1. STANDING COMMITTEE ON APPROPRIATIONS
30 AUGUST 2017

2. Performance Information 2016/17 NDP: Service delivery contributions
Content
Expenditure 2016/17
Operational Expenditure
Capital Expenditure
Performance Information 2016/17
NDP: Service delivery contributions
AGSA Findings
Risk and Opportunities
Other matters

3. Expenditure 2016/17: Operational
Income under budget by 4% as result of fare revenue down by 33%.
In relation to 2015/16 income was 1% down with fare revenue 14% down.
Expenditure in excess of revenue
Significant changes in costs on 2015/16
Insurance claims & premiums
Leases
Legal fees
New Rolling Stock Maintenance
Operational Expenditure cover operations plus protection and maintenance of current investment

4. Expenditure 2016/17: Capital
Underspending:
Conclusion of procurement phase related to Modernisation Programmes such as Depot Modernisation, 120 Km/h Perway and Station Modernisation not achieved.
Contracts under review, on hold and / or stopped.
Inefficient planning and procurement processes and turnaround time.
Slower spending due to delays
Rolling Stock Fleet Renewal
Signal Replacement
Depot modernisation
Station modernisation
Overspending
Refurbishment of MLPS coaches – additional coaches done as well as differences in fleet mix. Some coaches cost more than others.

5. Performance Information: Background
Note:
Security and Safety indicators under Rail only and not split for Metrorail and MLPS.

6. PRASA Strategic Priorities for the 2016/17 Period

7. PRASA Performance for 2016/17 Period

8. PRASA Performance for 2016/17 Period

9. PRASA Performance for 2016/17 Period

10. PRASA Performance for 2016/17 Period

11. Reasons for non-performance on APP
Metrorail
High number of operational and safety incidents namely rolling stock failures, infrastructure availability and failures, service closures, staff shortages and accidents aggravated by inclement weather, vandalism, arson and community unrest.
Increase in security related incidents against a backdrop of operational cost containment due to operational cash flow.
MLPS
Shortage and performance of appropriate locomotives
Autopax
Duplicate services not implemented as result of Vehicles Off the Road
Lower capacity buses used in high capacity routes (Peak period)
Commuter service not financially viable.
Projects
Delays in implementation (Demonstration corridor for new trains; contractual issues on signalling contracts)
Delays in tender processes (120km/h perway), award approvals (Wolmerton Maintenance depot)
Shortage of components such as wheels, rotary machines & rails as well as equipment for infrastructure maintenance
Therefore the need for a PRASA Turn Around Plan to address its unprecedented and existential crisis.

12. NDP: Improving Service Delivery
PRASA’s service delivery focus is derived from the organisation’s main objective & main business, which is to:
Ensure that, at the request of the Department of Transport, rail commuter services are provided within, to and from the Republic in the public interest, and
Provide, in consultation with the Department of Transport, for a long haul passenger rail and bus services within, to and from the Republic in terms of the principles set out in Section 4 of the National Land Transport Transition Act, 2000 (Act No. 22 of 2000).
The ultimate measure of service delivery for PRASA is, in pursuit of the mandate above, the provision of a dignified travel experience for commuters & passengers through offering a safe, reliable, predictable & affordable transport.
To this effect, PRASA has put measures to curb the decline in service delivery & to improve the customer experience in order to position rail as a backbone of public transport, supported by an efficient bus service. (Turn Around)

13. PRASA Measures to improve Service Delivery through Turn Around & Modernisation
Increase train availability & train performance in peaks to 88% on time
Reduce the number trains cancelled to less than 6% in peak periods
Improve the customer experience focusing on end-to-end passenger journey
Reduction in crime related incidents involving passengers
Reduction in the number of passenger injuries & fatalities by reducing overcrowding
Increase infrastructure reliability & performance by reducing signaling & telecoms faults by 15%
Reduce train delays and cancellations by reducing electrical overhead traction equipment & substation faults by 25%

14. PRASA Measures to improve Service Delivery through Turn Around and Modernisation (Continued)
Reduce train delays and cancellations by reducing perway faults by 15%
Reducing speed restrictions by 56%
Introduce automated ticketing system & a clock-face timetable
Reduction of Poverty, Unemployment and Inequality through capital programmes especially Rolling Stock Fleet Renewal Programme:
Over permanent jobs at PRASA
Over jobs created through Rolling Stock Fleet Renewal Programme
Training of artisans, engineering technicians, 596 professional engineers

15. Turn Around Phases

16. AGSA findings and remedial actions: Governance, internal controls and accountability
Irregular Expenditure
Prior year irregularities will reflect over the MTEF
Additional from National Treasury investigation – ±R3.7bn
Irregular declared up to 2015/16 R14.6bn
Irregular declared for 2016/17 R2.9bn
Majority of findings is in SCM
Fruitless and Wasteful Expenditure
Swifambo’s locomotives the significant portion
Litigation matters
The Court set aside the Swifambo contract. The defendant has lodged an appeal

17. AGSA findings and remedial actions: Governance, internal controls and accountability (Continued)
PRASA has:
Instituted reviews of policies, processes and procedures, SCM and HCM and ICT Policy;
In Progress
Re-align current existing organizational structures to increase efficiencies & enhance controls environment;
Part of Turn Around in medium to longer term
External independent and objective assistance required
Consolidated approach needed in incorporating governance and control in organisational re-design and implementation.
Consolidation of Engineering functions in PRASA Technical completed
Initiated process for filling scarce and critical vacant positions
Dependent on organisational review and operational shortfall resolution
Introduced and implemented proactive assurance in key processes.
Probity review instituted
Tender committees (BSC, BEC and BAC) in place

18. Risks & Opportunities Risks Opportunities Financial Operational
Funding structure
Operational
Safety & Security
Collisions, derailments
Loss of assets
Governance & Compliance
Litigation
Reputational
Stabilisation of business
Turn Around
Modernisation

19. Other matters: PRASA Funding
Add. Funding for MLPS 4th Qrt
Current position
Maintenance spend below benchmark
Backlog Creditors ± R1.7bn
Security deployment decreased yet need increases. New contracts on tender expected 30% higher.
Operational subsidy does not sufficiently cover adequate protection and maintenance of current investment
Proposal in lieu of additional funds
Flexibility & approval to move ± 20% between Opex and Capex subsidies
Portion (8 – 10%) re-allocation for Maintenance of Investments (Current & Future)
Addressing critical business needs
Security; Critical engineering and rail specific skill shortages; Training; Marketing & Communication and Compliance & governance