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Transnet Statement on Shosholoza Meyl Service

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Transnet Statement on Shosholoza Meyl Service August 17 2010 Transnet statement on Shosholoza Meyl service The Passenger Rail Agency of South Africa (PRASA) unilaterally discontinued its long distance passenger train services without consulting Transnet. This was for reasons that were within PRASA’s operational control and despite numerous attempts by Transnet to warn PRASA of the impending impact on service delivery. Notwithstanding Transnet’s minor role in this unfortunate situation, it should be noted that the Company has set out constructive ways, including specific proposals, to assist PRASA deal with some of its difficulties. These proposals are in accordance with Transnet’s continued commitment to open and transparent engagement with PRASA. They include a commitment to assist PRASA in getting the long distance passenger service reinstated. In addition, Transnet is available to meet PRASA representatives at their convenience. The facts PRASA decided to suspend its entire long distance passenger train service last week. It said this was due to the realignment of the service strategy and to ensure the reliability of rolling stock. Transnet was never informed of the decision or the reasons behind PRASA’s decision to discontinue its long distance passenger service. Transnet Rail Engineering (TRE) has not at any time refused to perform maintenance on PRASA’s rolling stock. Before August 15, Transnet had had no official notification from PRASA of the intention to move its maintenance work to other suppliers TRE and PRASA meet on a monthly basis to discuss locomotive maintenance issues and action plans. The reason for not executing maintenance on approximately 70 PRASA locomotives is that the purchase orders for this maintenance were never received from PRASA. This was a requirement imposed by PRASA. Transnet Rail Engineering has not at any time refused to certify PRASA’s locomotives as rail safe. Transnet has at no time refused PRASA access to the network. PRASA owes Transnet R1.3 billion of which R226 million is subject to a dispute resolution process which relates to the pricing on the Metrorail 10M5 coaches. Transnet has always conducted itself in an open and transparent manner seeking constructive resolution to matters of mutual interest. All discussions and negotiations have been conducted in good faith. We note with concern misleading, inaccurate and defamatory media statements attributed to various PRASA employees. PRASA announced last week that it would suspend its long distance passenger service – Shosholoza Meyl - for at least two weeks. It cited the need to make Shosholoza more responsive to customer demands, as well as the impact of, amongst other factors, the unreliability of locomotives as reasons for the decision. Transnet has had no official notification from PRASA on its decision to move maintenance of its rolling stock to different suppliers. Notwithstanding significant payment delays and pricing disputes, Transnet has continued to provide maintenance and upgrade services to PRASA. However, in mid-July 2010, PRASA revised certain governance processes that related to the manner in which it would authorize work performed by TRE. Locomotives requiring maintenance work since that time have not been worked on by TRE, as no work had been authorized by PRASA – this affected 70 locomotives. After suspending the long distance passenger services, Transnet received a request from PRASA to return these locomotives to PRASA in order that it can maintain the locomotives. This is being attended to as a matter of urgency with 32 being returned to date. In addition, 16 locomotives have been maintained and these will also be returned and the balance could be done (maintenance) within 2 to 3 weeks should PRASA decide to reverse its decision. With regards to the quality of maintenance work carried out by TRE, Transnet is satisfied with the performance. The quality of TRE’s repair work is illustrated further by the performance in Transnet Freight Rail’s fleet whose average age is 30 years. The fleet has improved availability from 79% to 89%, while reliability has moved from 60 faults per million km, to 25 faults per million km. This performance is in line with the performance standards of brand-new rolling stock. The same work is performed on PRASA’s passenger locomotives, by the same teams and to similar quality standards. However, the operator plays a major part in achieving these targets. Operator behaviour that may affect reliability includes overdue maintenance and driver conduct. In order that an agreed solution be reached, Transnet has invited PRASA to document the specific instance of unreliability for immediate investigation. This is in addition to the standard monthly status meetings between the two parties in which these issues are to be raised. To date, Transnet has had no formal complaints from PRASA nor have we had any claims under TRE’s 1-year warranty on service rendered. The basis on which PRASA’s operating license was granted by the Rail Safety Regulator was via a bi-lateral agreement. In terms of this agreement, TRE would certify locomotives’ safety on the network, based on specific maintenance to be performed by TRE. TRE is approved by the Rail Safety Regulator to perform such maintenance and provide a certification. If TRE certifies locomotives’ safety without executing the necessary maintenance, it will be in breach of this agreement. Consequently, if TRE exercises its obligation in terms of the Rail Safety Regulator’s requirements, it would be doing so to comply with the laws and regulations of the country relating to passenger safety. The pricing of Transnet’s services to PRASA is the subject of an independent review commissioned by Transnet and PRASA. The parties have agreed to be bound by the outcome of this investigation, which will include appropriate benchmarking of pricing for services rendered. PRASA owes Transnet R1.3 billion of which R226 million is subject to dispute resolution. These are audited numbers. Issued by Mboniso Sigonyela on behalf Transnet Limited Notes to editors: Transnet transferred the Shosholoza Meyl business to PRASA with effect from 1 April 2009; The deal included the transfer of 124 locomotives on which Transnet spent R200 million in upgrades; The deal included the provision of agreed maintenance services by Transnet to PRASA in respect of the Shosholoza Meyl business .
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