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PRASA | Annual Report 2016/17

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2 PRASA | Annual Report 2016/17


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Dr B.E NzimandeHonourable Minister of TransportParliament

Dear Honourable Minister

SUBJECT: FINANCIAL YEAR ENDED 31 MARCH 2017

We are pleased to submit, for your information, and presentation to Parliament, the Passenger Rail Agency of South Africa Annual Report for the period 1 April 2016 to 31 March 2017.

The report has been prepared in accordance with South African Generally Accepted Accounting Practice (SA GAAP), Public Finance Management Act, 1999, (Act No 1 of 1999) and other relevant Treasury Regulations.

Mr Sibusiso SitholeGroup CEO

Ms Khanyisile KweyamaChairperson


Corporate DetailsCompany Secretary:Mr L Zide served as the Company Secretary throughout the year.

Registered Address1040 Burnett Street, PRASA House, HatfieldPRETORIA

Postal Address:Private Bag X101Braamfontein2017

Bankers:Amalgamated Banks of South Africa – ABSAInvestec BankRand Merchant BankStandard Bank First National Bank Website: www.prasa.com


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CONTENT

GENERAL INFORMATION GOVERNANCEPERFORMANCE INFORMATION

For the digital Annual Report 2016/17, refer to our page at www.prasa.com/annualreport or scan the QR code to be taken there directly.

AUDITOR-GENERAL REPORT FINANCIAL INFORMATIONHUMAN CAPITAL MANAGEMENT

01 02 03

05 0604

7 Strategic Overview

9 Legislative & Other Mandates

10 Legal Operating Structure

11 Foreword By The Chairperson

14 Chief Executive Officer’s Overview

18 Delivering on the Mandate

23 Performance Against

Predetermined Objectives

63 Report of the Auditor-General to

Parliamenon the Passenger Rail

Agency of South Africa

72 Financial Information

77 Notes to the consolidated financial

statements for the year ended 31

March 2016

54 Human Capital Management

41 The Board Of Control Responsibility Statement

42 The Board of Control

43 Director’s Report

46 The Accounting Authority

50 Audit & Risk Report


7 Strategic Overview

9 Legislative Mandates

10 Legal Operating Structure

11 Foreword By The Chairman

14 Chief Executive Officer’s Overview

18 Delivering on the Mandate

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STRATEGIC OVERVIEW

Vision To be the backbone of public transport.

MissionTo provide safe, reliable, affordable and cleanpassenger rail and bus services.

1

4

2

5

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5 PRINCIPLES underpin the PRASA Vision and MissionService ExcellenceA deep commitment to superior performance that is safe, reli-able and affordable, provide a dignified travel experience that makes a lasting impression, and builds brand loyalty – both internally (employees) and ex-ternally (customers) – that adds benefit to the passenger.

AccessibilityPRASA shall provide quality rail, bus property management services that enable individuals and communities to access so-cio-economic opportunities and contribute to a better quality of life of the people as a whole.

SustainabilityA focus on sustainable develop-ment in business that considers not just the financial ‘bottom line’ of prosperity, but the environmental quality and social equity.

Modal IntegrationReframing the basis of business delivery, favouring innovation, seamless integration and partner-ships.

MobilityPRASA shall contribute tosustainable public transportsolutions through providinghigh-quality passengerservices founded on anintegrated network of mobility

Fairness and IntegrityTreating our customers and our colleagues the same as we would like to be treated.

Service ExcellenceProvide the kind of services that meet and exceed customers expec-tations.

Performance DrivenDeveloping the ability to venture into new areas of opportunity whilst offering quality products to our customers.

SafetyEnsuring our customers and colleagues enjoy their journey and arrive safely and refreshed.

CommunicationSharing information with our cus-tomers and colleagues in an open and honest way.

TeamworkWorking together with our custom-ers to achieve a common goal and recognising each other’s strengths and contribution.

Values


Strategic outcome orientated goalsPRASA has outlined its strategic outcome oriented goals which provide a road map for PRASA’s individual rail, bus / coach and real estate businesses that are designed to improve the service provided to the travelling public. The strategic goals also seek to ensure that PRASA’s rail operations strive to offer reliable, safe and secured service to the commuters.

The attainment of PRASA’s strategic goals is highly dependent on the organisation’s ability to sustain the current business operations, change and grow the business whilst striving for customer service excellence, which is depended on the achievement of the following:

The pursuance of the organisation’s strategic goals is aligned with PRASA’s National Strategic Plan that focuses on a prioritised list of rail services and network expansion interventions that seek to:

• Provide more capacity to accommodate forecast growth• Transform the rail product on many corridors• Seek to make better use of the network, and• Propose corridor extensions to new or growing settlements

Developing a viable Funding Model and rede-fining PRASA’s Operating

Model

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Securing future business through introducing new services and expanding the current network, as

well

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Revenue generation through a robust real

estate strategy

6

Skills development necessary for the rolling out of PRASA’s moderni-

sation program

5

Growing the property portfolio

4

PRASA’s non-operational and strategic assets

3

Addressing operational efficiencies and improv-

ing service delivery

2

Growing the revenue base and containing the cost of doing business

1


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LEGISLATIVE MANDATEThe 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 Property Management Services (formerly under SARCC and Transnet) became part of PRASA. This consolidation of entities followed a decision of the Cabinet of 1 December 2004, was done to offer integrated passenger services that prioritise customer needs, provide better mobility and accessibility to masses of the South African population in need of safe and affordable transport.

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 in November 2008, as well as the National Land Transport Act (NLTA) of 2000. In support of the NLTA, the development of the National Rail Act is currently underway.

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 organisation 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.

As a public entity, Government initiatives remain a strategic driver for PRASA and are manifested through legislation, government policies and strategies such as:

• White Paper on National Transport Policy• Draft White Paper on National Rail Policy• National Land Transport Strategic Framework• Integrated Transport Plans• National Development Plan• Public Finance Management Act

LEGAL OPERATING STRUCTURE

Divisions Subsidaries

RAIL DIVISION

Mainlinepassenger

service



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FOREWORD BY THE CHAIRPERSON

On behalf of the Board of Control I am pleased to present the PRASA Annual Report for the year ending 31 March 2017. The Board of Control has been appointed on 12 April 2018 and inherited an organisation that was yet to submit the 2016/17 annual report to Parliament.

The year under review has seen a significant number of changes at Accounting Authority and Management leadership level. These significant changes have negatively impacted the organisation and led to a governance and leadership instability. This instability meant that PRASA was unable to submit the annual financial statements and annual performance for audit, and approval of the adjusted annual financial statements and annual performance. This has resulted in a significant delay in the signing off of the 2016/17 audit report.

As we move into the new year, PRASA will focus on ensuring that it complies and submits its annual report timeously.

STRATEGIC ALIGNMENT

Since 2012, the MTEF Capital budget framework reflects a rising investment outlook in support of PRASA’s strategic initiatives. This increased investment has enabled PRASA to implement a modernisation programme anchored by the Rolling Stock Fleet Renewal, National Signalling Upgrade and Strategic Infrastructure Investment.

The PRASA Rolling Stock Fleet Renewal is a catalyst for the transformation of Metrorail services in particular and public transport in general. It is Government’s comprehensive Rail programme over the next two decades. Whilst the urgent challenge to improve passenger services remains primary, the Rolling Stock Fleet Renewal has been designed to achieve a number of key Government objectives such as the delivery of quality services to citizens, revitalization of South Africa’s rail engineering industry through local manufacturing and ensuring local content (65% minimum local set), employment creation and skills development as well as Broad-Based Black Economic Empowerment.

PRASA has in the period under review made considerable progress in achieving this objective. Gibela Rail Transport Consortium was appointed as a preferred bidder to supply 3600 new Metro rail coaches at a cost amounting to R51 billion over a 10 year period (2015-2025). In the period under review 11 new train sets were delivered and deployed in the Pretoria-Pienaarspoort corridor.

The introduction of the National Signalling Upgrade programme which is complimentary to the Fleet renewal, is aimed at automating train signal changes by replacing all existing signalling interlockings which consist mainly of obsolete mechanical and electro-mechanical systems, with electronic interlockings as the technology of choice.

PRASA has in this regard signed three major major contracts (With Siemens in Gauteng region, Bombadier for KwaZulu-Natal region and Thales-Maziya for Western Cape). The rollout of the signalling programme is progressing well in all regions with the anticipated completion date in the 2019/20 financial year.

The Rail Maintenance Depot modernisation equally complimentary to the Rolling Stock Fleet Renewal, entails the design and construction of full-functional modern


maintenance depots for existing metro trains including the full fleet deployment of new rolling stock fleet in 2035. In this regard, five sites have been identified namely, Braamfontein and Wolmerton in Gauteng; Durban Yard and Springfield in KwaZulu-Natal and Salt River in Western Cape. In the period under review Wolmerton depot was completed and is currently being used for staging and maintenance of the new fleet deployed in the Pretoria-Pienaarspoort corridor. PRASA must accelerate and ensure the issuance of tenders for the remainder of the other depots that have been seriously delayed, to provide for maintenance demand that will be created by the delivery of the new fleet.

The Strategic Infrastructure Investment is aimed at ensuring that the existing infrastructure network is optimised to attain the maximum benefit from the new rail fleet acquisition. In this regard, a number of key infrastructure initiatives that include perway and electrical infrastructure have been prioritised. These include; - Corridor mordernisation in the 3 Metrorail regions of Gauteng, Western Cape and KwaZulu-Natal. The priority corridors will include mordenisation of 134 stations, closed security systems with corridor protection, CCTV cameras and reaction units.- 120km/h Perway improvement, will allow for the current section speeds of 90km/h being upgraded to increase section speeds to 120km/h in anticiapation of the new rolling stock fleet. This intervention includes the upgrading of ballast profile for better stability, re-railing, re-sleepering, upgrading turnouts and replacement of single and double slips.

OVERALL PERFORMANCE

Whilst PRASA in the period under review experienced both Governance and Leadership instability, the historical performance however improved with 55% of targets achieved.

Irregularities in contract awards identified by the AGSA in the 2014/15 audit and the report of the Public Protector titled “Derailed” and issued in August 2015, resulted in the review of procurement and contract processes. The contract irregularities identified negatively impacted the ability of the organisation to maintain rolling stock assets as procurement of spares and components were terminated. The theft and vandalism of cables and components aggravated the challenges of Maintenance resulting in increased numbers of rolling stock unavailability and unreliability. This negatively affected delivery of safe, clean and secure train service.

Furthermore, a sizeable number of capex projects were subjected to forensic investigations and others subjected to litigation to be either reviewed or set aside. This negatively impacted on capex spent. In the period under review the forensic investigations conducted exposed PRASA to increased irregular expenditure and fruitless and wasteful expenditure.

GOVERNANCE

The Governance and Leadership instability that characterised the period under review has to be addressed. The Board has prioritised restoration of stability and governance by ensuring that the continuous decline in the financial management, performance reporting and Compliance processes are addressed. In this regard an action plan to address significant control deficiencies and consequence management will be developed and implemented.

The Board will furthermore attend to the uncertainty relating to the going concern by ensuring that an appropriate operating and financial model is developed to ensure financial viability and sustainability of PRASA. In this regard, the Board will also urgently attend to going concern and financial uncertainty of both subsidiaries (Intersite and Autopax).

Challenges will doubtlessly continue in the year ahead, but the Board is confident that fixing the instability and governance challenges with a focused plan will


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restore public confidence in the organisation. This will include amongst others the strengthening of the Management leadership team and commitment to provide and deliver both the PRASA mandate and the ambitious modernisation programme. PRASA is confident that the delivery of its mandate and implementation of the modernisation will yield the desired transformation of Metrorail and the revitalization of South Africa’s engineering industry.

ACKNOWLEDGMENT

On behalf of the Board of Control, I thank all employees, the Executive team who have ensured that PRASA delivers on its mandate.

I thank the previous Board members, my fellow Board members for their support, guidance and commitment in ensuring that PRASA is stabilised and turned around.

To all our stakeholders including all our customers and commuters in our respective transport modes, suppliers, Rail Safety Regulator and business partners thank you for your continued support.

Finally, the Board wishes to express sincere appreciation to the honourable Minister of Transport, Dr. B.E. Nzimande, the Deputy Minister of Transport, Ms. S. Chikunga, honourable Chairperson of the Portfolio Committee On Transport(PCOT), Ms. D. Magadzi and the honourable members of the PCOT, the Department of Transport for their guidance and support.

Ms. K. KWEYAMACHAIRPERSON PRASA BOARD OF CONTROL


STATEMENT BY THE PRASA ACTING GROUP CEO

This Annual Report for the financial year 2016/17 takes into account that at the time of its conclusion there has been changes in executive leadership. Accordingly, this performance review is based on information presented by senior management and audit outcomes. Despite the organisation showing an increase in performance targets at 55%, up from 40% the same period last year, this entity is still not performing at an optimal level. Rail’s disappointing performance, where only 33% of its targets were achieved, poses a serious challenge in positioning rail to be the mode of choice for the commuting public. This undesired level of performance is evident in the corresponding customer satisfaction rating during this period which remained flat at 56.90% (2015/16 was 56.78%). The continued decline in performance level by the Rail unit has shown a corresponding effect on the passenger patronage which dropped to 372 million passenger trips per annum, against 448 million passenger trips the previous year. Passenger patronage has a direct impact on the fare revenue. Similarly, both the long distance passenger services experienced a decline in customer satisfaction where Mainline Passenger Service (MLPS) and Autopax dropped to 70.43% and 61.82% respectively when compared to 74.60% and 74.72% recorded in the previous year.

For MLPS the performance has been affected by the inability to run additional trains to meet revenue targets due to locomotive availability and reliability.

CUSTOMER SATISFACTION INDEX

Subsidiary/Divisions 2015/16 2016/17

Metrorail 56.78% 56.90%

MLPS 74.60% 70.43%

AUTOPAX 74.72% 61.82%

Noting the below-than-acceptable performance in delivering on the core mandate of the organisation, management is now focusing on key interventions to turn both Metrorail and Autopax around. The Rail interventions are targeted on ensuring the availability of rolling stock, as well as the reliability of infrastructure, whilst ensuring passenger safety and security of assets.

For Autopax, focus has been on operational efficiencies through ensuring a marked improvement in on-time departures and arrivals, whilst addressing driver customer service training. Furthermore, management is working on the release of buses from the “Vehicle off the Road” list, subject to a cash injection which will enable the organisation to have sufficient buses to operate all services on time and each bus to have sufficient time to be cleaned.


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ANNUAL PERFORMANCE PLAN OVERVIEW

Whilst the historical performance, highlighted herein below, shows an upward trend in performance against the annual performance plans, a renewed effort in improving on performance against targets still remains a key focus if the organisation has to exceed customer expectations.

It must be noted that the organisation is undergoing tremendous change in its endeavour to improve passenger travel experience. The on-going modernisation programme, designed to transform passenger rail travel, is one but many of the challenges the organisation is facing where it has to focus on running its current operations, whilst also changing the business.

SUMMARY OF FINANCIAL PERFORMANCE

The Group revenue declined by 12% from R3.3 billion rand in 2015/16 to R2.9 billion in 2016/17, mainly due to a decline of 14% or R389 million in fare revenue collection from R2.7 billion in the previous year to R2.3 billion during this period. Despite an increase of 5% in operating subsidy from R4.9 billion to R5.2 billion, during this period, the Group still recorded a total comprehensive loss of R928 million; up from R554 million the previous year. The operating expenses increased from R9.2 billion to R10.6 billion; a R1.4 billion or 15% increase, mainly due to liability of R635 million for the National Transport Movement (NTM) ruling by the labour appeal court.


The continued underspending against the capital budget remains a concern, as this affects service delivery and the transformation of passenger rail travel. The organisation only spent R6.7 billion of its total capex budget of R13.8 billion, which of 48% of total spend.

TRANSFORMING THE BUSINESS

In order to reduce the cost of doing business, management has identified specific interventions for rail operations that should improve the financial performance of the organisation, such as fare revenue collection, rolling stock recovery, fencing of certain high volume corridors, additional rental income, reduction of employee costs through natural attrition and by not filling vacancies when they occur.

These and other interventions should stabilise the service and improve on performance levels and must result in the:

• Provision of safe, reliable, affordable and predictable passenger service. • Fare revenue collection by monitoring revenue budgets for high level corridor /

stations, and reviewing the ticketing / tariff regime. • 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.

• Reduction in crime related incidents involving passenger • Reduction in the number of passenger injuries and fatalities through improved

service availability, reliability and predictability that addresses overcrowding on trains as well as order on stations.

The above is premised on the successful execution of Rail Operations’ turnaround plan which will translate to between 448 to 500 million passenger trips per annum with at least 291 train sets at full capacity configuration and 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 95 % in order to fulfil the demand.

In the 2017/18 financial year, PRASA has identified short to long-term key focus areas that will improve its performance, increase patronage and improve its financial position. Short to Medium Term:

1. 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.

2. Improve Rail System performance: The realisation of the National Strategic

Plan, which is built on the assumption that operational performance is at

acceptable levels and meets customer expectation and is supported by

available of rolling stock and reliable infrastructure in a safe and secure

environment.

3. Realignment of support functions. To improve organisational efficiencies and

effectiveness

4. Exploit assets to support the primary mandate

Medium to Long-term:

5. Modernise the Rail System through investment programme of R173 billion for

the Rolling Stock Fleet Renewal Programme, Resignaling, and modernisation

of corridors and station upgrades.

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


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GOVERNANCEThe R4.9 billion irregular spending, recorded during this period, shows weakness in governance and internal controls. The repeat findings on irregular and fruitless and wasteful expenditure still remain the biggest challenge in the organisation. Significant deviations occurred during the year, which was due to weaknesses in internal controls.

Management is in the process of developing critical financial reporting controls which comprise a suite of controls that aim to reduce the incidences of non-compliance, and ensure that there are no material misstatements when reporting the financial results of the entity in the future. Governance and the control environment will continue to receive our focused attention to establish, enhance and maintain sound and sustainable financial and performance reporting. Strengthening of supply management processes and contract management will be the key focus in the next financial year. The entity commits to maintain effective, efficient and transparent systems of financial and risk management and internal control.

CONCLUSION

In spite of leadership instability at senior management and the numerous challenges faced by staff, the unwavering commitment and dedication by staff in delivering on the mandate is highly appreciated. PRASA hopes to build on this commitment.

Sibusiso SitholeGroup CEO


PRASA Rail, as the passenger rail operating division of the Group, is the 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.

The business unit has dedicated the most part of 2016/17 in ensuring that it effectively operates the Metrorail and Long Distance Services (MLPS) whilst renewing the business in preparation for the modernisation program that will focus on the provision of reliable, predictable and safe passenger rail transport.

As a mass public transport carrier, PRASA Rail is entrusted with the responsibili-ty 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

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 avail-ability and reliability of both rolling stock and infrastructure.

Turnaround Action plan by Rail Operations has, it’s focus, the following: • Increase train availability and train performance in peaks to 88% on time • Reduce the number trains cancelled to less than 6% in peak periods • Improve the customer experience focusing on end-to-end passenger journey • Reduction in crime related incidents involving passengers• Reduction in the number of passenger injuries and fatalities by reducing

overcrowding

Stabilising the passenger rail system requires drastic interventions. Rail Oper-ations 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.

PRASA RAIL

DELIVERING ON THE MANDATE


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DELIVERING ON THE STRATEGY (CONTINUED)

PRASA Technical ensures delivery of a modern transport system to all South Africans through the improvement, modernisation of maintenance depots, Overhauling of the current Rolling Stock Fleet, and other Strategic Infrastructure of the railway operating tunnel.

PRASA Technical core services• Strategic Infrastructure

• Electrical (OHTE & Substations)• Perway, Bridges and Structures• Stations upgrades• Platform rectification

• General Overhaul and Refurbishment of current fleet of Metrorail and MLPS• Engineering Services – Maintenance of Infrastructure and Current fleet of

Metrorail and MLPS• Maintenance Depot upgrade / renovation

The business unit’s priority areas for the year have been on two areas: curbing further decline in passenger patronage whilst endevouring to recover to recover lost customers. The success of the turnaround has been premised on the successful implementation of the rolling stock recovery plan which is focused on recovery of coaches out of service due to refurbishment, vandalism, wrecks or maintenance and the improvement of the reliability of the coaches in service.

• Increase infrastructure reliability & performance by reducing signaling & telecoms faults by 15%

• Reduce train delays and cancellations by reducing electrical overhead traction equipment & substation faults by 25%

• Reduce train delays and cancellations by reducing perway faults by 15%• Reducing speed restrictions by 56%

PRASA TECH


Autopax’s main objective and main business is to carry out the primary mandate of PRASA, in consultation with the Department of Transport, for long haul passenger 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). Autopax’s therefore provides for long distance inter-city, charter and cross border transportation of passengers in Southern Africa, in luxury, semi-luxury and intercity coach vehicles.

Over the past few years Autopax focused on determining the required fleet size to sustain and expand services in support of its mandate to operate on a full commercial basis, consolidate its market share, and support rail operations through effective feeder and distribution services and to offer services to the public at large. Since June 2015 Autopax managed to enter into the subsidised commuter transport market in Gauteng. This at the request of the Gauteng Department of Transport and Roads to operate certain subsidised commuter contracts that were returned to the department by the previous operator. The contracts was initially for a three-month period and later extended to nine months ending 31 March 2016. Subsequently new contracts were entered into for a further year ending 31 March 2017.

The following internal and external factors influenced the company’s performance during the 2016/17 financial year:

a. Political protests around the Tshwane Municipality - Autopax Passenger Services

were affected in that 19 of our busses allocated in Mamelodi for the commuter

contract were burnt. These busses had just completed the afternoon shifts and

were on route to the Depot. Most of these busses were burnt outside the Depot

prior to entering the premises. Fortunately, there were no passengers on board

and no injuries were reported on the drivers.

b. Accidents – Preventing accidents through rigorous recruitment and selection

process for new drivers, strict medical surveillance on new and existing

employees, strict monitored and managed resting periods for drivers and strict

monitored and managed maintenance schedules for vehicles.

c. New routes – Operations are consistently scanning the environment for new

routes in existing regions as well as cross border opportunities.

d. Vehicles off the road – The single largest contributor of non-availability of

vehicles that are off the road due to breakdowns that cannot be repaired

timeously as a result of cash flow challenges experienced. Autopax is now focused on turning around the business and has instituted mea-sures and interventions to ensure the following:• Increase in Fleet availability• Route and Fleet optimisation• Increase Revenue and Passenger Numbers• Improve Internal Controls – Reduce the use of Manual Systems and Cash

Handling• Improve operational efficiencies and customer satisfaction• The above will only start bearing fruit during the 2017/18 financialy year and will

Autopax regaining loss market.

AUTOPAX



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PRASA CRES CRES is a property management Division of PRASA responsible for managing PRASA’s property portfolio which is made up of operational (stations, depots and office buildings) and non -operational (residential and land) properties. The mandate is twofold and focuses on improving the condition of properties in order to provide quality public transport facilities whilst growing the portfolio value through commercialisation. The management and day to day running of the Property Portfolio of PRASA is the responsibility of Corporate Real Estate Solutions (CRES), a Division of PRASA established in October 2010. At the core of CRES delivery, is ensuring that the condition of the portfolio facilities is improved and continuously maintained to support PRASA business operations first whilst generating income through the exploitation of the portfolio stock. The portfolio currently has a wide variety of stock which can be broadly categorised into the following;• Railway Station Buildings• Workplace Facilities• Vacant Land• Commercial Facilities• Residential Facilities The delivery of CRES mandate contributes to the following PRASA objectives;a. Improve Rail System Performanceb. Modernise the Rail system through the investment programmec. 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


Intersite’s mandate is the implementation of PRASA’s secondary mandate, which is to generate income from the exploitation of the assets of PRASA. Intersite’s objective is to harvest property and commercial income generating opportunities for PRASA through a range of innovative and entrepreneurial solutions. The property opportunities are focused on developments around Stations, Station precincts and vacant land, while the commercial opportunities are focused on cost savings and income generation around Telecoms, ICT and Energy across the rail infrastructure portfolio.

The mandate will be realized through:• The facilitation of investment by strategic partners;• Develop the properties and assets;• Drive commercialization of select and approved PRASA assets, including

facilitating private sector investment in PRASA assets; and• Undertake project services related to transport projects.

The competitive advantage that Intersite has is PRASA’s large captive commuter base along with the rail and property infrastructure.

Intersite in pursuance of its Real Estate Mandate is entering a stage where its investment initiatives are coming to fruition.

To illustrate the impact that Intersite is making, it is important to note that there are two commercial developments which will commence the construction process within the next 12 months to invest approximately R 1 billion on PRASA properties with private investors.

A pipeline of real estate development projects are being aggressively pursued, with it being projected that a further four developments will be implemented in the first year of the next MTEF cycle. Key amongst those are social housing developments aligned to the corridor densification strategy with social and economic benefits to the commuters whilst also increasing rail patronage.

INTERSITE ASSET INVESTNMENTS


PRASA | Annual Report 2016/17 23

0223 Performance Against

Predetermined Objectives

PERFORMANCE INFORMATION


PERFORMANCE REPORT

The performance for 2016/17 shows an improvement in overall targets on previous financial years. This was achieved against the background of continued instability in the organisation from SCM processes to Executive changes. Irregularities in contract awards of previous years resulted in a review of procurement and contract processes with longer completion times than anticipated in new works to be conducted on the modernisation programme. Problems with irregularities in contracts on the General Overhaul programme that are also used for spares and components seriously impacted the ability of the organisation to maintain rolling stock assets that were aggravated by theft and vandalism of rolling stock in depots.

The historical performance of PRASA however improved for the year with 55% of targets achieved. The overall performance for the organisation since 2013/14 as well as the performance per PRASA Entity is depicted in the graphs below:

2011/12


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or w

eak-

ness

es o

f the

pol

icie

s or

pro

cedu

res.

Th

e fo

cus

for

2016

/17

was

aim

ed a

t ra

isin

g aw

aren

ess

of c

ompl

ianc

e w

ith

the

PFM

A, d

evel

oped

a C

ompl

ianc

e R

isk

Uni

vers

e th

at id

entifi

es th

e K

ey

Legi

slat

ion

and

regu

latio

ns, w

ith th

e ai

m o

f bri

ng a

war

enes

s of

com

plia

nce

and

assi

stin

g af

fect

ed b

usin

esse

s to

iden

tify

and

deve

lop

oper

atio

nal

cont

rols

.

The

Com

plia

nce

depa

rtm

ent f

ocus

sed

on 3

div

isio

ns /

depa

rtm

ents

nam

ely

PR

ASA

RA

IL (R

ail S

afet

y), S

ecur

ity

Dep

artm

ent a

nd H

CM

and

hav

e de

vel-

oped

Com

plia

nce

Ris

k M

anag

emen

t P

lans

for

thes

e. T

he C

ompl

ianc

e de

part

men

t als

o fa

cilit

ated

the

revi

ew

of k

ey H

uman

Cap

ital M

anag

emen

t P

olic

ies.


1.2

RU

NN

ING

TH

E B

USI

NES

S

Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Del

iver

ing

valu

e fo

r cu

stom

ers

Impr

ove

the

cust

omer

sa

tisfa

ctio

n ra

ting

Cus

tom

er

Satis

fact

ion

Rat

ing

for

PR

ASA

P

asse

nger

en

titie

s (M

et-

rora

il, M

LPS

and

Aut

opax

)

62.8

%

cust

omer

sat

-is

fact

ion

for

pass

enge

r en

-tit

ies

PR

ASA

Bet

wee

n 61

% a

nd

67%

cu

stom

er

satis

fact

ion

ratin

g fo

r P

RA

SA

Pas

seng

er

Entit

ies

59.4

9%-1

.51%

The

satis

fact

ion

rate

s of

the

entit

ies

com

pare

d ag

ains

t 20

15/1

6 w

ere

as fo

llow

:

2015

/16

2016

/17

Met

rora

il56

.78%

56.9

0%

MLP

S 74

.60%

70.4

3%

Aut

opax

74.7

2%61

.82%

Serv

ice

leve

ls fo

r M

etro

rail

and

Mai

nlin

e P

asse

n-ge

r Se

rvic

es (M

LPS)

det

erio

rate

d du

ring

201

6/17

as

refle

cted

in C

usto

mer

Sat

isfa

ctio

n an

d re

duci

ng r

ider

-sh

ip.

Met

rora

il se

rvic

e ca

paci

ty (r

ollin

g st

ock

avai

l-ab

ility

) and

infr

astr

uctu

re r

elia

bilit

y af

fect

ed o

vera

ll pe

rfor

man

ce o

f the

sys

tem

. Fo

r M

LPS

shor

tage

and

pe

rfor

man

ce o

f loc

omot

ives

aff

ecte

d ov

eral

l per

for-

man

ce o

f MLP

S.

The

Turn

-aro

und

plan

s fo

r M

etro

rail

incl

ude

Engi

-ne

erin

g an

d O

pera

tions

turn

-aro

und

com

mitm

ents

to

pro

vide

incr

easi

ng a

nd ta

rget

ed im

prov

emen

ts in

th

e 20

17/1

8 fin

anci

al y

ear.

The

turn

-aro

und

plan

for

MLP

S in

clud

e ac

cele

ratio

n an

d ob

tain

ing

addi

tiona

l lo

com

otiv

e ca

paci

ty d

urin

g 20

17/1

8 fin

anci

al y

ear.

Aut

opax

maj

or o

pera

tiona

l effi

cien

cies

aff

ectin

g cu

s-to

mer

ser

vice

that

wer

e id

entifi

ed o

n th

e C

SI R

epor

t w

ere:

• O

n tim

e D

epar

ture

s an

d A

rriv

als

• Im

prov

ing

the

clea

nlin

ess

of b

uses

• D

rive

r be

havi

our.


Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Aut

opax

to

focu

s on

im

prov

ing

oper

atio

nal

effic

ienc

ies

to e

nsur

e th

at t

hey

attr

act

mor

e cu

stom

ers

and

reta

in

curr

ent

pass

enge

rs.

Man

agem

ent

is

wor

king

on

the

rele

ase

of b

uses

fro

m t

he “

Vehi

cle

off

the

Roa

d” l

ist,

subj

ect

to a

cas

h in

ject

ion

by P

RA

SA, w

hich

will

ena

ble

the

orga

nisa

tion

to h

ave

suffi

cien

t bu

ses

to o

pera

te a

ll se

rvic

es o

n tim

e an

d ea

ch b

us to

hav

e su

ffici

ent t

ime

to

be c

lean

ed. M

ore

focu

s w

ill b

e pl

aced

on

driv

er c

usto

mer

se

rvic

e tr

aini

ng.

Del

iver

on

man

date

of

pub

lic

tran

spor

t

Incr

ease

M

etro

rail

com

mut

ers

over

the

MTE

F pe

riod

Met

rora

il co

mm

uter

s44

8.38

mill

ion

pass

enge

r tr

ips

Bet

wee

n 40

6 m

illio

n an

d 47

4 m

illio

n pa

ssen

ger

trip

s

372.

02

mill

ion

pass

enge

rs

-8.3

7%O

vera

ll s

ervi

ce p

erfo

rman

ce o

f M

etro

rail

decr

ease

d su

bsta

ntia

lly

duri

ng

the

year

an

d co

ntri

bute

d to

cu

stom

ers

seek

ing

alte

rnat

ive

tran

spor

t du

e to

the

un

relia

ble

Met

rora

il se

rvic

es.

Com

mut

ers’

unw

illin

gnes

s to

pay

for

ser

vice

s an

d hi

gh l

evel

s of

far

e ev

asio

n w

ith

lack

of

acce

ss c

ontr

ol c

ontr

ibut

ed t

o lo

w r

ecor

ding

of

pass

enge

r tr

ips.

The

Ope

ratio

nal

Turn

-aro

und

plan

to

impr

ove

serv

ice,

w

ith

impr

oved

co

mm

unic

atio

n to

cu

stom

ers

and

spec

ifica

lly th

e R

even

ue Im

prov

emen

t Str

ateg

y w

ill fo

cus

on r

egai

ning

lost

pas

seng

ers

and

mar

ket s

hare

.

MLP

S pa

s-se

nger

s pe

r an

num

ove

r th

e M

TEF

MLP

S pa

ssen

gers

659

573

pass

enge

rsB

etw

een

398

580

and

569

400

pas-

seng

ers

565

414

pass

enge

rs0%

-In

ran

geA

ltho

ugh

over

all s

ervi

ce p

erfo

rman

ce w

as p

oor,

suf

-fic

ient

add

ition

al tr

ains

and

rat

iona

lisat

ion

of o

ccu-

panc

ies

on k

ey r

oute

s co

ntri

bute

d to

MLP

S re

cove

ring

its

ope

ratio

ns w

ithin

the

targ

et.

Lack

of l

ocom

otiv

es

how

ever

pre

vent

ed r

unni

ng a

dditi

onal

trai

ns to

mee

t re

venu

e ta

rget

s.

The

R80

0m tr

ansf

er fr

om C

AP

EX a

s su

bsid

y fo

r M

LPS

cont

ribu

ted

to th

e re

cove

ry o

f MLP

S.



Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Incr

ease

A

utop

ax lo

ng

dist

ance

pas

-se

nger

s ov

er

the

MTE

F pe

riod

Aut

opax

lo

ng d

ista

nce

pass

enge

rs

2.68

mill

ion

pass

enge

rsB

etw

een

2.5

and

2.9

mill

ion

pass

enge

rs

2.25

mill

ion

pass

enge

rs-1

0%A

num

ber o

f rea

sons

cont

ribu

ted

to th

e un

derp

erfo

rman

ce:

1. A

utop

ax d

id n

ot i

mpl

emen

t al

l du

plic

ate

ser-

vice

s bu

dget

ed fo

r, d

ue to

a h

igh

num

ber

of b

uses

bee

n on

VO

R (V

ehic

le o

ff th

e R

oad)

. 2.

For

two

mon

ths

in th

e la

st q

uart

er, A

utop

ax o

pera

ted

low

er c

apac

ity b

usse

s in

hig

h ca

paci

ty r

oute

s.

3. T

here

are

new

pla

yers

in h

igh

dem

and

rout

es w

ho a

re

erod

ing

Aut

opax

mar

ket s

hare

.

The

incr

easi

ng n

umbe

r of

bus

ses

with

def

ects

and

br

eakd

owns

is a

maj

or c

ontr

ibut

or to

this

per

form

ance

. A

cas

h flo

w c

halle

nge

com

poun

ds t

he V

OR

cri

sis

due

to t

he fa

ct t

hat

Aut

opax

are

not

abl

e to

impl

emen

t th

eir

serv

ice

and

mai

nten

ance

pla

n.

Aut

opax

requ

este

d a

cash

inje

ctio

n fr

om c

orpo

rate

whi

ch

will

ass

ist i

n re

leas

ing

buse

s fr

om V

OR

list

to o

pera

te a

ll bu

dget

ed a

nd d

uplic

ate

serv

ices

.

This

com

bine

d w

ith i

mpr

ovin

g op

erat

iona

l ef

ficie

ncie

s i.e

. on

tim

e de

part

ures

, cl

eanl

ines

s of

bus

ses,

dri

ver

beha

viou

r as

wel

l as

focu

s on

mar

ketin

g st

rate

gies

whi

ch

will

ena

ble

Aut

opax

to a

ttra

ct n

ew p

asse

nger

s an

d re

tain

ex

istin

g on

es. A

utop

ax w

ill s

tren

gthe

n fle

xibi

lity

in th

eir

pric

ing

mod

el s

o as

to re

spon

d to

pas

seng

er d

eman

d an

d oc

cupa

ncy

leve

ls.

Del

iver

on

man

date

of

pub

lic

tran

spor

t

Pro

vide

a r

e-lia

ble

serv

ice

for

com

mut

-er

s

Met

rora

il tr

ains

ser

vice

pe

rfor

man

ce

trai

ns o

n tim

e

80.5

1% tr

ains

ru

n on

tim

eB

etw

een

79%

- 8

3%

of tr

ains

ru

n on

tim

e

77.4

4%-1

.56%

The

syst

em w

as a

ffect

ed b

y a

high

num

ber

of o

pera

tiona

l an

d sa

fety

rela

ted

inci

dent

s w

hich

incl

uded

rolli

ng s

tock

fa

ilure

s, i

nfra

stru

ctur

e av

aila

bilit

y, i

ncle

men

t w

eath

er

cond

ition

s, v

anda

lism

, de

railm

ents

and

lev

el c

ross

ing

inci

dent

s re

sult

ing

in a

bnor

mal

ope

ratin

g co

nditi

ons

with

ex

cess

ive

dela

ys.

The

Ope

rati

onal

Tu

rn-a

roun

d P

lan

will

sp

ecifi

cally

ad

dres

s th

e ro

lling

sto

ck a

nd in

fras

truc

ture

dep

ende

ncie

s to

geth

er w

ith o

pera

tiona

l in

terv

entio

ns,

to p

rovi

de a

n in

crea

sing

ly a

nd t

arge

ted

pred

icta

ble

serv

ice

over

the

ne

xt 1

8 m

onth

s.


Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Ensu

re

avai

labi

lity

of c

omm

uter

tr

ains

as

per

sche

dule

Met

rora

il Tr

ain

Serv

ice

Avai

labi

lity

95.3

1% T

rain

av

aila

bilit

yAv

aila

bilit

y of

bet

wee

n 94

% a

nd

98%

.

91.7

4%-2

.26%

The

syst

em w

as a

ffect

ed b

y a

high

num

ber

of o

pera

tiona

l an

d sa

fety

rel

ated

inci

dent

s w

hich

incl

uded

fai

lure

and

sh

orta

ge o

f ro

lling

sto

ck, s

hort

age

of o

pera

tiona

l st

aff,

serv

ice

clos

ures

, de

railm

ents

, SP

AD

S, l

evel

cro

ssin

g in

cide

nts,

tra

in fi

res,

ele

ctri

cal

failu

res

(hig

h te

nsio

n ex

plos

ions

), br

oken

rails

and

com

mun

ity u

nres

t res

ultin

g in

exc

essi

ve c

ance

llatio

ns o

f tra

ins.

The

Ope

rati

onal

Tu

rn-a

roun

d P

lan

will

sp

ecifi

cally

ad

dres

s th

e ro

lling

sto

ck a

nd in

fras

truc

ture

dep

ende

ncie

s to

geth

er w

ith o

pera

tiona

l in

terv

entio

ns t

o pr

ovid

e an

in

crea

sing

ly a

nd ta

rget

ed p

redi

ctiv

e se

rvic

e ov

er th

e ne

xt

18 m

onth

s.

Ensu

re tr

ains

pl

anne

d w

ithin

bud

get

is r

un fo

r M

LPS

Act

ual

num

ber

of

trai

nsop

erat

ed

1 81

7B

etw

een

1092

and

15

60 tr

ains

1790

14.7

4%Al

thou

gh o

vera

ll se

rvic

e pe

rfor

man

ce w

as p

oor,

suf

ficie

nt

addi

tiona

l tr

ains

and

rat

iona

lisat

ion

of o

ccup

anci

es o

n ke

y ro

utes

con

trib

uted

to M

LPS

reco

veri

ng it

s op

erat

ions

as

targ

eted

. Th

e la

ck o

f loc

omot

ives

how

ever

pre

vent

ed

runn

ing

addi

tiona

l tra

ins

to m

eet r

even

ue ta

rget

s.

Pla

ns t

o ob

tain

add

ition

al l

ocom

otiv

es f

rom

Tra

nsne

t an

d th

e pr

ivat

e se

ctor

will

enh

ance

MLP

S’s

abili

ty d

urin

g 20

17/1

8 to

exp

and

serv

ices

furt

her.

Ref

urbi

shed

ro

lling

sto

ck

for

com

mut

-er

ser

vice

s

Met

rora

il co

ache

s re

furb

ishe

d

350

coac

hes

re-

furb

ishe

d

Bet

wee

n 31

5 an

d 38

5 co

ach-

es r

efur

-bi

shed

461

19.7

4%Th

e re

furb

ishm

ent

prog

ram

me

of c

oach

es i

s ai

med

at

impr

ovin

g tr

ain

avai

labi

lity

and

relia

bilit

y as

wel

l as

to

ensu

re th

e su

stai

nabi

lity o

f the

flee

t till

the

seco

nd p

hase

of

the

Rol

ling

Stoc

k fle

et R

enew

al P

rogr

amm

e co

mm

ence

s.

The

follo

win

g w

ere

reas

ons

for

over

achi

evem

ent

of t

he

targ

et in

201

6/17

: P

robl

ems

expe

rien

ced

by t

wo

of t

he G

ener

al O

verh

aul

cont

ract

ors

in 2

015/

16 w

ere

reso

lved

in 2

016/

17 a

llow

ing

for

an im

prov

emen

t in

del

iver

y of

the

coa

ches

. Ano

ther

co

ntra

ctor

dep

loye

d ke

y m

anag

emen

t to

its

plan

ts t

hat

resu

lted

in im

prov

ed p

erfo

rman

ce.



Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Ref

urbi

shed

co

ache

s fo

r M

LPS

MLP

S co

ache

s re

furb

ishe

d

64 c

oach

es

refu

rbis

hed

Bet

wee

n 54

and

66

coac

hes

refu

r-bi

shed

8122

.73%

Con

trac

tors

tha

t ha

d ne

ver

wor

ked

on M

LPS

coac

hes

befo

re th

e ye

ar 2

014/

15 h

ave

impr

oved

thei

r ex

peri

ence

in

the

refu

rbis

hmen

t and

upg

radi

ng o

f coa

ches

.

Rel

iabl

e bu

ses

for

long

dis

tanc

ebu

ses

Bre

akdo

wns

on

bus

es p

er

45 0

00 k

m

trav

elle

d.

0.94

bre

ak-

dow

ns p

er 4

5 00

0 km

s

Bet

wee

n 1

to 1

.1

brea

k-do

wns

per

45

000

km

s

0.58

-42.

00%

The

good

per

form

ance

is a

ttri

bute

d to

regu

lar

insp

ectio

n an

d m

aint

enan

ce b

eing

don

e on

veh

icle

s on

the

road

. In

addi

tion

Aut

opax

con

duct

aft

er t

rip

insp

ectio

ns (A

TI) o

n ve

hicl

es d

aily

.

Del

iver

on

man

date

of

pub

lic

tran

spor

t

Impr

ove

the

leve

l of r

ail

pass

enge

r

safe

ty

Pas

seng

er

inju

ries

and

fa

talit

ies

per

mill

ion

pass

enge

rs

(Rai

l)

4.71

pas

sen-

ger

inju

ries

and

fa

talit

ies

per

mill

ion

pass

enge

rs

Bet

wee

n 4.

43 a

nd

5.01

pa

ssen

ger

inju

ries

an

d fa

tal-

ities

per

m

illio

n pa

ssen

gers

5.40

7.78

%Th

e nu

mbe

r of

inj

urie

s du

ring

the

yea

r w

as h

igh

due

to a

num

ber

of a

ccid

ents

in

Kw

aZul

u N

atal

(K

ZN)

and

Gau

teng

. A

n op

en l

ine

dera

ilmen

t in

KZN

at

Mos

ely

in J

une

2016

res

ulte

d in

8 c

omm

uter

s be

ing

inju

red.

A

head

-on

colli

sion

als

o in

KZN

in J

une,

bet

wee

n M

ereb

ank

and

Hav

ensi

de r

esul

ted

in 1

61 p

asse

nger

inj

urie

s. A

he

ad-o

n co

llis

ion

occu

rred

in

Oct

ober

201

6 be

twee

n K

aalfo

ntei

n an

d Te

mbi

sa in

Gau

teng

with

242

inju

ries

and

on

e fa

talit

y re

port

ed. I

n Fe

brua

ry 2

017,

a tr

ain

colli

sion

in

Gau

teng

occ

urre

d at

Lyn

ross

(Ros

slyn

, Tsh

wan

e) w

here

21

2 co

mm

uter

s w

ere

inju

red.

Oth

er c

ontr

ibut

ing

fact

ors

to t

he p

asse

nger

inj

ury

and

fata

lity

rate

, in

clud

ed t

he

num

ber

of in

juri

es a

nd fa

talit

ies

from

com

mut

ers

falli

ng

betw

een

the

trai

ns a

nd o

n pl

atfo

rms

whi

le e

ntra

inin

g or

det

rain

ing,

bei

ng p

ushe

d or

falli

ng o

n th

e st

airs

and

pl

atfo

rms

whi

le r

unni

ng fo

r tr

ains

.

The

Safe

ty M

anag

emen

t Sy

stem

(SM

S), w

hich

incl

udes

th

e A

nnua

l Sa

fety

Im

prov

emen

t P

lan

will

foc

us o

n th

e im

plem

enta

tion

of a

ll co

mpl

eted

Boa

rd o

f In

quir

y (B

OI)

reco

mm

enda

tions

. A T

rain

Dri

ver

Beh

avio

ural

Stu

dy w

ill

also

be

perf

orm

ed d

urin

g 20

17/1

8 to

inf

orm

the

SM

S,

espe

cial

ly o

pera

tiona

l im

prov

emen

ts u

nder

the

high

leve

l of

abn

orm

al o

pera

tion

cond

ition

s.


Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Impr

ove

the

leve

l of p

ublic

sa

fety

in th

e ra

il op

erat

ing

tunn

el.

Pub

lic

inju

ries

and

fa

talit

ies

1.32

pub

lic

inju

ries

and

fa

talit

ies

per

mill

ion

pass

enge

rs

Bet

wee

n 1.

05 a

nd

2.3

publ

ic

inju

ries

an

d fa

tal-

ities

per

m

illio

npa

ssen

gers

1.85

0% -

In

ran

geAl

thou

gh w

ithin

the

expe

cted

rang

e, th

e in

cide

nts

rem

ain

unac

cept

ably

hig

h du

e to

peo

ple

cros

sing

the

rai

lway

lin

es il

lega

lly a

t sta

tions

and

str

uck

by o

ncom

ing

trai

ns.

Con

trib

utin

g fa

ctor

s in

clud

e in

juri

es a

nd fa

talit

ies

from

st

aff r

idin

g, tr

avel

ling

on a

n ill

egal

sid

e of

trai

ns, s

lippi

ng

and

stru

ck b

y tr

ains

or

gett

ing

elec

troc

uted

.

The

Safe

ty M

anag

emen

t Sy

stem

(SM

S), w

hich

incl

udes

th

e A

nnua

l Sa

fety

Im

prov

emen

t P

lan

will

foc

us o

n th

e im

plem

enta

tion

of c

losi

ng c

orri

dors

with

fen

cing

/w

allin

g pr

ogra

m a

s w

ell a

s im

prov

ed c

omm

unic

atio

n an

d ed

ucat

iona

l pro

gram

to w

arn

com

mut

ers

of th

e da

nger

s of

con

duct

with

in th

e tr

ain

oper

atio

nal e

nvir

onm

ent.

Red

uce

bus

pass

enge

r in

juri

es

Bus

pas

sen-

ger

inju

ries

pe

r 10

0 00

0 pa

ssen

gers

tr

ansp

orte

d

4.04

pass

enge

r in

juri

es p

er

100

000

pas-

seng

ers

Bet

wee

n 3.

0 an

d 4.

5 pa

ssen

ger

inju

ries

per

10

0 00

0 pa

ssen

gers

0.77

-74.

33%

Ther

e w

ere

a to

tal

of 3

1 pa

ssen

ger

inju

ries

tha

t w

ere

reco

rded

dur

ing

the

2016

/201

7 fin

anci

al y

ear

for

both

lo

ng

dist

ance

an

d co

mm

uter

op

erat

ions

. Th

e ra

te

excl

udin

g th

e co

mm

uter

leg

of

the

busi

ness

is

1.33

or

55.6

7% l

ess

than

the

ran

ge. T

his

is a

n im

prov

emen

t of

67

.08%

on

2015

/16.

The

good

per

form

ance

is

attr

ibut

ed t

o th

e ro

ll ou

t of

ex

tern

al d

rive

r tr

aini

ng p

rogr

amm

e w

ith e

mph

asis

on

defe

nsiv

e dr

ivin

g sk

ills

effe

ctiv

e fr

om 1

Jun

e 20

16. T

his

trai

ning

off

ered

by

Ger

otek

is o

ngoi

ng.

Del

iver

on

man

date

of

pub

lic

tran

spor

t

Man

age

crim

e in

ci-

dent

sin

volv

ing

PR

ASA

as

sets

Cri

me

inci

-de

nts

repo

rt-

ed o

n P

RA

SA

asse

ts

2737

in

cide

nts

on

asse

ts

Bet

wee

n 23

80 a

nd

3090

in

cide

nts

invo

lvin

g as

sets

3591

16.2

1%Th

e as

set

rela

ted

secu

rity

inc

iden

ts a

re r

eflec

ting

in

crea

sing

tren

ds o

ver

the

past

2 y

ears

. A

n in

crea

se h

as

been

exp

erie

nced

of t

heft

and

vand

alis

m to

infr

astr

uctu

re,

rela

y ro

oms,

rol

ling

stoc

k an

d ca

bles

due

to

unm

anne

d cr

itica

l si

tes

and

hots

pots

. Se

vere

van

dalis

m t

o ro

lling

st

ock,

incl

udin

g tr

ain

fires

hav

e a

maj

or im

pact

on

the

insu

rabi

lity

and

capa

city

of t

he s

yste

m.

Vari

ous

succ

esse

s ha

ve

been

re

cord

ed

whi

le

the

impl

icat

ions

of C

rim

inal

Mat

ters

Am

endm

ent A

ct w

here

th

e st

rict

sen

tenc

es w

ould

ser

ve a

s a

dete

rren

t to

redu

ce

cabl

e an

d co

mpo

nent

thef

t has

not

yet

yie

lded

the

desi

red

resu

lts.

The

effe

ctiv

enes

s an

d hi

gh c

ost

of s

ecur

ity w

ill b

e ad

dres

sed

in th

e Se

curi

ty T

urn-

arou

nd p

lan

for

2017

/18.



Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Del

iver

on

man

date

of

pub

lic

tran

spor

t

Man

age

sche

dule

1

crim

e in

cide

nts

invo

lvin

g pa

ssen

gers

Sche

dule

1

crim

e in

ci-

dent

s re

port

-ed

invo

lvin

g P

RA

SA R

ail

pass

enge

rs

(MLP

S an

d M

etro

rail)

422

Sche

dule

1

inci

dent

s in

volv

ing

pas-

seng

ers

Bet

wee

n 35

0 an

d 51

0 Sc

hedu

le

1 in

cide

nts

invo

lvin

g pa

ssen

gers

564

10.5

9%Th

e cr

ime

inci

dent

s ag

ains

t pa

ssen

gers

are

refl

ectin

g an

inc

reas

e ov

er t

he p

ast

2 ye

ars

and

are

affe

cted

by

will

ingn

ess

of p

asse

nger

s to

rep

ort c

rim

es.

PR

ASA

Rai

l Ope

ratio

ns a

re h

ighl

y vu

lner

able

to c

rim

inal

ac

tiviti

es d

ue to

the

open

nat

ure

of th

e sy

stem

and

lim

ited

capa

bilit

y to

dep

loy

and

ensu

re v

isib

ility

in a

ll th

e ho

tspo

t ar

eas/

trai

ns. H

igh

visi

bilit

y is

requ

ired

to d

eter

cri

min

als.

A

s re

sult

of

budg

et c

onst

rain

ts,

depl

oym

ent

of g

uard

s w

as r

educ

ed in

Qua

rter

4.

The

syst

em h

as a

lso

expe

rien

ced

high

fre

quen

cy o

f co

mm

unity

pro

test

s an

d pu

blic

ser

vice

del

iver

y pr

otes

ts

whi

ch im

pact

ed o

n th

e R

ail e

nvir

onm

ent.

Ove

rcro

wdi

ng

owin

g to

red

uced

ope

ratio

nal

sets

mad

e it

diffi

cult

to

patr

ol a

nd p

erfo

rm c

rim

e pr

even

tion

on b

oard

. K

ey

tech

nolo

gy a

nd p

rote

ctio

n pr

ojec

ts s

uch

as th

e In

tegr

ated

St

atio

n A

cces

s M

anag

emen

t Sy

stem

(ISA

MS)

and

dep

ot

fenc

ing

did

not m

ater

ialis

e as

exp

ecte

d to

ass

ist i

n as

set

prot

ectio

n an

d cr

ime

prev

entio

n st

rate

gies

.

The

effe

ctiv

enes

s an

d hi

gh c

ost

of s

ecur

ity w

ill b

e ad

dres

sed

in th

e Se

curi

ty T

urn-

arou

nd p

lan

for

2017

/18.


1.3

CH

ANG

ING

TH

E B

USI

NES

S

Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Dep

loym

ent

corr

idor

st

rate

gy

Del

iver

ing

the

new

tr

ains

on

the

first

de

ploy

men

t co

rrid

ors

in

Gau

teng

Rea

dine

ss

for

depl

oy-

ing

the

new

EM

U tr

ains

in

Gau

teng

co

rrid

ors

Oct

201

6 -

Mar

201

7 P

reto

ria

– P

iena

ar-

spoo

rt

corr

idor

Off

-pea

k se

rvic

e op

erat

iona

l fr

om F

eb-

ruar

y 20

17

betw

een

Ris

sik

stre

et a

nd

Pie

naar

s-P

oort

Par

tially

A

chie

ved

In F

ebru

ary

2017

, th

e R

ail

Safe

ty R

egul

ator

(R

SR)

appr

oved

the

subm

itted

test

resu

lts

with

four

imm

edia

te

and

four

sho

rt te

rm c

ondi

tions

and

allo

wed

PR

ASA

to s

tart

ca

rryi

ng p

asse

nger

s. T

he fo

ur im

med

iate

con

ditio

ns w

ere

succ

essf

ully

add

ress

ed. P

hase

2 o

f the

Tri

al O

pera

tions

w

ith li

mite

d of

f-pe

ak s

ervi

ce fr

om P

iena

arsp

oort

to R

issi

k st

atio

ns h

avin

g pa

ssen

gers

on-

boar

d co

mm

ence

d on

6

Febr

uary

201

7 us

ing

2 ne

w E

lect

ric

Mul

tiple

Uni

t (E

MU

) tr

ains

.

App

rova

l fo

r co

mm

ence

men

t of

the

nex

t ph

ase

of t

he

depl

oym

ent,

afte

rnoo

n pe

ak,

was

rec

eive

d on

3 A

pril

2017

. Onc

e al

l sh

ort

term

con

ditio

ns a

re m

et t

hen

only

ap

prov

al w

ill b

e gr

ante

d fo

r th

e fu

ll se

rvic

e, w

hich

is

incl

usiv

e of

the

mor

ning

pea

k.

Rol

ling

Stoc

k R

e-ne

wal

Nat

iona

l Fl

eet

Ren

ewal

P

rogr

amm

e

Trai

n se

ts d

e-liv

ered

and

co

mm

is-

sion

ed

2 tr

ain

sets

de

liver

ed in

SA

for

test

ing

as p

er

cont

ract

From

11

– 1

3 tr

ain

sets

ac

cept

ed

as p

er

cont

ract

11 T

rain

se

ts p

ro-

visi

onal

ly

Acc

epte

d

In R

ange

This

del

iver

y fo

rm p

art

of t

he fi

rst

trai

n-se

ts p

rodu

ced

from

Als

tom

Bra

zil P

lant

. It

is e

xpec

ted

that

pro

duct

ion

of t

he l

ocal

ly p

rodu

ced

new

tra

in-s

ets

in N

igel

, C

ity o

f Ek

urhu

leni

will

com

men

ce in

the

2017

/18

finan

cial

yea

r.

Infr

astr

uc-

ture

re

adin

ess

Rol

l-ou

t of

sign

alin

g sy

stem

as

per

cont

ract

Sign

alin

terl

ocki

ngs

com

plet

ed

(Gau

teng

, K

ZN a

nd

Wes

tern

C

ape)

11 Inte

rloc

king

co

mm

issi

ons

com

plet

ed

Bet

wee

n 11

– 1

4 Si

gnal

in-

terl

ocki

ngs

com

mis

-si

ons

com

plet

ed

7 Inte

rloc

k-in

gs c

om-

mis

sion

ed

- 36

.36%

The

Dur

ban

Sign

allin

g P

inet

own

line

(4 i

nter

lock

ings

) co

mm

issi

onin

g w

as n

ot c

ompl

eted

by

end

of 2

016/

17

finan

cial

yea

r du

e to

the

del

ays

in t

he p

rovi

sion

of

mun

icip

al e

lect

rica

l pow

er c

onne

ctio

ns fo

r th

e ta

rget

ed

loca

tion.

The

elec

tric

al p

ower

pro

blem

has

now

bee

n re

solv

ed.

The

4 in

terl

ocki

ngs

will

be

deliv

ered

by

end

June

201

7.

Two

mor

e in

terl

ocki

ngs

at K

ruge

rsdo

rp a

nd L

uipa

ards

vlei

in

Gau

teng

wer

e co

mpl

eted

in A

pril

2017

. It

is e

xpec

ted

that

oth

er c

irca

9 in

terl

ocki

ngs

will

be

deliv

ered

in C

ape

Tow

n in

Dec

embe

r 20

17.

In a

dditi

on, 4

inte

rfac

es, b

etw

een

Apr

il 20

16 a

nd M

arch

20

17 w

ere

com

plet

ed in

Gau

teng

.



Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Infr

astr

uc-

ture

R

eadi

ness

Mod

erni

-sa

tion

of

135

stat

ions

(P

hase

1:

14

stat

ions

by

2019

)

Mod

erni

sa-

tion

stat

ions

com

-pl

eted

No

stat

ions

co

mpl

eted

Bet

wee

n 1

– 2

stat

ions

co

mpl

et-

ed (D

uffs

R

oad

and

Phi

lippi

or

Oak

moo

r)

as p

er

cont

ract

1 St

atio

n co

mpl

eted

0%

In R

ange

Duf

fs R

oad

stat

ion

mod

erni

zatio

n pr

ojec

t was

com

plet

ed

on t

ime

in M

ay 2

016.

The

con

stru

ctio

n m

ilest

ones

wer

e fin

ishe

d ac

cord

ing

to th

e pr

ojec

t sch

edul

e in

tim

e. P

rogr

ess

on th

e ot

her

two

proj

ects

is a

s fo

llow

: P

hilip

i sta

tion

mod

erni

zatio

n pr

ojec

t was

not

com

plet

ed

as p

lann

ed.

The

cont

ract

or f

or t

he p

roje

ct,

had

to w

ait

for

the

appr

oval

of

the

exte

nsio

n of

the

con

trac

t th

at

had

expi

red.

The

boa

rd a

ppro

ved

the

subm

issi

on fo

r th

e ex

tens

ion

of th

e co

ntra

ct a

nd fe

es in

crea

se in

Dec

embe

r 20

16.

The

cont

ract

or i

s in

the

pro

cess

of

mob

ilisi

ng

reso

urce

s to

res

ume

wor

k in

Apr

il 20

17.

Oak

moo

r st

atio

n m

oder

niza

tion

proj

ect w

as n

ot fi

nish

ed

as p

lann

ed. T

here

wer

e de

lays

in th

e co

nstr

uctio

n ph

ase

due

to p

aym

ent

issu

es b

etw

een

the

mai

n co

ntra

ctor

an

d su

b-co

ntra

ctor

. Th

e de

lays

wer

e al

so d

ue t

o th

e co

ntra

ctua

l is

sues

bet

wee

n th

e pr

ojec

t m

anag

emen

t co

nsul

tant

and

PR

ASA

. As

a re

sult

of

thes

e de

lays

, the

co

ntra

ct e

xpir

ed o

n th

e 30

th O

ctob

er 2

016

whe

n th

e pr

ojec

t was

63%

com

plet

e. W

ork

stop

ped

afte

r ex

piry

of

the

cont

ract

. Th

e su

bmis

sion

for

rei

nsta

tem

ent

of t

he

cont

ract

was

pre

sent

ed a

nd s

uppo

rted

at t

he C

orpo

rate

Te

nder

Pro

cure

men

t C

omm

ittee

(C

TPC

) in

Nov

embe

r 20

16.

The

final

app

rova

l w

ill s

erve

at

the

next

Fin

ance

C

apita

l Inv

estm

ent a

nd P

rocu

rem

ent C

omm

ittee

(FC

IP).


Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Mod

erni

sa-

tion

of d

epot

s fo

r th

e ne

w

rolli

ng s

tock

Dep

ot

mod

erni

-sa

-tio

n pr

oj-

ects

com

-m

enci

ng, i

n co

nstr

uctio

n an

d co

mpl

ete.

Salt

Riv

er

dem

oliti

ons

com

plet

ed

Alt

erna

-tiv

e Te

st

Faci

lity

at

Wol

mer

-to

n D

epot

co

m-

plet

e an

d ha

ndov

er

to G

ibel

a &

Mai

n-te

nanc

e Fa

cilit

y at

W

olm

erto

n co

mpl

eted

fo

r 20

new

pr

oduc

tion

trai

ns

Alt

erna

-tiv

e Te

st

Faci

lity

Com

plet

ed

and

Han

d-ed

ove

r to

G

ibel

a

Par

tially

A

chie

ved

The

cont

ract

or fo

r the

pro

ject

was

app

oint

ed in

Nov

embe

r 20

16 w

ith a

con

tinge

ncy

of 0

%. T

he c

ontr

acto

r di

sput

ed

the

0% c

ontin

genc

y w

hich

was

not

lin

e w

ith t

he 3

0%

cont

inge

ncy

in th

e R

eque

st fo

r P

ropo

sals

. Fol

low

ing

the

nego

tiatio

ns w

ith t

he c

ontr

acto

r, a

set

tlem

ent

of 1

5%

was

agr

eed

to a

nd a

ppro

ved

by t

he B

oard

of

Con

trol

in

Janu

ary

2017

.

The

cont

ract

was

fina

lized

and

sig

ned

by t

he c

ontr

acto

r an

d P

RA

SA i

n Fe

brua

ry a

nd M

arch

201

7 re

spec

tivel

y.

The

nego

tiatio

n an

d co

ntra

ct s

igni

ng p

roce

sses

del

ayed

th

e co

mm

ence

men

t of

the

con

stru

ctio

n ph

ase.

Des

igns

ha

ve s

tart

ed a

nd c

onst

ruct

ion

is e

xpec

ted

to s

tart

ear

ly

in 2

017/

18.

Upg

rade

d tr

ack

on

depl

oym

ent

corr

idor

s

Trac

k up

grad

e pr

ojec

ts fo

r 12

0km

/h

Com

plet

e te

nder

pr

oces

s fo

r Tr

ack

prep

a-ra

tion

for

new

R

ollin

g St

ock

with

pl

acem

ent

of

Con

trac

t(s)

fo

r w

ork.

Tend

er

Pro

cess

no

t com

-pl

eted

Not

A

chie

ved

The

tend

er fo

r Lo

ng le

ad it

ems

(rai

ls a

nd tu

rnou

ts) t

hat

wer

e in

clud

ed o

n th

e B

raam

font

ein

Dep

ot m

oder

nisa

tion,

w

hich

wer

e go

ing

to b

e us

ed in

the

120K

PH

pro

ject

, was

ca

ncel

led

as re

sult

of n

on-c

ompl

ianc

e to

PP

PFA

, the

reby

im

pact

ing

nega

tivel

y on

the

adve

rtis

emen

t of t

he 1

20K

PH

pr

ojec

t.

The

proj

ect

man

agem

ent

team

is w

orki

ng o

n a

revi

sed

tend

er t

o in

corp

orat

e th

e Lo

ng l

ead

item

s (r

ails

and

tu

rnou

ts)

will

ser

ve i

n th

e B

id S

peci

fic C

omm

ittee

in

June

201

7.



Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Cle

an,

func

tiona

l an

d m

oder

n st

atio

ns a

nd

faci

litie

s th

roug

h nu

mbe

r of

im

prov

ed &

up

grad

ed

stat

ions

and

w

orkp

lace

s

Stat

ion

upgr

ade

proj

ects

fo

r se

rvic

e ex

celle

nce

and

reve

nue

gene

ratio

n

21 s

tatio

n up

-gr

ade

proj

ects

co

mpl

eted

Bet

wee

n 12

– 1

5 st

atio

n up

grad

epr

ojec

ts

com

plet

ed

16 s

tatio

n up

grad

e pr

ojec

ts

com

plet

ed

6,67

%Th

e an

nual

tar

get

rang

e w

as e

xcee

ded

as a

n ad

ditio

nal

proj

ect w

as c

ompl

eted

ear

lier

than

ant

icip

ated

.

Stat

ion

Upg

rade

pro

ject

s co

mpl

eted

: A

t Par

k St

atio

n:

Lugg

age

Wra

ppin

g;

Afr

ican

B

ank;

R

efur

bish

men

t fo

r Sp

ykos

; R

efur

bish

men

t of

Dry

Cle

aner

s; C

eilin

g In

stal

latio

n at

CAN

; Ten

ant I

nsta

llatio

n of

Del

hi D

elic

ious

; Te

nant

Inst

alla

tion

of Z

uhri

; Clic

ks S

tore

; Ins

talla

tion

of

Cle

arVu

fenc

e; S

hosh

oloz

a Ab

lutio

ns a

nd M

etro

Abl

utio

ns

Oth

er p

roje

cts:

R

esid

entia

, Blo

emfo

ntei

n, S

prin

gs, U

mge

ni F

ire

Dam

age

Are

a an

d D

urba

n St

atio

n G

lass

Box

.

Wor

kpla

ce

impr

ovem

ent

proj

ects

20 w

orkp

lace

im

prov

emen

t pr

ojec

ts c

om-

plet

ed

Bet

wee

n 16

– 2

0 w

orkp

lace

im

prov

e-m

ent

proj

ects

co

mpl

eted

17 w

ork-

plac

e im

-pr

ovem

ent

proj

ects

co

mpl

eted

0% -

In

Ran

geTh

e fo

llow

ing

proj

ects

, to

rais

e th

e co

nditi

on o

f em

ploy

ee

wor

kpla

ces,

esp

ecia

lly d

epot

s to

acc

epta

ble

leve

ls, w

ere

com

plet

ed:

Gau

teng

: B

enro

se d

epot

. Geo

rge

Goc

h Si

gnal

dep

ot, E

lsbu

rg S

igna

l D

epot

, Ess

elen

Par

k Si

gnal

Dep

ot, W

olm

erto

n D

epot

, De

Wild

t; B

iom

etri

cs in

stal

latio

n H

atfie

ld, C

lean

ers

quar

ters

H

atfie

ld, E

xter

nal e

lect

rica

l lig

htin

g w

orks

Hat

field

, SC

M

Stor

age

in U

mja

ntsh

i Hou

se.

KZN

: D

urba

n St

atio

n P

erw

ay d

epot

, Cat

o R

idge

Tra

in O

pera

tions

de

pot,

Dur

ban

Stat

ion

SPP

M a

nd R

EAM

Offi

ce,

Red

hill

Serv

ices

offi

ces,

Um

bogi

ntw

ini S

igna

ls, D

urba

n W

elln

ess

cent

re, C

ross

moo

r Tr

ain

Ope

ratio

ns d

epot

,

Futu

re

Skill

s an

d C

apac

ity

Dev

elop

-m

ent

Bui

ldin

g te

chni

cal a

nd

oper

atio

nal

skill

s fo

r a

mod

ern

pub-

lic e

ntity

Skill

ed s

taff

fo

r de

ploy

-m

ent o

n th

e m

oder

nisa

-tio

n co

rrid

ors

262

empl

oy-

ees

com

plet

-ed

trai

ning

or

enr

olle

d fo

r tr

aini

ng

in s

peci

fic

criti

cal a

nd

tech

nica

l and

op

erat

iona

l sk

ills

Bet

wee

n 20

0 an

d 25

0 em

-pl

oyee

s in

tr

aini

ng

in s

peci

fic

criti

cal

tech

ni-

cal a

nd

oper

atio

nal

skill

s

269

em-

ploy

ees

com

plet

-ed

or

in

trai

ning

fo

r sp

ecifi

c cr

itica

l and

te

chni

cal

oper

atio

nal

skill

s

7.60

%Tr

aini

ng w

as fo

cuss

ed o

n m

oder

nisa

tion

skill

s se

ts. T

he

trai

ning

add

ress

ed v

ario

us jo

bs w

ithin

tra

in o

pera

tions

, ap

pren

tices

(bo

th e

lect

rica

l an

d ro

llin

g st

ock)

, tr

ack

mas

ters

(P

erw

ay d

epar

tmen

t) a

nd s

igna

lling

. Alt

houg

h th

e ta

rget

was

ach

ieve

d, c

halle

nges

wer

e fa

ced

in th

e la

st

2 qu

arte

rs r

egar

ding

inta

ke o

f lea

rner

s as

per

qua

rter

ly

targ

ets.

How

ever

, pr

oper

pla

nnin

g an

d al

loca

tion

of

reso

urce

s as

wel

l the

eff

ectiv

e de

term

inat

ion

of tr

aini

ng

capa

city

ass

iste

d th

e bu

sine

ss in

bei

ng a

ble

to fo

cus

on

achi

evin

g th

e ta

rget

s se

t in

both

tech

nica

l and

ope

ratio

nal

depa

rtm

ents

.


Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

t

2016

/17

Targ

etA

ctua

lVa

rian

ceC

omm

ents

Inte

grat

-ed

Pub

lic

Tran

spor

t N

etw

ork

Pla

nnin

g

Form

alis

e an

d se

cure

pa

rtne

rshi

p ag

reem

ents

w

ith T

rans

-po

rt a

utho

r-iti

es

Mem

o-ra

ndum

of

Agr

eem

ent

or M

emo-

rand

um o

f U

nder

stan

d-in

g w

ith

Met

ropo

litan

Tr

ansp

ort

Aut

hori

ties

Sign

ed A

gree

-m

ent w

ith C

ity

of C

ape

Tow

n

Dev

lope

d an

d su

bmitt

ed

a dr

aft

agre

emen

t w

ith 1

- 2

TA’s

to th

e G

CEO

/ G

roup

Exc

o by

Mar

ch

2017

One

dra

ft

agre

emen

t su

bmitt

ed

to A

ctin

g G

CEO

by

31 M

arch

20

17

0%

In R

ange

A

Mem

oran

dum

of

U

nder

stan

ding

(M

OU

) w

ith

the

Ekur

hule

ni M

etro

polit

an M

unic

ipal

ity h

as b

een

final

ised

an

d su

bmitt

ed fo

r ap

prov

al b

y th

e G

roup

CEO

. The

dra

ft

MO

U w

ith th

e C

ity o

f Tsh

wan

e is

cur

rent

ly b

eing

revi

ewed

by

the

PR

ASA

Leg

al D

epar

tmen

t.

Del

iver

ing

on g

over

n-m

ent

impe

rativ

es

Impr

ove

wom

en

deve

lopm

ent

thro

ugh

proc

urem

ent

in P

RA

SA

espe

cial

ly

Rai

l

Spen

ding

on

Bla

ck W

omen

O

wne

d C

om-

pani

es

R1.

405b

nB

etw

een

R1.

1bn

to

R1.

2bn

R1.

31 b

n9.

17%

The

valu

e re

flect

s th

e sp

endi

ng to

Bla

ck O

wne

rshi

p an

d no

t th

at m

ade

spec

ifica

lly fo

r B

lack

Fem

ale

Ow

ners

hip.

Th

e co

mpa

nies

tha

t ar

e in

clud

ed a

re t

hose

as

per

the

Sect

or C

hart

er fo

r R

ail w

ith m

ore

than

30%

bla

ck fe

mal

e ow

ners

hip.

bec

ause

mor

e B

lack

Wom

en O

wne

d En

titie

s ar

e pa

rtic

ipat

ing

in s

izea

ble

proj

ects

for

cons

truc

tion

and

engi

neer

ing.

The

se a

re n

ot ta

rget

ed p

roje

cts

as p

er t

he

PP

PFA

, fo

r w

omen

, bu

t th

ose

that

the

y co

mpe

te f

or in

th

e op

en m

arke

t.

PR

ASA

is s

till

revi

ewin

g th

e SC

M p

olic

y to

ens

ure

that

ec

onom

ic a

dvan

cem

ent

and

ente

rpri

se d

evel

opm

ent

thro

ugh

proj

ects

and

the

impl

emen

tatio

n of

the

PP

PFA

is

adhe

red

to fo

r de

sign

ated

gro

ups

(Wom

en, p

eopl

e liv

ing

with

dis

abili

ties,

you

th a

nd M

ilita

ry V

eter

ans)

.

Expa

ndin

g P

RA

SA n

et-

wor

ks a

nd

serv

ices

Incr

ease

d re

venu

e fr

om th

e bu

s co

mm

uter

co

ntra

ct

Incr

ease

A

utop

ax

com

mut

er

pass

enge

rs

over

the

MTE

F pe

riod

Bet

wee

n 2.

0 m

illio

n an

d 2.

4 m

illio

n bu

s co

mm

uter

s

1.80

m

illio

n bu

s co

mm

uter

s

-10.

00%

Man

ual t

icke

ting

is b

eing

use

d w

hich

res

ults

in m

anua

l ca

ptur

ing

of

pass

enge

r nu

mbe

rs.

The

figur

es

are

ther

efor

e no

t as

rel

iabl

e as

fro

m a

n el

ectr

onic

sys

tem

bu

t pr

ovid

e a

reas

onab

le in

dica

tion

of t

he s

tatu

s. M

ulti-

jour

ney

ticke

ts in

crea

sed

mor

e th

an 4

0% fr

om S

epte

mbe

r 20

16.

169

buse

s w

ere

allo

cate

d to

the

com

mut

er o

pera

tions

with

73

allo

cate

d fo

r th

e M

amel

odi d

epot

. Due

to c

omm

unity

pr

otes

t ac

tion

22 v

ehic

les

wer

e de

stro

yed

and

follo

win

g ag

reem

ent

with

the

Gau

teng

Dep

artm

ent

of R

oads

and

Tr

ansp

ort (

GP

DR

T) 5

5 bu

ses

wer

e su

bseq

uent

ly o

pera

ted.

Th

e al

loca

ted

buse

s w

ere

also

aff

ecte

d by

Veh

icle

s of

th

e R

oad

(VO

R)

due

to u

tilis

ing

long

dis

tanc

e bu

ses

for

com

mut

er o

pera

tions

.

1.4

SEC

UR

ING

TH

E B

USI

NES

S OF

TH

E FU

TUR

E PerformanceInformation


Stra

tegi

c

Obj

ecti

veK

ey

Per

form

ance

O

utco

me

Key

P

erfo

rman

ce

Indi

cato

r

2015

/16

Act

ual

Ach

ieve

men

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agem

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n A

pril

2016

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roup

in

201

7/18

fina

ncia

l yea

r.



0341 The Board Of Control Responsibility

Statement

42 The Board of Control

43 Director’s Report

46 The Accounting Authority

50 Audit & Risk Committee

GOVERNANCE


Governance

THE BOARD OF CONTROL RESPONSIBILITY STATEMENT

The Board of Control of the Passenger Rail Agency of South Africa provides effective leadership in the best interest of PRASA. The Board is responsible for the strategic direction and control of the company. For the year under review the Board has placed reliance on Management, internal and external auditors for the accurate preparation and fair presentation of the consolidated financial statements of the Group, comprising the statements of financial position as at 31 March 2017 and the statements of comprehensive income, the statements of changes in equity and statements of cash flows for the year then ended, as well as the notes to the consolidated financial statements, which includes a summary of significant accounting policies and other explanatory notes and the Board of Control’s Report, in accordance with South African Statements of Generally Accepted Accounting Practice and in the manner required by the Public Finance Management Act, 1999, (Act No1 of 1999) and the Legal Succession to the South African Transport Services Act.

The control by the Board is exercised by way of a governance framework which includes setting the corporate strategy with Executive Management, approving major investments decisions detailed reporting to the Shareholder and effective delegation to Executive Management.

The Board’s responsibilities include:

• Designing, implementing and maintaining internal control relevant to the preparation of these consolidated financial statements that are free from material misstatement, whether due to fraud or error;

• Selecting and applying appropriate accounting policies; • Making accounting estimates that are reasonable in the circumstances;• Maintaining an effective system of risk management.

The Board has made an assessment of the Group and the Company’s ability to continue as a going concern. There is some uncertainty on the ability of PRASA to continue as a going concern. The Entity and the group reported a loss of R1.5 billion and R928 million respectively in the current financial year which is an increase of 189% and 68% respectively from the previous financial year loss. Although all ratios are positive indicators of solvency and liquidity, the majority of the cash resources are earmarked for capital projects and not available for operational expenditure. The disparity between the allocation of capital and operational subsidy must be addressed, as the current allocation to operations does not allow for proper maintenance and operations on the infrastructure investments that are made.The auditor is responsible for reporting on whether the Group consolidated financial statements and the Company’s financial statements are fairly presented in accordance with the applicable financial reporting framework.

Approval of Group consolidated financial statements and Company financial statements

The Group consolidated financial statements and Company financial statements of the Passenger Rail Agency of South Africa, were not approved by the 31st of July 2017 as required by the PFMA because the then Board of Control of PRASA did not meet the minimum number required by Legal Succession Act.

___________________________________Khanyisile KweyamaChairperson of the PRASA Board of Control


THE BOARD OF CONTROL

P MolefeChairman

Z ManaseAR Committee Chairperson

M MatlalaFCIP Committee Chairperson

W SteenkampSHEQ Committee Chairperson

C Roskruge-CeleMember

N Kheswa HR and REM Committee Chairperson

X GeorgeMember

C ManyungwanaMember

L McMillanMember

T PhitsaneMember

C LetsoaloActing Group CEO

L ZideCompany Secretary

(AS AT 31 MARCH 2017)


DIRECTOR’S REPORT

ANNUAL FINANCIAL STATEMENTS:

This report and the annual financial statements have been prepared in compliance with the requirements of the Public Finance Management, 1999 (Act No 1 of 1999), as amended (“PFMA”). As advised by Managament, the Board of Control is aware, as at the date of this statement, of any circumstances, which would render any particulars included in the financial report to be misleading or inaccurate.

Nature of businessThe Passenger Rail Agency of South Africa (PRASA) is an Agency of the Department of Transport responsible for the provision of commuter rail services and long haul passenger rail and bus services. Through its facilities and real estate management division, PRASA Corporate Real Estate Solutions (PRASA CRES), stations, buildings and land are managed, maintained and upgraded. Intersite, a wholly-owned subsidiary of PRASA, is responsible for leveraging non-operational and non-strategic assets of PRASA. Intersite is responsible therefore for the secondary mandate of PRASA, which is to generate income from the exploitation of assets transferred to PRASA by the Minister of Transport.

Going concernPRASA has prepared its financial statements on a going-concern basis, confirming that the entity will be able to meet its financial obligations and finance future operations through a combination of Government funding and revenue income generated from operations. The realisation of assets and settlement of liabilities and commitments will occur in the ordinary course of business.

FINANCIAL POSITION AND RESULTS:

Capital expenditureTotal capital subsidy to the value of R13.8 billion (2016: R13.4 billion) was received during the year under review. The funds were expended mainly towards the upgrading and maintenance of the rolling stock, infrastructure upgrades and station developments.

Operational fundsPRASA received an operational subsidy of R5.2 billion for the year (2016: R4.9 billion).

Operational resultsTotal Group income amounted to R3.1 billion, (exclusive of government subsidy) compared to R3.5 billion in the prior year. Fare revenue for ticket sales for twelve months has been included in the results. Group operating expenditure increased by 15%. (2016: increased by 5.2%)

Governance


CORPORATE GOVERNANCE

The Board adheres to the principles of good corporate governance as espoused in the PFMA and King III Report and Protocol on Corporate Governance in the Public Sector. This entails the provision of an oversight on the Management of the assets of PRASA diligently and in a fair and transparent manner. Reporting to the Shareholder was strengthened by a Corporate Plan and Shareholders Agreement which ensured that the targets, measures and outputs are clearly articulated to enhance the Board’s accountability. The Board in discharging its obligations and to effectively fulfil its fiduciary duties is supported by the following Committees:

• Audit and Risk Committee • Finance, Capital Investment and Procurement Committee• Human Capital & Remuneration Committee• Safety, Health Environment and Quality Assurance Committee• Governance and Performance Committee

The Board as the Accounting Authority has delegated the day-to-day management to the Executive Committee under the leadership of the Group Chief Executive Officer.

MANAGEMENT OF RISK

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

Risks are managed through the following oversight and governance structure:SHEQ and Security risks have separate structures that monitor and manage riskprocesses. Key consideration, for the past Financial Year, has been the managementof the SHEQ and security risks by the Board of Control (BOC) and the SHEQcommittee. The rigours of risk management processes are being embedded in thesafety and security environment across the Group.

CONFLICT OF INTREST MANAGEMENT

All Directors and Executives are required to disclose any conflict or potential conflict of interest that they may have regarding any matter relating to the activities of PRASA and/or any matter discussed at Board, Board Committees and at the Executive Management meetings. The Group Company Secretary maintains a Conflict of interest and Related Party Disclosures register of the all Directors and for PRASA at large. The declaration of interest is a standard item on the agenda of all meetings of the Board and Board Committees and Executive Management Committee meetings. The Directors are also required to sign a declaration form at every meeting of the Board and Board Committees.

Protocol for Communication with ShareholderThe Executive Authority of PRASA is the Minister of Transport who represents the Shareholder. The Board as the Accounting Authority of the Corporation reports to the Minister of Transport. Communication with the Shareholder is channelled primarily through the office of the Chairman. Regular reporting was undertaken in terms of the Shareholders Compact.

Performance against GoalsPRASA’s 3 year Corporate Plan defines objectives that are directly linked to PRASA’s mandate as defined in the Legal Succession Act. These objectives are used to measure the performance of PRASA as they appear on pages 33 to 45 of this report.


Post Balance Sheet Events There were significant circumstances that affected the financial position of the Group that have risen between the date of the balance sheet and the production date of this report. Refer to note 40 of the annual financial statements.

Broad-Based Black Economic Empowerment (“B-BBEE”) B-BBEE ranks as a priority and is fully integrated into all areas of the Group, and will continue to play a meaningful role in stimulating economic growth in South Africa. In line with the Broad-Based Black Economic Empowerment Act, 2003 (Act No 53 of 2003), as well as the Supply Chain Management Policy, various committees have been instituted with representation from all divisions, including senior management, to ensure that the process remains transparent and fair at all times. The Group is fully committed to use the resources.

In order to strengthen and enhance spending for black owned companies PRASA is reviewing the SCM policy to ensure that economic advancement and enterprise development through projects and the implementation of the PPPFA is adhered to for designated groups (Women, people living with disabilities, youth and Military Veterans).

Constitution of the current Board of Control (Appointed 12 April 2018)

Significant changes to the constitution of the PRASA Board of control (Since 8 March 2017)

Committee Chairperson No. of members

Name of members

Board Of Control Ms K Kweyama 8 Ms K Kweyama, Ms D Tshepe, Mr L Wessie, Mr N Alli, Ms J Schreiner, Mr X George, Ms M Matlala, Mr C Letsoalo (Resigned), Mr S Ntsaluba, Dr N Sishi, Mr P Setai, Mr S Sithole (Appointed Interim GCEO – 1 June 2018), Mr L Zide (Appointed Acting GCEO (27 February 2017 to 7 December 2017 and again 1 April 2018 to 31 May 2018)

Governance and Perfor-mance

Ms K Kweyama 5 Ms K Kweyama, Mr L Wessie, Ms J Schreiner, Ms M Matla-la, Mr S Ntsaluba, Ms L Letlape – Autopax Chairperson, Mr B Mdebuka – Intersite Chairperson

Audit, Risk Committee (ARC) Mr S Ntsaluba 4 Mr S Ntsaluba, Mr L Wessie, Ms D Tshepe, Mr N Alli

Finance , Capital, Investment and Procurement (FCIP)

Mr K Wessie 4 Mr L Wessie, Mr N Alli, Ms D Tshepe, Ms J Schreiner

Human Capital and Remu-neration (HC and Rem)

Ms M Matlala 4 Ms M Matlala, Ms D Tshepe, Ms K Kweyama, Ms J Schrein-er, Mr X George

Safety, Health, Environment and Quality (SHEQ)

Ms J Schreiner 5 Ms J Schreiner, Ms M Matlala, Mr N Alli, Mr L Wessie, Mr S Ntsaluba, Mr X George

Boards Date of appointment Comments

Board 1: Chair-Dr Popo Molefe 1 August 2014 Terminated 8 March 2017

Board 2: Chair- Nazir Ali 1 March 2017 Terminated 10 April 2017

Board 1: Chair-Dr Popo Molefe Re-appointed 10 April 2017 Term ended 31 July 2017

PMFA Appointment of Mr Lindikaya Zide (PMFA-Section 49 (2) (b)

1 August 2017 Term Ended 18 October 2017

Board 3: Chair-Adv. Nana Makhubele 19 October 2017 Terminated 16 March 2018

Board: Chair: Mr Xolile George 30 March 2018 Terminated 12 April 2018

Board 4: Chair-Khanyisile Kweyama 12 April 2018 Current Board appointed for 12 months

Governance


THE ACCOUNTING AUTHORITY

THE RESPONSIBILITY OF THE BOARD

The Board of Control is the custodian of corporate governance within PRASA.

The PRASA Board of Control must ensure that PRASA effectively carries out its mandate as set out in the Legal Succession Act and PFMA by collectively directing the PRASA’s affairs, whilst meeting the appropriate interests of the Executive Authority and relevant stakeholders. To oversee and ensure the performance of PRASA in line with the approved Business Plan and Performance Agreement between PRASA and the Executive Authority. The PFMA further imposes fiduciary duties to the Board, including a duty of care and skill in managing the financial affairs of the Corporation.The Board is also obliged to maintain effective and transparent systems of inter-nal controls, including internal audit. Monitoring compliance to IT Governance.

The Board makes collective decisions about issues that will determine PRASA’s credibility and continued ability to adapt to the changes in the regulatory environment.

It is a primary responsibility of PRASA Board of Control to ensure that PRASA complies with the obligations imposed by various laws and regulations that are applicable to PRASA and that management of regulatory compliance is the responsibility of the Board.

The Board must provide leadership to PRASA, set its direction and pace, and develop its culture and ethos.

Board Members have a duty to the PRASA. They have ultimate responsibility for PRASA’s performance and are not mandated delegates or servants of any of its stakeholders.

The board must decide whether a member that has declared a conflict of interests should remain in a meeting or be recused.

The Board and all individual Board members must ensure that the principles set out in the Code of Corporate Practices and Conduct (King II Report) as well as the Board Code of Conduct in Annexure A hereto are observed in all the activities of the Board.

The directors are entitled to seek independent professional advice concerning the affairs of PRASA and have access to any information they may require in discharging their duties.


Committee Chairperson No. of members Name of members

Board Of Control Dr P Molefe 10 Dr P Molefe, Ms Z Manase, Ms N Kheswa, Ms M Matlala, Mr W Steenkamp, Mr T Phitsane, Mr C Manyungwana, Mr X George, Ms C Roskruge-Cele, Mr L McMillian,

Governance and Per-formance

Dr P Molefe 5 Dr P Molefe, Ms Z Manase, Ms N Kheswa, Mr W Steen-kamp, Ms M Matlala

Audit, Risk Committee (ARC)

Ms Z Manase 5 Ms Z Manase, Ms N Kheswa, Mr W Steenkamp, Mr L McMillian

Finance , Capital, In-vestment and Procure-ment (FCIP)

Ms M Matlala 5 Ms M Matlala, Ms C Roskruge-Cele, Mr C Manyungwa-na, Mr T Phitsane , X. George

Human Capital and Remuneration (HC and Rem)

Ms N Kheswa 6 Ms N Kheswa, Mr X George, Ms C Cele, Mr L McMillian, Mr T Phitsane, Mr W Steenkamp, Ms N Mxenge(resigned 14 August 2015)

Safety, Health, Envi-ronment and Quality (SHEQ)

Mr W Steenkamp 5 Mr W Steenkamp, Ms M Matlala, Ms Z Manase, Mr X George, Mr C Manyungwana

Constitution of the Board of Control for 2016/17 Financial Year

Board of Control and Board Committee Attendannce of meetings for the year April 2016 to March 2017 (1st April 2016 to 8 March 2017

Name of Director BoC

Number of

meetings = 9

ARM

Number of

meetings = 7

HC and Rem

Number of

meetings = 4

FCIP

Number of

meetings = 6

SHEQ

Number of

meetings = 2

Governance Status

Dr P. Molefe 9 1 Retired

Ms Z Manase 9 7 0 1 Retired

M. Matlala 9 6 2 1 Retired

W. Steenkamp 9 7 4 2 1 Retired

C. Cele 4 3 4 Resigned 15/01/17

C. Manyungwana 8 4 1 Retired

N. Kheswa 2 1 2 1 Resigned 11/07/16

X. George 5 1 2 0 Active

L. McMillian 4 4 0 2 Resigned 11/2016

T. Phitsane 8 2 4 Retired

C Letsoalo 6 2 2 1 Appointed 1/08/16

N. Khena (Acting GCEO

4 2 1 1 Retired

Governance


Board of Control and Board Committee Attendannce of meetings for the year April 2016 to March 2017 (1st March 2017 to 10 April 2017)

NON EXECUTIVE DIRECTOR REMUNERATION 2016/17

Name of Director BoC Status

Mr. Nazir Alli 1 Retired

Mr. Ronny Mkhwanazi 1 Retired

Mr. Frans Baleni 1 Retired

Mr. Tiyani Rikhotso 1 Retired

Dr. Natalie Skeepers 1 Retired

Ms. Constance Maleho 1 Retired

Name RemunerationR’000

Other allowanceR’000

Other reimbursementsR’000

TotalR’000

Dr P Molefe R1014 - 15 R1029

Ms Z Manase R483 - - R483

Ms M Matlala R435 - - R435

Ms N Kheswa R151 - 1 R152

Mr W Steenkamp R490 - - R490

Mr X George R398 - - R398

Mr T Phitsane R435 - - R435

Ms C Roskruge Cele R281 - - R281

Mr RL Mkwanazi R35 - - R35

Mr TR Rikhotso R39 - - R39

Ms Scheepers R39 - - R39

Mr MF Baleni R36 - - R36


BOARD COMMITTEES

Audit and Risk Committee:The Audit and Risk Committee supports the Board in discharging its Corporate Governance responsibilities in relation to:

• Review of disclosures in the Annual Report;• Financial reporting;• Internal control;• Business ethics and Fraud prevention policies;• Risk Management;• Ensuring integrity and effectiveness of internal audit function.

Amongst others, the Audit and Risk Committee is responsible for considering and recommending to the board the approval of the external audit strategy and fees.

The Audit and Risk Committee further monitors and approves the application of our financial resources, determines the level of the budget required to deliver the Business Plan objectives. The Audit and Risk Committee comprises of five independent non-executive members. The Group Chief Executive Officer, The Group Chief Financial Officer, Head of Internal Audit and External Auditors attend meetings by invitation.

Human Resources and Remuneration Committee:The Human Capital & Remuneration Committee supports the Board in discharging its responsibilities relating to:

• Direct authority for, or consideration and recommendation to the Corporation of, matters relating to inter-alia general staff policies, remuneration (executive and directors’ fees), bonuses, service contracts and retirement funds;

• Staff wellbeing and sound corporate culture; and• The promotion of an efficient and effective workforce.

Finance, Capital Investment and Procurement Committee:The FCIP Committee supports the Board in discharging its responsibilities relating to:

Monitoring the implementation of procurement policies and processes;• Successful negotiation of price reduction in prices charged;• Fostering Broad Based Black Economic Empowerment (B- BBEE) and supporting

small, medium and micro enterprises (SMMEs);• Adjudication of all capital investments projects and tenders; and• Ensuring adherence to the principles contained in the framework for supply chain

management issued by National Treasury.

Safety, Health and Environment Quality Committee:The SHEQ Committee supports the Board in discharging its responsibilities for the safety of commuters, employees and others who work and use the network and for environmental protection. In discharging its responsibilities, the Committee:

• Ensures that PRASA has effective safety and environmental policies, systems and programmes to meet all legislative responsibilities and to develop and sustain a safe and environmentally friendly culture.

• The SHEQ Committee has the responsibility to ensure that the commuter rail environment is safe, healthy and clean to both employees and the users of the system.

Governance and Performance Committee:The objective of the Governance Committee is to ensure that PRASA is governed in a way that is efficient, responsible, transparent, and accountable to the shareholder and the taxpayer.

Governance


AUDIT AND RISK COMMITTEE REPORT

The Entity is pleased to present it’s report for the financial year ended 31 March 2017

AUDIT AND RISK COMMITTEE RESPONSABLITY STATEMENT

The Entity reports that it has adopted appropriate formal terms of reference in line with the Board Charter and has discharged its responsibilities accordingly in terms of section 51 (1) a (ii) of the PFMA and 27.1.8 of the Treasury Regulations. The Audit and Risk Committee has regulated its affairs in accordance with the adopted terms of reference and has discharged its responsibilities contained therein.

The Audit and Risk Committee supports the Board in discharging its Corporate Governance responsibilities in relation to:

• Review of disclosures in the Annual Report;• Financial reporting;• Internal control;• Business ethics and Fraud prevention policies;• Risk Management;• Ensuring integrity and effectiveness of internal audit function.

Amongst others, the Audit and Risk Committee is responsible for approving the external audit strategy and fees.

The Audit and Risk Committee further monitors and approves the application of our financial resources. The Audit and Risk Committee comprises of five independent non-executive members. The Group Chief Executive Officer, The Group Chief Financial Officer, Head of Internal Audit and External Auditors attend meetings by invitation..AUDIT AND RISK COMMITTEE MEMBERS AND ATTENDANCE.

As per its terms of reference, the committee is required to meet at least 4 times a year. During the year under review, the Committee was constituted as set out below and had met 7 times:

Names 26.04.2016

23.05.2016

08.07.2016

27.07.2016

15.09.2016

12.12.2016

26.01.2017

Comments

Z. Manase P P P P P P P

N. Kheswa A A P Resigned 11 July 2016

L. McMillian P P A P P Resigned 1 Nov 2016

W. Steenkamp P P P P P P P


GeneralInformation

51

Internal auditInternal audit renders an independent and objective review and advisory service to: • provide assurance to the Board of Control that PRASA’s financial and operational

controls designed to manage the organization’s risks and achieve the entity’s objectives are operating in an efficient, effective and ethical manner, and

• Assist management in improving the entity’s system of internal controls, governance and business performance.

Roles and Responsibilities of internal auditInternal audit’s roles and responsibilities are guided by the approved charter taking into consideration PRASA’s objectives to achieve compliance with applicable legislative requirements in the conduct of its business. In addition to the execution of the 2016/2017 plan, the unit was able to use its limited internal resources to cover aspects of Probity and Pre-award of tender reviews for engagements. In conduct of its activities, internal audit plays an active role in:• developing and maintaining a culture of accountability and integrity;• facilitating the integration of risk management into day-to-day business activities

and processes; and• Promoting a culture of cost-consciousness, self-assessment and adherence to

high ethical standards.

Amongst its functions in the year 2016/2017, Internal Audit’s annual plan focused on key areas of Finance, Rail Operations, Human Capital, ICT, Performance Information and Supply Chain Management. In addition to the execution of the 2016/2017 plan, the unit was able to stretch its limited internal resources to cover aspects of Probity and Pre-award reviews for tenders. Internal Audit will continue to assist management to review the adequacy and effectiveness of controls in identified high risk areas, including the procurement environment. Internal Audit’s focus at the procurement environment is aimed at giving management reasonable assurance that procurement is conducted in a manner that results in fair, equitable, transparent and competitive processes in line with applicable legislation.

The effectiveness of internal controlIn line with the PFMA and the King Report on Corporate Governance for South Africa 2009 and the King Code of Governance Principles (collectively King III), Internal Audit provides the Audit and Risk Committee, and Management with recommendations relating to the implementation of appropriate and effective internal controls. This is achieved by means of the risk management process, as well as the iden-tification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the internal auditors, the audit report on the annual financial statement and the management report of the Auditor-Gener-al South Africa, there were matters reported that indicate material deficiencies in

Name Number of meeting = 2

Appointment date into the Committee

S Ntsaluba (Chairperson) 2 3 May 2018

L Wessie 2 3 May 2018

N Alli 2 3 May 2018

D Tshepe 2 3 May 2018

The current Audit and Risk Committee consists of the members listed hereunder, who were appointed into the PRASA Board of Control after the end of the year under review.

The newly constituted Audit and Risk Committee, which has considered the report for the year ending 31 March 2017 was appointed after the year end and met twice as set out below:


the system of internal control or deviation therefrom. In reviewing the abovemen-tioned reports including the financial statements for the year under review the Audit and Risk committee noted with concern the regress of the control environ-ment, these included: • Repeat Audit findings on both AGSA and Internal Audit Reports including inability

of management to implement recommendations• Lack of consequence management• Lack of document management• The increase in irregular expenditure

EVALUATION OF FINANCIAL STATEMENTS

The Audit and Risk Committee has evaluated the annual financial statements of PRASA for the year ended 31st March 2017 and; to the best of the Committees knowledge, the Committee believes that the annual financial statements have been prepared and do comply, in all material respects, with the requirements of the Public Finance Management Act.

The Committee has:• considered and reviewed the audited Annual Financial Statements to be included

in the Annual Report together with the Auditor-General South Africa and the former Acting Group Chief Executive Officer and the Interim Group Chief Executive Officer;

• considered the Auditor-General South Africa’s Management Report and Management’s response thereto;

• reviewed PRASA’s compliance with legal and regulatory provisions;• reviewed the significant adjustments resulting from the audit, and;• considered and reviewed the Performance Information Report to be included in

the Annual Report.• noted the qualified audit opinion by the Auditor General and remains committed

to assisting Management in discharging their duties in terms of the PFMA.

These annual financial statements were considered by the Audit and Risk Committee at their meeting of the 12th of June 2018 and recommended the same for approval by the Board of Control.

AUDITOR-GENERAL SOUTH AFRICA

The Entity met with the Auditor-General South Africa and concurs with and accepts the Auditor-General of South Africa’s report on the Annual Financial Statements, and are of the opinion that the audited Annual Financial Statements should be accepted and read together with the report of the Auditor-General South Africa.

Chairperson of the Audit and Risk Committee


0454 Human Capital Management

HUMAN CAPITAL MANAGEMENT


The PRASA Human Capital Management 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 man-agement, 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 PRA-SA corporate plan as dictated by both the primary and the secondary mandate.

HCM PRIORITIES FOR THE YEAR UNDER REVIEW

Cognizance of the need for the organisation to efficiently and effectively run the current operations, whilst preparing for changing the business, Human Capital Management identified the following as strategic priorities for the business:• Evaluating alternative operating delivery models to determine the case for

efficiencies and/or operational improvements.• A stronger policy focus in readiness for modernisation changes affecting the

organisation.• Engaging in workforce planning and preparing for future workforce requirements.• Exploring opportunities for cost containment and how a more commercial ethos

can be developed within operations.• Fair and equitable Pay and Grading structures and Reward processes

WORKFORCE PLANNING FRAMEWORK

Workforce planning is informed and driven by PRASA’s talent management strat-egy and framework that predicts and plans for current and future resources and skills that will be required to deliver on the mandate. It is also aimed at develop-ing capability and competency for existing and new employees to perform critical tasks as well as those skills needed for future business including managers, specialist or business critical roles as part of global succession planning. This strategy is aimed at closing the gap between existing talent and what is required to successfully respond to current and emerging business challenges.

To achieve the above PRASA will:• Consider staffing levels, workforces skills, workforce demographics and

employment trends within the organisation• Identify workforce skills to meet projected needs, staffing patterns and

anticipated programs and workload changes• Compare supply and demand analysis to determine the future gaps (shortages)

and surpluses (excesses) in the number of staff and needed skills• Develop recruitment and succession plan, including employee development and

retraining• Identify and establish a talent pool of people with leadership/specialist potential

early on in their careers• Develop talent management & succession planning as core business

competencies

HUMAN CAPITAL MANAGEMENT


Human CapitalManagement

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:• Translating our strategy into actionable plans to drive our business• Setting objectives that establish focus and reinforce strategy execution• 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.

The Performance Management framework, depicted below, recognises excellent performance and provide effective feedback, objective setting whilst establishing a clear link between team and individual responsibilities that serve to deliver on organisational goals and business objectives:

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.

Organisational Strategy

Head of Division Scorecard Head of Division ScorecardHead of Division Scorecard Head of Division Scorecard

Vision Mission

Organisational Scorecard• Is High Level• Has KPAs that span the entire organisation• Reflects the most strategic KPAs• Has a maximum number of 5 KPAs per Balanced

Scorecard Perspective

Divisional Scorecards• Has KPAs specific to the Division• Is more detailed than the organisational

scorecard• Has a number of KPAs and KPIs


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.

POLICY DEVELOPMENT

During the reporting period, the Human Capital and Remuneration Committee or reviewed the following policies:• Employee Relations Policy• Employee Wellness Policy• Employment Equity Policy• Talent Management Policy• Termination of Employment Policy• Total Reward Policy• Social Media Policy

HIGHLIGHT ACHIEVEMENTS

• The development and approval of the Human Capital Strategy• Training of Change Agents for Business Readiness and Modernisation• Establishment of The Bargaining Forum

CHALLENGES FACED BY THE PUBLIC ENTITY

• Budgetary constraints to effect some of the HR strategies• Changes in leadership• Organisational instability and uncertainty as a result of leadership changes

FUTURE HR PLANS /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:• What does the business do to drive performance?• How can HCM demonstrate a quantifiable return on investment for Human

Capital initiatives?• Which HCM initiatives can be directly targeted at building organisation 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?

• 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?

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. The journey culminates at a point where PRASA is positioned as an Employer of Choice. The roadmap is detailed for Year 1- 3 with an indication of the achievements that should be in place by year 4 and 5. The roadmap and overall strategy will be refreshed every year. This five year plan identifies our key priorities and intentions:



Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020

Meaningful

work

Hands-on

Management

Positive work

environment

Growth

opportunity

Trust in

leadership

• Revision and approval of Group HCM strategy

• Revision of HCM policies

• Standardised HCM practices operational across PRASA

• Roll out of standardised holistic HCM scorecard

• Understand 5 year workforce requirements

• Develop operating model and align organisation structures

• Develop PRASA EVP• Develop Talent

Management Strategy

• Create Future Skills Development Programe

• Train change champions and change agents for Modernisation

• Ensure roll out of integrated Employee Wellness programe aligned to Human Factor Management

• Leadership mobilised for strategic change

• Develop and socialise PRASA Competency Model

• Conduct skills audit and understand capability and capacity gaps

• Leadership curriculum in place from Executive down to supervisory levels

• Socialise and roll out Future Skills Development Program

• Refined Performance Management rolled out across all levels

• Vacancy management in line with Workforce, Succession & EE plan

• EVP and Talent Management Forums operational

• Develop pay bands aligned to the job grades

• Effective Bargaining Forum in place

• New HCM organisation and Service delivery model in place

• Talent review outcomes informing career movements and succession planning

• Impact of performance management experienced organisation wide

• Workforce planning process and output fully integrated into all key business strategies and decisions

• Adopted a culture and integrated wellness

• Gaining efficiencies through automated HRIS

• Advanced HCM practices embedded across the organisation

• Widely recognised as the employer of choice for key workforce segments

Employer of

choice


Personnel Cost by programme

ProgrammeTotal Expenditure for

the entity (R’000)

Personnel Expenditure

(R’000)

Personnel exp. as a %

of total exp. (R’000)

No. of employees

March 2016

Average personnel cost

per employee (R’000)

PRASA CORP 1 387 699 314 294 22,65% 414 759

METRORAIL 5 829 138 3 755 654 64,43% 12333 305

INTERSITE 33 222 25 774 77,58% 22 1172

AUTOPAX 1 004 872 373 430 37,16% 1415 264

SHOSHOLOZA 841 388 381 576 45,35% 1136 336

PRASA CRES 951 515 215 224 22,62% 657 328

PRASA TECHNI-CAL 73 170 58 649 80,15% 142 413

GRAND TOTAL 10 121 004 5 124 600 50,63% 16119 318

Performance Rewards

Programme Personnel rewards

(R’000)

No. of employees Personnel Expenditure (R’000)

Top Management 0 0 4 439 0,02%

Senior Management 0 0 348 196 0,07%

Professional qualified 23 205 5 482 877 0,15%

Skilled 2 420 207 555 2 137 076 0,25%

Semi-Skilled 5 817 342 1 591 1 821 882 0,57%

Unskilled 0 0 60 614 0,68%

GRAND TOTAL 8 260 754 2 151 5 124 600


Directorate/ Business Unit Personnel Expenditure

(R’000)

Training Expenditure

(R’000)

Training Expenditure as

a % of Personnel Cost.

No. of employees

trained

Avg. training cost per

employee (R’000)

PRASACORP 314 294 9 417 3,00% 124 76

METRORAIL 3 755 654 18 185 0,48% 3296 6

INTERSITE 25 774 182 0,71% 13 14

AUTOPAX 373 430 964 0,26% 905 1

SHOSHOLOZA 381 576 2 062 0,54% 176 12

PRASA CRES 215 224 2 073 0,96% 127 16

PRASA TECHNICAL 58 649 1 937 3,30% 51 38

GRAND TOTAL 5 124 600 34 821 0,68% 4 692 7

Explanations: The budgetary constraints and cost containment measures regulated by the National Treasury necessitated that the organisation focused on its recruitment and appointment of personnel. Further more the organisation in optimising the structure considered it prudent that it will fill only critical vacancies, supported by the appropriate approval.

Currently the Human Capital Management (HCM) department is reviewing various existing policies including but not limited to Recruitment, Remuneration and Performance management policy, which looks at the movement of existing employees, through the internal recruitment and selection process and try where possible to match the suitable internal candidates to the job.

Employment changesChanges in the employee profile are insignificant; however on the core critical skills, this is where the organisation’s retention and attraction of skills is low. There has been a number of terminations and high retirement rate for seasoned skilled and semi-skilled workers who have long service in the Rail industry.

Training Costs



Salary Band Employment at beginning of period Appointments Terminations Employment at end of the period

The Board 18 0 6 12

Top Management 0 0 0 0

Senior Management 218 5 24 199

Professional qualified 702 10 35 677

Skilled 5 389 284 284 5389

Semi-skilled 10 282 130 931 9481

Unskilled 413 23 75 361

GRAND TOTAL 17 022 452 1355 16119

Reasons for staff leaving

Reason Number % of total no. of staff leaving

Deceased 102 7,53%

Dismissal 358 26,42%

Resignation 225 16,61%

Retirement 255 18,82%

Ill Health 4 0,30%

Expiry of contrarct of employment 405 29,89%

Absconded 6 0,44%

GRAND TOTAL 1 355 100,00%

The total turnover for the year is 2.4%. Employees voluntarily terminating the employee service, lack of direction, retirement and expiry of contracts are some of the reasons why employees are leaving the organisation, and obviously better pay and growth opportunities offered by other Companies.

There is a high volume of employee dismissals, involving various contributing factors, which can be minimised and taken care of by adherence to business processes and continuous improvement of each function’s internal controls.

Labour Relations: Misconduct and disciplinary action

Personnel Cost by Salary Band

Nature of disciplinary Action Number

Verbal Warning No record available

Written Warning No record available

Final Written warning No record available

Dismissal 358


LEVELS MALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top Management 0 1 0 0 0 0 0 0

Senior Management 73 101 13 3 31 11 67 13

Professional qualified 234 259 35 34 36 20 46 74

Skilled 1598 1925 398 419 297 101 403 785

Semi-skilled 3049 3874 998 403 658 37 436 129

Unskilled 221 83 34 18 11 0 26 0

GRAND TOTAL 5175 6242 1478 877 1033 169 978 1001

LEVELS FEMALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top Management 0 0 0 0 0 0 0 0

Senior Management 18 44 6 3 4 1 6 4

Professional qualified 210 207 53 16 31 11 57 14

Skilled 1497 1398 442 211 261 30 493 72

Semi-skilled 2998 2991 1108 296 683 17 352 39

Unskilled 67 0 24 9 17 0 13 0

GRAND TOTAL 4790 4723 1633 535 996 59 921 129

Equity Target and Employment Equity Status

Levels Disabled Staff

Male Female

Current Target Current Target

Top Management 0 0 0 0

Senior Management 1 3 0 5

Professional qualified 5 10 3 15

Skilled 18 25 7 18

Semi-skilled 17 30 7 25

Unskilled 0 0 0 0

GRAND TOTAL 41 68 17 63

The major variances between target and current are informed by the following • Current vacant positions • Anticipation of growing the business, to accommodate the PRASA of tomorrow • Project based positions that will eventually be phased out on completion of

projects. • The need to achieve the national disability target of 2%

Notes: These targets exclude Foreign Nationals and FTCW

Notes: These targets exclude Foreign Nationals and FTCW



CategoriesBARRIERS

AFFIRMATIVE ACTION

MEASURES

TIME-FRAME FOR

IMPLEMENTION OF AA

MEASURES

YES NO YES NO START DATE END DATE

Recruitment procedures X X 01/10/2016 30/10/2019

Advertising positions X X 01/10/2016 30/10/2019

Selection criteria X X

Appointments X X

Job classification and grading X X 01/10/2016 30/10/2019

Remuneration and benefits X X 01/10/2016 30/10/2019

Terms & conditions of employment X X 01/10/2016 30/10/2019

Job assignments X X

Work environment and facilities X X 01/10/2016 30/10/2019

Training and development X X 01/10/2016 30/10/2019

Performance and evaluation X X 01/10/2016 30/10/2019

Promotions X X 01/10/2016 30/10/2019

Transfers X X

Succession & experience planning X X 01/10/2016 30/10/2019

Disciplinary measures X X 01/10/2016 30/10/2019

Dismissals X X

Retention of designated groups X X 01/10/2016 30/10/2019

Corporate culture X X 01/10/2016 30/10/2019

Reasonable accommodation X X 01/10/2016 30/10/2019

HIV&AIDS prevention and wellness pro-grammes

X X 01/10/2016 30/10/2019

Assigned senior manager(s) to manage EE implementation

X X

Budget allocation in support of employ-ment equity goals

X X 01/10/2016 30/10/2019

Time off for employment equity consulta-tive committee to meet

X X


Report of the auditor-general to Parliament on the Passenger Rail Agency of South Africa

Report on the audit of the consolidated and separate financial statements

Qualified opinion

1. IhaveauditedtheconsolidatedandseparatefinancialstatementsofthePassengerRailAgencyofSouthAfrica(Prasa)anditssubsidiaries(thegroup)setoutonpages73 to 132,whichcomprisetheconsolidatedandseparatestatementoffinancialpositionasat31March2017,andtheconsolidatedandseparatestatementofcomprehensiveincome,statementofchangesinequityandstatementofcashflowsfortheyearthenended,aswellasthenotestotheconsolidatedandseparatefinancialstatements,includingasummaryofsignificantaccountingpolicies.

2. Inmyopinion,exceptforthepossibleeffectsofthematterdescribedinthebasisforqualifiedopinionsectionofmyreport,theconsolidatedandseparatefinancialstatementspresentfairly,inallmaterialrespects, theconsolidatedandseparatefinancialpositionofPrasaand itssubsidiariesasat31March2017,andtheirfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithSouthAfricanStatementsofGenerallyAcceptedAccountingPractice(SAStatementsofGAAP)andtherequirementsofthePublicFinanceManagementAct,1999(Act1of1999)(PFMA).

Basis for qualified opinion

Irregularandfruitlessandwastefulexpenditure

3. Section 55(2)(b)(i) of the PFMA requires the entity to disclose in a note to the separate andconsolidatedfinancialstatementsparticularsofallirregularandfruitlessandwastefulexpenditurethathasoccurredduringthefinancialyear.ThePRASAgroupdidnothaveanadequatesystemfor identifyinganddisclosingall irregularand fruitlessandwastefulexpenditureand therewerenosatisfactoryalternativeproceduresthatIcouldperformtoobtainreasonableassurancethatallirregularandfruitlessandwastefulexpenditurehadbeenproperlyrecordedinnotes42and41totheseparateandconsolidatedfinancialstatements.

4. Consequently,IwasunabletodeterminethefullextentoftheadjustmentnecessarytothebalanceofirregularexpenditurestatedatR19,6billion(2016:R14,8billion)fortheentityandR20,3billion(2016:R15,3billion)forthegroupinnote42andfruitlessandwastefulexpenditureincurredasaresultofpaymentsmadewherethevaluederivedcouldnotbejustifiedasstatedatR988million(2016:R806,7million)fortheentityandR992,2million(2016:807,5million)forthegroupinnote41.

Context for the opinion

5. I conducted my audit in accordance with the International Standards on Auditing (ISAs). Myresponsibilitiesunderthosestandardsarefurtherdescribedintheauditor-general’sresponsibilitiesfortheauditoftheconsolidatedandseparatefinancialstatementssectionofmyreport.

6. I am independent of the group in accordance with the International Ethics Standards Boardfor Accountants’ Code of ethics for professional accountants (IESBA code) together with theethicalrequirementsthatarerelevanttomyauditinSouthAfrica.IhavefulfilledmyotherethicalresponsibilitiesinaccordancewiththeserequirementsandtheIESBAcode.


7. IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyqualifiedopinion.

Material uncertainty related to going concern 8. Idrawattention tonote43 in thefinancialstatements,which indicates that theentityandgroup

incurredanetlossofR1,5billionandR928millionrespectively,duringtheyearended31March2017.Whilethegroup’scurrentassetsexceededcurrentliabilitiesbyR3,3billion,themajorityofcashreservesarecommittedforcapitalexpenditure.Asstatedinnote43,theseeventsorconditions,alongwithothermatterssetforthinNote43,indicatethatamaterialuncertaintyexiststhatmaycastsignificantdoubtonthegroup’sabilitytocontinueasagoingconcern.Myopinionisnotmodifiedinrespectofthismatter.

Emphasis of matters

9. Idrawattentiontothemattersbelow.Myopinionisnotmodifiedinrespectofthesematters.

Restatement of corresponding figures

10.Asdisclosedinnote39tothefinancialstatements,thecorrespondingfiguresfor31March2016havebeenrestatedasaresultoferrorsinthefinancialstatementsofthepublicentityat,andfortheyearended,31March2017.

Significant uncertainty relating to litigation matters

11.Asdisclosedinnotes5and40tothefinancialstatements,thepublicentitywastheapplicantinalawsuitrelatedtothepurchaseof locomotives.Theultimateoutcomeofthismattercouldnotbedeterminedatthetimeofthisreportasthecourtjudgementiscurrentlyunderappeal.

Material prepayment for capital assets

12.Asdisclosed innote5 to thefinancialstatements,materialprepayments forcapitalexpenditureincludeprepaymentsofR1,9billionrelatingtothepurchaseofnewlocomotivesandR8,6billionforthenewrollingstock(fleetrenewalprogramme).

Material capital commitments

13.Included innote33 to thefinancial statements isR66,3billion relating toacommitment for thepurchaseofrollingstock(fleetrenewalprogramme).

Other matter

14.Idrawattentiontothematterbelow.Myopinionisnotmodifiedinrespectofthismatter.

Instability in the public entity

15.Section24oftheLegalSuccessiontotheSouthAfricanTransportServicesAct,1989(Actno.9of1989)(LegalSuccessionAct)prescribesthemembershipoftheboardofcontrolofPrasa.SincetheresignationoftherepresentativefromtheNationalTreasuryinNovember2016,theboardof


controldidnotcomplywiththerequirementsoftheLegalSuccessionActandwasnotappropriatelyconstituted.

Responsibilities of the accounting authority for the financial statements

16.Theboardofcontrol,whichconstitutestheaccountingauthorityisresponsibleforthepreparationand fair presentation of the consolidated and separate financial statements in accordancewithSAStatementsofGAAPandtherequirementsofthePFMA,andforsuchinternalcontrolastheaccountingauthoritydetermines isnecessary toenable thepreparationof theconsolidatedandseparatefinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

17.In preparing the consolidated and separate financial statements, the accounting authority isresponsibleforassessingthegroup’sabilitytocontinueasagoingconcern,disclosing,asapplicable,matters relating to going concern and using the going concern basis of accounting unless theaccountingauthorityeitherintendstoliquidatethepublicentityortoceaseoperations,orhasnorealisticalternativebuttodoso.

Auditor-general’s responsibilities for the audit of the consolidated and separate financial statements

18.Myobjectivesaretoobtainreasonableassuranceaboutwhether theconsolidatedandseparatefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,and to issueanauditor’s report that includesmyopinion.Reasonableassurance isahigh levelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorinaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedandseparatefinancialstatements.

19.Afurtherdescriptionofmyresponsibilitiesfortheauditoftheconsolidatedandseparatefinancialstatementsisincludedintheannexuretotheauditor’sreport.

Report on the audit of the annual performance report

Introduction and scope

20.InaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA)andthegeneralnoticeissuedintermsthereofIhavearesponsibilitytoreportmaterialfindingsonthereportedperformanceinformationagainstpredeterminedobjectivesforselectedobjectivespresentedintheannualperformancereport.Iperformedprocedurestoidentifyfindingsbutnottogatherevidencetoexpressassurance.

21.Myproceduresaddressthereportedperformanceinformation,whichmustbebasedontheapprovedperformanceplanningdocumentsofthepublicentity.Ihavenotevaluatedthecompletenessandappropriatenessoftheperformanceindicatorsincludedintheplanningdocuments.Myproceduresalsodidnotextendtoanydisclosuresorassertionsrelatingtoplannedperformancestrategiesandinformationinrespectoffutureperiodsthatmaybeincludedaspartofthereportedperformanceinformation.Accordingly,myfindingsdonotextendtothesematters.


22.Ievaluatedtheusefulnessandreliabilityofthereportedperformanceinformationinaccordancewiththecriteriadevelopedfromtheperformancemanagementandreportingframework,asdefinedinthegeneralnotice,forthefollowingselectedobjectivespresentedintheannualperformancereportofthepublicentityfortheyearended31March2017:

Objectives Pages in the annual performance report1.2Runningthebusiness 26-321.3Changingthebusiness 33-361.4Securingthebusinessofthefuture 37-39

23.Iperformedprocedurestodeterminewhetherthereportedperformanceinformationwasproperlypresented and whether performance was consistent with the approved performance planningdocuments.Iperformedfurtherprocedurestodeterminewhethertheindicatorsandrelatedtargetsweremeasurableandrelevant,andassessedthereliabilityofthereportedperformanceinformationtodeterminewhetheritwasvalid,accurateandcomplete.

24.Thematerialfindingsinrespectoftheusefulnessandreliabilityoftheselectedobjectivesareasfollows:

Objective 1.4: Securing the business of the future

Indicator:SpendingonBlackWomenOwnedCompanies

25.Thereportedachievementforthetarget,ofBetweenR1.1bntoR1.2bnwasmisstatedastheevidenceprovidedindicatedanachievementofanestimatedamountofR852million,andnotR1,3billionasreported.

26.Ididnotidentifyanymaterialfindingsontheusefulnessandreliabilityofthereportedperformanceinformationforthefollowingobjectives:

• Objective1.2:Runningthebusiness• Objective1.3:Changingthebusiness

Other matters

27.Idrawattentiontothemattersbelow.

Achievement of planned targets

28.Refertotheannualperformancereportonpages24to39forinformationontheachievementofplannedtargetsfortheyearandexplanationsprovidedfortheunder/overachievementofanumberoftargets.Thisinformationshouldbeconsideredinthecontextofthefindingsexpressedontheusefulnessandreliabilityofthereportedperformanceinformationinparagraphs23and24ofthisreport.

Adjustment of material misstatements

29.Iidentifiedmaterialmisstatementsintheannualperformancereportsubmittedforauditing.ThesematerialmisstatementswereonthereportedperformanceinformationoftheRunningthebusiness


objective.Asmanagementsubsequentlycorrectedthesemisstatements,Ididnotraiseanymaterialfindingson theusefulnessandreliabilityof thereportedperformance informationrelating to thisobjective.

Report on audit of compliance with legislation

Introduction and scope

30.InaccordancewiththePAAandthegeneralnoticeissuedintermsthereofIhavearesponsibilitytoreportmaterialfindingsonthecomplianceofthepublicentitywithspecificmattersinkeylegislation.Iperformedprocedurestoidentifyfindingsbutnottogatherevidencetoexpressassurance.

31.Thematerialfindingsoncompliancewithspecificmattersinkeylegislationsareasfollows:Annualfinancialstatements

32.Financialstatementswerenotsubmittedforauditingwithintwomonthsaftertheendoffinancialyear,asrequiredbysection55(1)(c)(i)ofthePFMA.

33.Thefinancialstatementssubmittedforauditingwerenotpreparedinaccordancewiththeprescribedfinancialreportingframeworkandsupportedbyfullandproperrecords,asrequiredbysection55(1)(a)and(b)ofthePFMA.

Material misstatements of disclosure items identified by the auditors in the submitted financialstatements were corrected and the supporting records were provided subsequently, but theuncorrectedmaterialmisstatementsresultedinthefinancialstatementsreceivingaqualifiedauditopinion.

ExpenditureManagement

34.Effective steps were not taken to prevent irregular, and fruitless and wasteful expenditure, asrequiredbysection51(1)(b)(ii)ofthePFMA.Theexpendituremainlyresultedfromnon-compliancewithlegislativeprescriptsandentitypolicies.Theirregularandfruitlessandwastefulexpendituredisclosedinnotes42and41doesnotreflectthefullextentoftheirregularandfruitlessandwastefulexpenditureincurredasindicatedinthebasisforqualificationparagraphs.

Procurementandcontractmanagement

35.Goods,worksorservicewerenotprocuredthroughaprocurementprocesswhichisfair,equitable,transparentandcompetitive,asrequiredbysection51(1)(a)(iii)ofthePFMAandSection217oftheConstitutionoftheRepublicofSouthAfrica.Thisincludedinstanceswhere:• supplychainmanagementprocesseswerenotfollowedwhenprocuringservicesfromsuppliers• professionalservicesweresourcedfromapanel thatdidnotcomplywith therequirementsofPRASA’ssupplychainmanagementpolicy

• contractswere issued in excess of the contract period stipulated onPRASA’s supply chainmanagementpolicy

• paymentsweremadetosupplierswithoutavalidcontract• contractswereawardedtosuppliersbasedondeviationsthatwerenotrecordedandapprovedbythedelegatedauthority

• somedeviations from thesupplychainmanagementpolicywereapprovedby thedelegated


officialseventhoughitwasnotimpracticaltofollowtheprocessstipulatedbythepolicy• goodsandserviceswereprocuredthroughaquotationprocessinsteadofatenderprocess.

36.ThepreferentialpointsystemwasnotappliedinallprocurementofgoodsandservicesaboveR30000,asrequiredbysection2(a)ofthePreferentialProcurementPolicyFrameworkAct.

37.Contractswere awarded to and quotations accepted from bidders based on preferential pointsthat were not allocated and calculated in accordancewith the requirements of the PreferentialProcurementPolicyFrameworkActanditsregulations.

38.Contractswereawardedtobiddersthathadnotscoredthehighestpointsintheevaluationprocess,asrequiredbysection2(1)(f)ofPreferentialProcurementPolicyFrameworkActandPreferentialprocurementregulations.

39.ConstructioncontractswereawardedtocontractorsthatwerenotregisteredwiththeConstructionIndustryDevelopmentBoard(CIDB)anddidnotqualifyforthecontractinaccordancewithsection18(1)oftheCIDBActandCIDBregulations17and25(7A).

ConsequenceManagement

40.DisciplinarystepswerenottakenagainstofficialswhohadincurredorpermittedirregularexpendituretoR5,3billionidentifiedinprioryears,asrequiredbysection51(1)(e)(iii)ofthePFMA.

Other information

41.Prasaanditssubsidiaries’accountingauthorityisresponsiblefortheotherinformation.Theotherinformationcomprisestheinformationincludedintheannualreport.Theotherinformationdoesnotincludetheconsolidatedandseparatefinancialstatements,theauditor’sreportthereonandthoseselectedobjectivespresentedintheannualperformancereportthathavebeenspecificallyreportedonintheauditor’sreport.

42.MyopiniononthefinancialstatementsandfindingsonthereportedperformanceinformationandcompliancewithlegislationdonotcovertheotherinformationandIdonotexpressanauditopinionoranyformofassuranceconclusionthereon.

43.Inconnectionwithmyaudit,my responsibility is to read theother informationand, indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththeconsolidatedandseparatefinancialstatementsandtheselectedobjectivespresentedintheannualperformancereport,ormyknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.If,basedontheworkIhaveperformedontheotherinformationobtainedpriortothedateofthisauditor’sreport,Iconcludethatthereisamaterialmisstatementofthisotherinformation,Iamrequiredtoreportthatfact.

44.Ihavenotyet received theannual report.When Ido receive this information, if I conclude thatthereisamaterialmisstatementtherein,Iamrequiredtocommunicatethemattertothosechargedwithgovernanceandrequestthattheotherinformationbecorrected.IftheotherinformationisnotcorrectedImayhavetore-issuemyauditor’sreportamendedasappropriate.


Internal control deficiencies

45.Iconsideredinternalcontrolrelevanttomyauditoftheconsolidatedandseparatefinancialstatements,reportedperformanceinformationandcompliancewithapplicablelegislation;however,myobjectivewasnottoexpressanyformofassurancethereon.Themattersreportedbelowarelimitedtothesignificantinternalcontroldeficienciesthatresultedinthebasisforqualifiedopinion,thefindingsontheannualperformancereportandthefindingsoncompliancewithlegislationincludedinthisreport.

Leadership

46.Instabilityinvariouskeypositionswithinthepublicentity,includingtheboardofcontrol,negativelycontributed to the decline in the financialmanagement, performance reporting and complianceprocessesand theoverall collapseof the internalcontrolswithin thepublicentityasa resultofinadequateandineffectiveoversight.

47.Consequencemanagementwas not implemented in accordancewith the approved disciplinaryprocessesbyseniormanagementandcorrectiveactionwasnotmonitoredbytheaccountingauthorityresultinginpoorperformanceandrepeattransgressions.

48.Thereisaslowresponsebyseniormanagementtoreviewingandupdatingtheinformationtechnologystrategicplan,businesscontinuityplan,disasterrecoveryplanandgoverningpoliciesandproceduresto address the previously reported deficiencies. The inadequate controls within the informationtechnologyenvironmentovernetworkaccessandsecuritymanagementcontributedtothecollapseintheinternalcontrolenvironment.

Financialandperformancemanagement

49.Thefinancialstatementscontainedasignificantnumberofmaterialmisstatements.Thiswasmainlyduetoalackoffinancialdisciplineofstaffinvolvedinfinancialreporting,aninadequatefinancialstatementcloseprocessresultinginmaterialadjustmentsbeingprocessedlateintheauditprocessandaslowresponsebyseniormanagementinaddressingpreviouslyreporteddeficienciestoensurecrediblefinancialstatementsarecompiled.

50.Thedocumentssupportingthefinancialstatementsarenotinallinstancesproperlyfiledandeasilyretrievableduetoaninadequatedocumentmanagementsystem.Despitethismatterbeingraisedrepeatedly during previous audit cycles it has remained unaddressed and has worsened. Thesignificantdelayswiththesubmissionofinformationhasnegativelyimpactedtheauditprocess

Otherreports

51.Idrawattentiontothefollowingengagementsconductedbyvariouspartiesthathad,orcouldhave,animpactonthemattersreportedinthepublicentity’sfinancialstatements,reportedperformanceinformation,compliancewithapplicablelegislationandotherrelatedmatters.Thesereportsdidnotformpartofmyopinionon thefinancialstatementsormyfindingson thereportedperformanceinformationorcompliancewithlegislation.

Investigations

52.The accounting authority commissioned a forensic investigation by an independent firm intoprocurementmattersincludingthosepreviouslyreportedonbytheAuditor-Generalduringthe2014-


15audit,andthePublicProtector.Theinvestigationwascompletedandthefinalreportissuedon31July2017.

53.The Public Protector issued her report on allegations of financial mismanagement and tenderirregularitiesbetween2010and2012inAugust2015.Assomemattersregardingtheseallegationswerenotfinalisedwhenthereportwasissued,theinvestigationintotheremainingmattersisstillongoing.

54.BasedontheoutcomeofthePublicProtector’sAugust2015report,NationalTreasuryinstitutedaforensicinvestigationinaccordancewiththeremedialactionrecommendedbythePublicProtector.This investigation isstill inprogressanddraft reportshavebeen issued.Theoutcomeof theseinvestigationsmayalsohaveanimpactonPRASA’ssubsidiaries.

55.TheDirectorateforPriorityCrimeInvestigationiscurrentlyinvestigatingcasesreportedbyPrasaintermsofthePreventionandCombatingofCorruptActivitiesAct,2004(ActNo.12of2004).Theinvestigationhasbeenongoingsince2016.Theoutcomeof this investigationmayalsohaveanimpactonPrasa’ssubsidiaries.

Placeofsigning

Dateofsigning


Annexure – Auditor-general’s responsibility for the audit

1. Aspartofanaudit inaccordancewiththeISAs,Iexerciseprofessional judgementandmaintainprofessionalscepticismthroughoutmyauditoftheconsolidatedandseparatefinancialstatements,andtheproceduresperformedonreportedperformanceinformationforselectedobjectivesandonthepublicentity’scompliancewithrespecttotheselectedsubjectmatters.

Financial statements

2. Inadditiontomyresponsibilityfortheauditoftheconsolidatedandseparatefinancialstatementsasdescribedintheauditor’sreport,Ialso:• identifyandassesstherisksofmaterialmisstatementoftheconsolidatedandseparatefinancialstatementswhetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisformyopinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

• obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessofthepublicentity’sinternalcontrol.

• evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebytheboardofcontrol,whichconstitutestheaccountingauthority.

• concludeontheappropriatenessoftheboardofcontrol,whichconstitutestheaccountingauthority’suseofthegoingconcernbasisofaccountinginthepreparationofthefinancialstatements.Ialsoconclude,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtonPrasaanditssubsidiariesabilitytocontinueasagoingconcern.IfIconcludethatamaterialuncertaintyexists,Iamrequiredtodrawattentioninmyauditor’s report to the relateddisclosures in thefinancialstatementsabout thematerialuncertaintyor,ifsuchdisclosuresareinadequate,tomodifytheopiniononthefinancialstatements.Myconclusionsarebasedontheinformationavailabletomeatthedateoftheauditor’sreport.However,futureeventsorconditionsmaycausethepublicentitytoceasetocontinueasagoingconcern.

• evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthedisclosures,andwhetherthefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

• obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithinthegrouptoexpressanopinionontheconsolidatedfinancialstatements.Iamresponsibleforthedirection,supervisionandperformanceofthegroupaudit.Iremainsolelyresponsibleformyauditopinion.

Communication with those charged with governance

3. Icommunicatewiththeaccountingauthorityregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatIidentifyduringmyaudit.

4. IalsoconfirmtotheaccountingauthoritythatIhavecompliedwithrelevantethicalrequirementsregardingindependence,andcommunicateallrelationshipsandothermattersthatmayreasonablybethoughttohaveabearingonmyindependenceandereapplicable,relatedsafeguards.


0673 Financial Information

77 Notes to the consolidated financial

statements for the year ended 31

March 2016

FINANCIAL INFORMATION


Financial Information

Entity Group

2016 2017 2017 2016

R’000 R’000 Notes R’000 R’000

Restated Assets Restated

48 317 965 53 120 076 Non-current assets 53 454 373 48 081 452

32 084 029 36 515 681 Property, plant and equipment 4 36 849 825 32 603 548

9 570 413 10 442 341 Prepayment for capital expenditure 5 10 442 341 9 570 413

409 284 392 862 Intangible assets 6 393 015 409 496

3 370 516 3 872 565 Investment property 7 3 872 565 3 370 516

2 121 472 1 893 800 Operating lease receivable 8 1 893 800 2 121 472

6 007 2 827 Defined benefit plan assets 18 2 827 6 007

756 244 - Investment/loan in/to subsidiaries 9 - -

7 342 816 13 412 778 Current assets 13 506 536 7 281 394

574 626 506 355 Trade and other receivables 10 556 568 460 979

282 694 438 553 Inventories 11 453 898 297 391

406 205 153 529 Prepayment for capital expenditure 5 153 529 406 205

6 079 291 12 314 341 Cash and cash equivalents 12 12 342 541 6 116 819

55 660 781 66 532 854 Total assets 66 960 909 55 362 846

EQUITY AND LIABILITIES

1 563 193 14 362 Total equity attributable to equity holders of the Entity

84 265 1 011 778

4 248 258 4 248 258 Share capital 13 4 248 258 4 248 258

(2 685 065) (4 233 896) Accumulated loss (4 163 993) (3 236 480)

45 708 249 56 631 334 Non-current liabilities 56 688 767 45 849 677

561 353 703 658 Provision for claims 15 703 658 561 353

1 369 340 1 229 445 Operating lease deferred income 16 1 229 445 1 369 340

10 505 9 443 Employee benefit obligations 17 9 820 10 928

43 767 052 54 688 788 Capital subsidy and grants 19 54 745 844 43 908 056

8 389 339 9 887 158 Current liabilities 10 187 877 8 501 391

- - Loans and borrowings 14 - 1 518

184 829 294 580 Provision for claims 15 294 580 184 829

1 267 1 152 Employee benefit obligations 17 1 198 1 319

4 088 636 3 840 685 Capital subsidy and grants 19 3 912 098 4 140 337

4 114 606 5 750 741 Trade and other payables 20 5 980 001 4 173 388

55 660 781 66 532 854 Total equity and liabilities 66 960 909 55 362 846

PASSENGER RAIL AGENCY OF SOUTH AFRICACONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2017


PASSENGER RAIL AGENCY OF SOUTH AFRICACONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2017

Entity Group

2016 2017 2017 2016

R’000 R’000 Notes R’000 R’000

Restated Restated

2 553 876 2 241 470 Revenue 2 877 710 3 270 593

568 916 561 146 Operating lease rental income 21,1 531 101 534 847

1 984 960 1 680 324 Fare revenue 22 2 346 609 2 735 746

4 866 160 5 081 666 Operational subsidy 23 5 180 454 4 925 105

3 382 610 3 323 463 Other income 3 433 088 3 493 593

3 222 907 3 140 275 Capital subsidy and grants amortised 19 3 204 511 3 271 351

159 703 183 188 Sundry income 29 228 577 222 242

(8 377 164) (9 718 287) Operating expenses 27 (10 581 588) (9 211 587)

(2 485 197) (2 227 726) Depreciation and amortisation 25 (2 357 894) (2 537 967)

( 134 907) ( 167 693) De-recognition of assets 24 ( 187 081) ( 140 910)

( 751 155) ( 1 009 216) Impairment losses recognised 4, 9 ( 219 523) ( 751 155)

( 14 258) 220 730 Fair valuation of investment properties 7 220 730 ( 14 258)

5 986 ( 1 895) Actuarial gain/(loss) 26 ( 1 855) 6 071

( 954 049) (2 257 488) Loss before investment income and finance cost

(1 635 959) ( 970 515)

( 7 008) ( 9 731) Finance cost 30 ( 12 540) ( 9 730)

424 805 718 388 Finance income 31 720 986 426 599

( 536 252) (1 548 831) Loss before taxation (972 513) ( 553 646)

- - Taxation 32 - -

( 536 252) (1 548 831) Total comprehensive loss for the year (927 513) ( 553 646)


PASSENGER RAIL AGENCY OF SOUTH AFRICACONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2017

Entity Group

2016 2017 2017 2016

R’000 R’000 Notes R’000 R’000

ORDINARY SHARE CAPITAL

4 248 258 4 248 258 Balance at the beginning of the year 13 4 248 258 4 248 258

4 248 258 4 248 258 Balance at the end of the year 4 248 258 4 248 258

ACCUMULATED LOSS

(2 148 813) (2 685 065) Balance at the beginning of the year restated

39.1.1 (3 236 480) (2 682 834)

( 536 252) (1 548 831) Loss for the year restated (927 513) ( 553 646)

( 295 235) Loss for the year March 2016 ( 312 411)

( 110 428) Depreciation on late capitalisation of assets

( 110 428)

( 156 153) Reversal due to take on assets recognised in error in prior year

( 156 153)

156 153 Reversal due to take on assets recognised in error in prior year

156 153

70 022 Depreciation on late capitalisation of assets

70 022

- Accrual for prior year ( 218)

( 9 753) Assets vandalised ( 9 753)

( 27 148) Correction on straight lining of leases ( 27 148)

( 156 790) Correction on revaluation of investment property

( 156 790)

( 5 987) Correction on rental income ( 5 987)

( 933) Costs previously stated as Work in Progress to be expensed

( 933)

(2 685 065) (4 233 896) Balance at the end of the year (4 163 993) (3 236 480)

1 563 193 14 362 Total equity attributable to equity holders of the Entity

84 265 1 011 778



PASSENGER RAIL AGENCY OF SOUTH AFRICACONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2017

Entity Group

2016 2017 2017 2016

R’000 R’000 Notes R’000 R’000

Cash flow from operating activities

( 792 807) (2 114 155) Operating cash flows before working capital changes

34.1 (2 198 670) ( 802 616)

(1 470 584) ( 939 263) Changes in working capital 34.1 ( 931 715) (1 403 832)

(2 263 391) (3 053 418) Cash utilised from operations (3 130 385) (2 206 448)

424 805 718 388 Finance income 31 720 986 426 599

( 5 945) ( 8 724) Finance cost 30 ( 11 520) ( 6 296)

(1 844 531) (2 343 754) Net cash used from operating activities (2 420 919) (1 786 145)

Cash flow from investing activities

(4 134 335) (3 948 527) Acquisition of property, plant and equipment

34.2 (3 949 988) (4 136 509)

(2 784 633) ( 908 731) Prepayment for capital expenditure 5 ( 908 731) (2 784 633)

( 44 412) ( 25 873) Acquisition of intangible asset 6 ( 25 874) ( 44 511)

( 121 970) ( 281 336) Acquisition of investment property 7 ( 281 336) ( 121 970)

( 4 036) (70 789) Increase in loans to subsidiaries 9 - -

(7 089 386) (5 235 256) Net cash used in investing activities (5 165 929) (7 087 623)

Cash flow from financing activities

- - Repayment of loans and borrowings 14 ( 1 490) ( 49 020)

13 355 887 13 814 060 Capital subsidy and grants received 19 13 814 060 13 355 887

13 355 887 13 814 060 Net cash flow from financing activities 13 812 570 13 306 867

4 421 970 6 235 050 Net increase in cash and cash equivalents 6 225 722 4 433 099

1 657 321 6 079 291 Cash and cash equivalents at the begin-ning of the year

6 116 819 1 683 720

6 079 291 12 314 341 Cash and cash equivalents at the end of the year 12 12 342 541 6 116 819


PASSENGER RAIL AGENCY OF SOUTH AFRICANOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

1 Corporate information

The Passenger Rail Agency of South Africa (PRASA) is governed by the Legal Succession to the South African Transport Services Act No 9 of 1989 as amended by Act No 38 of 2008. The consolidated financial statements of the Group for the year ended 31 March 2017 comprise of the Entity and its subsidiaries (together referred to as “the Group”).

2 Accounting policies

The accounting policies set out below have been applied, in all material respects, consistently to all periods presented in these consolidated financial statements, and have been applied consistently by all Group entities.

2,1 Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for certain assets and liabilities which are measured at fair value as set out in the accounting policies below. The financial state-ments are prepared on the going concern basis. PRASA performs a public function in the public interest in rela-tion to the provision of rail transportation to the South African public. The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. A going concern analysis conducted indicates that the forecasted cash flow analysis will be sufficient to cover the current expenditure trends pertain-ing to the 2017/18 period.

2.1.1 Basis of consolidation

The financial statements of the subsidiaries are prepared for the same reporting period as PRASA. The account-ing framework and basis of preparation for Intersite is the same but Autopax comply with IFRS. There are no significant difference that had to be accounted for.

2.2 Statement of compliance

The consolidated financial statements have been prepared in accordance with Statements of Generally Accepted Accounting Practice (GAAP),as prescribed by the Accounting Standards Board, the Public Finance Management Act, 1999 (Act No 1 of 1999) and specific regulations issued by National Treasury.

2.2.1 Financial viability

Current assets exceed current liabilities by R3.3 billion. Should the short term portion of deferred income of R3.9 billion be excluded as part of current liabilities as it is not a true liability which involves a contractual agreement to deliver cash or another financial asset, the current assets then exceed current liabilities by R7.2 billion. PRASA will be able to deliver on its mandate in delivering commuter and passenger services over the next twelve months.

2.3 Functional and presentation currency

The consolidated financial statements are presented in South African Rand, which is the Group’s functional cur-rency. All financial information presented in Rand has been rounded to the nearest thousand.



2.4 Use of estimates and judgments

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets, liabilities, revenue, expenditure and disclosure items that are not readily apparent from other sources. The estimates and associated assumptions are based on historical ex-perience and other factors that are considered to be relevant. The resulting estimates may differ from the actual results. The estimates and underlying assumptions are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimates are revised and any future periods affected. The use of inaccurate assumptions in calculations for any of these estimates could result in a significant impact on financial results in future periods.

Estimates and assumptions

Information about critical judgements in applying accounting policies that have the most significant effect on the consolidated financial statements are included in the following notes:

• Note 8: Operating lease receivable

• Note 16: Operating lease deferred income

The estimates and assumptions about critical judgements that have a significant risk of causing a material ad-justment to the carrying amounts of assets and liabilities are included in the following notes:

• Note 4: Property, plant and equipment

• Note 7: Investment Properties

• Note 15: Provision on Claims

• Note 17: Employee Benefit Obligations

• Note 18: Defined Benefit Plan Assets

2.4.1 Gain on fair valuation of investment property

During the year under review a gain of R220.7 million (2016: (R14.3) million) was realised through the statement of comprehensive income due to the fair valuation on investment property. (Refer Note 7). The value of investment properties has been determined using the comparable sales method as well as capitalisation of net income meth-od. These methods are deemed appropriate for valuing both vacant and leased properties.

3 Basis of consolidation

3.1 Subsidiaries

Subsidiaries are those entities over which the Group has the power to exercise control, so as to obtain benefits from their activities. In assessing control, potential voting rights that are presently exercisable are taken into account. The consolidated financial statements incorporate the assets, liabilities and results of the operations of the Group and its subsidiaries. Results of subsidiaries are included from the acquisition date until the disposal date. Inter-company transactions, balances and unrealised gains and losses are eliminated on consolidation. The investment in subsidiaries in the Entity’s separate financial statements is carried at cost less impairment losses.

3.2 Property, plant and equipment

3.2.1 Recognition and measurement of owned assets

An item of property, plant and equipment is recognised as an asset if:

• it is probable that future economic benefits will flow to the Group; and

• the asset has a cost, or other determined value which can be measured reliably.

PASSENGER RAIL AGENCY OF SOUTH AFRICANOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017 (Countined)


Property, plant and equipment is initially measured at cost, including all directly attributable costs necessary to bring the asset to its required working condition for its intended use. Subsequently property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment in value. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Property, plant and equipment cease to be recognised when it is disposed of or permanently withdrawn from use or when no future economic benefits are expected from its use or disposal. Gains and losses arising from the retirement or disposal of property, plant and equipment are deter-mined as the difference between the net disposal proceeds and carrying amount of the assets and are recognised as income or expenses in the statement of comprehensive income. The depreciation method used reflects the pattern in which the assets’ future economic benefits are expected to be consumed by the Group.

3.2.2 Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other costs are recognised in the statement of comprehensive income as an expense when incurred.

3.2.3 Prepayments

Payment made up front to a supplier prior to and during construction of the asset is capitalised as a prepayment under long-term assets. The amount for assets expected to be delivered in the new financial year will be classi-fied to current assets. Once construction of the asset is complete and delivered to PRASA, and meets the organ-isations quality standards, the prepayment is de-recognised and transferred to property, plant and equipment.

3.2.4 Depreciation

Property, plant and equipment are depreciated using the straight line method over their useful lives taking into account residual values, where appropriate. The remaining useful lives of the assets and residual values are as-sessed annually and may vary depending on a number of factors. In re-assessing remaining useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Resid-ual value assessments consider issues such as expected future market conditions, the remaining life of the asset and projected disposal values. Depreciation on all property, plant and equipment commences from the month the items are available for use. Depreciation is recognised on a straight-line basis to write off the cost of assets to their residual values over the following estimated useful lives. Land is not depreciated as it is deemed to have an indefinite life. Depreciation ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised. The depreciation charge for each period is recognised in the statement of comprehensive income.

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appro-priate. If expectations differ from previous estimates, the changes are accounted for as a change in accounting estimates. During the year under review the estimate of the useful lives of buses was not changed (2016: changed from 8 years to 10 years). This represents a change in estimate and therefor no adjustments were required for prior year figures. The estimated useful lives of items of property, plant and equipment are as follows: ;

Asset class Useful life

• Facilities and leasehold improvements 3 to 50 years

• Rolling stock

- Undercarriages 33 to 40 years

- Components 10 to 40 years

• Network assets 5 to 149 years

• Moveable assets and workshop equipment 3 to 10 years

• Buses and vehicles 3 to 10 years

Depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated.

Financial InformationPASSENGER RAIL AGENCY OF SOUTH AFRICA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017 (Countined)


Assets under construction represent work in progress and are transferred to the appropriate category of assets on receipt of completion certificates, when the asset is available for use. Depreciation commences on the first day of the month of transfer.

3,3 Intangible assets

3.3.1 Recognition and measurement of owned assets

Intangible assets are initially measured at cost. Cost includes its purchase price, including import duties, non-re-fundable purchase taxes, after deducting trade discounts and rebates and any directly attributable cost of prepar-ing the asset for its intended use. An intangible asset is recognised if, and only if, it is probable that the expected future economic benefits that are attributable to the intangible asset will flow to the Group and the cost of the in-tangible asset can be measured reliably. Internally generated goodwill is not recognised as an asset. Expenditure on an intangible item that was initially recognised as an expense is not recognised as part of the cost of an intan-gible asset at a later date. After initial recognition, intangible assets are carried at their cost less any accumulated amortisation and any accumulated impairment losses. Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised as an expense when it is incurred. Gains and losses arising from the retirement or disposal of intangible assets are determined as the difference between the net disposal proceeds and carrying amount of the assets and are recognised as income or expenses in the statement of comprehensive income.

Development costs of intellectual property or copyrights are recognised as an asset if, and only if, the Group can demonstrate all of the following:

• technical feasibility of completing the intangible asset so that it will be available for use or sale;

• the intention to complete the intangible asset and use or sell it;

• the ability to use or sell the intangible asset;

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;

• how the intangible asset will generate future economic benefits; and

• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Intangible assets are derecognised on disposal or when no future economic benefits are expected from its use or disposal.


Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the spe-cific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in the statement of comprehensive income as incurred.

3.3.3 Amortisation

Intangible assets are amortised using the straight line method. Amortisation commences when the asset is avail-able for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Amortisation ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised. The amortisation charge for each period is recognised in state-ment of comprehensive income.

The useful life and amortisation period of intangible assets are reviewed at each reporting date and adjusted if ap-propriate. If expectations differ from previous estimates, the changes are accounted for as a change in accounting estimates. The estimated useful lives are as follows:

Asset class Useful life

Copyright 20 years

Software 1 to 10 years



3,4 Investment property

3.4.1 Recognition and measurement of investment property

“Investment properties (properties that are not owner occupied) are property held to earn rentals or for capital appreciation or both. An investment property is recognised if, and only if, it is probable that the expected future economic benefits that are attributable to the investment property will flow to the Group and the cost of the investment property can be measured reliably. Investment properties are measured initially at cost. The cost of a purchased investment property comprises its purchase price, any directly attributable expenditure and transaction costs. After initial recognition, investment properties are measured at fair value which reflects the market condition at balance sheet date. Fair value is based on valuation performed by appointed independent registered valuer(s) taking into account factors such as the property growth and market in the surrounding area. The fair value of the investment properties reflects the market conditions at the balance sheet date. Fair value is determined without any deduction for transaction costs that may occur on sale or other disposal. A gain or loss arising from a change in fair value of investment property is recognised in the statement of com-prehensive income for the period in which it arises

3.4.2 Disposal of investment property

On disposal of an investment property, or when it is permanently withdrawn from use and future economic benefits are no longer expected from the property concerned, it will be derecognised. The difference between the net disposal proceeds and the carrying value is recognised as a gain or loss in the statement of compre-hensive income in the period of the retirement or disposal. Compensation from third parties for investment property that was impaired, lost or given up is recognised in the statement of comprehensive income when the compensation becomes receivable.

3.4.3 Transfers

Transfer to or from investment property will be made when there is a change in use of the property. The commencement of owner-occupation of an investment property would result in a transfer of the investment property to Property, Plant and Equipment. Similarly, the end of owner-occupation of a property would result in a transfer from Property, Plant and Equipment to Investment Properties. Transfer from investment property which is carried at fair value to self-occupied property, the fair value of the property at the date of change in use would be treated as deemed cost of the property for subsequent accounting purposes. For a transfer from property, plant and equipment to an investment property it will be carried at fair value. The accounting policy on property, plant and equipment is applied up to the date of change in use. Any resulting change in the carry-ing amount of the property is recognised in the statement of comprehensive income.


The Group recognises in the carrying amount of an item of investment property the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other costs are recognised in the statement of comprehensive income as an expense when it is incurred.




3.5 Impairment of assets

3.5.1 Non-financial assets

The carrying amounts of the Group’s non-financial assets other than inventory are reviewed at each reporting date to determine whether there is any indication that an asset may be impaired. In assessing whether there is any indication that an asset may be impaired, the Group considers both internal and external sources of information. If there is any indication that an asset may be impaired, its recoverable amount is estimated. The recoverable amount of the asset is the higher of its fair value less costs to sell and its value in use. The best evidence of an asset’s fair value less costs to sell is a price in a binding sale agreement in an arm’s length transaction, adjusted for incremental costs that would be directly attributable to the disposal of the asset. If there is no binding sale agreement but an asset is traded in an active market, fair value less costs to sell is the asset’s market price less the costs of disposal. If there is no binding sale agreement or active market for an asset, fair value less costs to sell is based on the best information available to reflect the amount that an entity could obtain, at the end of the reporting period, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. Costs of disposal, other than those that have been recognised as liabilities, are deducted in determining fair value less costs to sell. In as-sessing value in use, the expected future cash flows from the asset are discounted to their present value using a pre-taxation discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised immediately in the statement of comprehensive income if the carrying amount of an asset exceeds its recoverable amount. After the recognition of an impairment loss, the depreciation (amortisation) charge for the asset is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life. A previously recognised impairment loss is reversed if there is an indication that the impairment loss may no longer exist and the recoverable amount increases as a result of a change in the estimates used to determine the recoverable amount. The increased carrying amount shall not exceed the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior years. The reversal is recognised in the statement of comprehensive income. After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the asset is adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.

3.6 Inventories

Inventories are assets held for sale in the ordinary course of business, assets in the process of production for such sale or assets in the form of materials or supplies to be consumed in the production process or in the rendering of services. Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inven-tories to their present location and condition. Costs of inventories are measured using the weighted average cost formula. The amount of any write-down of inventories to net realisable value and all losses of inventories is recognised as an expense in the period the write-down or loss occurs. The amount of any reversal on any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

3.7 Provisions

A provision is recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made on the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The discount rate does not reflect risks for which future cash flow estimates have been adjusted. Future events that may affect the amount required to settle an obligation are reflected in the amount of a provision where there is sufficient objective evidence that they will occur. Gains from the expected disposal of assets are not taken into account in measuring a provision. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimburse-ment is recognised when, and only when, it is virtually certain that reimbursement will be received if the Group settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reim-bursement may not exceed the amount of the provision. Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as finance costs. A provision is reversed to the extent that it is no longer probable that a future outflow of economic benefits will be required to settle the obligation. Provisions are reviewed at the end of each financial year and are adjusted to reflect current best estimates.



3.8 Revenue recognition

Revenue is recognised when it is probable that future economic benefits will flow to the Group and these bene-fits can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.

3.8.1 Fare revenue

Revenue from the rendering of passenger services is recognised in the statement of comprehensive income in the period the service is rendered by reference to the stage of completion of the transaction at the end of the reporting period. It comprises of transport services to train or bus commuters for passenger and long distance journeys rendered during the period.

3.8.2 Operating lease income

Revenue from property management activities is recognised as income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which the usage from the leased asset is diminished. Initial direct costs incurred in negotiating and arranging an operating lease is add-ed to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. Recoveries of operating costs (for example, rates and taxes, water and electricity) are recognised as income, as the costs are charged to lessees and are also included in Revenue (refer note 3.16).

3.9 Finance income

Interest income is recognised in the statement of comprehensive income as it accrues, using the effective interest method.

3.9.1 Government grants and subsidy

Government grants are recognised in the statement of comprehensive income on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to com-pensate. Where grants and subsidies relate to the purchase of property, plant and equipment they are classi-fied as non-current liabilities and are recognised on a systematic basis, as income over the periods necessary to match them with the costs for which they are intended to compensate. Other government grants that are receivable as compensation for expenses or losses incurred or for the purpose of giving immediate financial support to the entity with no future related costs are recognised in the statement of comprehensive income in the period in which they become receivable. Grants received for acquisition of non-depreciable assets will be released to comprehensive income statement on impairment or disposal of the asset. Subsidy received from Government for bus commuter services rendered is kilometre based, per contractual arrangement to operate commuter passenger services on specific routes per defined timetables. Revenue from Government subsidy is recognised when the service that it relates to has been rendered.

3.10 Financing costs

Financing costs comprise interest payable on borrowings and trade payables calculated using the effective interest method and unwinding of discount. The interest expense component of finance lease payments is rec-ognised in statement of comprehensive income using the effective interest method. All other borrowing costs are recognised in the statement of comprehensive income in the period in which they are incurred.

3.11 Leases

The determination of whether an arrangement, is or contains a lease is based on the substance of the arrange-ment and requires an assessment of whether:• the fulfilment of the arrangement is dependent on the use of the specific asset or assets; and • the arrangement contains a right to use the asset(s) A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards inci-dental to ownership. The Group considers the substance of a transaction rather than the form of the lease contract. Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern of the user’s benefit. Assets held by the Group under leases which transfer to the Group sub-stantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. At inception of an arrangement, the Group determines whether such an ar-rangement is or contains a lease. This will be the case if the following two criteria are met:




• the fulfilment of the arrangement is dependent on the use of the specific asset or assets; and

• the arrangement contains a right to use the asset(s)

At inception or on reassessment of the arrangement, the Group separate payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at the amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate. Lease assets are depreciated in terms of the ac-counting policy on property, plant and equipment stated above. Capitalised leased assets are depreciated over the shorter of the estimated useful life and the term of the lease.

Leases whereby private parties lease land from PRASA and then construct assets at their own cost for com-mercial purposes, are shown as operating lease income. After the arrangement period, the land and any in-frastructure constructed thereon revert back to PRASA. PRASA recognises the land as investment property as risks and rewards of ownership remain with PRASA. The residual amount of the infrastructure is recognised as a receivable and the deferred income are recognised as part of lease income in statement of comprehensive income over the period of the lease agreement.

3.12 Income taxation

Income taxation expense comprises current and deferred taxation.

3.12.1 Current taxation

PRASA is exempt from the payment of any taxation, transfer duty, stamp duty or levy that would have been payable (excluding customs and excise, and VAT), in terms of section 31(4) of the Legal Succession to the South African Transport Services Act No 9 of 1989, as amended by Act No 38 of 2008.

Intersite Asset Investments (SOC) Ltd (Intersite) and Autopax Passenger Services (SOC) Ltd (Autopax) are sub-sidiaries of the Group and are liable for taxation, therefore subject to the Income Tax Act. Income taxation is recognised in statement of comprehensive income except to the extent that it relates to items recognised di-rectly in equity, in which case it is recognised in equity. Current taxation is the expected taxation payable on the taxable income for the year, using taxation rates enacted or substantively enacted at the reporting date, and any adjustment to taxation payable in respect of previous years.

3.12.2 Deferred taxation

Deferred taxation is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxation is measured at the taxation rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred taxation is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred taxation assets and liabilities are offset if there is a legally enforceable right to offset current taxation liabilities and assets, and they relate to income taxes levied by the same taxation authority on the same taxable Group, or on different taxation entities, but they intend to settle current taxation liabilities and assets on a net basis or their taxation assets and liabilities will be realised simultaneously. A deferred taxation asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, and reviewed annually to assess probability of recovery.



3.13 Employee benefits

3.13.1 Short-term employee benefits

The cost of all short-term employee benefits is recognised in statement of comprehensive income during the period in which the employee renders the related service, unless another policy requires or permits the inclu-sion of the benefits in the cost of an asset. The accruals for employee entitlements to salaries, performance bonuses and annual leave represent the amounts for which the Group has a present obligation to pay as a result of the employee’s services provided after deducting any amounts already paid. The accruals have been calculated at undiscounted amounts based on expected salary levels. If the amount already paid exceeds the undiscounted amount of the benefits, the Group recognises that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

The Group recognises the expected cost of short-term employee benefits in the form of compensated absences as follows:

• in the case of accumulating compensated absences, when the employees render services that increase their entitlement to future compensated absences; and

• in the case of non-accumulating compensated absences, when the absences occur.

The Group measures the expected cost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period.

The Group recognises the expected cost of any bonus payments when, and only when:

• there is a present legal or constructive obligation to make such payments as a result of past events; and

• a reliable estimate of the obligation can be made.

3.13.2 Defined benefit plans

The Group operates a defined benefit plan with regards to pension benefits upon retirement of employees, the assets of which are held in separate trustee funds administered by Metropolitan Health Group (Pty) Ltd. Anoth-er defined benefit plan for medical scheme benefits for employees and pensioners exists under administration of the Transmed Medical Scheme. These funds are valued by professional independent actuaries. The benefit cost and obligations under the defined benefit fund are determined using the projected unit credit method on an annual basis. The benefit costs are recognised in the statement of comprehensive income. Any actuarial gains or losses are recognised in the statement of comprehensive income in the period in which they arise. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value, and any unrecognised past-service cost and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension fund liability. Past service cost is recognised immediately to the extent that the benefits have already vested, and are otherwise amortised on a straight-line basis over the average period until the amended benefits become vested. The amount recognised in the statement of financial position represents the present value of the defined benefit obligation less the fair value of the plan assets; less unrecognised past service cost. Any resulting asset is limited to the present value of available refunds and reductions in future contributions to the plan.

3.13.3 Defined contribution plan

Under the defined contribution structures, fixed contributions payable by the Group and members are accumu-lated to provide retirement benefits through a provident fund. The Group has no legal or constructive obligation to pay any further contributions other than these fixed contributions. Contributions to any defined contribution plan are expensed as incurred.




3.14 Operating leases

The Group, as lessor, enters into a variety of operating lease agreements with third parties in order to maxi-mise the inflow of economic benefits from Group assets. Leases where a significant portion of the risks and rewards of ownership are retained by the Group are classified as operating leases. Payments received under operating leases are recognised as income on a straight-line basis over the term of the lease.

3.15 Financial instruments

Financial instruments are contracts that give rise to both a financial asset of one entity and a financial liability of another entity. They include cash at bank, receivables, investments, payables and financial guarantees.

3.15.1 Fair value

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models making maximum use of market inputs and relying as little as possible on Group-specific inputs.

3.15.2 Recognition and measurement of financial instruments

Financial assets or financial liabilities not at fair value through statement of comprehensive income are initially measured at fair value plus transaction cost directly attributable to the acquisition or issue of the financial instrument, when the Group becomes a party to the contractual arrangements. The subsequent measurement of financial instruments is dealt with below.

For the purpose of measuring financial assets after initial recognition, financial assets are classified as loans and receivables.

A financial asset not carried at fair value through statement of comprehensive income is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise or indications that a debtor will enter bankruptcy. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that show similar credit risk characteristics. All impairment losses are recognised in statement of comprehensive income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in statement of comprehensive income. After initial recognition, the Group measures all financial liabilities at amortised cost using the effective interest method. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in statement of comprehensive income.

The Group derecognises a financial instrument when and only when:

• the contractual rights or obligations to the cash flows from the financial instrument expire; or

• it transfers the financial instrument.

3.15.2.1 Trade and other receivables

Trade and other receivables are recognised initially at fair value plus any directly attributable transaction cost. Subsequent to initial recognition trade and other receivables are stated at amortised cost using the effective interest method less impairment losses. Trade debtors are assessed for creditworthiness and impairments are some on an individual basis.



3.15.2.2 Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. For the purposes of the cash flow state-ment, cash and cash equivalents consists of cash and cash equivalents as defined.

3.15.2.3 Trade and other payables

Trade and other payables are measured at amortised cost using the effective interest method.

3.16 Deferred income

Deferred income represents rental received in advance in respect of certain lease agreements and is recognised as income over the period of each lease agreement on a straight-line basis.

3.17 Events after the reporting date

Evidence received after the end of the reporting date which provide additional information of conditions existing at the end of the reporting period, other than those relating to Government grants including non-monetary grants at fair value, are adjusted for in the financial statements at the end of the reporting date. Evidence received after the end of the reporting period which provide additional information of conditions existing at the end of the reporting date but relate to Government grants, including non-monetary grants at fair value, are not adjusted for at the end of the reporting date unless, there is reasonable assurance that all the conditions attaching to them have been fully complied with, or there is reasonable assurance that the grants will be received. Non adjusting events are disclosed in the notes to the annual financial statement if the event is of such importance that non-disclosure would affect the ability of users to make proper evaluations and decisions.

3.18 Income received in advance

Income on ticket sales for the rendering of passenger services in a future period is recognised as revenue received in advance at year-end.

3.19 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any taxation effects.

3.20 Irregular or fruitless and wasteful expenditure

Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of the Public Finance Management Act or Treasury Regulations. Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised.

3.21 Capital commitments

Capital commitments are disclosed in respect of agreements with external parties that will result in future obligations to make outflow of resources. Such agreement may be in the form of purchase orders, notice to proceed with service delivery, other contractual documentations and for amounts which the Board’s approval has been obtained but not yet contracted for.

3.22 Related parties

A related party is a person or entity that is related to the Group. Related party transactions are shown at arm’s length in accordance with the statements of GAAP as issued by the Accounting Standards Board (ASB) and the SAICA Circular on related party disclosures for State-owned entities. Related parties are classified in terms of those listed in the Public Finance Management Act, 1999 (Act No 1 of 1999) in schedules 1 (Constitutional Institutions), 2 (Major Public entities) and 3 (Other Public entities). Key management as well as close family members of key management has been disclosed.




Land

Facilities & Leasehold

improve-ments

Rollingstock

Networkassets

Moveables &

Workshop

Buses& Vehicles

Assets under

constructionTOTAL

R’000 R’000 R’000 R’000 R’000 R’000 R’000 4 Property, plant and equipmentGroupCarrying amount at 1 April 2015 1 161 787 6 761 109 8 788 747 3 001 034 364 263 738 504 8 782 710 29 598 154 Cost 1 161 787 8 473 724 16 078 518 5 383 218 725 335 1 710 461 8 782 710 42 315 753 Accumulated depreciation - (1 705 534) (7 130 078) (2 382 184) ( 361 027) ( 971 957) - (12 550 780)Accumulated impairment losses - ( 7 081) ( 159 693) - ( 45) - - (166 819)Additions - - - - - - 6 196 336 6 196 336 Capitalisations 50 748 771 1 660 624 340 465 62 218 743 (2 812 871) - Transfer from prepayment - - 217 161 - - - - 217 161 Transfer to investment property ( 19 216) - - - - - - (19 216)Impairment loss recognised - - ( 751 155) - - - - (751 155)De-recognition on disposal of assets ( 22) ( 10 076) ( 122 121) ( 1 056) ( 250) ( 6 461) - (139 986)Depreciation charge for the year - (388 596) (1 525 277) (360 280) (101 242) (122 352) - (2 497 746)

Carrying amount at 31 March 2016 1 142 599 7 111 208 8 267 979 2 980 163 324 989 610 434 12 166 175 32 603 548 Cost 1 142 599 9 202 861 17 590 768 5 182 016 784 798 1 697 605 12 166 175 47 766 822 Accumulated depreciation - (2 084 572) (8 403 946) (2 201 853) ( 459 764) (1 087 171) - (14 237 305)Accumulated impairment losses - ( 7 081) ( 918 843) - ( 45) - - ( 925 969)Additions - - - - - - 6 678 924 6 678 924 Capitalisations - 494 249 3 983 109 200 917 100 027 15 123 (4 793 424) - Transfer from prepayment - 11 416 278 063 - - - - 289 479 Transfer to investment property (547) - - - - - - (547)Impairment loss recognised - (158 864) (23 318) - - (37 341) - (219 523)De-recognition on disposal of assets - (2 165) (143 361) ( 8 488) (490) (32 013) - (186 517)Depreciation charge for the year - ( 454 795) (1 413 049) (223 989) (50 115) ( 173 591) - (2 315 539)

Carrying amount at 31 March 2016 1 142 052 7 001 049 10 949 423 2 948 603 374 411 382 612 14 051 675 36 849 825 Cost 1 142 052 9 543 055 21 387 822 5 375 863 884 284 1 615 426 14 051 675 54 000 177 Accumulated depreciation - (2 534 538) (9 506 194) (2 427 260) (509 828) (1 195 473) - (16 173

293)Accumulated impairment losses - ( 7 468) ( 932 205) - ( 45) (37 341) - ( 977 059)

EntityCarrying amount at 1 April 2015 1 161 437 6 760 983 8 788 747 3 001 034 358 239 169 411 8 782 099 29 021 950 Cost 1 161 437 8 469 338 16 078 518 5 383 218 703 918 499 592 8 782 099 41 078 120 Accumulated depreciation - (1 701 274) (7 130 078) (2 382 184) ( 345 679) (330 181) - (11 889

396)Accumulated impairment losses - (7 081) (159 693) - - - - (166 774)Additions - - - - - - 6 194 161 6 194 161 Capitalisations - 748 315 1 660 624 340 465 60 746 742 (2 810 892) - Transfer from prepayment - - 217 161 - - - - 217 161 Transfer to investment property (19 216) - - - - - - (19 216)Impairment loss reversed - - ( 751 155) - - - - (751 155)De-recognition on disposal of assets ( 22) (10 063) (122 121) (1 056) (115) (604) - (133 981)Depreciation charge for the year - ( 389 427) (1 525 277) (360 280) (102 077) (67 831) - (2 444 891)





Land

Facilities & Leasehold

improve-ments

Rollingstock

Networkassets

Moveables &

Workshop

Buses& Vehicles

Assets under

constructionTOTAL

R’000 R’000 R’000 R’000 R’000 R’000 R’000 Carrying amount at 31 March 2016 1 142 199 7 109 808 8 267 979 2 980 163 316 793 101 718 12 165 368 32 084 028 Cost 1 142 199 9 198 036 17 590 768 5 182 016 762 547 499 546 12 165 368 46 540 480 Accumulated depreciation - (2 081 147) (8 403 946) (2 201 853) (445 754) (397 828) - (13 530

527)Accumulated impairment losses - (7 081) (918 843) - - - - (925 924)Additions - - - - - - 6 677 463 6 677 463 Capitalisations - 494 209 3 983 110 200 917 98 536 15 185 (4 791 956) - Transfer from prepayment - 11 416 278 063 - - - - 289 479 Transfer to investment property ( 547) - - - - - - ( 547)Impairment loss recognised - (158 864) (23 319) - - - - (182 183)De-recognition on disposal of assets - (2 165) (143 361) (8 488) ( 374) (12 741) - (167 129)Depreciation charge for the year - (454 681) (1 413 049) (223 989) (48 089) (45 623) - (2 185 431)Carrying amount at 31 March 2017 1 141 652 6 999 723 10 949 423 2 948 603 366 866 58 539 14 050 875 36 515 681 Cost 1 141 652 9 538 190 21 387 822 5 375 863 862 453 464 868 14 050 875 52 821 723 Accumulated depreciation - (2 530 999) (9 506 194) (2 427 260) (495 587) (406 329) - (15 366 369)Accumulated impairment losses - (7 468) (932 205) - - - - (939 673)

Assets are impaired when they are damaged. Assets are derecognised when components or assets are replaced. None of the assets are pledged as security for liabilities.


Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

5 Prepayment for capital expenditure

Locomotives

1 709 187 1 938 521 Balance at the beginning of the year 1 938 521 1 709 187

446 495 - Payments made during the year - 446 495

( 217 161) - Transferred to Property Plant and Equipment - ( 217 161)

1 938 521 1 938 521 Prepayment on locomotives 1 938 521 1 938 521

PRASA entered into a contractual agreement with Swifambo Rail Leasing (SRL), on 25 March 2013, to construct and supply new locomotives from Vossloh Spain which were to be utilised for Mainline Passenger Services. The expenditure would be incurred for a period of 5 years. Risk and rewards of ownership would pass to PRASA upon delivery of the locomotives, and after PRASA satisfied itself that all quality parameters are met. 13 locomotives were delivered to PRASA during the 2014/15 and 2015/16 financial years. No locomotives were delivered during the 2016/17 financial year as during a forensic investigation it became apparent that the contract between SRL and PRASA never came into existence as conditions precedent were not timely fulfilled. Furthermore the investigation revealed irregularities including unlawfulness. The court has now ruled in favour of PRASA to set aside the contract. Subsequently Swifambo has taken the matter on appeal.

Rolling stock


2 326 722 908 731 Payments made during the year 908 731 2 326 722

- ( 278 063) Transferred to Property Plant and Equipment ( 278 063) -

8 026 681 8 657 349 Total rolling stock 8 657 349 8 026 681

394 789 153 529 Less: Short-term portion 153 529 394 789

7 631 892 8 503 820 Long-term portion rolling stock 8 503 820 7 631 892



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

On the 14th of October 2013, PRASA entered into an agreement with the Gibela Rail Transport Consortium (Gibela) for the design, supply and manufacture of 600 new trains. The financial agreement was approved and gazetted by the Minister of Finance on the 16th of April 2014. The contractual terms of the Agreement stipulate that the risks and rewards of ownership will pass to PRASA upon delivery of the rolling stock, and after PRASA satisfies itself that all quality parameters are met. 11 trains were delivered during the 2016/17 financial year. The short term portion is the amortisation of the advance payment for delivery of 7 trains in accordance with amended payment schedule.

Test facility depot

11 416 11 416 PRASA made advance payments calculated at 10% of the contract value to suppliers for the construction of the Test Facility Depot for the new trains. Consequently, PRASA holds guarantees issued by the suppliers’ bankers and financial institutions, which amounts to the value of the advance payments.

11 416 11 416

( 11 416) Transferred to Property Plant and Equipment ( 11 416)

11 416 - - 11 416

11 416 - Less: Short-term portion - 11 416

- - Long-term portion test facility - -

9 570 413 10 442 341 Prepayment for capital expenditure 10 442 341 9 570 413

6 Intangible assets

Copyright

14 171 14 171 Cost 14 171 14 171

( 4 979) ( 5 686) Accumulated Amortisation ( 5 686) ( 4 979)

9 192 8 485 Carrying amount at the beginning of the year 8 485 9 192

( 707) ( 707) Amortisation ( 707) ( 707)

8 485 7 778 Carrying amount at the end of the year 7 778 8 485

14 171 14 171 Cost 14 171 14 171





Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Copyright comprises the product and tool de-sign of the 10M4 Series 2 rolling stock model. None of the items have restricted titles or are pledged as security for liabilities.

Software

522 016 565 434 Cost 571 177 527 659


395 986 400 799 Carrying amount at the beginning of the year 401 011 396 014

44 412 25 873 Additions 25 874 44 511

( 39 599) ( 41 588) Amortisation ( 41 648) ( 39 514)

400 799 385 084 Carrying amount at the end of the year 385 237 401 011

565 434 590 763 Cost 596 506 571 177

( 164 635) ( 205 679) Accumulated amortisation ( 211 269) ( 170 166)

Software comprises customised Geographic Information Systems and Enterprise Resource Planning software.

409 284 392 862 Intangible assets 393 015 409 496

7 Investment property

3 148 222 3 370 516 Fair valued amount at the beginning of the year restated

3 370 516 3 148 222

121 970 281 336 Additions 281 336 121 970

19 216 547 Transfer from property plant and equipment 547 19 216

(924) (564) De-recognition of investment property ( 564) ( 924)

96 290 - Investment property receivable in future - 96 290

(14 258) 220 730 Fair valuation 220 730 ( 14 258)

3 370 516 3 872 565 Carrying amount at the end of the year 3 872 565 3 370 516

1 394 157 1 548 259 Original cost 1 548 259 1 394 157

1 794 141 2 014 871 Fair valuation 2 014 871 1 794 141

182 218 309 435 Work in Progress 309 435 182 218

Investment property consists of commercial properties within South Africa, most of which are situated in KwaZulu-Natal, Western Cape and Gauteng.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

A: Development leases

Property is rented out to third parties under development leases of 50 years or less. Some vacant land is currently held for future development and capital appreciation.

The fair market valuation of the land was professionally determined by an independent valuer, Knight Frank ( 2016: DDP Valuers). Comparable sales method as well as capitalisation of net income method was used.

B: Commercial Properties

The properties comprise commercial areas rented out to third parties under operating leases ranging from 1 month to 10 years.

The fair market valuation of the station properties was professionally determined by an independent valuer, Knight Frank (2016: DDP Valuers). Comparable sales method as well as capitalisation of net income method was used.

Valuers are members of the Institute of Valuers, and have appropriate qualifications and experience in the valuation of properties in the relevant locations.

2 121 472 1 893 800 8 Operating lease receivable 1 893 800 2 121 472

PRASA entered into development leases with private parties. These arrangements entail the construction of infrastructure on PRASA’s land at their own cost for use by these parties over the lease period. The private party has the right of use of the PRASA land through the development lease. At the end of the lease pe-riod, the right to the use of the land and the infrastructure reverts to PRASA.

The risks and rewards associated with owning the land do not pass to the lessee at any stage of this arrangement. The land is recognised as Investment property - Refer Note 7 - as the land is used for commercial purposes.

The residual interest relating to the infrastruc-ture constructed by the private party is mea-sured at the net present value of the estimated gross residual value of the infrastructure at the end of the lease and is recognised as a re-ceivable.




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

9 Investment in subsidiaries

The Entity's subsidiaries are:

9.1 Intersite Asset Investments (SOC) Ltd "Inter-site"

88 212 88 212 Unlisted shares at cost

( 88 212) Impairment on investment in subsidiaries - -

88 212 - Net investment in subsidiary - -

Intersite was a subsidiary throughout the year. The holding entity’s interest in the aggregate profit after taxation of the subsidiary amount-ed to R6.7 million (2016: Profit R11.4 million). Investment in subsidiary was impaired during 2016/17 financial year.

100 100 Ownership (%)

100 100 Voting power (%)

Country of incorporation: South Africa

Principal activity: Property and asset invest-ment solutions to Group through a range of in-novative and entrepreneurial solutions.

Authorised share capital

4 000 ordinary shares of R1 each

Issued share capital

88 212 88 212 375 ordinary shares of R1 each

9.2 Autopax Passenger Services (SOC) Ltd "Autopax"

581 402 581 402 Unlisted shares at cost

- ( 581 402) Impairment on investment in subsidiaries - -

581 402 -

82 594 86 630 Opening balance

4 036 70 789 Loans granted and expenses paid

- (157 419) Impairment of loan in subsidiaries - -

86 630 - Loan owing by the subsidiary - -

668 032 - Net investment in subsidiary - -



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Autopax was a subsidiary throughout the year. The loan is interest free, unsecured, payable on demand, subordinated in favour of the sub-sidiary's other creditors. The interest in the loss after taxation of the subsidiary amounted to R212.5 million. (2016: Loss 28.5 million). Investment in subsidiary was impaired during 2016/17 financial year.

100 100 Ownership (%)

100 100 Voting power (%)

Country of incorporation: South Africa

Principal activity: Passenger bus services

Authorised share capital

800 000 000 ordinary shares of R1 each

Issued share capital

601 864 601 864 601 863 850 ordinary shares of R1 each (2016: R601 863 850)

756 244 - Total net investments in subsidiaries - -

9,3 Related party transactions with subsidiaries

During the year, the Entity entered into trans-actions with its wholly-owned subsidiaries, In-tersite and Autopax. All transactions with the above are concluded on an arm’s length basis.

Related party transactions are summarised as follows:

Intersite

( 40 399) ( 41 234) Professional services rendered to PRASA Cor-porate

- -

( 40 399) ( 41 234) Services rendered by subsidiary - -

( 4 097) ( 16 585) Net amounts owed to subsidiary mainly for the retainer

- -

( 4 097) ( 16 585) Amounts owed to subsidiary - -

Autopax

26 521 37 277 Rental of property from PRASA CRES and bus billing

- -




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

7 548 5 359 Rental of buses from PRASA Corporate - -

( 78 222) ( 108 579) Auxiliary transport mainly to PRASA Rail - -

( 44 153) ( 65 943) Services rendered by subsidiary - -

55 652 42 519 Amounts owed by subsidiary mainly for rentals - -

55 652 42 519 Amounts owed by subsidiary - -

10 Trade and other receivables

233 370 147 884 Trade receivables 183 006 100 804

125 961 115 228 Tenant debtors 115 228 125 961

40 736 49 644 Other receivables 56 128 47 754

400 067 312 756 354 362 274 519

21 740 14 413 Prepayments 23 020 33 641

152 819 179 186 Straight lining of operating leases 179 186 152 819

574 626 506 355 Short-term portion of trade and other receiv-ables

556 568 460 979

Receivables are shown net of impairment losses amounting to R98.1 million (2016: R90.2 million). Included in trade receivables are train control services rendered, traction recovery and electricity charges to Transnet. The prepayment amount consists of advance payments for insurance premiums, licence fees and municipal rates prepayments in Kwa-zulu-Natal.

Allowance for impairment

The Group's trade receivables are stated after allowances for doubtful debts based on man-agement's assessment of the creditworthiness of the respective debtors. An analysis of the al-lowance is as follows:

( 83 712) ( 86 250) Balance at the beginning of the year ( 90 207) ( 91 256)

( 2 538) ( 9 612) Charged to statement of comprehensive in-come

( 7 981) 1 049

( 86 250) ( 95 862) Balance at the end of the year ( 98 188) ( 90 207)

11 Inventories

282 694 438 553 Inventories 453 898 297 391

282 694 438 553 Total inventories 453 898 297 391



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

None of the inventory is pledged as security for liabilities. During the year R265 million worth of material was recognised in the income statement.

12 Cash and cash equivalents

388 338 264 295 Bank balances 283 598 410 451

5 662 539 12 015 002 Call deposits 12 023 899 5 677 954

6 050 877 12 279 297 Total cash and cash equivalents 12 307 497 6 088 405

28 414 35 044 Tenant deposits held in Trust 35 044 28 414

6 079 291 12 314 341 12 342 541 6 116 819

Tenant deposits are held in a Trust account with ABSA bank. Interest earned on these de-posits amounts to R1.8m and is included in the tenant deposit held in Trust.

Call deposits earn interest at an average rate of 7.76% (2016: 6.25%) per annum.

13 Share capital

Authorised

4 248 258 4 248 258 4 248 258 440 ordinary shares of R1 each 4 248 258 4 248 258

Issued and fully paid

4 248 258 4 248 258 4 248 258 440 ordinary shares of R1 each 4 248 258 4 248 258

There were no movements in the share capital of the Entity (2016: None).

The shares are 100% (2016: 100%) owned by Government.

14 Loans and borrowings

- - Opening balance 1 518 48 210

- - Interest correction on this agreement during the year

( 28) 2 328

- - Repayment of loans and borrowings ( 1 490) ( 49 020)

Total Loans and borrowings - 1 518

- - Less: short-term portion - ( 1 518)

- - Long-term portion of loans and borrowings - -




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Autopax acquired 570 buses. The acquisition was financed in terms of instalment agree-ments, governed by a master loan agreement dated 10 February 2010. The Government is-sued a guarantee for the due and punctual fulfilment of Autopax’s payment obligations up to the maximum total guarantee amount of R1 216 million. The guarantee was valid for 6 years from the date of signature (16 April 2010) and reduced by any reduction in the amount of capital outstanding. The outstanding bal-ance of the guarantee on 31 March 2017 is RNil (2016: R1.5 million). Interest was fixed at 9.45% compounded monthly. The repayment term was 6 years. The first payment commenced on 15 March 2010.

15 Provision for claims

The amount shown comprises the gross pro-vision in respect of certain claims brought against the Group by commuters in respect of accidents which occurred in the current and previous financial years. It is not expected that the outcome will give rise to significant claims over and above the amounts provided for.

677 828 746 182 Balance at the beginning of the year 746 182 677 828

236 231 472 261 Provisions made during the year 472 261 236 231

( 167 877) ( 220 205) Repayment on insurance claims ( 220 205) ( 167 877)

746 182 998 238 Balance at the end of the year 998 238 746 182

( 184 829) ( 294 580) Less: short-term portion ( 294 580) ( 184 829)

561 353 703 658 Long-term portion provision for claims 703 658 561 353

The Chain Ladder method was applied in cal-culating the development factors for PRASA liability losses as at 31 March 2017. Ultimately these factors will be used to estimate the level of reserves required. The Chain Ladder meth-od is a calculation approach used to estimate outstanding claims (Incurred But Not Report-ed (IBNR)) and future claim payments as re-quired), whereby the weighted average of past claim development is projected into the future with adjustments to development patterns where applicable.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

The projection is based on the ratios of cumu-lative past claims, paid and incurred, for suc-cessive years of development. The method can be applied to past claims data with either ex-plicit or implicit allowance for claims inflation. Based on the stability in the average claim val-ues, the implicit adjustment was retained. The actuarial valuation was done by AON (2016: Elgatone), an independent Company.

A discount rate of 7.9% (2016: 8.01%) was used to discount future estimated payments. Each year was discounted to represent today’s val-ue. In addition to adjustments to the incurred claim patterns as derived from prior years’ reporting patterns, the discounting model at-tempts to allow for further uncertainties in the timing of claim payments for up to 16 years in the future. The derived development and settlement factors were applied to these out-standing losses to project a future settlement pattern, and then based on the total settlement pattern, a discounting cash flow model was de-veloped.

16 Operating lease deferred income

(1 369 340) 1 229 445 Deferred income 1 229 445 (1 369 340)

Less: short term portion

(1 369 340) 1 229 445 Balance at the end of the year 1 229 445 (1 369 340)

Amortisation of the obligation by third parties to transfer developed infrastructure at the end of the lease period to PRASA - Refer Note 8.

17 Employee benefit obligations

Employees of the Group participate in Transmed Medical Scheme administered by Metropolitan Health Group (Pty) Ltd.

The terms of the post-retirement medical scheme are summarised below:




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

• The Entity subsidises some employees for a fixed amount of R213 per month in retirement. The amount is fixed irrespective of the number of dependents on the medical scheme and will not increase in future. Employees of the entity retiring from 1 April 2012 onwards are not eligible for the post retirement medical aid subsidy.

The actuarial projection method used to value the fund is the Projected Unit Credit method. The valuation was done by Alexander Forbes (2016: Alexander Forbes).

Movement in the present value of the unfunded obligation:

14 240 11 772 Accrued liability at the beginning of the year 12 247 14 815

( 1 469) ( 1 318) Benefits paid ( 1 371) ( 1 527)

( 999) 141 Expenses recognised in statement of compre-hensive income

142 ( 1 041)

1 063 1 007 - Interest cost 1 048 1 106

( 2 062) ( 866) - Actuarial (gain)/loss ( 906) ( 2 147)

11 772 10 595 Accrued liability at the end of the year 11 018 12 247

1 267 1 152 Less: short-term portion 1 198 1 319

10 505 9 443 Long-term liability at the end of the year 9 820 10 928

Principal actuarial assumptions at the report-ing date:

9,10% 9,00% Discount rate per annum 9,00% 9,10%

PA(90) ultimate

rated down 2 years + 1.0% p.a.

from 2006

PA(90) ultimate


from 2006

Post retirement mortality assumption PA(90) ultimate


from 2006

PA(90) ulti-mate rated

down 2 years + 1.0% p.a. from 2006

Sensitivity results

Should the discount rate decrease by 1% the accrued liability will be R11.9 million; should the discount rate increase by 1% the accrued liability will be R10.3 million for the Group.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

The post retirement medical plan exposes the Group to actuarial risks, such as longevity risk, interest rate risk and market (investment) risks.

18 Defined benefit plan assets

The Group operates a defined benefit fund administered by Metropolitan Retirement Fund Administrators. The assets of the funds are held separate from those of the Group. The fund was actuarially valued by Alexander Forbes Actuaries, an independent company (2016: Alexander Forbes).

A member with at least 10 years pensionable service is entitled to the following benefits on attaining the minimum retirement age:

• An annual pension equal to: (Average pensionable salary) x (pensionable service) x (accrual factor of 1)

• Plus a gratuity equal to:

(1/3) x (1) x (gratuity factor)

A member with less than 10 years of pension-able service is entitled to gratuity equal to twice the member's own contribution without interest, on attaining the age limit.

The rules do not permit late retirement after the attainment of the age limit.

1 335 474 1 442 026 Fair value of plan assets 1 442 026 1 335 474

( 585 895) ( 566 396) Total present value of obligations ( 566 396) ( 585 895)

749 579 875 630 Surplus 875 630 749 579

( 743 572) ( 872 803) Less: amount not recognised ( 872 803) ( 743 572)

6 007 2 827 Net defined benefit plan assets 2 827 6 007

The asset is subjected to a maximum value of the present value of any economic benefits available in the form of refunds from plan or reductions in future contributions to the plan.




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Movement in the fair value of plan assets

1 264 673 1 335 474 Fair value of plan assets at the beginning of the year

1 335 474 1 264 673

98 589 121 023 Interest income on assets 121 023 98 589

731 865 Member contribution 865 731

1 097 940 Company contribution 940 1 097

( 981) ( 414) Administration cost ( 414) ( 981)

( 47 377) ( 58 454) Benefits paid ( 58 454) ( 47 377)

18 742 42 592 Net return on assets 42 592 18 742

1 335 474 1 442 026 Fair value of plan assets at the end of the year 1 442 026 1 335 474

The fair value of plan assets consist of:

127 806 240 530 Cash 240 530 127 806

446 048 449 191 Equity 449 191 446 048

303 820 315 371 Bonds 315 371 303 820

100 828 95 606 Property 95 606 100 828

354 702 341 328 International 341 328 354 702

2 270 - Other - 2 270

1 335 474 1 442 026 Fair value of plan assets at the end of the year 1 442 026 1 335 474

Movement in the present value of defined benefit obligations

( 621 974) ( 585 895) Present value of defined benefit obligations at the beginning of the year

( 585 895) ( 621 974)

( 47 756) ( 51 753) Interest cost ( 51 753) ( 47 756)

( 3 299) ( 1 774) Past and current service cost ( 1 774) ( 3 299)

( 731) ( 865) Member contributions ( 865) ( 731)

981 414 Administration cost 414 981

47 377 58 454 Benefits paid 58 454 47 377

39 507 15 023 Actuarial loss 15 023 39 507

( 585 895) ( 566 396) Present value of defined benefit obligation at the end of the year

( 566 396) ( 585 895)

Expenses recognised instatement of compre-hensive income

( 3 299) ( 1 774) Past and current service costs ( 1 774) ( 3 299)

122 415 Net interest on net defined benefit asset 415 122

3 924 ( 2 761) Actuarial gain ( 2 761) 3 924

747 ( 4 120) Expenses recognised in statement of com-prehensive income

( 4 120) 747



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

These expenses are recognised in operating expenses.

The principal actuarial assumptions used were as follows:

9,26% 9,00% Discount rate 9,00% 9,26%

6,94% 6,20% Inflation rate 6,20% 6,94%

7,94% 7,20% Salary increase rate 7,20% 7,94%

5,21% 4,65% Pension increase allowance 4,65% 5,21%

The defined benefit obligation exposes the Group to actuarial risks, such as longevity risk, interest rate risk and market (investment) risks.

19 Capital subsidy and grants


13 355 887 13 814 060 Capital subsidy and grants received during the year

13 814 060 13 355 887

(3 222 907) (3 140 275) Less: amortised (3 204 511) (3 271 351)

47 855 688 58 529 473 Total 58 657 942 48 048 393

(4 088 636) (3 840 685) Less: short-term portion (3 912 098) (4 140 337)

43 767 051 54 688 788 Long-term portion 54 745 884 43 908 056

Capital subsidies are recognised as deferred income and amortised over the useful life of the assets.

Capital subsidies receivable in future years:

2018: R 13 339.8 million

2019: R 14 982.6 million

2020: R 15 804.9 million

20 Trade and other payables

819 818 799 650 Trade payables 865 027 762 242

707 405 1 654 897 ** Accruals on operational expenditure 1 790 676 803 441

2 059 826 2 728 936 Accruals for property, plant and equipment ac-quired

2 728 936 2 059 826

117 690 133 025 Retention 133 025 117 690

3 704 739 5 316 508 5 517 664 3 743 199

312 281 343 997 Leave pay accrual 365 353 328 294

26 491 33 156 Tenant deposits 33 156 26 491

71 095 57 080 Income received in advance 63 828 75 404

4 114 606 5 750 742 Trade and other payables 5 980 001 4 173 388




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

** Included in accruals for operational expendi-ture is a claim of R635 million against PRASA for unfair dismissal of employees. On 13 Feb-ruary 2013 PRASA terminated employment of 700 members of The National Transport Move-ment (“NTM”) on allegations that they partic-ipated in the burning of train coaches during their strike. The decision was upheld by the Labour Court. The NTM appealed the matter with the Labour Appeal Court. On 21 Novem-ber 2017 PRASA lost the case and was ordered to reinstate the employees retrospectively to the date of dismissal.

21 Operating leases

568 916 561 146 21,1 Operating lease rental income 531 101 534 847

The future minimum lease payments receiv-able under non-cancellable operating leases are as follows:

249 713 265 907 Not later than one year 265 907 249 713

622 875 606 779 Later than one year and not later than five years

606 779 622 875

875 352 808 508 Later than five years 808 508 875 352

1 747 940 1 681 194 1 681 194 1 747 940

21.1.1 Description of the Group as lessor's signifi-cant leasing arrangements

21.1.1.1 Short-term commercial and residential oper-ating leases

The Group has entered into a number of short-term commercial and residential operating leases in respect of certain land and buildings with third parties, in order to maximise the inflow of economic benefits from our assets. The average term of these leases is between 3 and 5 years, and no purchase options are provided for. In some older lease agreements, lessees have renewal options for a short-term period if they have complied with all terms and conditions of the original lease, and on renew-al, lease rentals are subjected to escalation. Newer lease agreements have no renewal op-tions but have rights of first refusal should the Group decide to continue leasing the proper-ties on expiry of the lease. Lease agreements generally contain a clause that they may be cancelled at the option of the lessor after giv-ing sufficient notice to the lessee, should the lease arrangements conflict with commuter services.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

21.1.1.2 Leasehold improvements operating leases

The Group has entered into a number of oper-ating leases with third parties for the lease of land. In terms of the agreements, the lessee is obliged to effect leasehold improvements on the premises, which remains the property of the lessor, without compensation to the les-see, on termination of the lease. Lease rentals charged for the land are market-related, de-termined with reference to independent valua-tions of the properties, and no incentive is given to lessees in view of the leasehold improve-ments which they are obliged to effect. The terms of the leases are generally between 20 and 50 years. The leases have rental reviews renegotiated every 5 years with the majority of the leases incorporating turnover clauses..

These leasehold improvements are effected and financed by lessees, who have exclusive rights of use of the buildings for the period of the lease. As a result, these buildings are not classified as assets of the Group as defined and therefore have not been capitalised. How-ever, these assets will be capitalised on expiry of the lease. These assets are bonded by les-sees' financiers who have the first option of occupation in the event of breach of contract.

145 580 149 791 21,2 Operating lease expenses 241 733 195 054

The future minimum lease payments payable under non-cancellable operating leases are as follows:

1 116 947 Not later than one year 5 998 13 343

4 734 4 734 Later than one year and not later than five years

8 368 16 887

11 914 10 020 Later than five years 10 020 11 914

17 764 15 701 Future minimum lease payments 24 386 42 144

Operating lease expenditure not shown under non-cancellable leases comprises lease ex-penses paid to Transnet on a month to month basis for cost of infrastructure rentals as well as locomotives on an ad hoc basis.




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Leases for subsidiaries consist of office build-ings and motor vehicle rentals.

PRASA entered into a development lease agreement with Ekurhuleni Municipality on 1 December 2014 for land on which the Gibela factory will be constructed. The lease is for a period of 20 years. The first 2 years of the rental will be at zero value. The next 36 months thereafter will be for an amount of R78.9 thou-sand per month. After year 5, the lease will be reviewed and agreed upon for the next 5 years until year 10. Thereafter the rentals and an-nual escalation rates will be reviewed every 5 years based on market values.

1 984 960 1 680 324 22 Fare revenue 2 346 609 2 735 746

Fare revenue comprises ticket sales to train and bus commuters for passenger and long distance journeys.

4 866 160 5 081 666 23 Operational subsidy 5 180 454 4 925 105

The operational subsidy is received annually to fund our operations. The following Medium Term Expenditure Framework allocations have been made in respect of future years:

2018: R 5 876.6 million

2019: R 6 125.9 million

2020: R 5 430.0 million

Subsidy received to operate commuter bus services on specific routes is per contractual agreement per defined timetables and based on kilometres.

24 De-recognition on disposal of assets

122 121 143 361 De-recognition on rolling stock items 143 361 112 369

11 862 23 768 De-recognition of components on other assets 43 156 27 617

133 983 167 129 De-recognition on disposal of assets 4 186 517 139 986

924 564 De-recognition on investment property 7 564 924

134 907 167 693 De-recognition on disposal of assets 187 081 140 910

Assets are de-recognised when components are replaced or when assets are de-recognised due to damage.

25 Depreciation and amortisation on assets

(2 444 891) (2 185 431) Depreciation on property, plant and equipment 4 (2 315 539) (2 497 746)

( 40 306) ( 42 295) Amortisation on intangible assets 6 (42 355) (40 221)

(2 485 197) (2 227 726) Depreciation and amortisation on assets (2 357 894) (2 537 967)



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

26 Actuarial gain

2 062 866 Employee benefit obligations 906 2 147

3 924 (2 761) Defined benefit plan assets ( 2 761) 3 924

5 986 (1 895) ( 1 855) 6 071

27 Operating expenses

14 391 17 139 Audit fee - external audit 19 451 16 061

9 225 6 129 Audit fee - internal audit 6 129 9 225

86 241 108 025 Auxiliary transport ( 547) 8 021

13 145 15 008 Bank charges 17 188 15 294

4 760 4 222 Commission paid 24 341 29 684

69 923 69 409 Communications 72 538 72 866

157 908 154 421 Computer expenses 155 109 158 638

7 689 3 852 Directors emoluments 28 7 833 10 353

4 452 162 5 356 922 Employee benefits 5 752 144 4 815 592

748 611 814 811 Energy expenses 1 045 591 981 023

202 742 208 115 Haulage fees 208 115 202 742

190 908 191 088 Health and risk 206 964 204 925

249 665 485 466 Insurance claims 486 454 250 711

77 706 120 645 Insurance premiums 125 208 82 183

41 681 56 051 Legal fees 56 205 41 690

1 243 46 License and transport certificate fees 17 528 18 176

145 178 271 222 Maintenance expenditure 355 005 236 146

9 192 5 507 Management fees on external services 5 507 9 192

14 973 30 547 Managed Portfolio Expenses 30 547 14 973

31 014 9 284 Marketing 11 179 32 536

228 903 291 688 Material expenses 331 364 279 233

388 283 418 442 Municipal charges 421 160 392 873

8 901 7 636 On board services-Cost of trading stock 7 636 8 901

145 580 149 791 Operating lease expenses 241 733 195 054

17 253 16 119 Printing 16 850 18 200

221 316 182 279 Professional fees 149 999 192 309

24 806 26 464 RSR rail safety license fees 26 464 24 806

557 490 490 247 Security 516 605 582 650

4 - Toll fees 32 938 32 797

48 399 12 241 Training 13 368 49 075

105 228 106 260 Train control officers cost - external service 106 260 105 228

50 547 37 785 Travel expenses 38 924 52 078

20 177 26 338 Travel and accomodation - Staff 45 871 43 188

31 921 25 088 Other expenditure 29 926 35 164

8 377 164 9 718 287 10 581 588 9 221 587




Entity Group

Directors’ fees Salary

Retire-ment

contribu-tions Other Bonus 2017 2016 2017 2016

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 28 Personnel cost and directors' emolumentsDefined contribution and benefit plans expense 488 854 457 408 515 327 483 060 Unemployment Insurance Fund 25 077 24 470 27 375 26 631 Unwinding of interest on post-retirement medical aid benefits 1 007 1 063 1 048 1 106 Salaries and personnel cost 4 791 254 3 918 231 5 150 434 4 250 063 Executive directors - 3 638 72 314 - 4 024 4 393 4 024 4 393 Mr TL Montana (GCEO) - - - - - - 4 393 - 4 393 Mr C Letsoalo (AGCEO) 11 3 638 72 314 - 4 024 - 4 024 - Non-executive directors 7 817 - - 16 - 3 852 7 689 7 833 2 128 Dr P Molefe (Chairperson) 1 014 - - 15 - 1 029 2 128 1 029 2 128 Ms Z Manase 483 - - - - 483 799 483 799 Ms C Cele 281 - - - - 281 769 281 769 Mr X George 398 - - - - 398 714 398 714 Ms N Kheswa 151 - - 1 - 152 745 152 745 Ms M Matlala 435 - - - - 435 898 435 898 Mr T Phitsane 435 - - - - 435 688 435 688 Mr W Steenkamp 490 - - - - 490 948 490 948 Mr RC Mkwanazi 35 - - - - 35 - 35 - Mr TR Rikhotso 39 - - - - 39 - 39 - Ms N Scheepers 39 - - - - 39 - 39 - Mr MF Baleni 36 - - - - 36 - 36 - Autopax (subsidiary) - Ms L Letlape 421 - - - - - - 421 374 Ms B Haywood 262 - - - - - - 262 299 Mr TC Luvhani 345 - - - - - - 345 291 Ms MG Mokoka 718 - - - - - - 718 212 Mr K Pillay 297 - - - - - - 297 186 Intersite (subsidiary)Mr M Mdebuka (Chairperson) 385 - - - - - - 385 20 Mr B Boshielo 214 - - - - - - 214 346 Mr BZ Mabusela 343 - - - - - - 343 16 Ms N Mashinini 343 - - - - - - 343 16 Ms NS Mxenge 391 - - - - - - 391 246 Mr P Moiloa 214 - - - - - - 214 297 Ms LR Hlapolosa 48 - - - - - - 48 361 Other key management - 49 501 4 435 - - 46 706 46 597 53 936 50 339 Ms HM Manyatsa (GCFO) 1 - 2 586 251 - - 2 837 4 230 2 837 4 230 Ms Y Page (AGCFO) 2 - 888 137 - - 1 025 - 1 025 - Mr BB Kupe (ACEO Autopax) - 3 059 - - - - - 3 059 1 410 Mr N Khena (AGCEO) 3 - 1 564 125 - - 1 689 1 990 1 689 1 990 Mr N Molepo(ACEO Intersite) 6 - 3 296 780 - - 331 3 832 4 076 3 832 Mr P Gombert (ACEO Intersite) 4 - 369 57 - - - - 426 2 332 Mr EM Mofi 5 - 2 584 343 - - 2 927 3 541 2 927 3 541 Ms P Ngubane - 2 758 215 - - 2 973 2 801 2 973 2 801 Mr BD Kekana - 2 727 222 - - 2 949 207 2 949 207 Mr L Zide - 2 786 428 - - 3 214 3 217 3 214 3 217 Mr AR Zaman - 2 692 - - - 2 692 2 537 2 692 2 537 Mr P Malele 10 - 369 - - 369 - 369 - Mr T Holele - 2 641 - - - 2 641 1 453 2 641 1 453 Mr B Khumalo 7 - 903 72 - - 975 1 883 975 1 883



1 Till December 2016 2 From November 2016 3 Till June 2016 4 Till May 2016 5 Till November2016

6 Till June 2017 7 From August 2017 8 Till August2016 9 From August 2016 10 From December 2016

11 From July 2016



Entity Group

Directors’ fees Salary

Retire-ment

contribu-tions Other Bonus 2017 2016 2017 2016

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Mr M Matakata 8 - 742 63 - - 805 2 014 805 2 014 Mr E Makhura 9 - 935 70 - 1 005 - 1 005 - Mr Z Mayaba - 2 483 209 - - 2 692 2 537 2 692 2 537 Mr C Mbatha - 2 124 369 - - 2 493 2 342 2 493 2 342 Ms P Munthali - 3 115 - - - 3 115 2 923 3 115 2 923 Ms M Ngoye - 2 591 451 - - 3 042 2 947 3 042 2 947 Mr P Sebola - 2 771 234 - - 3 005 2 359 3 005 2 359 Mr S Sithole - 3 140 - - - 3 140 2 996 3 140 2 996 TM Mohube - 2 378 409 - - 2 787 2 788 2 787 2 788

7 817 53 139 4 507 330 - 5 360 774 4 459 851 5 759 997 4 825 945


Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

29 Sundry income

60 034 87 898 Insurance recovered 105 790 61 394

10 802 10 200 On board sales 10 200 10 802

3 597 3 317 Hire of trains/buses 25 791 55 338

12 902 19 053 TETA recoveries 19 559 12 902

27 786 36 684 Train control officers 36 684 27 786

- - Development facilitation fee 2 849 9 511

44 582 26 036 Other 27 704 44 509

159 703 183 188 228 577 222 242

30 Finance cost

- - Interest on long-term loan 14 28 ( 2 328)

( 1 063) ( 1 007) Interest on post retirement benefits 17 ( 1 048) ( 1 106)

( 5 945) ( 8 724) Interest on creditors ( 11 520) ( 6 296)

( 7 008) ( 9 731) ( 12 540) ( 9 730)

31 Finance income

424 805 718 388 Interest received from banking institutions, on bank balances and call accounts.

720 986 426 599

Call deposits earn interest at an average rate of 6.25% (2016: 5.30%) per annum.

32 Taxation

PRASA is exempt from taxation in accordance with Legal Succession to Transport Services Act no 9 of 1989, as amended by Act 38 of 2008. The wholly owned subsidiaries had the option to apply for tax exemption. Intersite received its exemption and the tax exemption of Auto-pax is in progress.

33 Capital commitments

64 591 547 66 252 092 New rolling stock 66 252 092 64 591 547

4 530 185 3 733 991 Signals and telecommunications 3 733 991 4 530 185

4 334 239 3 172 020 Other capital programmes 3 172 020 4 334 239

73 455 971 73 158 103 73 158 103 73 455 971



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

34 Reconciliation of net loss before taxation to cash utilised in operations

( 792 807) (2 114 155) 34,1 Operating cash flows before working capital changes

(2 198 670) ( 802 616)

( 536 252) (1 548 831) Net loss before taxation ( 927 513) ( 553 646)

Adjusted for:

2 444 891 2 185 431 Depreciation of property plant and equipment 4 2 315 539 2 497 746

40 306 42 295 Amortisation intangible assets 6 42 355 40 221

134 907 167 693 Loss on de-recognition of property, plant and equipment and investment property

24 187 081 140 910

751 155 1 009 216 Impairment of property, plant, equipment and investment in subsidiary

4 219 523 751 155

2 538 9 612 Impairment of trade and other receivables 10 7 981 ( 1 049)

( 5 986) 1 895 Actuarial (gain)/loss on employee benefit obli-gations and assets

17 1 855 ( 6 071)

14 258 ( 220 730) Fair value adjustments on investment proper-ties

7 ( 220 730) 14 258

1 063 1 007 Unwinding of interest on post-retirement med-ical aid benefits

17 1 048 1 106

- - Interest on long-term loan 14 (28) 2 328

2 080 419 Defined benefit assets 419 2 080

(3 222 907) (3 140 275) Amortisation on capital subsidy and grants re-ceived

19 (3 204 511) (3 271 351)

- 227 672 Operating lease receivable 227 672 -

- ( 139 895) Operating lease deferred income (139 895) -

5 945 8 724 Finance lost 30 (11 520) 6 296

( 424 805) ( 718 388) Finance income 31 (720 986) ( 426 599)

(1 470 584) ( 939 263) Changes in working capital (931 715) (1 403 832)

( 50 267) 58 659 (Increase)/decrease in trade and other receiv-ables

( 103 569) 22 647

( 1 469) ( 1 318) Benefits paid on post retirement medical aid benefit

( 1 371) ( 1 527)

68 354 252 056 Increase in provision for insurance claims 252 056 68 354

(40 466) (155 859) Increase in inventories ( 156 507) ( 43 794)

(1 446 736) (1 092 801) Decrease in trade and other payables ( 922 324) (1 449 512)

(2 263 391) (3 053 418) Cash utilised in operations (3 130 385) (2 206 448)




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

34,2 Acquisition of property, plant and equipment reconciliation

(6 194 161) (6 677 463) Acquisition of property, plant and equipment 4 (6 678 924) (6 196 336)

2 059 826 2 728 936 Accruals not part of cash flows 2 728 936 2 059 827

(4 134 335) (3 948 527) Cash utilised in operations (3 949 988) (4 136 509)

35 Contingent liabilities

- 21 623 35.1 Prodigy Business Services 21 623 -

35 907 35 908 35.2 Bagale Consulting claiming for alleged failure to pay for services rendered during 2010.

35 908 35 907

32 479 36 381 35.3 Labour disputes, including mass dismissal dispute by National Transport Movement.

36 381 32 479

3 460 3 460 35.4 Rail & Road Assessing Services, for alleged failure to pay for services rendered. Applica-tion was launched for dismissal of action.

3 460 3 460

2 280 2 280 35.5 Lenkwane Cleaning Services for alleged breach of contract.

2 280 2 280

40 589 40 589 35.6 Proconse Consulting Engineers for alleged failure to pay for services rendered.

40 589 40 589

35 000 115 000 35.7 Various insurance claims for personal injuries as well as legal and other matters which may result in a possible loss in future.

115 000 35 000

146 461 146 461 35.8 Bombardier Africa Alliance - Delay claims al-legedly occasioned by a change request and a NUMSA strike.

146 461 146 461

173 173 35.9 Algee Medics and Fire for alleged failure to pay for services rendered.

173 173

4 200 4 200 35.10 Tiro Projects - Claim for alleged failure to pay for professional services rendered.

4 200 4 200

150 150 35.11 Alleged unlawful arrest of ME Mlungisi. 150 150

8 552 8 552 35.12 National Force Security for alleged unlawful cancellation of security contract.

8 552 8 552

100 100 35.13 Transportation and Traffic Technology Africa for alleged failure to pay for professional ser-vices rendered.

100 100

6 774 6 774 35.14 Madisha & Associates - Claim for alleged breach of contract.

6 774 6 774

20 000 20 000 35.15 Baran Projects SA - Claim for alleged failure to pay for goods sold and delivered.

20 000 20 000

478 478 35.16 Koor Dindar Moti Quantity Services - Claim for alleged failure to pay for services rendered / work performed.

478 478

940 940 35.17 The New Age - Claim for alleged failure to pay for goods sold and delivered.

940 940



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

10 324 10 324 35.18 Sbahle Safety consultants for alleged failure to pay for services rendered.

10 324 10 324

344 344 35.19 Be My Guest Trading for alleged failure to pay for services rendered.

344 344

929 929 35.20 Rasakanya Builders CC - Claim for alleged failure to pay for cleaning services rendered.

929 929

10 000 10 000 35.21 Business Pledge - Claim for alleged failure to pay in terms of an agreement.

10 000 10 000

843 843 35.22 Phumelela Fleet Operations (Pty) Ltd - Claim for alleged failure to pay services rendered, viz Vehicle Management Tracking System.

843 843

2 109 2 109 35.23 Enterprise Technology Solutions (Pty) Ltd - Declaratory order setting aside cancellation of rental and loan of certain equipment agree-ment.

2 109 2 109

41 222 21 626 35.24 Siyaya Rail Solutions - Claim for alleged failure to pay for professional services rendered.

21 626 41 222

6 781 6 781 35.25 Daveglen 371 (Pty) Ltd t/a Security Internation-al - Claim in respect of Statutory increases de-termined by the Security Industry.

6 781 6 781

- 56 593 35.26 Siyaya db Consulting Engineers - Claim for al-leged failure to pay for services rendered.

56 593 -

662 - 35.27 ME Nkoenyane - Claim for alleged agreed leave.

- 662

- - 35.28 EE Meishwine vs Autopax, claiming for loss of support.

6 997 -

- 7 500 35.29 Madisha & Associates CC - alleged early ter-mination of contract

7 500 -

- 66 35.30 Raamba Engineering Enterprises CC and JR-ACCE (Pty) Ltd - subcontractor work

66 -

- 385 35.31 DBI - change in scope and budget 385 -

- 12 687 35.32 MMQS-MACE (PTY) LTD - claim for work done 12 687 -

- 1 983 35.33 OTIS (PTY) LTD - variation on contract 1 983 -

- 13 760 35.34 VISION AFRICA as part of MMQS-MACE (PTY) LTD - alleged work done

13 760 -

- 286 35.35 Pro-Serve Consulting - alleged work done 286 -

- 4 362 35.36 Kamo Architects - alleged services rendered 4 362 -

- 5 423 35.37 Kamo Construction - alleged services ren-dered

5 423 -

- 15 164 35.38 Lebepe Quantity Surveyors - alleged services rendered

15 164 -

- 1 200 35.39 Brouwers Property Development cc - penalties 1 200 -

- 238 946 35.40 Siyangena interest 238 946 -

410 757 854 380 Total contingent liabilities 861 377 410 757




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

The matters listed in the note are matters in re-spect of which the counterparty mentioned has commenced legal proceedings either in court or through alternative dispute resolution, for exam-ple, arbitration proceedings. There is uncertainty relating to the amount and the timing of the out-flow, a final determination in this regard will be made by the presiding officer of the court or the arbitral forum as the case may be. In the event that PRASA is successful in its defence on any of the matters listed in this note, PRASA may be re-imbursed for part of the legal costs it incurred in defending the matter in question.

36 Contingent asset

The matters below are under litigation and have been recognised as contingent assets. Their ex-istence will only be confirmed by the occurrence or non-occurrence of one or more uncertain fu-ture events not wholly within the control of PRA-SA. R2.6 billion is for Swifambo Rail Leasing for the contract of buying of locomotives where court rules that contract must be set aside.

- 711 687 *** Claims for monies paid on contract where condi-tions were not met.

711 687 -

18 719 10 064 Tenant collections under litigation. 10 064 18 719

91 399 90 298 Non-payment of professional services rendered to Government departments, and other third par-ties.

90 298 91 399

- 28 941 Monies paid in respect of loans advanced to em-ployees.

28 941 -

- 32 775 Claims against employees for being absent from work, employed on basis of misrepresentation and for services not rendered.

32 775 -

14 740 14 740 Claim against insurer of company for non-per-formance and delivery on a capital contract.

14 740 14 740

124 858 888 505 888 505 124 858



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

*** ‘On 03 July 2017, the Local Division of the Gauteng High court ruled in favour of PRASA to set aside an agreement in the amount of R3.5 billion with Swifambo Rail Leasing for the sale and purchase locomotives dated 25 March 2013. PRASA had paid Swifambo an amount of R2.6 billion which the court ruled that it must be paid back to PRA-SA. R1.9 billion is accounted for under prepaid expenditure. The matter has been taken on ap-peal.

37 Other related party transactions

The Group is a Schedule 3B Public Entity in terms of the Public Finance Management Act, 1999 (Act No 1 of 1999). It therefore has a significant num-ber of related parties, including other State-owned entities, Government departments and all other entities within the national sphere of Government. The Group used the database main-tained by National Treasury to identify related parties. A list of all related parties is available on the National Treasury website at www.treasury.gov.za. Transactions with related parties are con-cluded on an arm's length basis.

The Entity has a related party relationship with its subsidiaries Autopax and Intersite, as well as with its directors and senior executives (key management). Refer note 8 for related party transactions with subsidiaries and note 27 for related party transactions with key management.

Transactions with related entities

Services rendered to related parties comprise principally transportation (rail and road) ser-vices. Services purchased from related parties comprised principally energy, telecommunica-tions, information technology, transportation and property related services.

The following is a summary of transactions with related parties during the year and balances due at year-end:

Services rendered to related parties

138 521 122 460 Major Public entities 187 049 160 352

138 521 122 460 187 049 160 352




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Services received from related parties

1 488 984 1 603 941 Major Public entities 1 608 577 1 495 712

683 160 594 268 Other Public entities 643 939 741 297

2 172 144 2 198 209 2 252 516 2 237 009

Net amounts due to related parties

( 166 016) ( 753 012) Major Public entities ( 754 660) ( 164 700)

( 8 692) ( 5 453) Other Public entities ( 6 108) ( 13 045)

( 174 708) ( 758 465) ( 760 768) ( 177 745)

Majority of transactions with Major Public enti-ties are with Transnet and Eskom.

Majority of Other Public entities transactions are with South African Revenue Services.

38 Risk disclosure

38,1 Financial risk management

38.1.1 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations, result-ing in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy parties. The Group performs ITC checks on ten-ants before contracts are entered into. Tenants are required to pay deposits, provide guarantees or sureties based on their risk profile.

Financial assets, which potentially subject the Group to credit risk, consist principally of cash and cash equivalents, loans and receivables and trade and other receivables. The Group’s cash and cash equivalents are placed with high credit quality financial institutions.

Concentrations of credit risk with respect to trade receivables are due to leases with Govern-ment entities or tenants under operating lease agreements. Where relevant, the Group has poli-cies in place to ensure that transactions only take place with customers with an appropriate credit history.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

PRASA has entered into a contractual agreement with Swifambo for the acquisition of locomotives. Advance payments were made towards the said acquisition. PRASA has applied to the court to have the transaction set aside. PRASA is exposed to credit risk should Swifambo fail to reimburse the amount paid.

38.1.1.1 Maximum exposure to credit risk

The Group’s exposure to credit risk with regards to loans and receivables are limited due to collat-eral held, except for R1.9biilion prepaid to Swi-fambo of which a court case has started.

The carrying amount of financial assets recorded in the financial statements, which is net of im-pairment losses, represents the Group’s maxi-mum exposure to credit risk:

7 638 480 9 687 139 Prepayment for capital expenditure 5 9 687 139 7 638 480

454 942 312 756 Trade and other receivables 10 354 362 341 295


14 172 713 22 279 192 22 348 998 14 096 594

Tenant receivables comprise of hawkers, resi-dential and commercial tenants in the following percentages:

1,5% 1,5% Hawkers 1,5% 1,5%

8,9% 8,9% Residential 8,9% 8,9%

89,6% 89,6% Commercial 89,6% 89,6%

100,0% 100,0% 100,0% 100,0%

Commercial tenants are deemed to be low risk compared to residential tenants. However, during the last few years we have been negative-ly impacted due to poor economic conditions in the property market.

38.1.1.2 Collateral

For all tenant receivables collateral is held in the form of tenant deposits, guarantees or sureties based on the risk profile of the respective tenant.




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

38.1.1.3 Financial assets that are past due but not im-paired

The tenant trade receivables are tenants who have entered into rental contracts. All tenants prepay amounts. Therefore, if a tenant has not paid, the amount is past due. The following rep-resents information on the credit quality of trade receivables that are past due but not impaired:

38.1.1.4 Aged analysis of financial assets that are past due but not impaired

Trade receivables

70 424 8 013 30 days past due 11 948 42 826

24 254 912 31 to 60 days past due 2 948 23 523

130 004 203 208 61 to 90 days and over past due 203 208 17 296

224 682 212 133 Total 218 104 83 645

Tenant trade receivables

21 178 23 553 1 to 30 days past due 23 553 21 178

18 827 20 908 31 to 60 days past due 20 908 18 827

70 477 95 504 61 to 90 days and over past due 95 504 70 477

110 482 139 965 Total 139 965 110 482

All of the Group's trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be im-paired and an allowance of R98.1 million (2016: R90.2 million) has been recorded accordingly.

38,2 Liquidity risk management

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group is on continuing engagements with our Shareholder and National Treasury. The Group maintains sufficient cash resources to fund its capital program via cash allocations from Government on a monthly basis, in order to act as an agent for Government in the provision of rail commuter services. The Group also man-ages liquidity risk through an on-going review of future commitments.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due under both normal and stressed conditions, without incurring unacceptable losses or reputa-tional damage.

The Group receives a guaranteed subsidy from National Treasury through the Medium Term Ex-penditure Framework allocation process to fund all current and future obligations.

The below maturity analysis details the Group’s remaining contractual maturity for its financial liabilities. The below analysis has been drawn up based on the undiscounted cash flows of finan-cial liabilities based on the earliest date on which the Group can be required to pay. The analysis includes both estimated interest and principal cash flows.

38.2.1 Maturity analysis

Non-derivative financial liabilities

Trade payables

3 320 050 5 183 483 1 to 6 months 5 384 639 3 358 291

117 690 133 025 7 to 12 months 133 025 117 690

3 704 739 5 316 508 Carrying amount 20 5 517 664 3 743 199

Loans and borrowings

- - 1 to 6 months - 1 518

- - Carrying amount 14 - 1 518




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

38,3 Market risk disclosures

38.3.1 Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s income and operating cash flows are substantially independent of changes in market interest rates. However, the value of post employment assets and obligations will be affected when there are fluctuations in market interest rates.

Employee benefit obligations sensitivity analysis

The results of the valuation are sensitive to the assumptions used. The valuation are based on a number of assumptions. The value of the liability could turn out to be overstated or understated, depending on the extent to which actual experi-ence differs from the assumptions adopted. Re-fer to note 17

38.3.2 Foreign exchange currency risk

Foreign currency risk is the risk that the fair val-ue or future cash flows of a financial instrument will fluctuate because of changes in foreign ex-change rates. This would arise mainly as a result of import capital and operational expenditure programmes where goods are imported from, and services provided in foreign countries and thus are exposed to currency fluctuations.

On the 25th of March 2013, PRASA entered into a contractual agreement valued at R3.5 billion with Swifambo Rail Leasing (SRL), which includes its technical partners Vossloh Spain and Vossloh Germany, to construct 88 new locomotives for Mainline Passenger Services. SRL submitted to PRASA a price based on EURO, at the Rand/Euro exchange rate of R10.18 (the “Set Rate”). The contractual agreement stipulates that the risk for the fluctuations of the Rand against the EURO shall be shared by the parties. SRL shall be re-sponsible for the cost and the risk of fluctuation of the Rand to the Euro above the Set Rate up to R10.40. PRASA shall be responsible for the cost and the risk of the fluctuation of the Rand to the Euro above R10.40.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

On the 14th of October 2013, PRASA entered into an agreement with Gibela for the design, supply and manufacture of 600 new trains. In this pro-gramme PRASA is not exposed to foreign cur-rency risk as Gibela is responsible for addressing the risk through financial methods such as hedg-ing, at no cost to PRASA.

38.3.3 Capital management

The Group’s capital consists of share capital. Capital and operational subsidies are received through the Medium Term Expenditure Frame-work. Capital subsidy is accounted for in terms of IAS 20 'Accounting for Government grants and disclosure of Government assistance'.

38,4 Categories of financial instruments

Loans and receivables

454 942 312 756 Trade and other receivables 38.1.1.1 354 362 341 295


6 534 233 12 627 097 Carrying amount 12 696 903 6 458 114

Financial liabilities at amortised cost

3 437 740 5 316 508 Trade payables 38.2.1 5 517 664 3 475 981

- - Other financial liabilities 14 - 1 518

3 437 740 5 316 508 Carrying amount 5 517 664 3 477 499

Due to nature of financial instruments the carry-ing amount approximates the fair value amount.

39 Prior period error adjustment

Costs previously taken to Work in Progress, now reversed as these costs incurred are not directly attributable to an asset.

Assets vandalised written off

Correction on billing for Eastern cape leases

Depreciation due to late capitalisation of assets

Corrections on IAS17 disclosure of leases

Financial InformationPASSENGER RAIL AGENCY OF SOUTH AFRICA

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017 (Countined)


Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

39,1 Restatement of accounts

39.1.1 Restatement of consolidated statement of com-prehensive income for the year

Restatement of accumulated loss

(966 678) Balance as at 31 March 2014 (1 481 718)

(2 959) Costs previously stated as Work in Progress to be expensed

(2 959)

(969 637) Balance as at 31 March 2014 restated (1 484 677)

(1 034 220) Loss for the year March 2015 (1 053 201)

(144 956) Costs previously stated as Work in Progress to be expensed

(144 956)

(2 148 813) Accumulated loss 31 March 2015 restated (2 682 834)

(295 235) Loss for the year March 2016 (312 411)

(110 428) Depreciation on late capitalisation of assets (110 428)

(156 153) Reversal due to take on assets recognised in er-ror in prior year

(156 153)

70 022 Depreciation on late capitalisation of assets 70 022

156 153 Reversal due to take on assets recognised in er-ror in prior year

156 153)

- Diesel accrual for prior year (218)

(9 753) Assets vandalised (9 753)

(27 148) Correction on straight lining of leases (27 148)

(156 790) Correction on revaluation of investment property (156 790)

(5 987) Correction on billing for Eastern Cape leases (5 987)

(933) Costs previously stated as Work in Progress to be expensed

(933)

(2 685 065) Accumulated loss 31 March 2016 restated (3 236 480)

39.1.2 Work in Progress

9 208 707 Balance as at 31 March 2015 9 209 318

(265 521) Capitalisation facilities and leasehold improve-ment prior to 2015

(265 521)

(13 172) Capitalisation facilities and leasehold improve-ment

(13 172)

(2 959) Reversal of costs to expense account (2 959)


8 782 099 Balance at end of year 31 March 2015 restated 8 782 710



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

5 937 848 Additions 5 940 023



(574 543)


(130 264)

(322 316) Capitalisation network assets (322 316)

(5 204) Capitalisation moveable assets (5 204)

266 999 Capital accrual not raised 266 999

(1 778 565) Capitalisations (1 780 544)

12 165 368 Balance at end of year 31 March 2016 restated

12 166 175

39.1.3 Facilities and leasehold improvement accumu-lated depreciation

(1 994 924) Balance as at 31 March 2016 (1 998 349)

(86 223) Depreciation on late capitalisation (86 223)

(2 081 147) Balance at end of year 31 March 2016 restated (2 084 572)

Network assets accumulated depreciation

(2 558 398) Balance as at 31 March 2016 (2 558 398)


378 839 Reversal due to take on assets recognised in er-ror in prior year

378 839


Moveable assets accumulated depreciation

(443 841) Balance as at 31 March 2016 (457 851)


(445 754) Balance at end of year 31 March 2015 restated (459 764)

39.1.3 Facilities and leasehold improvement - cost


265 521 Cost capitalised prior to 2015 265 521

13 172 Cost capitalised 13 172








Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

Network assets - cost




(534 992)


Moveable assets - cost

757 343 Balance as at 31 March 2016 779 594


762 547 Balance at end of year 31 March 2015 restated 784 798

39.1.4 Investment property


(848 422) Correction on IAS 17 disclosure (848 422)


121 970 Additions 121 970

19 216 Transfer from property plant and equipment 19 216

(924) De-recognition of investment property (924)

142 532 Fair valuation 142 532

96 290 Revaluation on property receivable in future 96 290

(156 790) Fair valuation correction (156 790)


39.1.5 Operating lease receivable

Balance as at 31 March 2015

2 186 723 Revaluation on property receivable in future 2 186 723


(65 251) Revaluation on property receivable in future (65 251)


39.1.6 Operating lease liability

Balance as at 31 March 2015

(1 338 302) Revaluation on property receivable in future (1 338 302)


(31 038) Revaluation on property receivable in future (31 038)


39.1.7 Trade and other payables


266 999 Capital accruals understated 266 999




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

48 081 863 39.1.8 Capital subsidy and grants Balance as at 31 March 2016

48 081 863



(156 153)


40 Events after reporting date

15 April 2017: Kraaifontein, Western Cape: Eight coaches completely destroyed and three partially damaged by fire. Three different train sets were affected. Cause of the fire still under investiga-tion. Estimated loss R32 million. There were no reported injuries or fatalities.

16 April 2017: Braamfontein, Gauteng: Three coaches completely destroyed by fire caused by panto hook-up. Estimated loss R9.5 million. There were no reported injuries or fatalities.

27 April 2017: Houtheuwel, Gauteng: One motor coach and one plain trailer completely destroyed by fire on an empty train set. Cause under inves-tigation. Estimated loss R9.5 million. There were no reported injuries or fatalities.

27 April 2017: Retreat, Western Cape: One motor coach and one plain trailer completely destroyed by fire. Cause under investigation. Estimated loss R9.5 million. There were no reported inju-ries or fatalities.

15 May 2017: Umbogintwini – Isipingo, KwaZu-lu-Natal: Rail infrastructure damaged due to heavy rains in the region. Estimated damage R28 million. There were no reported injuries or fatal-ities.

18 May 2017: Wonderboom, Gauteng - Five coaches totally destroyed by fire. Cause under investigation. Estimated damage R14.5 million. There were no reported injuries or fatalities.

19 May 2017: Kwaggastroom – Houtheuwel, Gauteng: One coach totally destroyed by fire and one partially damaged. Cause under investiga-tion. Estimated damage R5 million. There were no reported injuries or fatalities.




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

24 May 2017: Briardene – Temple, KwaZulu-Na-tal: One motor coach and two plain trailers totally destroyed by fire by angry commuters. Estimated damage R16 million. There were no reported in-juries or fatalities.

1 June 2017: Elandsfontein -Tshwane Business Express collided with Metro. Cause of accident under investigation. Estimated damage R25 mil-lion. There were no reported injuries or fatalities.

12 June 2017: Cape Town Station - Several coach-es totally destroyed by fire by angry commuters. Estimated damage R45 million. There were no reported injuries or fatalities.

14 June 2017: Koelenhof, Western Cape - Two plain trailers totally destroyed by fire. Cause un-known. Estimated cost R5 million. There were no reported injuries or fatalities.

19 June 2017: Nyanga, Western Cape - One motor coach and one plain trailer totally destroyed by fire. One plain trailer partially destroyed. Cause under investigation. Estimated cost R8 million. There were no reported injuries or fatalities.

03 July 2017, the Local Division of the Gauteng High court ruled in favour of PRASA to set aside an agreement in the amount of R3.5 billion with Swifambo Rail Leasing for the sale and purchase locomotives dated 25 March 2013. PRASA had paid Swifambo an amount of R2.6 billion which the court ruled that it must be paid back to PRA-SA. R1.9billion is accounted for under prepaid expenditure and R712 million for impaired lo-comotives is disclosed under contingent assets. The matter has been taken on appeal.

15 July 2017: Van Der Stel, Western Cape - Train fire, one motor coach was totally destroyed by fire. Cause under investigation. Estimated cost R5.5m. There were no reported injuries or fatal-ities.

10 October 2017: Various stations, Kwazulu-Na-tal - Storm damage. Estimated cost R150m. There were no reported injuries or fatalities.

20 November 2017: Century City, Western Cape - Three trailers damaged during fire. The fire affected optic fibre cables leading to the nearby train traffic control centre as well. Cause under investigation. Cost of damage not known as yet.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

13 February 2013: PRASA terminated employ-ment of 700 members of The National Transport Movement (‘NTM”) on allegations that they par-ticipated in the burning of train coaches during their strike. The decision was upheld by the La-bour Court. The NTM appealed the matter with the Labour Appeal Court. On 21 November 2017 PRASA lost the case and was ordered to reinstate the employees retrospectively to the date of dis-missal. The estimate of the back pay including leave amounted to R635 million. The full amount of the NTM liability of R635 million is accounted for in accruals.

21 November 2017: Akasia Park, Western Cape - Train fire, one motor coach and two plain trailers were totally destroyed by fire. One plain trailer was partially destroyed. Cause under investiga-tion. Estimated cost R12m. There were no report-ed injuries or fatalities.

21 December 2017: Pinetown - Kwazulu-Natal - One motor coach destroyed by fire due to an elec-trical fault. Cause under investigation. Estimated cost R5.5m. There were no reported injuries or fatalities.

24 December 2017: Kathelong, Gauteng - Sub station struck by lightening. Estimated cost R6.4m. There were no reported injuries or fatal-ities.

04 January 2018: Henneman/Kroonstad, Free State - Shosholoza Meyl collided into a Third Party Mechanical Horse pulling two trailers at the Geneva level crossing. Cause under inves-tigation. Estimated cost R56m. There were 145 injuries and 23 fatalities.

09 January 2018: Geldenhuis, Gauteng - Met-rorail train 0323 collided with a stationery train 0317. Cause under investigation. Estimated cost R5m. There were no reported injuries or fatali-ties.

18 January 2018: Tembisa, Gauteng - Sub station flashed over. Estimated cost R2.4m. There were no reported injuries or fatalities.

23 January 2018: Kathelong, Gauteng - Sub sta-tion flashed over. Estimated cost R2.6m. There were no reported injuries or fatalities.

31 January 2018: Berea Road, Kwazulu-Natal - One motor coach and one trailer damaged. Cause under investigation. Estimated cost R6.9m. There were no reported injuries or fatalities.

31 January 2018: Durban, Kwazulu-Natal - One motor coach damaged. Cause under investiga-tion. Estimated cost R6m. There were no report-ed injuries or fatalities.




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

15 February 2018: Faure, Western Cape - One motor coach was totally destroyed by fire. One plain trailer was partially damaged. Cause under investigation. Estimated cost R6m. There were no reported injuries or fatalities.

04 March 2018: Dube, Gauteng - Sub station struck by lightening. Estimated cost R1m. There were no reported injuries or fatalities.

13 March 2018: Eerste Fabriek, Gauteng - A large group of commuters vandalised and stoned sev-eral train sets as a result of train delays. Esti-mated cost R5m. There were no reported injuries or fatalities.

31 March 2018: Bonthewel, Western Cape - Theft of railway infrastructure (electrification - trac-tion, signalling, telecommunication and perma-nent way) between December and March 2018. After the incident was reported it was then dis-covered that this is not a claimable incident as the damage occurred for a period of time. There were no reported injuries or fatalities.

08 May 2018: Maraisburg, Gauteng - Two coaches were burnt as a result of connector cables that were tampered with resulting in electrical fault igniting the fire. The cost of the damage is not yet known. There were no reported injuries or fatalities.

22 May 2018: Retreat Station, Cape Town - Two coaches were burnt. Arson caused by suspected commuters. Estimated cost R4m. There were no reported injuries or fatalities.

30 May 2018: Ottery Southfield, Cape Town - Two coaches were burnt. Arson caused by suspected commuters. Estimated cost R7.5m. There was one reported injury and one fatality.

18 June 2018: Steenberg, Western Cape - Two coaches were burnt. Estimated cost R10m. There were no reported injuries or fatalities.

24 June 2018: Phillipi, Western Cape - Train set alight by protesting commuters. Two motor coaches and two plain trailers burnt. The cost of the damage is not yet known. There were no re-ported injuries or fatalities.

30 June 2018: Bosman, Gauteng - Train set was torched and plain trailer was totally burnt. The cost of the damage is not yet known. There were no reported injuries or fatalities.



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

PRASA has not paid any increases since April 2015 to date for private security service provid-ers. The current PRASA contracts under para-graph 17.2.3. states “An increase not exceeding the percentage increase in CPIX or 7% in the contract value, which ever is the least, may be negotiated on the remaining contract amount, after the completion of the first twelve months, if the statutory increase exceeds 7%.” The total potential cost for the negotiations of outstanding increases are calculated at R91m.

07 July 2018: Westgate/Crown, Gauteng - One motor coach and trailer were torched. The cost of the damage is not yet known. There were no reported injuries or fatalities.

21 July 2018: Cape Town, Western Cape - Two motor coaches and four plain trailers were com-pletely burnt and one plain trailer was partially damaged. Estimated cost R21m. There were no reported injuries or fatalities.

41 Fruitless and wasteful expenditure

218 309 - ** Locomotives - not shown in prior year - 218 309

- 158 458 Cost incurred on designs not in use 158 458 -

2 708 5 456 Non compliance with HCM policies 5 456 2 708

14 944 - Uninstalled hardware - 14 944

5 945 8 724 Interest and penalties on late payments of cred-itors accounts

11 521 6 296

4 721 - Fruitless and wasteful expenditure due to lack of planning

- 4 721

2 540 8 063 Process not followed on dismissal of Employee 8 063 2 540

3 832 679 Salary paid to former Executive 679 3 832

3 169 - Advisory contract for former Executive - 3 169

969 - Service rendered by supplier did not add value - 969

113 - Tender re-advertised due to error on initial ad-vertisement

- 113

72 1 Other 627 425

257 322 181 381 Total for year 184 804 258 026




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

549 374 806 696 Opening balance 807 459 549 433

497 110 715 419 Locomotives received from Swifambo Rail Leas-ing

715 419 497 110

10 969 16 914 Interest and penalties on late payments of credi-tors accounts

17 324 11 028

41 295 74 363 Other 74 716 41 295

806 696 988 077 Closing balance 992 263 807 459

** The matter is currently in court.

42 Irregular expenditure

Prior years

Prior years

- 747 No evidence could be provided to prove that a due process was followed in prior to appointing the supplier.

747 -

16 824 61 217 Feasibility study and testing of the market was not conducted prior to the consideration of sup-plier projects unsolicited proposal.

61 217 16 824

18 506 - Approval for confinement not in compliance with the PRASA SCM policy and PPPFA.

14 449 18 506

2 092 139 2 283 424 786 588 Competitive bidding method not followed for the appointment of the supplier, contravening the SCM Policy.

788 244 2 291 610 2 183 530

22 322 - Contract not signed by a duly delegated official. - 24 766

44 223 31 598 Criteria used in the evaluation are different from those stated in the RFP.

31 598 44 223

386 - Deviation not approved by delegated official. - 386

22 251 1 157 Emergency not ratified as per the requirements of the SCM Policy.

1 157 22 251

101 - Employment contract extended without the prop-er approval.

- 101

97 32 Non compliance with the Treasury Regulation on cost containment.

32 97

- 170 692 Non compliance with CIDB regulations. 170 692

218 309 - Supplier not disqualified and was subsequently appointed despite not submitting pertinent bid documentation.

- 218 309

14 944 16 306 Unfair advantage granted to the winning bidder. 16 306 14 944

2 118 12 055 Contract extensions more than allowed by PRA-SA SCM Policy and in some cases extended more than once without competitive bidding process.

27 328 331 062

34 214 4 679 Overspending on a contract prior to obtaining ap-proval from delegated official.

62 836 34 214

101 253 465 Payment made to supplier without a contract. 937 101 253



Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

1 648 078 1 129 136 Procurement not in line with PRASA SCM Policy and PPPFA.

1 254 594 1 648 567

21 603 8 422 Purchase of goods and services through splitting of quotes instead of a tendering process.

8 422 21 603

2 645 1 365 The bid documents of winning bidder were ac-cepted after the time for submission of bids had elapsed.

1 365 2 645

129 155 The suspension policy was not followed and sus-pension paid to employee in excess of 30 days.

155 129

- 1 598 Non compliance with HCM policies with regards to overtime.

1 611 -

- 34 018 Non compliance with HCM policies with regards to recruitment.

34 018 -

2 277 1 674 Three quotations not obtained for the procure-ment as prescribed by the SCM Policy.

1 674 2 277

3 769 - Additional meetings not approved by Minister of Transport.

- 3 769

52 939 52 247 167 559 Non-compliance with the PRASA Remuneration Policy

167 559 52 247 52 939

4 319 127 3 810 987 954 147 Total before condonement 955 803 4 032 995 4 742 395

10 504 924 14 824 051 Opening balance 15 322 692 10 580 297

954 147 Prior years 955 803

- ( 2 020) Less: amount recovered ( 2 020) -

- - Less: amounts condoned - -

14 824 051 19 587 165 954 147 Total 955 803 20 309 470 15 322 692




Entity Group

2016 2017 2017 2016

R’000 R’000 R’000 R’000

216 cases have been under investigation by Na-tional Treasury. A draft report was issued. This may lead to a possible amount of irregular expen-diture in the contracted amounts of R3.7 billion. Management is in the process of going through the report and to determine if all documents were provided for investigation. Thereafter it will be possible to determine if these costs are irreg-ular or not. Management will then also deter-mine what steps need to be taken on regularising the expenditure and to take action with regards to consequence management. Some employees as implicated in some cases are not in the employ of PRASA any more. Non- compliance to regu-lations and processes forms a significant part of the irregular expenditure. Report on investiga-tions done by Werksmans will be made available after July 2017 and management will take ac-tion where necessary in executing consequence management. 41 cases with criminal intent are currently under investigation by the Hawks, no report or indication of when these matters will be finalised could be obtained by management.

43 Going concern uncertainty

There is some uncertainty on the ability of PRA-SA to continue as a going concern. The Entity and the group reported a loss of R1.5 billion and R928 million respectively in the current financial year which is an increase of 189% and 68% re-spectively from the previous financial year loss. Although all ratios are positive indicators of sol-vency and liquidity, the majority of the cash re-sources are earmarked for capital projects and not available for operational expenditure. The disparity between the allocation of capital and operational subsidy must be addressed, as the current allocation to operations does not allow for proper maintenance and operations on the infrastructure investments that are made.

44 Standards and interpretations issued but not yet effective

The Accounting Standards Board agreed that, as an interim measure, Government Business En-terprises that applied Statements of Generally Accepted Accounting Practice (GAAP), should continue to apply Statements of GAAP (as at 1 April 2012). Directive 12 include criteria to be assessed by management to determine whether IFRS or GRAP should be applied. Management assessed Directive 12 and concluded that from 1 April 2018 PRASA will apply GRAP as the new accounting reporting framework. Management is not in a position to ascertain what the effect on the financial statements may be from 1 April 2018.



NOTES


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