billion to support the rollout over the next three years.

4. Acquisition Of Locomotives

Background

On the 21st January 2016, PRASA management submitted a memorandum requesting the FCIP to approve the process for the purchase of 24 locomotives (including the 7E type locomotives for the Eastern Cape) to support the long-distance rail service. The FCIP granted the approval for PRASA to explore the option of procuring these locomotives from Transnet. This is an interim arrangement to support the long-distance current operation.

PRASA and Transnet Engineering (TE) have advanced negotiations on the purchase of 8 Refurbished Class 7E Locomotives and 16 New Class 22E Locomotives. The Term-Sheet is agreed by both Parties, with the drafting of the contract underway. The contract signature is expected to take place by mid-March 2017. In line with the agreed Term-Sheet, TE will deliver the locomotives as follows:

• 8 refurbished 7Es locomotives for the Eastern Cape within three months after contract signature; and

• 16 class 22Es locomotives for mainline service within twelve months after contract signature.

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5. 120 Km/H Perway Programme

Background

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 the upgrading of the ballast profile for better stability, re-railing, re-sleepering, upgrading of turnouts, replacement of single & double slips, replacement of scissors & diamond crossings, drainage upgrading, ballast screening, refurbish rails via grinding and the re-alignment of track via continuous tamping.

6. Station Modernisation Programme

Background

This programme focuses on the modernisation of stations in the Priority Corridors of the Rail network. One hundred and thirty five stations (135) were prioritised for Modernisation. PRASA has concentrated on stations, which have a high volume of commuters and have the potential to increase revenue. Any improvements on these stations will translate into real benefit for commuters, improving the overall customer experience and adding value to the service offering by PRASA. The Station Modernisation programme has been allocated R1.9 billion over the 2016 MTEF cycle, with R614 million allocated for the 2016/17 financial year, R640 million for the 2017/18 financial year and R672 million for the 2018/19 financial year. From the current 135 stations identified

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as priority stations, 28 stations are at various stages of development inclusive of the four (4) third party (co-funded) projects. These include Leralla, Germiston, Roodepoort and Vereeniging. Fourteen (14) stations have been prioritised to start with the construction in the current financial year.

18 Stations are prioritised for construction in the 2016 MTEF, with 3 Stations already in construction phase. The stations under construction include Philippi station (76% complete), Duffs road station (100% complete) and Oakmoor station (63% complete).

3 Station already in construction:

Stations Project Phase ConstructionStart Date

Due date Comments

Philippi Station Execution 01 October 2013 September 2017 Construction was at 76% when work stopped. Project time extension and variations order have been approved and the NTP issued. Contract negotiations in progress and remainder of the works not expected to exceed six (6) months.

Duffs Road Execution 15 October 2014 June 2016 Duffs Road Station project is 100% complete. Practical completion was reached on 13 July 2016. The capitalization process will be completed by 31 January 2017.

Oakmoor* Execution 22 January 2014 30 June 17 The station is 63% complete. Contract expired 30 October. An SCM process is well underway to re-instate the contract and extend the completion duration. Currently there is no work on site. The contractor has cash flow problems.

Mabopane Station

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Background

Mabopane Station is one of the largest stations in Gauteng in terms of the activities within Station vicinity as well as the number of commuters that pass through the station on a daily basis. It is situated at about 55 kilometers north of City of Tshwane’s (COT). The station is dominated by informal economic activities (Traders). The station was therefore identified as one of PRASA’s Gauteng A Corridor stations (i.e. priority station). Mabopane Station precinct is an important City of Tshwane’s (COT) transport and community empowerment node. The station development has been divided into two projects, which include the Bridge and Concourse projects. This investment will improve customer travel experience, increase commercial space, and improve trading stalls, amongst others.

Park Station

Background

Park Station is the centre of intermodal transport in Gauteng and the station has passenger volumes in excess of 200,000 per day. The Upgrade of Park Station is vital to meeting passenger demands and expectations for the present and into the future. This project is aligned to the PRASA Corporate strategy since it will ensure that the strategic goals of improving the financial performance, managing risk and ensuring operational effectiveness are achieved. Furthermore, the upgrade of Park Station project will enhance business drivers such as increased revenue, customer satisfaction and compliance. A further R1.3 billion spending is earmarked for spending over the next three years. Eleven major projects for Park Station (7 NSUP Infrastructure upgrades and 4Commercialisation) are planned for implementation during the 2016/17 financial year to support infrastructure upgrade and retail expansion.

7. Project Management Support

Background

PRASA has started the process to build Project Management capacity within the Group to support the rollout of the Capital Programme. This will be done through a creation of a panel of Project Management Institutions to ensure efficient and effective execution of the projects.

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To date, PRASA has finalized a technical specification targeting skilled resources in the areas of Project Management, Feasibility Studies, Project Planning, Engineering, Design, Cost and Benefit Analysis, Quantity Surveying and Contracting, amongst others. Bidding process is now closed, with 87 submissions received. The tenders have been evaluated and the report is being finalised for consideration by the Corporate Tender Procurement Committee (CTPC).

8. New Rolling Stock Deployment Readiness

Background

For PRASA to operate the commercial service using the modern Electronic Multiple Unit (EMU) fleet, the Railway Safety Regulator (RSR) of South Africa has to grant the “No Objection” certificate(s). The “No Objection” certificates come in two fold; [1] the Train Certification which confirms that the EMU train design, development and production meets all required safety, operations and maintenance parameters agreed between PRASA and Gibela (figure 1: S4) and [2] the Trial Operation which PRASA has to demonstrate operational readiness for commercial public service from a holistic or total system view (figure 1: S5).

PRASA/Gibela Contract

Design Engineering

Production in brazil

Arrival In South Africa

Testing & Commissioning

Trial Operations

Commercial Service

• Gibela• PRASA

S0 S1 S2 S3 S4 S4 S5

• Gibela• PRASA

• Gibela • Gibela • Gibela• PRASA

• PRASA • PRASA

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The Train Certification (S4) process from the very onset was made part and parcel of the technology review process. However, the Trial Operations “No Objection” was made mandatory by the RSR on 1 August 2016. The “No Objection” certificate processes for both phases (S4 and S5) were granted by the RSR. All required submissions were submitted on 11 November 2016. The approval to commence the Trial Operations was received on 30 November 2016 on the proviso that the operations and maintenance phase will be sought from RSR.

Subsequent to RSR approval, PRASA had a successful first Provisional Acceptance Certificate (PAC) on 1 December 2016. Train no. 6 was received from Gibela to commence the Trial Operation. The Trial Operations commenced on 2 December 2016 between Pienaarspoort and Rissik. All required 38 tests/exercises were concluded on 11 January 2017 with all test case results submitted to RSR on 12 January 2017. The approval of the submitted test results will allow PRASA to move into Phase two permitting commuters on-board during off-peak (8h30 – 15h30 and weekends). The operations will therefore continue leading up to the launch of the full commercialized service on 28 February 2017. The full commercial service will be operated with 9 train sets (8 operating and 1 spare set).

Testing and Commuter engagement

The modernisation readiness rollout programme requires extensive stakeholder engagement. Even though the emphasis is on external communication, internal communications must be improved and given priority as the overall operations are dependent on internal staff for efficiency. The greater part the communication rollout programme is focused on engaging external stakeholders such as commuters, public, municipalities, councillors, other operators, local government, politicians (at a political and provincial level), communities and media, in a strategic manner. The overall benefits will ensure that majority of the stakeholders are informed, educated and engaged in sharing and spreading the good news about the modernisation programme, the new trains, the new service, the new Prasa.

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OBJECTIVE 4: Expand PRASA Rail networks and services through regional/provincial corridor expansions and Introduction of new services

Urbanisation is progressing at breakneck speed, particularly in developing countries. In the 1800s approximately 3% of the earth’s population lived in cities. Today, nearly 50% are now living in cities, compared to 30% in 1950.

With this increasing rate of urbanisation, it is envisaged that between 60-65% of the world population would have migrated to the cities by 2030; this is two out of three people.

An effective and environmentally sustainable public transport system is required to accommodate the growing populace in the cities, including those travelling to and from the outskirts.

The revival of rail through the upgrading and modernisation of existing rail systems, new rail expansions and new corridors, and the introduction of new rail technology will contribute significantly in ensuring that rail becomes the backbone of public transport.

Attracting new customers require a prioritised list of rail service and network expansion interventions that will increase capacity, improve product offering, make better use of the network and expansion opportunities for growing demand.

The National Strategic Plan prioritizes a list of rail service and network expansion interventions, which will result in increased capacity, improved product offering, the better use of network/assets, as well as expansion opportunities for growing demand. Proposal for improved integration between rail and others modes of public transport, including city distribution, intermodal interchanges and the use of Autopax as complimentary services to MLPS, are just be some of the many interventions to gain new customers. The identification of key redevelopment sites to fund the strategic plan and the corresponding business strategies remain critical.

A number of issues are affecting the rail service in the main urban centres, many owing to the age and condition of the asset including: The alignment of network expansions and new corridors with PRASA property development and land use planning is crucial. The co-ordination, integration and alignment of rail planning within the Integrated Transport Plan must be a multi-level and multi-facet approach for PRASA in order to achieve

The Cities’ Integrated Public Transport Networks (IPTNs), as well as Integrated Transport Plans (ITPs) are central to the implementation of PRASA Strategic Plan. How PRASA capitalise on the significant progress that has been made in the position of rail as the backbone of public transport within the various ITPs and IPTNs will determine the securing of future business for the organisation.

Maintaining Relevance for the Future

Securing the future business for PRASA is informed by the organisation’s Strategic Plan, which provides a transformational, integrated and holistic approach to developing rail and all PRASA entities over the next forty years up to 2050. It builds on the 2006 National Rail Plan and widens the scope to include all PRASA’s entities.

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To secure future the business, the plan 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 planned Government investment in new rolling stock, new signaling, stations and three pilot Modernisation Corridors demonstrating the impact of an integrated approach to investment on rail corridors.

Planning for Growth and Expanding Prasa Networks and Service is informed by the National Strategic Plan, which calls for:

a. A prioritised list of rail services and network expansion interven-tions 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.

b. Clear proposals for improving integration between rail and other public transport modes to make

c. it easier for passengers to use railway services as part of the wider integrated transport systems.

Planning for Growth and Expansion through the provision of quality rail network and services is dependent on the deployment of a safe, predictable, reliable, high quality rail commuter and passenger services in high volume key corridors, through:

a. Improving the safety, security, resilience, reliability and efficiency of the network;

b. Supporting economic growth and development, particularly by providing access to major employment areas;

c. Connecting current and new economic or growth nodes, particu-larly by enhancing connectivity into the main cities of Johannes-burg, Tshwane, Ekurhuleni, Durban, Cape Town, East London and Port Elizabeth;

d. Supporting the main economic development corridors; e. Improving accessibility and connectivity to marginalized commu-

nities; f. Promoting better integration between land-use planning and

railway development to promote densification and sustainable de-velopment and to play to rail’s strength in supporting high volumes of travel;

g. Developing rail as the high-volume backbone of each province’s integrated transport network, thereby contributing to the devel-opment of a modern, integrated, high-quality, affordable and cus-tomer-focused public transport system that will improve people’s quality of life and promote social inclusion;

h. Providing strategic connectivity between provinces where this is appropriate, particularly supporting connections from KZN, the Western Cape and Eastern Cape to Gauteng.

1. Planning for Growth and Expansion in the Western Cape The Western Cape has an internationally high mode share for rail transport (55% of public transport travel), reflecting its developed and extensive rail

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network focussed on the important city of Cape Town; and a small number of other key stations, such as Bellville, with its surrounding growing employment opportunities. As in Gauteng, significant overcrowding of some services, and lengthy journey times on some corridors, is beginning to restrict railway development, and place strain on its critically important role in the public transport network.

1.1 Blue Downs Rail Link

The proposed Blue Downs Rail Link consists of a rail connection between the existing Khayelitsha and Bellville – Strand Lines. The preferred route alignment, as identified during earlier planning, takes off between Nolungile and Nonqubela stations on the Khayelitsha Line thereafter passing thorough the Mfuleni residential area and the Blue Downs CBD before linking up to the south of Kuils River Station on the Bellville – Strand Line. The preferred route alignment is approximately 9.5km in length and consists of a double line with the possibility of three to four stations.

The Blue Downs Rail Link will not only service the greater Blue Downs community, but also form a fundamental component of the future metropolitan rail and transport network of Cape Town. It will allow the established communities of Khayelitsha and Mitchell’s Plain direct access to the Bellville corridor of activity. Equally, it will form the second of three sectors of rail, enabling east-west linkage of a southerly rail corridor from Bellville via the Blue Downs Rail Link, Philippi Corridor (existing) and the future Philippi – Southfield link to the commercial corridor of Wynberg, Claremont and Rosebank in the west.

1.2 Cape Town International Airport Rail Link

The provision of a rail connection to the Cape Town airport will be achieved by building a ±4,5km rail link between the airport and the existing Bellville – Sarepta line to the north. The rail link will enable the movement of people between the airport and Cape Town Central Business District, as the main destination/originator of trips. In addition to maximizing the use of existing infrastructure this rail solution makes it possible to access the greater network should the train stop at Mutual station. Future phases of this solution will enable more direct access to the Bellville area and surrounds, and potentially linking more directly with the Metro south east (Khayelitsha, Mitchells Plain, etc.). The Cape Town rail network is considered the backbone of the public transport system for the City. The existing Sarepta-Bellville rail line is situated approximately 2-3 km north of the airport. The new ±4 km link between the existing railway line and the airport ensures that existing infrastructure is used optimally and also improves the reach and accessibility of the rail network. The review of the feasibility study for the project focusing on the operational and funding scenarios was considered.

Some considerations were the funding concepts in the form of commercial banking, development banking, commercial paper, equity, government guarantees and non-fare revenue streams. Even though this has been considered, detailed examination of funding scenarios is yet to be finalized. From an operational viewpoint, the PRASA developed 4 alternative route options with a view to propose a viable route both from a financial and operational point of view.

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2. Planning for Growth and Expansion KwaZulu-Natal

Durban is a major city of South Africa. There are significant flows of people into Durban from surrounding towns and settlements (the rest of the province being relatively rural). Existing demand from rail passengers focuseson the strategically important north – south link through Durban between Umlazi and Kwa-Mashu (and soon, Bridge City). The eThekwini Transport Authority (ETA) regards rail as the backbone of the public transport system. However, rail is particularly disadvantaged by the remoteness of Durban station from the city centre. It also suffers from existing overcrowding with further future growth forecasted, relatively long journey times from the outermost stations and some extremely lightly used passenger-railway corridors.

Our strategy focuses on strengthening rail’s role particularly around Durban by improving frequencies to provide more capacity and improve connectivity, reducing journey times from the outermost stations and converting and integrating the lightly used railway lines from their existing state into a new light rapid-transit system that would improve access into the city centre. The strategy also seeks to support development corridors and nodes identified across the province.

2.1 King Shaka and Northern Links

Significant growth is experienced in the North of Ethekwini, together with the Dube Trade Port development. The port will contain various developments including a passenger and freight hub (King Shaka), accommodating 50 000 residential units and house over 200 000 people. Rail based solution is being investigated to serve the airport and the Cornubia development. Due to large scale developments in areas like Dube Trade Port, Umhlanga and Ballito the north has rapidly developed as a major commercial and retail hub, thereby firmly establishing itself as a major investment area. As development continues in this area, a northwards investment direction is very evident.

The northward development trend is further reinforced with another key development proposal, viz. the Cornubia mixed-use development. The development is set to be eThekwini and the Province’s largest sustainable integrated human settlement initiative. This 1200ha multi-billion rand project has the potential to accommodate more the 50 000 dwelling units, 80ha industrial platform, and over 1.5 million square metres for commercial uses. In the area of Ballito, a mixed-use development comprising of 1.187million square meters of bulk has been proposed. This development is proposed to include a new international conference centre, residential, light industrial and retail/office uses.A number of other public and private projects have also been proposed for the northern area.

Given the significance and scale of the existing and proposed developments in the north, an ideal opportunity exists to expand rail, to ensure it plays a vital role in the provision of efficient and effective public transport in this area.

2.2 Bridge City

The Bridge City Development is located in the Inanda, Ntuzuma and Kwa-Mashu. The development on the approximately 60-hectare site comprises high-density mixed-use development and equates to approximately 700 000m2

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building area. The overall developments in the area include a regional hospital, retail, residential, magistrate’s court and other commercial facilities. As part of PRASA and eThekwini Municipality strategy to facilitate a better movement of commuters in the area, the Bridge City Rail Link was implemented. This included the construction of a railway station (situated in Kwa-Mashu) and a 3.5 km rail extension project for the Metrorail Durban region. The rail line is servicing the newly constructed Bridge City Shopping Centre and the surrounding areas. The rail service will be complemented by an integrated bus and taxi interchange located adjacent to the railway station. The Metrorail service has since commenced with operation.

3. Planning for Growth and Expansion in the Eastern Cape

Today there are two independent PRASA-operated passenger-rail services in the Eastern Cape in Nelson Mandela Bay and Buffalo City. One links Port Elizabeth to Uitenhage in Nelson Mandela Bay and the other links East London to Berlin. Frequencies are relatively limited, particularly off –peak, journey times are slow compared with road on the East London corridor, and the Port Elizabeth corridor has relatively low levels of demand for a heavy-rail service (despite the city being larger and rail journey times being more competitive with parallel roads).

Our strategy focuses on increasing the role and relevance of rail, particularly to the under-utilized Port Elizabeth corridor, through service upgrades to better service local communities, better integrate with other transport modes and network extensions to nearby major settlements and developments. 3.1 Motherwell Rail Link

Motherwell is situated 20km north of Nelson Mandela Bay CBD, and has expanded rapidly with over 200 000 dense settlements with low per capita income. The Motherwell extension will enhance the role of rail in Nelson Mandela Bay with 15 000 – 20 000 new daily passenger in the short term and increasing to 35 000 daily passengers by 2020. In this regard, the Motherwell Rail extension is confirmed as a category “A” corridor in the 2006 Rail Plan and Local ITP respectively. The Motherwell Rail Spur is considered the first phase of the full Motherwell Loop (±17km).

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4. Planning for Growth and Expansion in Gauteng

Gauteng has the greatest concentration of population and economic activity in South Africa. As a result, the Gauteng rail network is the busiest in the country. It feeds a number of centres in addition to central Pretoria and Johannesburg, reflecting the polycentric nature of growth in the province (for example, centres of employment such as Germiston and Kempton Park are important destinations). Without action by us, forecasted growth will only worsen current overcrowding, and long journeys will continue to make rail less attractive than road.

Our strategy focuses on enhancing rail’s role in the province by providing more capacity on the busiest corridors, reducing journey times on the longest journeys and investigating network extensions to support emerging larger and higher-density settlements.

Rail has an important future role to play in supporting urban expansion and densification through developing new rail corridors. Opportunities that could be developed further include new rail corridors to Etwatwa and beyond from Daveyton, Tembisa to Ivory Park, and the Baralink from Nasrec. In Ekurhuleni; there may be an opportunity to develop new rapid-transit corridors serving development adjacent to Oliver Tambo International Airport.

4.1 Daveyton – Etwatwa Rail Corridor

The project entails the extension of the rail corridor from the Daveyton Station into the areas of Chris Hani, Etwatwa and Knoppiesfontein. The extension is approximately 11km, which will also include the construction of 4 new stations. The first feasibility study for this extension was undertaken in 1999 and is captured as a priority rail extension in both the City’s Integrated Transport Plan and PRASA’s Rail Plan. In 2014, PRASA undertook a review of the feasibility study and has since updated the demand projections. The study investigated three alternatives for the rail alignment between Daveyton and Etwatwa. The proposed extension of the Daveyton rail line connects along the southern edge of Daveyton across the Blesbokspruit, into the Sentra-Rand Corridor and into Etwatwa Extension 23. The total estimated cost for the project is R2.1 billion.

4.2 Hammanskraal

The Hammanskraal to Pretoria Rail Corridor (HPRC) was served by a limited passenger train service until 1987. At that time approximately 10 000 one-way passengers used the service on a daily basis. Of these, approximately 8 000 passengers travelled in the peak period. Due to the long travel times (approximately 105 minutes) the service became unpopular with commuters. Based on the recommendation of a study done by the Department of Transport and the Council for Scientific and Industrial Research (CSIR) in 1986, the service was terminated towards the end of 1987. The current public transport services along the HPRC are provided by Bothlaba Bus Service and minibus taxis. The vast majority of commuters (over 90%) travel by bus.

A pre-feasibility study done in 2004 and subsequent feasibility study in 2010 found that a passenger train service could only be viable if the parallel competing bus service is terminated.

Hammanskraal is situated approximately 40 km to the north of the City of

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Tshwane (COT) which renders it fairly isolated from the rest of Tshwane, especially since it is separated from the more central areas by a large expanse of agricultural land. The area holds a total population of about 206 000 people (Census 2001)(2). Estimates showed that the population in the study area was approximately 240 000 by 2005 and could have increased to approximately 264 000 in 2010 and by 2025 it could be 358 000(2)

The Spatial Development Framework (SDF) (June 2005)(2) for Hammanskraal and the Northern Cross Border Area identified the Hammanskraal precinct as an activity node and stated that it “is essential that the proposed major road and rail network be constructed and or upgraded as a top priority in the area”. The National Treasury (NT) has approved funding for the development of the precinct as part of COT’s Tsošološo Programme on the condition that the Passenger Rail Agency of South Africa (PRASA) commits itself to the reintroduction of the train passenger service.

4.3 Moloto Rail CorridorBackground

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 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, 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.

The Moloto Rail Corridor Development Initiative was initiated due to various passenger public transport problems that have developed incremental over time over time. The pertinent problems include, but are not limited to:

a. Non-sustainability of transporting increasingly large commuter numbers by subsidized bus services over long distance to employ-ment destinations mainly within the metropolitan areas of City of Tshwane;

b. Long travel times in excess of seven (7) hours per day;

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c. High financial implications for both the Government and passen-gers;

d. Unacceptable levels of service quality;e. Insufficient road network particularly in the local residential areas;f. Increasing traffic congestion in urban areas; andg. Increasing road accidents that result in serious injuries, loss of life

and damage to property.

In addressing the transport challenges, the Department of Transport has introduced a three (3) pronged-approached. Firstly to optimize the current service design of the contracted bus services, secondly to address the current road infrastructure and improve road safety and lastly to implement a range of transportation solutions with rail transport forming the backbone of a transport oriented development solution.

In terms of the Rail Initiative, PRASA concluded a feasibility study in October 2014 that confirmed rapid rail as the preferred long-term transport solution for the corridor. PRASA established a Project Management and Implementation Office and submitted a Treasury Application 1 approval to National Treasury for project funding considerations. On 3 December 2015, National Treasury responded by not approving the application mainly expressing that the rail project is unaffordable.

Status update

In exploring alternative funding resources, the Moloto Rail Development Project was included in a list of projects submitted to the Forum on China-Africa Co-operation (FOCAC). On 7 September 2016, the China Communications Construction Company Limited (CCCC) and PRASA entered into a Memorandum of Understanding (MoU). The MoU are aimed at exploring areas of possible cooperation on the planning, funding and implementation of the Moloto Rail Corridor. The MoU, if pursued, will have to comply with the procurement rules and applicable legislation. The funding required for this development would also require a Treasury Guarantee and option analysis in securing the best possible funding solution.

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.

5. Other Planned Service Offerings: Product Development

5.1 Light Rail Solutions

Light Rail has been identified as the preferred technology by which to improve rails service specific and identified corridors. Light Rail can provide more relevant local services compared to heavy rail and make it possible to match service provision with current and potential future passenger numbers.

Using benchmarking and best practice case studies PRASA has studied a number of cities around the world who have made better use of light rail in certain corridors. Examples include Manchester Metrolink in the UK and Karlsruhe in Germany.

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The priority and implementation timescales of the proposed Light Rail Network (see PRASA National Strategic Plan) is in the medium and long term.

During the MTEF Period, PRASA shall develop options for each of the identified corridors with a view to producing fully worked through business for each proposal

5.2 High-Speed Project

Air completion and the distance around the country offer the potential to investigate creating high speed rail corridors operating at around 400kph. Experience in Europe and Asia has shown that high speed rail are critically dependent on the size of the overall travel market between key cities and the potential to achieve mode shift from air to high speed rail.

PRASA has identified two routes with sufficiently sized travel markets – from Gauteng to Cape Town to Durban. Although Cape Town – Gauteng has the larger travel market (when air) its distance of 1400km makes it difficult to be air competitive when city centre – city centre air and high speed rail journey times are compared. In contrast Durban – Gauteng is only 640km creating a real potential for a rail to capture a significant proportion of the air market in the future and a potentially stronger base case.

For high-speed rail to be successful a large travel market over 1, 1000 passenger per hour needs to be present and end to end journey times will be a maximum of four hours to be competitive with air. Journey times of 3 hours, Johannesburg to Durban, and 4.5 hours to Cape Town would need to be achieved to make the service competitive in terms of time travelled.

Eventual implementation will be dependent on growth in demand making high Speed Rail a longer term aim in the country. The early identification of corridors will be essential to safeguard future implementation and to identify how spatial and economic policy decisions might support future high speed rail development. A feasibility study will conducted by PRASA during the MTEF Period.

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5.3 Integrated Ticketing

A new ticketing system, which integrates with other modes of transport and for use across all platforms, offering a standard solution is being investigated for development and implementation.

PRASA intends to introduce an integrated system that is:

h. An electronic ticketing system which would be compatible with other local transport providers

i. More flexible and allows users to buy a ticket for a period of consecutive days rather defined calendar months or providing reduced fares outside the peak period

j. Passenger friendly gating systems which will improve the ap-pearance of stations, support access control and help to reduce ticketless travel

k. Helping to spread demand by incentivizing travel on less busy services

l. Addressing ticketless travel by providing low income passengers and special needs groups with concessionary passes to allow them to travel for reduced fares or free of charge outside the peak period; and

m. Providing much more accurate data to PRASA and stakeholders on travel patterns and journeys to help make service planning more responsive to passenger needs/

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OBJECTIVE 6: DRIVING THE SECONDARY MANDATE THROUGH THE EXPLOITATION OF ASSETS TO SUPPORT THE PRIMARY MANDATE

The second objective of secondary business is that PRASA shall generate income from the exploitation assets acquired by the organisation.

The focus is to generate income through:

1. Real Estatea) Facilities Managementb) Commercialisationc) Acquisition of development leasesd) Development of PRASA propertiese) 3rd Party Real Estate Development and Investmentf) Station Improvements and Upgrades

2. Telecommunications Infrastructure Commercialisationa) Leasing of Optic Fibreb) Commercialisation of Telecoms Towersc) Provision of Value Added Services

3. ICT Value Added Servicesa) Wi-Fi Solutions

4. Alternative Energy Generationa) Renewable Energy exploitation

The pursuit if the secondary mandate Turnaround Strategy and Action Plan is:

1) Increase operating revenue by 10% in the first year and 15% in the subsequent years through:a) Property development

i) Achieve 10% growth in operating revenue in the first yearii) Develop and Finalise the Real Estate Investment Policy and

Strategy for third party developmentiii) Finalise bulk development rights for property development

and commercialization

b) Property modernisationi) Complete 2 station in the first year out of the 28 stations

already at various phases of development prioritised

c) Property Upgrades and Improvementsi) Complete 85 property improvements in the first year exe-

cuting through• Station upgrade programme• Station improvement programme• Workplace improvement programme• ISAMS programme

d) Property Management and Commercialisationi) Achieve 10% growth in operating revenue in the first yearii) Renewal of 60% of lease agreements in the first yeariii) Upward adjustment of 31% of the leases to be renewed

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iv) Construction of retail outlets and other commercial facili-ties in identified stations

v) Development and provision of student accommodation and other residential property facilities

vi) evelop and implement a commercially viable advertising portfolio

e) Facilities Management and Energy Managementi) Compliant, functional, clean stations and workplace facili-

tiesii) Energy management through renewal energy and energy

efficiency programs

2) Enhance Operational Efficiencies through:a) Portfolio capacity assessment

i) Assessment of skills, resources and activities required to deliver on the mandate

b) Assessment of portfolio programme and resolving bottlenecksi) Identify programme related bottlenecksii) Develop and implement action plan to resolve bottlenecks

c) Prioritised portfolio programme accelerationi) Develop a prioritised programme-based action plan aligned

to benefits realisation

Implementing the Secondary Mandate

The secondary mandate is executed through two (2) PRASA entities, Corporate Real Estate Solutions (CRES), a division of PRASA, and Intersite Asset Investment (SOC) Ltd, a subsidiary of PRASA.

1. Corporate Real Estate Solutions (PRASA CRES):

The priorities for 2017/18 is will include Property Improvements, Property Management, and Facilities Management is coordinated centrally at Head Office and executed by five (5) regions located in Gauteng, KwaZulu Natal, Western Cape, and Eastern Cape.

a) Property Improvements

At the core of CRES delivery is an offering of improved and functional facilities creating a safe and functional environment that will enhance commuter and or user experience. In this regard, the Division receives capital budget allocation on an annual basis to deliver property improvements.

Property Improvements projects completed in the past four financial years came to a total of three hundred and eighty (380). A total of eighty (80) stations are anticipated to be completed at the end of the 2016/ 2017 financial year and this will take this to a total of four hundred and sixty (460) completed projects.

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The graph below indicates the achievements over the period of four (4) years.

90

80

70

60

50

40

30

20

10

0

2012/13 FY 2013/14 FY 2014/15 FY

PROPERTY IMPROVEMENT PROJECTS

2015/16 FY

2021

53

1614

65

28

14

80

128

49 NSIP

NSUP

WPIP

5 000.00

4 000.00

3 000.00

2 000.00

1 000.00

0.00

2012 2013 2014 2015

Growth in investment portfolio value

924.27

2 544.15

3 249.24

3 996.64

Cost

Revaluation

Balance

For the 2017/2018 FY, a total of 80 property improvements are anticipated to be completed.

b) Property Management

The investment portfolio continues to show growth from R924 million as at March 2012 to R4.2 billion in March 2016. The investment portfolio is made out of acquired development leases (11) a few stations with commercialized stations. The valuation for the period ending March 2017 will include the additional two development leases acquired during the 2016/2017 financial year. This enormous growth has strengthened the financial position of PRASA in value over a period of four (4) years.

Portfolio growth in revenue has also seen an increase as the Operating revenue grew from R258 million in 2012/2013 FY to R550 million end March 2016. As indicated in graph 1 below, the revenue trend for the Division has increased significantly over the past few years owing to the dedication and determination of CRES employees to grow the portfolio value in line with the Real Estate Strategy. This is performance is commendable as it has been sustained over a period.

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700

600

500

400

300

200

100

PRASA CRES Revenue Growth

FY2011/2012

236 000 000Revenue excl subsidy

FY2012/2013

258 000 000

FY2013/2014

325 000 000

FY2014/2015

439 000 000

FY2015/2016

579 000 000

FY2015/2016

(14th Period)

550 929 573

FY2016/2017

601 475 658

For the 2017/2018 FY, Operating Revenue is expected to grow by at 19% from the forecast of R540 million of March 2017.

Portfolio growth in size has seen an increase the previous financial year as an additional 14 040 square meter of Gross Lettable Area (GLA) was achieved. The anticipated GLA to be attained for 2016/2017 is about 5 000 square meters. For the 2017/2018 FY, GLA is expected to grow by an additional 5 000 square meters.

c) Facilities Management

The maintenance of portfolio facilities is characterized by the provision of the following key services;

• Cleaning & Hygiene Services • Pest Control & Fumigation • General Waste Management • Horticulture • Security • Repairs and Maintenance

The above services are provided to most portfolio stock including, Station facilities, Workplace facilities, and Commercial and Residential buildings. It can be noted that the location of these facilities and the user conduct / behavior has a direct impact on facility lifespan and condition. To date, Station facilities condition degenerates at a much faster rate than other portfolio stock due to an increased rate in vandalism and theft, whereas workplace facilities experience a lesser rate of these incidents, hence Security will in the 2017/2018 financial year be included as one of CRES services. The Division will in the first quarter of the 2017/2018 develop a strategy and plan for its Soft and Hard Services to improve efficacy.

2. INTERSITE: Asset Investments (a Subsidiary of PRASA)

Intersite mandate is the execution of PRASA’s secondary business objective, which is the generating of income through the exploitation of assets of PRASA.

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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; linked to Transport Oriented Developments, (under the auspices of the Neighbourhood Development Programme Grant (“NDPG”) an infrastructure grant linked to the Urban Network Strategy geared towards raising the rate of investment by private investors by lowering the costs of business) and broadband services linked to PRASA telecommunication infrastructure.

The competitive advantage that Intersite currently has, is its exclusive rights to developments of PRASA owned land, the large captive commuter / passenger consumer base, entrenched relationships and knowledge of rail related property developments.

Delivering on the Mandate

Its aim it is to leverage Group’s large asset base by generating income from the exploitation of assets acquired by PRASA. Station modernisation will be supported by investment from Intersite to harvest opportunities around these stations.

Key Focus Areas:

Responsible for sweating PRASA’s assets, Intersite is responsible for the following key strategic areas:

a) The facilitation of investment by strategic partnersb) Development of PRASA properties and assetsc) Commercialization of select and approved PRASA assets, including

facilitating private sector investmentd) Undertaking project management services related to transport

related projectse) Leveraging PRASA telecommunication infrastructure, andf) Providing telecommunication services to the market and to meet

PRASA Information, Communication and Technology needs.

Contributing to the Corporate Plan

Intersite has developed a comprehensive business plan to support PRASA’s Corporate Plan focusing on:

1) Investment by strategic partner/s in the development of properties and assets

2) Capital raising for the funding of Intersite participation into PRASA properties/assets investments

3) Commercialisation of PRASA telecommunication infrastructure, which entails Dark Fibre leasing,

4) Implementation of the Value Added Services offering; and5) Growth and development of the property portfolio and assets of

PRASA

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Critical Success Factors

• Funding for the required strategic and defined planning and asset identification cost

• Regulatory approvals from the relevant authorities• Available select and approved investment assets and properties ready to

be taken to market• Support for the implementation of the approved Investment Strategy by

PRASA Group• Transfer of the select rights and assets [on leasehold bases] from PRASA

to Intersite for leveraging.

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Isipingo Station (Durban)The station development of 12 000 m2 with a commercial and or retail offering. Daily Feet: + 18 000 Gross Lettable Area : 10 000 m2 · Business Opportunities: Food , Fashion , Banking &Financial , Health and Government services Project Phase : Construction to start April 2016 Occupation: March 2019

Johannesburg StationThe proposed development will increase the capacity of the station precinct by more than 180 000 sqm. This will be achieved through the conversion of existing buildings and creation of new facilities. Office Space: 21 000 m2. Retail space : 20 000 m2 ,· Hotel space : 10 00 m2 · Residential: 2 000 m2 · Other: 128 000 m2

Pretoria StationIncrease the capacity of the station precinct by more than 180 000 sqm .This will be achieved through the conversion of existing buildings and creation of new facilities. Office Space : 21 000 m2 ,· Retail space : 20 000 m2 ,· Hotel space : 10 000 m2 · Residential : 2 000 m2 · Other : 128 000 m2

Mabopane Station (Pretoria)Daily Feet : +70 000 - Gross Lettable Area : 5 719 m2 - Households within a 2.5 km from the station Business Opportunities : Food , Fashion , Banking &Financial, Health, and Government services- Project Phase : Construction - Occupation : 2017

Cape Town StationThis will increase the capacity of the station precinct by more than 185 000 sqm. To be achieved through the conversion of existing buildings and creation of new facilities. Office Space : 36 000 m2 · Retail space: 24 000 m2 · Hotel space : 12 900 m2. Residential : 20 000 m2 · Other: 91 900 m2

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BE SAFE

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HUMAN CAPITAL INVESTMENT: BUILDING CAPACITY

PRASA is currently going through a modernisation process through the upgrade and investment in new passenger rail infrastructure and services, whilst at the same time running the current business in order to deliver on the mandate. The demand to change the business whilst running the current operations requires a human capital management strategy that is adaptable to a changing environment.

The PRASA HCM strategy is guided by a principle that the effectiveness of an organisation depends on its ability to anticipate and adapt to change. The growing demand to change the business and run it simultaneously requires that people management issues such as talent and performance management, as well as competence management and skills development, must be at the forefront of PRASA strategic deliverables.

The foundation of the Human Capital Management (HCM) Strategy is that people management begins with the alignment of HCM objectives to business objectives. The HCM strategy thus responds to strategic imperatives articulated in the PRASA corporate plan as dictated by both the primary and the secondary mandate.

Set HR priorities for the year under review and the impact of these prioritiesCognizance of the need for the organisation to efficiently and effectively run the current operations, whilst preparing for changing the business, Human Capital Management identified and implemented the following as strategic priorities for the business during the year under review:

a) Evaluating alternative operating delivery models to determine the case for efficiencies and/or operational improvements.

b) A stronger policy focus in readiness for modernisation changes affecting the organisation.

c) Engaging in workforce planning and preparing for future workforce requirements.

d) Exploring opportunities for cost containment and how a more commercial ethos can be developed within operations.

e) Fair and equitable Pay and Grading structures and Reward pro-cesses

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Employee performance management framework

PRASA’s Performance Management Framework has been developed to be a management tool that will contribute to the process of ensuring continuous improvement, through:

a) Translating our strategy into actionable plans to drive our businessb) Setting objectives that establish focus and reinforce strategy

executionc) Assigning accountability and responsibility for achieving these

objectives to individuals and teams within our business

It is a way of managing performance to achieve excellence in every aspect of PRASA’s business and to reward employees in return.

For an effective performance management environment, Human Capital has developed a performance framework that is focused on delivering on the mandate and also ensuring alignment of day-to-day deliverables with medium-to-long term business objectives.

Delivering on the above must first ensure that:a) Employees have the right skills and behaviours to meet the needs

of the organisation and our customers;b) Right people with right skills can deliver on the strategy;c) Effective recruitment, induction, probation, performance man-

agement and learning and development policies exist within the organisation;

d) There is workforce that is genuinely focused on what the customer and the shareholder expects;

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e) There are clearly defined job expectations and academic perfor-mance criteria to encourage desired behaviours and outcomes;

f) There is management, career development and succession plan-ning;

g) Employees receive and utilise regular and constructive feedback to enhance their performance

h) Employees are regularly appraised and fairly assessed against their agreed performance objectives;

i) Training needs supported by Individual Development Plans for each employee are identified, developed and an effective training plan is put in place; and

j) Equitable, flexible and fair pay and performance systems and prac-tices that reward excellence are applied at all times.

Employee wellness programmes

PRASA’s Employee Wellness Programme recognizes that short-term personal and psychological related problems may adversely affect an employee’s wellbeing and ability to function on the job.

The Employee Wellness Programme has two distinct phases that are critical to address in both implementation and in costing there of which the first level is the reactive counselling service that is delivered in response to a particular problem or identified problem by the employee. Referral may be voluntary (self-referral) or may be part of a formal referral.

The second level is project based and addresses projects like Modernisation that affect some of our employees.

Preventative programmes have been introduced to support employees with factors such as emotional/mental health conditions, substance use or abuse, psychosocial problems amongst others, and all of these do affect business performance by reducing productivity and increasing both planned and unplanned absences.

Future HCM Goals

Given the challenge of operating the business of today whilst shifting gears for the business of tomorrow and in a business with revenue growth and cost containment challenges, HCM future plans and goals on delivering quantifiable measurable value will be driven through finding critical answers to the following:

a) What does the business do to drive performance?b) How can HCM demonstrate a quantifiable return on investment for

Human Capital initiatives?c) Which HCM initiatives can be directly targeted at building or-

ganisation capability for the current business and for the future business in ways that deliver bottom-line impact, either increasing the organisation’s revenue or reducing costs?

d) What is the appropriate Operating Model and Organisational Structure that will deliver in the most efficient and effect manner a mandate that guarantees high quality passenger service on a sustainable basis?

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In light of the above, Group Human Capital Management has developed a HCM roadmap to articulate the HCM journey in creating business value and addressing the organisation’s most pressing strategic challenges.

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EMPLOYMENT EQUITY

PRASA’s perception of the spirit of the Employment Equity initiative is to ensure the establishment of a healthy context within which all South Africans will both develop the competence required for life-long employability and enjoy the opportunity to be able to reap the rewards of being an integral part of a successful and profitable world-class organisation. We realise and acknowledge that in the past there have been inequalities in this regard and that a significant challenge now faces businesses and Government to rectify the situation.

Central to the challenge is the removal of barriers to entry by previously disadvantaged groups where such competence exists, as well as the development of competence in such groups where this has previously been neglected. Both goals must be achieved as quickly as possible without compromising the competitiveness and thus the sustainable profitability of businesses in the process.

In order to achieve this delicate balance, what is required is a committed partnership between business and those tasked with the execution of the Employment Equity legislation to ensure success. Both parties must be sensitised to each other’s needs and priorities to ensure an optimal working relationship, which will generate both a healthy, constructive database and creativity in developing innovative solutions to this enormous challenge.

Purpose of Employment Equity

To realise PRASA’s vision, deliberate and pervasive action throughout the organisation is required. Affirmative action is a necessary stage of the process. Our strategy document addresses the procedural steps necessary to create a fair and just environment. The intention is to implement a Code of Best Practice to counteract any bias that favours certain groups over others while ensuring continuous improvements in standards within the group The Code thus combines equitable people management with improved business standards. The Code of Best Practice will apply until critical mass is achieved within time frames decided upon after consultation with all relevant stakeholders. In this document, “critical mass” implies that the targets as set according to the EE plan ,are met and the overall percentage of employees from the designated groups mirrors our customer base in terms of race. Employment Equity Committees will monitor the process and report to the EE Office on progress. It is PRASA’s commitment to identify, develop, reward and retain each employee who demonstrates the qualities of individual initiative, enterprise, hard work and loyalty in their jobs. PRASA will prioritise the advancement of those severely disadvantaged. In prioritising this process, line management should be guided by the general consensus within South Africa that the list below illustrates the order of disadvantages to overcome.

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Priority order as per below:

The medium to long-term strategic target is to achieve a 50% gender balance at management and specialist/technical levels.

1) Females of all races including disabled females (African/Coloured/Indian and White)

2) African /Coloured/Indian Male including males with disabilities of all races

3) People with disabilities all races4) And white Males

Conditions of the Environment

The Employment Equity planning aims to create an environment conducive to the implementation of Employment Equity values and changing of attitudes within the organisation through:

a) The establishment of a diversity and Employment Equity pro-gramme

b) EE Targets for every Division/Regional Office and subsidiary of PRASA

c) Introduction of diversity management workshops that will prepare all employees at all levels with regards to the negative impact of discrimination and stereotyping

d) The integration of the diversity philosophy into all management and

e) Leadership trainingf) Employment Equity Training at all levels and establishment of EE

Committees g) to address Diversity interventions

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Occupational Levels Male Female Foreign Nationals

Total

A C I W A C I W Male Female

Top management 1 0 0 0 0 0 0 0 0 0 1

Senior management 200 8 15 25 90 10 5 6 0 0 359

Professionally qualified and experienced specialists and mid-management

390 75 35 130 400 35 20 25 0 0 1110

Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents

2500 600 180 1120 1200 360 40 85 0 0 6085

Semi-skilled and discretionary decision making

3550 590 50 190 2300 290 20 50 0 0 6085

Unskilled and defined decision making

900 150 15 75 1100 100 15 20 0 0 2375

TOTAL PERMANENT 7541 1423 295 1540 5090 795 100 186 0 0 16970

Temporary employees

400 200 150 150 300 100 100 150 0 0 1550

GRAND TOTAL 7941 1623 445 1690 5390 895 200 336 0 0 18520

* The workforce compliment will be aligned in accordance with the objectives set on the Turnaround Strategy and Plan

Monitoring the Employment Equity Plan

Monitoring and control mechanisms will be implemented to assess and regulate the progress towards targets on a regular basis so that corrective measures are taken timeously. • Divisional CEO’s and the Group CEO are directly accountable for implementing

corrective measures aimed at correcting their negative variances, within The group particularly on female and disability representation

• Divisional and Regional HR jointly with the EE Committees are responsible for the Implementation and monitoring of the Divisional/Regional Employment Equity Plan

• The National Employment Equity and Diversity Manager is responsible for the overall

• Monitoring and implementation of the National Employment Equity Strategy and the EE Plan at a National Level

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FRAUD AND PREVENTION PLAN

PRASA recognises the potential negative effects of fraud to the achievement of its mandate and objectives. PRASA hereby intends to promote consistent organisational behaviour by providing guidelines and assigning responsibility for the management of fraud in the organisation. These guidelines are to act as enablers to allow the effective fraud prevention within PRASA. It is the responsibility of management to assess their environment and implement these guidelines in their areas of responsibility. Fraud and corruption prevention like any other risks, is the responsibility of everyone in PRASA Purpose

The purpose of this Fraud Prevention Plan is:

a) To highlight practical steps that PRASA will implement to ensure that its employees, suppliers another stakeholders behave ethical-ly in their dealings with, or on behalf of PRASA.

b) To ensure that appropriatesteps are put in place to create a cul-ture, which is intolerant to fraud and corruption.

c) To provide direction and identify various areas of training on fraud and corruption to deter employees, suppliers and other stakehold-ers from committing fraud and corruption. To provide a framework for investigating all suspected cases of fraud, theft or corruption where:• The value of PRASA has suffered or may have suffered; or• Has been misrepresented for personal gain as a result of the actions or

omissions of directors and staff employed by PRASA and/or customers, contractors and other external stakeholders

Scope

The Fraud Prevention Policy applies throughout PRASA including its divisions and subsidiaries. It also applies to the Board of PRASA, the Board of Directors of Intersite and Autopax, and to all the employees

The following are controls that PRASA has to manage fraud in the workplace:

a) Fraud Prevention Planb) Fraud Prevention Policyc) Whistle blowing policyd) Fraud Hotlinee) Fraud Awareness Campaignsf) Fraud Risk Assessments

Fraud Prevention Policy

The Fraud Prevention Policy outlines the overall intent of PRASA towards Fraud Management. It also outlines the roles and responsibilities of the various stakeholders within PRASA.

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It seeks to accomplish the following:

a) Encourage employees, suppliers and other stakeholders to behave ethically in all dealings with, or on behalf of PRASA;

b) Create a culture which is intolerant to fraud and corruption; c) To comply with the requirements of the PFMA and Treasury Reg-

ulations in ensuring that public resources are safeguarded from fraud and corruption; and

d) Set guidelines for employees to detect and report fraud.

Fraud Prevention Plan

The Fraud Prevention Plan seeks to:

a) Highlight practical steps that PRASA will implement to ensure that its employees, suppliers and other stakeholders behave ethically in their dealings with, or on behalf of PRASA.

b) Ensure that appropriate steps are put in place to create a culture which is intolerant to fraud and corruption.

c) Provide direction and identify various areas of training on fraud and corruption to deter employees, suppliers and other stakehold-ers from committing fraud and corruption.

d) Provide a framework for investigating all suspected cases of fraud theft or corruption where the value of PRASA has suffered or may have suffered or has been misrepresented for personal gain as a result of the actions or omissions of directors and staff employed by PRASA and/or Customers, contractors and other external stakeholders.

Whistle Blowing PolicyThe Whistle Blowing Policy seeks to:

a) Address organizational accountability, transparency and individual responsibility by encouraging individuals to report crime and irreg-ularities in the workplace in a responsible and ethical manner,

b) Provide alternative avenues for staff of properly addressing bona fide concerns that individuals within the Group might have and

c) Offer staff the necessary protection from victimization, harassment and/or disciplinary proceedings whilst reporting irregular activi-ties.

Whistle Blowing HotlineThe independently managed Whistle blowing hotline seeks to give effect to the whistle blowing policy by providing alternative avenues for staff to report fraudulent activities anonymously where preferred

National Fraud Awareness CampaignsNational Fraud Awareness Campaigns seeks to raise awareness on Fraud throughout the organisation to inform employees on what avenues they can use to report fraud without fear of intimidation.

Fraud Risk Assessment.Fraud Risk Assessments are a pro-active measure that seeks to identify all areas of potential fraud and mitigate the risk of fraud through the implementation of adequate controls.

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ENTERPRISE RISK MANAGEMENT AND PLAN

Risk Management is an integral part of the organisation’s objectives. It is the responsibility of the Board Of Control (BOC) to ensure that there is an effective and efficient risk management in the organisation and that its methodologies and techniques outlined below are embedded within strategy setting, planning and business process to safeguard performance and sustainability.

BOC

Executive

Committee

RISCOM

Audit & Risk

CommitteeSHEQ

Risks are managed through the following oversight and governance structure:

SHEQ and Security risks have separate structures that monitor and manage risk processes. Key consideration, for the past Financial Year, has been the management of the SHEQ and security risks by the Board of Control (BOC) and the SHEQ committee. The rigours of risk management processes are being embedded in the safety and security environment across the Group.

Our process of defining, assessing, classifying and monitoring risks is set out on the next page:

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Establish Context

Identify Risks

Analyse Risks

Evaluate Risks

Treat Risks

Com

mun

icat

e &

Con

sult M

onitor & R

eview

The Group ERM department facilitated discussions and workshops in August 2015 with Group EXCO and other Business Units, following which the below Group Risk Profile was developed with detailed mitigation.

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MATERIALITY AND SIGNIFICANCE FRAMEWORK

General

This document was developed to give effect to the March 2005 amendment to the Treasury Regulations (TR), whereby the following new requirement was placed on public entities:

Section 28.3.1 – “For purposes of material [sections 55(2) of the Public Finance Management Act (Act)] and significant (section 54(2) of the Act), the accounting authority must develop and agree a framework of acceptable levels of materiality and significance with the relevant executive authority.”

From a financial statement perspective, IAS 1 Par 7, defines “material omissions or misstatements of items are material if they could, individually or collectively influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.”

In order to arrive at the materiality framework we considered the following:

a) Nature and risks associated with PRASA’s business; b) Statutory requirements;c) Quantitative and qualitative factors; andd) Material impact of the omission or misstatement on decision

making.

These considerations are to be discussed and agreed with members of the Board of Control, members of executive management as well as supported by the relevant documentation such as the Corporate Plan 2017/18 – 2019/20, Shareholder Compact and the PRASA budget. In addition, the materiality framework will be discussed with the external auditors. Also required will be the preparation of appropriate and relevant mitigation strategy to elimination of probable omission.

Accordingly, this framework deals with materiality aspects in two main categories, quantitative and qualitative. The policy set out hereunder should be appropriately presented in the annual report as required.Implications of a Materiality Framework for PRASA

The materiality framework provides a guideline against which PRASA can identify measure and evaluate any losses or irregular, fruitless or wasteful expenditure as and when they occur during the financial year. PRASA will then review these items individually and aggregated against the materiality framework to ensure that the annual report materially reflects the financial position of the Group.

As a public entity PRASA is required by law and treasury regulations to include the materiality framework in the following documents to be submitted to the

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entity’s executive authority:

a) Annual Report [section 28.3.1 of the Treasury Regulation] – Includ-ing Financial Statements;

b) Corporate plan [section 29.1.1(f) of the Treasury Regulation] – Three-year plan.

Quantitative Aspects

Group materiality

Gross operational expenditure will be used as the basis for the materiality calculation due to the following:

a) PRASA is unable to be profitable as its fare revenue income gener-ated is significantly less than its operational expenditure required to execute its mandate, hence receives a subsidy allocation from Government to sustain itself;

b) Gross operational expenditure is therefore a more representative measure of the economic activities undertaken in PRASA than income received including the subsidy allocation;

c) This method is a stable basis of measure and is consistent with the prior years;

d) The use of net assets as a measure would provide a materiality level that is significantly higher than that calculated using opera-tional expenditure and PRASA wishes to be prudent in its approach to determining its materiality level.

The percentage used (namely, 0.5%) of 2015/16 audited gross operational expenditure to calculate the materiality level, takes into account the following considerations:

a) The Agency received an unqualified audit report for the year ended 31 March 2016;

b) The primary users of the financial statements are Board of Direc-tors, Management, the Auditor-General, National Treasury, the Department of Transport, SCOPA and Parliament;

c) The control and inherent risks associated with the Agency; and

d) The statutory requirements laid down to regulate the business activities of the Agency with specific reference to:i) The Legal Succession to the South African Transport Services

Act, (Act No. 38 of 2008), as amended;ii) The Public Finance Management Act, 1999 (Act No. 1 of 1999),

as amended 31 December 2010; andiii) The Treasury Regulations as amended 15 March 2005.

Materiality level calculation

The total materiality level for the Group of R46 778 430 has been calculated in Annexure A and been divided into the relevant individual business units and subsidiaries.

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Qualitative Aspects

Misstatements and/or omissions either individually or in aggregate could influence the economic decisions of a user. Materiality is not solely limited to the quantum of the assertions contained in its financial statements, but is also affected by the nature of business operation and environment, the impact can be implied and/or explicit. The nature of the misstatement and/or omissions may also influence the economic decisions of a user even though the quantum is below the materiality threshold. Qualitative aspects include:

a) Endorsement of the mandate and the interpretation on the man-date;

b) Sustainability of the Agency considering its mandate, corporate plan and funding requirements;

c) Environmental practices and impacts on the business;d) Contingent liabilities;e) Potentially damaging legal actions pending;f) Level of compliance with relevant legislation; g) Transactions entered into, including fraudulent and dishonest

behaviour, that could result in a reputational risk and damage to PRASA;

h) The impact of political decisions on PRASA such as its mandate and the required funding;

i) Conflict of interest disclosures by directors, management and staff; and

j) Potential competitor(s).

Subsidiaries

Annexure A shows the inclusion of Intersite Assets Investments (SOC) Ltd and Autopax Passenger Services (SOC) Ltd.

Acquisition Or Disposal Of Significant Shareholding Or Material Asset(S)

In terms of section 54(2) of the PFMA, PRASA would inform the Executive authority and the relevant Treasury promptly and in writing any transition to acquire or dispose shareholding or assets. The relevant particulars of the transaction would be provided. Again, in line with section 51(1)(g) of the PFMA, PRASA would inform the executive authority and Treasury on any intention to establish new entity or subsidiary.

90


Materiality excluding Subsidaries

Audited AFS 2015/16

Gross Operating Expenditure Materiality

Corporate 1 314 455 828 6 572 279

PRASA Rail 6 086 507 914 30 432 540

PRASA CRES 875 916 956 4 379 585

PRASA Tech 89 597 269 447 986

Total 8 366 477 966 41 832 390

Materiality including Subsidiaries

Audited AFS 2015/16

Gross Operating Expenditure Materiality

Corporate 1 314 455 828 6 572 279

PRASA Rail 6 086 507 914 30 432 540

PRASA CRES 875 916 956 4 379 585

PRASA Tech 89 597 269 447 986

Intersite 29 251 342 146 077

Autopax 959 992 612 4 799 963

Total 9 355 685 920 46 778 430

ANNEXURE A: MATERIALITY AND SIGNIFICANCE FRAMEWORK CALCULATION

91


FINANCIAL POSITION

The Turnaround plan of PRASA is reflected in the financial position of PRASA that aims to achieve efficiencies of R7,948 billion over the MTEF.

In illustration the budget without the actions PRASA is implementing would have seen an additional accumulated shortfall of R6,932 billion over the MTEF as seen below:

Rm Forecast No action No action No action

2017 2018 2019 2020

Operational Subsidy 5 082 5 496 5 757 6 023

Fare revenue 2 450 2 450 2 604 2 768

Lease income 626 688 746 785

Other income 385 398 410 427

Total income 8 543 9 032 9 517 10 003

Less: Expenses 10 086 11 094 12 133 13 380

Employee cost 5 403 5 766 6 338 7 135

Energy 1 054 1 106 1 209 1 366

Security 528 607 660 725

Haulage 207 220 237 258

Other 2 894 3 395 3 689 3 896

Operational Shortfall -1 543 -2 062 -2 616 -3 377

Rm

2018 2019 2020 Total

Operational Shortfall Interventions -2 062 -2 616 -3 377 -8 055

Income 555 1 020 1 586 3 161

- Fare Revenue 455 835 1 300 2 590

- Lease Income 100 185 286 571

Expenditure 1 285 1 596 1 906 4 787

- Employee cost 579 670 760 2 009

- Energy 210 260 310 780

- Security 184 228 272 684

- Halauge 53 65 78 196

- Other 259 373 486 1 118

Total efficiencies 1 840 2 616 3 492 7 948

Shortfall/Surplus -222 - 115 -107

The actions of the Turnaround Plan of PRASA are bring savings of R7.498 billion over the MTEF as follows:

92


Projections of revenue, expenditure and borrowings

Rm Budget 2018 Budget 2019 Budget 2020

Income 9 588 10 537 11 589

Rental Income 788.01 931 1 071

Fare Revenue 2 905 3 439 4 068

Other Income 322 325 336

Government Subsidy -Autopax 77 85 91

Government Subsidy 5 496 5 757 6 023

Operating Expenses 9 809 10 537 11 474

Employee costs 5 187 5 668 6 375

Energy 896 949 1 056

Security 423 432 453

Municipal charges 428 468 520

Maintenance 334 369 408

Maintenance - Gibela Train 222 260 153

Material 275 301 331

Leases 268 249 267

Insurance Claims 248 260 278

Health and Risk 239 258 284

Computer Expenses 212 242 239

Haulage 167 172 180

Insurance Premiums 130 143 160

Train Control Officers Costs 113 123 136

Other 666 643 633

Shortfall -221 - 115

93


Asset and Liability Management

Rm 2018 2019 2020

ASSETS

Non-current assets 64 070 75 859 88 309

PPE 49 292 62 581 76 631

Prepayment 9 965 7 965 5 965

Invesrment property 4 807 5 307 5 707

Defined benefit plan assets 6 6 6

Current assets 8 572 10 129 11 905

Trade and other receivable 569 539 529

Inventories 325 315 280

Cash and cash equivalents 7 678 9 275 11 096

Total assets 72 642 85 988 100 214

EQUITY AND LIABILITIES

Total equity 406 406 521

Share capital 4 248 4 248 4 248

Accumulated loss (3 842) (3 842) (3 727)

Non-current liabilities 70 854 84 200 98 311

Provision for claims 798 854 914

Employee benefits and grants 13 14 15

Capital subsidy and grants 70 043 83 332 97 382

Current Liabilities 1 381 1 381 1 381

Trade and other payables 1 381 1 381 1 381

Total equity and liabilities 72 642 85 988 100 214

94


2018 2019 2020

Cash Flow from operating activities

Net cash used from operating activities ( 221) - 115

Cash flow from investing activities

Acquisition of property, plant and equipment ( 13 721) ( 15 352) ( 16 212)

Net cash used in investing activities ( 13 721) ( 15 352) ( 16 212)

Cash flow from financing activites

Capital subsidy and grants received 13 721 15 352 16 212

Net cash flow from financing activities 13 721 15 352 16 212

Net increase in cash and cash equivalents ( 221) - 115

Cash and cash equivalents at the beginning of the year 7 899 7 678 9 275

Cash and cash equivalents at the end of the year 7 678 9 275 11 096

Cash Flow Statement

95


CAPITAL EXPENDITURE PROGRAMME: 2017/18 – 2019/20 MTEF

Capital Programme 2017/18 2018/19 2019/20 Total MTEF

PRASA Corporate 6 796 089 713 7 309 556 194 7 463 491 302 21 569 137 209

Rolling Stock Fleet Renew al Programme 4 420 482 736 4 676 870 000 4 938 775 000 14 036 127 736

Signalling and Telecommunications Programme 1 912 835 295 2 023 779 000 2 137 111 000 6 073 725 295

ICT Systems 193 938 182 215 938 182 - 409 876 364

Enterprise Resource Planning (ERP) 43 241 640 93 241 640 93 241 640 229 724 920

Automatic Ticketing System 110 000 000 177 200 000 161 836 291 449 036 291

Asset Protection 115 591 860 122 527 372 132 527 372 370 646 603

PRASA Rail 1 654 849 530 2 072 289 446 2 267 279 003 5 994 417 980

Capital Intervention Programme (Safety, Emergency & Special Needs projects) 405 944 048 559 331 129 595 331 129 1 560 606 306

Depots Machinery and Equipments 195 800 000 207 548 000 287 548 000 690 896 000

Locomotives 401 249 482 328 629 517 330 260 071 1 060 139 070

Rolling Stock Adhoc Condition Work 169 776 000 180 776 000 208 782 706 559 334 706

Rolling Stock Components 232 080 000 246 004 800 261 257 098 739 341 898

Fencing Programme (Stations and Corridors) 250 000 000 550 000 000 584 100 000 1 384 100 000

PRASA Technical 3 292 899 077 4 184 346 968 4 484 750 590 11 961 996 636

General Overhaul of Metrorail Coaches 1 360 534 037 1 439 445 000 1 520 054 000 4 320 033 037

Refurbishment of Smeyl Coaches 151 415 304 160 197 000 169 168 000 480 780 304

Depots Modernization Programme (incl hig-tech fencing) 539 373 441 729 373 441 753 890 055 2 022 636 937

Electrical Programme: Substation, New Overhead Lines & OHTE 231 612 220 281 612 220 299 072 178 812 296 618

Footbridges, Level Crossings and Structures 92 510 620 122 458 157 130 050 563 345 019 340

120km/h Perw ay Programme 207 395 920 259 895 920 319 895 920 787 187 760

Station Modernization Programme (135 stations) 429 201 583 274 201 583 291 202 082 994 605 248

Green View - Pienaarspoort Project 150 000 000 155 000 000 192 000 000 497 000 000

Motherw ell Rail Extension 90 855 952 390 855 952 415 089 021 896 800 925

Blue Dow ns rail Link 40 000 000 371 307 695 394 328 772 805 636 467

PRASA Corporate Real Estate Solutions 1 976 830 680 1 785 787 392 1 996 571 104 5 759 189 176

Station Improvement Programme 392 806 320 416 374 699 436 374 699 1 245 555 718

Station Upgrade Programme 451 266 960 478 342 978 506 782 206 1 436 392 144

Park Station Upgrade 233 488 260 336 488 260 376 488 260 946 464 780

Mabopane Station Upgrade 40 000 000 60 000 000 110 000 000 210 000 000

Workplace Improvement Programme, (incl depots facilities) 320 938 580 360 394 895 382 739 378 1 064 072 853

Energy Renew able Programme 70 000 000 134 186 560 184 186 561 388 373 120

Integrated Station Access Management System (ISAMS) 468 330 560 - - 468 330 560

Total 13 720 669 000 15 351 980 000 16 212 092 000 45 284 741 000

2016 MTEF Allocation 13 720 669 000 15 351 980 000 16 212 092 000 45 284 741 000

Unallocated - - - -

Year-on-year growth -6.1% 11.9% 5.6%

2017 Capital Programme (Proposed Allocations)

96


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102


3)

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tegi

c O

bjec

tive

3: R

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n su

ppor

t fun

ctio

ns to

ach

ieve

an

effic

ient

Rai

l bus

ines

s th

roug

h in

tegr

atio

n of

a)

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isio

ns, d

epar

tmen

ts a

nd s

ubsi

diar

ies

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ong-

dist

ance

tran

spor

t ser

vice

sc)

R

educ

ing

expe

nses

by

R4,

787b

n ov

er th

e 20

18-2

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MTE

F

Focu

s ar

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man

ce

Indi

cato

rAu

dite

d / A

ctua

l Per

form

ance

Estim

ated

pe

rfor

man

ceM

ediu

m T

erm

Tar

gets

2014

2015

2016

2017

2018

2019

2020

HCM

Tur

naro

und

Prod

uctiv

ity: R

even

ue

(exc

l. Su

bsid

y) p

er

empl

oyee

R20

4 98

2R

203

796

R22

7 23

0R

214

370

R24

6 42

5 –R

263

223

by

year

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R28

9 53

8 –

R30

6 38

1 by

ye

ar-e

nd

R33

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8 –

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6 by

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nd

Fina

ncia

l Tu

rnar

ound

Actu

al O

pera

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l Ex

pend

iture

R

8,21

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8.79

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10,0

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cast

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81bn

by

year

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≤R10

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Perf

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ting

Freq

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Prod

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Actu

al O

pera

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ture

An

nual

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by

year

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≤R9.

81bn

103


4)

Mod

erni

se th

e R

ail S

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m th

roug

h th

e R

173

billi

on (o

ver

ten

year

s) in

vest

men

t pro

gram

me

of th

e 20

18-2

020

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F fo

cusi

ng o

n:a)

R

ollin

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ock

fleet

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pro

gram

me

b) I

nfra

stru

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grad

es

Focu

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man

ce

Indi

cato

rAu

dite

d / A

ctua

l Per

form

ance

Estim

ated

pe

rfor

man

ceM

ediu

m T

erm

Tar

gets

2014

2015

2016

2017

2018

2019

2020

Rol

ling

Stoc

k R

enew

alTr

ain

sets

pr

ovis

iona

lly

acce

pted

as

per c

ontr

act

agre

emen

t

11 tr

ain

sets

pr

ovis

iona

lly

acce

pted

6-7

sets

by

year

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10-1

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y ye

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sets

by

year

end

Re-

sign

alin

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ntra

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re (C

TC)

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ldin

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com

plet

ed

Com

plet

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of th

e G

aute

ng

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ve

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re

Com

plet

ed

Com

plet

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of

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Cen

tre

Com

plet

ed

Com

plet

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of th

e bu

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Bel

lvill

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ntra

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Cont

rol b

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Com

plet

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of

the

build

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of

Dur

ban

Cent

ral

Traf

fic C

ontr

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Sign

al

Inte

rloc

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mpl

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as

per

cont

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(s)

6 in

terl

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com

mis

sion

s co

mpl

eted

9 si

gnal

in

terl

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ngs

com

plet

ed

32 -

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sign

al

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co

mm

issi

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com

plet

ed b

y ye

ar-

end

36 -

52 s

igna

l in

terl

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ng

com

mis

sion

s co

mpl

eted

by

year

-end

40 -

56 s

igna

l in

terl

ocki

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com

mis

sion

s co

mpl

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by

year

-end

Dep

loym

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Corr

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mpl

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de

ploy

men

t co

rrid

ors

in

prep

arat

ion

for

roll-

out o

f new

Fl

eet

Pret

oria

to

Pien

aars

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Pret

oria

to

Saul

svill

e by

yea

r-en

d

Ger

mis

ton

to

Lera

lla b

y ye

ar-

end

104


Focu

s ar

eaPe

rfor

man

ce

Indi

cato

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dite

d / A

ctua

l Per

form

ance

Estim

ated

pe

rfor

man

ceM

ediu

m T

erm

Tar

gets

2014

2015

2016

2017

2018

2019

2020

Dep

ot

Mod

erni

satio

nD

epot

m

oder

nisa

tion

proj

ects

co

mm

enci

ng,

in

cons

truc

tion

and

com

plet

e.

Dem

oliti

on

wor

k on

B

raam

fon-

tein

co

mpl

eted

Dem

oliti

on

wor

k on

Sa

lt R

iver

co

mpl

eted

Alte

rnat

ive

Test

Fac

ility

at

Wol

mer

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plet

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and

han

dove

r to

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ela

Mai

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ance

Fac

ility

at

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com

plet

ed

for 2

0 ne

w tr

ains

and

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B

raam

font

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ase

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mm

ence

d by

yea

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d

Com

men

ce

cons

truc

tion

at M

ain

depo

t at

Ben

rose

by

year

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Com

men

ce

mai

n de

pot

cons

truc

tion

at S

alt R

iver

by

year

-end

Capi

tal B

udge

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pita

l B

udge

tSp

end

R 6

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nR

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97bn

R 5

bn

R13

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n by

yea

r-en

d

R15

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n by

ye

ar-e

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1bn

by

year

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105


Perf

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ance

Indi

cato

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port

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Freq

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y20

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8 Ta

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arte

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Trai

n se

ts p

rovi

sion

ally

ac

cept

ed a

s pe

r co

ntra

ct

agre

emen

t

Annu

al6-

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ts b

y ye

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nd

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sets

Cent

ral T

raff

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r(CT

C)

build

ings

com

plet

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nual

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lvill

e Ce

ntra

l Tra

ffic

Cent

re b

uild

ing

com

plet

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end

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lvill

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affic

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tre

build

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plet

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plet

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as p

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ontr

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s)Q

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mm

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Com

plet

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com

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Dep

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proj

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co

mm

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d co

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alM

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ty a

t W

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mpl

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fo

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new

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and

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by y

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Mai

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Fa

cilit

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W

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for 2

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Focu

s ar

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man

ce

Indi

cato

rAu

dite

d / A

ctua

l Per

form

ance

Estim

ated

pe

rfor

man

ceM

ediu

m T

erm

Tar

gets

2014

2015

2016

2017

2018

2019

2020

Mot

herw

ell

Dev

elop

men

tEn

viro

nmen

tal

Impa

ct

Asse

ssm

ent (

EIA)

su

bmitt

ed

Prel

imin

ary

desi

gns

com

plet

ed

Subm

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appl

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by y

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d co

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Com

plet

e co

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stat

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tend

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rido

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oder

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tion.

5)

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nd P

RA

SA R

ail n

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orks

and

ser

vice

s th

roug

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R

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Int

rodu

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new

ser

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Perf

orm

ance

Indi

cato

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port

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Freq

uenc

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Com

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mun

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Subm

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EIA

ap

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107


Stra

tegi

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l 2: E

xplo

it PR

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s as

sets

that

incr

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patr

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the

publ

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crea

sing

val

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ass

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to R

801

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Stra

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6: E

xplo

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ass

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to g

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addi

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l rev

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thro

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l Est

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b.

Oth

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s

Focu

s ar

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ce

Indi

cato

rAu

dite

d / A

ctua

l Per

form

ance

Estim

ated

pe

rfor

man

ceM

ediu

m T

erm

Tar

gets

2014

2015

2016

2017

2018

2019

2020

Fina

ncia

l Tu

rnar

ound

Inco

me

from

re

al e

stat

e an

d ot

her a

sset

s (in

cl.

Inte

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pany

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R60

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by

year

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nd

Stat

ion

Mod

erni

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nSt

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oder

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proj

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com

plet

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1 St

atio

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Stat

ions

by

year

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d

Com

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cial

isat

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Nat

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Upg

rade

pro

ject

s (N

SUP)

Com

plet

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11 p

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21 p

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ts b

y ye

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by y

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Gro

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Area

(G

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1440

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5000

m2

4500

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00 -

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m2

by y

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Prop

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D

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Prop

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com

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deve

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mm

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108


Perf

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Freq

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ced

109


NOTES

110


NOTES

112


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