Department of Transport PASSENGER RAIL CONSOLIDATION 19 October 2005

Background Rationale for Consolidation Process of Consolidation Contents

BACKGROUND COMMUTER RAIL INSTITUTIONAL ARRANGEMENTS SARCC Responsible for commuter rail Own the assets Report to Minister of Transport Receive operational and capital subsidy from Dept. of Transport Pay management fee to operator Metrorail Operator Receive management fee for operations Division of Transnet Transnet report to Minister of Public Enterprises  Shosholoza Meyl An integral part of Spoornet, which is a business unit of Transnet.

BACKGROUND CURRENT STATE OF COMMUTER RAIL BACKLOG IN INVESTMENT IN COMMUTER RAIL OVER LAST 30 YEARS OLD ROLLING STOCK=HIGH MAINTENANCE COST INFRASTRUCTURE OLD ESPECIALLY SIGNALLING AND COMMUNICATION SYSTEMS(also old technology) INSTITUTIONAL ARRANGEMENTS FRAGMENTED SERVICES UNRELIABLE AND FRAGMENTED 2.2m PASSENGERS DAILY

RATIONALE FOR CONSOLIDATION Economic aspect of rail-movement of goods Transnet focus on economic aspects -freight Socio-economic role of passenger relates to passengers – responsibility DoT (access to economic opportunities and social activities Current institutional arrangements fragmented and impacts service levels Efficiencies in passenger rail not being exploited Cabinet approved the restructuring of passenger rail by consolidating the various entities into one reporting to DoT-December 2004

RATIONALE FOR CONSOLIDATION cont. Implement a Stabilisation Programme to halt the deterioration in service levels (short term) Close the gap between operations and infrastructure delivery Improve implementation of the Refurbishment /General Overhaul Programme Improve Safety and Security Improve fare collection and signaling Better scheduling of train services in the short-term

RATIONALE FOR CONSOLIDATION cont. Medium – Long Term: (31 March 2006 onwards) - Creation of a consolidated Passenger Rail Entity to house commuter and long distance passenger services, as well as the property portfolio of the entity - Implement the Passenger Rail Plan which will guide planning and investment in rail infrastructure - Develop and implement funding strategy for the financing of rolling stock (Standardisation of fleet) - Build capacity of Metros/Provinces in preparation for devolution of commuter rail functions in the next 8 – 10 years

PROCESS OF CONSOLIDATION STEERING COMMITTEE –DoT, DPE, Treasury, Transnet, SARCC –Phase 1-Metrorail under SARCC-1 June 2005 –Phase 2-Bring Shosholoza Meyl-31 March 2006 Completed Due Diligence on all three entities Developed Interim Passenger Rail Plan Developed the Business Plan for consolidation

PHASE 1 OF CONSOLIDATION Metrorail under SARCC 1 June 2005 Appointed Acting CEO Board to appoint Transitional EXCO Minister filled vacancies on the Board Going concern – S 197 of LRA Minister appointed Transition Executive Team Task Team - DoT, Metrorail and Organised Labour-finalise agreement and work plan to address 197 issues Business Plan – final draft

Phase 2 Formation of new PaxCo (consolidation of SARCC, Metrorail and Shosholoza Meyl) Need for amendments to Legal Succession Act for phase 2 Finalise transfer of assets Harmonise condition of service

Current Status Draft Legal Agreement developed between SARCC and Transnet for the transfer of Metrorail into SARCC. Delays due to other considerations: Pension Fund issues. Conditions of Service for employees. Precedence in the context of Transnet’s disposal of Assets. However, it is expected that consolidation of the three entities will be completed by the end of the financial year: 31 March 2006.

Conclusion Any delay in consolidation will simply see a deterioration in the quality of commuter rail services. There should be an improvement in service levels as a result of funding over the past few years. Critical to our success in the short term is the need to redefine the relationship between SARCC and Metrorail (operational risks, penalties, incentives, etc).

Department of Transport Thank you