Annual Report 2019/20

ANNUAL REPORT 2019/20

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Annual Report 2019/20_26_OCT_2020.indd 2 10/26/20 4:29 PM Constitutional Contents

PART A: GENERAL INFORMATION 05 Statement of Responsibility and Public Entity’s General Information 6 Confirmation of Accuracy for List of Abbreviations/Acronyms 7 the Annual Report 12 Chairperson’s Foreword 9 Strategic Overview 14 Chief Executive Officer’s Overview 11 Constitutional and other Mandates 16 Board of Directors 18 Executive Committee 19 Organisational Structure 20

PART B: PERFORMANCE INFORMATION

Auditor’s Report: Performance Information by Programme/ 21 Predetermined Objectives 22 Activity/ Objective 33 Situational Analysis 22 Outcome 1: Railways are Safer 33 Service Delivery Environment 22 Outcome 2: Sustainable Institutional Organisational Environment 27 Growth and Development 40 Key Policy Developments and Outcome 3: Improved Stakeholder Service 43 Legislative Changes 29 Revenue Collection 46 Strategic Outcome Oriented Goals 30 Capital Investment 47

PART C: GOVERNANCE 49 Introduction 50 Compliance with Laws and Regulations 67 Portfolio Committees 50 Fraud and Corruption 68 Executive Authority 50 Minimising Conflict of Interest 69 The Accounting Authority/Board 50 Code of Conduct 69 Company/Board Secretary 62 Health Safety and Environmental Issues 70 Risk Management 63 Social Responsibility 72 Internal Controls 65 Audit Committee Report 73 Internal Audit and Audit Committees 65 B-BBEE Compliance Performance Information 75

77 PART D: HUMAN RESOURCE MANAGEMENT PART E: FINANCIAL INFORMATION Introduction 78 87 Auditor General’s Report 90 Human Resource Oversight Statistics 80 Annual Financial Statements 94 Notes 142

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Annual Report 2019/20_26_OCT_2020.indd 4 10/26/20 4:29 PM PART A: GENERAL INFORMATION

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Annual Report 2019/20_26_OCT_2020.indd 5 10/26/20 4:29 PM Public Entity’s General Information

Registered Name: Railway Safety Regulator Registration Number: N/A Physical Address: Building 4, Waterfall Point Office Park, Cnr Waterfall and Woodmead Drive, Waterfall City, Midrand, 1685, South Africa

Postal Address: P.O Box 11202, Centurion, 0051, South Africa

Telephone Number: +27 10 495 5291

Email Address: [email protected] Website Address: https://www.rsr.org.za External Auditors: Auditor General of South Africa

271 Veale Street, Muckleneuk, 0181

Banker: ABSA

Company/ Board Secretary Mmuso Selaledi (Acting)

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Annual Report 2019/20_26_OCT_2020.indd 6 10/26/20 4:29 PM List of Abbreviations/Acronyms

AFS Annual Financial Statements

AGSA Auditor General of South Africa

APP Annual Performance Plan

ASB Accounting Standards Board

BBBEE Broad Based Black Economic Empowerment

CCMA Commission for Conciliation Mediation and Arbitration

CEO Chief Executive Officer

CFO Chief Financial Officer COO Chief Operations Officer CSM-CA Common Safety Method Conformity Assessment

CSM-RA Common Safety Method Risk Assessment

DoT Department of Transport ERM Enterprise-Wide Risk Management

FY Financial Year GRAP Generally Recognised Accounting Practice

HFM Human Factor Management

IAA Internal Audit Activity

ICT Information Communication Technology

IIMS Integrated Information Management System

KPI Key Performance Indicator

MoU Memorandum of Understanding

MTEF Medium Term Expenditure Framework MTSF Medium Term Strategic Framework

NATMAP National Transport Master Plan 2050

NDP National Development Plan 2030

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Annual Report 2019/20_26_OCT_2020.indd 7 10/26/20 4:29 PM NIMS National Information Monitoring System

PFMA Public Finance Management Act

PRASA Passenger Rail Agency of South Africa

REPUBLIC Republic of South Africa

RIA Regulatory Impact Assessment

RM3 Railway Management Maturity Model

RSR Railway Safety Regulator

SADC Southern Africa Development Community

SALGA South African Local Government Association

SANS South African National Standards

SARA Southern Africa Railways Association

SATAWU South African Transport and Allied Workers

SCM Supply Chain Management

SMME Small Medium and Micro Enterprises

SMS Safety Management System

SMSR Safety Management System Report

SOP Standard Operating Procedure

TETA Transport, Education and Training Authority

TFR Transnet Freight Rail

TR Treasury Regulations

UNTU United National Transport Union

VSCC Verbal Safety Critical Communication

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Annual Report 2019/20_26_OCT_2020.indd 8 10/26/20 4:29 PM Chairperson’s foreword

s I take over the reins as the Chairperson of the Board of Directors of the Railway Safety Regulator (RSR), I am pleased to present the 2019/20 Annual Report in a year where the Regulator achieved 94 A per cent of its annual performance targets. It would be remiss of me not to acknowledge the role played by my colleagues who were part of the previous RSR Board. This great performance would not have been possible without their dedication and stewardship.

The year under review has indeed been exceptional and saw the RSR accentuate the 6th Administration’s apex priorities and the Department of Transport’s Strategic Outcome to ensure an efficient and integrated rail network that accelerates social and economic development. The Regulator aligned its strategic goals and objectives to ensure that all rail industry activities are completed with safety as the main consideration.

The Board of Directors focused on discharging their duties of ensuring that the RSR complies with legislation, conducts its business in harmony with the applicable regulatory requirements and ensures that suitable policies, as well as frameworks, are steadfast to promote a culture of compliance within the organisation. In line with this, the Compliance Unit was established to assist the Board in the management of compliance risks, by ensuring that all instances of non-compliance are adequately followed up and resolved. This enabled the RSR to conduct its business activities in an increasingly efficient and effective environment.

Throughout the 2019/20 Financial Year, the RSR’s compliance monitoring was prioritised with the organisation ensuring controls and processes to support the requirements of the relevant Acts. These controls and processes were assessed for validity through corroboration of supporting evidence. To this effect, numerous policies were signed off and all departments across the organisation developed Standard Operating Procedures which guarantees that processes are in place to ensure excellent service delivery every time.

We are very pleased about the key strategic relationships that were established with the South African Local Government Association (SALGA) in the Gauteng and North-West provinces respectively. To this end, strong relationships are being built that will have mutual benefits for both entities. A lot of work is still required in this space and over time, we hope to see positive impacts on compliance as well as spatial planning, among other priorities. In the new financial year, the RSR will focus on strengthening its mandate by developing a Common Safety Method for Supervision Framework as well as a Financial Sustainability Plan. These will no doubt bring immeasurable value to the industry.

Allow me to thank the Minister of Transport, Mr. Fikile Mbalula, the members of the previous Board, the executive team and all the staff members of the RSR as well as our extensive assembly of stakeholders for making the Regulator a significant player in the railway environment.

______Mr Boy Johannes Nobunga CHAIRPERSON: RSR BOARD

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Annual Report 2019/20_26_OCT_2020.indd 10 10/26/20 4:29 PM Chief Executive Officer’s report

he past financial year has been both challenging and outstanding for the Railway Safety Regulator (RSR). Notwithstanding the challenges, the Regulator performed exceptionally well. T I am, therefore, truly honoured to present the 2019/20 Annual Report of the RSR which reflects on a year where the RSR achieved a sterling 94 per cent overall performance.

As a state-owned entity of the National Department of Transport, the RSR aligned its Annual Performance Plan with the Apex Priorities of the 6th Administration. In line with transforming the economy to serve all South Africans and create jobs, the organisation awarded a total of R3 044 959 for internal and external bursaries during the year under review. The bursaries were awarded to nine staff members and 29 deserving students, who will over time become contributing professionals in industries, including the rail sector.

To advance nation-building and social cohesion, the RSR is strengthening the rail regulatory framework through the development of determinations, protocols and guidelines. These tools are aimed at building industry capacity to develop effective safety management approaches as well as the development of an industry safety risk profile to support critical risk mitigation decisions that will result in safer railway operations. These require industry cooperation.

To that extent, the RSR reviewed its engagement with the industry by adopting a collaborative approach in mitigating the risks of railway occurrences and thereby reducing the number of occurrences.

Throughout the financial year, the Supply Chain Management (SCM) unit continued to ensure compliance with legislation, National Treasury instruction notes and the RSR’s internal controls. Special care was taken to ensure that efficiency in the procurement of goods and services continued to improve the overall organisational performance. However, the audit outcome indicates that a bit more has to be done to ensure compliance with all supply chain legislation.

Some of the highlights of the year under review included the conclusion of the restructuring process, including the filling of crucial vacancies; the development of a Safety Risk Model (SRM) scope; occurrence reporting categories were published, and the Common Safety Method for Risk Assessment (CSM-RA) was tested with three Class A operators. Competency guidelines and agreed workload planning are still in progress and will be included in the operational plan of the relevant department for the 2020/21 FY to ensure that we do not lose sight of the set targets.

I would like to take this opportunity to thank the Department of Transport and the previous Board of Directors for their valuable insight and guidance. To the RSR family, you have shown that through hard work and dedication, we can rise above any challenge and unite as a team to soar as an organisation.

This Annual Report is a clear reflection of the RSR’s devotion to improve railway safety and to reduce operational risks in the railway environment to as low as reasonably possible.

______Ms Tshepo Kgare ACTING CHIEF EXECUTIVE OFFICER

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Annual Report 2019/20_26_OCT_2020.indd 11 10/26/20 4:29 PM Statement of responsibility and confirmation of accuracy for the Annual Report

To the best of my knowledge and belief, I confirm the following:

All information and amounts disclosed in the Annual Report are consistent with the Annual Financial Statements audited by the Auditor General.

The Annual Report is complete, accurate and is free from any omissions.

The Annual Report has been prepared in accordance with the guidelines on the Annual Report as issued by National Treasury.

The Annual Financial Statements (Part E) have been prepared in accordance with the GRAP standards applicable to the public entity.

The accounting authority is responsible for the preparation of the Annual Financial Statements and the judgements made in this information.

The accounting authority is responsible for establishing and implementing a system of internal control by providing reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the Annual Financial Statements.

The external auditors are engaged to express an independent opinion on the Annual Financial Statements.

In our opinion, the Annual Report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the public entity for the financial year ended 31 March 2020.

Yours faithfully

______Ms Tshepo Kgare Mr Boy Johannes Nobunga ACTING CHIEF EXECUTIVE OFFICER CHAIRPERSON: RSR BOARD Date: 30 September 2020 Date: 30 September 2020

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Annual Report 2019/20_26_OCT_2020.indd 13 10/26/20 4:29 PM Strategic overview

Vision

Zero occurrences. Mission To oversee and promote safe railway operations through appropriate support, monitoring and enforcement, guided by an enabling regulatory framework.

Values

Integrity and trust Transparency Fairness & equity

We instil confidence in our We will openly communicate We will ensure that we are consistent stakeholders through quality, information. in applying policies and procedures professional and efficient service and that we are impartial in treating delivery. all our stakeholders by ensuring that we communicate effectively to all our stakeholders.

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Annual Report 2019/20_26_OCT_2020.indd 14 10/26/20 4:29 PM Strategic overview

Innovation Speed of execution Respect and diversity

We will create a conducive We will make prompt decisions We recognise and acknowledge that the RSR is a non- environment that allows and take appropriate action racial equal opportunity employer with a multinational, for the sharing and informed by organisational multi-ethnic, multi-skilled and multi-cultural people. In implementation of new ideas priorities. doing so, we remain proud of our heritage while being in line with the goals of the consciously aware of our collective diversity and cultures. RSR. We, therefore, engage with and treat each other, our customers, as well as our work, with dignity and respect.

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Annual Report 2019/20_26_OCT_2020.indd 15 10/26/20 4:29 PM Constitutional and other mandates

CONSTITUTIONAL MANDATE • Promote the harmonisation of the railway safety regime of the Republic with the objectives and requirements of The Constitution identifies the legislative responsibilities of SADC for the operation of railways. different levels of government regarding airports, roads, traffic management and public transport. Transport is a function Legislative mandate that is legislated and executed at all levels of government. The implementation of transport functions at the national level takes place through public entities which are overseen The RSR was established in terms of the National Railway by the Department of Transport. Safety Regulator Act No. 16 of 2002 as amended, to establish a national regulatory framework for South Africa The RSR is responsible for ensuring Compliance with chapter and to monitor and enforce compliance in the rail sector. 2 and 3 of the Constitution of the Republic of South Africa. The primary legislative mandate of the RSR is to oversee and enforce safety performance by all railway operators in Promotion of the rights of people in South Africa affirms the South Africa including those of neighbouring states whose democratic values of human dignity, equality and freedom. rail operations enter South Africa. In terms of the Act, all The achievement of safer railways reinforces the values operators are primarily responsible and accountable for contained in the Bill of Rights. ensuring the safety of their railway operations.

The RSR observes and adheres to the principles of co- Other legislative mandates operative government and intergovernmental relations which is supported by its work on the rail reserve regulations The RSR is a statutory organisation and primarily derives and harmonisation of the Southern African Development its mandate from its constitutive legislation, the National Community (SADC) railways through common safety Railway Safety Regulator Act No. 16 of 2002 as amended. methods. Also, the RSR must comply with legislative prescripts that have an impact on its business/operations, including but not LEGISLATIVE AND POLICY MANDATES limited to the: Our railway safety functions are driven by legislation. We are • Occupational Health and Safety Act, Act no. 85 of 1993; accountable to Parliament and the public to: • Legal Succession to the South African Transport • Provide for and promote safe railway operations; Services Act no. 9 of 1989, as amended; • Encourage the collaboration and participation of • Public Finance Management Act, Act no. 1 of 1999, as interested and affected parties in improving railway amended; safety; • National Environmental Management Act no. 107 of • Recognise the prime responsibility and accountability of 1988; operators in ensuring the safety of railway operations; • National Disaster Management Act no. 57 of 2002; • Facilitate a modern, flexible and efficient regulatory • Promotion of Access to Information Act no. 2 of 2000; regime that ensures the continuing enhancement of safe • Various labour legislation, including Section 189 of the railway operations; and Labour Relations Act no. 66 of 1995, Basic Conditions

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Annual Report 2019/20_26_OCT_2020.indd 16 10/26/20 4:29 PM of Employment Act no. 75 of 1997, Skills Development telecommunications and public transport, and it needs to be Act no. 97 of 1998, Employment Equity Act no. 55 of robust and extensive enough to meet industrial, commercial 1998; and household needs. • Protected Disclosures Act no. 26 of 2000; and • Promotion of Administrative Justice Act no. 3 of 2000. As expressed in our vision and mission statements, the RSR is committed to contributing towards the country’s medium- Policy mandate and long-term socio-economic objectives, with a specific focus on MTSF Outcome 6: An efficient, competitive and The RSR as a state entity is also governed and directed responsive economic infrastructure network. Therefore, the by various policies developed and approved by the South RSR’s strategic intent aims to ensure that the upgrading and African government at varying spheres. The following are expansion of the country’s rail network and fleet contribute some of the policy mandates that guide the work of the to: RSR: • Improved safety management practices and accountability by all industry stakeholders; • The National Development Plan 2030 (NDP); • Sector-wide compliance with railway safety regulations • The National Transport Master Plan 2050 (NATMAP); and standards; • The National White Paper on Transport Policy, 1996; • Constructive engagements with industry and funders to encourage investments in safer and user-friendly rail • The New Growth Path Framework; technologies; • Various national and international policies within the • Safe railway behaviour of those directly interacting with railway sector. the railways (operators, commuters, pedestrians and • National Government’s strategic outcomes motorists); and • Improved customer service. Alignment to the Medium-Term Strategic Framework Department of Transport Strategic Outcome-Oriented Goals The Medium-Term Strategic Framework (MTSF) is defined as a statement of intent identifying the development In line with the Department of Transport’s (DoT) Strategic challenges facing South Africa. It also outlines the Outcome-Oriented Goal 1, which aims to ensure an efficient medium-term strategy for improving living conditions and and integrated infrastructure network that serves as a contributions to economic growth and prosperity. South catalyst for social and economic development, the RSR will Africa requires investment into an effective network of align its strategic goals and objectives to ensure that all rail economic infrastructure aimed at supporting the country’s industry activities are completed with safety as the main medium- and long-term economic and social objectives. This economic infrastructure is a precondition for providing consideration. basic services such as electricity, water, sanitation,

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Annual Report 2019/20_26_OCT_2020.indd 17 10/26/20 4:29 PM Board of directors

Mr Boy Johannes Nobunga Ms Tshepo Kgare Dr Nomusa Zethu Qunta Deputy Chairperson Acting Chief Executive Officer Board Chairperson

Mr Andre Harrison Ms Ntombizine Mbiza Ms Hilda Thamaga Thopola Mr Christiaan Johan De Vos

Major-General Willem Venter Major - General Michael Motlhala Mr Tibor Szana Mr Jan-David De Villiers (Retired)

Mr Mmuso Selaledi Acting Company Secretary

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Annual Report 2019/20_26_OCT_2020.indd 18 10/26/20 4:29 PM Executive committee

Standing L-R: Mr Freddie Kgomari (Acting Chief Operations Officer), Mr Khayalethu Madlwabinga (Executive: Human Resources), Mr Regardt Gouws (Chief Financial Officer) Seated L-R: Mr Mmuso Selaledi (Executive: Risk and Strategy), Ms Malerato Kekana (Chief Audit Executive), Ms Tshepo Kgare (Acting Chief Executive Officer) and Ms Madelein Williams (Executive: Media and Communications)

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Annual Report 2019/20_26_OCT_2020.indd 19 10/26/20 4:29 PM BOARD GOVERNANCE Legal Legal Services Secretary Company LEGAL SERVICES AND HUMAN RESOURCES Services Relations Employee Employee Employee Administration MEDIA AND Corporate COMMUNICATIONS Stakeholder Engagement Communications OFFICER BOARD CHIEF EXECUTIVE OPERATIONS Region Eastern Eastern Region Safety Coastal Coastal Region Central Central Management Safety Permit Safety Management Administration ICT and Systems FINANCE INTERNAL AUDIT Financial Facilities Accounting Supply Chain Management Management RISK AND STRATEGY Risk Compliance Strategy and Strategy Performance Management Management Organisational structure Organisational

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Annual Report 2019/20_26_OCT_2020.indd 20 10/26/20 4:29 PM PART B: PERFORMANCE INFORMATION Organisational structure Organisational

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Annual Report 2019/20_26_OCT_2020.indd 21 10/26/20 4:29 PM Auditor’s report: Predetermined objectives

The AGSA currently performs the necessary audit procedures on the performance information to provide reasonable assurance by means of an audit conclusion. The audit conclusion is included in the report to management and contains material findings under the Predetermined Objectives heading in other legal and regulatory requirements section of the Auditor’s Report.

Refer to page 90 of the Auditors Report, published as Part E: Financial Information.

Situational analysis Service Delivery Environment Alignment to the apex priorities

The MTSF is government’s high-level strategic document to guide the five-year implementation and monitoring of the NDP 2030. The MTSF flows from the 2019 electoral mandate of the governing party and identifies the priorities to be undertaken over the 2019-2024 financial years to place the country on a positive trajectory towards the achievement of the 2030 vision. It sets targets for implementation of the priorities and interventions for the five-year period and states the outcomes and indicators to be monitored.

The seven apex priorities of the 6th Administration are:

• Transforming the economy to serve all South Africans and create jobs. • Investing in the capabilities of all the people through an education and skills revolution. • Advancing social transformation through the strengthening of the social wage. • Tackling the persistence of apartheid spatial development to build sustainable and safe human settlements, towns and rural areas, and effective local government. • Advancing nation-building and social cohesion, and a safe South Africa for all. • Building a better Africa and world. • Renewing and building a capable, honest developmental state and a social compact.

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Annual Report 2019/20_26_OCT_2020.indd 22 10/26/20 4:29 PM The RSR aligned its Annual Performance Plan with the apex priorities of the 6th Administration by focusing on:

Priority 1: Transforming the economy to serve all South Africans and create jobs: Unemployment is a national emergency and the country must commit to reducing unemployment from 27.6 per cent to 14 per cent in the next five years, while focusing on a skilling and reskilling programme to equip 3,5 million young South Africans. Massive job creation is to be achieved on the back of the Industrial Strategy, Job Summit initiatives, Operation Phakisa, and the Private Public Growth Initiative.

Contribution: The RSR awarded a total value of R2 762 474 for external bursaries to 29 students to assist with the completion of their studies in the 2020 academic year. The organisation also awarded internal bursaries to nine staff members totalling R282 485.

Priority 4: Tackling the persistence of apartheid spatial development to build sustainable and safe human settlements, towns and rural areas, and effective local government.

The Regulator is in constant engagement with SALGA as a nodal point to municipalities. Through such engagements, the RSR has been included as a member of the Tshwane Rail Steering Committee and can influence the rail-safety agenda, particularly with regards to operations in the Tshwane area. This Committee is concerned with safety-related issues pertaining to rail operations in the Tshwane area from a municipal perspective. The RSR will endeavour to establish similar relationships with other municipalities, particularly those where safe railway operations are a concern for the Regulator.

Contribution: The RSR established solid relations with SALGA in the Gauteng and North-West provinces respectively. To this end, municipal stakeholders attended a workshop for rail active municipalities in the North West province where the RSR socialised the stakeholders on the Regulator’s mandate. The municipalities were also educated on their responsibilities relating to compliance as well as spatial planning, especially where the municipal developments are adjacent to the rail reserve and may have an impact on their safety permit. Emphasis was placed on the importance of consulting the RSR prior to undertaking any railway developments. Similar efforts were made to engage the Tshwane Oversight Committee on Roads and Transport. Furthermore, the RSR is engaging SALGA to plan a national conference with municipalities across the country. The RSR

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Annual Report 2019/20_26_OCT_2020.indd 23 10/26/20 4:29 PM will have an opportunity to address mayors and municipal b. Industry-wide hazard log: To provide for a uniform, managers on the challenges experienced in their respective standardised and accurate reporting of all occurrences to municipalities. The conference is scheduled to take place in the the RSR. new financial year. Contribution: This target has been planned for in the 2020-25 Priority 5: Advance nation-building and social cohesion, reporting period. For this target to be achieved, it is important and a safe South Africa for all: for the occurrence reporting categories to be published. The The RSR is strengthening the rail regulatory framework through RSR will commence with the industry-wide hazard log during the crafting of determinations, protocols and guidelines. The the 2020/21 FY. aforementioned tools are aimed at building an industry safety c. Railway Management Maturity Model: This tool is used risk profile to support critical risk mitigation decisions that will to assess and measure a railway operator’s ability to result in safer railway operations. These interventions include: control safety risks, to help identify areas for improvement a. Occurrence Reporting Categories published: This and provide a benchmark for year-on-year comparison. will provide a structured representation of the causes and The model will enable the rail operator towards increased consequences of potential accidents arising from railway excellence in safety risk management. operations and maintenance, to allow for the determination Contribution: An assessment was conducted on Transnet of a risk profile of operators for focused mitigation activities Freight Rail (TFR), a division of Transnet SOC Ltd, and and controls. it was recommended that TFR review its approach to the Contribution: The Occurrence Reporting Categories was implementation of the Safety Management System (SMS) with published in March 2020 and outlines the mandatory notifiable focus on execution, motoring and review. railway occurrences to be managed by the operators. It also details the railway occurrences that must be reported to the d. Human Factor Management Capacity Building Chief Executive Officer. Framework: The Framework will enable operators to mitigate Human Factor Management (HFM) risks within their operations.

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Annual Report 2019/20_26_OCT_2020.indd 24 10/26/20 4:29 PM Contribution: Although the RSR was unable to develop to it may lead to increased occurrences. This protocol outlines the HFM Capacity Building Framework, the organisation the minimum requirements for the management of VSCC, conducted a study to determine the current population of including the framework to be implemented for safety-related employees who occupy safety-critical grade positions in train personnel in the execution of their operational activities. It operations for effective oversight on vacancies. Although only seeks to explain the level of VSCC required for safety-related a few railway operators participated in the study, the RSR personnel within the railway industry in South Africa. managed to collect data from a sample of approximately 17 053 individuals performing safety-critical grades functions, f. Interface Agreements Framework: The Framework nationally from Class A operators. More data is required to aims to mitigate risks of occurrences associated with inter- ensure a representative sample population which will allow the operability between operators on the common network at RSR to effectively monitor the status of safety-critical grades the interface of railway operations. for the railway industry. Therefore, future data will be collected Contribution: An analysis of the sample of the current interface from all railway operators including the remaining class A, B agreement signed between Transnet and its counterparts and C operators. were conducted. The analysis provided an understanding of e. Verbal Safety Communication Determination the level of compliance with interface agreement regulatory developed: This Determination will ensure that the requirements outlined by Transnet SOC Ltd. This is done to correct communication protocols are observed between enhance the safety performance of operators through the safety-critical staff during train authorisations and provision of a framework which will assist the industry in protocols, to reduce the risk of signals passed at danger concluding appropriate interface agreements. (SPAD) and collisions. The objectives of the study were to:

Contribution: The Verbal Safety Critical Communication • Conduct an assessment of the tools available to operators (VSCC) was published during March 2020 and was developed to manage interfaces and to assess what these require. primarily to achieve uniform and seamless VSCC within the • Conduct a literature review on how the interfaces are railway operations in South Africa. The railway industry has managed within the railway industry in other countries. been conducting operational activities, including verbal • Assess Transnet’s revised proposed Interface Agreement communication under normal, abnormal, degraded modes of Framework. working and during emergencies. Non-adherence to VSCC • Provide considerations to be made by the operators to has contributed to numerous railway occurrences, including develop and conclude compliant interface agreements. collisions and SPAD. VSCC, therefore, is a crucial component g. Industry-organised labour forum: The RSR regularly of safe railway operations, and consequently, non-adherence engages with stakeholders in organised labour. Labour

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Annual Report 2019/20_26_OCT_2020.indd 25 10/26/20 4:29 PM stakeholder meetings with the two prominent trade to spearhead the initiative. Due to the outbreak of the unions in the rail industry i.e. the South African COVID-19 pandemic and the subsequent announcement Transport and Allied Workers Union (SATAWU) and by the President of a 21-day national lockdown, the the United National Transport Union (UNTU) take campaign was postponed. To ensure that railway safety place quarterly. The meetings are scheduled with the remains a priority during these trying times, the RSR intent of ensuring that organised labour is informed developed a social media campaign in collaboration with of regulatory developments and to leverage unions its Rail Communication Forum members which consists of as ambassadors of rail safety when they engage with members across the rail and transport sector. The team their constituencies. developed audio-visual material containing rail safety messaging which was distributed by means of different Contribution: The RSR had four labour Forum meetings social media platforms. during the year under review. The forum discussed safety pertinent matters within rail operations in the country. Priority 6: Build a better Africa and world During these deliberations, the RSR was able to demystify The RSR is a member of the Southern African Railways factually incorrect perceptions of the role of the Regulator Association (SARA), an association that aims to promote and set the record straight with members of the unions. the harmonisation of the railway safety regime in the SADC The Forum assisted the RSR to acquire real-time rail railway operations. The Regulator plays a pivotal role in safety information from members of the trade unions, who ensuring that RSR Standards are adopted at a regional are either closely associated with the operators due to level, thus ensuring interoperability among member their membership base or are also employees of the major states. RSR personnel also represent the RSR in various operators. structures of the Association i.e. Board, EXCO and Working h. National Rail Communicators Forum: The Committees. RSR established a National Rail Communicators Contribution: The RSR continues to be a member of Forum, comprising of communicators from various SARA and participates actively in all structures of the rail stakeholders. The Forum is a platform for rail Association. The Regulator also offers technical expertise stakeholders to collaborate on a national basis. Several where required, particularly on the adoption of RSR outreach initiatives take place across the country, with Standards within a SADC context. On an annual basis, some being duplicated. The Forum, therefore, aims to the RSR participates in the SARA Conference, where it bring like-minded stakeholders together to collaborate exhibits and present papers to the rail fraternity. on such initiatives and in so doing, to reach a wider target audience. Additionally, the RSR is in conversation with the SADC Railways Sub-Sectoral Committee where a proposal was Contribution: The RSR hosted three forum meetings with presented by the Committee to establish a Regional Railway the National Rail Communicators Forum, where collective Regulators Association. The RSR together with the Land communications endeavours were discussed. The Forum Transport Regulatory Authority (LATRA) of Tanzania was agreed on one major campaign that was to be held in the subsequently tasked with the development of a concept fourth quarter. Considering this, arrangements were made note and a Terms of Reference for the establishment of the for a safety awareness campaigns to be held on 31 March Association. where the Deputy Minister of Transport was expected

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Annual Report 2019/20_26_OCT_2020.indd 26 10/26/20 4:29 PM Organisational Environment industry towards excellence in the management of safety to reduce operational risks in the railway environment to as low as reasonably practical. The strategic aspirations of The 2019/20 FY commenced with the finalisation of a the RSR to achieve the reduction of risk are documented Section 189 of the Labour Relations Act, 66 of 1995 (Act in the RSR Strategic Plan which sets out the specific No. 66 of 1995) that was instituted during the latter part of strategic objectives to be achieved during this period. the 2018/19 FY. A new structure was implemented with the following results: While the RSR’s responsibilities are designed to protect • A reduction in staff complement from 196 to 160 the interests of rail users, the Regulator strives to be employees; transparent in its work. Data and evidence must drive • A reduction in office accommodation from five to three decisions; clear processes and governance must guide buildings; the delivery of the work. The RSR, as the enforcing • A reduction in the fleet from 28 to 11 vehicles. authority of safety legislation on South Africa’s railways, plays an advisory and training role to other regulators The organisation operated with significantly lower and operators in the SADC region on various safety costs, such as a technology review revenue, business regulatory tools and techniques. The following functions development revenue, cost of employment, goods and were undertaken to ensure the successful execution of the services and a reduction in office accommodation and RSR’s mandate: fleet costs. • Issues and manages safety permits: The SMS Notwithstanding the successful implementation of the new and concomitant safety permit provide the legal structure, the organisation managed to achieve a 100 per interface between the RSR and railway operators. cent overall performance score at the end the 2018/19 This relationship enables and promotes continuous FY. The RSR continued on this trajectory by achieving a improvement in safe railway operations. Annually, 94 per cent performance score at the end of the 2019/20 the RSR evaluates the Safety Improvement Plans FY. The organisation, however, failed to achievement and the Safety Management System Report (SMSR) one target namely, Competency guidelines and agreed submitted by operators, which outline directives and/ workload planning established by 31 March 2020. or interventions to improve safety in the operational environment. During November 2017, Ms Tshepo Kgare was appointed • Conducts inspections and audits: The RSR is as the Acting Chief Executive Officer. Ms Kgare is currently mandated to provide safety oversight across the still acting in the role and has provided excellent leadership railway industry. This role is undertaken through to the organisation during extremely challenging times. various strategic initiatives such as conducting safety- The process of finalising the appointment of a Chief related audits and inspections of operators’ activities. Executive Officer is envisaged to be completed during the The key objectives of safety audits and inspections are 2020/21 FY. to critically assess the safety management systems Performance delivery and processes of operators. These assessments provide in-depth knowledge and understanding of the In line with international best practices regarding railway interventions that are required to promote and attain safety management, the RSR must guide the railway safe rail operations.

ANNUAL REPORT 2019/20 27

Annual Report 2019/20_26_OCT_2020.indd 27 10/26/20 4:29 PM • Conducts safety assessments: The RSR fulfils with the Act and safety standards adopted by the Board its safety oversight mandate on new railway works of Directors of the RSR. and technology developments by conducting safety • Supports and promotes occupational health assessments on the SMSR submitted by the operators. and safety and security: The the RSR conduct Furthermore, the RSR provide approvals on all lifecycle investigations, audits and inspections to address phases of railway projects to ensure that safety is occupational health and safety and security issues not compromised in the revitalisation of the local rail that impact the railway safety. Occupational health industry. These regulatory safety assessments ensure and safety legal requirements are included in the HFM that the impact of the intended changes is considered Standard and are, therefore, continuously promoted within the immediate environment of its application and during technical workshops conducted by the RSR. from a systemic perspective encompassing the asset/ • Co-operates with relevant organs of state to improve system life cycle. safety performance and oversight functions: In • Investigates railway occurrences: To achieve compliance with the Act, the RSR must conclude safety improvement and a reduction of occurrences, appropriate co-operative agreements with relevant the RSR conducts investigations of occurrences that state organs to give effect to co-operative government have led to major loss including fatalities, injuries and and inter-governmental relations as contemplated in damage to property to identify the root cause and to Chapter 3 of the Constitution. To this end, the RSR prevent recurrences. Operators are obligated to report has concluded 12 cooperative agreements, nine with all occurrences to the RSR to ensure that analysis various government departments and three with industry and review of incidents and the causes thereof are associations. The Memorandum of Understanding consolidated to assist the Regulator in providing (MoU) with government departments aim to eradicate tools and strategic direction in addressing safe rail duplication where there is dual jurisdiction and operations. promote collaboration. The agreements with industry • Develops regulations, safety standards and associations aim to share best practice and maintain regulatory prescripts: In line with sections 29, 30 an interactive approach in enforcing compliance. The and 50 of the Act, the RSR is mandated to develop 12 agreements focus on different issues, while the regulations, safety standards and related regulatory common denominator is ensuring rail safety. prescripts which form an integral part of the regulatory • Plays a leading role in the alignment of the railway regime adopted for the oversight and enforcement of safety regime of South Africa with those of SADC: safe railway operations. The RSR plays a significant role in harmonising the • Issues notices of non-conformance and non- rail safety regime within the SADC. The RSR, through compliance: The RSR issues operators with such SARA, conducts workshops on its South African notices to indicate conditions within the operators’ standards with the vision of adapting the standards at system that are deemed to be sub-standard or not in SADC level once approved by the SARA Board. compliance with regulatory prescripts that ensure safe • Conducts research: The RSR promotes and facilitates rail operations in terms of the adopted regulatory regime research in areas related to its strategic goals. and, continues to impose penalties for non-compliance

28 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 28 10/26/20 4:29 PM • Data management and analysis: In support of sections 37 and 39 of the Act, which requires that all occurrences be reported to the RSR and in turn, the RSR is required to establish the National Management Monitoring System (NIMS). In relation to risk identification and management as well as strategic and operational planning, the RSR must maintain an accurate data management system. The data must be reliable and analysed for risks regularly. This enables the RSR to accurately identify major safety-relevant risks that will require actions such as inspections, audits, investigations and awareness campaigns to increase the level of operational safety within the South African rail environment. The Annual State of Safety Report, which is tabled in Parliament, remains the highlight of the data management and analysis function and provides insight into the current state of rail safety, areas of concern as well as the RSR’s actions and activities towards addressing challenges and root causes of occurrences. To achieve its objectives as directed by the Act, the RSR may conduct several other activities relating to safe railway operations. This provision allows the RSR to go beyond that which is expressly contained in the Act to achieve its objectives.

Key policy developments and legislative changes

During the period under review, no changes were made to the policies or legislation that may have an impact on rail operations.

ANNUAL REPORT 2019/20 29

Annual Report 2019/20_26_OCT_2020.indd 29 10/26/20 4:29 PM Strategic Outcome Oriented Goals

Strategic pillars Strategic Goal Strategic outcomes statement objectives Triple E: 1. Safer Railways To change from an 1.1 Establishment of a common platform for regular Enforcement, adversarial engagement between the RSR and high-risk operators education and industry approach to agree on minimum safety objectives to be achieved engineering/ towards by individual operators to ensure that high-risk railway human factors a collaborative risk- operators meet or exceed their safety objectives. based 1.2 Enhance the SMS by developing and implementing a approach in Determination for a CSM-CA and a CSM-RA for railway mitigating the operators to ensure that operational risk exposures risks of railway are identified, analysed, prioritised and appropriately occurrences mitigated. and thereby 1.3 Introduce and phase in operational excellence with the reducing the major operators through the RM3. The RM3 will assist number of railway operators to achieve operational excellence occurrences through the effectiveness of their SMS. 1.4 Roll-out of a human factors management programme to all railway operators designed to: • Standardise CSM with all operators; • Determine acceptable vacancy rates within safety critical grades; • Ensure effective workload planning for staff involved in safety critical work; and • Safe systems of work. 1.5 Develop and implement a Determination for Verbal Safety Critical Communications. This strategic initiative will ensure that the correct communications protocols are observed between safety critical staff during train authorisations. The Determination will reduce the risk of SPADs and collisions during degraded mode. 1.6 Establish an industry work group on inter-operability and interface management. This strategic thrust must ensure safe inter-operability between operators on the common network and the review of all interface management agreements between operators addressing the operational risks at the common network and interface of railway operations.

30 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 30 10/26/20 4:29 PM Strategic pillars Strategic Goal Strategic outcomes statement objectives Excellence 2. Sustainable We strive for 2.1 Secure a sustainable operational financial base. Institutional excellence by 2.2 Ensure performance excellence. growth and enriching our 2.3 Develop and implement an integrated IMS which can development governance enable the RSR to measure the effectiveness of the processes and compliance monitoring initiatives. procedures with applicable compliance frameworks and risk strategies. Relevance 3. Improved By providing a 3.1 Promote safe railway behaviour. stakeholder platform 3.2 Establish an industry stakeholder interest group on service for collaboration infrastructure and rolling stock. This high-level strategic with all group shall ensure that all stakeholders are kept abreast stakeholders and on the roll-out of new infrastructure and rolling stock interested technology and investment programmes; improved parties, we will be maintenance strategies and universal access to ensure recognised that rail safety considerations play a major role. as a leading safety 3.3 Implement a platform for regular engagement with regulator organised labour, stakeholders and affected parties to by improving on the share lessons learnt to further improve railway safety. levels of 3.4 Establish a consultative railway forum for railway safety awareness to serve as a platform for consultation, cooperation, among operators, collaboration and the exchange of information between commuters and the the Regulator, safety permit holders, associations, other public. interested parties, and relevant organs of state. 3.5 Establish a level crossing elimination committee to decrease the number of level crossing occurrences by identifying areas of concern and initiate joint measures to address and reduce level crossing occurrences through a cooperative approach among stakeholders.

ANNUAL REPORT 2019/20 31

Annual Report 2019/20_26_OCT_2020.indd 31 10/26/20 4:29 PM For the year under review the organisation performed as follows:

KPI no. Annual target Result 1.1.1 Safety Performance agreements concluded all (4) high risk operators by 31 March 2020 Achieved 1.2.1 Safety risk model scope developed by 31 March 2020 Achieved 1.2.1.1 Occurrence reporting published by 31 March 2020 Achieved 1.3.1 CSM-RA tested with 3 Class A operators by 31 March 2020 Achieved 1.3.2 Railway Management Maturity assessment report for Transnet by RSR by 31 March 2020 Achieved

1.4.1 Safety critical grades assessment report by 31 March 2020 Achieved 1.4.1.1 Competency guidelines and agreed workload planning established by 31 March 2020 Not achieved 1.5.1 Determination on Verbal Safety Critical Communication published by 31 March 2020 Achieved 1.6.1 Interface agreement audit report by 31 March 2020 Achieved 2.1.1 Annual permit fee model submitted to DoT by 31 March 2020 Achieved 2.2.1 Unqualified audit with less findings by 31 March 2020 Achieved 2.3.1 Business requirements for the NIIMS developed by 31 March 2020 Achieved 3.1.1 22 Railway safety promotion initiatives conducted by 31 March 2020 Achieved 3.1.2 Survey on safe railway behaviour by 31 March 2020 Achieved 3.2.1 Annual Railway Safety Conference conducted by 31 March 2020 Achieved 3.3.1 4 Industry-organised labour forum discussions conducted by 31 March 2020 Achieved Overall achievement 15/16 = 94 %

The table below depicts the comparison of the performance of the organisation from the 2015/16 to 2019/20 FY.

Comparison of 2015/16 to 2019/20 Financial Year Annual Cumulative Performance Targets 120% 100% 94% 100% 90% 89%

80% 72%

60%

40%

20%

0% 2015/16 2016/17 2017/18 2018/19 2019/20

32 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 32 10/26/20 4:29 PM deviations Comment on None None None None for 2019/20 Deviation from planned target to actual achievement None None None None Actual 2019/20 achievement Achieved Safety Performance agreements concluded all (4) high risk operators by 31 March 2020 Achieved Safety risk model scope developed by 31 March 2020 Achieved Occurrence reporting published by 31 March 2020 Achieved tested with 3 CSM-RA Operators by A Class 31 March 2020 2019/20 Planned target Safety risk model scope developed by 31 March 2020 Occurrence reporting published by 31 March 2020 tested with 3 CSM-RA Operators by A Class 31 March 2020 Safety Performance agreements concluded all (4) high risk operators by 31 March 2020 Actual 2018/19 achievement Safety risk framework developed through industry working committees by 31 March 2019 Draft Determination for Occurrence reporting developed for public comments by 31 March 2019 Framework for Common Safety Method for Risk Assessments developed by 31 March 2019 Safety Performance Agreements set A for 19 Category Operators by 31 March 2019 Key indicator performance Industry safety risk profile developed Industry safety risk profile developed Common safety Methods developed and piloted Monitored compliance with set targets by individual operator’s ASIP No 1.2.1 1.2.1.1 1.3.1 1.1.1 Objective Industry safety risk Industry safety risk profiling towards increased critical risk mitigation decisions Industry safety risk profiling towards increased critical risk mitigation decisions Industry-consulted risk assessment tools and methodologies To ensure that To railway operators meet or exceed their safety objectives No 1.2 1.2 1.3 1.1 Performance information by programme/ activity/ objective by programme/ information Performance Outcome 1: Railways are safer

ANNUAL REPORT 2019/20 33

Annual Report 2019/20_26_OCT_2020.indd 33 10/26/20 4:29 PM deviations Comment on None None for 2019/20 Deviation from planned target to actual achievement None None Actual 2019/20 achievement Achieved Railway Management Maturity assessment by Transnet Report for RSR by 31 March 2020 Achieved Safety critical grades assessment report by 31 March 2020 2019/20 Planned target Railway Management Maturity assessment by Transnet Report for RSR by 31 March 2020 Safety critical grades assessment report by 31 March 2020 Actual 2018/19 Competency Management Safety-critical vacancies Workload planning achievement

Railway Management Maturity assessment tool adopted by 31 March 2019 Developed by 31 March 2019 Industry accepted frameworks developed to address: • • • Key indicator performance Implementation of railway management maturity assessments HFM Capacity Building programme developed and conducted at high risk operators No 1.3.2 1.4.1 Objective CMS. acceptable vacancy rates within safety critical grades. workload planning for involved staff with safety critical work. Standardised Determining Ensure effective

Develop and conduct a HFM Capacity Building programme aimed at addressing: Industry-consulted risk assessment tools and methodologies 1. 2. 3. No 1.4 1.3

34 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 34 10/26/20 4:29 PM deviations deviations Comment on Comment on None None None for 2019/20 for 2019/20 Deviation from Deviation from planned target to planned target to actual achievement actual achievement None None request for A quotations was sent to service providers to outsource the work. Respondents quoted 6-12 months instead of 1 Quarter. Actual Actual 2019/20 2019/20 achievement achievement Achieved Railway Management Maturity assessment by Transnet Report for RSR by 31 March 2020 Achieved Safety critical grades assessment report by 31 March 2020 Not achieved 2019/20 2019/20 Planned target Planned target Railway Management Maturity assessment by Transnet Report for RSR by 31 March 2020 Safety critical grades assessment report by 31 March 2020 Competency guidelines and agreed workload planning established by 31 March 2020 Actual Actual 2018/19 2018/19 Competency Management Safety-critical vacancies Workload planning Competency Management Safety-critical vacancies Workload planning achievement achievement

Railway Management Maturity assessment tool adopted by 31 March 2019 Developed by 31 March 2019 Developed by 31 March 2019 Industry accepted frameworks developed to address: Industry accepted frameworks developed to address: • • • • • • Key Key indicator indicator performance performance Implementation of railway management maturity assessments HFM Capacity Building programme developed and conducted at high risk operators HFM Capacity Building programme developed and conducted at high risk operators No No 1.3.2 1.4.1 1.4.1.1 Objective Objective CMS. acceptable vacancy rates within safety critical grades. workload planning for involved staff with safety critical work. CMS. acceptable vacancy rates within safety critical grades. workload planning for involved staff with safety critical work. Standardised Determining Ensure effective Standardised Determining Ensure effective

Develop and conduct a HFM Capacity Building programme aimed at addressing: Industry-consulted risk assessment tools and methodologies Develop and conduct a HFM Capacity Building programme aimed at addressing: 1. 2. 3. 1. 2. 3. No No 1.4 1.3 1.4

ANNUAL REPORT 2019/20 35

Annual Report 2019/20_26_OCT_2020.indd 35 10/26/20 4:29 PM deviations Comment on None None for 2019/20 Deviation from planned target to actual achievement None None Actual 2019/20 achievement Achieved Determination on Safety Critical Verbal Communication published by 31 March 2020 Achieved Interface agreement audit report by 31 March 2020 2019/20 Planned target Interface agreement audit report by 31 March 2020 Determination on Safety Critical Verbal Communication published by 31 March 2020 Actual 2018/19 achievement Interface agreement framework developed by 31 March 2019 Draft Industry national protocol for Verbal Safety Critical Communication published for comments by 31 March 2019 Key indicator performance Interface agreements aligned with operational risks Determination on Safety Critical Verbal Communication developed No 1.6.1 1.5.1 Objective Inter-operability concerns identified and all interface agreements aligned with the identified operational risk exposures Developed and implemented Determination on Verbal Safety Critical Communication No 1.6 1.5

3636 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 36 10/26/20 4:29 PM Strategy to overcome areas of underperformance

Target 1.4.1.1 - Competency guidelines and agreed workload planning established by 31 March 2020

Strategy: The target will be included in the Operational Plan of the relevant department for the 2020/21 financial year

Changes to planned targets

No Initial 2019/20 Annual target Revised 2019/20 Annual target 1.1.1 Safety Performance agreements concluded with 4 Safety Performance agreements concluded all (4) high risk Category A operators by 31 March 2020 operators by 31 March 2020 1.2.1 Occurrence reporting categories published by 31 Safety risk model scope developed by 31 March 2020 March 2020 1.2.1.1 Industry wide hazard log completed by 31 March Occurrence reporting published by 31 March 2020 2020

Linking performance with budgets

In assessing the achievement of the outputs in comparison with the planned targets, the public entity must consider the linkages and the relation to the resources available to the public entity, particularly the financial resources. Therefore, the following financial information should be presented. The financial information must agree with the information in the Annual Financial Statements.

ANNUAL REPORT 2019/20 37

Annual Report 2019/20_26_OCT_2020.indd 37 10/26/20 4:29 PM - 368 465 368 465 368 465 368 465 R 1 987 610 Over/under expenditure - 146 253 146 253 146 253 146 253 R 3 992 855 2019/20 Actual expenditure - R 514 718 514 718 514 718 514 718 5 980 465 Budget 330,805 354 705 (69 195) (69 195) (69 195) (69 195) R Over/under expenditure 519 340 443 240 443 240 443 240 443 240 R 2018/19 443 240 Actual expenditure R 774 046 874 046 374 046 374 046 374 046 374 046 Budget Indicator Key Performance Monitored compliance with set targets by individual operator’s ASIP Industry safety risk profile developed Industry safety risk profile developed Common safety Methods developed and piloted (CSM-CA) Common safety Methods developed and piloted Implementation of railway management maturity assessments No 1.1.1 1.2.1 1.2.1.1 2018/19 1.3.1 1.3.2 To ensure that railway operators To meet or exceed their safety objectives. Objective Industry safety towards increased critical risk risk mitigation decisions profiling Industry safety towards increased critical risk risk mitigation decisions profiling Industry consulted risk assessment tools and methodologies Industry-consulted risk assessment tools and methodologies Industry-consulted risk assessment tools and methodologies

38 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 38 10/26/20 4:29 PM 78 137 368 465 368 465 368 465 R Over/under expenditure 41 344 146 253 146 253 146 253 R 2019/20 Actual expenditure R 119 481 119 514 718 514 718 514 718 Budget - 830 805 740 066 (69 195) R Over/under expenditure - 443 240 443 240 443 240 R 2018/19 Actual expenditure - R 274 046 183 307 374 046

1 1 Budget Indicator Key Performance HFM Capacity Building programme developed and conducted at high risk operators HFM Capacity Building programme developed and conducted at high risk operators Determination on Safety Critical Verbal Communication developed Interface agreements aligned with operational risks No 1.4.1 1.4.1.1 1.5.1 1.6.1 vacancy rates within safety critical grades. involved with planning for staff safety critical work. vacancy rates within safety critical grades. involved with planning for staff safety critical work. Standardised CMS. Determining acceptable workload Ensure effective Standardised CMS. Determining acceptable workload Ensure effective

Develop and conduct a HFM Capacity Building programme aimed at addressing: Objective 1. 2. 3. 1. 2. 3. Develop and conduct a HFM Capacity Building programme aimed at addressing: Developed and implemented Determination on Verbal Critical Communication Safety Inter-operability concerns identified Inter-operability concerns identified and all interface agreements aligned with the identified operational risk exposures

ANNUAL REPORT 2019/20 39

Annual Report 2019/20_26_OCT_2020.indd 39 10/26/20 4:29 PM deviations Comment on None None None for 2019/20 Deviation from planned target to actual achievement None None None Actual 2019/20 achievement Achieved Business requirements for the NIIMS developed by 31 March 2020 Achieved Unqualified audit with less findings by 31 March 2020 Achieved Annual permit fee model submitted to by 31 March DoT 2020 2019/20 Planned target Business requirements for the NIIMS developed by 31 March 2020 Unqualified audit with less findings by 31 March 2020 Annual permit fee model submitted to by 31 March DoT 2020 2018/19 Actual achievement IMS scope completed by 31 March 2019 New indicator Revised permit fee model validated and finalised by 31 March 2019 indicator Key performance New National Integrated Information Management System (NIIMS) build Clean audit Progress made in revising the permit fee model developed in 2014/15 No 2.3.1 2.2.1 2.1.1 Objective To monitor To and track the effectiveness of RSR compliance initiatives Clean administration To secure To an adequate operational financial base 2.3 2.2 2.1 No Outcome 2: Sustainable institutional growth and development

40 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 40 10/26/20 4:29 PM Strategy to overcome areas of under performance

All targets were achieved in Outcome 2.

Changes to planned targets

No Initial 2019/20 Annual target Revised 2019/20 Annual target 2.2.1 100% of all audit findings relating to the 2017/18 Unqualified audit with less findings by 31 March 2020 FY addressed 2.3.1 Integrated IMS specification developed by 31 Business requirements for the NIIMS developed by 31 March March 2020 2020

Linking performance with budgets

In assessing the achievement of the outputs in comparison to the planned targets, the public entity must consider the linkages and the relation to the resources available to the public entity, particularly the financial resources. Therefore, the following financial information should be presented. The financial information must agree with the information in the Annual Financial Statements.

ANNUAL REPORT 2019/20 41

Annual Report 2019/20_26_OCT_2020.indd 41 10/26/20 4:29 PM - - 353 700 R 6 857 803 13 490 306 Over/under expenditure - - R 543 220 5 909 403 66 373 357 2019/20 Actual expenditure - - 896 920 R 79 863 663 12 767 206 Budget - (69 195) R 43 720 050 (6 590 833) (7 127 947) Over/under expenditure - 443 240 R 12 715 108 23 513 903 12 682 137 2018/19 Actual expenditure - 374 046 124 275 554 190 233 953 R

6 5 67 Budget Indicator Key Performance Progress made in revising the permit fee model developed in 2014/15 Clean audit Year-on-year Service Year-on-year Delivery Index growth) (SDIX Effective management Effective of human and resources through financial budgetary control and governance measures New National Integrated Information Management System (NIIMS) build No 2.1.1 2.2.1 2018/19 2018/19 2.3.1 To secure an adequate To operational financial base Clean administration To ensure performance To excellence Objective To ensure performance To excellence monitor and track the To of RSR effectiveness compliance initiatives

42 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 42 10/26/20 4:29 PM - - 353 700 R 6 857 803 13 490 306 Over/under deviations expenditure Comment on None None None None - - R 543 220 5 909 403 66 373 357 2019/20 Actual expenditure for 2019/20 Deviation from - - planned target to actual achievement None None None None 896 920 R 79 863 663 12 767 206 Budget - 2019/20 (69 195) R 43 720 050 (6 590 833) (7 127 947) Actual achievement Achieved 4 Industry-organised labour forum discussions conducted by 31 March 2020 Achieved Annual Railway Safety Conference conducted by 31 March 2020 Achieved Survey on safe railway behaviour by 31 March 2020 Achieved 23 Railway safety promotion initiatives March conducted by 31 2020 Over/under expenditure - 443 240 R 2019/20 12 715 108 23 513 903 12 682 137 2018/19 Actual Planned target expenditure 4 Industry- organised labour forum discussions conducted by 31 March 2020 Annual Railway Safety Conference conducted by 31 March 2020 Survey on safe railway behaviour by 31 March 2020 22 Railway safety promotion initiatives conducted by 31 March 2020 - 374 046 R 6 124 275 5 554 190 67 233 953 Budget Actual 2018/19 achievement 3 Industry- organised labour forum discussions conducted by March 2019 31 Annual industry safety thematic intervention conducted by 31 March 2019 New Indicator 21 Railway safety promotion initiatives conducted by 31 March 2019 Indicator indicator Key Performance Key performance Industry-organised Industry-organised labour forum implemented Annual industry safety thematic Interventions conducted Number of safety promotion initiatives conducted Number of safety promotion initiatives conducted Progress made in revising the permit fee model developed in 2014/15 Clean audit Year-on-year Service Year-on-year Delivery Index growth) (SDIX Effective management Effective of human and resources through financial budgetary control and governance measures New National Integrated Information Management System (NIIMS) build 3.3.1 3.2.1 3.1.2 3.1.1 No No 2.1.1 2.2.1 2018/19 2018/19 2.3.1 Objective Regular engagement with organised labour and interested parties to encourage collaboration towards improved railway safety of employees, commuters and the public To promote safety To consideration during new investments through annual industry safety thematic interventions To promote safe To railway behaviour To promote safe To railway behaviour

To secure an adequate To operational financial base Clean administration To ensure performance To excellence 3.3 3.2 3.1 3.1 Objective No To ensure performance To excellence monitor and track the To of RSR effectiveness compliance initiatives Outcome 3: Improved Stakeholder Service

ANNUAL REPORT 2019/20 43

Annual Report 2019/20_26_OCT_2020.indd 43 10/26/20 4:29 PM Strategy to overcome areas of underperformance

All targets were achieved in Outcome 3.

Changes to planned targets

No Initial 2019/20 Annual target Revised 2019/20 Annual target

3.1.2 Survey on safe railway behaviour Survey on safe railway behaviour by 31 March 2020

Linking performance with budgets

44 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 44 10/26/20 4:29 PM R 1 170 115 1 170 115 1 170 115 1 170 115 Over/under expenditure R 2019/20 Actual 1 306 260 1 306 260 1 306 260 1 306 260 expenditure R 2 476 375 2 476 375 2 476 375 2 476 375 Budget - (36 558) R (283 087) (283 087) Over/under expenditure - 952 169 R 2 595 640 2018/19 Actual 952 169 expenditure - R 559 082 669 082 669 082

2 Budget Key Performance Indicator Number of safety promotion initiatives conducted Number of safety promotion initiatives conducted Annual industry safety thematic Interventions conducted Industry-organised labour forum implemented No 3.1.1 3.1.2 3.2.1 3.3.1 To promote safe railway To behaviour To promote safe railway To behaviour promote safety To consideration during new investments through annual industry safety thematic interventions Objective Regular engagement with organised labour and interested parties to encourage collaboration towards improved railway safety of employees, commuters and the public

ANNUAL REPORT 2019/20 45

Annual Report 2019/20_26_OCT_2020.indd 45 10/26/20 4:29 PM Revenue collection

Sources of 2018/19 2019/20 revenue Estimate Actual amount Over/Under Estimate Actual amount Over/Under collected collection invoiced collection

Permit Fees 167 827 500 164 048 051 (3 779 449) 169 500 000 170 560 765 562 314

Investment 1 755 833 5 817 473 4 061 640 1 889 888 8 160 496 6 270 608 Income Grant 63 018 000 63 018 000 - 63 522 000 63 522 000 - Income Total 232 601 333 232 883 524 282 191 234 911 888 242 243 261 6 832 922

2018/19 FY 1. Safety Permits: The main contributor to the shortfall in permit fees was the reduction in permit fees for SADC operators who disputed their permit fees. The RSR and SADC operators reached a settlement agreement which resulted in Mozambique Ports and Railways (CFM) and Botswana Rail’s permit fees reducing to R1 million (from R3.2 million) and R500 000 (from R1.2 million) respectively. Another contributing factor was the number of operators opting for a single legal entity permit.

2. Investment income: Large operators paid permit fees earlier than expected resulting in the organisation holding positive cash balances for longer. Another contributing factor was the cancellation of the regional office and vehicle lease contracts during the year which resulted in cost-savings. As part of its cash flow strategies, the RSR invests its surplus cash balances at the Corporation for Public Deposits which is held by the South African Reserve Bank.

2019/20 FY 1. Safety Permits: Over-collection against the budget was mainly due to temporary permit applications being received during the year. All temporary permits for 2019/20 were issued due to operators delaying the permit application assessments. These delays include changes in trading name, incomplete application on NIMS or partial submission of documents. A total of five Temporary Permits were issued during the 2019/20 financial year.

2. Investment income: The main reason for over-collection is that the RSR invests its surplus cash balances with the South African Reserve Bank to generate more interest. Another contributory factor can be attributed to large operators such as PRASA and TFR paying their permit fees before the permit expiry date which resulted in a bigger positive bank balance over a longer period. The delay in paying for the disputed accrued offices rental expenses as well as the general underspending during the financial year also contributed to the over-collection. The matter is currently awaiting deliberation by the courts and it is, therefore, not certain whether payment would be made or not.

46 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 46 10/26/20 4:29 PM The RSR’s revenue team is working tirelessly to collect all A significant portion of the RSR’s fixed assets at 31 March outstanding revenue. The team implements and ensures 2020 comprises of newly acquired assets. These acquisitions compliance with the RSR Revenue and Receivable Policy. account for 82 per cent of the carrying amount of the RSR’s The Policy stipulates all collection methods to be followed assets at 31 March 2020. The new acquisitions include motor for receivables, and where possible, the team engages vehicles (17%), office equipment (9%), computer equipment the Permit Management unit to trace all operators who are (8%), furniture (9%), leasehold improvements (55%) and in arrears. Reconciliations are done monthly to highlight intangible assets (2%). The disposals for the year comprised problem areas in order to address it speedily. The revenue of old furniture and computer equipment that was scrapped team: and other items that were auctioned to RSR staff. A significant portion of these assets was fully depreciated. A few assets • Issue invoices once generated and make follow-ups; comprising of computer equipment were stolen during the • Issue reminders and letters of demand for debts financial year. A significant portion was stolen during a burglary outstanding for more than 30 days; and at the RSR’s previous offices. These losses were reported to the South African Police Service and claimed from the insurer. • Refer debtors owing more than 60 days to the Legal Department to institute legal action. The RSR has an Asset Management unit within its Finance Department that is responsible for updating the asset register Capital investment with all asset transactions such as receipts, movements, disposals, useful life assessments and other changes. The unit The RSR is a PFMA Schedule 3A Public Entity with the conducts asset verifications at least twice a year in terms of the Department of Transport as its only shareholder. The RSR RSR’s approved Asset Management Policy. The RSR has a manages its assets in line with its Asset Management Policy. Disposal Committee which deals with all the voluntary disposal The RSR has not embarked on any infrastructure projects and of assets. The employees of the RSR are required to report did not close down or downgrade any facilities during the year. any stolen assets to the South African Polices Services within 24 hours and to furnish the Asset Management unit with the No maintenance activities were undertaken during the year as case number to ensure that the unit updates the asset register. the entity does not own significant infrastructure or moveable assets that require continuous maintenance. The RSR entered A significant portion of the RSR’s fixed assets at 31 March into new lease agreements for its Head Office, Regional Office 2020 comprises of newly acquired assets during the 2019/20 (Gauteng), Coastal Regional Office (Cape Town) and Eastern financial year. The assets in good condition represent more Regional Office (Durban). The rental expenses associated with than 82 per cent and the remaining 18 per cent represents these new operating lease agreements are significantly lower assets in a fair condition. than those incurred in previous years under the full facilities lease arrangements.

ANNUAL REPORT 2019/20 47

Annual Report 2019/20_26_OCT_2020.indd 47 10/26/20 4:29 PM 48 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 48 10/26/20 4:30 PM PART C: GOVERNANCE

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Annual Report 2019/20_26_OCT_2020.indd 49 10/26/20 4:30 PM Introduction

Corporate governance embodies processes and systems The Board is the focal point of the organisation’s corporate by which public entities are directed, controlled and held to governance system. Corporate governance being the policies, account. In addition to legislative requirements based on a public processes, structures and controls to be applied and adhered entity’s enabling legislation, and the Companies Act, corporate to within the organisation by all involved (Board of Directors, governance with regard to public entities is applied through the management, employees, auditors and service providers). precepts of the Public Finance Management Act (PFMA) and run in tandem with the principles contained in the King Report To the extent applicable and relevant to the RSR, the Board on Corporate Governance. subscribes to the principles of good governance as set out in the King Report on Governance in South Africa, 2016 (King IV) and Parliament, the Executive and the Accounting Authority of the recognises these as fundamentally important to the success and public entity are responsible for corporate governance. continued sustainability of the organisation. Good governance, among others, ensures that resources and business activities throughout the organisation are focussed on attaining the objectives of the organisation. The Board is responsible and Portfolio committees accountable for the public entity’s performance and strategic direction. The Portfolio Committee on Transport (PCOT) visited the RSR offices on 08 October 2019. The Annual Report and State of The role of the Board is as follows: Safety Report were presented to the PCOT. The organisation • Exercise prudent control over the organisation and its briefed the Committee on challenges encountered regarding affairs; compliance by the industry and the measures it has adopted to • Delegates the implementation and execution of the mitigate the challenges. organisation’s short, medium- and long-term strategy to management; and. Executive authority • Approve the policies and operational plans developed by management to give effect to the approved strategy. The organisation submits all quarterly reports to the Executive Board Charter Authority and the National Treasury (NT) in compliance with the NT frameworks. All quarterly reports for the 2019/20 FY were The purpose of the Charter is to provide guidance to the Board submitted within 30 days after the end of each quarter. of Directors in the discharge of their duties, responsibilities and to ensure consistent corporate governance practices as well as the culture within the organisation. The Charter is not intended The accounting to, and does not, replace any other document, legislation, authority/board regulation or law of general application that regulates or applies to the RSR and/or the Board. The Charter must be read in conjunction with the National Railway Safety Act No. 16 of 2002. Introduction

The Board is committed to ensuring that it complies with the letter and spirit of the legislative prescripts applicable to the Regulator.

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Annual Report 2019/20_26_OCT_2020.indd 50 10/26/20 4:30 PM No. of attended Meetings 09 team) / Ministerial task Audit committee Other Committees or Task Teams (e.g.: Teams or Task Audit Committee: Limpopo Economic Cluster Audit Committee (Chair)

Board Directorships (List the entities) RTIA Department of Sports Commissioner with the Independent Commission for Public officer Bearers in the Presidency Tourism Board of KZN Road Accident Fund (member of Eastern Cape Department of ARC, Education Free State Development Corporation ARC and Department of Rural Development, Agriculture and Land Affairs

• • • • •

Area of expertise Performance Management Macro-economic Planning Corporate Governance Policy Development and Development Training Strategic Planning Strategy Development Business Planning Financial and Management Accounting

• • • • • • •

Qualifications B Admin (Unizul) MCom (UP) (University of MBA PHD (Wits) Honours in B.A BCom Hons (UP) Oxford Brookes) Certificate in Public Sector Corporate Governance (UNISA) Theology from (North University) West

• • • • • • Date appointed 01/11/2016

terms of the Public Entity Designation (In Board Structure RSR Board Chairperson Dr Nomusa Zethu Qunta Name Composition of the Board

ANNUAL REPORT 2019/20 51

Annual Report 2019/20_26_OCT_2020.indd 51 10/26/20 4:30 PM No. of attended Meetings 07 team) / Ministerial task Audit committee Other Committees or Task Teams (e.g.: Teams or Task N/A Board Directorships (List the entities) RSR Deputy Chairperson: Mpumalanga Tourism and Parks Agency Area of expertise Governance and Legislation Qualifications Cert in Economic BCom Hons (UWC) Advanced Dip in Dip in Public Relations (IAC) and Public Finance (UNISA) Economic Policy (UWC)

• • • • Date appointed 01/11/2016 terms of the Public Entity Designation (In Board Structure Board Deputy Chairperson Mr Boy Johannes Nobunga Name

52 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 52 10/26/20 4:30 PM No. of attended Meetings 06 team) / Ministerial task Audit committee Chairperson: RSR Safety Committee Member: Human Resource and Remuneration Committee Other Committees or Task Teams (e.g.: Teams or Task • • Board Directorships (List the entities) Council Member: National Forest Advisory Council Ekurhuleni Housing Company • • Area of expertise Enterprise-Wide Risk Management (Corporate; Operational and SHE Risk Assessment, Evaluation and Control) Environmental Health & Management Public Health, education and development Occupational Health/ Hygiene & Safety Health, SHEQ (Safety, Environment and Quality) Management System Design, Implementation & Monitoring of an Integrated Model Health & Wellness SHEQ System and Legal Compliance Audit Construction Contractor Safety & Management Health, Safety, Environmental Education Training and SAIOSH: 25324394 • • • • • • • • • • HPCSA: HI 0042803 • Qualifications Total Quality Total Masters Degree in Senior Management Higher Diploma Diploma International NEBOSH Public Health (MPH) in Occupational Hygiene (WITS) Development in Business Administration (SMDP: USB) Management (UNISA) Environmental Health: (TUT) Higher Diploma Occupational Health & Safety Management: (POTCH UNIV) Environmental Health (TUT) Environmental Management (UK)

• • • • • • • Date appointed 01/11/2016 terms of the Public Entity Designation (In Board Structure Board Member Ms Hilda Thopola Name

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Annual Report 2019/20_26_OCT_2020.indd 53 10/26/20 4:30 PM No. of attended Meetings 08 team) / Ministerial task Audit committee Other Committees or Task Teams (e.g.: Teams or Task Human Resource and Remuneration Committee Board Directorships (List the entities) Non-Executive: Africa Rising Leadership & Management Practitioners Pty Ltd; Member: Chartered Institute of Logistics and Transport. Institute of Information Technology Professionals South Africa. Institute of Directors in Southern Africa • • • • Area of expertise Strategy & Strategic Management Operations & Logistics Knowledge Management Qualifications MBA (UCT) MBA Bachelor of Philosophy in Knowledge Management (Stellenbosch) Certificate in Logistics Management (UP) National Diploma for (CPUT) Technicians

• • • • Date appointed 01/11/2013 terms of the Public Entity Designation (In Board Structure Board Member Mr Andre Harrison Name

54 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 54 10/26/20 4:30 PM No. of attended Meetings 10 10 team) / Ministerial task Audit committee Other Committees or Task Teams (e.g.: Teams or Task Member: Safety Committee Member: Audit and Risk and Human Resource and Remuneration Committee (HRRC) Board Directorships (List the entities) N/A N/A Area of expertise Major Events Security (Security Advisor) Railway Raid and Rapid Police Reintroduction and development of a policing capacity for the rail environment in south africa. Acting Divisional commissioner visible policing on a rotational basis Law Diplomacy • • • • • Qualifications National Higher Certificate Police Administration (UP) National Diploma Police Administration (Dept of Education Bachelor of Law (UNISA) Baccalaureus Procurations (UNISA) Master of Public Administration (UP) Certificate Public Relations (PRISA) Academic Honorary Colours (UP) Executive Public Management Development Programme (UP) Bachelor of Law (Middlesex University United Kingdom) with Articles: International BA Relations Honours International Relations • • • • • • • • • • • Date appointed 01/11/2016 (re-appointment) 01/11/2016 (re-appointment) terms of the Public Entity Designation (In Board Structure Board Member Board Member Maj-Gen Willem (Retired) Venter (SOEG) Ms Ntombizine Mbiza Name

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Annual Report 2019/20_26_OCT_2020.indd 55 10/26/20 4:30 PM No. of attended Meetings 06 05 team) / Ministerial task Audit committee Member: Safety Committee External: Department of Employment and Labour Chairperson of the Advisory Council for OHS Member of the Board at the Compensation Fund Member of the Investment Committee Other Committees or Task Teams (e.g.: Teams or Task Member: Safety Committee • • • • • Board Directorships (List the entities) Advisor Gautrain Management Agency N/A Area of expertise Inspections Rail Policy and Economic Regulation Rail Infrastructure and Industry Development Occupational Health and Safety Investigations Qualifications in Mechanical Engineering

• • • • • • Qualifications Baccalaureus Artium (Potchefstroom University) B.Com – Financial Management (UP) Advanced Certificate (UP) in Tax Certificate programme in Business Management Project (WITS) National Higher Diploma (Mechanical Engineering): Cape Technikon Town • • • • • Date appointed 11/10/2018 01/11/2016 (re-appointment) terms of the Public Entity Designation (In Board Structure Board Member Board Member Mr Jan-David Villiers Szana Mr Tibor Name

56 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 56 10/26/20 4:30 PM No. of No. of attended attended Meetings Meetings 06 10 05 06 team) team) / Ministerial task / Ministerial task Audit committee Audit committee Member: Safety Committee External: Department of Employment and Labour Chairperson of the Advisory Council for OHS Member of the Board at the Compensation Fund Member of the Investment Committee Other Committees Other Committees or Task Teams (e.g.: Teams or Task or Task Teams (e.g.: Teams or Task Member: Safety Committee Member: Human Resource and Remuneration Committee Member: Safety Committee • • • • • Member: Safety Committee Board Board Directorships Directorships (List the entities) (List the entities) N/A N/A N/A Advisor Gautrain Management Agency Area of Area of expertise expertise Inspections Executive Management and Leadership Railway policing Partnership policing Crime prevention planning and Tactical operations Police emergency services Major Events Planning and Operations Community policing Joint planning and operations Rail Operations Railway Incidents Investigations Human Relations Basic Conditions of Employment Act Labour Relations Act Act 85 Investigations Investigations Qualifications in Mechanical Engineering Rail Policy and Economic Regulation Rail Infrastructure and Industry Development Occupational Health and Safety • • • • • • • • • • • • • • • • • • • • • • Qualifications Qualifications B-Tech Policing (TUT) B-Tech National Higher Diploma Policing (UNISA) National Diploma Police Administration (UNISA) Certificate: Labour Relations (UP); Advanced Labour Law Diploma (RAU); Certificate Labour Relations Trade Unions (UP); Diploma: Conciliation and Mediation (CCMA) Baccalaureus Artium (Potchefstroom University) B.Com – Financial Management (UP) Advanced Certificate (UP) in Tax Certificate programme in Business Management Project (WITS) National Higher Diploma (Mechanical Engineering): Cape Technikon Town • • • • • • • • • • • • Date Date appointed appointed 01/11/2016 01/11/2016 11/10/2018 01/11/2016 (re-appointment) terms of the terms of the Public Entity Public Entity Designation (In Designation (In Board Structure Board Structure Board member Board Member Board Member Board Member Maj-Gen Michael Motlhala Mr Chris De Vos Mr Jan-David Villiers Szana Mr Tibor Name Name

ANNUAL REPORT 2019/20 57

Annual Report 2019/20_26_OCT_2020.indd 57 10/26/20 4:30 PM No. of attended Meetings 08 10 team) / Ministerial task Audit committee Other Committees or Task Teams (e.g.: Teams or Task Member: Human Resource and Remuneration Committee Member: Human Resources and Remuneration Committee Member: Safety Committee Member: Audit and Risk Committee Board Directorships (List the entities) Services SETA (Sector Services SETA Education and Training Authority) N/A Area of expertise Occupational Health and Strategic Leadership: Strategy Formulation and Execution. Organisational Design and Performance Management. General Management: Operations, Finance and Human Resources. Regulatory Management: Compliance. Corporate Governance. Project/Program Management. Policy Development. Management Transport and Planning. Safety

• • • • • • • • • Qualifications SAMTRAC(NOSA); (NOSA); ASHEP (NOSA); HIRA Accident investigation (FOREFRONT) Post Graduate Traffic Diploma in and Transportation (Nottingham Trent UK) University, Diploma in Road Safety (Lund Sweden) University, NDip: Civil Engineering (Vaal Technikon) Triangle Certificate: Risk Management (UCT) • • • • • • • • Date appointed 26/04/2019 terms of the Public Entity Designation (In Board Structure Board Member Board Member Mrs Irene Dlamini Ms Tshepo Kgare Ms Tshepo Name

58 ANNUAL REPORT 2019/20

Annual Report 2019/20_26_OCT_2020.indd 58 10/26/20 4:30 PM There are no alternate members of the Board.

The following Board members have served their maximum two terms as stated in the National Railway Safety Regulator Act. • Mr Andre Harrison • Maj-Gen Willem Venter (Retired) (SOEG) • Ms Ntombizine Mbiza • Mr Chris De Vos

Committees

Committee No. of No. of Name of members meetings held members Audit and Risk Committee 16/04/2019 03 Prittish Dala (Chairperson) Siyakhula Simelane Ntombizine Mbiza 25/05/2019 03 Prittish Dala (Chairperson) Siyakhula Simelane Ntombizine Mbiza 15/07/2019 03 Prittish Dala (Chairperson) Siyakhula Simelane Ntombizine Mbiza 25/07/2019 03 Prittish Dala (Chairperson) Siyakhula Simelane Ntombizine Mbiza 22/10/2019 03 Prittish Dala (Chairperson) Siyakhula Simelane Ntombizine Mbiza 07/12/2019 03 Prittish Dala (Chairperson) Siyakhula Simelane (absent) Ntombizine Mbiza 17/01/2020 03 Siyakhula Simelane (Chairperson) Prittish Dala Ntombizine Mbiza 25/02/2020 03 Siyakhula Simelane (Chairperson)* Prittish Dala Ntombizine Mbiza

*Resigned 28 February 2020

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Annual Report 2019/20_26_OCT_2020.indd 59 10/26/20 4:30 PM Committee No. of No. of Name of members meetings held members Human Resource and 12/04/2019 06 Andre Harrison (Chairperson) Remuneration Committee Hilda Thopola Irene Dlamini Chris De Vos Ntombizine Mbiza Tshepo Kgare 10/07/2019 05 Andre Harrison (Chairperson) Hilda Thopola (absent – International conference) Irene Dlamini Chris De Vos Ntombizine Mbiza Tshepo Kgare 16/10/2019 03 Andre Harrison (Chairperson) Hilda Thopola (Absent) Irene Dlamini (Absent) Chris De Vos Ntombizine Mbiza Tshepo Kgare (absent – International conference) 13/11/2019 04 Andre Harrison (Chairperson) Hilda Thopola (Absent) Irene Dlamini (Absent) Chris De Vos Ntombizine Mbiza Tshepo Kgare 20/01/2020 05 Andre Harrison (Chairperson) Hilda Thopola (Absent) Irene Dlamini Chris De Vos Ntombizine Mbiza Tshepo Kgare 07/02/2020 05 Andre Harrison (Chairperson) Hilda Thopola (Absent) Irene Dlamini Chris De Vos Ntombizine Mbiza Tshepo Kgare

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Annual Report 2019/20_26_OCT_2020.indd 60 10/26/20 4:30 PM Committee No. of No. of Name of members meetings held members Safety Committee 10/04/2019 04 Hilda Thopola (Chairperson) Chris De Vos Willem Venter Michael Motlhala (Absent) Tibor Szana (Absent) Tshepo Kgare 10/07/2019 06 Hilda Thopola (Chairperson) Chris De Vos Willem Venter Michael Motlhala Tibor Szana Tshepo Kgare 19/08/2019 04 Hilda Thopola (Chairperson) Chris De Vos Willem Venter Michael Motlhala (Absent) Tibor Szana (Absent) Jan-David Villiers (Absent) Tshepo Kgare 23/10/2019 05 Hilda Thopola (Chairperson) Chris De Vos Willem Venter Michael Motlhala Tibor Szana (Absent) Jan-David de Villiers (Absent) Tshepo Kgare 23/01/2020 06 Hilda Thopola (Chairperson) Chris De Vos Willem Venter Michael Motlhala Tibor Szana (Absent) Jan-David de Villiers Tshepo Kgare

ANNUAL REPORT 2019/20 61

Annual Report 2019/20_26_OCT_2020.indd 61 10/26/20 4:30 PM Remuneration of board members

How board members’ remuneration is determined

In terms of the National Treasury Circular on the service benefits package for office bearers of certain institutions, the remuneration of the Board and committee members are classified under category S. The Circular provides a schedule of pre-determined fees payable to board members on an annual basis. The Department of Transport annually confirms the rates prescribed in terms of the National Treasury Circular.

In addition, members of the Audit and Risk Committee are remunerated in terms of the rates prescribed by the South African Institute of Chartered Accountants (SAICA).

Name Emoluments Allowances Expenses Total

Dr. Nomusa Zethu Qunta (Chairperson) 340 904 8 400 16 365 365 669 Mr. Boy Johannes Nobunga (Deputy Chairperson) 109 804 5 650 31 774 147 228 Mr. Jan - David de Villiers 1 - - - - Mr. Christian Johan de Vos 248 427 5 650 21 046 275 123 Mr. Andre Harrison 220 761 5 650 7 231 233 642 Major - General Michael Monash Motlhala 3 - - - - Mr. Rendani Dlamini 128 853 5 400 - 134 253 Ms. Ntombizine Mbiza 245 295 5 650 25 458 276 403 Ms. Hilda Thamaga Thopola 183 234 5 650 21 041 209 925 Major - General Willem Venter (Retired) 232 133 5 650 69 165 306 948 Mr. Tibor Szana 2 - - - - 1 709 411 47 700 192 080 1 949 191

Company/board secretary

The primary purpose of the role of the Company Secretary is to ensure that the RSR complies with standard financial and legal practices and maintains high standards of corporate governance. The role also ensures and manages corporate governance within the Board and the RSR in accordance with legislative prescripts and best practice. Furthermore, this role proactively manages the required stakeholder relations to ensure the effective functioning of the Board of Directors and its subcommittees and ensures compliance with good corporate governance and other legislative and statutory requirements.

1 Member from a specified office in the National Department of Transport - not remunerated. 2 Member delegated by the Minister of Labour - not remunerated. 3 Member delegated by the Minister of Safety and Security - not remunerated.

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Annual Report 2019/20_26_OCT_2020.indd 62 10/26/20 4:30 PM Risk management

Responsibilities of the Audit and Risk Committee

The Audit and Risk Committee reports that it has complied with its responsibilities arising from Section 51 (1) (a) (ii) of the Public Finance Management Act (PFMA) and the National Treasury Regulation 27.1. The Audit and Risk Committee has adopted formal terms of reference, the Audit and Risk Committee Charter and has regulated its affairs and discharged all its responsibilities in compliance with this Charter.

Integrated Risk Management

The Board is responsible for entrenching RSR-wide risk management governance through effective leadership. Management accounts to the Board for the effective integration of risk management into the daily operations and for the implementation and monitoring of the risk management process.

The Committee considers all risk matters, including emerging risks in the organisation and provides advice and guidance on the overall risk management system, with special attention placed on the risks that have been measured as above the acceptable tolerance levels of the organisation. The Audit and Risk Committee independently monitors the effectiveness of the risk management system and reports to the Board accordingly.

The RSR has implemented an integrated internal enterprise risk management strategy which identifies risks and opportunities on an ongoing basis. This strategy is underpinned by the following principles:

• A strong and solid risk culture is a critical pillar of good governance; • Consideration of real and potential risks in decision-making processes; • The acceptance that risk management is mandatory; • Continuously monitoring the risk exposure as impacted by the changing internal and external environment; • Acceptance that accountability for risk management cannot be deferred or shifted; and • The importance of maintaining an appropriate balance between risk and control.

During the year under review, the RSR revised its risk management framework, Fraud and Corruption Framework, Whistle Blowing Policy and the Business Continuity Policy to augment the alignment to national and international best practices.

Governance and Risk Management

The Audit and Risk Committee is responsible for providing oversight of the risk management function. Management has designed and implemented controls to manage risks faced by the RSR. The Risk Management Unit reports to the Audit and Risk Committee on the management of risks and advises management continually on the best risk management practices. This include the monitoring of progress made on the implementation of future mitigation strategies to provide assurance that the RSR is effectively managing its risks to enhance performance.

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Annual Report 2019/20_26_OCT_2020.indd 63 10/26/20 4:30 PM The RSR EXCO, under the direction of the Board of Directors, use their knowledge of the organisation and the railway industry to formulate a five-year strategic plan. The strategic risks to the plan are determined by considering the effect of uncertainty on the strategic objectives in the strategic plan.

The Committee has reviewed the strategic, operational, project-specific risk registers, considered new and emerging risks and has satisfied itself of the risk-mitigating measures employed to ensure risks are within tolerable levels.

The RSR ensures progress in the management of risks through its risk monitoring activities. It is committed to improving its risk performance on an ongoing basis, where high-risk areas are targeted through focused resources and effort. Every choice the RSR makes in pursuit of its objectives has its risks and through day-to-day integration of risk management in decision making has resulted in improved organisational performance. The heat map below reflects the top ten (10) strategic risks in the RSR.

Top Strategic Risks

Strategic Risk Heat Map 5 Almost certain

Highly likely 4 1 Possible 3 3 2 Remote 2 5 4 Unlikely 1 7 6 8 0 Negligible Minor Medium Serious Critical

Likelihood Impact

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Annual Report 2019/20_26_OCT_2020.indd 64 10/26/20 4:30 PM Legend

No Outcome Risk 1 Railways are safer Lack of independence 2 Sustainable institutional growth and Loss of key personnel development 3 Sustainable institutional growth and Financial sustainability development 4 Railways are safer Inaccurate and incomplete safety information 5 Railways are safer Loss of critical data 6 Improved stakeholder service Inadequate stakeholder buy-in and support 7 Railways are safer Rapid technological advancements 8 Railways are safer Excessive cost of regulation

Internal controls

The effectiveness of internal control

The system of controls within the RSR is designed to provide reasonable assurance that assets are safeguarded and that liabilities and working capital are properly managed in line with the PFMA and the protocol on corporate governance. This is achieved by a risk-based internal audit plan, Internal Audit assessing the adequacy of controls mitigating the risks and the Audit and Risk Committee monitoring the implementation of corrective actions.

From our review of the reports of the Internal Auditors, the Audit Report on the review of the Annual Financial Statements and the Management Report from the Auditor-General of South Africa (AGSA), it can be concluded that the system of internal control as applied over financial and non-financial matters and enterprise risk management at the RSR is satisfactory. The Committee has noted management’s commitment to addressing the lack of control effectiveness, where they exist. The Committee will be monitoring management’s progress in resolving these issues regularly.

Internal Audit and Audit Committees

The Internal Audit function is managed through a co-sourced model under the direction of the Chief Audit Executive. An inhouse team has been appointed and commenced in the third and fourth quarters respectively. The function has provided the RSR with value-added services to ensure that financial, compliance, environmental, operational and performance objectives are achieved. The Audit and Risk Committee has successfully approved and monitored the implementation of the 2019/20 Internal Audit Plan with 18 planned audit reviews which were as follows:

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Annual Report 2019/20_26_OCT_2020.indd 65 10/26/20 4:30 PM • Management of MOUs • Board Governance • Project Management • Deviations Review • Annual Financial Statements Review • Reputation Management • Supply Chain Management and Contract Management • Finance Controls • Risk Management • Business Continuity Management • NIMS • Section 189 • OHS • Information Technology Vulnerability • Assets Management • IT Governance • Ethics • Audits and Inspections

Key activities and objectives of the Audit Committee

The primary purpose of the Audit and Risk Committee is to assist the Board in fulfilling the oversight responsibility required in terms of the PFMA, Treasury Regulations and corporate governance and has authority to:

• Conduct or authorise investigations into any matters within its scope of responsibility; • Access information, records and personnel as it requires to fulfil its responsibilities; • Request the attendance of any executive or employee at Committee meetings; • Conduct meetings with external auditors (Auditor-General) and internal auditors as necessary; • Obtain advice from external parties as necessary; • Resolve any disagreements between management and the auditor regarding financial reporting; and • Pre-approve all auditing and non-audit services.

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Annual Report 2019/20_26_OCT_2020.indd 66 10/26/20 4:30 PM Audit and Risk Committee members

Name Qualifications Internal or If internal, Date Date No. of external position in appointed resigned meetings the public attended entity Siyakhula • B Comm. Accounting External No 01/02/2019 02/02/2020 06 Simelane (University of KZN) • Honours B Comm Accounting • Chartered Accountant • MDP: B-BBEE (UNISA) Prittish Dala • Bachelor of Information and External No 01/02/2019 n/a 08 Technology (Bond University) • Bachelor of Science (Computer Science) Honours (UJ) • Master of Information Technology • Doctorate Information Technology

Ntombizine • Bachelor of Law (Middlesex External No 01/11/2016 n/a 08 Mbiza University United Kingdom) with Articles • BA International Relations • Honours International Relations

Compliance with laws and regulations

The Board of Directors are responsible to ensure compliance with legislative, regulatory and best practice requirements, and are liable for the consequences of non-compliance. In discharging its duties of ensuring that the RSR complies with legislation the Board has committed that the Regulator shall conduct its business in accordance with the applicable regulatory requirements and ensure that appropriate policies and frameworks are committed to promote a culture of compliance within the RSR.

Subsequently, the Compliance unit was established to assist the Board in the management of compliance risks, by ensuring that all instances of non-compliance are adequately followed up and resolved. This enables the RSR to conduct its business activities efficiently and effectively.

Throughout the 19/20 FY, the RSR’s compliance monitoring was conducted whereby departmental heads provided controls and processes with which the RSR ensure compliance with the requirements of the relevant acts. These controls and processes were assessed for validity through corroboration of supporting evidence such as policies and reports.

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Annual Report 2019/20_26_OCT_2020.indd 67 10/26/20 4:30 PM Other efforts applied by the RSR to ensure compliance • Declaration of Authority obligations were met include: • Supply Chain Management Policy • Identifying, assessing and monitoring compliance with • Communications Policy applicable regulatory requirements; and • Penalty Fee Policy

• Development of a compliance policy for effective • Overtime and Standby Policy compliance processes to serve as a cornerstone in • Framework of acceptable levels of materiality & promoting the compliance culture within the organisation. significance

Continuous monitoring of the RSR’s compliance takes The RSR developed a policy matrix with the purpose place quarterly and compliance reports are presented to the of demonstrating how each item in a policy should be Board and the Audit and Risk Committee to ensure that the implemented in practice. The policy matrix will be used to Regulator maintains acceptable levels of compliance with track the implementation of policies. laws and legislation. The Audit and Risk Committee was satisfied that the RSR has complied with applicable laws and regulations governing the entity with a suggestion to develop a regulatory universe Compliance Policies for the RSR. All policies developed during the year under review were subjected to alignment by oversight committees such as EXCO, Board Subcommittees and the Board to avoid conflict Fraud and corruption with laws and regulations that are relevant to the RSR.

During the year under review, the Board of Directors reviewed The RSR has implemented a Fraud and Corruption and approved 19 policies as listed below: Prevention Strategy as part of the overall Governance and Risk Management Strategy. The effectiveness of the Strategy • Disciplinary Policy is monitored on an ongoing basis. Management is responsible • Employee Wellness Policy for the prevention of incidents and occurrences of fraud and • Grievance Policy corruption and does this through the design, implementation • Job Evaluation Policy and monitoring of a sound system of internal controls. A risk • Labour Relations Policy assessment with a specific focus on fraud and corruption is conducted annually and monitoring and reporting are being • Leave Administration Policy done continually. Education and awareness of potential • Probation Policy incidents of fraud and corruption are conducted regularly. • Recruitment and Selection Policy For the year under review, the emphasis was placed on fraud • Remuneration Policy and corruption prevention awareness to ensure that staff • Resettlement Policy members are aware of potential risk factors that could lead • Sexual Harassment Policy to fraud and corruption in the organisation and to promote • Restructuring Policy compliance. • Performance Management Policy

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Annual Report 2019/20_26_OCT_2020.indd 68 10/26/20 4:30 PM To promote fraud and corruption prevention, the • Act honestly and in good faith; organisational value of integrity and trust was prioritised • Perform their duties conscientiously and in the best by the introduction of a Whistle Blowing Policy that makes interest of the RSR; and provision for employees to report (confidential disclosure) • Exercise reasonable care and diligence in the suspected fraud and corruption. Furthermore, the performance of their duties. Committee is responsible for ensuring that all calls to the RSR’s Whistle Blowing Hotline, administered by the external independent service provider, are followed up. Code of conduct Based on an assessment of the information received, an investigation is initiated. The service provider provides a list and details of reported cases to the Audit and Risk The purpose of the RSR’s Code of Conduct and Ethics Committee Chairperson monthly. No cases have been is to: reported through the hotline during the period under • Establish standards that would promote and review. encourage ethical behaviour and decision-making by all RSR employees, Board members and stakeholders; Minimising conflict • Ensure that ethics and desirable business conduct are communicated as an integral part of the RSR’s of interest corporate identity, culture and purpose; • Ensure that a good ethical foundation informs the A conflict of interest is a situation in which a person or RSR’s policies, procedures, practices, conduct and organisation is involved in multiple interests, financial or business processes; and otherwise, and serving one interest could involve working • Relay a clear message that failure to live up to the against another. The RSR endeavours to mitigate conflict desired ethics and conduct could undermine the of interest by avoiding it. RSR’s objectives and will not be tolerated.

The RSR is guided by its approved Code of Conduct The RSR deems contravention of this Code as a serious and Ethics, as approved by the Board, to uphold the matter and those who violate the Code or similar policies highest ethical standards, norms and certain professional will be subjected to disciplinary measures, which may behaviour. Every employee is expected to: include the termination of services. Disciplinary measures • Declare financial interests at the beginning of every may also be imposed for conduct that is considered financial year as required by the RSR Conditions of unethical or improper, even if the conduct is not specifically Service; covered in the Code. • Take personal responsibility for their actions and In all cases and where applicable, the RSR’s Employee comply with all legal obligations, policies and Relations Policy, Disciplinary Code and Procedure and the procedures; National Railway Safety Regulator Act No. 16 of 2002 as amended, will be followed. Contraventions may also lead to civil action or criminal charges. Approval of any action not

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Annual Report 2019/20_26_OCT_2020.indd 69 10/26/20 4:30 PM compliant with the Code must be sought in advance and provision of a safe work environment, the RSR has developed may only be granted by the CEO in consultation with the several relevant occupational health and safety policies to Board. Only the Board may grant waivers of this Code for provide guidance and facilitate compliance to the applicable directors and executive officers of RSR. When a waiver is legislation. During the 2019/20 FY, the following milestones granted, the Board shall ensure that appropriate controls were achieved: are in place to protect the RSR and its stakeholders. Policy development and implementation

Health safety and To fulfil its legal and moral obligations for the provision of a safe work environment, the RSR has developed and implemented environmental issues occupational health and safety policies during the year under review. These policies are aimed at providing guidance and The management of Occupational Health and Safety (OHS) facilitating compliance to the applicable legislation and include remains crucial and integral to the activities of the RSR. As an the following: authority body for the railway industry in South Africa, the RSR continues to lead by example in matters relating to occupational Occupational Health and Safety Policy health and safety, thereby prioritising the management of health In support of the Regulator’s growth trajectory and the and safety for its employees, contractors, visitors and any other commitment to OHS management throughout all regional stakeholder that may come into contact with the Regulator’s offices, the OHS Policy was reviewed and approved during the activities. Compliance to the applicable national OHS legislation year under review. The RSR implemented this Policy throughout and global best practices, therefore, remains a primary focus for all regional offices, including continual engagements and the RSR. communication with the RSR personnel, interested and affected parties. The RSR further continues to support and ensure compliance to the OHS legislative framework, by facilitating the integration of This Policy was drafted and implemented in line with the these legislations into the Railway Safety Regulatory Framework. Occupational Health and Safety Act No. 85 of 1993 as amended In an endeavour to fulfil its legal and moral obligations for the and its Regulations.

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Annual Report 2019/20_26_OCT_2020.indd 70 10/26/20 4:30 PM Substance Abuse Policy and Alcohol Testing Procedure

The Substance Abuse Policy was reviewed and implemented in OHS governance support of the General Safety Regulations to the Occupational structures Health and Safety Act No. 85 of 1993 as amended, and in alignment with one of the regulatory tools, the Human Factors OHS Committee Management Standard, SANS 3000-4: 2011 which requires that railway operators manage the use of substances in workplace. The RSR has established Occupational Health and Safety The implementation of this Policy, therefore, enables the RSR as Committee structures at the RSR’s Head Office and the regional the Regulator to lead by example. offices. To give effect to this Policy, RSR personnel, visitors and contractors were exposed to random alcohol testing during the The purpose of the Occupational Health and Safety Committee is to year under review. A total number of 22 sessions of alcohol initiate, develop, promote, maintain and review measures to ensure testing was conducted across the RSR offices. the health and safety of employees in the workplace. The Committee further ensures that health and safety matters are discussed at Smoking Policy the correct level and escalated through proper channels to the Management of the RSR. The Committee held meetings as follows: To encourage good health practices and in support of national health strategies to reduce illnesses attributable to tobacco RSR office Planned Meetings smoking and to ensure the provision of a safe work environment, meetings held the RSR continues to monitor compliance to the Smoking Policy. Head Office 4 4 The Policy was reviewed, approved and implemented during the Eastern Region 4 4 year under review. Central Region 4 4 Emergency preparedness Coastal Region 4 4

Emergency simulation exercises were conducted across the To enhance and strengthen governance, the RSR Executives are RSR offices to test the effectiveness of the emergency plans and responsible and accountable for the management of OHS risks procedures. The emergency plans and procedures were found in their respective areas of responsibility and appointed in terms to be effective and were adhered to during the simulations. of the OHS Act as 16.2 appointees. Additional appointments and training of Health and Safety representatives, Fire Marshals, First Aiders and Evacuation Marshals were conducted to ensure effective management of OHS. OHS committees were convened during the period under review in line with the Terms of Reference (TOR) of the Committee.

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Annual Report 2019/20_26_OCT_2020.indd 71 10/26/20 4:30 PM Response measure to COVID-19 Olievenhoutbosch. The learners were exposed to possible careers within the rail industry and the corporate world in Towards the end of the financial year, the COVID-19 general. They were afforded the opportunity to interview (Coronavirus) pandemic reached South Africa; the RSR RSR employees about careers that interested them and subsequently developed preventative measures to ensure they were reassured that opportunities are available for that the organisation remain a safe working environment everyone, irrespective of gender. At the conclusion of the in line with the its COVID-19 response plan. programme, learners were presented with certificates.

Conducted compliance audits Zonnebloem NEST Senior School To guide operational excellence, compliance audits were conducted at all RSR offices to assess the level of The RSR’s Western Cape Regional Office partnered with compliance to minimum requirements of the Occupational PRASA to host 19 learners from the Zonnebloem NEST Health and Safety Act No. 85 of 1993 as amended. Table 2 Senior School in Cape Town as part of the 2019 Cell C below, presents the level of compliance for all RSR offices Take a Girl Child to Work programme. The school was over a period of three years. selected following the death of a grade 10 learner who was struck by a train on route to school during April 2019. Level of compliance After listening to motivational talks from both the RSR and 2017/18 2018/19 2019/20 PRASA, the learners were treated to a site visit at the 89% 90% 94% Metrorail Training Centre and Rolling Stock Depot where they were given first-hand experience of a day in the life of women in rail. There were improvements in the level of compliance at all the RSR offices. Continuous monitoring is conducted to Mandela Day ensure full compliance with the Occupational Health and The RSR celebrated Mandela Day with the Thembelenkosini Safety Act. Care Givers in Soweto. Donations in the form of food items and cleaning materials were collected from RSR staff members at the Head Office and the Gauteng Social responsibility Regional Office. The RSR donated a kitchen sink and other equipment that was highlighted as priority items that Cell C Take A Girl Child to Work would assist the home in improving the quality of service it provides. On the day of the event, the RSR handed over The RSR hosted the Cell C Take A Girl Child to Work at the donated items and treated the staff and beneficiaries of the RSR’s Head Office in Gauteng during the period under the home to a meal. review. The organisation hosted 15 girl learners from the Seshegong Secondary School from the nearby township of

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Annual Report 2019/20_26_OCT_2020.indd 72 10/26/20 4:30 PM Audit committee report

We are pleased to present our report for the financial year ended 31 March 2020.

Audit Committee Responsibility

The Audit Committee has complied with its responsibilities arising from Section 51(1)(a)(ii) of the Public Finance Management Act and Treasury Regulation 27.1. The Audit Committee also adopted appropriate formal terms of reference as its Audit Committee Charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.

The Effectiveness of Internal Control

The system of controls within the RSR is designed to provide reasonable assurance that assets are safeguarded and that liabilities and working capital are properly managed in line with the PFMA and the protocol on corporate governance. This is achieved by means of a risk-based internal audit plan, Internal Audit assessing the adequacy and effectiveness of controls mitigating the risks and the Audit and Risk Committee monitoring the implementation of corrective actions.

From the Committee’s review of the Internal Audit reports presented during the 2019/20 financial period, the 2019/20 Audit Report on the review of the Annual Financial Statements and the Management Report from the Auditor- General of South Africa (AGSA), it can be concluded that the system of internal control as applied over financial and non-financial matters and enterprise risk management and governance at the RSR is generally satisfactory. However, improvements are required within ICT, cyber security, SCM and contract management, and compliance monitoring. The Committee has noted management’s commitment to address the lack of control effectiveness, where they exist. The Committee will be monitoring management’s progress in resolving these issues on a regular basis.

The Committee reviewed and approved the internal audit charter for the year under review. The Committee reviewed and approved the three-year rolling plan, including the annual internal audit plan for the 2019/20 FY.

The approved internal audit plan for the 2019/20 FY consisted of 18 audits and two ad hoc audits. Seventeen of these audits were completed by 31 March 2020.

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Annual Report 2019/20_26_OCT_2020.indd 73 10/26/20 4:30 PM The following were areas of concern: On a quarterly basis, the Audit and Risk Committee reviewed the RSR’s implementation plan of audit issues • SCM and Contract Management raised in the prior year. The Committee met with the • Information Technology Vulnerability Assessment AGSA to ensure that there were no unresolved issues that • National Information Management System emanated from the regulatory audit. Corrective actions on • Directives and Penalties the detailed findings raised by the AGSA will continue to The Committee evaluated the independence, effectiveness be monitored by the Audit and Risk Committee. The Audit and performance of the internal audit function and Committee concurs and accepts the conclusions of the compliance with its mandate. AGSA on the Annual Financial Statements and believes that the audited Annual Financial Statements must be accepted and read together with the report of the AGSA. In-year Management and Monthly/Quarterly Report

The public entity has submitted monthly and quarterly Appreciation reports to the Executive Authority. The Audit and Risk Committee wishes to acknowledge Evaluation of Financial Statements the dedication and work performed by the Acting Chief Executive Officer, Management and the officials of the The Committee reviewed the Annual Financial Statements prepared by the public entity. RSR. The Audit and Risk Committee wishes to express its appreciation to Management, the AGSA and the Internal Audit Department for the co-operation and information they Auditor’s Report have provided to enable the Committee to discharge its responsibilities. The Committee have reviewed the public entity’s implementation plan for audit issues raised in the prior year and were satisfied that the matters have been adequately ______resolved except the matters relating to SCM and contract Ms Margaret Phiri CA (SA) management. CHAIRPERSON: AUDIT AND RISK COMMITTEE

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Annual Report 2019/20_26_OCT_2020.indd 74 10/26/20 4:30 PM B-BBEE compliance performance information

The following table has been completed in accordance with the compliance to the B-BBEE requirements of section 13(g) (1) of the Broad-Based Black Economic Empowerment Act of 2013 and as determined by the Department of Trade and Industry.

Name of sphere of government / Public entity / The Railway Safety Regulator Organ of state: Registration number (If applicable): Not Applicable Physical address: Building 4, Waterfall Point Office Park, Cnr Waterfall and Woodmead Drive, Waterfall City, Midrand, 1685

Type of sphere of government / Public entity / Regulation Organ of state: Organisation industry / Sector Transportation sector

Has the sphere of government / Public entity / Organ of state applied any relevant Code of Good Practice (B-BBEE Certificate Levels 1 – 8) with regards to the following:

Criteria RSR Relevant Annexure

Determining qualification criteria for the issuing of No The RSR has not set any qualification licences, concessions or other authorisations in criteria for the issuing of operator respect of economic activity in terms of any law permits

Developing and implementing a preferential No No criteria applied during the year procurement policy Determining qualification criteria for the sale of No The RSR is a fully owned entity of the state-owned enterprises National Department of Transport

Developing criteria for entering into partnerships No No criteria have been set by the RSR with the private sector

Determining criteria for the awarding of incentives, No No incentives, grants and investment grants and investment schemes in support of schemes were awarded by the RSR Broad Based Black Economic Empowerment during the year

APPROVED BY:

______Mr Boy Johannes Nobunga CHAIRPERSON: RSR BOARD

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Annual Report 2019/20_26_OCT_2020.indd 76 10/26/20 4:30 PM PART D: HUMAN RESOURCE MANAGEMENT

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Annual Report 2019/20_26_OCT_2020.indd 77 10/26/20 4:30 PM Introduction

The strategic role of the Human Resource function is aided alternative positions with the remainder of the positions being by its operational capabilities to facilitate the acquisition filed in accordance with the Recruitment Policy. The RSR has and retention of human capital in the organisation through further provided employees with the opportunity to upskill the provision of competitive remuneration and benefits The their qualifications to comply with the minimum requirements function ensures the provision of sound employee relations of the positions. and wellness which contributes to the execution of the RSR’s mandate. Institutional Governance Implementation of PWC Investigation Report The improvement of efficiencies and the promotion of good governance has been key during this period. To ensure such efficiencies and good governance, various policies have The recommendations from the investigation report among been reviewed and subsequently approved by the Board. others, required for disciplinary action to be instituted against Such policies include the RSR Conditions of Services as they those identified in the report as contraveners of RSR policies set the tone and foundation for the governance of conditions and good governance. Disciplinary action has been instituted of employment for the RSR and its employees. Following accordingly and have been finalised in accordance with the the revision and approval of 12 policies in the previous Disciplinary Policy. While the majority of the disciplinary financial period, there has been significant progress in the matters have been successfully resolved in favour of the development of Standard Operating Procedures (SOP) to aid RSR, some of the outcomes from the disciplinary processes the effective implementation of the said approved policies. have been referred to the CCMA. The RSR is attending to the remaining matters at the CCMA to ensure finality.

Dispute Resolution and Management Implementation of the Organisational Structure Pursuant to the implementation of the revised structure, the RSR was inundated with grievances and CCMA referrals In the year under review, the revised approved organisational pertaining to the Section 189 process. Through commitment, structure was successfully implemented and subsequently diligence and employment of effective dispute resolution, resulted in a Section 189 process. The process resulted in the the RSR has managed to resolve all the grievances and retrenchment of five employees. The implementation of the subsequently addressed all the CCMA matters pertaining to structure in accordance with the approved criteria resulted in the implementation of the approved structure. employees being confirmed, placed and offered

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Annual Report 2019/20_26_OCT_2020.indd 78 10/26/20 4:30 PM Human Resource Administration Management

The debt of the former CEO that related to the payment of legal matters in the amount of R153,000 have been factored into his leave provision and will be processed accordingly once all matters have been finalised. The talent management processes have ensured that the RSR maintains and exceeds the promotion of women as it has recorded a higher percentage of women at 50,3 per cent vs males at 49,7 per cent during the period under review. The updated Human Resources Information System has been implemented to bolster the governance and compliance of human resources, financial and labour related legislation and policies.

The Human Resources Department has revised its operational plan to further align it towards a proactive approach to help in talent management and development strategies; employee relations and wellness; rewards and recognition as well a enhanced employee engagement matters.

The HR Department has further undertook engagements through education on HR policies and processes to advance employee relations, employee wellness, performance management and employee development matters.

A learning organisation as well as a healthy human capital plays a pivotal role in meeting and exceeding the mandate and goals of the RSR.

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Annual Report 2019/20_26_OCT_2020.indd 79 10/26/20 4:30 PM Human resource oversight statistics

Personnel cost by programme/ activity/ objective

Programme/activity/ Total expenditure Personnel Personnel exp. No. of Average objective for the entity expenditure as a % of total employees personnel cost (R) (R) expenditure (R) per employee (R) OCEO 9 407 318 1 336 097 1% 2 668 048 COO - HO 3 621 956 3 465 063 2% 2 1 732 531 Systems & ICT 15 134 035 9 224 633 5% 12 768 719 Safety Permit 18 312 626 17 769 406 9% 14 1 269 243 Management Safety Management 11 789 739 10 881 516 5% 13 837 040 Coastal Region 9 774 503 8 886 091 4% 13 683 545 Central Region 19 100 889 18 589 244 9% 20 929 462 Eastern Region 9 722 213 9 405 544 5% 13 723 503 Company Secretary 5 016 587 1 457 475 1% 2 728 738 Legal Services 4 935 673 2 659 544 1% 4 664 886 CAE 3 773 541 2 994 442 1% 7 427 777 Risk and Strategy 12 540 121 9 998 701 5% 13 769 131 Management Finance 52 040 901 20 051 658 10% 34 589 755 Human Resources 13 379 352 8 640 069 4% 12 720 006 Media & Communications 13 832 049 8 607 009 4% 14 614 786 Total 202 381 504 133 966 493 66% 175 765 523

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Annual Report 2019/20_26_OCT_2020.indd 80 10/26/20 4:30 PM Personnel cost by salary band Level Personnel expenditure % of personnel No. of Average personnel (R) expenditure to total employees cost per employee personnel cost (R) (R) Top Management 675 000 - 1 675 000 Senior Management 20 211 931 15% 13 1 554 764 Professional qualified 75 926 652 57% 76 999 035 Skilled 33 595 094 25% 67 501 419 Semi-skilled 3 557 816 3% 18 197 656 Unskilled - - - - TOTAL 133 966 493 100% 175 765 523

Performance rewards Programme/activity/ Performance rewards Personnel Expenditure % of performance rewards to objective (R) total personnel cost (R) Top Management - 675 000 - Senior Management 1 482 728 20 211 931 7% Professional qualified 4 346 519 75 926 652 6% Skilled 1 685 876 33 595 094 5% Semi-skilled 182 658 3 557 816 5% Unskilled - - - TOTAL 7 697 781 133 966 493 6%

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Annual Report 2019/20_26_OCT_2020.indd 81 10/26/20 4:30 PM Training costs

Programme/activity/ Personnel Training Training No. of Avg. training objective expenditure expenditure expenditure as a % employees cost per (R) (R) of personnel cost trained employee Internships - - - - - Staff training 23 452 659 1 110 842 5% 24 46 285 Bursaries 9 455 583 357 810 4% 14 25 558 TOTAL 32 908 242 1 468 652 4% 38 38 649

Employment and vacancies

Programme/activity/ No. of employees 2019/2020 Approved 2019/2020 % of vacancies Objective posts vacancies OCEO 3 3 2 67% COO 86 86 14 15% Company Secretary 2 2 1 50% Legal Services 4 4 1 25% CAE 6 6 - - Risk and Strategy 12 12 2 17% Management Finance 39 39 5 13% Human Resources 11 11 2 18% Media & Communications 12 12 1 8% Total 175 175 28 16%

The table detail the attempts made to fill the posts of senior management and highly skilled supervisors. It further explains why vacancies have remained unfilled for prolonged periods and the measures taken to successfully attract and retain staff.

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Annual Report 2019/20_26_OCT_2020.indd 82 10/26/20 4:30 PM Employment changes

Salary Band Employment at Appointments Terminations Employment beginning of period at end of the period Top Management 1 - 1 - Senior Management 12 5 3 10 Professional qualified 69 14 11 65 Skilled 61 10 9 58 Semi-skilled 18 1 4 14 Unskilled - - - - Total 161 30 28 147

Information on changes in employment over the financial year. Turnover rates indicate trends in the employment profile of the public entity.

Reasons for staff leaving

Reason Number % Of total no. of staff leaving Resignation 18 64.3% Retirement 1 3.6% Dismissal 3 10.7% Death - - Voluntary Severance Packages 3 10.7% Contract expiry 3 10.7% Total 28 100%

Labour Relations: Misconduct and disciplinary action

Nature of disciplinary action Number Verbal warning - Written warning - Final written warning - Dismissal 3

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Annual Report 2019/20_26_OCT_2020.indd 83 10/26/20 4:30 PM Equity target and employment equity status Levels Male

African Coloured Indian White Current Target Current Target Current Target Current Target Top - 1 ------Management Senior 6 4 - 1 - - 1 1 Management Professional 37 36 2 4 - 2 3 5 qualified Skilled 20 19 - 2 - 2 - 3 Semi-skilled 4 5 - 1 - 1 - 1 Unskilled ------TOTAL 67 65 2 8 - 5 4 10

Full implementation of the Employment Equity (EE) Plan should be achieved by 31 May 2024.

Levels Female African Coloured Indian White Current Target Current Target Current Target Current Target Top - 1 ------Management Senior 3 3 3 - - - - 1 Management Professional 20 23 3 3 - 3 - 3 qualified Skilled 37 29 1 4 - 2 - 4 Semi-skilled 8 10 1 1 - 1 1 2 Unskilled ------TOTAL 68 66 5 8 - 6 1 10

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Annual Report 2019/20_26_OCT_2020.indd 84 10/26/20 4:30 PM Levels Disabled staff Male Female Current Target Current Target Top Management - - - - Senior Management 1 0 0 0 Professional qualified 0 1 0 1 Skilled 0 0 1 0 Semi-skilled - - - - Unskilled 0 0 0 0 TOTAL 1 1 1 1

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Annual Report 2019/20_26_OCT_2020.indd 86 10/26/20 4:30 PM PART E: FINANCIAL INFORMATION

ANNUAL REPORT 2019/20 87

Annual Report 2019/20_26_OCT_2020.indd 87 10/26/20 4:30 PM Index

89 Board members’ responsibilities and approval

90-93 Auditor - General Report

94 Statement of financial position

95 Statement of financial performance

96 Statement of changes in net assets

97 Cash Flow Statements

98-99 Statement of comparison of budget and actual amounts

100-111 Accounting Policies

112-141 Notes to the Annual Financial Statements

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Annual Report 2019/20_26_OCT_2020.indd 88 10/26/20 4:30 PM Board members’ responsibilities and approval

The members of the Board of the RSR are required by the The focus of risk management in the RSR is, therefore, on Public Finance Management Act (Act No. 1 of 1999) to maintain identifying, assessing, managing and monitoring all known adequate accounting records. The Board is also responsible forms of risk across the RSR. While operating risk cannot be for the content and integrity of the Annual Financial Statements fully eliminated, the RSR endeavours to minimise it by ensuring and related financial information included in this report. It is the that appropriate infrastructure, controls, systems and ethical responsibility of the Board to ensure that the Annual Financial behaviour are applied and managed within predetermined Statements fairly present the state of affairs of the RSR, the procedures and constraints. results of its operations and cash flows for the period that ended. The Board is of the opinion, based on the assurance given by management, that the system of internal control provides External Auditors had unrestricted acess to all the financial reasonable assurance that the financial records may be relied records and related data to express an independent opinion on for the preparation of the Annual Financial Statements. on the Annual Financial Statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material The audited Annual Financial Statements have been prepared misstatement or errors. in accordance with the Standards of Generally Recognised Accounting Practice, including any interpretations, guidelines The Board has reviewed and approved the budget of the RSR and directives issued by the Accounting Standards Board. for the 2020/21 FY and in light of this review and the current financial position,are satisfied that the RSR has access to The Annual Financial Statements are based on appropriate adequate resources to continue in operational existence for accounting policies consistently applied and supported by the foreseeable future. reasonable and prudent judgement and estimates. Though the Board is primarily responsible for the financial The Board acknowledge that they are ultimately responsible affairs of the RSR, they are supported by the RSR’s Internal for the system of internal financial control established by the and External Auditors. RSR, and place considerable importance on maintaining a strong control environment. To enable the Board to meet these The External Auditors are responsible for independently responsibilities, they set standards for internal control to reduce reviewing and reporting on the RSR’s Annual Financial the risk of misstatement or errors in a cost effective manner. Statements. The Annual Financial Statements have been The standards include the proper delegation of responsibilities examined by the RSR’s External Auditors and their report is within a clearly defined framework, effective accounting presented on page. procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored The Annual Financial Statements on page, which have been throughout the RSR. All RSR employees are required to prepared on the going concern basis, were approved by the maintain the highest ethical standards to ensure the RSR’s Board on 31 July 2020 and were signed on their behalf by: business is conducted in a manner that in all reasonable circumstances, is above reproach.

______Ms Tshepo Kgare Mr Boy Johannes Nobunga ACTING CHIEF EXECUTIVE OFFICER CHAIRPERSON: RSR BOARD

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Annual Report 2019/20_26_OCT_2020.indd 89 10/26/20 4:30 PM Auditor-General Report Report of the auditor-general to Parliament on the Railway Safety Regulator

Report on the audit of the financial statements Report on the audit of the annual performance report

Opinion

1. I have audited the financial statements of the Railway Safety Regulator set out on pages 94 to 141, which comprise the statement of financial position as at 31 March 2020, the statement of financial performance, statement of changes in net assets, cash flow statement and the statement of comparison of budget and actual amounts for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies. 2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Railway Safety Regulator as at 31 March 2020, and its financial performance and cash flows for the year then ended in accordance with the Standards of Generally Recognised Accounting Practice (Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA).

Basis for opinion

3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of this auditor’s report. 4. I am independent of the public entity in accordance with sections 290 and 291 of the Code of Ethics for Professional Accountants and parts 1 and 3 of the International Code of Ethics for Professional Accountants (including International Independence Standards) of the International Ethics Standards Board for Accountants (IESBA codes) as well as the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA codes. 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Responsibilities of the accounting authority for the financial statements

6. TheBoard of Directors, which constitutes the accounting authority is responsible for the preparation and fair presentation of the financial statements in accordance with the Standards of GRAP and the requirements of the PFMA, and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 7. In preparing the financial statements, the accounting authority is responsible for assessing the Railway Safety Regulator’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the appropriate governance structure either intends to liquidate the public entity or to cease operations, or has no realistic alternative but to do so. Auditor-general’s responsibilities for the audit of the financial statements

8. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 9. A further description of my responsibilities for the audit of the financial statements is included in the annexure to this auditor’s report.

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Report on the audit of the financial statements Report on the audit of the annual performance report

Opinion Introduction and scope

1. I have audited the financial statements of the Railway Safety Regulator set out on pages 94 to 141, which comprise the 10. In accordance with the Public Audit Act of South Africa 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in statement of financial position as at 31 March 2020, the statement of financial performance, statement of changes in net assets, terms thereof, I have a responsibility to report on the usefulness and reliability of the reported performance information against cash flow statement and the statement of comparison of budget and actual amounts for the year then ended, as well as the predetermined objectives for the selected strategic outcome presented in the annual performance report. I performed procedures notes to the financial statements, including a summary of significant accounting policies. to identify material findings but not to gather evidence to express assurance. 2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Railway Safety 11. My procedures address the usefulness and reliability of the reported performance information, which must be based on the Regulator as at 31 March 2020, and its financial performance and cash flows for the year then ended in accordance with the approved performance planning documents of the public entity. I have not evaluated the completeness and appropriateness of Standards of Generally Recognised Accounting Practice (Standards of GRAP) and the requirements of the Public Finance the performance indicators included in the planning documents. My procedures do not examine whether the actions taken by Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA). the public entity enabled service delivery. My procedures also do not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters. Basis for opinion 12. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from 3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those the performance management and reporting framework, as defined in the general notice, for the following selected strategic standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of this outcome presented in the annual performance report of the public entity for the year ended 31 March 2020: auditor’s report. 4. I am independent of the public entity in accordance with sections 290 and 291 of the Code of Ethics for Professional Accountants and parts 1 and 3 of the International Code of Ethics for Professional Accountants (including International Independence Standards) of the International Ethics Standards Board for Accountants (IESBA codes) as well as the ethical requirements that Strategic outcome Pages in the annual performance report are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA codes. Strategic outcome 1: Railways are safer 33 – 36 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 13. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine Responsibilities of the accounting authority for the financial statements whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 6. TheBoard of Directors, which constitutes the accounting authority is responsible for the preparation and fair presentation of the financial statements in accordance with the Standards of GRAP and the requirements of the PFMA, and for such internal 14. I did not identify any material findings on the usefulness and reliability of the reported performance information for this strategic control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from outcome: material misstatement, whether due to fraud or error.

7. In preparing the financial statements, the accounting authority is responsible for assessing the Railway Safety Regulator’s ability • Strategic outcome 1: Railways are safer to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the appropriate governance structure either intends to liquidate the public entity or to cease operations, or has no realistic alternative but to do so. Other matter Auditor-general’s responsibilities for the audit of the financial statements 15. I draw attention to the matter below. 8. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance Achievement of planned targets is a high level of assurance but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these 16. Refer to the annual performance report on pages 33 to 45 for information on the achievement of planned targets for the year financial statements. and explanations provided for the achievement of targets. 9. A further description of my responsibilities for the audit of the financial statements is included in the annexure to this auditor’s report.

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Report on the audit of compliance with legislation

Introduction and scope

17. In accordance with the PAA and the general notice issued 24. If based on the work I have performed, I conclude that in terms thereof, I have a responsibility to report material there is a material misstatement in this other information, findings on the public entity’s compliance with specific I am required to report that fact. I have nothing to report in matters in key legislation. I performed procedures to identify this regard. findings but not to gather evidence to express assurance. 18. The material findings on compliance with specific matters in key legislation are as follows: Internal control deficiencies 25. I considered internal control relevant to my audit of the Procurement and contract management financial statements, reported performance information and compliance with applicable legislation; however, my 19. Bid documentation for procurement of commodities objective was not to express any form of assurance on designated for local content and production, did not it. The matter reported below is limited to the significant stipulate the minimum threshold for local production and internal control deficiencies that resulted in the findings on content as required by the 2017 preferential procurement compliance with legislation included in this report. regulation 8(2). Similar non-compliance was also reported 26. Insufficient progress has been made by senior management in the prior year. in implementing measures and controls to ensure that irregular expenditure is prevented and that compliance with all supply chain legislation is enforced and closely Expenditure management monitored. 20. Effective and appropriate steps were not taken to prevent irregular expenditure amounting to R1 578 846 as disclosed Other reports in note 28 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. 27. I draw attention to the following engagements conducted by various parties which had, or could have, an impact Other information on the matters reported in the public entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These 21. The accounting authority is responsible for the other reports did not form part of my opinion on the financial information. The other information comprises the statements or my findings on the reported performance information included in the annual report. The other information or compliance with legislation. information does not include the financial statements, the auditor’s report and the selected strategic outcome Investigation presented in the annual performance report that has been specifically reported on in this auditor’s report. 28. The audit committee has commissioned an investigation by the National Treasury on reported allegations in terms of 22. My opinion on the financial statements and findings on Treasury Regulation 27.1.9. The investigation is in progress. the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon. Pretoria 30 September 2020 23. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected strategic outcome presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

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1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the financial statements and the procedures performed on reported performance information for the selected strategic outcome and on the public entity’s compliance with respect to the selected subject matters.

Financial statements

2. In addition to my responsibility for the audit of the financial statements as described in this auditor’s report, I also:

• identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error; design and perform audit procedures responsive to those risks; and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the over- ride of internal control

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the public entity’s internal control

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors, which constitutes the accounting authority

• conclude on the appropriateness of the board of directors, which constitutes the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists relating to events or conditions that may cast significant doubt on the ability of the Railway Safety Regulator to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify my opinion on the financial statements. My conclusions are based on the information available to me at the date of this auditor’s report. However, future events or conditions may cause a public entity to cease operating as a going concern

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and determine whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

Communication with those charged with governance

3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and, where applicable, actions taken to eliminate threats or safeguards applied.

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Figures in Rand Note(s) 2020 2019 Restated

Assets Current Assets Receivables from exchange transactions 3 7 666 303 2 291 363 Receivables from non-exchange transactions 4 4 270 000 4 500 000 Cash and cash equivalents 5 65 053 011 42 653 407 76 989 314 49 444 770

Non-Current Assets Property, plant and equipment 6 30 081 725 10 333 197 Intangible assets 7 2 509 166 3 242 786 32 590 891 13 575 983 Total Assets 109 580 205 63 020 753

Liabilities Current Liabilities Finance lease obligation 8 - 15 259 Payables from exchange transactions 9 44 190 200 37 689 546 Provisions 10 5 447 518 6 826 513 49 637 718 44 531 318 Total Liabilities 49 637 718 44 531 318 Net Assets 59 942 487 18 489 435 Accumulated surplus 59 942 487 18 489 435

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Figures in Rand Note(s) 2020 2019 Restated

Revenue

Revenue from exchange transactions

Safety permit fees 11 170 560 765 164 048 051 Other revenue 14 606 540 1 409 317 Technology audits 13 - 1 728 550 Technical awareness workshop - 1 547 550 Interest received 12 8 160 496 5 817 473 Total revenue from exchange transactions 179 327 801 174 550 941

Revenue from non-exchange transactions

Administration grant 63 522 000 63 018 000 Penalties 770 000 6 000 000 Other income 214 755 198 314 Total revenue from non-exchange transactions 64 506 755 69 216 314 Total revenue 243 834 556 243 767 255

Expenditure

Employee related costs 15 (133 966 493) (155 563 889) Depreciation, amortisation and impairment (7 390 432) (23 278 849) Debt impairment and write - off 16 (1 838 877) 7 876 794 Finance costs (403) (3 856) Loss on disposal of assets (297 203) (77 714) General expenses 17 (58 888 096) (53 427 148) Total expenditure (202 381 504) (224 474 662) Surplus for the year 41 453 052 19 292 593

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Figures in Rand Note(s) Accumulated Total net assets surplus Balance at 01 April 2018 (803 158) (803 158)

Surplus for the year 19 292 593 19 292 593 Total changes 19 292 593 19 292 593 Opening balance as previously reported 18 685 227 18 685 227

Correction of errors 25 (195 792) (195 792) Balance at 01 April 2019 as restated 18 489 435 18 489 435

Surplus for the year 41 453 052 41 453 052 Total changes 41 453 052 41 453 052 Balance at 31 March 2020 59 942 487 59 942 487

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Figures in Rand Note(s) 2020 2019 Restated

Cash flows from operating activities Receipts Sale of goods and services 170 251 535 177 968 882 Grants 63 522 000 63 018 000 Interest income 8 160 496 5 817 473 241 934 031 246 804 355

Payments Employee costs (134 927 876) (151 309 097) Suppliers (62 911 533) (61 811 995) Finance costs (403) (3 856) (197 839 812) (213 124 948) Net cash flows from operating activities 18 44 094 219 33 679 407

Cash flows from investing activities Purchase of property, plant and equipment (21 421 891) (1 375 482) Proceeds from sale of property, plant and equipment 245 131 74 708 Purchase of other intangible assets (502 596) - Net cash flows from investing activities (21 679 356) (1 300 774)

Cash flows from financing activities Finance lease payments (15 259) (51 672)

Net increase/(decrease) in cash and cash equivalents 22 399 604 32 326 961 Cash and cash equivalents at the beginning of the year 42 653 407 10 326 446 Cash and cash equivalents at the end of the year 5 65 053 011 42 653 407

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Budget on Cash Basis Figures in Rand Approved Adjustments Final Actual Difference Reference budget budget amounts on between final comparable budget and basis actual Statement of financial performance

Revenue

Revenue from exchange transactions

Safety permit fees 165 000 000 - 165 000 000 164 445 366 (554 634) Application fees 4 500 000 - 4 500 000 6 115 399 1 615 399 32 Other revenue - - - 606 540 606 540 32 Interest received-investment 1 889 888 - 1 889 888 8 160 496 6 270 608 32 Total revenue from ex- 171 389 888 - 171 389 888 179 327 801 7 937 913 change transactions Revenue from non-exchange transactions Transfer revenue Administration grant 63 522 000 - 63 522 000 63 522 000 - Penalties - - - 770 000 770 000 32 Other income - - - 214 755 214 755 32 Total revenue from non- exchange transactions 63 522 000 - 63 522 000 64 506 755 984 755 Total revenue 234 911 888 - 234 911 888 243 834 556 8 922 668

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Figures in Rand Approved Adjustments Final Actual Difference Reference budget budget amounts on between final comparable budget and basis actual Expenditure Employee cost (147 839 741) 13 460 019 (134 379 722) (133 966 493) 413 229 Non -executive directors (3 249 911) 769 000 (2 480 911) (2 481 650) (739) Depreciation and amortisation - - - (7 390 432) (7 390 432) 32 Loss on disposal of assets - - - (297 203) (297 203) 32 Finance costs - - - (403) (403) Office rental (21 501 970) 11 367 967 (10 134 003) (11 356 705) (1 222 702) 32 Debt impairment and write-off - - - (1 838 876) (1 838 876) 32 Repairs and maintenance (390 000) 297 381 (92 619) (344 996) (252 377) 32 External audit fee (2 843 100) (549 454) (3 392 554) (3 392 554) - Consulting and professional fees (13 305 212) (17 032 732) (30 337 944) (13 421 391) 16 916 553 32 General expenses (42 614 954) 3 636 212 (38 978 742) (27 890 801) 11 087 941 32 Capital expenditure (3 167 000) (27 033 400) (30 200 400) - 30 200 400 32 Total expenditure (234 911 888) (15 085 007) (249 996 895) (202 381 504) 47 615 391 Surplus - (15 085 007) (15 085 007) 41 453 052 41 453 052 Actual amount on - (15 085 007) (15 085 007) 41 453 052 41 453 052 comparable basis as presented in the budget and actual comparative statement

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1. Presentation of Financial Statements Budget variance

Variance of 10% or more between budget and actual amounts The Financial Statements have been prepared in accordance is regarded as material. All material differences are explained. with the Standards of Generally Recognised Accounting Prac- tice, issued by the Accounting Standards Board in accordance with Section 55 of the Public Finance Management Act No.01 Useful life assessment of 1999. In determining the useful life and residual values of each prop- These Annual Financial Statements have been prepared on an erty, plant and equipment and intangible assets, management accrual basis of accounting and are in accordance with historical took the nature and condition of each asset type and the usage cost convention as the basis of measurement, unless specified. of assets into consideration. They are presented in South African Rands. The accounting policies are consistent with the previous period. In the absence of an issued and effective Standard of GRAP, accounting policies for material transactions, events or conditions were developed in accordance with paragraphs 8, 10 and 11 of GRAP 3 as read with Directive 5. 1 . 1 Property, plant and equipment

Assets, liabilities, revenues and expenses were not offset, ex- Property, plant and equipment are tangible non-current assets cept when offsetting is either required or permitted by a Stan- (including infrastructure assets) that are held for use in the dard of GRAP. production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during A summary of significant accounting policies, that have been more than one period. consistently applied in the preparation of these financial statements, is disclosed below. The cost of an item of property, plant and equipment is recognised as an asset when:  It is probable that future economic benefits or Comparative information service potential associated with the item will flow to the RSR; and When the presentation or classification of items in the Annu-  The cost of the item can be measured reliably. al Financial Statement is amended, prior period comparative amounts are restated if material. The nature and reason for the Property, plant and equipment is initially measured at cost. reclassification is disclosed. Where the accounting errors have been identified in the current year, the correction is made retro- The cost of an item of property, plant and equipment is the spectively as far as is practicable, and prior year comparatives purchase price and other costs attributable to bring the asset are restated accordingly. Where there has been a change in ac- to the location and condition necessary for it to be capable counting policy in the current year, the adjustment is made retro- of operating in the manner intended by management. Trade spectively as far as practicable, and the prior year comparatives discounts and rebates are deducted to arrive at the cost. are restated accordingly. When an asset is acquired through an on-exchange transaction, its cost is the fair value as at the date of acquisition. Significant accounting judgements and estimates When an item of property, plant and equipment is acquired in In preparing the Annual Financial Statements, management exchange for an on-monetary asset or monetary assets, or a is required to make estimates and assumptions that affect the combination of monetary and non-monetary assets, the asset amounts presented in the Annual Financial Statements and acquired is initially measured at fair value (the cost). If the related disclosures. Use of available information and application acquired item’s fair value was not determinable, it’s deemed of judgement is inherent in the formation of estimates. Significant cost is the carrying amount of the asset(s) given up. judgements include the following:

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When significant component in so far as an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Recognition of costs in the carrying amount of an item of property, plant and equipment*ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.The residual value will be applied if there is an intention to sell the asset at the end of its useful life.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Depreciation method Average useful life Furniture and fixtures Straight line 10 - 20 years Motor vehicles Straight line 12 - 15 years Office equipment Straight line 6 - 20 years IT equipment Straight line 6 - 12 years Leasehold improvements Straight line 5 -10 years Leased assets Straight line 3 - 6 years

The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potential are expected to be consumed by the RSR. The depreciation method applied to an asset is reviewed at least at each reporting date and, If there has been a significant change in the expected pattern of consumption of the future economic benefits or service potential embodied in the asset, the method is changed to reflect the changed pattern. Such a change is accounted for as a change in an accounting estimate.

At each reporting date, the RSR assesses whether there is any indication that its expectations about the residual value and the useful life of an asset have changed since the preceding reporting date. If any such indication exists, the RSR revises the expected useful life and/or residual value accordingly. The change is accounted for as a change in an accounting estimate or an error if it is deemed that the useful lives were assessed incorrectly.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

Assets which the RSR holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. Proceeds from the sale of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the cash flow statement.

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The RSR separately discloses expenditure to repair and An intangible asset arising from development (or from the maintain property, plant and equipment* in the notes to the development phase of an internal project) is recognised when: Financial Statements.  It is technically feasible to complete the asset so that it will The RSR discloses relevant information relating to assets be available for use or sale. under construction or development, in the notes to the Financial  There is an intention to complete and use or sell it. Statements (see note 6).  There is an ability to use or sell it.  It will generate probable future economic benefits or service potential. 1 . 2 Intangible assets  There are available technical, financial and other An asset is identifiable if it is: resources to complete the development and to use or sell  Separable, i.e. is capable of being separated or divided the asset;and from an entity and sold, transferred, licensed, rented or  The expenditure attributable to the asset during its exchanged, either individually or together with a related development can be measured reliably. contract, identifiable assets or liability, regardless of whether the entity intends to do so;or Intangible assets are carried at cost less any accumulated  Arises from binding arrangements(including rights amortisation and any impairment losses. from contracts), regardless of whether those rights are transferable or separable from the RSR or from other An intangible asset is regarded as having an indefinite useful life rights and obligations. when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net A binding arrangement describes contracts and other cash inflows or service potential. Amortisation is not provided arrangements that confer similar rights and obligations to the for these intangible assets, but they are tested for impairment parties as if it were in the form of a contract. annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is An intangible asset is recognised when: provided on a straight line basis over their useful life.  It is probable that the expected future economic benefits or service potential that are attributable to the asset will flow The amortisation period and the amortisation method for to the RSR; and intangible assets are reviewed at each reporting date.  The cost or fair value of the asset can be measured reliably. Reassessing the useful life of an intangible asset with a finite The RSR assesses the probability of expected future economic useful life after it was classified as indefinite, is an indicator that benefits or service potential using reasonable and supportable the asset may be impaired. As a result, the asset is tested for assumptions that represent management’s best estimate of the impairment and the remaining carrying amount is amortised set of economic conditions that will exist over the useful life of over its useful life. the asset. Internally generated brands, mastheads, publishing titles, Where an intangible asset is acquired through a non-exchange customer lists and items similar in substance are not recognised transaction, its initial cost at the date of acquisition is measured as intangible assets. at its fair value as at that date. Expenditure on research (or on the research phase of an Internally generated goodwill is not recognised as an intangible internal project) is recognised as an expense when it is incurred. asset.

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Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Depreciation method Average useful life Computer software Straight line 3 - 8 years

The RSR discloses relevant information relating to assets under construction or development, in the notes to the Financial Statements (see note 6).

1 . 3 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one RSR and a financial liability or a residual interest of another RSR.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Credit risk is the risk that one party, to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Derecognition is the-removal of a previously recognised financial asset or financial liability from an RSR’s statement of financial position.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction.

A financial asset is:  Cash;  Residual interest of another entity;or  A contractual right to: - receive cash or another financial asset from another entity;or - exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the RSR.

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment in accordance with the original or modified terms of a debt instrument.

A financial liability is any liability that is a contractual obligation to:  Deliver cash or another financial asset to another entity; or  Exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the RSR.

Liquidity risk is the risk encountered by the RSR in the event of difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

Loans payable are financial liabilities, other than short-term payables on normal credit terms.

A financial asset is past due when a counterparty has failed to make a payment when contractually due.

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Initial recognition previously recognised impairment loss is reversed directly or by The RSR recognises a financial asset or a financial liability in its adjusting an allowance account. The reversal does not result in statement of financial position when it becomes a party to the a carrying amount of the financial asset that exceeds what the contractual provisions of the instrument. The RSR recognises amortised cost would have been had the impairment not been financial assets using trade date accounting. recognised at the date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit.

Initial measurement of financial assets and financial liabilities 1.4 Statutory receivables The RSR measures a financial asset and financial liability Identification initially at its fair value plus transaction costs that are directly Statutory receivables are receivables that arise from legislation, attributable to the acquisition or issue of the financial asset supporting regulations, or similar means, and require settlement or financial liability. The RSR measures a financial asset and by another entity in cash or another financial asset. financial liability initially at its fair value. Carrying amount is the amount at which an asset is recognised Subsequent measurement of financial assets and financial in the statement of financial position. liabilities The RSR measures all financial assets and financial liabilities The cost method is the method used to account for statutory after initial recognition at amortised cost.All financial assets receivables that requires such receivables to be measured measured at amortised cost, or cost, are subject to an impairment at their transaction amount, plus any accrued interest or review. other charges (where applicable) and, less any accumulated impairment losses and any amounts derecognised.

Gains and losses Nominal interest rate is the interest rate and/or basis specified in For financial assets and financial liabilities measured at legislation, supporting regulations or similar means. amortised cost, a gain or loss is recognised in surplus or deficit when the financial asset or financial liability is derecognised or The transaction amount (for purposes of this Standard) for impaired, or through the amortisation process. a statutory receivable means the amount specified in, or calculated, levied or charged in accordance with, legislation, supporting regulations, or similar means. Impairment and uncollectibility of financial assets RSR assess at the end of each reporting period whether there is Recognition any objective evidence that a financial asset or group of financial assets is impaired. The RSR recognises statutory receivables as follows:  If the transaction is an exchange transaction, using the policy on Revenue from exchange transactions; Financial assets measured at amortised cost:  If the transaction is a non-exchange transaction, using the If there is objective evidence that an impairment loss on financial policy on Revenue from non-exchange transactions(taxes assets measured at amortised cost has been incurred, the and transfers);or amount of the loss is measured as the difference between the  If the transaction is not within the scope of the policies listed asset’s carrying amount and the present value of estimated in the above or another Standard of GRAP, the receivable is future cash flows (excluding future credit losses that have recognised when the definition of an asset is met and, when not been incurred) discounted at the financial asset’s original it is probable that the future economic benefits or service effective interest rate. The carrying amount of the asset is potential associated with the asset will flow to the RSR and reduced directly or through the use of an allowance account. the transaction amount can be measured reliably. The amount of the loss is recognised in surplus or deficit. Initial measurement If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an The RSR initially measures statutory receivables at their event occurring after the impairment was recognised, the transaction amount.

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Subsequent measurement 1 . 6 Leases The RSR measures statutory receivables after initial recognition A lease is classified as a finance lease if it transfers substantially using the cost method. Under the cost method, the initial all the risks and rewards incidental to ownership. A lease is measurement of the receivable is changed subsequent to initial classified as an operating lease if it does not transfer substantially recognition to reflect any: all the risks and rewards incidental to ownership.  Interest or other charges that may have accrued on the receivable (where applicable); When a lease includes both land and buildings elements, the  Impairment losses;and RSR assesses the classification of each element separately.  Amounts derecognised.

Derecognition Finance leases-lessee Finance leases are recognised as assets and liabilities in the The RSR derecognises a statutory receivable, or a part thereof, statement of financial position at amounts equal to the fair when: value of the leased property or, if lower, the present value of  The rights to the cash flows from the receivable are the minimum lease payments. The corresponding liability to settled, expire or are waived; the lessor is included in the statement of financial position as a  The RSR transfers to another party substantially all of finance lease obligation. the risks and rewards of ownership of the receivable; or The discount rate used in calculating the present value of the  The RSR, despite having retained some significant minimum lease payments is the RSR’s incremental borrowing risks and rewards of ownership of the receivable, has rate if it is impractical to determine the interest rate implicit in transferred control of the receivable to another party the lease. and the other party has the practical ability to sell the receivable in its entirety to an unrelated third party, Minimum lease payments are apportioned between the finance and is able to exercise that ability unilaterally and charge and reduction of the outstanding liability. The finance without needing to impose additional restrictions on charge is allocated to each period during the lease term so as the transfer. In this case, theRSR: to produce a constant periodic rate of on the remaining balance - derecognise the receivable;and of the liability.The RSR’s increantal borrowing rate is the prime - recognise separately any rights and obligations interest rate. created or retained in the transfer. Any contingent rents are expensed in the period in which they The carrying amounts of any statutory receivables transferred are incurred. are allocated between the rights or obligations retained and those transferred on the basis of their relative fair values at the The present value of the lease is considered to amount to transfer date. The RSR considers whether any newly created “substantially all of the fair value” when it exceeds 95% of the rightsand obligations are within the scope of the Standard of fair value of the leased assets. GRAP on Financial Instruments or another Standard of GRAP. Any difference between the consideration received and the amounts derecognised and, those amounts recognised, are Operating leases - lessee recognised in surplus or deficit in the period of the transfer. Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between 1 . 5 Taxation the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. Income tax The RSR has obtained income tax exemption from the Commissioner of the South African Revenue Services under 1 . 7 Impairment of cash-generating assets Section 10(i) (cA) (1) of the Income Tax Act, 1962 as amended. Cash-generating assets are assets used with the objective of generating a commercial return. A commercial return means Value Added Tax positive cash flows are expected to be significantly higher than the cost of the asset. The RSR is exempt from the Value Added Tax.

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Impairment is a loss in the future economic benefits or service Irrespective of whether there is any indication of impairment, potential of an asset, over and above the systematic recognition the RSR also tests a cash-generating intangible asset with of the loss of the asset’s future economic benefits or service an indefinite useful life, or a cash-generating intangible asset potential through depreciation (amortisation). not yet available for use for impairment annually by comparing itscarrying amount with its recoverable amount. This impairment The carrying amount is the amount at which an asset is test is performed at the same time every year. If an intangible recognised in the statement of financial position after deducting asset was initially recognised during the current reporting period, any accumulated depreciation and accumulated impairment that intangible asset was tested for impairment before the end of losses. the current reporting period.

A cash-generating unit is the smallest identifiable group of RSR does not have cash - generating assets. assets used with the objective of generating a commercial return that generates cash inflows from continuing use that are largely Value in use independent of the cash inflows from other assets or groups of assets. Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to be derived from the Costs of disposal are incremental costs directly attributable to continuing use of an asset and from its disposal at the end of its the disposal of an asset, excluding finance costs and income useful life. tax expense. When estimating the value in use of an asset, the RSR estimates Depreciation (amortisation) is the systematic allocation of the the future cash inflows and outflows to be derived from continuing depreciable amount of an asset over its useful life. use of the asset and from its ultimate disposal and the RSR applies the appropriate discount rate to those future cash flows. Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between 1. 8 Impairment of non-cash-generating assets knowledgeable, willing parties, less the costs of disposal. Cash-generating assets are assets used with the objective of The recoverable amount of an asset or a cash-generating unit is generating a commercial return. Commercial return means that the higher of its fair value less costs to sell and its value in use. positive cash flows are expected to be significantly higher than the cost of the asset. Useful life is either:  The period of time over which an asset is expected to be Non-cash-generating assets are assets other than cash- used by the RSR;or generating assets.  The number of production or similar units expected to be obtained from the asset by theRSR. Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition Judgements made by management in applying the criteria to of the loss of the asset’s future economic benefits or service designate assets as cash-generating assets or non-cash- potential through depreciation (amortisation). generating assets, are as follows: Carrying amount is the amount at which an asset is recognised Identification in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses When the carrying amount of a cash-generating asset exceeds thereon. its recoverable amount, it is impaired. A cash-generating unit is the smallest identifiable group of assets The RSR assesses at each reporting date whether there is managed with the objective of generating a commercial return any indication that a cash-generating asset may be impaired. If that generates cash inflows from continuing use that are largely any such indication exists, the RSR estimates the recoverable independent of the cash inflows from other assets or groups of amount of the asset. assets.

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Costs of disposal are incremental costs directly attributable to The present value of the remaining service potential of a non- the disposal of an asset, excluding finance costs and income cash-generating assets is determined using the following tax expense. approach:

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life. Recognition and measurement If the recoverable service amount of a non-cash-generating Fair value less costs to sell is the amount obtainable from asset is less than its carrying amount, the carrying amount of the sale of an asset in an arm’s length transaction between the asset is reduced to its recoverable service amount. This knowledgeable, willing parties, less the costs of disposal. reduction is an impairment loss. Recoverable service amount is the higher of a non-cash- generating asset’s fair value less costs to sell and its value in An impairment loss is recognised immediately in surplus or use. deficit. Useful life is either: Any impairment loss of a revalued non-cash-generating asset is  The period of time over which an asset is expected to be used by the RSR;or treated as a revaluation decrease.  The number of production or similar units expected to be obtained from the asset by the RSR. When the amount estimated for an impairment loss is greater than the carrying amount of the non-cash-generating asset Judgements made by management in applying the criteria to towhich it relates, the RSR recognises a liability only to the designate assets as non-cash-generating assets or cash- extent that is a requirement in the Standards of GRAP. generating assets, are as follows: After the recognition of an impairment loss, the depreciation Identification (amortisation) charge for the non-cash-generating asset is adjusted in future periods to allocate the non-cash-generating When the carrying amount of a non-cash-generating asset asset’s revised carrying amount, less its residual value (if any), exceeds its recoverable service amount, it is impaired. on a systematic basis over its remaining useful life.

At each reporting date, the RSR assesses whether there is any indication that a non-cash-generating asset may be impaired. If Reversal of an impairment loss any such indication exists, the RSR estimates the recoverable The RSR assesses at each reporting date whether there is any service amount of the asset. indication that an impairment loss recognised in prior periods for a non-cash-generating asset may no longer exist or may have Irrespective of whether there is any indication of impairment, the decreased. If any such indication exists, the RSR estimates the RSR also tests a non-cash-generating intangible asset with an recoverable service amount of that asset. indefinite useful life or a non-cash-generating intangible asset not yet available for use for impairment annually by comparing An impairment loss recognised in prior periods for a non-cash- its carrying amount with its recoverable service amount. This generating asset is reversed if there has been a change in the impairment test is performed at the same time every year. If estimates used to determine the asset’s recoverable service an intangible asset was initially recognised during the current amount since the last impairment loss was recognised. The reporting period, that intangible asset was tested for impairment carrying amount of the asset is increased to its recoverable before the end of the current reporting period. service amount. The increase is a reversal of an impairment loss. The increased carrying amount of an asset attributable to Value in use a reversal of an impairment loss does not exceed the carrying amount that would have been determined (net of depreciation or The value in use of non-cash-generating assets is the present amortisation) had no impairment loss been recognised for the value of the non-cash-generating assets remaining service asset in prior periods. potential.

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A reversal of an impairment loss for a non-cash-generating asset is recognised immediately in surplus or deficit. Any reversal of an impairment loss of a revalued non-cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the non-cash-generating asset is adjusted in future periods to allocate the non-cash-generating asset’s revised carrying amount,less its residual value(if any),on a systematic basis over its remaining useful life.

1 . 9 Share capital / contributed capital An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

1 . 1 0 Employee benefits

Short-term employee benefits Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service.

Short-term employee benefits include items such as:  Wages, salaries and social security contributions;  Short-term compensated absences (such as paid annual leave and paid sick leave) for which the compensation for the absences is due to be settled within 12 months after the end of the reporting period in which the employees render the related employee service;  Bonus,incentiveandperformancerelatedpaymentspayablewithin12monthsaftertheendofthereportingperiodin which the employees render the related service; and  Non-monetary benefits (for example, medical care, and free or subsidised goodsor services such as housing,cars and cellphones) for current employees.

When an employee has rendered service to the RSR during a reporting period, the RSR recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service:  As a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, the RSR recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and  As an expense, unless another Standard requires or permits the inclusion of the benefits in the cost of an asset.

The expected cost of compensated absences is recognised as an expense because the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The RSR measure the expected cost of accumulating compensated absences as the additional amount that the RSR expects to pay as a result of the un used entitlement that has accumulated at the reporting date.

The RSR recognise the expected cost of bonus, incentive and performance related payments when the RSR has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. A present obligation exists when the RSR has no realistic alternative but to make the payments.

1 . 1 1 Provisions and contingencies Provisions are recognised when:  The RSR has a present obligation as a result of a pastevent;  It is probable that an outflow of resources embodying economic benefits or service potential will berequired to settle the obligation; and  A reliable estimate can be made of the obligation.

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The amount of a provision is the best estimate of the expenditure Fair value is the amount for which an asset could be exchanged, expected to be required to settle the present obligation at the or a liability settled, between knowledgeable, willing parties in an reporting date. arm’s length transaction.

Where some or all of the expenditure required to settle a Revenue is measured at the fair value of the consideration provision is expected to be reimbursed by another party, the received or receivable, net of trade discounts and volume reimbursement is recognised when, and only when, it is virtually rebates. certain that reimbursement will be received if the RSR settles the obligation. The reimbursement is treated as a separate Measurement asset. The amount recognised for the reimbursement does not exceed the amount of the provision. Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similar distributions is Provisions are reviewed at each reporting date and adjusted to recognised when: reflect the current best estimate. Provisions are reversed ifit  It is probable that the economic benefits or service is no longer probable that an outflow of resources embodying potential associated with the transaction will flow to the economic benefits or service potential will be required, to settle RSR, and the obligation.  The amount of the revenue can be measured reliably.

A provision is used only for expenditures for which the provision Interest is recognised, in surplus or deficit, using the effective was originally recognised. Provision are not recognised for interest rate method. future operating deficitts. Revenue comprises of: Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 20. Safety permit application and permit fee

Where a fee is received by the RSR for issuing a financial Revenue arising from permit fees as published in the guarantee and/or where a fee is charged on loan commitments, Government Gazette by the Minister of Transport on an annual it is considered in determining the best estimate of the amount basis is recognised on an accrual basis, when economic benefit required to settle the obligation at reporting date. Where a fee is probable. This is presented in the statement of financial is charged and the RSR considers that an outflow of economic performance. resources is probable, the RSR recognises the obligation at the higher of: • The amount determined using in the Standard of GRAP Technical awareness workshops on Provisions, Contingent Liabilities and Contingent Revenue from technical awareness workshops is recognised Assets; and when candidates register for technical awareness workshops. • The amount of the fee initially recognised less, where This revenue type has been discontinued in the 2020/21 FY. appropriate, cumulative amortisation recognised in accordance with the Standard of GRAP on Revenue Interest received from Exchange Transactions. Interest received comprises interest charged on operator’s late payments and favourable bank balances. Interest income is 1 . 1 2 Revenue from exchange transactions recognised using the effective interest rate. Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result Technology audits in an increase in net assets, other than increases relating to The RSR conducts technology audits and recovers costs in contributions from owners. accordance with section 17(1) (bB) of the National Railway Safety Regulator Act No. 16 of 2002 as amended. The RSR An exchange transaction is one in which the RSR receives does not charge for technology audits as the current legislation assets or services, or has liabilities extinguished, and directly is being reviewed. gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

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When the outcome of the technology review transaction can be The RSR recognises an asset in respect of transfers when the estimated reliably, revenue will be recognised by reference to the transferred resources meet the definition of an asset and satisfy stage of completion of the transaction at reporting date. Stage the criteria for recognition as an asset. Transferred assets are of completion will be determined using the life cycle phases as measured at their fair value as at the date of acquisition. indicated in the published Gazette. To the extent that an asset has not been recognised, a deferred income will be recognised as a liability. The deferred income will 1 . 1 3 Revenue from non-exchange transactions be transferred to revenue as and when the conditions attached to the grant are satisfied. Non-exchange transaction are defined as transactions where RSR receives value from another entity without directly giving approximately equal value in exchange. Revenue from non- 1 . 1 4 Borrowing costs exchange transaction is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an Borrowing costs are interest and other expenses incurred by an asset and there is no liability to repay the amount. Revenue entity in connection with the borrowing of funds. Borrowing costs from administration grant is considered to be revenue from non- are recognised as an expense in the period in which they are exchange transactions. incurred.

Revenue from non-exchange transactions is recognised when there is reasonable assurance that the amount will be received 1 . 1 5 Fruitless and wasteful expenditure and the value thereof can be reliably measured. Fruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised. Fines and penalties Revenue from fines and penalties is recognised when: All expenditure relating to fruitless and wasteful expenditure  It is probable that the economic benefits or service is recognised as an expense in the statement of financial potential associated with the transaction will flow to performance in the year that the expenditure was incurred. The RSR; and expenditure is classified in accordance with the nature of the  The amount of the revenue can be measured reliably. expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.

This comprise of revenue arising from penalties charged as a result of failure by operators to comply with any provisions 1 . 1 6 Irregular expenditure of the National Railway Safety Regulator Act No. 16 of 2002 as amended, the regulations and the standards that inhibit or Irregular expenditure as defined in section 1 of the PFMA is prevent the Regulator’s ability to perform its mandate. expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including - Unconditional grant (a) This Act; or (b) The State Tender Board Act, No. 86 of 1968, or any Government grants are recognised as revenue when: regulations made in terms of the Act;or  It is probable that the economic benefits or service (c) Any provincial legislation providing for procurement potential associated with the transaction will flow to procedures in that provincial government. RSR;  The amount of the revenue can be measured National Treasury practice note 2 of 2019/20 effective from 17 reliably;and May 2019 which was issued in terms of sections 76(2)(e) to  To the extent that there has been compliance with 76(4)(a) of the PFMA applies. any restrictions associated with the grant.

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Where irregular expenditure was incurred in the previous 1 . 1 8 Related parties financial year and is only condoned in the following financial year, the register and the disclosure note to the Financial Statements A related party is a person or an entity with the ability to control must be updated with the amount condoned. or jointly control the other party, or exercise significant influence over the other party, or vice versa, or an entity that is subject to Irregular expenditure that was incurred and identified during common control, or joint control. the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded Control is the power to govern the financial and operating appropriately in the irregular expenditure register. If liability policies of an entity so as to obtain benefits from its activities. for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in Joint control is the agreed sharing of control over an activity law. Immediate steps must thereafter be taken to recover the by a binding arrangement, and exists only when the strategic amount from the person concerned. If recovery is not possible, financial and operating decisions relating to the activity require the accounting officer or accounting authority may write off the the unanimous consent of the parties sharing control (the amount as debt impairment and disclose such in the relevant venturers). note to the Financial Statements. The irregular expenditure register must also be updated accordingly. If the irregular Related party transaction is a transfer of resources, services expenditure has not been condoned and no person is liable in or obligations between the reporting entity and a related party, law, the expenditure related must remain against the relevant regardless of whether a price is charged. programme/expenditure item, be disclosed as such in the note to the Financial Statements and updated accordingly in the Significant influence is the power to participate in the financial irregular expenditure register. and operating policy decisions of an entity, but is not control over those policies.

1 . 1 7 Budget information Executive Management are those persons responsible for planning, directing and controlling the activities of the RSR, RSR is typically subject to budgetary limits in the form of including those charged with the governance of the RSR in appropriations or budget authorisations (or equivalent), which accordance with legislation, in instances where they are required is given effect through authorising legislation, appropriation or to perform such functions. similar. Close members of the family of a person are considered to be General purpose financial reporting by the RSR shall provide those family members who may be expected to influence, or be information on whether resources were obtained and used in influenced by management in their dealings with the RSR. accordance with the legally adopted budget. The RSR is exempt from disclosure requirements in relation The approved budget is prepared on a cash basis and presented to related party transactions if that transaction occurs within by functional classification linked to performance outcome normal supplier and/or client/recipient relationships on terms objectives. and conditions no more or less favourable than those that it is reasonable to expect the RSR to have adopted when dealing The approved budget covers the fiscal period from 2019/04/01 with that individual entity or person in the same circumstances. to 2020/03/31. The terms conditions must also be within the normal operating parameters established by that reporting entity’s legal mandate. The budget for the economic entity includes all the entities approved budgets under its control. Where the RSR is exempt from the disclosures in accordance with the above, the RSR discloses narrative information about The Annual Financial Statements and the budget are not on the nature of the transactions and the related outstanding the same basis of accounting therefore a comparison with the balances, to enable users of the RSR’s financial statements to budgeted amounts for the reporting period have been included understand the effect of related party transactions on its Annual in the Statement of comparison of budget and actual amounts. Financial Statements.

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2. New standards and interpretations

2 . 1 Standards and interpretations issued, but not yet effective

The entity has not applied the following standards and interpretations, which have been published and are mandatory for the entity’s accounting periods beginning on or after 01 April 2020 or later periods:

Standard/ Interpretation: Effective date: Expected impact: Years beginning on or after  Directive 14: The application of Standards of GRAP by Public 01 April 2021 Unlikely there will be a Entities that apply IFRS® Standards material impact  Guideline: Guideline on Accounting for Land fill Sites 01 April 2021 Unlikely there will be a material impact  IGRAP 20: Accounting for Adjustments to Revenue 01 April 2021 Unlikely there will be a material impact  GRAP 34: Separate Financial Statements 01 April 2021 Unlikely there will be a material impact  GRAP 35: Consolidated Financial Statements 01 April 2021 Unlikely there will be a material impact  GRAP 36: Investments in Associates and Joint Ventures 01 April 2021 Unlikely there will be a material impact  GRAP 37: Joint Arrangements 01 April 2021 Unlikely there will be a material impact  GRAP 38: Disclosure of Interests in Other Entities 01 April 2021 Unlikely there will be a material impact  GRAP 110 (as amended 2016): Living and Non-living Resources 01 April 2021 Unlikely there will be a material impact  Directive 13: Transitional Provisions for the Adoption of Standards 01 April 2021 Unlikely there will be a of GRAP by Community Education and Training (CET) Colleges material impact  Directive 7 (revised): The Application of Deemed Cost 01 April 2021 Unlikely there will be a material impact

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Figures in Rand 2020 2019

3. Receivables from exchange transactions

Trade debtors 1 474 686 1 585 386 Prepayments 2 320 603 801 323 Deposits 4 005 522 168 246 Staff debts 25 907 20 258 Impairment allowance (160 415) (283 850) 7 666 303 2 291 363

Statutory receivables included in receivables from exchange transactions above are as follows: Safety permit fees 1 187 328 1 019 171 Technology audits - 148 600 Impairment allowance - (148 600) 1 187 328 1 019 171

Other non-financial asset receivables included in receivables from exchange transactions above are as follows: Prepayments 2 320 603 801 323 Deposits 4 005 522 168 246 Staff debt 25 907 20 258 Other debtors 287 358 417 615 Impairment allowance - non statutory receivables (160 415) (135 250) 6 478 975 1 272 192 Financial asset receivables included in receivables from exchange transactions above - - Total receivables from exchange transactions 7 666 303 2 291 363 Statutory receivables general information Transaction(s) arising from statute

The statutory receivables of the RSR comprises safety permit fees charged to the rail operators. The safety permit fees are charged to rail operators in terms of sections 23(2) of the National Railway Safety Regulator Act of 2002 as amended.

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Notes to the Financial Statements

Determination of transaction amount

Safety permit fees

The Minister of Transport annually determines in terms of section 23 (2)(a), fees that the Railway Safety Regulator must charge for the safety permit. The safety permit fees are published for compliance and general information in the Government Gazette. The fees are determined for each category of operators.

Technology audits

The Minister of Transport may in terms of section 17(1)(bB) determine in consultation with Minister of Finance by notice in the Gazette, fees for providing services by the Railway Safety Regulator. The legislation is currently under review and RSR did not charger for technology audits during the year.

Interest or other charges levied/charged

There was no interest charged on the statutory receivable arising from exchange receivable transactions at 31 March 2020 in line with RSR revenue and receivable policy.

Basis used to assess and test whether a statutory receivable is impaired

In terms of the RSR’s revenue and receivable policy, an invoice is overdue when it is more than 30 days. RSR assesses receivables for impairment based on the receivable age analysis.

Figures in Rand 2020 2019

Reconciliation of provision for impairment

Relating specifically to statutory Receivables Opening balance 148 600 (10 019 695) Provision for impairment - 148 600 Reversal of impairment (148 600) 10 019 695 - 148 600

Main events and circumstances that led to the recognition or reversal of impairment losses on statutory receivables

Other impairment losses recognised or reversed The impairment losses for the current year were recognised as the relevant debtors were unable to pay as they were under business rescue. The impairment losses were reversed as the debtors subsequently managed to pay their debts during the year.

Key indicators and assumptions used to assess and calculate whether statutory receivables were impaired during the reporting period

The receivables were impaired based on the following situations of the debtors: • Overdue for more than 30 days. • Debtors did not respond to follow up requests. Indication of financial difficulty.

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Notes to the Financial Statements

Figures in Rand 2020 2019

Debtors in business rescue.

Confirmation of non operation of the rail activities.

Receivables past due but not impaired

Relating specifically to Statutory Receivables

Statutory receivables which are less than 30 days past due are not considered to be impaired. At 31 March 2020, R750 967 (2019: R914 905) were past due but not impaired due to confirmation obtained for future payment.

The ageing of amounts past due but not impaired is as follows:

Age 31 to 60 days 637 261 792 859 61 to 90 days 28 758 7 373 91 to 120 days 42 594 - Over 120 days 42 354 114 673 750 967 914 905

Receivables impaired Relating specifically to Statutory Receivables As of 31 March 2020, statutory receivables of R0 (2019: R148 600) were impaired and provided for. The ageing of these amounts is as follows:

Age Over 120 days - 148 600

Total trade and other receivables past due but not impaired RSR does not have collateral held against these amounts: 31-60 days 637 261 800 470 61-90 days 28 758 14 873 91- 120 days 42 594 9 000 Over 120 days 169 297 125 660 877 910 950 003

Total trade and other receivables impaired

As on 31 March 2020, the trade and other receivables relating to receivables from exchanage transactions were impaired and provided for.The amount of the provision was R160 415 as of 31 March 2020 (2019: R283 850).These amounts were impaired because they were overdue. The RSR does not have collateral held against these amounts.

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Figures in Rand 2020 2019

Age Over 120 days 160 415 283 850

Reconciliation of provision for impairment of total trade and other receivables Opening balance 283 850 10 019 695 Provision for impairment 160 415 283 850 Amounts written off as uncollectible (80 250) - Reversal of impairment (203 600) (10 019 695) 160 415 283 850

4. Receivables from non-exchange transactions

Trade debtors 4 270 000 4 500 000

Statutory receivables included in receivables from non-exchange transactions above are as follows: Penalties 4 270 000 4 500 000 Total receivables from non-exchange transactions 4 270 000 4 500 000

Statutory receivables general information Transaction(s) arising from statute

The statutory receivables from non - exchange receivables arise from the charging of penalties by the RSR to the rail operators which contravened the provisions of the National Railway Safety Regulator Act of 2002 as amended. The fees are charged in terms of section 45A of the Act.

Determination of transaction amount

The penalties fees are charged in terms of section 45 A of the National Railway Safety Regulator Act of 2002 as amended and penalty fee model developed in terms of the Penalty Fee Regulation of 2011.The penalty fees are approved by the Minister of Transport and published in the Government Gazette.

Interest or other charges levied/charged

There was no interest charged on the statutory receivable arising from the non-exchange receivable transactions at 31 March 2020.

Basis used to assess and test whether a statutory receivable is impaired

In terms of the RSR’s Revenue and receivable policy, an invoice is overdue when it is more than 30 days old. The RSR assesses receivables for impairment based on the receivable age analysis.

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Figures in Rand 2020 2019

Statutory receivables past due but not impaired

Statutory receivables which are less than 3 months past due are not considered to be impaired. At R3 500 000, (2019: R2 000 000) were past due but not impaired.

The ageing of amounts past due but not impaired is as follows:

Age Over 120 days 3 500 000 2 000 000

Factors the entity considered in assessing statutory receivables past due but not impaired

- Payment agreements with the debtor.

- The financial status of the debtor. The total payment was subsequently received after year end.

- The operator’s permit expiry dates.

Statutory receivables impaired

As of 31 March 2020, no statutory receivables relating to receivables from non - exchange were impaired as payment was received after year end

Total trade and other receivables past due but not impaired Age Over 120 days 3 500 000 2 000 000

The receivables were not pledged as security for any liabilities of the RSR.

Receivables from non-exchange transactions impaired

As of 31 March 2020, no receivables from non-exchange transactions were impaired and provided for.

5. Cash and cash equivalents

Cash and cash equivalents consist of: Cash on hand 3 153 4 917 Bank balances 1 599 912 2 677 077 Short-term deposits 63 449 946 39 971 413 65 053 011 42 653 407

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6. Property, plant and equipment 2020 2019 Cost / Accumulated Carrying Cost/ Accumulated Carrying valuation depreciation value valuation depreciation value and and accumulated accumulated impairment impairment Furniture and fixtures 6 213 048 (1 210 962) 5 002 086 5 300 964 (2 219 401) 3 081 563 Motor vehicles 4 819 864 (464 343) 4 355 521 165 239 (164 051) 1 188 Office equipment 3 136 195 (481 544) 2 654 651 846 788 (472 422) 374 366 IT equipment 7 940 861 (4 192 641) 3 748 220 7 258 216 (4 356 327) 2 901 889 Leasehold 14 796 595 (535 968) 14 260 627 33 854 406 (29 991 370) 3 863 036 improvements Leased assets 750 533 (689 913) 60 620 792 955 (681 800) 111 155 Total 37 657 096 (7 575 371) 30 081 725 48 218 568 (37 885 371) 10 333 197

Reconciliation of property, plant and equipment - 2020 Opening Additions Disposals Depreciation Total balance

Furniture and fixtures 3 081 563 2 314 702 (136 554) (257 625) 5 002 086 Motor vehicles 1 188 4 654 626 - (300 293) 4 355 521 Office equipment 374 366 2 406 844 (3 727) (122 832) 2 654 651 IT equipment 2 901 889 2 027 182 (152 843) (1 028 009) 3 748 220 Leasehold improvements 3 863 036 14 796 595 - (4 399 004) 14 260 627 Finance leases 111 155 - (4 079) (46 456) 60 620 10 333 197 26 199 949 (297 203) (6 154 219) 30 081 725 Reconciliation of property, plant and equipment - 2019 Opening Additions Useful life Disposals Depreciation Other Total balance increase changes Furniture and fixtures 3 311 913 - 104 (9 820) (220 634) - 3 081 563 Motor vehicles 12 654 - - - (11 466) - 1 188 Office equipment 409 047 46 330 5 389 (7 579) (78 821) - 374 366 IT equipment 2 430 424 1 329 151 (2 011) (51 926) (803 749) - 2 901 889 Leasehold improvements 13 349 974 - - - (18 190 378) 8 703 440 3 863 036 Finance leases 199 865 - 87 463 (8 389) (167 784) - 111 155 Work in progress - Leasehold improvements 6 950 558 1 752 882 - - - (8 703 440) - 26 664 435 3 128 363 90 945 (77 714) (19 472 832) - 10 333 197

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7. Intangible assets

2020 2019 Cost / Accumulated Carrying Cost/ Accumulated Carrying valuation depreciation value valuation depreciation value and and accumulated accumulated impairment impairment Computer software 19 872 657 (17 363 491) 2 509 166 19 615 865 (16 373 079) 3 242 786

Reconciliation of intangible assets - 2020 Opening Additions Disposals Amortisation Total Balance

Computer software 3 242 786 502 596 (1) (1 236 215) 2 509 166

Reconciliation of intangible assets - 2019 Opening Amortisation Total Balance Computer software 7 038 023 (3 795 237) 3 242 786

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Figures in Rand 2020 2019

8. Finance lease obligation

Current liabilities - 15 259 - 15 259

9. Payables from exchange transactions

Trade payables 15 637 211 11 760 833 Revenue received in advance 7 803 196 7 831 330 Accrued leave pay 5 443 676 5 026 570 Other payables and accruals 13 271 406 12 853 575 Operating lease payables1 1 816 967 - 13th cheque accrual 217 744 217 238 44 190 200 37 689 546

1This liability relates to smoothing of operating lease rentals in respect of the new regional offices.

Analysis of trade and other payables 0 to 30 days 8 538 570 6 071 101 31 to 60 days 928 781 62 868 61 to 90 days 6 382 68 511 Over 90 days 6 163 478 5 558 353 15 637 211 11 760 833

10. Provisions Reconciliation of provisions - 2020 Opening Additions Utilised Total Balance during the year

Performance bonus1 6 826 513 4 857 014 (6 826 513) 4 857 014 Provisions for back pay2 - 590 504 - 590 504 6 826 513 5 447 518 (6 826 513) 5 447 518

1 Performance bonus payments are expected in 2020/21 FY of which the exact amount is uncertain due to outstanding moderation and final approval.

2 Payment of backpay expected in the 2020/21 financial year of which the timing is uncertain due to it currently being under review.

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Reconciliation of provisions - 2019

Opening Additions Reversed Total Balance during the year

Performance bonus - 6 826 513 - 6 826 513 Provisions for back pay 1 907 197 - (1 907 197) - 1 907 197 6 826 513 (1 907 197) 6 826 513

Figures in Rand 2020 2019

11. Safety permit fees Safety permit fees 164 445 366 157 788 990 Application fees 6 115 399 6 259 061 170 560 765 164 048 051

12. Interest received

Interest earned on bank balance 8 160 496 5 811 333 Interest earned on debtor’s balance - 6 140 8 160 496 5 817 473

13. Technology audits

Technology audits - 1 456 650 Application fees-technology audits - 271 900 - 1 728 550 RSR does not charge for technology audits due to current legislation being under review.

14. Other revenue EPWP - 1 311 000 Bad debts recovered 75 540 98 317 Conference revenue 531 000 - 606 540 1 409 317

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Figures in Rand 2020 2019

15. Employee related costs

Salaries1 69 992 412 86 352 882 Performance bonus 5 728 280 6 826 513 Medical aid - company contributions 6 186 009 6 918 219 Unemployment Insurance Fund 529 565 626 254 Union Fees 97 765 111 385 Leave pay accrual 417 106 (332 172) Pension fund 13 118 766 14 462 009 Salaries leave paid2 888 698 1 228 249 13th cheque 552 091 686 702 Acting allowances 916 917 1 147 440 South African Revenue Service 35 538 884 37 536 408 133 966 493 155 563 889

1 Included in salaries are voluntary severance packages paid out in 2018/19 amounting R6 811 027 and retrenchment packages in the 2019/20 amounting to R201 154, following a restructuring process.

2 Leave paid out relating to restructuring amounting to R638 787 in 2018/19 and R104 924 in 2019/20.

16. Debt impairment

Allowance for impairment (43 081) (9 729 845) Bad debts written off 1 881 957 1 853 051 1 838 876 (7 876 794)

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Figures in Rand 2020 2019

17. General expenses External audit fees 3 392 554 3 033 485 Railway safety outreach and awareness 1 606 619 1 933 144 Bank charges 85 453 81 409 Cleaning 471 913 249 720 Computer expenses 2 068 352 1 441 903 Postage and couriers 81 967 52 228 Catering -refreshments 509 508 375 068 Gifts 128 586 7 941 Insurance 572 108 228 338 Conferences and seminars 2 867 515 1 185 746 Placement fees 1 305 476 - Printing and stationery 324 765 314 600 Protective clothing 187 766 40 750 Repairs and maintenance 344 456 398 670 Subscriptions and membership fees 534 419 243 658 Telephone and data 2 963 671 4 220 949 Training 1 468 652 206 005 Travel - local 5 041 171 3 452 500 Travel - International 1 399 537 291 274 Municipal services 2 963 543 1 815 640 Lease payment vehicle 284 549 3 569 797 Equipment rentals 1 150 000 445 000 Corporate stationery 408 253 168 871 Office rental and services 11 356 705 11 290 586 Workmens compensation 189 206 234 776 Library & literature 59 167 217 808 Non - executive directors remuneration 2 481 650 2 354 216 Consulting and professional fees 13 421 391 15 448 348 Relocation cost 1 219 144 124 718 58 888 096 53 427 148

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Figures in Rand 2020 2019

18. Cash generated from operations Surplus 41 453 052 19 292 593 Adjustments for: Depreciation and amortisation 7 390 432 23 278 849 Loss on sale of assets 297 203 77 714 Proceeds from sale of assets (245 131) (74 708) Changes in working capital: Receivables from exchange transactions (5 144 940) (4 133 282) Payables from exchange transactions 343 603 (4 761 759) 44 094 219 33 679 407

19. Commitments

Approved and contracted for Capital commitments

Property, plant and equipment 3 479 125 8 839 839 Intangible assets - 611 104 3 479 125 9 450 943

Operational commitments General expenditure 198 071 846 8 447 001

Total commitments approved and contracted for Capital commitments 3 479 125 9 450 943 General expnediture 1 198 071 846 8 447 001 201 550 971 17 897 944

1 The 2019/20 includes office rental and related services to the amount of R174.3 million.This is in respect of the new office leases entered into during the year.

Approved and contarcted for

Operational commitments Not yet contracted for and authorised by members - 239 121 452

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Figures in Rand 2020 2019

The RSR will utilise its own resources to fund the commitments for the 2019/20 FY through available cash resources at year-end and the approved budget for the 2020/21 budget.

Operating leases - as lessee (expense) Minimum lease payments due - within one year Building - Centurion - 1 836 591 Building - Furniture and ICT Equipment - Cape Town - 520 552 Building - Furniture and ICT Equipment - Durban - 347 116 Building - Gauteng - 612 410 Building 2 - Central office 2 347 853 - Building 4 - Central office 6 950 348 - Building - Eastern region 773 038 - Building - Coastal region 1 293 144 - - in second to fith year Building 2 - Central office 11 154 037 - Building 4 - Central office 33 019 291 - Building - Eastern region 3 319 335 - Building - Coastal region 5 379 729 - - In sixth to tenth year Building 2 - Central office 17 432 676 - Building 4 - Central region 50 524 108 - 132 193 559 3 316 669

New leases entered into in line with GRAP 13 disclosure requirements.

20. Contingencies

1. Termination of employee contract

Following the termination of the contract of employment of a former employee, the party referred the dispute to the CCMA for unfair dismissal and requested reinstatement. The CCMA has finalised the matter in favour of the RSR. The matter has been referred by the employee to the Labour Court. In the unlikely event that the employee is successful, a possible award is estimated at three months salary amounting to R412 970.

2. Job grading

Various matters relating to the implementation of job grading was heard at the CCMA and were not in favour of a retrospective payment relating to the implementation of a regrading process. One of these cases was submitted to the Labour Court which may confirm a liability. The estimation of the possible award amounts to R327 505 based on salary grading differences up to a maximum of 17 months.

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3. Full Facilities Management vs RSR

In June 2018, the RSR terminated the contract for facilities management following a forensic audit. The matter has proceeded to abritration and exchanged pleadings and the RSR has approached the High Court to set aside the agreement. An obligation will only be confirmed through the arbitration or High Court ruling. The RSR may be exposed to a possible obligation yet to be confirmed in the amount of R23 million as the claim against the RSR amounts to R31 million and the RSR’s intention to recover fruitless and wasteful expenditure amounting to R8 million.

4. Section189

The employee is challenging the law fullness of the section 189 process following his retrenchment. Although the RSR has good prospects of success, the matter is currently at the Labour Court to confirm whether there is a liability which is estimated at 12 months salary amounting to R1.1 million.

21. Related parties

Relationships Executive authority Honourable Minister of Transport: Mr F Mbalula(MP) Controlling entity National Department of Transport Related entities Entities reporting to the Department of Transport Members of key management Ms Tshepo Kgare - Acting CEO Mr Regardt Gouws - Chief Financial Officer Mr Mmuso Selaledi - Executive: Risk and Strategy Mr Khayalethu Madlwabinga - Executive: Human Resources Ms Madelein Williams - Executive: Media and Communications Ms Malerato Kekana - Chief Audit Executive Mr Freddy Kgomari - Acting Chief Operations Officer

Figures in Rand 2020 2019

Related party transactions and balances

National Department of Transport (Controlling entity) Administration grant 63 522 000 63 018 000

Amounts included in revenue relating to PRASA (Related entity)

Permit fees 31 360 950 29 491 462 Technology audits - 132 600 Penalty fees - 4 500 000

Amounts included in Trade receivables relating to PRASA

Conference income 20 000 - Technology audits - 148 600 Penalty fees 3 500 000 4 500 000

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Remuneration of management

Executive management 2020 Basic Medical Performance Other Total salary aid and bonus allowances Name pension Mr N A Poya - Chief Executive Officer1 661 759 12 944 - - 674 703 Ms T Kgare Acting - Chief Executive Officer 2 663 056 83 169 335 266 22 081 3 103 572 Mr J Nethathe - Acting Chief Operations Officer2 1 548 237 - 105 297 3 836 1 657 370 Mr K Madlwabinga - Executive Human Resources3 1 126 805 264 905 120 697 - 1 512 407 Mr R Gouws - Chief Financial Officer 1 559 142 214 971 165 188 120 1 939 421 Ms M Williams - Executive Media and 1 409 030 - 122 084 - 1 531 114 Communications4 Ms Z Camroodien - Executive Legal Services5 589,011 99 592 92 606 - 781 209 Ms RS Huntley: Executive: Organisational 97 334 26 667 - - 124 001 Intelligence and Planning6 Mr H Murovhi - Company Secretary7 753 754 28 990 167 070 - 949 814 Mr F Kgomari - Acting Chief Operations Officer8 1 692 475 115 206 145 700 - 1 953 381 Ms M Kekana -Chief Audit Executive9 1 253 367 413 297 118 089 - 1 784 753 Mr B Bruwer - Executive: Office of the CEO10 1 288 055 - 142 010 - 1 430 065 Mr M Selaledi - Executive Risk & Strategy11 1 567 210 68 672 212 994 - 1 848 876 16 209 235 1 328 413 1 727 001 26 037 19 290 686

1 Resigned 06 June 2019. 2 Acting Chief Operations Officer from 17 September 2018 to 31 May 2019. 3 Appointed 18 May 2019. 4 Appointed 1 April 2019. 5 Resigned 15 September 2019. 6 Dismissed 18 April 2019. 7 Resigned 14 August 2019. 8 Acting Chief Operations Officer from 1 December 2019. 9 Appointed 5 July 2019 10Resiged 30 November 2019 11Appointed 5 July 2019

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Notes to the Financial Statements

2019 Name Basic Medical aid Allowances Total salary and pension

Mr N A Poya Chief Executive Officer1 3 466 245 144 825 - 3 611 070 Ms T Kgare Acting Chief Executive Officer 2 647 775 75 546 840 2 724 161 Mr J Nethathe - Acting Chief Operations Officer 1 612 343 - 5 153 1 617 496 Mr S Kekana - Executive: Occurrence Investigations3 1 174 427 267 805 120 000 1 562 232 Mr R Gouws - Chief Financial Officer 1 450 481 203 181 240 1 653 902 Mr I Shai - Executive: Legal2 777 009 140 448 - 917 457 Mr S Nxazonke - Executive: Corporate Affairs 851 325 76 506 - 927 831 Ms RS Huntley: Executive: Organisational Intelligence and 1 552 487 314 582 120 1 867 189 Planning3 Mr H Murovhi - Company Secretary 1 607 195 65 292 - 1 672 487 Mr TH Fumbata - Chief Operations Officer2 1 659 372 37 540 - 1 696 912 Ms M Kekana - Acting Chief Audit Executive 1 225 838 350 467 - 1 576 305 Mr B Bruwer - Executive: Office of the Chief Executive Officer 1 421 881 - - 1 421 881 Mr M Selaledi - Chief Risk Officer 1 247 091 174 655 - 1 421 746 20 693 469 1 850 847 126 353 22 670 669

1 On precautionary suspension effective from 27 November 2017, subsequently resigned on 06 June 2019.

2 Resigned 30 August 2018.

3 Dismissed 18 April 2019.

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Notes to the Financial Statements

22. Related parties - Board members

Board and committee members

2020 Name Emoluments Allowances Expenses Total Dr. Nomusa Zethu Qunta (Chairperson) 340 904 8 400 16 365 365 669 Mr. Boy Johannes Nobunga (Deputy Chairperson) 109 804 5 650 31 774 147 228 Mr. Jan-David de Villiers1 - - - - Mr. Christian Johan de Vos 248 427 5 650 21 046 275 123 Mr. Andre Harrison 220 761 5 650 7 231 233 642 Major - General Michael Monash Motlhala3 - - - - Mr. Rendani Dlamini 128 853 5 400 - 134 253 Ms. Ntombizine Mbiza 245 295 5 650 25 458 276 403 Ms. Hilda Thamaga Thopola 183 234 5 650 21 041 209 925 Major - General Willem Venter (Retired) 232 133 5 650 69 165 306 948 Mr. Tibor Szana2 - - - - 1 709 411 47 700 192 080 1 949 191

1 Delegate from the National Department of Transport - not remunerated.

2 Delegated from the National Department of Labour - not remunerated.

3 Delegated from South African Police Services - not remunerated.

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2019 Emoluments Allowances Expenses Total Dr. Nomusa Zethu Qunta(Chairperson) 282 397 6 000 12 710 301 107 Mr. Boy Johannes Nobunga (Deputy Chairperson) 152 981 3 000 52 615 208 596 Mr. Christian Johan de Vos 262 964 3 000 19 174 285 138 Mr. Andre Harrison 292 717 3 000 9 982 305 699 Mr. JD de Villiers 1 - - - - Major - General Michael Monash Motlhala 3 - - - - Mr. Zacharia Ntate Mosothoane 13 466 250 - 13 716 Ms. Masaccha Mbonambi 4 85 411 2 500 - 87 911 Ms. Ntombizine Mbiza 223 923 3 000 13 830 240 753 Mr. Jack Mazibuko 4 5 399 1 500 - 6 899 Ms. Hilda Thamaga Thopola 192 086 3 000 - 195 086 Major - General Willem Venter (Retired) 240 172 3 000 78 892 322 064 Mr Tibor Szana 2 - - - - 1 751 516 28 250 187 203 1 966 969

1 Delegate from the National Department of Transport - not remunerated.

2 Delegate from the National Department of Labour - not remunerated.

3 Delegated from South African Police Services-no remunerated.

4 Resigned.

Audit and Risk Committee 2020 Members’ fees Cellphone Expenses Total allowance

Dr. Prittish Dala (Independent member) 1 332 132 2 875 2 275 337 282 Mr Simphiwe Simelane (Independent member) 1 229 334 3 250 - 232 584 561 466 6 125 2 275 569 866

1 New appointment during the year.

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2019 Members’ fees Cellphone Expense Total allowance

Mr. Ameen Amod (Independent chairperson)1 153 709 2,500 - 156 209 Ms. Desiree Nage (Independent member)1 137 624 2,500 343 140 467 Ms. Reshoketswe Ralebepa (Independent member)1 87 571 2,500 - 90 071 Dr. Prittish Dala (Independent member) 2 500 - - 500 Mr Simphiwe Simelane (Independent member)2 - - - - 379 404 7 500 343 387 247

1 Contract ended in January 2019. 2 New appointment after year end.

23. Change in accounting policy

1. Receivables

Presentation of revenue from exchange and non-exchange transactions.

This is a voluntary change in the presentation and disclosure as the RSR has already adopted the Standards on Revenue from exchange transactions and non -exchange transactions.

The RSR has in the previous financial years presented receivables as one amount on the face of the statement of financial position and separately disclosed the exchange and non - exchange receivables in the notes to the financial statements. During the 2019/20 financial year, the management has opted to make a separate presentation of the receivables from exchange and non-exchange transactions on the face of the statement of financial position in order to present a clear distinction of the receivables types on the face. This presentation option was motivated by the significant growth in the revenue from non - exchange transactions in recent years. The effect of the change on the previous year is as follows:

Description Previous Policy Restated year change Receivables 6 791 363 (6 791 363) - Receivables from exchange transactions - 2 291 363 2 291 363 Receivables from non - exchange transactions - 4 500 000 4 500 000 6 791 363 - 6 791 363

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2. Statutory receivables The change in accounting policy is made in accordance with transitional provisions prescribed in Directive 2.

This change in accounting policy relates to the initial adoption of the GRAP 108 on Statutory receivables.

The RSR applies this Standard as its receivables from permits, penalties and technology audits meet the recognition criteria for statutory receivables.

All changes resulting from the application of the Standard of GRAP on Statutory receivables shall be accounted for retrospectively in accordance with the requirements of GRAP 3. The transitional provisions for GRAP 108 requires that when an entity initially adopts a Standard of GRAP, GRAP 3 requires an entity to apply the requirements of the Standard being adopted restrospectively. The implication of adopting the Standard relate to additional disclosures relating to Statutory receivables and the implication did not result in the adjustment of financial figures.

24. Change in accounting estimate

Intangible assets

At the end of 2018/19 FY, RSR assessed and revised the useful life of a certain class of its intangible assets. The amortisation on these intangible assets was originally estimated at five years and subsequently revised to eight years. The effect of this change was implemented during the 2019/20 FY. The effect of the change on actual and expected amoritsaion expense in the current and future financial period is as follows:

Description 2019/20 2020/21 2021/22 Original estimate 2 489 674 750 267 - Revised estimate (1 081 951) (1 081 951) (1 076 039) 1 407 723 (331 684) (1 076 039)

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2 5 . Prior period errors

Presented below are those items contained in the statement of financial position,statement of financial performance and cash flow statement that have been affected by the prior - year adjustment:

1. PPE useful life adjustments

At the beginning of the 2019/20 financial year, the useful life of the relevant individual assets was revised in the asset register. The implementation of the new useful life in the asset register resulted in the difference between from the initial calculation. The resultant difference amounted to R195 792 which represented overstatement of the of the carrying amount of assets in the previous year. The correction of the error was accounted for retrospectively. Statement of financial position 2019

As previously Correction of Restated reported error Property, plan and equipment 10 528 989 (195 792) 10 333 197

Statement of financial performance

As previously Correction of Restated reported error Other revenue from non-exchange 394 106 (195 792) 198 314

2. Cash flow statement Cash flow from operating activities

As previously Correction of Restated reported error Sale of goods and services 178 164 674 (195 792) 177 968 882 Payments to suppliers (62 007 787) 195 792 (61 811 995) 116 156 887 - 116 156 887

As previously Correction of Restated reported error Cash flow from operating activities - reconciliation note Surplus for the year 19 488 385 (195 792) 19 292 593 Interest income (5 817 473) 5 817 473 - Finance costs 3 856 3 856 - Payables from exchange transaction (4 957 551) 195 792 (4 761 759) 8 717 217 5 813 617 14 530 834

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2 6 . Risk management Financial risk management The RSR manages its net assets to ensure that it will be able to continue as a going concern, while meeting its overall objectives. Funding is obtained primarily from grants and the administration of permit fees. The strategy is consistent with that applied in prior years.

From its use of financial instruments, the RSR has exposure to the following risks: - Credit Risk - Liquidity Risk - Market Risk This note presents information about the RSR’s exposure to each of the above risks. Further quantitative disclosures are included throughout these financial statements. The Board has the overall responsibility for the establishment and oversight of the RSR’s risk management framework. The Board has established the Audit and Risk Committee which is responsible for the oversight on the development and monitoring the RSR’s risk management policies.

The RSR’s risk management policies are established to identify and analyse the risks faced by the RSR to set appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in the RSR’s activities. RSR through its training and management standards and procedures aims to develop a disciplined and effective control environment in which all employees understand their roles and obligations. The Audit and Risk Committee oversees how management monitors compliance with RSR’s risk policies and procedures, and review the adequacy of the risk management framework in relation to the risk faced by the RSR. The Audit and Risk Committee is assisted in its oversight role by the Internal Audit. The internal audit undertakes both regular and adhoc financial reviews of controls in place to mitigate the risk which are reported to the Audit and Risk Committee.

Debtors are assessed at year end for recoverability and the necessary provision for write off will be raised if deemed material.

The RSR’s financial instruments consist mainly of cash and cash equivalents, receivable and payables. Bank deposits and balances, receivables and payables approximate their fair values due to the short term nature of these instruments.The fair values together with the carrying amounts have been determined by using available market information and are presented in the statement of financial position.

Liquidity risk

Liquidity risk is the risk that the RSR will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk is considered low as the current assets exceeded current liabilities at 31 March 2020. The total current assets reported in the statement of Financial Position has already taken account of the provision for credit loses. Furthermore, all the open order commitments of the RSR at 31 March 2020 were fully funded. Management monitors rolling forecast of the RSR’s cash and cash equivalents on the basis of the expected cash flows. The RSR engages with the rail operators on a continuous basis to ensure that it has the cash flows to meet the expected payments as they fall due.

The table below analyses the RSR’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

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Maturity groupings Later than Later than Later than Later than Total one month one month three month one year and and no later and no later no later than than three than one five years months year Trade payables - 9 971 907 5 665 304 - 15 637 211 Revenue received in advance 295 196 - 7 508 000 - 7 803 196 Accrued leave pay - 5 443 676 - - 5 443 676 Other payables and accruals - 975 665 12 295 741 - 13 271 406 Operating lease payables - - - 1 816 967 1 816 967 13th cheque accrual - - 217 744 - 217 744 295 196 16 391 248 25 686 789 1 816 967 44 190 200

Credit risk

The risk that a counter party will not meet its obligations under financial instruments, leading to a financial loss. The RSR is exposed to credit risk from its operating activities, primarily for receivables. The RSR’s maximum exposure to credit risk as at 31 March 2020 was R11 936 303 (2019: R6 791 363).

Potential concentration of credit risk consist mainly of cash and cash equivalents and receivables. Financial institutions with an acceptable independent rating are accepted. The carrying amount of the receivables are recorded at net of impairment allowances which represents the RSR’s maximum exposure to credit risk.

At 31 March 2020, the RSR did not consider there to be any significant concentration of credit risk which had not been adequately provided for.

Market risk

Market risk is the risk that changes in market prices such as interest rates, will affect the RSR’s income or the value of its holdings of financial instruments. The objectives of market risk management is to manage and control market risk exposure within acceptable parameters, while optimising the return. The RSR is then exposed to one primary type of market risk namely, interest risk.

Interest rate risk

Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in the market interest rate. The RSR’s exposure to the risk of changes in market rates is limited to cash and cash equivalents that have floating interest rates which may fluctuate during a financial year. The sensitivity of the finance income to these changes are deemed negligible.

Cash and cash equivalent

The RSR only deposits cash with major banks with high quality credit standing. RSR, therefore, does not consider to be any significant exposure to credit risk.

The RSR utilised ABSA bank for daily transactions which has a Ba1 rating as well as the South African Reserve Bank for investment purposes.

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Figures in Rand 2020 2019

Financial assets and Liabilities

The RSR’s principle financial assets are accounts receivables and cash and cash equivalents. At 31 March 2020, the carrying amounts of cash, accounts receivables and accounts payables at amortised cost approximate their fair values, due to the short term maturities of these assets and liabilities. Management has assessed the impact of COVID-19 on outstanding balances and no further risks were identified. The available cash balances at year - end and collection rate after year - end to meet future obligations were assessed and no material risks has been identified. The net fair value of the assets and liabilities of the RSR are stated below:

The management has assessed the impact of COVID-19 on outstanding balances and no further risks were indentified. The collection rates after year-end and available cash balance at year-end to meet further obligations were assessed and no material risk has been identified.

Assets Receivables 11 936 303 6 791 363 Cash and cash equivalents 65 053 011 42 653 407 76 989 314 49 444 770

Liabilities Payables from exchange transactions 44 190 200 37 689 546

No financial instrument is carried at an amount in excess of its fair value.

2 7. Going concern

The Annual Financial Statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. Management has assessed the RSR’s ability to continue as a going concern, including the effect of COVID-19 and no material uncertainties were identified.

2 8 . Events after the reporting date

Although COVID-19 can be considered as an event after reporting date, no additional disclosures, adjusting or non-adjusting has been identified.

29. Fruitless and wasteful expenditure

Opening balance 8 724 382 9 639 902 Opening balance as restated 8 724 382 9 639 902 Add: Fruitless and wasteful - current 61 789 985 Less: Amount written off - current (55 455) (916 505) Closing balance 8 730 716 8 724 382

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Figures in Rand 2020 2019

30. Irregular expenditure

Opening balance 13 286 992 14 769 004 Add: Irregular expenditure identified in the current year, relating to prior year 413 896 1 140 671 Opening balance as restated 13 700 888 15 909 675 Less: Amounts condoned (12 191 329) (3 644 689) Add: Irregular expenditure identified in the current year 1 578 846 1 022 006 Less: Amounts recovered (14 888) - Closing balance 3 037 517 13 286 992

Details of irregular expenditure - prior year Status

Non-compliance to NT SCM Instruction Note No. 3 of 2016/17 - Sole service provider 1 94 875 Non-compliance to NT SCM Instruction Note No. 3 of 2016/17 - Sole service provider 2 215 625 Non-compliance to the NT Regulations - Local Content for textile 2 100 345 Non-compliance with procurement legislation and SCM processes 2 3 051 413 896

1 Not condoned by National Treasury. 2 Sent to National Treasury for condonement.

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Details of irregular expenditure - current year Status

Non - compliance with supply chain processes relating to training of employees 1 14 949 Non - compliance with supply chain processes relating to training of employees 1 12 340 Non - compliance with supply chain processes relating to payroll system consultation 1 6 789 Non - compliant with supply chain processes relating to newspaper vacancy advertisement 1 60 168 Non - compliant with supply chain processes relating to legal 1 286 830 Non - compliance to the NT Regulations- Local Content for textile 2 108 000 Non - compliant with delegation of authority relating to legal services 2 239 315 Non - compliant with delegation of authority relating to legal services 2 313 389 Non - compliance to the NT Regulations relating to recruitment services 1 139 150 Non - compliance with NT regulations relating to travel and accommodation 2 138 200 Non - compliance to the NT Regulations relating to recruitment services 2 259 716 1 578 846

1 Sent to National Treasury for condonation. 2 Under investigation.

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Details of irregular expenditure condoned Status

Non - compliance with procurement regulations relating to policy development consultants 1 89 200 Non - compliance with procurement regulations relating to additional coaching sessions. 1 145 000 Non - compliance with procurement regulations relating to Strategic Sessions 1 61 537 Non - compliance with contract variation regulations relating to outreach campaigns 1 1 576 400 Non - compliance with contract variation regulations relating to stakeholder engagements 1 130 000 Non - compliance with procurement regulations relating to legal services on RSR mandate 1 286 390 Non - compliance with procurement regulations relating to legal services 1 91 196 Non - compliance with contract variation regulations relating to relocation services 1 18 829 Non - compliance with contract variation regulations relating to leased building 1 6 544 565 Non - compliance with procurement regulations relating to training and development 1 498 000 Non - compliance with contract variation regulations relating to leased building 1 1 071 880 Non - compliance with procurement regulations relating to training 1 12 340 Non-compliance with procurement regulations relating to restructuring consultants 1 341 550 Non - compliance with delegations of authority for travel 1 275 928 Non - compliance with procurement regulations relating to travel 1 239 966 Non - compliance with procurement regulations relating to legal fees 1 286 830 Non - compliance with procurement regulations relating to training 1 14 949 Non - compliance with procurement regulations relating to employee wellness 1 3 051 Non - compliance with procurement regulations relating to HR software 1 6 789 Non - compliance with procurement regulations relating to legal fees 1 137 555 Non - compliance with procurement regulations relating to furniture rental 1 359 375

12 191 330

1 Condoned by National Treasury.

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Figures in Rand 2020 2019

31. Consulting and professional fees

Internal audit 827 572 1 424 386 Regulations and governance - 337 680 Board of inquiry - 1 463 928 Business consultancy 1 768 064 1 818 580 Risk management 112 184 37 725 Research 739 997 3 206 Board support 41 847 160 959 ICT support and improvement 1 232 806 69 837 Security system 130 912 341 261 HR training and development1 551 568 3 177 929 Finance support 132 937 55 062 Legal fees 7 843 295 6 408 901 Forensic audit 40 208 148 894 13 421 390 15 448 348

1 Included in HR training and development are organisational design, job grading and profiling costs relating to the restructuring process amounting to R1 090 229 in 2018/19.

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3 2 . Budget differences

Revenue movements  Safety permit: Application fees - R1 615 399 The actual revenue generated from application fees exceeded the budget of R4.5 million by R1.6 million. The safety permit application fees for 2019/20 financial year amounted to R6.4 million based on the permit fee schedules. Management applied a prudent approach and capped the budget at R4.5 million. This was to accommodate any downward changes in the industry such as closing down of operators, reclassification etc. The actual results far exceeded the management expectations.  Interest received - R6 270 608 Large operators paid permit fees during the first quarter resulting in the organisation holding positive cash balances for longer. Another contributing factor was the delay in the payment of disputed accruals in respect of the cancelled lease for the old regional offices. As part of the cash flow strategies the RSR’s invests its surplus cash balances at the Coproration for Public Deposits which is held by South African Reserve Bank.  Penalties - R770 000 This penalty was imposed on Botswana rail for operating without a valid safety permit. The RSR does not budget for as these are considered variable revenue to which funds can not be committed to.  Other revenue and other income - R606 540 and R214 755 The RSR does not budget for variable revenue. The reason for not budgeting for this type of revenue is that it is not certain to beraised. Therefore, the RSR does not want to increase its expenditure for revenue that may not be collected. The R606 540 includes insurance proceeds for loss of assets, proceeds from sale of assets and conference revenue.

Expenditure movements  Depreciation and amortisation - R7 390 432 The RSR does not budget for non cash items. • Loss on disposal of assets - R297 203 The RSR does not budget for non cash items. • Consulting and professional fees - R16 916 553 This variance is as a result of planned expenditure not incurred before year-end. Due to under expenditure or purchase orders issued, but services have not been delivered by year - end. • Office rental - R1 222 702 This variance resulted from the recognition of the operating lease liability in respect of the new RSR regional offices which is a non cash item not budgeted for. • Debt impairment- R1 838 876 The RSR does not budget for bad debts and debt impairment. • General expenses - R11 087 941 This variance is as a result of planned for expenditure not invoiced by year-end. Due to under expenditure or purchase order issued, but services have not been delivered by year - end. • Capital expenditure - R3 497 861 The total budget was R30.2 million and R26.7 million was incurred, resulting in a variance of R3.5 million. The variance is as a result of the planned capital expenditure not invoiced by year - end.

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Annual Report 2019/20_26_OCT_2020.indd 143 10/26/20 4:30 PM HEAD OFFICE (MIDRAND): +27 10 495 5291, Building 4, Waterfall Point Office Park, Cnr Waterfall and Woodmead Drive, Waterfall City, Midrand, 1685, SOUTH AFRICA

CENTRAL REGION: +27 87 284 6591, Building 2, Waterfall Point Office Park, Cnr Waterfall and Woodmead Drive, Waterfall City, Midrand, 1685, SOUTH AFRICA

COASTAL REGION: +27 21 493 1718, 2 Long Street Building, 2 Long Street, 11th Floor, Cape Town, 8000, SOUTH AFRICA

EASTERN REGION: +27 31 492 7289, Embassy Building, 22nd Floor, 199 Anton Lembede Street, Durban, 4000, SOUTH AFRICA

RP299/2020 144 ANNUAL REPORT 2019/20 ISBN: 978-0-621-48751-0 Title of Publications: Railway Safety Regulator Annual Report 2019/2020

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