Corporate Plan 2020-2022 1
CORPORATE PLAN 2020-2022 1
04 Legislative Mandate 05 Vision, Mission and Values 06 Legal Operating Structure 07 Organisational Structure 08 Contributing to the National Development Plan 10 National Government Imperatives 13 PRASA’s National Strategic Plan 14 Market Development & Industry Overview 19 Informing the Corporate Plan 21 The Value Proposition 23 Executive Summary 28 Key Drivers of the Corporate Plan 71 Human Resource Management 76 Employment Equity 78 Enterprise Risk Management and Plan 80 Enterprise Risk Management Framework 86 Fraud Prevention Plan 87 Financial Position 91 Materiality Framework 93 Capital Expenditure Programme: MTEF 2019/20 – 2021/22 99 Introduction to the APP 2020/2022
CORPORATE PLAN 2020-2022 3 LEGISLATIVE MANDATE
PRASA, as the implementation arm of the National Department of Transport, the sole shareholder, is primarily focused on the mandate contained in the Legal Succession Act of South African Transport Services (“SATS”) Act of 1989 as amended.
The main objective and main business of PRASA is to: • National Transport Policy • National Development Plan Ensure that, at the request of the Department of • National Land Transport Act Transport, rail commuter services are provided • Public Finance Management Act within, to and from the Republic in the public interest, • Green Paper on Rail and provide, in consultation with the Department of • Public Transport Strategy Transport, for a long haul passenger rail and bus • Economic Strategy and Job creation initiatives services within, to and from the Republic in terms of the principles set out in section 4 of the National Legislative & Regulatory Environment Land Transport Transition Act, 2000 (Act no 22 of 2000). • The crafting of the PRASA strategy and plan takes cognisance of the legislative The second objective and secondary business of • The National Land Transport Act (Act 5 of 2009) PRASA is that PRASA shall generate income from the as government’s transport exploitation of assets acquired by it. • Strategy and Green paper on Rail. • National Railway Safety Regulator Act A further requirement is that, in carrying out its [No 16 of 2002] objectives and business, PRASA shall have due • Labour Relations Act, Employment Equity Act and regard for key Government, social, economic and Conditions of Employment Act transport policy objectives. As a public entity, Government initiatives remain the strategy driver for PRASA. This is manifested through legislation, government policies and strategies such as:
STATEMENT OF PURPOSE
The launch of the Passenger Rail Agency of South of South Africa. This mandate is implemented in Africa (PRASA), in March 2009 brought forth a consultation with and under the guidance of the new era in passenger transport that saw the Minister of Transport. former South African Rail Commuter Corporation (SARCC) transformed into PRASA. Metrorail, The focus of the Corporate Plan is to ensure that, Shosholoza Meyl, Autopax (the subsidiary in the medium to long term, PRASA remains a company operating Translux and City to City bus leader in passenger transport solutions and that, services), as well as Intersite Asset Investments as a modern public entity, it continues to deliver (formerly under SARCC and Transnet) are now high quality passenger services in a safe and part of PRASA. The consolidation of entities secure environment which is underpinned by its followed a decision of the Cabinet of 1 December commitment to delivering Public Value. 2004. The consolidation of these entities was done to offer integrated passenger services that Deliver on the mandate of public transport by prioritise customer needs, provide better mobility providing safe, reliable, clean, affordable and and accessibility to transport by masses of the sustainable services resulting in customer South African population in need of safe and satisfaction of more than 80% in five years. affordable transport. Exploit PRASA’s assets that increase the As a wholly owned Government public entity, patronage of the public transport mandate by reporting to the Minister of Transport, PRASA’s bringing communities to stations and increasing main responsibility is to deliver commuter rail value from other assets to R1.071 billion by 2020. 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
4 CORPORATE PLAN 2020-2022 VISION, MISSION AND VALUES
Vision To be the backbone of public transport.
Mission To provide safe, reliable, affordable and clean passenger rail and bus services.
Values
Service Excellence Fairness and Teamwork Integrity Provide the kind of Treating our customers Working together services that meet and our colleagues the with our customers to and exceed customer same as we would like achieve a common goal expectation. to be treated. and recognizing each other’s strengths and contribution.
Safety Communication Performance Driven Ensuring our customers Sharing information Developing the ability to and colleagues enjoy with our stakeholders in venture into new areas of their journey and arrive an open and honest way. opportunity whilst offering safely and refreshed. quality products to our customers.
CORPORATE PLAN 2020-2022 5 LEGAL OPERATING STRUCTURE
Divisions Subsidiaries
RAIL DIVISION
Mainline passenger service
6 CORPORATE PLAN 2020-2022 ORGANISATIONAL STRUCTURE
PRASA Board of Control
Group Company Audit Secretary
Group GROUP Group Group Group Group Strategic Group Legal ENTERPRISE Group Human Capital Strategy ICT PROCUREMENT Asset Compliance WIDE RISK Finance Management Development/sip7 MANAGEMENT
AUTOPAX PRASA Intersite CEO PRASA Rail PRASA CEO Operations Technical and CRES engineering
Intersite BOARD AUTOPAX BOARD
CORPORATE PLAN 2020-2022 7 CONTRIBUTING TO THE NATIONAL DEVELOPMENT PLAN
According to the National Development Plan, The NDP notes that currently outdated, malfunction- mobility is one of the key dimensions of human prone railway technology and poor inter-modal capacity. Transportation cuts across the economy, linkages dominate these corridors. PRASA is aware environmental sustainability, spatial transformation, of the need for reliable, economical and smooth- global connectivity, state capability, social cohesion flowing corridors linking various modes of transport and health. To function optimally, South Africa needs (road, rail, air, sea ports and pipelines). In realising reliable, economical, and smooth-flowing corridors the objectives outlined in the NDP, PRASA plays a linking its various modes of transport (road, rail, air, crucial role in providing a suitable public transport sea ports and pipelines). solution that is safe, efficient, reliable and cost- effective. The National Development Plan calls for Integrated, holistic, long-term perspective on all transport The development and deployment of the total networks informed by growth priorities, the transport network, which will help improve transport environment, inclusivity and access. efficiency and accessibility while reducing the overall environmental, social and economic costs is key to Where people live and work matters. Apartheid attainment of the NDP imperatives. spatial planning has led to the majority of South Africans living far from places of work, with PRASA has noted the NDP strategic focus areas poor access to basic services and low levels of and planning priorities which focuses on creation participation in the economy. The need for people of workable urban transit solutions that will to live closer to their places of work and with better streamline an effective urban transport system, quality public transport allows them to access work particularly – as it pertains to PRASA, through: opportunities and in the most affordable manner. • Increasing investment in public transport The National Development Plan assumes that by and resolving existing public-transport policy 2030, investment in the transport sector will: issues • Providing incentives for public transport use a. Bridge geographic distances affordably, foster • Renewing the commuter train fleet reliability and safety so that all South Africans • Property Development can access previously inaccessible economic • Broadband Connectivity opportunities, social spaces and services. b. Support economic development by allowing the transport of goods from points of production to where they are concerned. This will also facilitate regional and international trade. c. Promote low-carbon economy by offering transport alternatives that minimize environmental harm.
8 CORPORATE PLAN 2020-2022 PRASA also takes into account the multi-dimensional aspect of the NDP regarding, employment, housing, environment and skill development and training.
HOUSING EDUCATION PRASA’s approach to integrated transport planning Skills development and training for PRASA taking into account future human settlements employees as well as future employees are close and transport corridors and cities’ urban planning to the heart of the rail business. PRASA through and densification strategy. PRASA’s current various initiatives support development of learners and future network expansions are informed towards engineering fields for rail, development by the organisation’s National Strategic Plan and training of rail specific artisans and other that supports investments in safe, reliable and transport related skills. In addition the organisation affordable public transport supported by spatial supports transport, engineering, public service development frameworks that balance location of management development through partnerships jobs and human settlements. This is at the heart with South African Universities such as University of PRASA’s 20-year strategy where developments Of Cape Town, University of Stellenbosch, Wits for commuter rail are based on demand patterns Business School and UNISA. PRASA also uses its and spatial plans. PRASA, through its division modernisation programmes to illicit the support CRES and subsidiary Intersite, also contributes of the private sector in skills development and to housing as part of its real estate strategy, employment to address social protection as supported by other chapters of the NDP around contained in the NDP. densification of cities to enable better public transport services.
ENVIRONMENT EMPLOYMENT
PRASA also addresses clean environments in its PRASA, plays a major role in reducing costs of stations, rail operations, bus services as well as living through affordable rail fares for people safety and security of passengers. Environmental travelling to and from places of employment. An sustainability is key to the development and effective public transport system that contributes upgrades of PRASA facilities as well as the to the movement of people facilitates employment reduction of greenhouse gas emissions with the and labour force participations thereby increasing aim of zero emissions on buildings by 2030. commuter and passenger numbers and social demographics.
CORPORATE PLAN 2020-2022 9 NATIONAL GOVERNMENT IMPERATIVES
Industrial Policy Action Plan (IPAP10) Job Creation and Skills Development Skills Development is critical to enable the creation PRASA’s Support for IPAP of meaningful sustainable jobs and as such the The Industrial Policy Action Plan is a catalyst Rolling Stock Fleet Renewal Programme has a for stimulating the country’s manufacturing and strong focus on Skills Development. Overall, Gibela productive capacity and for the creation of new is contracted to up-skilling 19 527 individuals industrialists, jobs and skills development. PRASA during the implementation of the Programme. The acknowledges that the manufacturing sector remains breakdown is as follows: vitally important for the South African economy and that the rail industry is a key component in driving the Approximately 8 088 jobs (combination of Local country’s industrial policy, transforming the economy, Factory and Suppliers) are expected to be created and the creation of Black industrialists. through the Rolling Stock Fleet Renewal Programme over a 10-year period. This is based on a target to PRASA’s train manufacturing plant on the East Rand achieve a minimum of 65% local content on the new in Dunottar provides economic linkages with various trains. As part of the first phase of the Programme, supplier and supporting industries and service the Local Factory will directly employ approximately providers and creation of new industrialists. 1 500 employees of which 99% of the labour force will be South Africans, with a target of employing 85% PRASA’s support for IPAP is the recognition that historically disadvantaged South Africans and 25% public procurement is a key lever for industrialisation females. and re-industrialisation, through the promotion of local production. The rail industry has been identified Conclusion as being critical to the future of South Africa and The demand for rail is set to continue globally and Industrialisation. South Africa’s budding rail industry can play a critical role in global supply chains. Thus, the need to Local Content and Industrialisation revitalize the industry and to use the current PRASA The support for IPAP10 is realised through the rolling stock programme to drive Industrialisation manufacturing of PRASA’s Rolling Stock Fleet has been recognized. Renewal Programme (a total of 600 trains or 3,600 coaches) with targets for Localization exceeding the Economic empowerment and skills 65% minimum as designated by the Department of development Trade and Industry. In enabling the Government national agenda PRASA’s believes that the current procurement of guided by the National Development Plan vision 600 train sets, coupled with rail industrialisation 2030, BBBEE ACT, Skills Development ACT and contractual obligations, will attempt to stem the Employment Equity ACT; PRASA will implement a tide and reindustrialize the sector. However, such number of developmental programmes aimed at measures, although critical to reasonable start are reversing the triple challenge of unemployment, not sufficient to sustain a rail industry in the long poverty and inequality. term. Sustainability requires an industry that does not only rely on demand from South Africa but has export PRASA in collaboration with academia, Government potential; this means the ability to be part of a global departments and agencies and the Private supply chain. The train manufacturing plant provides sector will, in the next 5 years, ensure economic ample opportunities to meet some of the demands of empowerment and skills development of four (4) key the SADC rail operators in the long run. focus groups: The reindustrialisation plan will include improved • Women support for and responsiveness to manufacturing • Youth enterprises and upgraded infrastructure networks • People living with disabilities and with commitments which include: • Military veterans • Local content percentage commitments based on the expenditure on the new trains; PRASA, through its Capital Programme, Human • Skills development commitments based on Capital Management and corporate social investment contract value as well as commitments on will ensure that the key focus groups identified number of individuals skilled; and mainly participate in the core technical areas of the • Transformation commitments including business namely; rail engineering, property and job creation, enterprise development and construction. Other key areas of participation will other transformation elements based on Broad- include Information Communication Technology (ICT), Based Black Economic Empowerment criteria. Professional services, general services and bursary awards.
10 CORPORATE PLAN 2020-2022 PRASA is in the process of amending the Contributing to regional transport Supply Chain Management Policy to include the empowerment of the key focus groups. Chief to this requirement and SADC amendment is the pronouncements on preferential procurement, developmental programmes, PRASA’s corporate strategy is aligned with enterprise and supplier development. the government’s policy statements and the pronouncement SOE’s contribution to the development of the continent and in particular On the Role of SOEs: Presidential Review the region, through SADC. The corporate strategy Committee Recommendations. further articulates how through Autopax’s regional ambition strategy as well as PRASA’s participation PRASA, as a State Owned Entity, is cognizant of in the Southern African Rail Association structures, the role it must play and is playing in ensuring that as SADC Protocol on Transport, Communications it responds to the State’s developmental agenda. and Meteorology (PTCM). Furthermore, the Group South Africa’s aspiration to be a Developmental State contributes to the country’s aspiration of playing a demands of SOE’s to be completely aligned to this prominent role in advancing government policies that narrative. advances the African Union’s Agenda 63 as well as those articulated in the 2030 Agenda for Sustainable Therefore, PRASA is aware of its role, as an SOE Goals. to address economic, social, and service delivery challenges facing the country. To this effect, its own Detail of PRASA’s strategy and contribution to the transformation agenda has to address the challenges region are further articulated in the long-term that are disproportionately borne by the majority of Corporate Strategy and Plan of the organisation. the population which to a large extent is the poorest of the poor. PRASA will align with the government’s policy statements and the pronouncement by the African PRASA’s long-term strategy has, in the main, taken Union towards the creation of a manufacturing hub to into account that, as an SOE, it has an indispensable service the Continent. The entity will further engage role to play in service delivery and in addressing the Department of Transport in this regard. the socio-economic imbalances that continue to characterise this country. Green Transport Strategy
To this effect, PRASA has noted the Presidential PRASA recognizes its role as a public transport Review Committee’s 31 Recommendations on the service provider in contributing its fair share to role of SOE’s role in advancing the Developmental the national effort to contribute to clean energy, State agenda; particularly the following taking into account the DoT and the sector’s primary recommendations, responsibility of promoting the development of the • on SOE’s role in ensuring that the procurement efficient integrated transport systems to enable process is transformational and takes into socio- economic development contributing to a green account local and historical factors, transport, as a public transport service provider. • in SOEs playing a leading role in socio- economic development, PRASA has since identified a number of key rail • on SOEs playing a leading role the South African investments which are energy efficient such as economy and in prioritising skills development, investing in new modern trainsets which are • on SOEs requirement to develop transformation stainless steel with less energy consumption, office plans, and station buildings which are energy efficient • on the private sector participation in partnering through improved energy supply system, including with SOEs to deliver on the provision of both lighting. Through Intersite Investment, PRASA is well economic and social infrastructure, and positioned to deploy and tap into Solar PV and other • on the appropriate funding model for the funding energy generation and energy efficiency technologies of public infrastructure based on a distinction through collaboration with the private sector. This between economic and social infrastructure contemplated business model will enable and encourage rapid pursuit of all viable solar projects by PRASA is fully cognisance of its significant Intersite and private Strategic Development Partners. weaknesses threatening its direct contribution Solar PV systems deployed onto commercial and to ensuring that the country does attain its industrial rooftops and landholdings can now developmental state ambition. This Plan has been generate electricity that is cheaper than that provided developed in recognition of the recommendations to customers from the national grid. of the Presidential Review Commission and its deliverable is further expanded in the long-term PRASA Corporate Strategy and Corporate Plan.
CORPORATE PLAN 2020-2022 11 Aligning with department of transport The Corporate Plan also contributes to resolving strategic plan for 2020 -2022 prevalent problem areas as identified by the DoT within its next MTEF, as identified below: The PRASA Corporate Plan is aligned to the White Paper on National Transport policy which seeks to a. Improving the level of integration of transport provide safe, reliable, effective, efficient, and fully infrastructure network and operations integrated transport operations and infrastructure b. Decreasing accidents and incidents (and which will best meet the needs of freight and fatalities) across all transport modes. passenger customers at improving levels of service c. Improving infrastructure, access and mobility and cost in a fashion which supports Government in rural and peri-urban areas. strategies for economic and social development d. Ensuring reliability, affordability, accessibility, whilst being economically and environmentally efficiency, effectiveness and safety of public sustainable. transport.
Department of Transport: Strategic Objective Alignment
Strategic Objective of the Rail branch: Contribution from PRASA Objectives: Enhance performance, efficiency and reliability of the a. Improving Rail System operational Transport Sector performance. b. Re-align the support Divisions and Subsidiaries to achieve an efficient Rail business. c. Modernise Rail through the R173 billion investment program, over ten years (2013- 2023) d. Expanding PRASA networks and services e. Exploit assets to generate additional revenue Regulate and enhance transport safety and security Improve the customer experience Modernise Rail through the R173 billion investment program.
12 CORPORATE PLAN 2020-2022 PRASA’S NATIONAL STRATEGIC PLAN
The Passenger Rail Agency of South Africa (PRASA)’s Aligning the Corporate Plan to the National Strategic Plan provides a transformational, Strategic Plan integrated and holistic approach to developing rail The development of the Corporate Plan for MTEF and other public transport services in South Africa 2019/20 – 2021/22 is aligned with PRASA’s Strategic over the next forty years up to 2050. It builds on Plan which outlines the key priorities and steps to the 2006 National Rail Plan and widens the scope delivery and execution of the mandate. to include all PRASA’s entities. It provides a road map for PRASA’s individual rail, bus / coach and real estate businesses to combine to improve The steps that need to be taken the service provided to the travelling public and to commence the journey to the seeks to capitalize on the opportunity provided by implementation of the plan are as planned Government investment in new rolling follows: stock, new signaling, stations and three prioritised Modernisation Corridors demonstrating the impact Expand Rail of an integrated approach to investment on rail Network and services in line with the National corridors. Strategic Plan.
The National Strategic Plan of 2012 brings together Improve the Customer Experience a set of individual Strategic Plans prepared for the A customer-centric superior performance that most populated provinces of Gauteng, the Western is safe, reliable; and provides a dignified travel Cape, KwaZulu-Natal and the Eastern Cape, and experience based on end-to-end customer the long- distance passenger market. It describes journey. the changes and investment that will need to be made in the future if passenger rail is to achieve Improve Rail System performance the exciting future strategic vision that PRASA and The realisation of the National Strategic Plan its stakeholders have identified. It identifies how 2050 is built on the assumption that operational the Strategic Plan can be delivered. There has been performance is at acceptable levels and meets significant interaction between PRASA and national, customer expectations. provincial, city and municipal stakeholders in the preparation of this plan to ensure alignment with Realign support functions to achieve an efficient parallel planning processes such as Provincial Land Rail and Bus business Transport Frameworks, Integrated Public Transport The alignment of various business units, including Networks and Integrated Rapid Public Transport departments and subsidiaries in the delivery of Networks. These engagements occurred through the mandate is the foundation of the National project staring committees over a 2 year period. Strategic Plan.
Modernise the Rail System through At the core of the National Strategic Plan 2050 is: Investment programme of R173 billion (over ten years (2013-2023)) investment programme for the • A prioritised list of rail services and network Rolling Stock Fleet Renewal, Re-signaling, and expansion interventions that provides modernisation corridors and station investment. more capacity to accommodate forecast growth, transforms the rail product on many corridors, seeks to make better use of the network and proposes corridor extensions to new or growing settlements. • Clear proposals for improving integration between rail and other public transport modes to make it easier for passengers to use railway services as part of the wider integrated transport systems, use of Autopax to feed into and complement rail services and priority hubs on the network. • A review of the corridor classification in the 2006 National Rail Plan to reconfirm priorities. • The identification of key redevelopment sites to contribute funding for the implementation of the Strategic Plan.
CORPORATE PLAN 2020-2022 13 MARKET DEVELOPMENT AND INDUSTRY OVERVIEW
Macro Socio-Economic Environment The September 2018 budget reprioritised spending in favour of infrastructure spend and employment Orgnisation for Economic Co-operation and stimulation. However the general revenue collection Development (OECD) forecasts that economic growth has remained constrained as fiscal space is tight. will rise steadily in 2019-20, driven by exports, Additional revenues from broadening the tax base however this is likely to be dampened by recent have been offset by higher public sector wages, energy uncertainty. Equally the government budget investment in free higher education and social deficit is anticipated to remain high relative to GDP. benefits. To strengthen employment, inclusiveness Credible structural policy reforms are necessary to and tax revenues in the medium to long term, job broaden competition and economic opportunities creation needs to be accompanied by investments in order to support growth. High oil prices and a that increase productivity, such as improving the weak exchange are having a negative inflationary quality of education. This is particularly important as pressures ensuring that the band is maintained 39% of the 15-34 year olds are neither in education, at the upper 3-6% target range of the monetary training nor employment, contributing to severe skill policy. As a state owned enterprise within the South shortages. Timely implementation would increase African government ,PRASA has a direct mandate investor confidence and investment. to deliver upon stated government strategies such as the National Development Plan which includes PRASA has experienced reduced levels of economic growth, economic development and collections. If PRASA intends to expand rail services employment to mention a few. This fits the broader and their accessibility to the bigger emergent development agenda of government to service the middle class, market development will be of less privileged members of the community through utmost importance. In its Corporate Strategy it access to services. In this context PRASA contributes is expected to adopt its services aligned to other to economic development in general, but operate national imperatives to ensure adherence to also as a key role-player in the economy that must environmental regulatory requirements imposed ensure economic development of services, and by government. In this context the Department of infrastructure. Transport “Draft Green Transport Strategy (2017- 2050)”, and the National Development Plan (NDP) PRASA is also greatly influenced by developments 2030 vision is that by 2030 South Africa’s transition in the South African Economy. The following socio to an environmentally sustainable, climate change -economic factors inter alia may influence PRASA resilient and, low carbon economy should be Corporate Strategy: Socio-economic aspects such as achieved. population and economic growth; energy deficiencies; increase in administered prices in the country. South African Property Market Forecast (2019– 2022): While the South African business sector is When considering the market of PRASA it is faced with many challenges, there is significant important to note that the South African population opportunity for growth within sectors of the local has increased from 40.5 million people in 1996 to economy and industry during 2018 and beyond, one 57, 6 million in 2018 according to the latest United being the property sector. Nations estimates. Together with the population growth, internal migration of people from the less Despite challenges that face the South African industrialised to the more industrialised provinces economy the property market will not ‘fall off a and the ongoing process of urbanisation to the six cliff’ in 2018. Indeed, the remarkable thing about metropolitan areas, the market demand for PRASA real estate is its ability to re-balance and create services increased considerably over the years. opportunities for both consumers and property practitioners in virtually any economic or political Against this increase in the demand for passenger circumstances. rail services the South African socio-economic conditions have become a challenge with job losses According to Urban Real Estate Research Unit steadily increasing over the last couple of years. (URERU), there will likely be two important factors Unemployment is at 27, 5 % contributing to persistent which will influence the next big cycle in the property inequalities in income and economic opportunities sector, the first in view is public transport and and a further retreat in business confidence has secondly the impact of this on the property sector for been experienced. External sector metrics are even example who saw the rise of Sandton and Century less encouraging with export growth at its weakest City coming. in years. This impacts on the PRASA target market as this puts a heavy burden on its already strained We have an economy with a GDP of approximately resources and the implementation of a Corporate $296bn and a population of almost 60-million Strategy. In this regard a growing population and people to fuel it. Certain tactics need to be changed growing demand for public transport in urban areas in order to adapt property businesses and refocus specifically will continue to put pressure on limited on growth nodes within the sector. The property resources and PRASA will be no exception. market in 2018 includes significant focus and growth
14 CORPORATE PLAN 2020-2022 in the affordable and gap housing market. People With regard to retail space, South Africa is the sixth considered too well-off to receive government- most ‘malled’ country in the world. This is rather subsidised houses, yet do not qualify for bonds alarming considering the uncertain economic climate with banks, will encounter alternative solutions and all the different contributing factors that need and funding being introduced to this sector. For to be considered for a shopping centres or mall example, when economic growth slows as it has to be successful and show financial conviction. done in SA, or interest rates rise and it becomes The additional pressure on the end consumer’s difficult for new homebuyers to obtain credit, there disposable income shows a decrease in foot traffic is usually a spike in demand for rental homes, which in shopping malls and ultimately the individual opens up opportunities for buy-to-let investors and spent resulting in business closing down and leaving property developers, as well as estate agencies with vacancies within the malls. The very recent example a track record of good property management and of this developing trend is the like of Stuttafords, rent collection. SA is also experiencing rapid youth River Island, Mango and other previously stable urbanisation, which is further fuel for this trend. retailers have been forced to withdraw from the country, creating more and more vacancies in large Another big budget allocation is student housing, shopping centres. According to Lightstone, this where pressure has been placed on government to could be indicative of developers moving to smaller, provide accommodation close to tertiary education nimbler ‘strip malls’ with much less gross leasable campuses. There is still a significant under-supply, property (GLA) to fill. returns are great, and exits are easy due to new JSE-specialised student housing REIT listings the Observations within the Industrial sector will see property market in 2018 include significant focus and usage driven by export manufacturers and online growth in the affordable and gap housing market. shopping distribution centres, which are growing Within the urbanised inner-city CBDs, medium-rise faster than most other sectors. Amazon are building and affordable gap housing will increase in 2018 and distribution centres in South Africa and further we beyond. This is both challenging and exciting given will see the likes of Alibaba and others following suit that the backlog in this sector is estimated to be shortly with the weak rand stimulating the export around 60,000 units per year, with just a 10% delivery market. However, importers using warehousing will rate (Land Equity Group) be adversely affected by a weaker rand, and they will require downward rent reversions if it doesn’t Based on the current developments within the strengthen over the short-medium term. South African economy and data analysis within the property sector trends and impact can be forecast for A recovery in the market will boost the economy and business within the commercial, retail and industrial the implication to the property market is that excess zones of the South African Property Sector space will be taken up, vacancy rates will start to decline because of limited supply, income will start Tough economic conditions will see the office to increase and capitalization rates start to show market narrow down as decentralised business improvements in line with the improved market nodes increase. Many listed corporates are already conditions and is anticipated that we will experience focused on streamlining or reducing their fixed an upturn in the property sector after 2019. costs, which includes the quantum of rented space. This shrinkage of space, as well as retrenchments, WHERE ARE WE IN THE LONG PROPERTY CYCLE? creates office vacancies, however, the positive aspect is that these vacancies can be absorbed by The property market has shifted notably over the converting the voids to serviced offices or increasing last 18 months as the fall-out from the weak political the ever-popular co-working spaces. and economic climate, poor growth and credit downgrades continue, the inevitable result is that this For example, going forward the Banking Sector rather good performing economic sector, is now also which traditionally had a wide network consisting taking strain and continue should the economy not of branches & services centers occupying a large improve. footprint of GLA is now moving towards more digital / advisory driven branches which will be more The property sector experiences a boom every dominant within the urban market, with rapidly 10 years and judging from this 2018 should be decreasing in-branch transactional activities and the turning point for an upward swing from the therefore the need for lesser physical space, however progressive down turn experienced since 2008/2009 the more traditional activities of the Banks will due to the effects of the global financial and mainly be found more in rural settings which will economic crises. Slow economic growth in South be a bit slower to come on board the digital banking African has had a negative impact on the property train and therefore the need for space will still be in sector and as a result a delay in the upward swing. demand in these areas from this sector. However experts in the industry have indicated that we will experience an upturn in the property sector after 2019.
CORPORATE PLAN 2020-2022 15 MARKET DEVELOPMENT AND INDUSTRY OVERVIEW (Continued)
The Office Market: According to SAPOA (South industrial assets, to turn its focus on developing new African Property Owners Association), the national high-tech warehouses aimed at the logistics sector. office development activity is likely to trend down gradually, given that the overall office development Retail Property Market: With the current economic pipeline is slowing down compared to recent history, climate there seems to be a shift in consumer owing to the poor economic outlook. The average behaviour to prefer small regional, neighbourhood vacancy rate in major metro’s for A & B office and community centres offering convenience grades are forecasted to reach between 10% - 15% to customers compared to larger malls. This and consequently the growth in the office market trend will have a positive impact on station rentals is expected to plateau as there is a general environments and transport hubs as it opens up oversupply of office accommodation. The long term development opportunities for convenience centres trend forecasts the vacancy rate to average 11.2% around stations to provide the commuter and the and rental growth to average 2.7% in 2018. surrounding community with convenience shopping and service offering at their doorstep. The sector will The office sector across all three provinces, there recover as the economy start to improve are encouraging indications despite the negativity. A circumspect approach is necessary to avoid over Residential Property Market: Despite the poor and supply and rental contractions. uncertain economic and political conditions facing Even though businesses may experience internal South Africa, major players in the property industry growth and require additional space, the current are expecting that South Africa’s residential property trend indicates that office tenants and owners will market will continue to maintain its resilience – rather endeavor to employ the services of working particularly in major metros and key hubs. space specialists, encourage mobile offices rather than relocating to bigger office space. Other factors which will continue to fuel activity in the residential property market incorporate a number of Another external element that needs to be ongoing trends. These include an increasing demand considered is the global trend of shrinking office for sectional title properties, in convenient locations sizes. In recent years companies have started moving close to the workplace and all amenities, from away from individual offices and cubicles in favour of first-time buyers and those downscaling or seeking a more social work setting. Minimising work space a more manageable, lock-up-and-go property with has also played a part and as a result, many property reduced operating costs to cater for a more flexible managers and landlords are finding themselves lifestyle. This trend also lends to the increase in leasing to a larger number of tenants, each utilising the residential rental demand as it is becoming a smaller space with more employees. Medium-to- increasingly difficulty for first time property buyers small businesses have also started leaning towards and young upcoming youth to purchase property and flexible leases and subdividing space to share risk therefore the need to rent instead. and ultimately reduce monthly costs. Another favourable indicator is that developers are Tough economic conditions will see the office market continuing to bring new products to the marketplace narrow down. Many listed corporates are already across a range of price bands in response to the focused on streamlining or reducing their fixed demand for residential property in key growth nodes. costs, which includes the quantum of rented space. According to Lightstone statistics, some 90 000 new This shrinkage of space, as well as retrenchments, homes are entering the housing market each year, creates office vacancies, however, the positive providing accommodation mainly for the sub-R1 aspect is that these vacancies can be absorbed by million price range. converting the voids to serviced offices or increasing the ever-popular co-working spaces. In the major metros and economic hubs it is evident that densification is a factor which will increasingly The Industrial Market: One of the only sectors to drive demand in the residential property market. In show resilience is the industrial zones. Developers addition, the live, work, play, shop concept continues are continuing to build on risk and are rewarded to gather momentum partly due to major cities’ with a favourable uptake of tenants in spaces such increased traffic congestion, while the transition to as warehouses. Interestingly, the logistics industry ‘green’ energy and water-efficient homes will gain seems to be the catalyst for the stability in the impetus not only for the purpose of sustainability and industry with many new high-tech warehouses also due to the rising cost of utilities. catering specifically for this division. Another opportunity within the South African A great example of this is Fortress Income Fund property market is the rising demand for student which is seen as a leader in this space after accommodation. According to Rawson Property disposing most of its office portfolio and old Group, investing in student accommodation still
16 CORPORATE PLAN 2020-2022 MARKET DEVELOPMENT AND INDUSTRY OVERVIEW (Continued)
remains a highly attractive option provided that accommodation markets like Stellenbosch, Pretoria, it is developed within the right kind of property in the Southern Suburbs of Cape Town and the parts the right location. The current accommodation of Johannesburg surrounding Wits and the main UJ arrangements can accommodate fewer than one campus. in five students who apply for a residency, and student numbers are growing annually as increasing This can generally be summed up as clean, safe numbers of young people complete their secondary accommodation within easy reach of campus at an schooling. Furthermore, SA is attracting higher affordable price, the most consistent demand being numbers of foreign students and from other for newly-built and pre-owned one and two-bedroom countries in sub-Saharan Africa, where the latest sectional title apartments with high tech security, research by Jones Lang LaSalle (JLL) has found that parking, Internet connectivity and good access to the number of young adults aged 18-25 will increase shops and other amenities as well as campus. considerably, and that the demand for new, purpose- built student accommodation is set to top 500 000 Global Trends In Station Development: Stations beds in the next five years., as can be seen it must globally are now developed as mix developments be noted that due to continuing public sector budget that include inter-modal, retail, commercial, constraints (and not only in SA), private investors will residential and other ancillary facilities associated have a vital role to play in meeting this demand. with transport oriented developments. By improving buildings and introducing new functions to the Therefore, it is clear now that the question becomes stations, they become more attractive for people in not whether to invest but how quickly one can general, not only for passengers. This has resulted in identify and acquire suitable properties, and this is a significant improvement of the property values and becoming increasingly obvious in the major student value proposition to commuters
CORPORATE PLAN 2020-2022 17 Be Ontrack
18 CORPORATE PLAN 2020-2022 INFORMING THE CORPORATE PLAN
Organisational Context 03 Organizational inefficiencies: PRASA’s faces serious challenges, which are systemic from years of under-investment in passenger rail services. This under investment has Uncoordinated procurement of security services. resulted in an unreliable service (infrastructure and Immature IT-based financial control systems rolling stocks) which is prone to break downs. and business planning. Limited individual performance accountability. High headcount and Increasing operating costs, have put PRASA in escalating personnel expenses despite declining an unenviable financial position, with revenues to passenger numbers. High number of FTE in continuing decline whilst patronage and customer support functions and redundant roles. High satisfaction are at their lowest levels. number of Customer Service staff with significant overtime PRASA operating model and governance structure is weak with unclear lines of accountability and Inadequate support functions and insufficient clarity over spans of control. There is 04 misaligned operating model: predominately a silo structure with redundant and overstaffed functions, as well as an abnormally large corporate function. Disjointed business units and divisions, including subsidiaries. Unclear mandates and The following snapshot shows a glaring analysis of interfaces between divisions, subsidiaries and an organisation that is not designed to perform at its inefficient group structure and blurred reporting optimal level: lines, as well as clarity of responsibilities and accountability of divisions and individuals. Lack off aligned performance management framework Declining operational to drive individual accountabilities. 01 performance:
Metrorail’s asset performance lacks behind 05 Inadequate maintenance: industry benchmarks, with areas of the business deteriorating over recent years. Costs have risen above inflation whilst Metrorail’s revenue Due to inadequate quality of maintenance work per passenger remained relatively constant. and planning, the plan is developed with the Significant loss of fare revenue through fare realisation that the below-than-acceptable evasion due to operating an open system, performance in delivering on the core mandate unvailaibility of rolling stock and infrastructure of the organisation requires key interventions to as well as high costs for network access paid to turn the business around and rescue it from near Transnet for MLPS. collapse.
Declining financial performance: Unintegrated capital project 02 06 prioritization and delivery:
Decline in non-subsidy driven financial ratios and As result of limited integration across the operating ratios accomponied by decline in overall organisation and a shortage of skills and revenue per employee. Increased dependency on knowledge to enable efficient planning and operational subsidy. Ineffective asset utilisation to delivery. Inefficient capital planning and generate revenue. execution and misalignment between the capital
project portfolio of projects and the strategic requirements of PRASA Group resulted in the limited impact of completed Capital projects.
CORPORATE PLAN 2020-2022 19 INFORMING THE CORPORATE PLAN (Continued)
At the core of HCM strategy intervention is Managing Change addressing the following issues: 07 • The design of an Operating Model that will address and resolve structural and systems deficiencies. Managing change and building a strong • Clear accountability throughout the group. organisational culture: PRASA has not yet • Clarifying responsibilities and reporting lines. entered a stage where customer expectations are • A new contracting regime for senior managers. satisfactorily met, which should be measured by • Adherence to performance contracting and the organisation’s ability to deliver reliable and management framework. predictable safe passenger services. In fact, the • A change management intervention that gunners business performance has deteriorated to almost support around one common vision. total collapse and now requires immediate and drastic interventions.
Research and Product Development However, management is aware of the challenges 09 lying ahead in creating a PRASA we all want. Mobilising people around a set of collective values, beliefs and principles requires a drive towards a PRASA recognises the importance of shared vision and pursuit of a common objective to collaborations with key partners in the academic deliver a PRASA that delivers public value. A PRASA sphere as well as research institutions to that prides itself in working towards the attainment continuously improve our service and product. of the organisation’s goal will rely on each employee’s A concert effort in entering into strategic understanding and appreciation for national and partnerships with key players in our on-going public service agenda and selflessness in advancing effort to revitalize PRASA’s passenger service will the interest of the country’s democratic dispensation be made in this regard.
Instilling the right organisational culture and a A separate report will be developed on the work PRASA We All Want will demand unconditional: that has been done by PRASA in this regard as well as future work in our quest to seek innovation • Commitment to a developmental public service public transport solutions. oriented culture. • Professionalism and ethical conduct. • Honesty and integrity. Risk Management and Mitigation • Transparency and adherence to governance 10 control. • Commitment to superior customer service. • Performance excellence and accountability. Risk Management is an integral part of the • Dynamism and resolve in delivering on the organisation’s objective. The Corporate Plan has mandate. been subjected to a vigorous risk assessment process and a separate Risk Management Plan is Achieving the desired organisational culture and included herein. requisite behavioral characteristics will be measured against how customer-centric, dynamic, responsive and solutions driven PRASA employees are in delivering on the organisation’s mandate.
08 Performance management
The successful execution of the Corporate Plan is highly dependent on the rest of the staff committed to delivering on a common objective. The role of each employee in helping PRASA out of its current challenges and in preparation for the organisation for growth is everyone’s responsibility. A commitment to deliver quality and reliable service that exceeds customer and stakeholder expectations should be an employee alienable promise that cannot be broken.
20 CORPORATE PLAN 2020-2022 THE VALUE PROPOSITION
The 2020-2022 MTEF Corporate Plan focuses on turning around the Rail Business and seeks to mobilise all the related functional areas that must contribute to the to rally around PRASA Rail in order to ensure that PRASA delivers on its primary mandate.
Amongst other key focus areas, this Corporate Plan has prioritized the following areas that will ensure that PRASA re-instil confidence of our customers, particularly the daily commuters.
The Corporate Plan has identified these 5 key focus areas as game changer for getting the business back on track:
Improved Improved on-time Improved The consolidation The consolidation operational performance by customer and of PRASA Real of PRASA Rail safety focused reducing train stakeholder Estate Solutions Engineering on earning back cancellations and communication (CRES) and and PRASA the confidence of delays through through the roll- Intersite Asset Technical into a the multitudes improving the out dedicated Investment single division in of commuters infrastructure and focused into a single order to ensure who have lost condition, communication entity to drive the reliability confidence in reliability and and information PRASA’s property and availability the ability of the availability of dissemination development of rolling PRASA to ensure rolling stock using key touch commercialisation stock and rail that their end- points and strategy to support infrastructure. to-end journey platforms. the Primary guarantees Mandate their safety to and from their destination.
1 2 3 4 5
Central to the successful turnaround of the business is the ultimate realisation of the core deliverables of the two previous Corporate Plans, 2017/18 and 2018/19, which sought to realise improved efficiencies of R7.9 billion from savings and business rationalisation.
The efficiency commitments, contained in the two Corporate Plans, still form part of PRASA Get-On-Track Rescue Plan but now inform the 2020-2022 Corporate Plan, focussing on:
A Arresting the current decline in the business Designing an appropriate Operating Model performance, particularly the Rail business. B that will resolve organisational structural inefficiencies and the manner in which it deploys and manages its resources.
The successful execution and delivery this Corporate Plan will require stringent performance measures and a complete change in organisational culture and commitment to delivery of the pre-determined objectives.
The change must be felt by the ordinary commuter, passenger and stakeholders through a clear commitment to customer and stakeholder communication and engagement that shows that PRASA cares.
During the MTEF Period, PRASA’s value proposition is bases on the realisation that the commuter and passengers expect an uninterrupted service that takes them to their final destination on time and safely. That is the commitment and the promise we make
Its all about: Clear, credible and timeous Safety and service excellence communication
CORPORATE PLAN 2020-2022 21 Be Inspired
22 CORPORATE PLAN 2020-2022 EXECUTIVE SUMMARY
Introduction advertising, and accepting only inflationary linked salary increases for Management grades, this has In 2018, under the guidance of the Board of Control, not yet improved the Group’s financial position. the Executive set out to develop a rescue plan, However, management is relentless in its effort to appropriately titled Get On Track, which now informs get the business back on track. the Corporate Plan and focuses on the following: Whereas government will invest over R2.7 billion in The execution of the above should result in the rail maintenance operations in the 2019 MTEF, in organisation being able to successfully: the immediate period the group is faced with costs 1. Arrest the current decline in the business challenges that will result in an estimated operating performance, particularly the Rail business. cash shortfall of R6.7 billion by end of the first year 2. Ensure that commuter and passenger service is of the MTEF. Operating cash shortfall is expected reliable, available, predictable and safe. to increase to R12.8 billion by the end of the MTEF. 3. Resolve organisational in-efficiencies in the This is as a result of operating costs increasing manner in which it deploy and manages its at a rate higher than own revenue generated and resources subsidy. Subsidy has been increasing by inflation while own revenue has been on the decline due to The inability of PRASA to implement its ambitions lack of maintenance, vandalism and theft of assets contained in Corporate Plans for 2017/18 to current and the closing off the rail system. Accordingly, 2018/19 were also in the main compounded by the while management will be working hard to improve absence of a quorating Board to implement some of the availability of assets through asset maintenance the efficiencies identified in the two Corporate Plans. in line with additional maintenance funding, in the However, most of the deliverables identified in the short-term the organisation will still be faced with previous Corporate Plans have influenced PRASA’s cash flow challenges that may affect the quality of Get-On-Track Rescue Plan which form the basis of service to the commuter. the 2020-2022 Corporate Plan under development. The efficiencies of R7.9 billion identified are part The greatest challenges facing PRASA is that by of a basket of initiatives such as developing an nature, it is a cash business and a great part of its Operating Model that will assist PRASA to design an costs is fixed. Furthermore, a major part of increases organisational structure that is fit for purpose. The in its operating costs are subject to approval by Executive and the Board is fully committed to turning regulatory bodies and negotiation with labour around PRASA and to reduce its cost to income unions. These include costs of energy which is ratio by identifying areas that result in improving subject to approval by NERSA, security costs subject efficiencies. The current work on consolidating to annual increases determined by the Private CRES and Intersite, as well as Rail Engineering and Security Industry Regulatory Authority, costs of Technical, as well creating a shared services, is employees in the bargaining grade that are subject part of an on-going effort to identify cost reductions to negotiation with Labour Unions, rates and taxes and savings measures. The Operating Model and subject to approval by various Municipal Councils, the supporting Organisational Structure will assist legal and insurance costs that are largely affected by PRASA in creating what hopefully will be a lean and commuter injuries and asset vandalism. mean organisation. In the previous 2018/20 Corporate Plan, PRASA had made a commitment to reduce operating Context of the Corporate Plan expenses by R4.79 billion through a R2.01 billion The Financial Position: PRASA faces a massive cash reduction in personnel costs by rationalisation of shortfall on its operational expenditure budget, which employee positions at management levels, R780 has accumulated over several years, caused by rising million reduction in energy costs mainly through operational costs, declining revenues, and a stagnant contract renegotiation with Eskom, R684 million operational subsidy. reduction in security costs through effective deployment of security staff to achieve efficiencies The key drivers of the increasing costs have been and implementation of technology to augment the increasing salary bill, rising utility costs to and streamline security functions, R196 million in Municipalities and Eskom, debt to Transnet, non- haulage costs through Transnet tariff negotiations funding of the long distance passenger rail service and R1.12 billion in other costs. and its low subsidy amongst others, causing Shosholoza Meyl to be subsidized by Metrorail at Included in the Corporate Plan was a commitment some point. to improve revenue collection by R3.16 billion by 2019/20. This was to be achieved through increase Whilst management has implemented strict cost in fare revenue from the operational turnaround containment measures over the years, curbing and such as fencing project, rolling stock recovery and cutting costs such as travel, catering, marketing and increase in passenger trips and rental income to
CORPORATE PLAN 2020-2022 23 EXECUTIVE SUMMARY (Continued)
grow through rental increase of at least 10% and requirements of the organisation. Furthermore, increase in income through new developments on initial investment in operating costs will be required commercial projects. Overall, the turnaround has to realise the objectives of the rescue plan. committed to improve PRASA financial performance by R7.95 billion through the 2017 MTEF. Getting the Business Back on Track: PRASA presents this plan at the time when the organisation 2018 2019 2020 Total MTEF finds itself at an unprecedented crossroads since its inception. Unfortunately, PRASA has not yet Efficiencies from entered a stage where customer expectations are satisfactorily met and the organisation is said to be Income 555 1020 1586 3161 delivering reliable and predictable safe passenger Expenses 1285 1595 1905 4785 services. In fact, the business performance has deteriorated to almost total collapse and now 1840 2615 3491 7946 requires immediate and drastic interventions.
Fare revenue has been negatively affected by a This Corporate Plan is underpinned by difficult socio-economic environment. This has management’s commitment to get the business back been compunded by reduced rolling stock and on track through the delivery of an efficient service infrastructure reliability and availablity, theft, arson and unparalleled performance. The service is poor, and vandalism of assets. These and inadequate unreliable, unpredictable and unsafe, thus resulting security measures, have negatively affected the in the decline customer and stakeholder confidence realisation of savings of R4.79 billion by the end of on PRASA’s capability to deliver on its Mandate. the 2017 MTEF period. Other challenges that PRASA has faced over the period include: The Corporate Plan assumes that turning around the rail business will result in a positive impact on the • Leadership instability leading to non- commuters and passengers experience yielding the implimention of the various turnaround most benefit for PRASA financial performance, and strategies. should be supported, amongst others, by: • Delays in the determination of operating model • The protection of people, infrastructure and and optimal organisation structure affecting assets is paramount to ensure availability, rationalisation of personnel; reliability of the service. • Reduction in energy charges and haulage costs • Engineering and technical service that ensures require approval of Eskom and Transnet which reliability and availability of infrastructure and were not been granted. rolling stock. • Increase in security incidents and delays in • A procurement strategy and plan that is timely capital projects have affected the possible and responds to the demand of the business. reduction in security costs. Reducing security • A modernisation programme that should costs will require collective effort with law transform the rail product. enforcement agencies to address incidents of a criminal nature in the rail service and this work Costing the Back-On-Track Rescue Plan: Since is ongoing. Rail operations, particularly Metrorail, constitute a significant part of the PRASA Group, accounting In general, the timing of the realisation of the for ~60% of PRASA group expenditure (including 2017 MTEF savings accompanied by all the above engineering services), this Corporate Plan challenges, did not take into account the time acknowledges that turning around the commuter required to negotiate these savings with affected rail service will yield the most benefit for both the parties and the time required to implement projects business and the passengers it serves. to realise the savings. A dedicated focus on commuter and passenger In 2018, the Board and Management embarked service, supported by the people, assets and in a process of revising the turnaround strategy infrastructure protection, as per the illustration (now referred to as rescue plan) with the purpose below, will have the highest impact on customer of identifying savings and increase in revenue. satisfaction which should increase patronage and However, the rescue plan has identified the need hence revenue. for finalisation of the operating model and optimal organisational structure to inform the resource
24 CORPORATE PLAN 2020-2022 EXECUTIVE SUMMARY (Continued)
Improving Commuter Travel Experience: At the which should result in the following performance heart of the Corporate Plan is the acceptance that improvements: recovering the Rail business is not negotiable and • A 1% month to month improvement in trains is informed by PRASA’s Get-On-Track Plan, which delayed and cancelled. focuses on increasing the reliability, availability, • An increase in rolling stock availability to a total predictability, safety and security of PRASA of 260 trains in FY20 and 285 trains in FY22 operations, by: (excluding new rolling stock). • Improving On-time Performance. • Effecting a 6% fare increase in FY22 as a result • Reducing train cancellations. of improved service. • Ensuring safety of passengers, public and staff. • An improvement of ~12% p.a. on safety incidents • Protecting the corridors and assets. arising out of safety improvements. • An increase in customer satisfaction to 74% and The Corporate Plan also acknowledges that increasing to 81% as a result of the successful improving customer service level will grow customer roll-out of the modernisation Modernization patronage resulting in an increase in revenue base program. and should be anchored transforming the rail product through Modernisation Assuming the injection of the required investment to ensure reliability and availability, the commuter However, turning around Metrorail requires a R6.6 service will yield a total benefit of R5.4 billion billion level of investment, both in Capex and Opex, over a 5-year period, which include both revenue to improve reliability and availability of both rolling improvement and cost reduction from efficiencies. stock and infrastructure over a 5-year period. The performance of Metrorail during the MTEF period Below is a snap shot of the impact of the investment is based on the assumption of the successful in reliability, availability and protection of the service, implementation of the Rescue Plan interventions people and infrastructure if the required capex and opex injection is sought:
CORPORATE PLAN 2020-2022 25 EXECUTIVE SUMMARY (Continued)
Failure to implement the Rescue Plan initiatives • Returning 260 train sets to service to improve will result in a projected revenue of R473 million in train capacity to the customer. financial year 2024 and this translates to a 5-year • Halving the number of kilometres under speed (FY20 to FY24) cumulative loss of R1.8 billion. restriction to improve train running times, reduce Revenue has been following a downward trend for train delays as well as improve predictability of the past 3 years and if nothing is done to improve service. the commuter services there is a potential loss in • Replacing obsolete Traction Circuit breakers with revenue of 13% (CAGR) which translates to R1.8 new generation High Speed Circuit Breakers to billion in the next 5 years. ensure a stable power supply. • Upgrading back up power supply units to Improving safety and security of people and assets: key panels to reduce panel and interlocking. To protect people, assets and infrastructure a total downtime due to power outages investment of R8.5 billion (both in Capex and Opex) • Procuring and installing replacement rail tracks will be required over the next 5 years and this will in order to improve safety and ride quality. yield a total of R3.9bn, with the main contributor • Erecting robust corridor fencing to secure the being maintenance cost reduction/avoidance. infrastructure and combat fare evasion. Furthermore, implementing safety and security • Appointing more personnel in the safety critical initiatives has the potential to increase revenue by grades to improve safe operations. R516mn over a 5-year period, due to reduction in fare • Re-introducing Quality Assurance in maintenance evasion and additional rental income. execution in order to improve the quality of service to the customer. There is a direct correlation between crime incidents and maintenance cost as 70% of the non operational Modernisation: A Game Changer for Rail Travel out of service (wrecks) trains are as a result of vandalism. By implementing the protection initiatives As a game changer for passenger rail travel the to reduce crime incidents on assets, the maintenance Rolling Stock Fleet Renewal Programme provides cost is expected to be reduced to R1.9 billion instead the commuter a dignified travel experience and is a of R2 billion by FY2023. catalyst for the transformation of Metrorail services and public transport as a whole. It is the beginning Failure to inject the required investment level of what would be a total overhaul of the train system for safety and security initiatives will result in over the next few decades and is aimed at delivering operational costs increasing by ~R2 billion over quality services to citizens and the revitalization of the next 5 years due to higher maintenance and rail as the mode of choice for daily commuters. insurance premium costs Impact of rolling stock and infrastructure improvements over the MTEF period will result in A key dependency in sustaining the recovery from the Metrorail increasing or recovering its performance Rescue year through the MTEF stabilisation period is during 2019/20 to 65% of the 2008/09 service levels, the Security strategy to contain theft and vandalism which is 20% business improvement, and to 80% of on rolling stock and infrastructure. The deployment the 2008/09 service levels at the end of the MTEF of security staff for asset protection, commuter period (2021/22). safety and fare revenue protection will be augmented with the Security Technology Plan planned over the However, PRASA is cognisant of the fact that whilst MTEF period at a budgeted cost of R843m and which it embarks on the modernisation programme and include as priority: focuses on the deployment of new rail infrastructure and services, the organisation still has to contend • Fencing/walling of corridors in all regions for with running the current operations and improving priority completion during 2019/20. the customer service experience. Therefore, in • Fencing and security of depots to protect the parallel to the Modernisation Programme, PRASA is recovered rolling stock sets. continuing with its upgrades and maintenance of the • Protection of sub-stations, tie stations and relay current infrastructure network. rooms on priority corridors. • On-board protection of commuters and To run the current business effectively and efficiently passengers. requires a commitment to delivering quality services with increased frequencies, safe operations, and Ensuring Service Availability and Reliability ensuring personal security of passengers. This in turn will lead to PRASA regaining its lost market To ensure the availability and reliability of the service, share and achieving further growth in patronage. this Corporate Plan will seek to ensure that both rolling stock and infrastructure meet performance expectation the following deliverables:
26 CORPORATE PLAN 2020-2022 EXECUTIVE SUMMARY (Continued)
Managing change and building a strong At the heart of this Corporate Plan is the pursuit of organisational culture the following overall objectives:
During the MTEF period, redefining and refocusing 1. Strengthening Governance and Stabilizing the the organisation will be a commitment to building a Organisation. PRASA that society wants. This will mean continuing 2. Improving the Financial Position. to improve on that which has worked, discard that 3. Improving Commuter and Passenger Travel which has not worked whilst making PRASA to Experience. become a learning organisation. This will require 4. Ensuring Reliability and Availability of the building an organisation whose employees display a: Service & Infrastructure. • Commitment to a developmental public service 5. Managing and Improving the Property Condition: oriented culture. Railway Stations & Workplace Facilities. • Commitment to superior customer service. 6. Improving Passenger Rail Travel Experience • Performance excellence and accountability. through Modernisation. • Cadre of employee that puts safety of 7. People, Assets and Infrastructure Protection. customers first. 8. Asset Management and Maintenance. • Professionalism and ethical conduct. 9. Exploiting the Assets through Commercialisation • Culture of Honesty and integrity. and Property Development. • Culture of Transparency and adherence to 10. Procuring for the Business. governance control. 11. Effective Management of Capital. 12. Built to last: Redefining the Organisation. Focus of the Corporate Plan 13. Building Customer and Stakeholder Confidence. 14. Planning for growth and network expansions. The Corporate Plan is anchored on the Get-On-Track Rescue Plan and focuses on the following: • Prioritised interventions to turnaround the Rail Business. • Capital Programme Investment & Modernisation Program Readiness. • An Asset Maintenance and Management Framework to support the Rail business. • Human Capital Development Strategy for New and Critical Skills. • Investment in R&D and Innovation. • Exploiting Assets through Commercialisation and Property Development. • Network expansion aligned with Transit-Oriented Development and Corridor Densification. • Addressing Organisational and Structural Inefficiencies. • Alignment of Corporate Plan with Budget (Funding and Financial Health). • Strengthen participation and contribution toward regional development (SADC).
CORPORATE PLAN 2020-2022 27 KEY DRIVERS OF THE CORPORATE PLAN
01 Strengthening governance and stabilizing the organisation
Context
PRASA has experienced instability at various levels since 2015, including the Executive Authority, Accounting Authority and Executive Management. This point is illustrated below: • The Department of Transport as shareholder has had 3 Ministers; • PRASA has had 4 Boards of Control; • PRASA has seen 7 Group CEOs in acting/interim capacity
This instability has negatively impacted on the organisation’s ability to take and implement the necessary and crucial decisions to fulfill its mandate. The continued appointment of the PRASA Board of Control and Group CEO on an interim basis will continue to contribute to leadership instability.
In the past few years, PRASA has continued to show significant non-adherence to governance as a result of weak internal controls or controls that do not appropriately ensure compliance with applicable policies and relevant legislation. Significant leadership changes at both board and executive levels, which have characterised the organisation over the years, have negatively impacted the organisation and directly contributed to the collapse of internal controls. The number of positions at executive levels, which still remain vacant, with 7 acting/interim Group CEOs since July 2015 have severely impacted on the organisation to deliver on its mandate. Coupled with this instability is the fact that PRASA has also had four (4) boards during the same period and in most cases have not met the required statutory quorum thus preventing it from executing its fiduciary duties.
Fixing governance weaknesses instability and governance challenges with a focused plan will restore public confidence in the In reviewing the current status, management and organisation. the Board, through its Audit and Risk Committee have noted with concern the regress of the control This will include amongst others the strengthening environment, which, amongst others, include: of the management leadership team and • Repeat Audit findings on both AGSA and Internal commitment to provide and deliver both the Audit Reports including inability of management PRASA mandate and the ambitious modernisation to implement recommendations. programme. PRASA is confident that the delivery • Lack of consequence management. of its mandate and implementation of the • Lack of document management. modernisation will yield the desired transformation • The increase in irregular expenditure, fruitless of Metrorail and the revitalization of South Africa’s and wasteful expenditure. engineering industry.
The Board has prioritised restoration of stability and MTEF Deliverables governance by ensuring that management addresses The following high-level interventions the continuous decline in the financial management, have been identified: performance reporting discipline and compliance processes. In this regard an action plan to address • Review of corporate strategy. significant control deficiencies and consequence • Performance Management and Reporting. management will be developed and implemented. • Strengthen and implement adherence to governance, internal control framework and The Board will furthermore attend to the uncertainty risk management. relating to the going concern by ensuring that • Implement remedial and disciplinary. an appropriate operating and financial model measures to address findings by Auditor is developed to ensure financial viability and General Treasury and Internal Audit sustainability of PRASA. In this regard, the Board • Implement ICT Governance Framework. will also urgently attend to the going concern and • Implement measures to manage litigation and financial uncertainty of both subsidiaries (Intersite contingent liabilities. and Autopax).
Challenges will doubtlessly continue in the year ahead, but the Board is confident that fixing the
28 CORPORATE PLAN 2020-2022 Be Effective
CORPORATE PLAN 2020-2022 29 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Financial Position 02 Context The Group has for a number of years experienced cash flow problems and is currently experiencing a severe cash crisis. The accumulated funding shortfall of the past number of years is projected to be R6billion at the end of the 2018/19 financial year increasing to R13 billion by end of financial year 2021/22. There are three main areas which are the reasons for the decline in financial performance. The first is the personnel costs, which have seen the number of employees rise from 15 300 in 2010/11 to 17 922 in 2013/14 and down to 15 706 by January 2019, without any corresponding increase in service levels and revenue. The second is that the operating funding model sees the operational subsidy increase by inflation whilst the actual cost of running rail including over 80% of personnel costs, increases well above inflation, leading to a funding deficit which cannot be recovered and a downward spiral in the ability of PRASA to provide the required service. The third area is a result of the ambitious capital program, which results in further maintenance and other costs being incurred under operational expenditure. These additional costs (except until recently maintenance) are not funded through an additional allocation of the operational subsidy, leading to a further decline in the financial performance.
The reality is that the labour intensive nature of PRASA Rail operations and related personnel costs leaves very little funding to be allocated to other costs such as energy, insurance, security, Transnet train control officers and access. The previous unfunded maintenance activities have led to the decrease in service availability and reliability and with corresponding decline revenue whistle costs has continued to increase. If PRASA kept the same level of fare revenue of 2014/15, increasing at targeted inflation, fare revenue should be R4.3 billion by 2021/22 and should have been R3.9 billion by 2019/20. PRASA has managed to survive from a cash flow perspective through an ever increasing creditor’s book, in particular Transnet, and interest earned off the unspent capital allocation.
Addressing the Funding Gap Operational: PRASA has a systemic problem with the operational funding allocated as there is Capital: At present PRASA seems to have projects simply insufficient funding available to maintain that it executes without a real understanding of and sustain operations, new or old. In fact the what the benefits are to the entity. Further, these way the operational funding works at PRASA, it benefits are then not translated into how they would is diametrically opposed to sustaining operations impact on the organisation over the next ten years and the modernisation program as it simply with regards to additional income generated or does not provide for increases in maintenance, costs saved. Lack of integrated project planning and insurance, security and other costs required to execution results in full benefits of capital investment run the operations of the company. This matter is not realized. separate from the lack of efficiency which needs to be addressed within PRASA as a separate and This means that neither PRASA nor the shareholder management issue. has an accurate view of the medium and long term goals stemming from capital investment. Investment Passenger rail globally is not seen as a profitable benefit analysis needs to be viewed over the long enterprise and is mostly subsidised. There are term, not only for each individual project, but all the exceptions though, but these tend to be in small projects and initiatives combined so as to deliver densely populated areas such as Hong Kong, what the future picture for PRASA over the long term Singapore and Switzerland where rail trips are short is and how gaps in cost versus expenditure will be with high volumes. It is against this backdrop that closed or funded. PRASA should be viewed, where the rail distances traveled are not short and the volumes are not nearly Strengthening of project execution will require what they are elsewhere. proper project planning with the correct sequence of what project comes before which. This will A further reason to substantiate the Opex subsidy ensure value for money in project execution and is that the selling prices of the tickets are governed avoidance of PRASA not realizing full benefits on and therefore there needs to be a subsidy which some of its completed projects. Currently, PRASA has to cater for the difference between the sales is faced with some projects completed whilst other achieved and the costs incurred of running rail. In projects needed to realise anticipated benefits of theory the calculation of the subsidy should be easy the completed projects are either behind or not yet as it should simply be the revenue generated less planned. the costs to operate, leaving the residual balance to be the Opex subsidy (after addressing inefficiencies).
30 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
This is unfortunately not how the Opex subsidy • Security costs increase by the PSIRA is calculated and the funding model of PRASA is recommended rate which is above CPI currently therefore unsuitable and a systemic hurdle to the at 8%; business being able to perform going forward. • Municipal costs increase by 10% and a targeted CPI increase is received; The reduction of R1.7 billion in rail operating subsidy • Maintenance and materials increase by 10% and for the 2019 MTEF effected in allocation letters a targeted CPI increase is received; received from the National Department of Transport • Insurance claims and premiums increase by 20% will have an adverse effect in an already bad financial and a targeted CPI increase is received. situation and rail operations of PRASA. The above costs constitute 84% (2016/17 financial year) of PRASA’s running costs and the current Operating 2019 2020- 2021- Total method of calculating the funding costs for rail in no subsidy 2020 2021 2022 way addresses the real increases in the running costs reduction 581 269 572 740 571 352 1 725 361 of rail. The funding model is divorced from reality and needs to be urgently reviewed. Personnel costs are First 465 201 450 154 430 567 1 345 922 by far the largest element of cost at 52% (2016/17 reduction financial year), at PRASA. PRASA is regularly Second 116 068 122 586 140 785 379 439 questioned as to the validity of staff numbers reduction required to run rail, particularly when measured against the steep decline in the service and product With the current reduced operating subsidy, the provided by PRASA. In line with the turnaround plan, 2019/20 financial year will be a testing year for rail an operating model needs to be developed for PRASA operations. Rail services is mostly likely to be shut and will inform the level of employment required at down by either by striking employees for no pay, PRASA. This should be accompanied by a funding unpaid municipal costs and none payment of Eskom model agreed with government. which will results in traction electricity being cut-off. Failure to pay contracted security services providers The combination of the large personnel costs and and employees is likely to result in asset vandalism funding model short comings have resulted in a and theft. Failure to pay commuters for injuries will severe impact on the cash available to keep the result in assets being attached and PRASA being PRASA product secure and operational. This effect is viewed as non-curing for those injured in its system. well illustrated when a review of maintenance costs With the declining fare revenue as a result of lack are made in 2010, maintenance made up 12% of the of maintenance and asset vandalism, theft and total costs, yet in the 2017 it only makes up 3%. When arson, in the 2018/19 financial year, PRASA barely compared to what a similarly aged fleet running kept its rail operations functional through interest cost would be, in this case BART in San Francisco, income generated from capital funds. The additional their maintenance cost is 10% of their total cost. reduction will put pressure in PRASA cash crisis that This therefore points to the fact that the lack of the interest income will not overcome. This will lead cash with continued theft, vandalism and arson of to the non-recovery of service as envisage in the assets is leading to fewer trains being available, rescue plan. inadequate maintenance being performed leading to lower revenues. This would be a death spiral for any Having identified the reason for the subsidy we need normal business. to review how the subsidy is calculated and how this calculation affects PRASA. The general subsidy Problem Statement: PRASA does not possess a is simply increased by CPI every year (except for suitable funding model and therefore finds itself in the reduction in the 2019 MTEF) whilst some of the financial distress. This is a result of a high allocation subsidies constituent parts are increased by e.g. CPI of funds to personnel costs, lack of a suitable plus 2%. The subsidy increase therefore occurs in a operational funding model that takes the real costs vacuum separate from the real costs effect incurred of doing business into account and the lack of by PRASA in running rail. Examples of this would be: operational funding allocated to maintain and service the expansive capital program. • For the two financial years to 2018/19, 83% of personnel costs, where subject to labour agreement increase salaries of 8% per annum. Before this, previous 3 year labour agreement provided for 9.5% increases per financial year yet subsidy was targeted inflationary.; • Energy costs increase by 12% but only a targeted CPI increase is received;
CORPORATE PLAN 2020-2022 31 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
MTEF Deliverables The following high-level interventions have been identified:
• Reestablish/capacitate the Finance department. • Develop a suitable funding model that takes into account the real cost of doing business and supports the operating model. • A financial strategy that addresses the need for appropriate systems, skills, policies and processes suitable for running an organisation of this size and complexity. • Revenue protection and cash management strategy. • Revenue fair evasion and leakage protection strategy • Reduce reliance on Interest to finance operational costs.
32 CORPORATE PLAN 2020-2022 Be Moved
CORPORATE PLAN 2020-2022 33 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Improving commuter and 03 passenger travel experience
Context The performance of Metrorail and MLPS is at an all-time low. The PRASA Rail Recovery Plan focuses on rescuing Metrorail and MLPS in the 2019/20 financial year from further decline, with on-going recovery towards stabilisation over the 2020/21 – 2021/22 financial years. The impact and implications of modernisation (new trains) will need serious consideration and decisions for migration towards creating a fully modernised system parallel to the recovery and stabilising the existing system.
Metrorail
At the heart of this Corporate Plan is the recognition that recovering the Rail business is not negotiable and is informed by the Rescue Plan with a particular focus on two areas:
1. Recovering the Rail Business: 2. Improving Operational Safety • Rolling Stock Recovery - increase capacity • Management of manual authorisations - and service improvement and address improved technological non-commercial overcrowding cell and token system and reprioritisation of • Infrastructure Condition - service reliability re-signalling program to high risk corridors. and reduction of manual authorisations • Human factors management – recruitment leading to excessive overtime and working of train operating staff in critical vacancies hours by operational staff including supervision and sign-off of manual • Corridor Protection – addressing open authorisations and limitation or reduction nature of the system through fencing/ of train staff to under 12 hours, as well as walling projects and repair of illegal access appointment of human factors management points in order to combat fare evasion, high specialist. levels of vandalism and illegal trespassing • Safety Incentive program – promote a safety that causes accidents culture in number one priority for staff and • Fare Revenue Management - ticket system commuters, including safety campaigns. stabilisation, access control and corridor • Refocusing of Train operations, security, lock down with station and corridor revenue station staff to platform marshalling and targets. safety practises with no-tolerance. • Communicating with commuter and stake • Continuous task observation and speed holders on service improvements and monitoring with consequence management recovery plan on breaching of conduct. • Operational safety culture. (See2 below)
3. Compliance with the Safety Management System (SMS) The adequate implementation of a Safety Management System (SMS) by PRASA is a key element in improving operational safety and forms the basis on which the Railway Safety Regulator issue safety permits.
The SMS framework, herein below provides a tool for the ease of use by PRASA and, at the same time, for facilitating compliance with the legal requirements. The overall purpose of the SMS is to ensure that the PRASA achieves its business objectives in a safe manner and by implementing all relevant elements of an SMS in an adequate way will provide PRASA with the necessary assurance that it will continue to control all the identified risks associated with its activities, under all conditions.
34 CORPORATE PLAN 2020-2022 CORPORATE PLAN 2020-2022 35 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
The aim of the Rescue Plan is to recover the Metrorail the 2019/20 Rescue year and further stabilise the business to: recovery over the remaining two years of the MTF • 65% of the 2008/09 service levels during 2019/20 period 2019/20 – 2021/22. including 20% business improvement, and • 80% of the 2008/09 service levels by the end of The objective of PRASA’s Rescue and Recovery Plan the MTEF period of 2021/22. for Metrorail is to restore service performance during the 2019/20 Rescue year and further stabilise the The unavailability and unreliability of rolling stock recovery over the remaining two years of the MTF and infrastructure, which are key enablers to period 2019/20 – 2021/22. regular, reliable and on-time train services, can no longer guarantee that rail is the backbone of public To stabilize the commuter service the following transport. The availability of train sets (rolling stock) requirements have been identified as needing has decreased from 288 sets in 2013/14 to 200 by immediate implementation and have been confirmed the end of 2017/18 and is currently at 174 sets (with with rail operations, engineering and technical only 50% correctly configured with 12-coaches). services as deliverables for the 2019/20 period: This decline happened despite the general overhaul program and repair interventions that amounted to Review the functions, operating model and billions of rand. delegation of authority of the Regions Rapid rolling stock recovery programme to the Reliable and predictable commuter services with following train sets requirements sufficient capacity are dependent on having train • Western Cape: 88 train sets sets in the correct 12-coach configuration on a daily • Gauteng: 118 train sets basis especially during peak periods. Furthermore, • KZN: 54 train sets the availability and reliability of the infrastructure • Eastern Cape: 9 Locomotives enable trains to move safely through the network with minimized failures, has not been at the required Restore the service across the Regions to desired condition levels. 74% of train cancellations are as service levels: result of rolling stock and 11% due to infrastructure. • Western Cape: Restore the central line In terms of train delays, infrastructure (mainly • Gauteng: Reduce speed restrictions signaling) contributes to 49% of delays and rolling and manual authorisations stock 19%. • KwaZulu-Natal : Restore track condition • Accelerate procurement of critical spares, rail With nearly half of the total fleet out of service components and track maintenance machines for either maintenance or due to vandalism, train • Redesign service to demand. burnings and accidents, it is clear that Metrorail will • Implement operational safety measures continue to lose passengers, especially in the peak periods where the full fleet is required. Regional Interventions The aim of the Rescue Plan is to recover the The high level of fare evasion has resulted in Metrorail business during 2019/20 to 65% of Metrorail recording less than 700 000 passengers the 2008/09 service levels, i.e. 20% business trips per week day, while the system is capable improvement, and to 80% of the 2008/09 service of carrying 2,5 to 3 million passengers daily. This levels at the end of the MTEF period (2021/22). further exacerbated an unpredictably service due to rolling stock availability and reliability of Western Cape operational infrastructure condition; which had been • Restore Central line: 40 to 62 sets and increase deteriorating over a number of years. train trips by 60% by year-end. • Recover Nyanga sub-station by June 2019 Metrorail current service levels are, on average, (Double capacity on Khayelitsha line) below 50% of what the service levels and business • Re-instate Bonteheuwel and Kapteinsklip sub- performance were in 2008/09, when Metrorail stations. transported 650m passengers. The forecasted • Roll-out and complete 11 Concrete Walling passenger trips for 2018/19 are 213m due to the Projects during the MTEF period on the central service decline, low service capacity and loss in line confidence by commuters in the Metrorail system. This has further resulted in an unwillingness to buy Gauteng tickets and increasing the loss in revenue earned. • Total service rationalisation (optimise the 12 existing new trains, as well as additional ones for Recovering Commuter Service delivery during the year, which will be 2 trains The objective of PRASA’s Rescue and Recovery Plan per month). for Metrorail is to restore service performance during
36 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
• Efficiency of available fleet in terms of demand Protecting the Service • Increase train trips from 946 to 1135 (20%) and A key dependency in sustaining the recovery from the increasing corridors served from 19 to 22 with Rescue year through the MTEF stabilisation period is frequencies rationalised to demand per corridor. the Security strategy to contain theft and vandalism • Increase in train sets from 82 to 113 (44%) on rolling stock and infrastructure. The deployment • Ring rail concept in Gauteng North with of security staff for asset protection, commuter Interchange transfers on corridor shuttles. safety and fare revenue protection will be augmented • Introduce 2 new trains sets per month. with the Security Technology Plan planned over the MTEF period at a budgeted cost of R843m and which KwaZulu-Natal include as priority: • Focus on 35 highly reliable sets out of 54 to offer • Fencing/walling of corridors in all regions for predictable service. priority completion during 2019/20. (R336m). • Emergency intervention on track condition. • Fencing and security of depots to protect the • Roll-out Fencing project in Umlazi corridor recovered rolling stock sets. • Protection of sub-stations, tie stations and relay During this period the Gauteng region will also rooms on priority corridors. receive a further 24 new train sets at average two train sets per month. The 24 new train sets, The implementation of the Security Technology Plan together with the existing 18 new train sets, will be will provide the base for incrementally rationalising incorporated into a rationalised operational plan and re-deployment of security forces and costs. to serve a larger portion of the Gauteng North rail network with new trains. This will augment the Impact of the Recovery Plan recovery strategy in Gauteng with improved train The service recovery plan during the 2019/20 availability and performance. rescue year will still offer limited services but aims to provide a predictable service with continuous Depending on depot and infrastructure readiness, it improvement aligned with the incremental is expected that the Western Cape and KZN regions improvement in availability and reliability of rolling will start receiving new trains in 2020/21 and 2021/22 stock and infrastructure per quarter. Services will be respectively to enhance their service recovery plan focussed on high-density demand corridors in each during the MTEF period. region as priority, with consistent train set reliability, configuration and frequencies in order to match Impact of rolling stock and infrastructure available supply better to demand, especially in peak improvements over the MTEF period: periods. The objective is to re-establish confidence • Rolling stock set availability will increase from in the timetable with regularity of trains whilst the current 160 sets to 260 sets during 2019/20 managing overcrowding as far as possible. with 58% increase in service capacity by year-end (Quarter 1 = 6%, Quarter 2 = 13%, Quarter 3 = During the two stabilising years of the remaining 22% and Quarter 4 = 17%). MTEF period services will normalised towards 80% of • The infrastructure availability factor will improve 2008/09 service levels with consistent and expanded from the current 42% to 55% in 2019/20 and to timetables, supported by normalised maintenance 70% by 2021/22. practises. • A projected 60% improvement in Cancellations (Base = 20% cancellations nationally). Revenue Impact • A projected 41% improvement in Delays (Base = The current ticketing system capabilities will be 37% delays nationally). restored during the 2019/20 Rescue year, while • The infrastructure improvement programme is automated (card-based) system will be introduced also geared towards reducing the high levels of during the remaining two years of the MTEF period manual authorisations to mitigate operational when a “closed system” can be supported with safety risks and incidents. access control and fencing/walling at stations and corridors.
CORPORATE PLAN 2020-2022 37 MTEF Deliverables
The Rescue/Recovery Plan pursue the following projected business targets over the MTEF period:
Restore Metrorail services in 2019/20 Rescue Year to 65% of 2008/09 Benchmark Year, when we transported 650m passengers. • Currently transporting 213m passengers and business performance is below 50% of what it was in 2008/09. • 20% - 35% business improvement in the Rescue Year.
Restore Metrorail services to 80% of 2008/09 over the following 2 years (2020/21 – 2021/22)
The Rescue/Recovery Plan pursue the following projected business targets over the MTEF period:
Metrorail 2018/19 (F) 2019/20 2020/21 2021/22 Projections Passenger Trips 213m 246m 270m 314m Fare Revenue 929m 1 076m 1 399m 1 888m Cost recovery 16% 15% 18% 23%
Long distance passenger service: MLPS
Since the transfer of MLPS from Transnet in in sweating the available assets in order to warrant 2008/09, passenger numbers declined from 3,8m the ongoing operating subsidy required for operating to a forecasted low of 375 000 for 2018/19. Trains MLPS. operated declined from 6 750 trains in 2008/09 to 1800 in 2018/19. Recovering Passenger Service The Rescue/recovery plan for MLPS over the MTEF The main contributing factor for the decline in MLPS period aims to restore services on key popular relates to the availability of reliable locomotives, routes and run/manage these services very well while the PRASA locomotive initiatives/plans did not with an improved on-line booking system to ensure materialise to provide consistent locomotive support train occupancy is maximised. Motor vehicle carrier to the MLPS business. coaches will be prioritised on key routes for this lucrative market to augment the revenue earned on The performance of the national rail network owned services. by TRANSNET remains a dependency input for the MLPS business performance and passenger A locomotive support plan includes the interim lease confidence in terms of reliable long distance of 12 locomotives to improve locomotive reliability, passenger rail services offered by PRASA. while alternatives for a sustainable locomotive support plan from the PRASA existing locomotive All Government policies and developmental fleet, and/or additional available locomotives from strategies require PRASA to manage the existing TRANSNET, will be evaluated for upgrade and MLPS asset more efficient in terms of value add refurbishment feasibility. for the subsidy allocated to operate long distance passenger rail. The locomotive support plan will also include a technology assessment for the medium to longer The independent Lufthansa Turn-around study term re-definition of long distance passenger travel developed in 2014 confirmed the case for the Turn- in terms of higher speeds and long distance rail around potential of the MLPS business, based on comfort requirements, in order to serve the extensive focused investments and major business efficiencies intercity and tourist travel market.
38 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
MLPS Projections 2018/19 (F) 2019/20 2020/21 2021/22 Train trips 1 840 1 987 2 062 2 140 Passenger 375 000 463 000 510 000 561 000 numbers Revenue 114m 141m 155m 170m Cost coverage 14% 15% 15% 16%
MLPS Rescue Plan will include, inter alia: MTEF Deliverables • Collaboration with tourist and hospitality industries for catering and tourist package • Secure 3 year locomotive lease as interim development. arrangement to stabilise and recover the • Explore additional revenue services to improve MLPS service. the financial health Invest in internet booking and • Renegotiate TRANSNET access agreements business support systems. with performance/penalty regime and settle/ • Collaboration with Autopax on route viability negotiate outstanding Transnet debt. allocation, support in case of emergencies • MLPS team to develop comprehensive and for integrated last leg destination travel, business case for turn-around with passenger, especially rural areas. cost, revenue and funding projections to • Restore MLPS over the MTEF period to 30% of ensure subsidy confirmation and capex needs 2008/09 performance benchmark against outputs. • Renegotiate access fees and haulage cost. • Develop technology/modernisation migration plan including capex requirements for experimenting with higher speed technology on demonstration route.
Long distance passenger service: Bus Operations (Autopax)
INTRODUCTION the company to a financially sustainable level, Autopax Passenger Services (SOC) Ltd also known as the leadership of the business is confronted with Autopax is a wholly-owned subsidiary of Passenger the challenge of effectively managing the current Rail Agency of South Africa (PRASA). Autopax exist business whilst creating and implementing the future to service the primary mandate of PRASA which Autopax business based on this strategy. is, provide in consultation with the Department of Transport, for long haul passenger rail and bus The organisation finds itself in a financially and services within, to and from the Republic in terms operationally distress state requiring, management of the principles set out in section 4 of the National and leadership with aptitude that can catapult the Land Transport Act, 2009 (Act No. 5 of 2009). business into new frontiers. The company is also The company derives its mandate from the confronted by a business unfavourable organisational shareholder’s compact. Based on the Shareholder’s culture that permeates within its human capital compact, Autopax is mandated to deliver quality that is compounded by the collapse in employee and safe long distance bus passenger services in morale and motivation. The company has overtime South Africa with a view to grow the market share experienced a decline in corporate and ethical and expanding the business and thus creating culture, leading to collapse in corporate governance. shareholder value. Due to major cash flow challenges to sustain the Autopax has ambitions of assuming leadership business, there is a high number of the bus fleet in the long distance road passenger transport that remains off the road (parked due to mechanical solutions. The attainment of this ambition is centred breakdowns), the cash flow constraints has also on the company’s mission of providing a preferred, contributed hugely to poor fleet maintenance regime sustainable, high quality, seamless and affordable leading to unreliability of services. road passenger transport services. This business strategy is necessitated by a number of business This has in the main resulted in unacceptable lower challenges that confronts the company today. In the levels in passenger numbers, contraction in market process of crafting a strategic plan that will return share and reduced revenue collection. The external
CORPORATE PLAN 2020-2022 39 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
creditors’ book has increased to the level that of the fleet the cost of maintenance is very high. threatens the continued trading of the company. The current financial state of the business makes The lack of robust Information and Communication it difficult to provide adequate fleet maintenance Technology (ICT) solutions which is a basic regime. The inadequate preventative fleet requirement in any bus operations has also maintenance regime has a negative impact on the contributed to the multifaceted challenges that durable lifespan of the fleet as well reliability of the confronts the business. These challenges include, service. but not limited to inadequate fleet management and monitoring, poor revenue collection and protection Reduction in revenue and passenger number – systems and inadequate inventory and materials Since the 2014/2015 financial year, the company management. has been experiencing a decline in fare revenue coupled with increase in net losses. This is directly Historical business performance and challenges attributable to the reduction experienced in passenger numbers due to reduced fleet available The company only posted a profit during the for all operational requirements. The fact that the 2014/2015 financial year. At the end of 2018/2019 company is operating older fleet creates a challenge financial year the total amount of historic debt in terms of competitiveness with passengers accumulated in the past three years will be circa preferring new fleet. R206 267 459.00 and R603 656 501.00 which is made up of external creditors book and PRASA Unsustainable cost structure – The Company has debt respectively. The total number of buses fully experienced a marked increase in the cost structure operational on road has been increased to circa of operating the business. The increase in the 180 per month during the 2018/2019 financial years operational cost is as a result of reduced revenue in contrast to 90 buses per month during the last collection. Employee costs constituted 42% of quarter of 2017/2018 financial year. Based on the operational expenditure as at the end of 2018/2019 above, the company continues to identify areas that financial year, this figure is expected to remain the requires urgent attention to improve the financial and same at the end of 2019/2020 financial year. The operational performance of the business as per of other operational costs that have increased in the this business plan. last three financial years include fuel and general operational costs. Decrease in fleet availability – Whilst the number of operational fleet has increased during the current Lack of infrastructure – The Company does not have financial year, the number of operational fleet the requisite infrastructure to adequately run its remains low. More than half of the total fleet is operations. This includes Depots, Information and parked at the depot or with various service providers Communication technology and fleet maintenance due to either mechanical breakdowns or accidents. workshops. This contributes directly to poor balance The reduction in fleet availability has direct detriment sheet, ineffective revenue collection and protection effect on revenue, passengers and customer systems in the company as well as inability to satisfaction. effectively manage all key resources in the business including but not limited to fleet, fuel, passengers Inadequate fleet maintenance regime – The current and inventory. fleet is over eight (8) years old and 60% of the fleet has exceeded 800 000 kilometres. Due to the age
40 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
CONTEXT OF UNDER-PERFORMANCE STRATEGIC FOCUS FOR THE MTEF PERIOD TO IMPROVE PERFORMANCE During the 2014/2015 financial year the company posted a profit of R7 920 829.00, however in the The strategy and business plan review is about the following two years the company made losses. It following milestones: is projected that the company will post loss of over • The strategy and business plan review focuses on R300 000 00.00 at the end of the 2018/2019 financial major financial and operational turnaround of the year. It is clear that the challenges that the company business. is currently experiencing today are a manifestation of • It is aimed at ensuring that Autopax becomes what happened since 2015/2016 financial year. a financially viable entity, capable of delivering Management has taken time to reflect on the above on PRASA’s primary mandate as per the Legal and concluded that the following are some of key Succession Act. reasons the company has deteriorated over a period • It is also aimed at repositioning Autopax to of time. effectively and efficiently support PRASA Rail operations. Lack of core technical expertise: The Company • It is focused on investing in new capacity and has overtime lost individuals with core technical resources that will meet passenger demands in a expertise, most of this positions have not being medium to long term horizon. filled or replaced with right skills due to cash flow • Reviewing and addressing the company’s weak challenges in the business. The business also has balance sheet. a number of employees in management and at critical junior level functions without core technical The 2019/2020 business plan will ensure that whilst it skills. This challenge permeate in a number of areas support the company’s core strategic direction, plan in the business including the collapse of the fleet also begin to explore its strategic growth trajectory. maintenance regime in the Technical Department. To this end the company has identified possible The high number of the fleet breakdowns points growth opportunities in the intercity business, Cross directly towards lack of core technical skills in the Board operations as well Charter. The company business. This situation has also been very prevalent will improve synergies with Rail Operations as part in the operations planning environment like bus of its strategic growth plans. This approach will scheduling and dispatching which is at the core of any require the company to review its fleet capacity to bus industry operations. Due to cash flow challenges, meet the anticipated demand. Measures are afoot the company has not invested in people development to implement this growth trajectory focusing on the to curtailing this challenges. radical fleet recovery plan.
Lack of management and leadership skills: The Key focus areas business is operating with very thin expertise at Planned fleet operations (Bus allocation) management and leadership level. This has also resulted in the compression in roles due to the # Growth area Current New fact that managers are then required to execute Allocation Allocation and perform roles at the lower levels with little or capacity to delegate. 1 Intercity 178 260 Scheduled Lack of effective employee skills development: services The Company has overtime invested less and less in 2 Charter 0 33 employee skills development as well management & services leadership development due to cash flow constraints. This impacted a lot on the skills in the company 3 Cross Boarder 2 50 across all levels of the business. The company was services previously accredited as a fleet repairer by various 4. Rail Operations 0 72 Original Equipment Manufacturers, this accreditation has since been lost. The issue of ineffective employee Total operational fleet 180 415* skills development is also prevalent in all spheres of *This figure is inclusive of 10% (41) Technical spare capacity. the business.
Performance management: The Company has implemented performance management in 2018/19 and need to inculcate the culture of performance management to hold people accountable. Service providers are also made to account on poor service deliver through supplier performance management process.
CORPORATE PLAN 2020-2022 41 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Growing the Business Key business objectives The company’s growth trajectory strategy in about 1. Route optimization: It is management’s the increase in the number of operational buses and considered view that the implementation of will pivot around the following: the Route Optimisation will lead the company 1. Organic growth in Intercity and Cross Border to realise the desired financial management, operations – The company has identified viability and sustainability. a number of routes that present a growth 2. Revenue optimisation: It is management’s opportunity for the business. To this end, the considered view that the implementation of the company will be lodging applications with the Revenue optimisation will lead the company relevant authorities with the aim of increasing the to realise the desired financial management, number of intercity services. viability and sustainability. 2. PRASA Rail operations – During the 2014/2015 3. Asset optimisation: The implementation of financial year, the company was able to effectively the asset optimisation process will ensure that and efficiently support rail operations leading into the company realises the desired effective and inter-company revenue of over R65 000 000.00. efficient operations. The Autopax strategy and business plan are 4. Cost optimisation: The implementation of this aimed at returning the company to this position. objective will ensure that the company realises This plan will assist PRASA Rail operations during the strategic lever of financial management, occupations and emergencies. viability and sustainability as well as effective and 3. Cross Border operations – The company is efficient operations. currently operating two daily services between 5. Control optimisation: This objective will ensure Gauteng and Maputo. The company has recently that the business realises the strategic lever of acquired fourteen (14) permits to operate between effective and efficient operations and performance Gauteng and Zambia (Lusaka). The company is excellence. also in the process of acquiring additional cross 6. Supply Chain optimisation: This objective will operating permits focusing at Swaziland, Lesotho, ensure that Autopax realises the strategic lever of Namibia, Botswana and Zimbabwe. effective and efficient operations. 4. Charter services – The charter market remains 7. Performance management: This objective will a huge opportunity for Autopax towards the ensure that Autopax realises the strategic lever of realisation of the growth trajectory strategy. The Performance excellence. company has in the last two financial years failed 8. Customer centricity: This objective will ensure to convert a number of charter opportunities. With that Autopax realises the strategic lever of the increase in the number of operational buses, excellent customer service. It is management’s the company will be in a position to fully explore considered view that the implementation of the this market. customer centricity will lead the company to 5. Feeder services for Metrorail – The company realise the desired Excellent Customer Service. is exploring plans with Metrorail with the aim of ensuring that it is in a position to provide Metrorail with feeder services as per the Legal Succession Act.
42 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Ensuring reliability and availability of the service 04 At the heart of the interventions is the recognition and commitment that the product must be understood in terms of the reliability and availability of both the infrastructure and the service being rendered. Further more how reliable and readily available the information about the product being offered will make the service more predictable and that it must be safe and secured. The RAPS Framework is what informs the interventions that will make the service reliable, Available, Predictable and Safe and anchored by people who understand their role and contribution in delivering product quality
Improving Reliability and Availability The incorporation of revised maintenance activities The central approach of the Rescue Plan is to restore with respect to the infrastructure and the new trains the service to the commuting public by stabilising into the regions, including the development of a the supply of rolling stock and infrastructure to suitable maintenance execution framework to enable realise the service offering as per the timetable. a higher availability of the asset for peak demand periods will form the central focus during the MTEF The stabilisation will focus on the placement of period. long term supply contracts for various maintenance components and services to create an environment Predictability of the service that is free from stock-outs which advances The predictability of the service offering to the improved maintenance planning and execution. customer is premised on high reliability and availability of the asset, in compliance with the Returning coaches to active service is the primary published timetable. The progression to the delivery target in this intervention where the regional of a predictable service in terms of the Rescue Plan depots will be afforded the opportunity to install is centered on the improvements in the reliability of the components and return the coaches on a steady the assets through the planned interventions. tempo as the components are delivered to the depots. Accelerated Fleet Renewal A further intervention in the Rolling Stock Acquisition of critical components needed to ensure Department to accelerate the return of coaches to an increase in the number of trains available to service, is the activation of the service providers for provide a reliable services, as well as the work to ad hoc work who, in conjunction with the regional carry out the restoration of the network that will depots, will assist in improving the availability of reduce sections of the network currently under coaches for the operations. speed restrictions is critical for the turnaround of the commuter services.
CORPORATE PLAN 2020-2022 43 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
The Regional Infrastructure Departments have been and engineers, with the latter being used as mentors tasked, as a short term intervention, to procure the to the younger staff and to build the knowledge base services and products to accelerate the appointment at PRASA. of contractors in the regions. Other contracts for economies of scale, e.g procurement of rails, will be An Academy for training must be established and managed centrally. be fully accredited by the relevant SETA, from Food Handling (long distance trains and buses), through Corridor Fencing Customer Care (frontline staff), Operations (Drivers, The replacement of the fences of the rail corridors TCO’s, Metro Guards, Bus Drivers), Security and is a key intervention in advancing the securing of the all technical grades (signals, electrical, perway, assets from further theft and vandalism. Concrete electronic, ICT, mechanical) to ensure consistency walls are to be used where the network is vulnerable of service provision on the one hand, and quality to theft and vandalism. improvements of service on the other.
Consolidating Engineering/Tech Division A revisit of the technical specifications for mission- In accordance with the PRASA Turnaround Strategy, critical rolling stock components in 2019 through the the reconstruction of the Engineering function is an PRASA Chair of Rail at the University of Stellenbosch essential step out of the quagmire, to a place where will be incorporated into the maintenance process sound decision-making is the norm and adherence to both internally and through the service providers in standards in paramount. order to address component reliability, which will ultimately improve the overall reliability of the asset. This strategy acknowledges that, notwithstanding The relationship with the CSIR is to be developed to the immediate interventions to turn the business assist in reliability of infrastructure assets. around, the medium and long term aspects point to a re-establishing of a strong Engineering function Key focus areas for the MTEF period: in PRASA; in the first instance, a bringing together Supporting the Commuter and Passengers of the former PRASA Technical and the PRASA Rail services means Back to Basics on Rolling Stock Engineering Services, as was originally envisaged in and Infrastructure Maintenance and will focus on the 2012 PRASA Corporate Plan. the following interventions: The establishment of a core engineering competence is to instill sound engineering practice in all facets of 1. Returning 260 train sets to service to improve the business and proceed toward international best train capacity to the customer. practice for physical asset management (ISO 5000) 2. Halving the number of kilometres under in the longer term. A programme to build this unit speed restriction to improve train running will commence in the 2019/2020 year and spread times, reduce train delays as well as improve over the MTEF so that the PRASA Engineering unit is predictability of service. adequately capacitated by the end of the MTEF. 3. Replacing obsolete Traction Circuit breakers with new generation High Speed Circuit Breakers to ensure a stable power supply. On the execution of Capital Projects, the current method of project execution is being reviewed in 4. Upgrading back up power supply units to key panels to reduce panel and interlocking the light of the pending decision with respect to downtime due to power outages. the introduction of an EPCM Contractor for the 5. Procure and install replacement rail tracks in EPMO and the need to step up the Modernisation order to improve safety and ride quality. programme of PRASA. Building the Project Execution 6. Erect robust corridor fencing to secure the Programme with suitably qualified Project Managers infrastructure and combat fare evasion. and administrators with a fully-capacitated 7. Appoint more personnel in the safety critical programme office for project execution under both grades to improve safe operations. modernisation and capital intervention projects will 8. Re-introduce Quality Assurance in accelerate the delivery of capital projects in PRASA. maintenance execution in order to improve the quality of service to the customer. Strengthening Technical Capacity Capacitating the technical staff will be dealt with along the recruitment, retraining and development of existing staff, and contracting in retired technicians
44 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
05 Managing and improving the property condition: Railway stations & workspace facilities
In line with Passenger mobility requirements, PRASA has positioned the bulk of its operational property portfolio facilities i.e. Railway stations & Workplace facilities as enablers of a successfully delivery of Passenger Rail Services through Metrorail and Shosholoza Meyl. The entity further uses its non-operational portfolio space particularly at Railway stations to respond not only to Passenger mobility requirements, but facilitate community access to other basic necessities including access to food, health, clothing, banks etc.
At the core of managing and improving facilities is delivering an offering of improved and functional facilities creating a safe and functional environment that will enhance commuter and or user experience. As a result, railway stations are evolving from being just commuter / transport hubs to destinations where people meet, work, eat, drink and travel. Railway stations are now bringing convenience through retail and or government services not only to the commuters but to communities and household in and around the stations.
These services are being piloted in different regions including Johannesburg Park, Sausville, Germiston, Pretoria station in Gauteng, Isipingo, Durban station in KwaZulu Natal, Cape Town station in the Western Cape. The intent is to extend the services to prioritised stations in the metropolitan and rural areas with the need. In this regard, the Division receives capital budget allocation on an annual basis to deliver property improvements.
Thus the condition of station facilities within the rail system environment is critical towards offering a dignified travel experience to commuters and passengers who use PRASA’s transport solutions. Facilities maintenance and general upkeep forms an integral part of ensuring that the rail system performance is at its optimum level, whilst supporting PRASA business operations through the generation of additional revenue.
The portfolio and categories of facilities requiring regular maintenance and upkeep are listed herein below:
Station Station Building Precinct Workplace Building Land Building Commercial Building Residential Buildings
Because railway stations serve as connecting points for commuters and passengers who use PRASA’s mode of transport, facilities management therefore plays a central role in the in the provision of a conducive environment for those who patronize the stations.
Key to the delivery of the programme is alignment with Government’s Programme of Action outcome number four (4), the creation of decent employment through inclusive economic growth.
Improving the condition of facilities into a modern and functional state requires a dedicated station improvement and station upgrade as well as elaborate workplace improvement projects as depicted below:
National Station National Station Workplace Station & Station & Improvement Upgrade (NSUP) Improvements Workplace Workplace (NSIP) (WPIP) Maintenance (CIP) Cleaning & Waste Management
CORPORATE PLAN 2020-2022 45 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Customer Expectations Despite ongoing efforts to upgrade and improve the Of the score card of customer expectations regarding condition of the stations, due to the openness of the the functionality PRASA facilities, particularly system, these stations are subject to vandalism and stations, 50% of the expected deliverables have to do theft of an alarming rate. It has been observed that with facilities management as indicated below: the nature of human settlements where a station • Clean, working toilets/platforms/subways. is located has a direct impact on the condition of • Appropriate lighting on foot bridges and in the station facility. Consequently, the maintenance subways. programme is skewed towards unplanned • Maintenance and cleaning of facilities. maintenance activities and thus compromises • Shelters and appropriate heating. scheduled or planned maintenance and adversely • Universal accessible environment. impacting the functionality of these facilities. • Directional signage for way-finding. • Safe and clean parking facilities Key Focus Areas for the MTEF Period Internally, workplace facilities are utilised by PRASA 1. Upgrade & Improve Assets into functional employees and include Depots, Yards, CTC’s, Drivers and safe levels (Station & Facility Upgrade Mess Rooms, and Offices etc. With more than 100 Programme). workplace facilities, enhancing the current building 2. Maintain Assets for functionality, safety conditions remains a priority so as to ensure & cleanliness levels (Utilities & Facilities minimal interruptions in business operations as a Management Programme. result of an unsuitable work environment.
06 Improving passenger rail travel experience through modernisation
PRASA continues to intensify its implementation of departments chaired by the Group CEO to oversee the Modernization Programme, with a number of key the delivery of the capital and modernization strategic projects having entered the implementation programme. Taking into account the need for phase. PRASA’s Modernisation programme, through additional capacity to deliver key capital and R173 billion government investment over a 10 year modernization programme such as station period (2013-2023) is aimed at transforming the rail developments, depots, platform rectification, perway, product through the following key projects: and electrical works etc., PRASA is embarking • Rolling Stock Fleet Renewal Program. on a process to appoint key technical and project • 120km/h perway improvement. management personnel to fast-track delivery of • Signaling Programme. these programmes to meet new train delivery • Depot Modernisation. programme. The appointment of these resources is • Station Modernisation. on a critical path, with expertise expected to be put in place by first quarter of the 2019/20 financial year. PRASA has since reviewed the implementation model for the modernization programme, with The appointment of key technical and project support Project Support Offices in the four regions to roll panels for use in the execution of the projects was out key capital and modernization programmes to delayed for an extended period in the Procurement be created overseen by Programme Managers in space and consequently only surfaced very late in the line with the Corridor Approach – this approach BAC. The review of the Modernisation Programme will see a procurement process of various projects projects identified the need to urgently appoint being implemented under one Programme Manager technical and project managers to accelerate the responsible for the Corridor in line with the projects in the light of the revised roll out plan for the deployment of new train-sets. The rail division of deployment of the new train sets. PRASA will drive the business readiness projects, including operational readiness to align with new The successful rollout of the above modernisation train deployment. programme will prove to be a game changer for the future of rail as well as a catalyst to transform To that effect, PRASA has established a Group passenger rail travel experience which will re- Capital Investment Committee comprising of position rail as the backbone of public transport. senior executives from key business units and line
46 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
PRASA Rail requirement for accepting the new trains The Rolling Stock Fleet Renewal Programme involves into the system: the acquisition of 600 new, modern, world-class trains for Metrorail Services as well maintenance 1. National dedicated/coordinating structure – support for the fleet. There are currently two Master Modernisation Plan. contracts in place with the Gibela Rail Transport 2. Regional ownership of modernisation process – Consortium (Gibela): Regional Program Offices. 3. Integrated deployment and modernisation Manufacture Supply Agreement (MSA) – 600 New roll-out plan. Trains, for Contract Value of R59 billion over 15 4. Regional Operations Plans (service rationalisation year delivery period; and - deployment roll-out. Technical Support and Spares Supply Agreement (TSSSA) - agreement governing the maintenance A. Rolling Stock Fleet Renewal: A game changer for of the New Trains, over a period of 19 years. the modern passenger Over the MTEF period, the Programme will ramp-up As a game changer for passenger rail travel the local manufacture of the New Trains at the factory Rolling Stock Fleet Renewal Programme provides site in Dunnottar, Nigel, with approximately 80 the commuter a dignified travel experience and is a New Trains targeted to be utilized for commercial catalyst for the transformation of Metrorail services operations in the period. and public transport as a whole. It is the beginning of what would be a total overhaul of the train system over the next few decades and is aimed at delivering Benefits/Impact quality services to citizens and the revitalization of As a game changer, the Rolling Stock Fleet rail as the mode of choice for daily commuters. Renewal Programme provides a world class metro rail service that will reduce travel time, provide The Rolling Stock Fleet Renewal Programme will more reliable trains that will increase passenger result in PRASA procuring approximately 7 224 new trips and improve overall safety of the service. The rolling stock coaches with projected investment major benefits of the Programme are: of R123.5 billion over a period of 20 years. The 1. Modern, safe and reliable trains for metro procurement of new rolling stock is a critical line services. component of PRASA’s mandate to provide for 2. Faster and more reliable trains with modernization and growth. PRASA has since made increased capacity. considerable progress to achieving this objective 3. Improved overall safety of the trains. where Gibela was appointed to supply 3600 new 4. Improved overall service to passengers. Metro Rail coaches.
2018/19 2019/20 2020/21 2021/22 2022/23 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
GN 18 DEC 2018 - FEB 2020
Gauteng North 44 OCT 2020 - MAY 2021
W Cape 35 MAY 2021 - JAN 2022
KZN 39 APR 2021 - NOV 2022
Gauteng South 39 AUG 2023 - MAY 2028
E Cape 38
CORPORATE PLAN 2020-2022 47 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Focus Areas: Focus Areas:
• Manage manual authorisations. • Manage manual authorisations. New business and new system • Safety incentive programe - • Service: Normalised (consistent providing for actual demand of 20 000 Safety Culture and expanded time table) - 30 000 passengers per hour • Service: limited but predictable • Automated (card) ticket and with continuous improvement. access control in a closed system • Rolling stock components - environment reliability. • Commuter information apps. • Communicate “ Bear with us” • Eliminate track condition message. limitations • Restore ticketing capability, incl • Normalised maintenance speed points. practises • Contain vandalism. • Security technology reducing • Accelerate fencing projects. security costs. • Accelerate integrated • Signalling improvements with modernisation planning increased headways. • Gauteng North introducing new • Preparing business for change. trains • Introducing new trains in W Cape and KZN • Implementing corridor focused modernisation
B. Signaling Programme Benefits/Impact In 2013, PRASA commenced with the roll out of a The signalling programme will have the new modern signaling system to replace existing following benefit/impact on the commuter travel signaling interlocking, which consist mainly of experience: obsolete mechanical and electromechanical systems, 1. Reduce number of signaling failures. with electronic interlocking as the technology of the 2. Reduce train delays and cancellations due to future. The programme includes: signal failures. • The construction of Control Centers in each 3. Improved reaction time from a Centralized region and modification of the existing remote Operational Control Centre servicing the control system. Gauteng region. • The Automatic Train Protection (with In-Cab 4. Reduce headway time period during signaling functionality). operations, improving number of trains available during peak periods. During the MTEF period, all 3 regions will be completed, with stations commissioned and connected to the Control Centers using the new system.
48 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
C. Depot Modernisation Benefits/Impact In line with the implementation of the Rolling The station modernisation programme will have Stock Fleet Renewal Programme, Depot the following benefit/impact on the commuter Modernisation involves the following: travel experience: • Upgrade and construction of modernized depots 1. Improved revenue collection. for operations of New Trains 2. Improved station operations. • Modernization of 6 Depots across all 3 regions 3. Enhanced commuter flow. • Gauteng: Wolmerton, Benrose and Braamfontein 4. Enhanced station surroundings – inter- Depots modal facilities, shops, and other commuter • Western Cape: Paarden Eiland and Salt River requirements. • KwaZulu-Natal: Durban and Springfield Depot 5. Provide universal access.
During the MTEF period, the following Depots have been prioritized for implementation: • Wolmerton Depot (Gauteng) Challenges of Fixing, Running and Changing the • Paarden-Eiland Depot (Western Cape) Business: PRASA is cognisant of the fact that whilst • Springfield Depot (KwaZulu-Natal) it embarks on the modernisation programme and focuses on the deployment of new rail infrastructure Benefits/Impact and services, the organisation still has to contend The Depot Modernisation Programme will have the with running the current operations and improving following benefit/impact on the commuter travel the customer service experience. Therefore, in experience: parallel to the Modernisation Programme, PRASA is 1. Modern infrastructure to support operations and continuing with its upgrades and maintenance of the maintenance of new rolling stock. current infrastructure network. 2. Improve maintenance efficiencies. 3. Improve overall safety of the trains and service To run the current business effectively and efficiently that PRASA provides. requires a commitment to delivering quality services 4. Improve working environment for staff. with increased frequencies, safe operations, and ensuring personal security of passengers. This in D. Station Modernisation turn will lead to PRASA regaining its lost market Station Modernisation forms part of the majority of share and achieving further growth in patronage the 135 planned station improvements upgrades and new over rail stations that are currently dealing with E. 120km/h Perway Programme higher than normal passenger numbers. The programme’s objective is to upgrade perway infrastructure to enable rolling stock to achieve The identified stations will undergo a modernization speeds of up to 120km/h. This is a significant process that will improve access, safety, increase improvement on the current limitation of 90km/h. commercial space and improve the “look and feel” This is in line with PRASA modernization strategy of and involve, amongst other stations the following: introducing new rolling stock for Metrorail services. • Gauteng: Mabopane/Pretoria/Germiston/ Johannesburg/Naledi. Over the MTEF period, the perway programme will • KwaZulu-Natal: Umlazi/Durban/Kwa Mashu/ focus on correcting rail line geometry, replacement Bridge City. of turnouts, doubling of the railway track from • Western Cape: Khayelitsha /Kapteinsklip/Cape Germiston to Knights in Gauteng and replacement of Town. old railway tracks across the three regions.
CORPORATE PLAN 2020-2022 49 Be Safe
50 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
07 People, Assets and Infrastructure Protection Context
An integrated people, assets and infrastructure protection strategy is integral in ensuring the provision of a safe, reliable and predictable service across all PRASA facilities, infrastructure and assets, as well commuters and staff. The Security Rescue Plan addresses the full suite of security solutions as well as the techniques and methodology for the deployment of in-house and external security, including technology and skills required to protect people, assets and infrastructure.
The Rescue Plan is based on the recognition that the safety and security of passengers and staff as well as the protection of assets and rolling stock required to provide reliable and safe commuter and passenger service is key in the delivery of both the primary and secondary mandate of PRASA
At the core of people, assets and infrastructure on board PRASA passenger services is a cause protection are the following key focus areas: for concern and remains an elusive target for protection services, including Rapid Rail Police that Corridor Management: The open system of is tasked with ensuring the safety and security of the PRASA’s rail network is prone to acts of criminality, passengers. unauthorized access, fare evasion, theft and vandalism, Illegal electricity connection, land Objective: To ensure that passengers/rail invasion, Illegal crossing of the railway lines with commuters are enjoying a safe and secure journey resultant fatalities and injuries. from origin to destination and maintain a zero tolerance for crime perpetrated on trains and buses. Objective: To protect electrical, signal and rail infrastructure to ensure that a reliable, available and During the MTEF period, Protection Services will predictable service can be provided (Target is less focus on the following deliverables and in ensuring than 409 occurrences per month) the safety and protection of the above key focus areas, a multi-disciplinary approach is required to: Station Precinct Protection: PRASA’s stations are • Provide proper access and egress control and fast becoming more than just a train service. They risk verification at access control gates; are becoming areas of convergence where various • Deploy security personnel on identified high risk patrons either come to catch a train or a bus, shop areas; and dine, work and trade. Total station security • Provide access control to premises and buildings; provision and protection, within the precinct requires • Provide escort duties at agreed high risk an integrated security strategy that is forever aware turnaround points, and guarding in agreed high of the various stakeholders that patronize the station risk sites; environment. • Protect cash and staff in ticket offices and at sales points; Objective: To ensure that passengers, staff, assets, • Protect the following essential installations and commercial area and revenue are protected against assets: crime, and that rail safety is observed between the • Rolling stock train and the platform. Target is to have a residual • Staging yards and overnight staging facilities. risk in the Tolerable part of the risk matrix striving • Perway, electrical and signal Infrastructure for green. Target for passenger related crimes < 49/ • Depots month. • Stations (Including commercial areas and inter-modal facilities) Depot, staging yards and other facilities: The • Implement Security Strategy and Operational physical security provision and security technology Plan 2 deployment at all the staging yards, overnight staging • Develop and Implement the Train Operations facilities and offices are prone to security breaches Safety Plan and Framework and need include modern technology to ensure adequate security provision. Priority Security Technology Projects interventions Objective: To ensure that the condition of trains and • Expedite Corridor fencing/walling projects coaches at staging yards and overnight facilities (Engineering and Regions) – Current budget do not further deteriorate as the result of crime in = R336m – all priority corridor projects to be support of the recovery of rolling stock programme. completed by end 2019/20. (Requirement over
MTEF = R4bn.); On-board protection: The provision and safety • Expedite and Monitor Depot fencing projects in measures remain the leading challenge in ensuring all prioritized corridors; commuter safety to and from their destinations. • Fast track procurement and deployment of 34 The level of crimes conducted on innocent civilians
CORPORATE PLAN 2020-2022 51 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Armoured vehicles ; For the protection and security of passengers, assets, • Install state of the art technology in Sub-stations, and infrastructure to prevent crime conducted on the tie stations and relay rooms; rail environment coordinated structures have been • Prioritize drone technology to cover high risk established, as detailed below: areas ; • Introduce revenue leakage monitoring technique National railway crime combating forum: This to reduce revenue fraud; forum is attended by various role players from State • Stabilise ticket system in 2019/20 and; Departments, PRASA, Transnet Freight Rail, the • Migrate to automated card based system in a RSR, Gautrain, the SAPS, Crime Intelligence and the “closed system” environment over medium term. HAWKS to focus on national crime incidents, or any special sub-committee of the National Rail Crime Collaborations with law enforcement agencies to Combating Forum appointed for that purpose. This combat crime forum is chaired by the Component Head Rapid Rail Police and meets quarterly to review crime trends Collaborative efforts with various enforcement and performance in terms of the Security Plan and agencies are on-going to curb crime related SAPS crime prevention plans. incidents on board the trains as well as those against infrastructure and assets. The Provincial Rail Crime Combating Forum (PRCCF): This forum performs similar functions to Joint responsibilities of PRASA and the SAPS the NRCCF but at Provincial Level. It meets monthly. The South African Police Service is mandated by Section 205 of the Constitution of the Republic of NATJOINTS and NATJOC: The NATJOC which is the South Africa 1996 (ACT 108 and 1996) to combat, National Joint Operations Center has the mandate prevent and investigate crime. On 11 June 2003 to activate and redeploy the Police and Defense Cabinet approved the mandate, functions and Special Force where needed to combat any threat resources of the Division Protection and Security and can immediately activate the deployment of the Services PSS, which included the Rapid Rail Police. Public Order Police (POPS) in case of civil unrest/ protests or the Special Task Force to counter any The following joint roles and responsibilities have terrorist threat. The National Joint Operations and been defined between the parties must be performed Intelligence Structure is the Country’s National in accordance with and subject to the relevant Combined SANDF, Police, Intelligence, Justice and legislation, existing policies, instructions and other Law Enforcement Structure for South Africa. guidelines of PRASA and SAPS and in the spirit of All State Departments are participants at Director cooperation, mutual trust, respect, good faith and in General Level. PRASA Rail Protection Services accordance with their respective mandates issued in represents the NDOT (and PRASA) at this level for all terms of the applicable legislation: rail transport matters. • Gathering and sharing information relating to safety and security in the rail environment on a daily basis. MTEF Deliverables • Gathering and sharing crime intelligence The following deliverables have been identified and security related issues in the railway and will be pursued during the MTEF period: environment within the ambit of set legislation and sensitivity thereof; • Phase in 70% of personnel as set out in the • Joint planning and execution of joint operations Security Strategy in year 1; involving the available resources of both parties • Phase out of contracted security over this which shall be approved by the National Rail MTEF period; Crime Combating Forum or the respective • Implement the roll out of fully equipped Provincial Rail Crime Combating Forum, prior to suitable security patrol and rapid response such operations. vehicles; • Joint conducting of operations in line with the • Implement the Total Security Management crime patterns and crime threat analysis and (TSM) programme; strategies will be realigned, should the need • Interduce technology solutions to detect and arise; combat crime within the rail system • Joint coordinating of the deployment of PRASA • Train and rollout Platform Marshals according and contractor security personnel and SAPS to the signed off plan; members to ensure effective and efficient use of • Introduce performance based management on resources and to avoid duplication of efforts. outsourced contracts; • Developing and executing emergency and • Commission new tactical and operational contingency plans; and security equipment; • Monitoring crime statistics and trends and agree • Professionalise Security services and align on redeployment of resources, or development of them to the new Security strategy principles; new strategies to address risks. • Engage Labour to ensure that Protection Service is regarded an Essential Services. • Depoliticize Protection Services by redefining and inculcating new professional culture.
52 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
08 Asset management and maintenance Context
A return to the maintenance practices that have been developed over an extensive period is central in ensuring sustainability of the asset performance in the short term. This must be supported by a sound asset management system that includes an effective reliability engineering function. Benchmarking of maintenance best practices against similar international operators is essential in optimising the cost, risk and performance parameters of the asset in the medium term.
A significant step in the right direction is the re-introduction of a rigorous Quality Assurance function that must be woven into the entire asset care value chain. As with many asset-intensive organisations, PRASA must build a solid core of Engineering capability in the various disciplines to foster the growth of a rigorous Asset Management portfolio.
CORPORATE PLAN 2020-2022 53 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
SHORT TERM FOCUS AREAS Reliability Engineering Asset Maintenance & Project Execution Many of the recent decisions on maintenance During the MTEF period asset engineering strategy or maintenance practice have not been will re-establish the disciplined approach to adequately researched in order to examine the maintenance execution and entrench a culture of root cause of certain failures and instead the utilising information embedded in the systems rule of averages has been applied in an attempt at our disposal. These include, amongst others, at addressing the problem. The outcomes are the Computerised Maintenance Management deviations from the standard for maintenance System (CMMS), SAP (Finance & HR), Geographic or (irregularly) enforced testing and sourcing of Information System (GIS), and Document alternate components. These practices corrupt Management (DM). This intervention includes the the maintenance practices and standards incorporation of the new maintenance practices which ultimately manifest in a decline in asset acquired through the modernisation projects like the performance. New Rolling Stock, Signalling and Station Building Information Management (BIM) systems. The short term focus is to re-compile a deep This stable environment is to re-institute the supply body of knowledge of the asset, its maintenance chain and ensure that the necessary parts, tools, and performance in order that true Reliability equipment, service contracts and personnel are in Engineering could be applied using world-class place to execute the maintenance in accordance with investigative tools and techniques. These tools the maintenance regime that is programmed into the are embedded in the to-be installed SAP Plant computerised maintenance management system. Maintenance (PM) module.
The primary purpose of this approach is to firmly Setting Engineering & Quality Standards address the frontline delivery of assets for the The Engineering Standards for assets in PRASA operations. is scattered across the organisation and, in some places unattainable for use by the broader Inventory Management organisation. Many repositories have not been The processes of MRP and other auxiliary services maintained and are thus not synchronised with have been disjointed and non-existent. Consequently the asset register or with the installed asset. the regional operations are constrained from The consequence is that the procurement of exercising maintenance in accordance with the replacement parts for basic maintenance is severely maintenance plan. Focus will be to re-establish a compromised and many suppliers try to muscle sound MRP system, processes and procedures with their way into the space thus created. rigorous KPI’s, checks and balances, to ensure a zero standard for stock-outs. The short term focus is to re-establish the Engineering Standards repository and Technical Modernisation Library for use throughout the organisation, but PRASA has embarked on a Modernisation drive ensure that the mechanisms are in place to enable because many items in its value proposition sustainability of the function in the medium to long have aged or have been misused and contractual term. compliance by PRASA where Engineering and Maintenance must deliver has been left at the MEDIUM TERM FOCUS AREAS starting blocks without any documented strategy for accelerating to the desired performance levels. In Technical Compliance other areas, PRASA cannot evoke warranty claims The legislation framework in which PRASA operates due to the lack of the necessary internal engineering continues to undergo tremendous enhancements and maintenance effort, and the suppliers are left whilst the practices of doing business within PRASA scot-free. still reek of a past era. The recent items in the legal framework has, quite rightly so, entrenched The short term focus is to accelerate the process a strong accountability stance, where exposure to of developing resources to facilitate compliance litigation on a myriad of activities by PRASA is highly with the Modernisation drive within PRASA. This likely, given the archaic practices in the operations, includes system enhancements, upskilling and/ maintenance and engineering departments. These or recruitment of people, tools and equipment range from non-compliance with, amongst others, improvement, and knowledge management system Ergonomic Design (Human Factors Management), enhancements. An important element in this focus Green Buildings (Carbon Tax), Exposure to Toxic is the amalgamation of the former PRASA Technical Chemicals (OHS), Injuries to Persons using our and PRASA Rail Engineering Services into a unit that is focused on the common goal and delivering value as originally intended in 2012.
54 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
facilities (new RSR Standards & OHS), construction Key Focus Area Deliverables regulations (OHS) to Food Poisoning (On-Train Facilities and at Stations). Short Term Maintenance Review current practices & The medium term focus is to re-establish a system Execution & Project Implement updates of management to ensure that there is a proactive Management mechanism for legal compliance. Inventory Review problem areas & Knowledge Management Management Implement to standardised It is patent that if one does not continuously improve process and supply chain the knowledge base from which one operates, one is management practices bound to become extinct. PRASA appears to be in a continuous cycle of ‘re-inventing the wheel’ in spite Modernisation Develop a response to the of the fact that there are numerous learning points modernisation requirement that are lost to the organisation. In nearly all projects and implement deployed in PRASA, there is no proactive process Reliability Develop and implement a of recycling the knowledge into the organisation in Engineering standardised process order that the application of knowledge could be used by the next employee and in this way advance Setting Engineering Compile Standards for the platform from which the next solution is based. and Quality Engineering in PRASA Many projects that have been deployed and were Standards and Quality Assurance unsuccessful yet the learnings are not recycled for methodologies posterity. Even the successful projects do not inform Medium Term the organisation of the key interventions that were used to ensure success and consequently every new Technical Compile and Install a project goes back to the starting box. Compliance proactive compliance mechanism A learning organisation exploits its intellectual Knowledge Develop a comprehensive capital to ensure it’s continued survival. In parallel Management Engineering Knowledge with the short term approach on Reliability Management Policy, with Engineering, the development of Research and the necessary process, Development facilities, Think Tanks, Engineering procedures and systems Forums and Training facilities will be pursued to entrench a culture of advancing PRASA’s Intellectual Long Term Capital. Physical Asset Migration to a PRASA Asset LONG TERM FOCUS AREAS Management Management system
Physical Asset Management Asset Management is an across-the-board approach by an organisation to advance the effective utilisation of the all its resources in order to optimally satisfy its stakeholders. It is a transparent approach to managing assets (especially public assets) that advances its acceptability to the market place, investor, user and customer. This requires a broader participation of the other functions in the organisation in order that the system could materialise and deliver on the promise. The ISO 55000 standard provides the basis for Asset Management.
The long term focus will be to migrate into an asset management system that will enable PRASA to favourably demonstrate its effective and efficient use of funding.
CORPORATE PLAN 2020-2022 55 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
09 Property development and commercialisation: exploiting the assets
Context
Corridor expansion and extensions to new and/or growing settlements and the transformation of the rail product provide new opportunities for PRASA’s real estate commercialisation and property development strategy. The development and establishment of new economic hubs at flagship (existing and new) stations and new human settlements forms part of PRASA’s commercialisation strategy and its ambition to create destination stations. Through co-investing with third-party developers at stations and precincts PRASA will help to grow passenger demand and increase income generated to support the funding required by PRASA in executing its first primary mandate.
Furthermore, investment in delivering the secondary mandate can help create new patronage from enhanced facilities on or around stations that help to make them a destination of choice for passengers and to build demand volumes.
The commercialisation and property development growth is dependent on expanding the footprint of strategy is driven through Corporate Real Estate the portfolio which will only be achievable through (CRES) and subsidiary Intersite Assets Investment. new development of GLA and conversion of assets no longer required for operational use. Assessment will The objective is to grow portfolio value of PRASA’s be done on the base rental to ensure it remains intact through effective implementation of an aggressive and grow at the required rate. property development and commercialisation strategy in order to increase income from the Commercialisation Key Focus Areas for the exploitation of the secondary mandate. MTEF Period: The exploitation of the secondary mandate to 1. Upgrade and Commercialisation of Station restructure and grow the property portfolio value properties as per MTEF Capex programme. to at least R1 billion in 2020. In this regard focus is 2. Commercialisation of non-station properties given to four (4) key focus areas outlined below: inclusive of vacant land • 30 properties nationally identified as Phase 1. Acquisition of high yielding Development leases 1 to offer to market through RFP for a Build (DL), to Operate and Transfer Back (BOTB) (long 2. Commercialisation and Optimisation of vacant term lease); medium term land, • Masterplan implementation (Pretoria/ 3. Disposal of superfluous properties, facilitated by Johannesburg/Cape Town); through BOTB Intersite Investments, or 3rd party developments; medium to long 4. Investing in Third party developments facilitated term by Intersite Investments, 3. Managed Portfolio Growth Plan. • Acquisition of additional Development Property Commercialisation Leases based on assessment; long term 4. Improvement to residential properties (NRIP) PRASA generates revenue by renting the non- to attract better rentals. operational space of its properties which include 5. Establishment of Utilities Management railway stations. In this regard, it has seen a function. gradual growth in its rental revenue from a base of R220 million in March 2011 to R583 million in • Acquisition of utilities management March 2017. The collected rental revenue assists to system- short term. supplement allocated government subsidy towards • Implementation of management function- the provision of an effective rail passenger transport medium term. service. There are a number of projects completed 6. Advertising portfolio re-engineering. to date which contributed to the increase of the gross 7. Capacity building/business processes & lettable area of the portfolio and subsequently to systems/integrated planning revenue growth and improved asset value. Focus • SAP Real Estate Module must be placed on additional initiatives as revenue
56 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Property Development and and drive its mandate. The core business areas as indicated provide the operational focus. The Investments model is designed to enable Intersite to implement the required strategies in order to execute on the Intersite, as an investment vehicle for PRASA, mandate as articulated earlier in the document. has as its priority the realisation of a “rail plus property strategy” which has been implemented Private Public Partnerships: These strategic by successful rail companies such as Hong Kong, partnerships, which also include a number of Japan etc. Similarly, Telecoms needs to receive the SOE’s allow it to fast-track the commercialization requisite focus for it to harvest opportunities around of select qualifying PRASA assets in line with its the commuter base and infrastructure to provide mandate, whilst supporting the achievement of significant immediate returns. Both initiatives Government objectives where these overarch and require the support from the Shareholder as they are are common across SOEs. By leveraging existing the future significant contributor to mitigate the cash assets, programme deployment is expedited whilst deficit in PRASA. costly duplications of expensive infrastructure are minimized. In this instance, the mandate of Intersite needs to be re-affirmed and supported by the shareholder Taxation Status: Intersite’s legal status has as its and must be funded in terms of an approved funding advantage a tax-exempt status which makes it not model. There is an agreement that Intersite must liable for income tax. As such, concerns previously be retained as a separate legal entity for investment raised regarding tax leakage don’t apply. Besides transacting purposes. the tax exempt status, Intersite is registered with the SA Revenue Services (“SARS”) for VAT and as As a wholly owned subsidiary and investment arm such is able to claim all qualified input VAT, in totality of PRASA Intersite is able to enter into contracts whilst PRASA is limited. This ability to claim back and strategic partnerships with both the public and VAT presents Intersite, and by implication PRASA, the private sector; participate in Special Purpose with access to an alternative funding source that can Vehicles; indirectly borrow; and commercialize any be utilized to fund qualifying projects and bring the qualifying PRASA asset - in line with its mandate - PRASA Group to a sustainable status in the short to without adversely affecting the balance sheet of the long term. PRASA Group. As a separate legal entity, the ability to borrow and raise funding is another key feature which is not the case with PRASA directly or any of MTEF Key Focus Areas its Divisions and this allows Intersite to sweat the For Intersite to realise its full value and potential, non-operating assets and drive non-fare revenue to listed below are key transformational enablers support the primary mandate. that need to be addressed during the MTEF period. The transitional “enablers” that have Sweating of Assets: The assets that Intersite been identified, are to be managed aggressively has been mandated by the PRASA Group Board to enable the transformation to occur within the of Control to commercialize as per the signed required period. In no particular order, these are Shareholder Compact includes the following, listed below: namely: digital and static advertising; renewable energy; property developments and investments; • Provide internal CAPEX allocation to Intersite ICT/telecoms infrastructure; and ICT/telecoms as the first funding option; services. Intersite commercializes these assets by • Direct investments into the current pipeline crowding in private sector strategic partners with the projects (Property and Telecommunications); requisite Intellectual Property (IP) and investment • Capacitate Intersite to finalize and realize capital. More significantly, by entering into strategic potential revenue generation in respect for partnership, Intersite is able to share the risks and investment projects in progress; rewards and tap into the expertise and skills base • Transfer of relevant investment grade assets that the private sector has developed thus shortening from the PRASA Group to the Intersite the learning curve for the company. Balance Sheet; • Land/Non-Operating Assets condition
Operating Model: To sweat non-operating asset assessment to be conducted; and to respond to the secondary mandate of PRASA, • Approved borrowing plans; Intersite requires a new operating model that is • Finalize Debt Funding Options; and based upon international best practice, adapted to • Conversion of Intersite to a Schedule 2 entity meet PRASA’s mandate requirements. Intersite has (Ease of doing business in respect of Public identified five (5) key delivery areas or core functions; Private Partnerships and borrowing) (i) real estate, (ii) telecoms, (iii) alternative energy, (iv) ICT, and (v) advertising) for commercialisation
CORPORATE PLAN 2020-2022 57 Be Ready
58 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
10 Procuring for the business Context
At the heart of the deliverables by Supply Chain Management is ensuring that urgent interventions are implemented to address identified problems or bottlenecks that impact on procuring for the business. Implementation of SCM procurement processes must support the corporate strategy for PRASA to achieve its immediate, medium to long term goals and objectives.
SCM system must be consistent with the Preferential Procurement Policy Framework Act (PPPFA), 2000 (Act No. 5 of 2000) and all other relevant legislation.
Supply Chain Management: Supply Chain Strategic Approach to Procurement: Supply Chain Management (SCM) is one of the key mechanisms Management is the main driver and enabler for that enables PRASA to implement strategies towards the execution of key strategic projects, particular achieving its objectives. It operationalizes critical the modernisation programme. The delay in legislative provisions in order for South Africa to the implementation and completion of strategic realize its transformative agenda of true reflection of projects aligned to procurement spend and our society in all spheres of our lives. Supply Chain budget has become the biggest challenge for Management policy defines how supply chain should PRASA. SCM procurement plan will, in the main, operate in order to fulfil the business requirements be informed by the deployment of these strategic that will assist to achieve its business strategy. It projects, particularly rail infrastructure and depot focuses on ensuring that the procurement of goods, modernisation that are critical in the deployment of services and works follows a clearly defined process the new rolling stock. with strict governance procedures whilst timeously responding to the urgent needs of the business The implementation of interventions is meant to necessary for the delivering on the mandate. support PRASA’s Rescue Plan that focuses on the Rail business and improving the rail system This SCM strategy is to ensure that the procurement performance, whilst ensuring organisational of goods, services and works happen in a structured efficiencies in the procurement of goods and and focuses on driving down operational costs while services. ensuring quicker turnaround times to ensure that projects are delivered within the financial year. It Supply Chain Management has identified the seeks to address the challenges that have resulted following objectives that will enhance the in the organisation to be unable to fast track procurement of good and services, in support of the procurement. business:
Challenges: Supply Chain Management has not 1. Establish an Integrated Engineering been able to effect support the business in the Procurement & Contract Management Platform procurement of good and services particularly those 2. Implement an Open Tender System for tenders activities meant to fast track delivery programme R10M meant to transform passenger rail services, as a ≥ result of the following challenges: 3. Develop a Procurement Plan which seeks to reflect the following: • Disconnected governance structures across • Date by which specification will be received PRASA which result to inefficiencies in doing from end-user. business – policy and bid committees. • SCM Timelines (i.e. BSC, Advert, BEC, BAC & • Urgent procurement which has become a default Award). way of doing business. • Targeted procurement which seeks to address • Consistent deviation and condonation which must black groups identified that talks to black in be obtained from National Treasury. the PPPFA. • Lack of contract lifecycle management due • Consolidate similar projects without excluding absence/ obsolete of systems. small BBBEE service providers. • Tender projects which had piled due to • Fast-track the execution of key strategic disbandment of bid committees. projects through procurement plan aligned to • Persistent variation orders modernisation • Incomplete/ faulty tender requirements/ • Ensure the establishment of special specifications committees to resolve and unblock any • Lack of capacitation of SCM Department. bottleneck in the implementation of • Delayed and inaccurate procurement plans from modernisation projects relevant stakeholders. • Ensure procurement spend is aligned to • Lack of economic transformation targets procurement plan
CORPORATE PLAN 2020-2022 59 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
4. Establishment of Capital Investment Committee 9. Curbing Irregular Expenditure • Synchronize implementation of all projects • Identify all products and services in the either in terms of corridor or any efficient procurement plan (Opex & Capex) which will be method. excluded from the default method of procuring • Ensure that Procurement Plans are in order to improve efficiencies, manage responsive to Rail objectives. irregularities and improve turnaround times. • Align and synchronise projects in order to enable seamless procurement. 10. Strategic Inventory Management • Allocation of budgets (including CAMS) to projects with approved business cases and • At least 80% of the products in the inventory draft specifications. system must be contracted. • Ensure that specifications are developed • Demand forecasting. either in house or outsource through • Re-configure the inventory management partnerships, etc. system on SAP. • Responsible for oversight on all projects in the • Establish delivery lead times with suppliers. procurement plan. 11. Asset Disposal Strategic Approach 5. Re-aligning SCM Structure and Resource development • Appointment of disposal committees in the regions and the different divisions. • A single procurement structure which talks • Appointment of contractors to uplifts the non- to all procurement but accommodates ferrous and ferrous scrap metals. subsidiaries, divisions and regional • Appointment of Auctioneers to dispose all delegations. other decommissioned assets. • Divisional structures accounting to CPO office • The disposal and uplifting should happen as but responsible for Divisional and regional and when required. Procurement. • A single overarching development programme for all human resources involved in the 12. Fleet Management Strategic Approach procurement of goods and services. This The key for fleet management is to improve and must not replace Individual Development manage vehicle availability for the end user through Programmes. the following: • Capacitate the SCM structures across the • Consolidating demand plan for vehicles. organization. • Procurement of vehicles timeously. • Ensuring vehicle road worthiness. 6. Develop SCM body of governance in line with • Managing fuel efficiencies. Treasury Regulations • Approve SCM Policy. Critical Success Factors • Approve SOPs which give effect to the policy. A success strategic procurement approach must • Develop charters for various bid committees. contain the following key elements: • A detailed operation plan which clearly indicates 7. Develop strategic partnerships on procurement initiatives, assigned responsibilities, completion of critical goods and services with other state dates, and expected outcomes. organs and private companies • A project management team scheduling regular meetings to review progress across initiatives, to • Entering into an agreement with selected state manage roadblocks, and to support participants. institutions which may help in development of • A change-management plan and resources specification or dedicated to communicating new changes. • Entering into partnerships with private • A good leadership that visibly demonstrates entities, however after default procurement support and accountability. processes have been followed e.g. GTA.C • Noticeable tracking and communication of • Identify projects upfront which may be progress to the rest of the organization — ideally categorised for participation into transversal integrated with the procurement dashboard. contracts arranged by National Treasury or contracts organized by other state organs. MTEF Deliverables: • Address the costing structure of all products and services (i.e. commodity management) • Integrated Engineering Procurement & 8. Improved Contract Management Contract Management Platform. • Implementation of Open Tender System for Reconfigure the procurement SAP system in order to tenders ≥R10M. accommodate the following: • Create a catalogue of critical projects for • B-BBEE categorization of contracted service acceleration. providers • Create strategic partnerships • Generate necessary triggers as and when • Adopt turnkey solutions on some strategic required (e.g. expiry of contracts) projects. • Ability to load the contract on SAP • Establish Broad Based Black Economic • Ability to generate reports Empowerment targets. • Development of an electronic supplier performance management tool
60 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
11 Effective management of capital programme Context
PRASA has received extensive additional and increasing capital allocations over the past 10 years to recapitalise the business, including specific allocation to accelerate the modernisation of the business in line with the new train manufacturing and roll out. The capital program is largely managed centrally in line with the modernisation priorities by national project teams in various entities or divisions. The PRASA brown-fields environment, whilst trying to stabilise and run the current system under extreme degraded conditions, and at the same time also prepare the system operationally to accept and absorb total new technology creates high risk and challenging operating conditions. The additional capital allocations have also not incorporated full life cycle planning and implementation of new technology and left serious gaps and risks in terms of aligning operational budgets to be able to absorb and operate the modernised system. Significant additional engineering and maintenance personnel will be required and trained to operate the modernised systems. The capital program remains underspend on an annual basis due to instability in the Supply Chain Management approaches and leading from outdated and misaligned capital investment priorities.
Planning: The capital program should be driven to 2018, R80 billion was allocated and only R54 billion by models derived from the respective regional spent, leaving R26 billion or 33% unspent. In the last transport plans. This would provide an empirical three years PRASA received R43 billion and only R23 basis for the roll out of the rail modernisation billion was spent, leaving R20 billion or 47% unspent. program being undertaken at PRASA. These models would inform PRASA of the potential for Problem Statement rail in each province and would provide guidance on where and when to effect upgrades to the system to A fragmented capital programme, which is not maximise its return. Further, it would allow PRASA based on regional transport plans, having little to understand its customer of the future and assess impact on revenue or cost savings with poor project where new rail potential lies outside of its current management. network.
Capital allocation: The allocation of capital is based MTEF Deliverables: on elementary business plans submitted by divisions. Most of these business cases are not based on 1. Develop a long term strategic investment plan empirical evidence as to the cost to be incurred and aligned with regional transport plans and benefits to be obtained from the expenditure. The needs. governance processes and reasons for the allocation 2. Review of capital program governance and of the capital is therefore questionable. implementation model. 3. Reprioritisation of capital program and Skills and capacity: The PRASA capital program has implementation approach. seen the capital allocation more than double from 4. Turnkey approach to ensure infrastructure 2011 to 2015. There has however been little increase and operational readiness in line with in the skills and capacity required to run a capital modernisation and business needs. programme of this size, particularly SCM and project 5. Ensure operating cost to operate and maintain management skills. new technology is managed within a holistic Change Management Model. Capital spend: The impact of the above on capital 6. Integrated and aligned planning with full life spending can be illustrated by the fact that from 2011 cycle implementation. 7. Secure suitable resources to facilitate the planning, prioritisation and execution of a capital program of this size and nature. 8. Implement interventions to accelerate capital spending.
CORPORATE PLAN 2020-2022 61 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
12 Built to last: Redefining the organisation
Operating Model: PRASA’s complex operating model • High headcount and escalating personnel and fragmented organisational structure, as well as expenses (high wage bill, overtime costs), the duplication of functions in many areas, coupled despite declining passenger numbers, high with overlapping mandates between CRES and number of employees in support functions, Intersite, has rendered the organisation inefficient to redundant roles and under staffing in core and run an effective service and to deliver on its mandate. critical skills. The duplication of Boards in subsidiaries has further • Fragmented conditions of service and costly complicated the performance monitoring and Organized Labour Agreements evaluation of the mandates and their delivery. Lack • Low staff Morale, unproductive workforce, poor of clarity of roles and responsibilities, flexibility in the work ethic and lack of unified organizational roles and over staffing, resulting in redundancies, is culture. indicative of an Operating Model and Organisational • Non adherence to HCM policies, processes and Structure that is not ‘fit for purpose’ and requires a practices total overhaul. MTEF Deliverables Human Capital Management: PRASA’s HCM function is not structured to support the business because • Develop and implement a suitable operating of the complex organizational structure in between model and structures for the PRASA Group Corporate, Divisions, Subsidiaries, and Regions. including subsidiaries. Consequently, HCM is not able to address the • Merge CRES and Intersite and redefine the duplication of support functions in the regions and new entities’ mandate. • Consolidate engineering services in PRASA between the divisions and subsidiaries. Rail and PRASA Technical. • Establish a shared services model for support Skills and Capacity Building: The organisation has functions. not prepared itself for the changes and developments • Re-skill up-skill supernumeraries and in the transport sector and require investment in new redeploy redundant staff. • Implement an integrated Learning and skills and capacity development geared for the fast Development master plan consolidating all changing modern public entity. learning and development interventions in the organization. • Develop an ideal workforce plan and conduct Problem Statement a skills audit and skills matching for the organization. A complex operating model, misaligned organisation • Develop a long term collective bargaining structure, duplication of functions and bloated staff strategy and harmonize labour agreements compliment, mainly influenced by the following: • Introduce performance management for employees in the bargaining unit. • Inadequate support functions (e.g. management • Review contracting of management across all accounting) within the organisation to support the levels. integration of corporate planning and budgeting • Implement a comprehensive change process to reflect strategic projects in budget management plan inculcating a high • Inconsistent performance management performance culture and work ethic. application to drive individual accountabilities across the group. • Unclear roles and responsibilities and interfaces between divisions / incorrect implementation of mandates / subsidiaries and complex organizational structure / reporting lines
62 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
13 Building Customer and Stakeholder Confidence
PRASA’s customer and stakeholder confidence is 4. Builds a relationship between PRASA and various at its lowest level ever. The decline in stakeholder parties and fosters respect, enabling information confidence is as a result of events and issues that exchange and achieving mutually acceptable have continued to plague the organisation in the last outcomes. few years pertaining to, amongst other matters, the 5. Ensuring that stakeholder engagement is an following: integral part of core business planning. 1. A decline in public confidence, passenger 6. Ensuring a process that allows stakeholders patronage, and revenue, because of the product/ affected by the decisions to contribute to the service that has become unreliable, unavailable, decision-making process. unpredictable and unsafe; 7. Enhancing understanding and appreciation for 2. Loss of relevance in PRASA’s capacity to deliver projects and their contribution to the development public value as a public transport solutions of communities and improved service delivery. provider; 3. Allegations of corruption arising out of the Public Problem Statement Protector’s Report, Auditor General and that of
National Treasury; Leadership instability has resulted in the absence 4. Perceptions of management incompetence as of a focal point within the organisation where a result of continued under performance, both stakeholders interact and seek speedy solutions financially and operationally, as well as leadership to their problems. Over the years, changes in instability; leadership, both at Board and Management, has 5. Numerous investigations and litigation arising out resulted in over-consultation, promises and no of tender irregularities and fruitless and wasteful follow-ups or closure of matters addressed with expenditure. stakeholders because of the high turnover of Board and Executives. The stakeholder engagement plan intends to:
1. Give confidence to its customers that PRASA is MTEF Deliverables determined to bring back organisational stability and recover the business from its performance • Develop and implement an enterprise wide decline. communication strategy. 2. Give practical interventions and time lines on the • Develop a stakeholder engagement plan and resolutions on how it seeks to get the business framework. back on track, focusing on delivering public value • Implement an on-going communication 3. Raise the morale of the organization and mobilize and consultation programme with various staff and labour to focus on delivering on the stakeholders on the delivery of the mandate. Mandate. • Address commuter and passenger. communication inefficiencies at stations and on-board.
CORPORATE PLAN 2020-2022 63 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
14 Planning for growth and network expansions
Urbanisation is progressing at breakneck speed, are central to the implementation of PRASA Strategic particularly in developing countries. In the 1800s Plan. How PRASA capitalise on the significant approximately 3% of the earth’s population lived progress that has been made in the position of rail as in cities. Today, nearly 50% are now living in cities, the backbone of public transport within the various compared to 30% in 1950. ITPs and IPTNs will determine the securing of future business for the organisation. With this increasing rate of urbanisation, it is envisaged that between 60-65% of the world Maintaining Relevance for the Future population would have migrated to the cities by 2030; Securing the future business for PRASA is informed this is two out of three people. by the organisation’s Strategic Plan, which provides a transformational, integrated and holistic approach to An effective and environmentally sustainable public developing rail and all PRASA entities over the next transport system is required to accommodate the forty years up to 2050. It builds on the 2006 National growing populace in the cities, including those Rail Plan and widens the scope to include all PRASA’s travelling to and from the outskirts. entities.
The revival of rail through the upgrading and To secure future the business, the plan provides a modernisation of existing rail systems, new rail road map for PRASA’s individual rail, bus / coach and expansions and new corridors, and the introduction real estate businesses to combine to improve the of new rail technology will contribute significantly in service provided to the travelling public and seeks ensuring that rail becomes the backbone of public to capitalize on the opportunity provided by planned transport. Government investment in new rolling stock, new signaling, stations and three pilot Modernisation Attracting new customers require a prioritised list Corridors demonstrating the impact of an integrated of rail service and network expansion interventions approach to investment on rail corridors. that will increase capacity, improve product offering, make better use of the network and expansion Planning for Growth and Expanding PRASA Networks opportunities for growing demand. and Service is informed by the National Strategic Plan, which calls for: The National Strategic Plan prioritizes a list of rail service and network expansion interventions, which a. A prioritised list of rail services and network will result in increased capacity, improved product expansion interventions that provides more offering, the better use of network/assets, as well capacity to accommodate forecast growth, as expansion opportunities for growing demand. transforms the rail product on many corridors, Proposal for improved integration between rail and seeks to make better use of the network and others modes of public transport, including city proposes corridor extensions to new or growing distribution, inter-modal interchanges and the use settlements. of Autopax as complimentary services to MLPS, are b. Clear proposals for improving integration between just be some of the many interventions to gain new rail and other public transport modes to make it customers. The identification of key redevelopment easier for passengers to use railway services as sites to fund the strategic plan and the corresponding part of the wider integrated transport systems. business strategies remain critical. Planning for Growth and Expansion through the A number of issues are affecting the rail service in provision of quality rail network and services is the main urban centers, many owing to the age and dependent on the deployment of a safe, predictable, condition of the asset including: reliable, high quality rail commuter and passenger The alignment of network expansions and new services in high volume key corridors, through: corridors with PRASA property development and land use planning is crucial. The co-ordination, a. Improving the safety, security, resilience, integration and alignment of rail planning within the reliability and efficiency of the network; Integrated Transport Plan must be a multi-level and b. Supporting economic growth and development, multi-facet approach for PRASA in order to achieve particularly by providing access to major employment areas; The Cities’ Integrated Public Transport Networks c. Connecting current and new economic or growth (IPTNs), as well as Integrated Transport Plans (ITPs) nodes, particularly by enhancing connectivity
64 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
into the main cities of Johannesburg, Tshwane, g. Developing rail as the high-volume backbone of Ekurhuleni, Durban, Cape Town, East London and each province’s integrated transport network, Port Elizabeth; thereby contributing to the development of a d. Supporting the main economic development modern, integrated, high-quality, affordable and corridors; customer-focused public transport system that e. Improving accessibility and connectivity to will improve people’s quality of life and promote marginalized communities; social inclusion; f. Promoting better integration between land-use h. Providing strategic connectivity between provinces planning and railway development to promote where this is appropriate, particularly supporting densification and sustainable development and to connections from KZN, the Western Cape and play to rail’s strength in supporting high volumes Eastern Cape to Gauteng. of travel;
Key focus area for the MTEF period:
Eastern Cape: Motherwell Rail Link Motherwell is situated 20km north of Nelson Mandela Bay CBD, and has expanded rapidly with over 200 000 dense settlements with low per capita income. The Motherwell extension will enhance the role of rail in Nelson Mandela Bay with 15 000 – 20 000 new daily passenger in the short term and increasing to 35 000 daily passengers by 2020. In this regard, the Motherwell Rail extension is confirmed as a category “A” corridor in the 2006 Rail Plan and Local ITP respectively. The Motherwell Rail Spur is considered the first phase of the full Motherwell Loop (±17km).
Project Description • The Motherwell Rail Link / Spur comprise ± 8km double line (electrified) and three new stations. • The Motherwell Rail spur considered the first phase of the full Motherwell Loop (±17km), including linkage to Coega IDZ.
Progress Benefits/Impact • Planning review completed in 2013 • The Motherwell extenstion will enhance the • Detail design commenced in 2016 role of rail in Nelson Mandela Bay 15 000 - 20 000 daily passengers in the short term and increasing to 35 000 daily passengers in the medium term Timeframes • The development of the full “Loop” becomes • Detailed design and EIA to be completed in 2019 more attractive in the medium-long term as the • Awaiting finalisation of updated city transport Coega Development reached greater density model and plan 2019 to inform agreed timing of implementation. • Next stage: Construction tender and Estimated Capital Costs implementation • R 2 Billion
Daveyton – Etwatwa Rail Corridor The project entails the extension of the rail corridor from the Daveyton Station into the areas of Chris Hani, Etwatwa and Knoppiesfontein. The extension is approximately 11km, which will also include the construction of 4 new stations. The first feasibility study for this extension was undertaken in 1999 and is captured as a priority rail extension in both the City’s Integrated Transport Plan and PRASA’s Rail Plan. In 2014, PRASA undertook a review of the feasibility study and has since updated the demand projections.
The study investigated three alternatives for the rail alignment between Daveyton and Etwatwa. The proposed extension of the Daveyton rail line connects along the southern edge of Daveyton across the Blesbokspruit, into the Sentra-Rand Corridor and into Etwatwa Extension 23. The total estimated cost for the project is R2.1 billion.
CORPORATE PLAN 2020-2022 65 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Western Cape: Blue Downs Rail Link The proposed Blue Downs Rail Link consists of a rail connection between the existing Khayelitsha and Bellville – Strand Lines. The preferred route alignment, as identified during earlier planning, takes off between Nolungile and Nonqubela stations on the Khayelitsha Line thereafter passing thorough the Mfuleni residential area and the Blue Downs CBD before linking up to the south of Kuils River Station on the Bellville – Strand Line. The preferred route alignment is approximately 9.5km in length and consists of a double line with the possibility of three to four stations.
The Blue Downs Rail Link will not only service the greater Blue Downs community, but also form a fundamental component of the future metropolitan rail and transport network of Cape Town. It will allow the established communities of Khayelitsha and Mitchell’s Plain direct access to the Bellville corridor of activity. Equally, it will form the second of three sectors of rail, enabling east-west linkage of a southerly rail corridor from Bellville via the Blue Downs Rail Link, Philippi Corridor (existing) and the future Philippi – Southfield link to the commercial corridor of Wynberg, Claremont and Rosebank in the west.
Project Description • Provides Blue Downs and surounds access to rail transport • Improve rail services and connectivity between Bellville and the Metro South East and • Ease congestion on the existing network • New ±10km line and 3 stations
Location • Cape Town (Western Cape)
Progress Benefits/Impact • Cape Town council resolution confirming Blue • Significant reduce travel time to greater Downs Rail link as highest priority for netwoek Bellville area expension, 2012 • Significatly reduce travel distance for Metro • Planning review completed 2016 • Access to employment, education, • Specification for the appointment of a healthfacilities professional team is underway. • Unlock land for residential and industrial development. • ±25000 passengers/peak hour Timeframe • High stakholder support • Next phase - Detail design & EIA(earmarked to commence in 2019/20 Estimated Capital Cost • R3 billion
Long term expansion plans: the public transport system for the City. The existing Sarepta-Bellville rail line is situated approximately Cape Town International Airport Rail Link 2-3 km north of the airport. The new ±4 km link The provision of a rail connection to the Cape Town between the existing railway line and the airport airport will be achieved by building a ±4,5km rail ensures that existing infrastructure is used optimally link between the airport and the existing Bellville and also improves the reach and accessibility of the – Sarepta line to the north. The rail link will enable rail network. The review of the feasibility study for the movement of people between the airport and the project focusing on the operational and funding Cape Town Central Business District, as the main scenarios was considered. destination/originator of trips. In addition to maximizing the use of existing infrastructure this Some considerations were the funding concepts in the rail solution makes it possible to access the greater form of commercial banking, development banking, network should the train stop at Mutual station. commercial paper, equity, government guarantees Future phases of this solution will enable more and non-fare revenue streams. Even though this has direct access to the Bellville area and surrounds, been considered, detailed examination of funding and potentially linking more directly with the Metro scenarios is yet to be finalized. From an operational south east (Khayelitsha, Mitchells Plain, etc.). The viewpoint, the PRASA developed 4 alternative route Cape Town rail network is considered the backbone of options with a view to propose a viable route both from a financial and operational point of view.
66 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
King Shaka and Northern Links A pre-feasibility study done in 2004 and subsequent feasibility study in 2010 found that a passenger train Significant growth is experienced in the North service could only be viable if the parallel competing of Ethekwini, together with the Dube Trade Port bus service is terminated. development. The port will contain various developments including a passenger and freight Hammanskraal is situated approximately 40 km to hub (King Shaka), accommodating 50 000 the north of the City of Tshwane (COT) which renders residential units and house over 200 000 people. it fairly isolated from the rest of Tshwane, especially Rail based solution is being investigated to serve since it is separated from the more central areas by the airport and the Cornubia development. Due a large expanse of agricultural land. The area holds to large scale developments in areas like Dube a total population of about 206 000 people (Census Trade Port, Umhlanga and Ballito the north has 2001)(2). Estimates showed that the population in rapidly developed as a major commercial and retail the study area was approximately 240 000 by 2005 hub, thereby firmly establishing itself as a major and could have increased to approximately 264 000 in investment area. As development continues in this 2010 and by 2025 it could be 358 000(2) area, a northwards investment direction is very evident. The Spatial Development Framework (SDF) (June 2005)(2) for Hammanskraal and the Northern Cross The northward development trend is further Border Area identified the Hammanskraal precinct reinforced with another key development proposal, as an activity node and stated that it “is essential viz. the Cornubia mixed-use development. The that the proposed major road and rail network be development is set to be eThekwini and the constructed and or upgraded as a top priority in Province’s largest sustainable integrated human the area”. The National Treasury (NT) has approved settlement initiative. This 1200ha multi-billion rand funding for the development of the precinct as part project has the potential to accommodate more of COT’s Tsošološo Programme on the condition that the 50 000 dwelling units, 80ha industrial platform, the Passenger Rail Agency of South Africa (PRASA) and over 1.5 million square metres for commercial commits itself to the reintroduction of the train uses. In the area of Ballito, a mixed-use development passenger service. comprising of 1.187million square meters of bulk has been proposed. This development is proposed Moloto Rail Corridor to include a new international conference centre, residential, light industrial and retail/office uses. A number of other public and private projects have also been proposed for the northern area.
Given the significance and scale of the existing and proposed developments in the north, an ideal opportunity exists to expand rail, to ensure it plays a vital role in the provision of efficient and effective public transport in this area.
Hammanskraal Background The Hammanskraal to Pretoria Rail Corridor The Moloto Rail Corridor involves a new integrated (HPRC) was served by a limited passenger train multi-modal transport system that is to serve as service until 1987. At that time approximately 10 000 a spine and a catalyst for economic development one-way passengers used the service on a daily connecting Gauteng, Mpumalanga and Limpopo. The basis. Of these, approximately 8 000 passengers Minister of Transport gave a mandate for the project travelled in the peak period. Due to the long travel in 2006 and also indicated that it must be treated as times (approximately 105 minutes) the service part of the priority corridor strategy of the National became unpopular with commuters. Based on the Passenger Rail Plan. recommendation of a study done by the Department of Transport and the Council for Scientific and The project is a joint inter-governmental initiative Industrial Research (CSIR) in 1986, the service was consisting of the Department of Transport, PRASA, terminated towards the end of 1987. The current and the provincial governments of Gauteng, Limpopo public transport services along the HPRC are and Mpumalanga. The district municipalities provided by Bothlaba Bus Service and minibus taxis. of Nkangala, Sekhukhune and Metsweding and The vast majority of commuters (over 90%) travel by Tshwane Metro are also part of the initiative. bus. The Moloto Rail Corridor Development Initiative was
CORPORATE PLAN 2020-2022 67 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
initiated due to various passenger public transport (Moloto Road) which connects Tshwane Metro to problems that have developed incremental over time Nkangala, Sekhukhune and Metsweding districts. over time. The pertinent problems include, but are The road suffers from a systematic deterioration not limited to: due to the movement of large numbers of people to Gauteng. Increased commuting patterns result in • Non-sustainability of transporting increasingly traffic congestion, long travel times and loss of life large commuter numbers by subsidized bus through accidents. services over long distance to employment destinations mainly within the metropolitan areas of City of Tshwane; Other Planned Service Offerings: • Long travel times in excess of seven (7) hours per Product Development day; • High financial implications for both the Light Rail Solutions Government and passengers; Light Rail has been identified as the preferred • Unacceptable levels of service quality; technology by which to improve rails service specific • Insufficient road network particularly in the local and identified corridors. Light Rail can provide more residential areas; relevant local services compared to heavy rail and • Increasing traffic congestion in urban areas; and make it possible to match service provision with • Increasing road accidents that result in serious current and potential future passenger numbers. injuries, loss of life and damage to property. Using benchmarking and best practice case studies PRASA has studied a number of cities around the In addressing the transport challenges, the world who have made better use of light rail in Department of Transport has introduced a three (3) certain corridors. Examples include Manchester pronged-approached. Firstly to optimize the current Metrolink in the UK and Karlsruhe in Germany. service design of the contracted bus services, secondly to address the current road infrastructure The priority and implementation timescales of the and improve road safety and lastly to implement a proposed Light Rail Network (see PRASA National range of transportation solutions with rail transport Strategic Plan) is in the medium and long term. forming the backbone of a transport oriented development solution. During the MTEF Period, PRASA shall develop options for each of the identified corridors with a In terms of the Rail Initiative, PRASA concluded view to producing fully worked through business for a feasibility study in October 2014 that confirmed each proposal rapid rail as the preferred long-term transport solution for the corridor. PRASA established a High-Speed Project Project Management and Implementation Office Air completion and the distance around the country and submitted a Treasury Application 1 approval to offer the potential to investigate creating high National Treasury for project funding considerations. speed rail corridors operating at around 400kph. On 3 December 2015, National Treasury responded Experience in Europe and Asia has shown that high by not approving the application mainly expressing speed rail are critically dependent on the size of the that the rail project is unaffordable. overall travel market between key cities and the potential to achieve mode shift from air to high speed Status update rail. In exploring alternative funding resources, the Moloto Rail Development Project was included in PRASA has identified two routes with sufficiently a list of projects submitted to the Forum on China- sized travel markets – from Gauteng to Cape Town Africa Co-operation (FOCAC). On 7 September to Durban. Although Cape Town – Gauteng has 2016, the China Communications Construction the larger travel market (when air) its distance Company Limited (CCCC) and PRASA entered into of 1400km makes it difficult to be air competitive a Memorandum of Understanding (MoU). The MoU when city centre – city centre air and high speed rail are aimed at exploring areas of possible cooperation journey times are compared. In contrast Durban – on the planning, funding and implementation of the Gauteng is only 640km creating a real potential for Moloto Rail Corridor. The MoU, if pursued, will have a rail to capture a significant proportion of the air to comply with the procurement rules and applicable market in the future and a potentially stronger base legislation. The funding required for this development case. would also require a Treasury Guarantee and option analysis in securing the best possible funding For high-speed rail to be successful a large travel solution. market over 1, 1000 passenger per hour needs to be present and end to end journey times will be a The Moloto Corridor is situated in the western region of Mpumalanga. Its name is derived from the R573
68 CORPORATE PLAN 2020-2022 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
maximum of four hours to be competitive with air. Integrated Ticketing Journey times of 3 hours, Johannesburg to Durban, A new ticketing system, which integrates with other and 4.5 hours to Cape Town would need to be modes of transport and for use across all platforms, achieved to make the service competitive in terms of offering a standard solution is being investigated for time travelled. development and implementation. PRASA intends to introduce an integrated system Eventual implementation will be dependent on that is: growth in demand making high Speed Rail a longer term aim in the country. The early identification • An electronic ticketing system which would be of corridors will be essential to safeguard future compatible with other local transport providers implementation and to identify how spatial and • More flexible and allows users to buy a ticket economic policy decisions might support future for a period of consecutive days rather defined high speed rail development. A feasibility study will calendar months or providing reduced fares conducted by PRASA during the MTEF Period. outside the peak period • Passenger friendly gating systems which will improve the appearance of stations, support access control and help to reduce ticketless travel • Helping to spread demand by incentivizing travel on less busy services • Addressing ticketless travel by providing low income passengers and special needs groups with concessionary passes to allow them to travel for reduced fares or free of charge outside the peak period; and • Providing much more accurate data to PRASA and stakeholders on travel patterns and journeys to help make service planning more responsive to passenger needs/
CORPORATE PLAN 2020-2022 69 KEY DRIVERS OF THE CORPORATE PLAN (Continued)
Be Professional
70 CORPORATE PLAN 2020-2022 HUMAN RESOURCE MANAGEMENT
Overview of Human Capital Management matters at Workforce planning framework and key strategies the public entity to attract and recruit a skilled and capable workforce PRASA is currently going through a modernisation process through the upgrade and investment in new Workforce planning is informed and driven by passenger rail infrastructure and services, whilst at PRASA’s talent management strategy and framework the same time running the current business in order that predicts and plans for current and future to deliver on the mandate. The demand to change resources and skills that will be required to deliver the business whilst running the current operations on the mandate. It is also aimed at developing requires a human capital management strategy that capability and competency for existing and new is adaptable to a changing environment. employees to perform critical tasks as well as those skills needed for future business including The PRASA HCM strategy is guided by a principle managers, specialist or business critical roles as that the effectiveness of an organisation depends part of global succession planning. This strategy is on its ability to anticipate and adapt to change. The aimed at closing the gap between existing talent and growing demand to change the business and run it what is required to successfully respond to current simultaneously requires that people management and emerging business challenges. issues such as talent and performance management, as well as competence management and skills To achieve the above PRASA will: development, must be at the forefront of PRASA • Consider staffing levels, workforces skills, strategic deliverables. workforce demographics and employment trends within the organisation. The foundation of the Human Capital Management • Identify workforce skills to meet projected needs, (HCM) Strategy is that people management begins staffing patterns and anticipated programs and with the alignment of HCM objectives to business workload changes. objectives. The HCM strategy thus responds to • Compare supply and demand analysis to strategic imperatives articulated in the PRASA determine the future gaps (shortages) and corporate plan as dictated by both the primary and surpluses (excesses) in the number of staff and the secondary mandate. needed skills. • Develop recruitment and succession plan, Set HR priorities for the year under review and the including employee development and retraining impact of these priorities • Identify and establish a talent pool of people with leadership/specialist potential early on in their Cognizance of the need for the organisation to careers. efficiently and effectively run the current operations, • Provide tailored support to help individuals to whilst preparing for changing the business, Human realise their potential. Capital Management identified and implemented • Help retain talent by engaging in ongoing open the following as strategic priorities for the business dialogue about performance and aspirations during the year under review: (through career development discussions). • Evaluating alternative operating delivery models • Support and monitor the creation of individual to determine the case for efficiencies and/or personal development plans. operational improvements. • Actively deploy talent in target roles that fulfil • A stronger policy focus in readiness for their potential, (where possible), or provide modernisation changes affecting the significant development opportunities whilst organisation. adding business value. • Engaging in workforce planning and preparing • Put mechanisms in place to help talent in new for future workforce requirements. roles to aid transition and improve time to • Exploring opportunities for cost containment and perform. how a more commercial ethos can be developed • Develop talent management & succession within operations. planning as core business competencies. • Fair and equitable Pay and Grading structures and Reward processes.
CORPORATE PLAN 2020-2022 71 HUMAN RESOURCE MANAGEMENT (Continued)
PRASA’s Performance Management Framework has Capital has developed a performance framework that been developed to be a management tool that will is focused on delivering on the mandate and also contribute to the process of ensuring continuous ensuring alignment of day-to-day deliverables with improvement, through: medium-to-long term business objectives. • Translating our strategy into actionable plans to drive our business. The Performance Management framework, depicted • Setting objectives that establish focus and below, recognises excellent performance and reinforce strategy execution. provide effective feedback, objective setting whilst • Assigning accountability and responsibility for establishing a clear link between team and individual achieving these objectives to individuals and responsibilities that serve to deliver on organisational teams within our business. goals and business objectives:
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
72 CORPORATE PLAN 2020-2022 HUMAN RESOURCE MANAGEMENT (Continued)
Organisational Strategy 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
Head of Division Head of Division Head of Division Head of Division Scorecard Scorecard Scorecard Scorecard
Delivering on the above must first ensure that: Employee wellness programmes • Employees have the right skills and behaviours PRASA’s Employee Wellness Programme recognises to meet the needs of the organisation and our that short-term personal and psychological related customers; problems may adversely affect an employee’s • Right people with right skills can deliver on the wellbeing and ability to function on the job. strategy; • Effective recruitment, induction, probation, The Employee Wellness Programme has two performance management and learning distinct phases that are critical to address in both and development policies exist within the implementation and in costing there of which the organisation; first level is the reactive counselling service that • There is workforce that is genuinely focused on is delivered in response to a particular problem or what the customer and the shareholder expects; identified problem by the employee. Referral may be • There are clearly defined job expectations and voluntary (self-referral) or may be part of a formal academic performance criteria to encourage referral. desired behaviours and outcomes; • There is management, career development and The second level is project based and addresses succession planning; projects like Modernisation that affect some of our • Employees receive and utilise regular and employees. constructive feedback to enhance their performance Preventative programmes have been introduced to • Employees are regularly appraised and fairly support employees with factors such as emotional/ assessed against their agreed performance mental health conditions, substance use or abuse, objectives; psychosocial problems amongst others, and all of • Training needs supported by Individual these do affect business performance by reducing Development Plans for each employee are productivity and increasing both planned and identified, developed and an effective training unplanned absences. plan is put in place; and • Equitable, flexible and fair pay and performance systems and practices that reward excellence are applied at all times.
CORPORATE PLAN 2020-2022 73 HUMAN RESOURCE MANAGEMENT (Continued)
The services that are offered include: Policy development • 24/7 Telephonic Counselling During the reporting period, the Human Capital and • Face to Face Counselling services based Remuneration Committee or reviewed the following on needs policies: • Wellness campaigns • Executive Medical Evaluation – 80% to be done • Employee Relations Policy. for 2016/2017 • Employee Wellness Policy. • Screening of medicals - Clinics • Employment Equity Policy. • Online Health Advice • Talent Management Policy. • HIV and AIDS Education and Support service • Termination of Employment Policy. • Managing Absenteeism • Total Reward Policy. • AIDS day • Social Media Policy. • Voluntary Counselling and Testing campaigns • Implement HIV/AIDS PC programme Highlight achievements • Monthly Newsletters on relevant topics such as • The development and approval of the Human “Stress Management” Capital Strategy. • Quarterly Presentations on business related • Training of Change Agents for Business. skills such as “Listening Skills” Readiness and Modernisation. • Establishment of Bargaining Forum. The HIV and AIDS service offering is a stand-alone product but most aspects of the service introduced Challenges faced by the public entity simultaneously within the EWP. The EWP provides • Budgetary constraints to effect some of the HR for a broad range of awareness, training, support strategies. and counselling for all concerns relating to HIV and • Changes in leadership. AIDS of staff members. Treatment is introduced • Organisational instability and uncertainty as a progressively through the Lifestyle Management result of leadership changes. Programme.
Voluntary Counselling and Testing (VCT) is done on a monthly basis to monitor the impact of HIV/AIDS on the workforce.
74 CORPORATE PLAN 2020-2022 HUMAN RESOURCE MANAGEMENT (Continued)
Implementation Plan Roadmap 2019 - 2022
2021/22
• Effective Operating Model 2020/21 • Engaged Workforce • Standardized HCM Environment • Embedded HCM Policies, 2019/20 • Operating Model (Phase 2) • Leadership Development Procedures, Processes and Programme Practices • Continuous Rollout of Future • Employer of Choice • Draft Business Operating Priority Skills Model and Organizational • Skills Audit and Matching Structure developed (Phase • HCM Governance (HCM I) Policy Review, HCM Risk • Right Sizing of the Business Management & Management (Productivity Study, of Auditor General Findings) Workforce Planning) • Talent Management • Skills Audit and Matching (Succession Planning, • HCM Governance (HCM Promotion Management) Policy Review, HCM Risk • Employment Equity Management & Management Management of Auditor General Findings) • Effective Bargaining and • Enforcement of Performance Labour Management Management • Long Term Collective Bargaining Strategy • Harmonization of Benefits (Historical Archaic Labour agreements, overtime management, Medical Aid, Provident Fund Management) • Integrated Learning and Development Master Plan (Consolidated L&D, Future Skills, Learnership and Internships, Leadership Development, Bursary Programme) • Organizational Culture Framework (Employee Value Proposition, Top 300 leadership engagement) • Integrated Employee Wellness • Automation of Human Capital Management Processes (Leave Management, Performance Management, Workforce Planning, Job evaluation) • Enablement of Corridor Management Strategic Approach
CORPORATE PLAN 2020-2022 75 EMPLOYMENT EQUITY
PRASA’s perception of the spirit of the Employment It is PRASA’s commitment to identify, develop, Equity initiative is to ensure the establishment of a reward and retain each employee who demonstrates healthy context within which all South Africans will the qualities of individual initiative, enterprise, hard both develop the competence required for life-long work and loyalty in their jobs. PRASA will prioritise employability and enjoy the opportunity to be able the advancement of those severely disadvantaged. to reap the rewards of being an integral part of a In prioritising this process, line management should successful and profitable world-class organisation. be guided by the general consensus within South We realise and acknowledge that in the past there Africa that the list below illustrates the order of have been inequalities in this regard and that a disadvantages to overcome. significant challenge now faces businesses and Government to rectify the situation. Priority order as per below:
Central to the challenge is the removal of barriers to The medium to long-term strategic target is to entry by previously disadvantaged groups where such achieve a 50% gender balance at management and competence exists, as well as the development of specialist/technical levels. competence in such groups where this has previously been neglected. Both goals must be achieved 1) Females of all races including disabled females as quickly as possible without compromising the (African/Coloured/Indian and White). competitiveness and thus the sustainable profitability 2) Males of all races including disabled males of businesses in the process. (African/Coloured/Indian and White). 3) People with disabilities of all races and In order to achieve this delicate balance, what 4) White Males. is required is a committed partnership between business and those tasked with the execution of the Conditions of the Environment Employment Equity legislation to ensure success. Both parties must be sensitised to each other’s The Employment Equity planning aims to create an needs and priorities to ensure an optimal working environment conducive to the implementation of relationship, which will generate both a healthy, Employment Equity values and changing of attitudes constructive database and creativity in developing within the organisation through: innovative solutions to this enormous challenge. a) The establishment of a diversity and Employment Purpose of Employment Equity Equity programme. b) EE Targets for every Division/Regional Office and To realise PRASA’s vision, deliberate and pervasive subsidiary of PRASA. action throughout the organisation is required. c) Introduction of diversity management workshops Affirmative action is a necessary stage of the that will prepare all employees at all levels with process. Our strategy document addresses the regards to the negative impact of discrimination procedural steps necessary to create a fair and just and stereotyping. environment. The intention is to implement a Code d) The integration of the diversity philosophy into all of Best Practice to counteract any bias that favours management and leadership training. certain groups over others while ensuring continuous e) Employment Equity Training at all levels and improvements in standards within the group The establishment of EE Committees to address Code thus combines equitable people management Diversity interventions. with improved business standards.
The Code of Best Practice will apply until critical mass is achieved within time frames decided upon after consultation with all relevant stakeholders. In this document, “critical mass” implies that the targets as set according to the EE plan ,are met and the overall percentage of employees from the designated groups mirrors our customer base in terms of race. Employment Equity Committees will monitor the process and report to the EE Office on progress.
76 CORPORATE PLAN 2020-2022 1.1 Total number of employees (including employees with disabilities) in each of the following occupational levels, as per 2017: Note: A=Africans, C=Coloureds, I=Indians and W=Whites
Occupational Levels Male Female Foreign Total Nationals A C I W A C I W Male Female Top management 0 0 0 0 0 0 0 0 0 0 0 Senior management 101 3 11 13 44 3 1 4 2 2 184 Professionally qualified 259 34 20 74 207 16 11 14 4 1 640 and experienced specialists and mid- management Skilled technical 1925 419 101 785 1398 211 30 72 8 1 4950 and academically qualified workers, junior management, supervisors, foremen, and superintendents Semi-skilled and 3874 403 37 129 2991 296 17 39 3 2 7791 discretionary decision making Unskilled and defined 83 18 0 0 0 9 0 0 0 0 13758 decision making TOTAL PERMANENT 6242 877 169 1001 4723 535 59 129 17 6 13758 Temporary employees 568 58 6 59 355 26 0 4 6 3 1782 GRAND TOTAL 6810 935 175 1060 5078 561 59 133 23 9 14843
Monitoring the Employment Equity Plan Divisional/Regional Employment Equity Plan. • The National Employment Equity and Diversity Monitoring and control mechanisms will be Manager is responsible for the overall. implemented to assess and regulate the progress • Monitoring and implementation of the National towards targets on a regular basis so that corrective Employment Equity Strategy and the EE Plan at measures are taken timeously. a National Level.
• Divisional CEO’s and the Group CEO are directly Risk Management is an integral part of the accountable for implementing corrective organisation’s objectives. It is the responsibility measures aimed at correcting their negative of the Board Of Control (BOC) to ensure that there variances, within The group particularly on is an effective and efficient risk management in female and disability representation. the organisation and that its methodologies and • Divisional and Regional HR jointly with the techniques outlined below are embedded within EE Committees are responsible for the strategy setting, planning and business process to Implementation and monitoring of the safeguard performance and sustainability.
CORPORATE PLAN 2020-2022 77 ENTERPRISE RISK MANAGEMENT PLAN
Introduction Scope PRASA’s strategic objectives can be achieved The ERM Strategic Plan applies to PRASA the entire by managing or reducing risks and enhancing Enterprise which is made up of PRASA Corporate, the quality of management decision-making PRASA Rail, PRASA CRES, PRASA Technical, through proper planning and optimal allocation Intersite and Autopax. of the organisation’s resources. The Enterprise Risk Management (ERM) Strategic Plan outlines Risk management tools and techniques the activities that the ERM Department will be implementing to support and ensure the successful Risk Management Policy implementation of the PRASA Corporate Plan. The Board of Control must ensure that there is a policy in place, and that it is reviewed annually to ERM arrangements define the decisions, the ensure relevance. involvement by various stakeholders, and the structures, processes, responsibilities and other The Risk Management Policy outlines PRASA’s mechanisms required to make decisions. This commitment to the effective and efficient promotion involves building the right capacity, processes and and management of stakeholder value and structures in order to make the right decisions that undertakes to do so in a way that minimises exposure achieve alignment, manage risks, improve business that could adversely impact on its reputation and performance and manage costs. ability to fulfil its legislative mandate as contained in the Legal Succession Act. ERM will be implemented in accordance with the ISO 31000 Standard and the King 111 Report as outlined The Board of Control ensures that there is effective below: and efficient risk management in the organization and that the ERM methodology and techniques ISO 31000 Standard: The Standard contains a are embedded in strategy setting, planning and systematic and logical way of risk management business processes to safeguard performance and activities. The process outlines how PRASA should sustainability. The rigours of risk management manage risks by anticipating, understanding provide responses and interactions that strive to and mitigating risks that have been identified. create an appropriate balance between risk and The process further indicates the importance of reward. communicating and consulting with stakeholders and monitoring and reviewing the risks and the Risk Management Framework and Methodology controls. The greater emphasis and guidance on how risk management should be implemented and King 111 : King 111 emphasises that the Board integrated into the organisation is guided by the Risk of Control should appreciate that strategy, risk, Management Framework and Methodology, which performance and sustainability are inseparable. It is based on the ISO 31000 Standard. Thus the ERM also provides that the Board of Control is responsible Department follows guidelines and principles from for governance of risk and should ensure that there the Standard to achieve effective risk management is an effective risk-based Internal Audit. Therefore, implementation. the Board of Control must ensure that ERM is embedded in the governance processes of the Combined Assurance Model organisation, to achieve performance through the Combined assurance will establish an integrated effective and efficient provision of services. and coordinated approach that can be the bases of the Board of Control in assessing whether the King 111 also advices on the following issues organisation will be able to execute its strategies regarding risk management: successfully to achieve its organisational objectives. • Risk governance. This will be achieved through the establishment • Risk appetite and tolerance. of the Combined Assurance Steering Committee, • Linking performance and risk management. Combined Assurance Model and the Combined • Compliance risk. Assurance Plan. • Combined Assurance Framework. • Fraud risk. Combined assurance is the focusing of all assurance • ICT Governance. processes on the key risks facing the organisation • All the above factors have been taken into in an integrated manner such that they complement account in the development of the ERM Strategic one another in their efforts to ensure the mitigation Plan, Policy, Framework and Methodology. of the company’s risks. Combined assurance defines three assurance levels i.e. Management, oversight functions and Independent assurance providers, including external Audit.
78 CORPORATE PLAN 2020-2022 By effectively implementing combined assurance a risk and control assessment, and implementation number of benefits can be realised, including: of risk appetite. Key risk indicators can be used in the management of operational risk, also in a wider • More coordinated and relevant assurance efforts context in the overall management of PRASA. focusing on key risk exposure • Minimising business or operational disruptions Key risk indicators are metrics used to monitor • A comprehensive and prioritised approach identified risk exposure over time. They are in tracking of remedial actions on identified measurement tools that indicates the following: improvement opportunities or weakness • Amount of exposure to a given risk. • Improved reporting to the Board • Emerging risk. • A possible reduction in assurance costs. • Effectiveness of mitigating controls. • Whether a risk has occurred. Fraud Prevention Policy and Plan • How well risk exposure is being managed. PRASA is committed to preventing fraud and corruption and to creating an anti-fraud culture. To Comparison between Key Risk Indicators (KRIs) and achieve this, PRASA will comply with the relevant Key Performance Indicators (KPIs) requirements of the Public Finance Management KRIs are measurement tools used to assist Act (PFMA), 1999 (Act No. 1 of 1999) (as amended by management to identify emerging risks or determine Act No. 29 of 1999) and the principles of corporate where risks have materialised or not, and then governance. The Fraud policy is intended to: implement corrective measures at an early stage, • Define fraud and highlight duties and while KPIS help management understand how well responsibilities of the Board, management and their departments are performing in relation to their all employees. strategic goals and objectives. KPIs provides the • Develop and maintain effective internal controls most important information that enables the PRASA to prevent fraud. to understand whether the organisation is on track • Ensure that when fraud occurs vigorous and or not. prompt investigations are undertaken.
Key Risk Indicator Guidelines The purpose of key risk indicators is to develop a tool within ERM to facilitate the monitoring and control of risk. This will be used to support risk management activities and processes, including risk identification,
Examples of KRIs and KPIs
No Asset Management Key Risk Indicators Key Performance Indicators
Asset Management 1 Number of investment guideline Percentage improvement in the accuracy breaches detected of asset information 2 Number of orders executed Identification of individuals outside the without required authorisation asset team modifying asset information 3 Number of maintenance events Identification of configuration items missed having the most incidents Finance 1 Total number of payment fails Measure total amount of debt relative to assets 2 Number of disputed card Measure number of business days to transactions resolve credit balances 3 Number of online ticketing Measure the ratio of current liabilities accounts compromised by phishing and Trojan
CORPORATE PLAN 2020-2022 79 ENTERPRISE RISK MANAGEMENT FRAMEWORK
The Risk Management Process provides a description for the approach taken to identify and manage the risks associated with the organisation. The approach is informed by the Risk Management Process outlined in the ERM Framework and ISO 31000.
Establish Context
Identify Risks Monitor & Review
Analyse Risks
Evaluate Risks Communicate & Consult
Treat Risks
Figure 2: enterprise risk management methodology
80 CORPORATE PLAN 2020-2022 The risk context may be summarised as follows: The development of a Risk Profile involves the following three tasks: The external context: All external factors that must • Risk identification, i.e all risks associated with a be taken into account in risk management,such as decision must be identified and placed in a risk laws and regulations, contracts, trends in business register. drivers, political and socio-economic factors. • Risk analysis - the purpose of risk analysis is to provide the decision maker with sufficient The internal context: All internal factors that must understanding of the risk. be taken into account such as capabilities, resources, • Risk evaluation - Each risk once analysed is people, business processes, systems, policies. evaluated by comparing the residual risk after Therefore, Corporate objectives are then used to give risk treatment or with existing controls. effect to context and risk criteria. The risk evaluation phase is used to make a decision Development of Risk Profiles (Identify, Analyse and concerning which risks need treatment and the evaluate risks) treatment priorities based on the foregoing analysis.
IMPACT/CONSEQUENCE LIKELIHOOD Insignificant Minor Modarate Major Catastrophic 1 2 3 4 5 AlmostCertain 5 10 15 20 25 Likely 4 8 12 16 20 Moderate 3 6 9 12 15 Unlikely 2 4 6 8 10 Rare 1 2 3 4 5 Risk Rating Risk Magnitude Definition (Consequence x likelihood 19-25 Extreme Risk Immediate action required 12-18 High Risk Senior Management attention required 7-11 Moderate Risk Management responsibility must be specified 1-6 Low Risk Manage by routine procedure
Risk treatment Monitoring and Reporting (monitor, review, Consistent with IS31000, every aspect of the risk Ongoing Management of Risks (risk treatment) management process must be monitored and reviewed, including: Risk treatment involves the identification of • Has the risk changed in character with trends control options, selection of a controls option and and are new risks emerging? implementation of a control option. There are four • Has the context for the risk management risk treatments that can be selected to mitigate changed? against a particular risk, namely: • Is the risk treatment plan being implemented as • Avoid – an activity in order to not to be exposed to planned? a particular risk. • Are controls effective? • Transfer – form of risk treatment involving the • What is the appropriate frequency of monitoring? agree distribution of risk. • Was the risk assessment accurate based on the • Accept – informed decision to take a particular objectives? risk. • Can monitoring be improved by identifying better • Reduce - process that is modifying risk. Key Performance Indicators (KPIs) and Key Performance Indicators (KRIs)?
CORPORATE PLAN 2020-2022 81 ENTERPRISE RISK MANAGEMENT FRAMEWORK (Continued)
PRASA GROUP RISK PROFILE The Group Executive held a Risk Workshop on 26 The value of the risk management analysis approach February 2019 to unpack the PRASA Strat give Risk derives from the diversity of participants, the quality landscape in alignment with the PRASA mandate of the facilitated discussions and the consensus and Strategic Objectives and analyzed against the reached. The ERM Department facilitated discussions 2020-2022 MTEF Corporate Plan. Much as most and workshops with Group EXCO, following which the of the risks identified in the previous MTEF have below Group Risk Profile was developed. materialized, they continue to pose a serious threat The objective of developing a risk profile is: of re-occurrence to the point of collapsing the organization. • To evaluate the risks and develop a risk register that can be used for effective risk reporting and At the commencement of the Financial Year 2019/20, monitoring of PRASA Group risk exposure; Group Exco will implement a Risk Mitigation plan • To enable management to prioritise risk to address the risks that have materialized from management efforts towards the development re-curring, whilst ensuring the risks identified from and implementation of PRASA Group objectives; the Risk workshop held on 26 February 2019 are and mitigated. • To be able to identify risk mitigation plans related to the PRASA Group.
Risk Risk Description 1 1 2 3 No 5 1 12 1 Regulatory risk of withdrawal of 4 5 6 operating permit 2 Risk of not meeting financial 8 obligations (liquidity and solvency) 14 4 3 Loss of PRASA Assets due to 7 inadequate Security Strategy 15 10 9 4 Risk of Litigation
5 Risk of damage to the PRASA reputation
3 1 6 ICT Systems Collapse
7 Failure to manage exchange rates fluctuations in transactions
8 Disruption of operations due to violent community protests
2 9 Low staff productivity
10 Inadequate management of compliance to laws, Legislations and Policies
11 Labour unrest 1 12 Risk of technology investments not optimised, not aligned to business strategy and not delivering value
13 Cyber Crime 1 2 3 4 5 14 Risk of non-achievements of strategic goals
15 Failure to realise capital return on investment
16 Inability to sustain and grow bus operations
82 CORPORATE PLAN 2020-2022 ENTERPRISE RISK MANAGEMENT FRAMEWORK (Continued)
ERM OBJECTIVES Develop and implement Risk Appetite Framework
In response to the Corporate Plan and the analysis The current Risk Appetite Framework will be of the PRASA environment, the ERM Department reviewed in order for executive management to developed objectives which outline how ERM will define or set risk tolerance levels as per the current be implemented and how foreseeable risks will be Corporate Plan. The defined risk tolerance levels will managed in a manner that is proactive, effective and be used to manage risks across PRASA. appropriate, to assist PRASA to achieve its objectives, while maintaining risk exposure at an acceptable As stated in the ERM methodology, it is the level. responsibility of the Board to establish a risk appetite. In accordance with the provision of PFMA, The ERM objectives focus on the consequential PRASA shall have a low appetite for all forms of loss and significant risk to PRASA shareholder value. resulting from negligence, wasteful and fruitless This will outline management’s view on the most expenditure. consequential risks the organisation faces, their likelihood, their potential effect, the frequency, the Instil Risk Culture Across PRASA nature of updating the identification of such top risks and the role of risk management in strategic decision Risk Training and Awareness Programme making. • Risk training will be conducted across PRASA Risk is associated with human error, system failures as per the Training Plan. The training plan and inadequate procedures and controls. Risk will cover Risk Managers, Group EXCO, and management will provide risk controls that will Board of Control. As part of risk profiling provide good management and involves consistent exercise within PRASA, the ERM Department alertness and continuous improvement. This is conducts risk awareness. This process will a value-adding risk management activity that continue to ensure increase in maturity level impacts, either directly or indirectly on bottom-line for risk management. performance. The following key elements will be implemented to It must be borne in mind that risk management develop a strong risk culture within PRASA: is ultimately the responsibility of the Board and therefore the objectives were developed on the Strong support from the Board and premise that the governance structure of the Board Management:The Board will be responsible for is in place to deal with ERM. setting the stage for culture change and establishing the vision and firm-wide rules and guidelines related Provide an Effective and Efficient ERM to risks. The roles and responsibilities of the Board, Infrastructure executives, Business units management and the Operational Management from a risk management Establish Risk Steering Committee (RISCOM) point of view will be strengthened and clarified. • Group EXCO will re-establish a Risk Accountability and ownership: The Board is Steering Committee (RISCOM), which will ultimately accountable for risk management within be responsible for assisting its members, PRASA. Through the Audit and Risk Committee Divisional EXCO’s and EXCO’s at the (ARC), the Board will ensure compliance to the ERM Subsidiaries in the effective discharge of Policy, Framework and Methodology. The Board their accountability for Risk management by and management have to review risk appetite from reviewing the effectiveness of the PRASA’s which the ERM Department will engage management risk management systems, practices and across PRASA in dialogue on risk implications on procedures, and providing recommendations business strategies. Management should consider for improvement. risk in the recruitment process and adhere to clear communication and understanding of business Ensure optimised utilisation of the ERM expectations and performance measurement Information System implications. The ERM Department will enhance risk awareness through training. • The ERM Department has implemented a Risk Management Tool (GRC) which consists Risk transparency:This element will ensure that of Risk management, audit and compliance. risk positions are consistent with risk appetite and The main benefits of the tool are the are understood by risk owners. Risk reporting, integration of the three modules, information risk dashboard and risk analytics will be improved. repository and reporting functionalities. Risk advisory or discussion forums at senior
management level will be created, to create a culture of performance.
CORPORATE PLAN 2020-2022 83 ENTERPRISE RISK MANAGEMENT FRAMEWORK (Continued)
Communication and training Empower PRASA to Proactively Respond to Project Risks Risk appetite will be communicated across the organisation for a better understanding of risks Project Risk Management delivers a number of pursued by risk owners. The ERM Department and values including producing better business outcomes the HCM Department can jointly create workshop through more informed decision making, having a programs to increase knowledge and understanding positive influence on creative thinking and innovation, of risk throughout PRASA. creating better project control and contributing to project success. This will also provide guidance to Risk-adjusted Return on Capital Optimisation the risk manager, project managers and Project Stakeholders on the application of standard risk • Engage management to put risk at the centre management process for all business programs and of discussions during periodical strategic projects within PRASA. planning and to consider risk-return as an integral part of decision making. All projects that have an impact on the successful implementation of business objectives will be Partnership and collaboration identified and the risk management process will be embedded as part of the project management • Improve cooperation and dialogue with process. This will ensure that project managers risk owners to enable the pursuit of manage risks within their projects as per the ERM sustainable profitable growth opportunities. Framework and Methodology. ERM Department will work proactively with business to establish trust and open For all business projects, a project management conversation about risk related issues plan defining the following will be developed and and ensure that risk information is shared maintained: with business lines. ERM Department in • Risk management methodology to be used. consultation with EXCO will also establish • Assumptions that have a significant impact on a risk champions across PRASA. project. • Roles and responsibilities unique to risk Embed Risk Management within daily operations of management function. PRASA • Risk Management milestones. • Risk rating techniques. Facilitate Risk Assessments across the • Risk thresholds. organisation • Risk communication. • Risk Tracking processing. • Development and management of strategic and operational Risk Profiles at Group Reduce the cost of risk and cost of risk management business units and Departmental levels processes through assessments is critical. The management of these risk profiles will be Risk financing techniques will be implemented guided by the Risk Management Policy, to ensure that the cost of risk and the cost of risk ERM Framework, and Risk Appetite management process do not exceed the potential Framework. This will be outlined in the ERM benefit they provide for PRASA. Risk Financing will Implementation Plan. provide for the financial consequences of losses that occur despite risk control efforts. This is a process of Develop Risk Mitigation Strategies arranging a source of finance to cater for the effect of fortuitous loss in PRASA’s business cycle. The source • The ERM Department will assist of finance can be obtained from internal sources Management to develop adequate and such as cash flow, provisions, reserves and equity or effective mitigating controls in order to from external financing sources. manage risks properly. Internal audit shall develop its internal audit plan on the basis The cost of risk model consisting of the following of the key risks identified. The Internal elements, will be developed and implemented: Audit function shall provide an independent, • Maintenance and management costs. objective assurance on the effectiveness of • Internal controls and loss prevention expenses. the system of risk management, and on the • Unreimbursed and unrecovered operational adequacy and effectiveness of the adopted losses. controls. • Internal funding. • External insurance premiums.
84 CORPORATE PLAN 2020-2022 ENTERPRISE RISK MANAGEMENT FRAMEWORK (Continued)
Improve Risk Management Reporting by management, internal assurance providers and external assurance providers on the risk areas Identified risks will be continuously reviewed and affecting the company, To coordinate the appropriate updated, and this process will enable management to level of assurance or controls over significant risk identify new risks as soon as possible, decide where areas identified by the organisation and to provide and how to handle those risks and look for other appropriate report. risks that might be reduced or eliminated and no longer require coverage. Benefits of a combined assurance framework include amongst other: To ensure integration and alignment of assurance • More coordinated efforts focusing on key risk processes in PRASA and to maximise governance exposure. oversight and control efficiencies, a Combined • Minimising business disruptions. assurance framework will be developed and • Reducing repetition of reports being reviewed by implemented. The purpose of a Combined Assurance different committees. is to optimise the assurance to the Board of Control • Support the ARM Committee in making their and Audit and Risk Management Committee (ARM) control statements in the integrated report. • Continuous review and update of risks.
CONTINUOUS IMPROVEMENT
The ERM Department will conduct periodic review of the risk management system in order to ensure its continuing stability and effectiveness in satisfying requirements of the PRASA strategies. Records of such reviews will be maintained.
Continuous Risk Management Steps
Identify and Assess
Identify root cause of risk 1. Regular Review is Required Risk changes over time Develop Risk Proactive Monitoring 2. Control measures might not be followed or adequate Management Plan 3. Control measures might have opened new risk
Implement Risk Management Plan
CORPORATE PLAN 2020-2022 85 FRAUD PREVENTION PLAN
The following are controls that PRASA has to manage fraud in the workplace:
Fraud Prevention Policy Fraud Prevention Plan Whistle blowing policy
Fraud Risk Assessments Fraud Awareness Campaigns Fraud Hotline
Fraud Prevention Policy Fraud Prevention Plan Whistle Blowing Policy
The Fraud Prevention Policy The Fraud Prevention Plan The Whistle Blowing Policy outlines the overall intent seeks to: seeks to: of PRASA towards Fraud a. Highlight practical a. Address organizational Management. It also outlines steps that PRASA will accountability, transparency the roles and responsibilities of implement to ensure that its and individual responsibility the various stakeholders within employees, suppliers and by encouraging individuals PRASA. other stakeholders behave to report crime and ethically in their dealings irregularities in the It seeks to accomplish the with, or on behalf of PRASA. workplace in a responsible following: b. Ensure that appropriate and ethical manner, a. Encourage employees, steps are put in place to b. Provide alternative avenues suppliers and other create a culture which is for staff of properly stakeholders to behave intolerant to fraud and addressing bona fide ethically in all dealings with, corruption. concerns that individuals or on behalf of PRASA; c. Provide direction and within the Group might have b. Create a culture which identify various areas and is intolerant to fraud and of training on fraud c. Offer staff the necessary corruption; and corruption to deter protection from c. To comply with the employees, suppliers and victimization, harassment requirements of the PFMA other stakeholders from and/or disciplinary and Treasury Regulations committing fraud and proceedings whilst reporting in ensuring that public corruption. irregular activities. resources are safeguarded d. Provide a framework for from fraud and corruption; investigating all suspected and cases of fraud, theft or d. Set guidelines for corruption where the value employees to detect and of PRASA has suffered or report fraud. may have suffered or has been misrepresented for personal gain as a result of the actions or omissions of directors and staff employed by PRASA and/or Customers, contractors and other external stakeholders.
Whistle Blowing Hotline National Fraud Awareness Fraud Risk Assessment. Campaigns The independently managed Whistle blowing hotline seeks National Fraud Awareness Fraud Risk Assessments are to give effect to the whistle Campaigns seeks to raise a pro-active measure that blowing policy by providing awareness on Fraud seeks to identify all areas of alternative avenues for staff throughout the organisation potential fraud and mitigate to report fraudulent activities to inform employees on what the risk of fraud through the anonymously where preferred avenues they can use to implementation of adequate report fraud without fear of controls. intimidation.
86 CORPORATE PLAN 2020-2022 FINANCIAL POSITION
While government will invest over R2.7 billion in rail maintenance operations in the 2019 MTEF, in the immediate period the group is faced with costs challenges that will result in an estimated operating cash shortfall of R6.7 billion by end of the first year of the MTEF. Operating cash shortfall is expected to increase to R12.7 billion by the end of the MTEF. This is as a result of operating costs increasing at a rate higher than own revenue generated and subsidy. Subsidy has been increasing by inflation while own revenue has been on the decline due to lack of maintenance, vandalism and theft of assets and the closing off the rail system. Accordingly, while management will be working hard to improve the availability of assets through asset maintenance in line with additional maintenance funding, in the short-term the organisation will still be faced with cash flow challenges that may affect the quality of service to the commuter.
The greatest challenges facing PRASA is that by nature, it is a cash business and a great part of its costs is fixed. Furthermore, a major part of increases in its operating costs are subject to approval by regulatory bodies and negotiation with labour unions. These include costs of energy which is subject to approval by NERSA, security costs subject to annual increases determined by the Private Security Industry Regulatory Authority, costs of employees in the bargaining grade that are subject to negotiation with Labour Unions, rates and taxes subject to approval by various Municipal Councils and legal and insurance costs that are largely affected by commuter injuries and asset vandalism.
In the 2019/20 Corporate Plan, management has made a commitment to reduce operating expenses by R4.79 billion through a R2.01 billion reduction in personnel costs by rationalisation of employee positions at management levels, R780 million reduction in energy costs mainly contract renegotiation with Eskom, R684 million reduction in security costs through effective deployment of security staff to achieve efficiencies and implementation of technology to augment and streamline security functions, R196 million in haulage costs through Transnet tariff negotiations and R1.12 billion in other costs.
Included in the Corporate Plan was a commitment to improve revenue collection by R3.16 billion by 2019/20. This was to be achieved through increase in fare revenue from the operational turnaround such as fencing project, rolling stock recovery and increase in passenger trips and rental income to grow through rental increase of at least 10% and increase in income through new developments on commercial projects. Overall, the turnaround has committed to improve PRASA financial performance by R7.95 billion through the 2017 MTEF.
In 2018, the Board and Management has embarked in a process of revising the turnaround strategy (now referred to as rescue plan) with the purpose of identify savings and increase in revenue. However, the rescue plan has identified the need for finalisation of the operating model and optimal organisational structure to inform the resource requirements of the organisation. Furthermore, initial investment in operating costs will be required to realise the objectives of the rescue plan.
2019/20 2020/21 2021/22 R'000 R'000 R'000 Income 9 269 822 10 281 744 11 344 500 Rental income 728 787 781 396 838 258 Fare Revenue 1 991 213 2 540 983 3 133 238 Government subsidy 6 252 592 6 694 285 7 096 149 Other income 217 018 184 307 196 082 Insurance recoveries 70 000 70 000 70 000 On board sales 10 212 10 774 10 774
CORPORATE PLAN 2020-2022 87 FINANCIAL POSITION (Continued)
2019/20 2020/21 2021/22 R'000 R'000 R'000 Operating Expenditure 13 411 462 14 212 367 15 075 171 Personnel costs 6 526 855 7 065 032 7 614 774 Training 60 455 65 573 70 110 Material 389 418 421 896 450 641 Energy 1 178 484 1 188 268 1 250 694 Municipality costs 495 650 535 096 577 806 Leases 298 335 371 156 384 791 Maintenance 959 747 1 020 672 1 077 396 Communication 82 196 87 261 91 866 Insurance claims 656 946 591 251 532 126 Insurance premiums 212 256 240 348 263 659 Audit fees:External 17 815 18 794 19 827 Audit fees:Internal 15 000 16 200 17 496 Professional services 184 984 161 625 160 656 TCO 112 720 118 920 125 460 Legal fees 61 865 62 768 66 302 Security services 841 490 890 737 940 906 Health & Risk 312 780 335 828 360 059 On Board services: Cost of trading 18 547 18 809 20 922 Travel & Accommodation: Other 27 684 25 570 27 055 Travel & Accommodation: Staff 55 214 57 664 58 591 Auxiliary transport 105 937 111 760 117 184 Bank charges, penalties & levies 25 254 24 769 30 446 Office expenditure 8 808 9 078 9 597 Publication & Marketing 60 688 64 224 70 535 Printing costs 15 269 16 108 16 994 Haulage costs 222 817 235 072 235 072 Computer costs 256 728 268 549 283 315 Operational Readiness Non-Capital 25 499 Expenditure Management Fees 44 662 48 235 52 094 Research costs 7 371 7 784 8 212 Other Operating costs 129 988 133 320 140 583
Shortfall (4 141 640) (3 930 623) (3 730 671)
88 CORPORATE PLAN 2020-2022 FINANCIAL POSITION (Continued)
Whilst PRASA statement of financial position shows PRASA has sufficient amount in cash and cash equivalents, PRASA is face with operating cash flow challenges resulting increase amounts owed to creditors (trade and other payables) and negative net equity. Delays in capital projects implementation has resulted in significant amount in cash and cash equivalents. It is projected that, by the end of the 2019 MTEF PRASA will be owing R15.3 billion to its creditors mainly arising from operations related creditors.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 2019/20 2020/21 2021/22 R’000 R’000 R’000
ASSETS Non-current assets 72 707 535 84 233 700 98 307 874 Property plant and equipment 51 207 918 62 490 464 78 278 282
Prepayment for capital expenditure 14 353 682 14 145 641 12 161 548 Intangible assets 412 075 539 375 674 313 Investment property 4 737 770 5 062 130 5 197 641 Operating lease receivable 1 996 090 1 996 090 1 996 090 Current assets 12 292 071 8 536 968 5 780 615 Trade and other receivables 886 089 824 063 766 378 Inventories 297 731 267 958 241 162 Cash and cash equivalents 11 108 251 7 444 947 4 773 075 Total assets 84 999 606 92 770 668 104 088 489
EQUITY AND LIABILITIES Total equity attributable to equity holders of (6 078 810) (9 704 935) (13 157 521) the Entity Share capital 4 248 258 4 248 258 4 248 258 Accumulated loss (10 327 068) (13 953 193) (17 405 779) Non-current liabilities 81 752 311 90 054 390 101 897 311 Provision for claims 1543041 1790541 2013291 Operating lease deferred income 1 291 324 1 291 324 1 291 324 Employee benefit obligations 78 907 051 86 961 052 98 580 615 Capital subsidy and grants 9 326 104 12 421 213 15 348 699 Current liabilities 9 326 104 12 421 213 15 348 699 Trade and other payables 9 326 104 12 421 213 15 348 699 Total equity and liabilities 84 999 606 92 770 668 104 088 489
CORPORATE PLAN 2020-2022 89 FINANCIAL POSITION (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOW 2019/20 2020/21 2021/22 R'000 R'000 R'000
Operating cash flows before working capital (3 293 955) (3 108 015) (2 927 311) changes Changes in working capital (driven by 3 301 035 3 127 362 2 958 375 increase in creditors) Net cash used from operating activities 7 080 19 347 31 064
Cash flow from investing activities 10 209 621 10 851 744 14 707 361 Net cash used in investing activities 10 209 621 10 851 744 14 707 361
Cash flow from financing activities 11 709 621 11 651 744 14 707 361
Net cash flow from financing activities 11 709 621 11 651 744 14 707 361
Net increase in cash and cash equivalents -3 851 444 -3 663 304 -2 671 872 Cash and cash equivalents at the beginning of 14 959 695 11 108 251 7 444 947 the year Cash and cash equivalents at the end of the 11 108 251 7 444 947 4 773 075 year
90 CORPORATE PLAN 2020-2022 MATERIALITY FRAMEWORK
1. BACKGROUND financial year. PRASA will then review these items individually and aggregated against the materiality 1.1 General framework to ensure that the annual report materially reflects the financial position of the Group. This document was developed to give effect to the March 2005 amendment to the Treasury Regulations As a public entity, PRASA is required by law and (TR), whereby the following new requirement was treasury regulations to include the materiality placed on public entities: framework in the following documents to be submitted to the entity’s executive authority: Section 28.3.1 – “For purposes of material [sections • Annual Report [section 28.3.1 of the Treasury 55(2) of the Public Finance Management Act Regulation] – Including Financial Statements; (Act)] and significant (section 54(2) of the Act), the • Corporate plan [section 29.1.1(f) of the Treasury accounting authority must develop and agree a Regulation] – Three-year plan. framework of acceptable levels of materiality and significance with the relevant executive authority.” 2. QUANTITATIVE ASPECTS
From a financial statement perspective, GRAP 1 Par 2.1 Group materiality 5, defines “Material omissions or misstatements of items are material if they could, individually or Gross operational expenditure will be used as the collectively, influence the decisions or assessments basis for the materiality calculation due to the of users made on the basis of the financial following: statements. Materiality depends on the nature or • PRASA is unable to be profitable as its fare size of the omission or misstatement judged in the revenue income generated is significantly less surrounding circumstances. The nature or size of the than its operational expenditure required to information item, or a combination of both, could be execute its mandate, hence receives a subsidy the determining factor.” allocation from Government to sustain itself; • Gross operational expenditure is therefore a In order to arrive at the materiality framework we more representative measure of the economic considered the following: activities undertaken in PRASA than income • Nature and risks associated with PRASA’s received including the subsidy allocation; business; • This method is a stable basis of measure and is • Statutory requirements; consistent with the prior years; • Quantitative and qualitative factors; and • The use of net assets as a measure would • Material impact of the omission or misstatement provide a materiality level that is significantly on decision making. higher than that calculated using operational expenditure and PRASA wishes to be prudent in These considerations are to be discussed and agreed its approach to determining its materiality level. with members of the Board of Control, members of executive management as well as supported by the The percentage utilized (namely, 0.5%) of gross relevant documentation such as the Corporate Plan operational expenditure as audited for the 2017/18 2019/208 – 2021/22, Shareholder Compact and the financial year to calculate the materiality level and PRASA budget. In addition, the materiality framework takes into account the following considerations: will be discussed with the external auditors. Also required will be the preparation of appropriate The Agency received a qualified audit report for and relevant mitigation strategy to elimination of the year ended 31 March 2018; probable omission. The primary users of the financial statements are Board of Directors, Management, the Auditor- Accordingly, this framework deals with materiality General, National Treasury, the Department of aspects in two main categories, quantitative and Transport, SCOPA and Parliament; qualitative. The policy set out hereunder should The control and inherent risks associated with be appropriately presented in the annual report as the Agency; and required. The statutory requirements laid down to regulate the business activities of the Agency with specific 1.2 Implications of a Materiality Framework for reference to: PRASA • The Legal Succession to the South African Transport Services Act, (Act No. 38 of 2008), The materiality framework provides a guideline as amended; against which PRASA can identify, measure and • The Public Finance Management Act, 1999 evaluate any losses or irregular, fruitless or wasteful (Act No. 1 of 1999), as amended 31 December expenditure as and when they occur during the 2010; and • The Treasury Regulations as amended 15 March 2005.
CORPORATE PLAN 2020-2022 91 MATERIALITY FRAMEWORK (Continued)
2.2 Materiality level calculation 5. ACQUISITION OR DISPOSAL OF SIGNIFICANT SHAREHOLDING OR The total materiality level for the Group of R52 794 MATERIAL ASSET(S) 714 has been calculated in Annexure A and been divided into the relevant individual business units and In terms of section 54(2) of the PFMA, PRASA would subsidiaries. inform the Executive authority and the relevant Treasury promptly and in writing any transition to 3. QUALITATIVE ASPECTS acquire or dispose shareholding or assets. The relevant particulars of the transaction would be Misstatements and/or omissions either individually or provided. Again, in line with section 51(1)(g) of the in aggregate could influence the economic decisions PFMA, PRASA would inform the executive authority of a user. Materiality is not solely limited to the and Treasury on any intention to establish new entity quantum of the assertions contained in its financial or subsidiary. statements, but is also affected by the nature of business operation and environment, the 6. ANNEXURE A MATERIALITY AND impact can be implied and/or explicit. The nature of the misstatement and/or omissions may also SIGNIFICANCE FRAMEWORK influence the economic decisions of a user even CALCULATION though the quantum is below the materiality threshold. Qualitative aspects include: Materiality excluding Subsidiaries • Endorsement of the mandate and the AFS 2017/18 interpretation on the mandate; • Sustainability of the Agency considering Gorss Operating expenditure Materiality its mandate, corporate plan and funding Corporate 1,860,536,707 29,872,644 requirements; • Environmental practices and impacts on the Metrorail 5,974,528,869 29,872,644 business; MLPS 876,875,762 4,384,379 • Contingent liabilities; • Potentially damaging legal actions pending; PRASA Cres 971,361,011 4,856,805 • Level of compliance with relevant legislation; PRASA Tech 11,249,125 56,246 • Transactions entered into, including fraudulent and dishonest behaviour, that could result in a Total 9,694,551,473 48,472,757 reputational risk and damage to PRASA; • The impact of political decisions on PRASA such Materiality excluding Subsidiaries as its mandate and the required funding; • Conflict of interest disclosures by directors, AFS 2017/18 management and staff; and Gorss Operating expenditure Materiality • Potential competitor(s). Corporate 1,860,536,707 9,302,684 4. SUBSIDIARIES Metrorail 5,974,528,869 29,872,644
Annexure A shows the inclusion of Intersite Assets MLPS 876,875,762 4,384,379 Investments (SOC) Ltd and Autopax Passenger PRASA Cres 971,361,011 4,856,805 Services (SOC) Ltd. The rationale for the exclusion of subsidiaries in the main document is informed PRASA Tech 11,249,125 56,246 by the independence of their respective Audit Intersite 30,944,991 154,725 sub-committees, and of their Boards of Control or Directors. Autopax 833,446,322 4,167,232 Total 10,558,942.787 52,794,714
92 CORPORATE PLAN 2020-2022 CAPITAL PROGRAMME: 2019/20 – 2021/22 FINANCIAL YEARS
Context • Projects and programmes to improve Rail System performance. These include Network 1. During the capital budgeting process for the 2019 Rail Extensions, Fencing, National Station Medium Term Expenditure Framework (MTEF), Upgrade and upgrade work in large stations such the Enterprise Programme Management Office as Park and Mabopane; (EPMO) received 27 capital-funding requests • Projects and programmes already committed (totalling 99 projects) across the business from previous financial years for finalization; and units. A detailed prioritization assessment was • Projects and programmes demonstrating undertaken as part of the evaluation process of readiness to spend particularly on the priority funding requests received. In general, the EPMO corridors for the deployment of the new train assessed the following key areas: service. • Alignment of each business case with the 4. With these considerations, the prioritized projects prescribed capital budgeting guidelines; and programmes are aligned with business • The likely financial impact of the proposed priorities which should demonstrate sustained programme/project, both capex and operational; business growth over the period ahead. • The return on investment; • Associated risk assessments and proposed 5. The sections below outline the budget framework, mitigation measures; projected financial commitments into the 2019/20 • Implementation readiness of each programme/ financial year, general observations and funding project; recommendations. • Strategic intent in line with the approved Corporate Plan; and Budget Framework • Due consideration taken in determining various options and whether the proposed 6. The total PRASA Group capital baseline amounts investment will have an impact on improving to about R36 billion over the next three years as customer experience, improving rail system shown in Table 1 below. The 2019 MTEF capital performance, realigning support functions budget allocation from the Department of to achieve an efficient rail and bus business, Transport depicts a reduction of R 8.6 billion on modernising rail system through investment other capital from the baseline over the next three programme, expanding rail network and services years. This means there is no additional funding and exploiting assets to support the primary approved for the new projects in the capital mandate. programme.
2. Furthermore, the analysis is focused on projects 7. Over the medium term, PRASA’s capital and programmes which are aligned to the priority expenditure is expected to reach R10.2 billion in corridor for the deployment of the new trains 2019/20, R10.8 billion in 2020/21 and R 14.7 billion such as (Pienaarspoort – Pretoria – Saulsville). in 2021/22, bringing the total expenditure to The programmes and projects are mainly related R36 billion. to infrastructure in areas such as signalling, electrical, stations, fencing, platforms and perway.
3. Crafting PRASA’s response to the approved capital allocation from the Department of Transport, the evaluation process continues to prioritize projects/programmes in line with the following business priorities:
• Supporting the urgent priorities that achieve modernization of the Rail System performance such as Rolling Stock Fleet Renewal Programme, Station Modernization, Depots Modernization, Signalling and Telecommunication; • Initiatives to immediately improve Customer Experience which include rehabilitation of infrastructure which include Drainage Projects, National Station Improvement Programme, Capital Intervention Programme, Perway, Security Systems, Electrical and Information Communication Technology (ICT);
CORPORATE PLAN 2020-2022 93 CAPITAL PROGRAMME:2019/20 - 2021/22 FINANCIAL YEARS (Continued)
Budget Framework 2018/19 2019/20 2020/21 2021/2022 Total Medium Term Expenditure R thousands Main Budget Framework MTEF 2019 MTEF Baseline (after 8 362 232 10 209 621 10 851 744 14 707 361 35 768 726 reduction) 2019 MTEF Baseline (before 14 982 605 15 804 860 16 685 383 17 519 652 50 009 895 reduction) Capital Baseline Reduction -6 989 748 -4 202 081 -4 402 167 - -8 604 248 Other PRASA Capital 91 941 600 022 671 852 1 775 393 3 047 267 Year-on-year increase 40,0% -0,5% 26,2% Earmarked Funds 8 270 291 11 109 599 10 979 892 12 931 968 35 021 459 New Rolling Stock 4 676 870 5 823 266 6 193 111 8 646 179 20 662 556 Signalling 2 023 779 2 137 111 2 254 652 2 423 751 6 815 514 General overhaul of Metrorail 1 409 445 1 480 054 1 553 657 1 670 181 4 703 892 Coaches General overhaul of Mainline 160 197 169 168 178 427 191 857 539 497 Coaches Available budget 8 362 232 10 209 621 10 851 744 14 707 361 35 768 726
Business Drivers and Benefit Analysis
8. Over the 2019 MTEF, the largest capital share relate to modernisation objectives of Rail System performance (through programmes such as New Rolling Stock, Signalling and Telecommunication, Station Modernization, 120km/h Perway Programme, Depot Modernization), followed by programmes aimed at improving Service Reliability which include Capital Intervention Programme to sustain the current operation, refurbishment of infrastructure focusing on electrical works, rail tracks, signalling, as well as drainage projects. Lastly, the capital share relates to programmes on improving Rail System performance which include National Station Upgrade Programme, Network Rail Extensions, Level Crossings, Platform Rectification as well as improving Safety and Security through initiatives such as Asset Protection and Fencing. Improving Customer Experience is achieved through programmes such as National Station Upgrade, National Station Improvement as a well as Park Station projects.
Figure 1: Benefit Distribution
94 CORPORATE PLAN 2020-2022 CAPITAL PROGRAMME:2019/20 - 2021/22 FINANCIAL YEARS (Continued)
Summary of Key Programmes Corridor Modernization Programme Rolling Stock Fleet Renewal Programme (RSFRP) Signalling 9. A revised capital baseline of R21 billion is 12. A revised capital baseline of R2.14 billion in earmarked for spending over the next three 2019/20, R2.25 billion in 2020/21 and R2.43 billion years for the implementation of the Rolling Stock in 2021/22 is earmarked to further support the Fleet Renewal Programme. This investment has rollout of the signalling programme, bringing given impetus on this programme to sustainable the total revised allocation to R6.82 billion over delivery of the first 20 trains from Brazil, the next three years across all three regions construction and operation of a Local Factory (Gauteng, KwaZulu Natal and Western Cape). and delivery of the first Local New Train. The This investment is about bringing the modern delivery of the 3 600 new rolling stock vehicles signalling system which will give PRASA over the next 10 years is well underway and on additional operational capacity and flexibility. track. The new rolling stock programme is a The majority of signalling is old and yields an critical component of PRASA’s mandate to provide inherently low inefficiency in the train service for modernization and growth. PRASA has since level and increases the potential risk for accidents made considerable progress to achieve this and delays. It is PRASA’s intention to replace all objective. Overall, PRASA is expected to spend existing signalling interlockings, which consist R60 billion over a 10 year period between 2015 mainly of obsolete mechanical and electro- and 2025. mechanical systems, with electronic interlockings as the technology of choice. This is to improve the Accelerated Rolling Stock Programme safety of commuters and ensure reliability of the 10. The capital baseline for the Accelerated Rolling network. Stock Programme for meeting the objectives of Station Modernization Programme the existing rolling stock General Overhaul and Refurbishment programme is budgeted as part 13. This programme focuses on the modernization of of the earmarked funds. The General Overhaul stations in Priority Corridors. About 135 stations and Refurbishment of the existing rolling stock have been prioritized for modernization over for metro and long-distance rail services have the the medium term. The prioritization process primary aim of improving the quality of service took into account the stations with high volume and predictability over the short- to medium- of commuters and the potential for maximizing term. Although not adding additional service, revenue. These improvements will translate the programme addresses the immediate need into real benefits for commuters in terms of to improve the current rolling stock and ensure accessibility, safety, user-friendly and improving its reliability. The contribution of the programme the overall customer experience. Over R573 must continue to significantly improve the million will be invested in this area in the next rolling stock availability and improve train set three years. availability for commuters. A tender process is 14. A capital baseline amounting to R109 million currently underway to appoint General Overhaul in 2019/20, R225 million in 2020/21 and R239 contractors to support this programme. New million in 2021/22 is proposed for the rollout of General Overhaul concepts will be introduced to the station modernization programme, bringing enhance the current refurbishment and upgrade the total allocation to R573 million over the programme in order to realize full value for 2019 MTEF. The planned activities will allow money. This will be done by introducing modern for improvement on universal access, security technology to improve train performance and enhancements, and rebranding. This is line with reliability. PRASA’s plan to improve accessibility and create 11. The baseline for the General Overhaul (GO) of modern stations which are customer friendly. Metrorail Coaches allows for R1.48 billion in 120km/h Perway Programme 2019/20, R1. 55 billion in 2020/21 and R1.67 billion in 2021/23. This brings the total to R4.7 billion 15. Funding amounting to R372 million is proposed over the next three years. This investment will for the upgrade of perway infrastructure allow for approximately a further 1 736 coaches to over the next three years. This allows for a be refurbished/upgraded including the purchasing funding space of R160 million in 2019/20, R102 of critical components million in 2020/21 and R108 million in 2021/22. The 120km/h Perway Programme aims to revitalize the track infrastructure in the three modernization corridors to enable new trains to achieve 120km/h speed. Amongst others, the works will include the rehabilitation of drainage system, re-railing of the track and replacement
CORPORATE PLAN 2020-2022 95 CAPITAL PROGRAMME:2019/20 - 2021/22 FINANCIAL YEARS (Continued)
of the turnouts. PRASA’s current infrastructure Management System which include CCTV and allows for section speeds of up to 90km/h. access points. Spending on footbridges, level In anticipation of the new rolling stock fleet, crossings and structures is proposed which will infrastructure upgrades need to be undertaken eliminate high risk level crossings and improve to increase section speeds to 120km/h. The the safety of pedestrians. programme includes the upgrading of the 19. As part of protecting the assets and loss of ballast profile for better stability, re-railing, re- revenue, the Fencing Programme (Stations and sleepering, upgrading of turnouts, replacement of Corridors) is prioritized over the next three years single and double slips, replacement of scissors with an amount of R 507 million (R114 million in and diamond crossings, drainage upgrading, 2019/20, R191 million in 2020/21 and 202 million ballast screening, refurbish rails via grinding and in 2021/22). PRASA has been experiencing many the re-alignment of track via continuous tamping. incidences relating to persons being run over by trains, staff and customer safety, cable theft Depot Modernisation Programme and fare evasion, resulting from operating in an 16. A capital baseline of R1.7 billion to support the unsecured environment. The programme will be modernization of depots is proposed over the targeted at securing the stations and the network. next three years. The budget allocation has been 20. The re-signalling programme also places prioritised to support the construction activities an emphasis on the security of the signal over the next three years split as R285 million components. This includes the cabling trench in 2019/20, R590 million in 2020/21 and R826 (solid concrete) which is more secure compared million in 2021/22. There are currently seven to the current system. All these investments depots earmarked for modernization under the support PRASA’s plan to secure assets and reduce depot programme. This includes Wolmerton fare evasion. (Gauteng North), Braamfontein and Benrose (Gauteng South), Salt River and Parden-Eiland Property Portfolio (Western Cape), Durban and Springfield (KwaZulu Natal). The majority of these depots are still in Station Upgrade/Transit Oriented Developments the procurement phase, with only Wolmerton Programme, Station Improvement Programme and having completed the construction of Phase 1 Workplace Improvement Programme and 2, which delivered a new lifting shed, fully 21. PRASA will over the 2019 MTEF continue to refurbished external train, wash plant and roof prioritise spending on stations, with the primary sheeting replacement of the old/existing running goal of creating precincts that are commuter shed, to support the maintenance of new train- friendly. A capital baseline of R467 million for the sets and existing fleet. Phase 3 of Wolmerton National Station Upgrade Programme (NSUP) at depot is currently in the procurement phase. various stations across the country, R759 million Asset Protection and Safety for National Station Improvement Programme (NSIP), providing immediate improvements at 17. A capital baseline of R843 million to support the stations and R723 million for the Workplace the Asset Protection and Safety is proposed Improvement Programme (WIP) is prioritised. A over the next three years. This will allow for a new programme focusing on green/clean energy funding space of R265 million in 2019/20, R281 has been introduced to reduce the dependency million in 2020/21 and R298 million in 2021/22. and cost of power supply from Eskom; hence R The proposed allocation will support Corporate 334 million has been prioritised for the project Security to roll-out CCTV cameras, access control, over the 2019 MTEF period. early detection systems, integrated control rooms, alarm systems, fire detections, amongst 22. A capital baseline of R723 million for the others. The works are mainly targeted at key Workplace Improvement Programme over the office buildings, depots, corridors and stations. next three years involves the improvement of In addition, this will support the acquisition the staff office accommodation, improvement of of specialized vehicles for rapid response, depots facilities and workshops. This is in line specifically on rough terrain. with PRASA’s strategy to improve the working condition of staff across the Group. 18. Even though the proposed spending is R843 million over the next three years, the overall Energy Efficiency PRASA Capital Programme includes a number 23. The energy cost of operations, offices, depots, of security initiatives which are not part of stations within the property portfolio amounts this security capital baseline. These include approximately R380 million in the Group per spending on Depots Fencing which is part annum. Furthermore, the energy costs have of PRASA Technical infrastructure rollout as been increasing by an average of 15 per cent well as the Fencing Programme. There is also per annum. A capital baseline for the energy further spending on Integrated Station Access efficiency initiatives is supported, amounting to
96 CORPORATE PLAN 2020-2022 CAPITAL PROGRAMME:2019/20 - 2021/22 FINANCIAL YEARS (Continued)
R334 million over the next three years, to drive Information Communication Technology (ICT) the reduction of the costs of energy through 27. The baseline for ICT systems is expected to reach the retrofitting of the energy efficient lighting R723 million over the next three years, largely and heating, ventilation and air conditioning driven by investment in Automatic Ticketing equipment, and the installation of solar panels to System (Automatic Fare Collection) which is generate electrical energy to supplement for the allocated R66 million in 2019/20, R127 million in existing Eskom supply. 2020/21 and R135 million in 2021/22 and general 24. In support of these initiatives PRASA supports ICT Systems (acquisition of computers/laptops, innovative solutions that look at alternative, costs network connectivity and Enterprise Resource effective, renewable energy sources. Funding has Planning) which is allocated R117 million in been allocated to promote such initiatives that are 2019/20, R135 million in 2020/21 and R143 million aimed at reducing the cost of doing business thus in 2021/22. The proposed automated ticketing targeting to spend R105 million in 2019/20, R111 programme seeks improve systems used to million in 2020/21 and R118 million in 2021/22. collect revenue from ticket sales. An automated solution is much more reliable and efficient as Capital Intervention Programme (CIP) compared to a manual verification process which is prone to human error and fraud. It is against 25. Investment in Capital Intervention Programme this background that PRASA seeks to implement which includes the refurbishment of perway, an automated solution for ticket sales that will electrical, drainage system, signalling, assist PRASA to reduce loss of revenue and fraud. telecommunications, bridges and structures, continues to be critical to sustain and improve 28. Investment on Enterprise Resource Planning the current operation. To renew ageing aims to maximise PRASA’s potential through infrastructure in these areas will go a long way integration of the business environment. This in addressing the operational inefficiencies as can be achieved seamlessly by using a best well as sustaining the service. It is also a strategy of suite ERP. PRASA already has invested in to renew the entire infrastructure to support the core modules of Finance, Human Capital effective operation of the new rolling stock. It Management and Supply Chain Management, is further proposed that Capital Intervention so this is a continuation of the programme. The Programme receives a capital funding of R530 initiative involves implementation of the business million over the next three years for minor works, management modules to complete the ERP suite. emergency works, special needs and safety For example, Plant Maintenance for rolling stock, projects. Real Estate and Facilities Management module for the property management business and 26. Over the next three years, R301 million is enhancement of the Human Capital Management proposed for the National Electrical Programme. module to allow PRASA to maximise the value The condition of some of the electrical structures from its human resources. is a risk from a safety point of view which could potentially endanger the lives of commuters Project Integration and the general public. Funding in this area is therefore critical for the restoration of 29. Integrated project plan will be developed infrastructure and increased power capacity. to ensure alignment in the planning and implementation of projects across the Group. This will allow for a seamless implementation, including proper sequencing. The integrated plan will be monitored by the Group Capital Investment Committee on regular basis.
CORPORATE PLAN 2020-2022 97 CAPITAL PROGRAMME:2019/20 - 2021/22 FINANCIAL YEARS (Continued)
Summary of Funding Recommendations
2019 Capital Programme (Proposed Allocations) Capital Programme 2019/20 2020/21 2021/22 Total MTEF PRASA Corporate 8 407 874 322 8 990 530 957 11 645 264 035 29 043 669 314 Rolling Stock Fleet Renewal Programe 5 823 266 000 6 193 111 000 8 646 179 000 20 662 556 000
Signalling and Telecommunication 2 137 111 000 2 254 652 000 2 423 751 000 6 815 514 000 Programme ICT Systems 117 001 231 134 786 010 142 873 171 394 660 412 Automatic Ticketing System 65 702 000 127 300 211 134 938 224 327 940 435 Assets Protection 264 794 091 280 681 736 297 522 641 842 998 468 PRASA Rail 745 051 854 889 834 131 1 443 224 179 3 078 110 165 Capital Intervention Programme 158 855 200 180 210 200 191 022 812 530 088 212 Depots Machinery and Equipment 50 696 530 69 899 500 574 093 470 694 689 500 Rolling Stock Adhoc Condition Work 141 000 000 152 000 000 161 120 000 454 120 000 Rolling Stock Components 280 400 124 297 224 131 315 057 579 892 681 835 Fencing Programme (Stations and Corridors) 114 100 000 190 500 300 201 930 318 506 530 618 Prasa Technical 2 385 081 985 2 750 242 832 3 141 238 662 8 276 563 479 General Overhaul of Metrorail Coaches 1 480 054 000 1 553 657 000 1 670 181 000 4 703 892 000 Referbishment of Smeyl Coaches 169 168 000 178 472 000 191 857 000 539 497 000 Depots Modernization Programme (Incl hig- 285 452 098 590 223 400 825 636 804 1 701 312 302 tech fencing) Electrical Programme: Substation, new 94 500 200 100 170 212 106 180 425 300 850 837 overhead lines & OHTE 120km/h Perway Programme 160 912 490 102 520 110 108 671 317 372 103 917 Station Modernisation Programme (135 109 433 319 225 200 110 238 712 117 573 345 546 stations) Green View - Pienaarspoort Project 85 561 878 - 0 85 561 878 Property Portfolio (CRES) 1 023 056 387 1 084 439 770 1 149 506 156 3 257 002 314 Station Improvement Programe 238 253 825 252 549 055 267 701 998 758 504 877 Station Upgrades Programme 146 659 193 155 458 745 164 786 269 466 904 207 Park Station Upgrade 100 000 000 106 000 000 112 360 000 318 360 000 Mapopane Station Upgrade 96 000 000 101 760 000 107 865 600 305 625 600 Isipiingo Station Upgrade 110 000 000 116 600 000 123 596 000 350 196 000 Workspace Improvements Programme 227 143 369 240 771 971 255 218 289 723 133 630 Energy Renewable Programme 105 000 000 111 300 000 117 978 000 334 278 000 Total 12 561 064 548 13 715 047 691 17 379 233 033 43 655 345 272 2019 MTEF Allocation 10 209 621 000 10 851 744 000 14 707 361 000 35 768 726 000 Shortfall 2 351 443 548 2 863 303 691 2 671 872 033 7 886 619 272 Earmarked Funds
98 CORPORATE PLAN 2020-2022 Introduction to the APP 2020/22
The Framework for Managing Programme Performance Information (FMPPI) states that “performance information indicates how well an institution is meeting its aims and objectives, and which policies and processes are working. “ (p.1). The framework further states that “performance information … facilitates effective accountability, enabling legislators, members of the public and other interested parties to track progress, identify the scope for improvement and better understand the issues involved.” (p.1). Furthermore it is indicated that such performance information is dependent on a “thorough understanding of the nature of the [business]” (FMPPI, p.7)
CORPORATE PLAN 2020-2022 99 Internal Control Internal Framework by approved PRASA Board Risk Framework has been revised and Strategic Risk Assessment Performed COMMENTS Review and Review Internal update Control for Framework PRASA Perform Safety Strategic, Operational, Risk, andTechnical Assessment, Assign Mitigation, Implement and monitor of Effectiveness Risk Mitigation 2021/22 Monitoring Monitoring to compliance Control Internal for Framework PRASA Perform Strategic, Operational Risk Safety Assessment, Assign Mitigation, Implement and monitor of Effectiveness Risk Mitigation 2020/21 Implement Implement Control Internal for Framework PRASA Implement and monitor of Effectiveness Risk Mitigation 2019/20 Approve Approve Internal Control Framework PRASA for document Perform Strategic, Risk Safety Assessment and Mitigation by assigned 31 March 2019 YTD Actual Jan 2019 Approve Approve Control Internal for Framework PRASA document Perform Risk Strategic Assessment and Mitigation assigned 2018/19 Target Create and Create approve Control Internal Framework PRASA for document Perform Risk Strategic Assessment Baseline 2017/18 Establishment of Establishment Control Internal Framework Establishment of Risk Management Framework Performance Indicator 3 4 # Strengthening Strengthening Governance Focus Area Strategic Objective Strengthening Governance and Stabilizing the Organisation and Stabilizing Governance Objective 1: Strengthening
100 CORPORATE PLAN 2020-2022 To be developed be developed To during 2019/20 Performance Performance management agreements and in executed force Integrated Plan Integrated a Clean Deliver Audit COMMENTS performance performance management and monitoring consequence management Corporate 5-Year Strategy Integrated plant Integrated Address to Affecting Matters Opinion, Auditors Other Important Critical, Matters, Significant, and Moderate Housekeeping Repeat which are findings PP AG,IA, From and Treasury Implemented 2021/22 performance performance management and monitoring consequence management Corporate 5-Year Strategy Integrated plant Integrated Address to Matters Affecting Auditors Opinion, Other Important Matters, Critical, Significant which are Repeat findings PP AG,IA, From and Treasury Implemented 2020/21 Complete Complete all senior executive to management performance agreements by 31 May 2019 Complete all other employees performance agreements by 30 June 2019 Integrated plant Integrated Address to Affecting Matters Opinion Auditors and Critical Repeat which are findings PP AG,IA, From and Treasury Implemented • Corporate 5-Year Strategy • 2019/20 AG Plan AG Created. Does not exist 2012 National Strategic Plan YTD Actual Jan 2019 Integrated plant Integrated Key Address to Repeat which are findings PP AG,IA, From and created Treasury Performance Performance managements agreements with into entered all executives 5-Year Reviewed Corporate Strategy 2018/19 Target Establish an Establish plant Integrated Address to which are Key Repeat findings PP AG,IA, From and Treasury Does not exist 2012 National Plan Strategic Baseline 2017/18 Clear Key and Key Clear Repeat findings PP AG,IA, From and Treasury Performance Management for Agreement Executives 5-Year Review Corporate Strategy Performance Indicator 5 6 7 # Strengthening Strengthening Governance Focus Area Strategy Strategy Development and Execution Performance Performance Management Framework Strategic Objective Governance Organisational Stability
CORPORATE PLAN 2020-2022 101 All amounts reflect unconsolidated figures COMMENTS 276 855 496 170 334 526 838 257 703 7 096 149 000 1 074 593 290 15 075 171 031 1 888 309 746 1.12 (9.09) 0.07 0.05 R257 929 R462 314 28% 2021/22 265 080 736 781 395 659 6 694 285 000 1 398 747 960 987 385 468 154 849 569 14 212 367 269 1.10 (10.80) 0.09 0.07 R219 910 R429 146 25% 2020/21 774 480 558 140 772 336 728 787 023 6 252 592 000 1 075 959 969 13 411 461 880 297 229 925 1.0.7 (15.23) 0.13 0.10 R183 385 R396 697 22% 2019/20 329 903 190 475 193 104 649 236 933 601 870 6 577 911 000 677 178 633 10 972 666 174 1.03 (34.03) 0.37 0.27 R132 638 R347 362 21% Forecast 31 March 2019 282 682 473 842 015 656 218 634 457 754 703 794 6 125 877 999 1 790 794 380 11 902 440 256 1.02 (45.52) 0.92 0.88 R241 707 R365 992 33% 2018/19 Target 191 949 581 521 900 835 157 126 506 702 781 621 5 889 910 311 1 114 997 185 10 558 942 787 1.01 (88.58) 0.57 0.43 R160 493 R320 544 26% Baseline 2017/18 Baseline Debt to Debt to asset Debt to equity Current Current ratio Quick ratio Debt Ratios: • • Liquidity ratios: • • Revenue per Revenue employee Cost per Cost employee Cost coverage Cost Other income Operating Operating Subsidy Autopax MLPS Fare Revenue: Metrorail Rental Income Rental Performance Indicator # Solvency Solvency ratios Efficiency ratio Expenditure Revenue Focus Area Improve Improve financial position Manage Operating Expenditure Strategic Objective Revenue Grow Improving the Financial Position Objective 2: Improving
102 CORPORATE PLAN 2020-2022 COMMENTS Increase/decrease of safety incidents of safety Increase/decrease derailments, of accidents, (Total crossings. and level SPADS of accidents, incidents (Total Safety and level SPADS derailments, crossings. Number of security incidents service affecting of on time as a percentage Trains trains scheduled 2021/22 2 140 561 000 40% R170 m 80% 8 50 314m 1 730 78% 1 888m 70% 2020/21 60 2 062 510 000 30% R155m 75% 10 270m 2 000 73% 1 399m 65% 2019/20 70 1 987 463 000 25% R141m 68% 12 246m 2 400 68% 1 076m 60% YTD Actual Jan 2019 84 1 840 375 000 13% R114m 60% (E) 9 213m 2 650 57% 929m 52% 2018/19 Target 1970 584 000 40% R219m N/A 15 342m 3 900 68% 2 009m 59% 59 2 030 465 000 16% R155m 70,4% 17 Baseline 2017/18 270m 4 120 63,9% 1 282m 54% 63 Train trips Train Passengers Passengers On-time arrivals Revenue Customer Satisfaction Number of Safety: incidents safety Passenger trips Passenger Security Passenger Performance Measure (R) Revenue Customer Satisfaction Number of Safety: incidents safety Performance Indicator # MLPS METRORAIL Focus Area Recover Recover and Restore passenger service Strategic Objective Recover and Restore commuter service Improving Commuter and Passenger Travel Experience Travel and Passenger Commuter Objective 3: Improving
CORPORATE PLAN 2020-2022 103 COMMENTS 2021/22 55 938 2 643 866 passengers/ on long patronage by routes distances 2022 March 95% on time by departures 2022 March 85% Customer 85% Customer rating Satisfaction by Autopax for 2022 March R 1 076.0 m 130 accidents < 130 accidents per 51 106 264 by March kilometres 2022 0 fatalities per 2 643 0 fatalities by 866 passengers 2022 March 15 passengers < 15 passengers injuries per 2 643 by 866 passengers 2022 March 1 breakdowns per 60 per breakdowns 1 000kms 100% on time by rate service 2022 March 100% COF rate by 100% COF rate 2022 March 2020/21 55 938 2 566 860 passengers/ on long patronage by routes distances 2021 March 95% on time by departures 2021 March 80% Customer 80% Customer rating Satisfaction by Autopax for 2021 March R 996.3 m 150 accidents < 150 accidents per 51 106 264 by March kilometres 2021 0 fatalities per 2 566 0 fatalities by 860 passengers 2021 March 17 passengers < 17 passengers injuries per 2 566 by 860 passengers 202 March 1 breakdowns per 60 1 breakdowns 000kms 100% on time by rate service 2021 March 100% COF rate by 100% COF rate 2021 March 2019/20 55 938 2 492 098 passengers/ on long patronage by routes distances 2020 March 95% on time by departures 2020 March 80% Customer 80% Customer rating Satisfaction by March Autopax for 2020 R 922.5 m 171 accidents < 171 accidents per 51 106 264 by March kilometres 2020 0 fatalities per 2 < 0 fatalities 492 098 passengers 2020 by March 19 passengers < 19 passengers injuries per 2 492 by 098 passengers 2020 March 1 breakdowns per 60 1 breakdowns 000kms 100% on time by rate service 2020 March 100% COF rate by 100% COF rate 2020 March YTD Actual Jan 2019 15456 1 402 130 passengers/ on patronage distances long routes 75% On time Departures Waiting for for Waiting from results corporate R 417 m 210 per accidents 24 635 357 kilometres travelled 0`fatalities 0`fatalities per 1 237 252 passengers transported 19 passengers 19 passengers injuries per 1 237 252 passengers transported 0.33 breakdown 0.33 breakdown per 60000kms 76% On time Rate Service 89% 2018/19 Target 66341 2 819 638 -3 116 442 passengers/ on long patronage routes distances 2019 by March 80% - 85% on time departures 2019 by March 69% - 79% Customer rating Satisfaction by Autopax for 2019 March R 489.3 m 180 accidents < 180 accidents per 51375959 by kilometres 2019 March 0 fatalities < 0 fatalities per 2,968,040 by passengers 2019 March 55 passengers < 55 passengers injuries per 2,968,040 by passengers 2019 March 1 breakdowns per 1 breakdowns 60 000kms 85% to 95% on 85% to rate time service 2019 by March 100% COF rate by 100% COF rate 2019 March Baseline 2017/18 77241 1 898 777 passengers/ on patronage distances long routes 61% on time by departures 2018 March 62% R 568.2 m 262 accidents 262 accidents per 38262451 by kilometres 2018 March ‘7 fatalities ‘7 fatalities per 1898777 by passengers 2018 March ‘81 passengers ‘81 passengers injuries per1898777 by passengers 2018 March 0.41 per breakdowns 45 000kms 38% on time service 60% Performance Indicator Bus Trips Passenger Passenger Numbers On-Time Departures Customer Customer Satisfaction Index Total Revenue Total Safety Breakdowns Breakdowns per 60 000 km Bus Servicing (On Time rate) service COF # Focus Area BUS OPERATIONS (AUTOPAX) Strategic Objective Recover Recover and Restore passenger service
104 CORPORATE PLAN 2020-2022 Excluding EMU sets Excluding that will be brought during service into the period Cumulative for the for Cumulative year. COMMENTS Cumulative for the for Cumulative year. the for Cumulative year. This is temporary speed restrictions set by the Regional two Engineer between points. kilometre be aligned with To out plan roll new be to Depot locations land finalised through packages finalise NMBM to public participation process New contract in contract New 2019/20 New contract in contract New 2019/20 285 train sets 285 train 1120 Perway faults faults 1120 Perway per annum reported 2021/22 1040 Electrical 1040 Electrical per reported faults annum 17950 Signal faults per annum reported 25km of the network under temporary by restrictions speed Year-end Complete and Wolmerton Eiland Paarden Complete of construction depots 2 & 3 Continue with of the Construction extension rail 450 55 Commence Commence of construction Harmony depot land Complete packages and designs 285 train sets 285 train 1240 Perway faults faults 1240 Perway per annum reported 2020/21 1130 Electrical faults faults 1130 Electrical per annum reported 20840 Signal faults per annum reported 53km of the network under temporary by speed restrictions Year-end Commence at construction Springfield and Salt Depot River • • Commence construction 400 55 Commence Commence at construction Wolmerton (Phase 3) Eiland Paarden commenced 260 train sets by year-end 260 train 230 1440 1120 23740 Final Designs complete 2019/20 76 km by year-end • • designs for Complete Harmony depot 45 289 171 Detail Detail Designs complete 1181 230 YTD Actual Jan 2019 1481 155.4 Phase 2 Construction of Wolmerton Depot Upgrade complete 32 350 284 Submit EIA by application end year 1589 1354 2018/19 Target 20014 106 - 130 Complete Complete Construction on commence Wolmerton Phase 2 33 409 200 Annual 1530 1240 Baseline 2017/18 25233 137.40 56 Perway Faults per Faults Perway annum Electrical Faults Faults Electrical per annum Rail expansion Rail expansion projects (Motherwell) General Overhaul Overhaul General of Metrorail Coaches Metrorail Metrorail coaches Commuter in service Performance Indicator Signal faults temporary Reduce engineering speed restrictions in km on measured network the rail Rolling Stock Depot Rolling Stock modernisation projects in commencing, and construction complete. Bus Depot projects Bus Depot projects in commencing, and construction complete. General Overhaul Overhaul General of MLPS coaches # Infrastructure Infrastructure reliability Rail expansions Rolling Stock Focus Area Depot Modernisation Bus Depot Construction Reliability and of Availability and the Service Infrastructure Strategic Objective Expand PRASA rail and networks services Modernisation Ensuring Reliability and Availability of the Service & Infrastructure of the Service Objective 4: Ensuring Reliability and Availability
CORPORATE PLAN 2020-2022 105 COMMENTS 20 10 12 2021/22 25 05 10 2020/21 30 06 12 2019/20 04 03 03 YTD Actual Jan 2019 06 – 10 10 -14 30 - 40 2018/19 Target 12 13 17 Baseline 2017/18 NSUP WPIP NSIP Performance Indicator # Property Property Upgrades and Improvement Facilities Management Facilities Facilities Management Focus Area Upgrade & Improve & Improve Upgrade into Assets Functionality for Assets Maintain Functionality Strategic Objective for Assets Maintain Functionality Managing and Improving the Property condition: Railway Stations & Workplace Facilities & Workplace Stations Railway condition: the Property Objective 5: Managing and Improving
106 CORPORATE PLAN 2020-2022 COMMENTS A total of 22 A total sets will train be provisionally by accepted end March 2019 CTC Bellville will completed 2019 by March By end of the 2019 MTEF, the 3 depots be fully must modernized The perway will be aligned with the new rollingstock deployment 2021/22 62 train sets 62 train provisionally accepted 0 Springfield Depot complete Upgraded perway Cape Western and KwaZulu Natal Construction commence on 2 more stations 2020/21 42 train sets 42 train provisionally accepted 26 stations commissioned Eiland Paarden Depot complete Upgraded perway Upgraded in Gauteng Oakmoor stations complete 2019/20 20 train sets 20 train provisionally accepted 49 stations commissioned Phase 3 of Depot Wolmerton complete Commence with Commence turnout and track in replacement Gauteng Phillipi station complete Duffs Roads complete YTD Actual Jan 2019 19 train sets 19 train provisionally by accepted end of January 2019 65 stations commissioned Phase 2 of Wolmerton Depot complete Detailed Detailed specification corridors for in Gauteng complete Phillipi – 76% station complete Duffs Roads – 89% complete and Oakmoor – 35% station complete 2018/19 Target 20 train sets 20 train provisionally accepted by end of year financial 49 stations commissioned Phase 2 and 3 of Wolmerton Depot complete Issue request request Issue proposal for the for appointment of contractors the Complete construction of Philippi, Duffs Roads and Oakmoor stations Baseline 2017/18 18 train sets 18 train provisionally accepted 32 stations commissioned Phase 1 of Wolmerton Depot complete Condition assessment of perway condition complete 3 stations under construction Performance Indicator Train sets Train provisionally as accepted per contract agreement Stations Signaled as completed per contract Depots fully modernized Reduction in speed restrictions fully Stations modernized 124 106 3 # 3 Signalling Programme Depot Modernisation 120km/h Perway Programme Station Modernisation Rolling Stock Rolling Stock Renewal Fleet Programme Focus Area Modernizing Rail Infrastructure Strategic Objective Improving Passenger Rail Travel Experience Improving Passenger Rail Travel Experience through Modernisation through Experience Rail Travel Passenger Objective 6: Improving
CORPORATE PLAN 2020-2022 107 COMMENTS The Security department will its strengthen by deploying operation in-house more to in order resources infuse professionalism culture and Prasa The Security personnel The Security personnel exposed currently are of high levels to the risks due to and sophistication of criminals eagerness Business in the area. Plan has been acquire to developed and is these vehicles with FCIP The High level security The High level is a fully strategy A fledged CI4STAR. approach staggered will be adopted, Specifications Current this build up towards at Bid Specification are Committee There is a need to is a need to There the drone implement in line with technology pilot the successful in Cape Town. study 2021/22 70/30 split Deliver11 Deliver11 Armoured in High Vehicles Risk Regions commencing with Umlazi, KwaMashu Line and New of corridors KZN . integrate control control integrate Rooms in KZN in line with the model CI4STAR s Implement Implement drone Technology in Priority in Corridors KZN, GP, WC 2020/21 70/30 split Deliver 11 Deliver Armoured in Vehicles High Risk Regions commencing with Central Line, Paarl and Bellville in corridors Cape Town. integrate integrate control Rooms in in Gauteng line with the CI4STAR model Implement Implement Drone technology in Cape Town and Gauteng ( Priority corridors) 2019/20 70/30 split Deliver Deliver 11Armoured in Vehicles the high risk Regions, commencing with Pienaarspoort, Germiston, Mabopane, Rand and West Kaalfontein in corridors Gauteng. integrate integrate Rooms control in Cape Town in line with the model CI4STAR Analysis of the Analysis Cape Western in study pilot Cape Town. YTD Actual Jan 2019 48/52 Zero Unintegrated Unintegrated at Park , Stations Cape Town and Station Pretoria Stations Drone Drone is Technology in currently in Cape pilot Town 2018/19 Target 48/52 Zero Unintegrated Unintegrated at Park , Stations Cape Town and Station Pretoria Stations None Baseline 2017/18 48/52 split Zero Unintegrated Unintegrated at Park , Stations Cape Town and Station Pretoria Stations None Performance Indicator 70/30 in- / sourcing outsourcing split plus gradual of deployment technology Provide 34 Provide Armoured vehicles nationwide protection for of security in personnel conducting their work Integrate Integrate Surveillance Cameras & Sensors through fully rooms control Approve the Approve implantation of drone technology curb to vandalism and theft # Focus Area 70/30 human capital deployment fully towards fledged in- house security with Prasa culture Corridor Protection Strategic Objective Implement security strategy people, for and assets infrastructure protection Fast track and track Fast procure Armoured vehicles Install state state Install of the art by technology a developing plan Technology the aligned to need Protecting People, Assets and Infrastructure Assets People, Objective 7: Protecting
108 CORPORATE PLAN 2020-2022 COMMENTS Current computerised computerised Current not being maintenance lack of ICT used due to support Inventory Management Inventory a complete requires overhaul Maintenance Maintenance Engineering standards over been altered have and must many years be recalibrated 2021/22 85% compliance 85% compliance with schedule 85% Compliance 85% Compliance with standard 85% Compliance 85% Compliance with Standards 2020/21 60% compliance with schedule 60% compliance with standard 60% Compliance with Standards 2019/20 Implementation Implementation of Computerised Maintenance Management system Compilation of Inventory Management and Policy Procedure Compendium of maintenance Standards complete YTD Actual Jan 2019 None None None 2018/19 Target Not measured Not measured None Baseline 2017/18 No baseline No baseline None
Performance Indicator Schedule Schedule Compliance Compilation of an Inventory Management and Policy procedure Compilation of Maintenance Engineering Standards # Focus Area Maintenance Execution Inventory Inventory Management Setting Maintenance Engineering and Quality Standards Strategic Objective Developing a sound Engineering function Asset for Management Asset management and maintenance Objective 8: Asset
CORPORATE PLAN 2020-2022 109 Intersite will Intersite utilize capital advanced to Group from fibre deploy Capital of Capital 65M advanced for Group from of deployment fibre Intersite will Intersite utilize capital from advanced invest to Group in Umgeni structure top development COMMENTS Capital of 248M of Capital be advanced to for Group from Real Estate Investments Generate 23.5M Generate from in Revenue commercialisation of fibre - Generate 19.9M Generate in Revenue property from investments Umgeni (Devco 6,7,8&9) 2021/22 R773mil in 4 Invest structure developments Umgeni (Devco 6,7,8&9) Generate 22.2M Generate from in Revenue commercialisation of fibre - Generate 11.5M Generate in Revenue property from investments Umgeni (Devco 3,4&5) 2020/21 R715.8mil Invest in 3 Invest structure developments Umgeni (Devco 3,4&5) Generate 14.5M Generate from in Revenue commercialisation of fibre 282 km of fibre 282 km of fibre operated deployed, and maintained for by Intersite use commercial Generate 2.9M Generate in Revenue property from investments Umgeni (Devco 1&2) 2019/20 R663.5 mil Invest in 2 Invest structure top developments Umgeni (Devco 1&2) YTD Actual Jan 2019 R469.1mil 2018/19 Target R690 mil Baseline 2017/18 R615.3mil Increase in Increase growth revenue generated the from commercialization of fibre. Expansion of fibre Expansion of fibre optic network commercial for purposes Performance Indicator Increase Increase Operating Revenue Revenue growth growth Revenue generated property from investments New Real Estate Real Estate New Investments Developments # ICT/Telecoms ICT/Telecoms infrastructure commercialisation Commercialisation Focus Area Real Estate Real Estate Investments Strategic Objective Driving the secondary mandate the through exploitation of assets support to primary mandate Exploiting the Assets through Property Development and Commercialisation Development Property through the Assets Objective 9: Exploiting
110 CORPORATE PLAN 2020-2022 Approval of Approval be CIC to to submitted GCEO Awaiting the signed SCM Policy A strategic procurement plan for modernisation Current to structures be revised COMMENTS 80% availability of key components Operating CIC Operating 80% Procurement Spend Approved Approved & SCM Policy procedures R14.7bn Implementa- tion of the IEP & CM Tool Policy and directive Implementa- tion Approved SCM Structure 2021/22 80% availability 80% availability of key components Operating CIC Operating 80% Procurement Spend Approved Approved & SCM Policy procedures R10.8bn Implementa-tion Implementa-tion of the IEP & CM Tool Policy and directive Implementation SCM Approved Structure 2020/21 80% availability of key components Operating CIC Operating 80% Procurement Spend Approved Approved & SCM Policy procedures R10.2bn Developed Developed draft guideline Engage Transnet Rail Freight as a strategic partner in IEP obtaining & CM Tool SCM Approved Structure 2019/20
Approved Approved SCM Policy R2.5bn
2013 SCM Structures YTD Actual Jan 2019
Established Established CIC 80% Procurement Spend 2018/19 Draft 2018/19 Draft SCM Policy R12.6bn
2013 SCM Structures 2018/19 Target
Procurement Plan 2009 SCM Policy R13.7bn Baseline 2017/18 2013 SCM Structure Service Level Level Service Agreement Approved CIC Approved Created Created of catalogue projects Implementation Implementation of Open Tender for System ≥R10M tenders Signed SCM Policy Capital Capital Programme Spend Performance Indicator Integrated Integrated Engineering Procurement & Contract Management Platform SCM Approved Structure 2 4 1 2 3 # 1 5 Re-alignment of SCM structures Inventory Management Establishment of Establishment Investment Capital Committee Create a catalogue a catalogue Create projects of critical acceleration for Procurement Plan Procurement SCM Approve and Policy procedures Modernisation Supply Chain Supply Management/ Plan Procurement Focus Area Establish Establish Strategic Sourcing Framework Strategic Strategic Projects Procurement Strategy Strategic Objective Realign Support functions achieve to an efficient Rail and Bus Business Procuring for the Business for Objective 10: Procuring
CORPORATE PLAN 2020-2022 111 COMMENTS Targets are are Targets currently under review by the DTI 40 12% 2% 2% 1% Identified and products for services Strategic partnership 2021/22 ≥ 75 points 80% 15% 15% 40 12% 2% 2% 1% Identified and products for services Strategic partnership 2020/21 ≥ 70 points 80% 15% 15% 40 12% 2% 2% 1% 2019/20 Identified and products for services Strategic partnership ≥ 55 points 80% 15% 15% 7% 5% N/A N/A N/A
YTD Actual Jan 2019 32% N/A N/A N/A N/A N/A
2018/19 Target Baseline 2017/18 N/A N/A N/A N/A N/A
Performance Indicator Level 8 ( ≥ 40 Level points) 80% 15% 15% 40 12% 2% 2% 1% Identification Identification of institutions strategic for partnerships # 7 8 9 10 11 12 13 14 15 3 Black-Women Black-Women companies owned groups Designated Supplier Development Enterprise development Set B-BBEE level Set B-BBEE level PRASA for All empowering All empowering BBBEE suppliers Compliant QSE EME Black-owned companies Focus Area Create strategic strategic Create partnerships Establish Establish Broad Based Black Economic Empowerment targets Strategic Objective
112 CORPORATE PLAN 2020-2022 Overall capital capital Overall spending of R38bn the 2019 MTEF over The outcome The outcome of the Strategic Plan is Investment planning, effective and organising of co-ordinating and resources activities project bring about to successful of implementation projects Framework Framework ensure must and integrated aligned planning cycle with full life implementation. delivery Seamless of the Capital Programme COMMENTS Targeted Targeted spending of R17.4bn Implemen- tation 2021/22 Targeted Targeted spending of R14.5bn Implemen- tation 2020/21 Targeted Targeted spending of R14bn Developed Developed long-term investment plan 2019/20 Finalize Capital Programme Governance Framework Capital Capital spending of R2.5bn by achieved end January 2019 Specification Specification the for appointment of consulting under team development YTD Actual Jan 2019 Review in Review progress Targeted Targeted spending of R14bn Developed Developed long-term investment plan 2018/19 Target Finalized Capital Finalized Capital Programme Governance Framework 2019 MTEF Capital 2019 MTEF Capital Programme prioritized Baseline 2017/18 Investment Plan Investment in approved 2012. ITPs December & ITPNs of Cities Planning developed; & Implementation interventions of key emanating from Investment Strategic in Plan. Incorporated Plan – Jul Turnaround 18 Governance Governance Framework Reprioritised Capital to Programme meet urgent needs of PRASA improve to system rail and performance support projects with an Output or Outcome on improving safety revenue, and security Performance Indicator long- Developed investment term plan # Corporate Corporate Governance Supporting the urgent projects capital of PRASA for operational efficiency and effectiveness Focus Area Review Review Capital Program Governance Repriotisation of Capital Program Strategic Objective a Develop Long-Term Strategic Investment Plan Effective Management of Capital Programme Management of Capital Objective 11: Effective
CORPORATE PLAN 2020-2022 113 COMMENTS Implemen- tation 2021/22 Implemen- tation 2020/21 Implemen- tation 2019/20 Specifications Specifications depots for were developed following turnkey approach YTD Actual Jan 2019 Continue to Continue to adopt turnkey solution to implement for projects modernization that on a path critical 2018/19 Target Baseline 2017/18 Depots on a critical Depots on a critical modernization are for on a implemented approach turnkey Performance Indicator Timely of the delivery infrastructure asset and ensure maintenance # Focus Area Review Review of project implementation approach the across Group Strategic Objective Turnkey for approach infrastructure and Operational Readiness
114 CORPORATE PLAN 2020-2022 COMMENTS 2021/22 Fully functional Fully Model Operating Functional Real Functional Entity Estate Functional Functional engineering function functional Learning and Development environment The utilization of the workforce inform plan to recruitment, and selection of placement to employees, the ideal inform for skills required the organization 2020/21 Full Full implementation of the revised Model Operating Functional Real Functional Entity Estate Functional Functional engineering function Fully functional Fully Learning and Development environment The utilization of the workforce inform plan to recruitment, and selection of placement to employees, the ideal inform for skills required the organization 2019/20 Design a suitable operating model Design one Real Estate Entity Design one engineering function Design and implement an Integrated Learning and Development plan master (incorporating skills of the future) Design and implement the PRASA Workforce Plan YTD Actual Jan 2019 2018/19 Target Operating Operating Model for PRASA Functional Functional property management entity for PRASA Functional Functional engineering function Integrated Integrated Learning and Development plan master Implemented Implemented Plan Workforce Baseline 2017/18 Integrated Learning Integrated and Development plan master Implementation of the Integrated Learning and master Development plan Skills of the Develop future Workforce Plan Workforce Performance Indicator Operating Model Operating One Real Estate Entity One Real Estate One engineering function • • • • # Design and a implement operating suitable model and the for structures PRASA Group Focus Area Merge CRES and Merge and Intersite the new redefine mandate entitiys’ Consolidate Consolidate engineering in PRASA services Rail and PRASA Technical Implement Implement an integrated Learning and Development plan master consolidating and all learning development in the interventions organization. Develop an ideal Develop plan and workforce a skills conduct audit and skills the for matching organization. Strategic Objective Redefining the Organization Develop a Develop Capacitation and Development Plan Master Built to Last: Redefining the Organisation Last: Objective 12: Built to
CORPORATE PLAN 2020-2022 115 COMMENTS 2021/22 Employee surveys surveys Employee measuring the employee index satisfaction at and the level which the culture has changed A fully functional A fully Integrated Wellness Programme 2020/21 Full inculcation of inculcation Full the PRASA Values and Employee proposition Value Continuous to communication the regarding staff of the direction organization A fully functional A fully Integrated Wellness Programme 2019/20 Design and implement a unified organizational and culture gauge the effectiveness the effectiveness an through employee satisfaction survey Design an Integrated Wellness Programme YTD Actual Jan 2019 2018/19 Target A unified organizational culture Integrated Integrated Wellness Programme Baseline 2017/18 Performance Indicator A unified organizational A unified organizational Positioning culture PRASA as an employer of choice Integrated Wellness Wellness Integrated Programme # Unified Organizational Framework Culture (Galvanizing on the employees PRASA Strategic through direction Value Employee Proposition and interventions 300 leadership Top engagement sessions) Focus Area Consolidated Consolidated wellness employee interventions Assisted (Employee Programme, illness Chronic Management, Risk Management, Pool Aid, Medical Occupational Health, COIDA,) Strategic Objective Implement Enterprise Change Management
116 CORPORATE PLAN 2020-2022 Stakeholder Stakeholder Engagement Plan for submitted Approval Framework Framework submitted to Board for Approval Policy to be to Policy submitted for Board to Approval COMMENTS 1 Engagement Quarter Every No. of Stakeholders engaged and supporting PRASA Coordinated Coordinated communication the throughout Group 85% Customer 85% Customer Satisfaction 2021/22 1 Engagement Quarter Every No. of Stakeholders engaged and supporting PRASA Coordinated Coordinated communication the throughout Group 2020/21 70% Customer 70% Customer Satisfaction 1 Engagement Quarter Every No. of Stakeholders engaged and supporting PRASA Policy approved approved Policy and information communication the across Group 60% Customer 60% Customer Satisfaction 2019/20 No Measure No Measure existed Draft Draft Stakeholder Engagement Framework & Plan Draft Draft Communi- Policy cation YTD Actual Jan 2019 None No Measure No Measure existed Approved Approved Stakeholder Engagement & Framework Plan Communi- Policy cation 2018/19 Target None No Measure No Measure existed Draft Draft Stakeholder Engagement & Framework Plan Baseline 2017/18 None 12 Stakeholder 12 Stakeholder Engagement Forums Stakeholder Stakeholder Engagement & Plan Framework Group Group Communication Policy Performance Indicator group-wide Improved satisfaction customer 85% over of at least the MTEF # Focus Area Customer & Customer Stakeholder Relations Management & Communication Strategic Objective and Develop implement a Group Customer Management & Communication Strategy Building Customer and Stakeholder Confidence Confidence and Stakeholder Objective 13: Building Customer
CORPORATE PLAN 2020-2022 117 Reputation Reputation Plan submitted Board for Approval COMMENTS All Customer Communication Communication All Customer out according rolled Platforms the Plan to 85% positive about news PRASA 2021/22 2020/21 Migrate Go Migrate to Metro PRASA App Public Address at all System & Super Core Stations Core 24-Hour Call fully Centre functional Twitter Instagram Facebook YouTube Introduce PRASA Customer Newsletter 70% positive about news PRASA Information Information Display Screens Help Customer Desks 24- Integrated hour Call Centre Twitter Instagram Facebook YouTube Introduce PRASA Customer Newsletter 60% positive about news PRASA 2019/20 YTD Actual Jan 2019 Draft Reputation Management Plan Not achieved Twitter Only is active 2018/19 Target Reputation Reputation Management Plan approved Rollout at Rollout all identified points Re-activate Social Group Media None Baseline 2017/18 at some Exist points key Exist Cape Town has a vibrant social media Reputation Reputation Management Plan Performance Indicator Customer Engagement & Communication Platforms # Focus Area Reputation Reputation Management Customer Customer Communication Reputation Reputation Management Strategic Objective Improve Customer Experience
118 CORPORATE PLAN 2020-2022 Timing for Timing for commencement is of this project funding subject to availability The City (NMBM) the indicated update need to their transport model and plan, which may have an impact on the timing for implementation. Feedback by expected Mid-2019 but it seems the City is delay experiencing with this project. COMMENTS 50% completion of Detailed Design and EIA EIA Approved and Designs Commence Commence with construction of the rail network 2021/22 Appointment of Provider Service Planning Design & Environmental Impact (EIA) assessment Completion of Completion Design and Detail EA 2020/21 BSC Submission Submission of motivation Capital for Allocation 90% Complete 2019/20 Draft RFP Draft completed Detail Design Detail and EA (85%) YTD Actual Jan 2019 Commence Commence Design Detail phase of project Capital Motivation Completion of Completion Designs Detail of and receipt Environmental Authorisation 2018/19 Target Feasibility Feasibility study completed Feasibility study completed Feasibility Feasibility study completed Baseline 2017/18 Finalise RFP and Appointment of provider Service Detailed for Design and Environmental Impact Assessment Motivation Capital submission Performance Indicator Design Detailed & Environmental Authorisation 1 1 1 # Blue Downs Blue Downs Rail Link Daveyton- Etwatwa Rail Corridor Motherwell Motherwell Rail Link Focus Area Strategic Objective Rail network into expansion areas new Planning for Growth and Network Expansions and Network Growth Objective 14: Planning for
CORPORATE PLAN 2020-2022 119 120 CORPORATE PLAN 2020-2022