Department of Transport & Passenger Rail Agency of South Africa on challenges related to rail & road network system

Standing Committee on Appropriations

25 March 2015
Chairperson: Mr S Mashatile (ANC)
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Meeting Summary

PRASA told the Committee that it was the implementing arm of the National Department of Transport, providing transport via road and railway. As a government entity, the initiatives for PRASA were driven by policies and transport strategy. The rail sector took up 80% of the business of PRASA, mainly through Metrorail.  They had a few bus services, including Translux and City to City. They also had a property division.  Statistics were presented, highlighting the work of PRASA. It had 22 300 km of rail network, 4 638 metro coaches, 550 million trips a year for Metrorail passengers, 16 500 employees, 589 stations, and assets of R36 billion.

The biggest challenges for PRASA were its old and dilapidated railway infrastructure, long queues, overcrowding and unreliable trains. To this end, they had embarked on a 65% local content fleet renewal programme that would create 65 000 jobs. A manufacturing industry for these trains would be developed in Nigel to produce 3 600 coaches and 600 trains over 10 years at the cost of R51bn. The 20-year plan was to spend R123 billion on new trains, which would be modern and be able hold more people as they would be an open design, not closed like the current trains, with 1,346 passengers per train. They would also have automatic anti-crash systems, a 40-year design life and 31% energy savings. They would have air conditioning and communication about stations coming up. There would be five modern new depots that would be able to support and service these trains. Over R7 billion would be spent on signalling. The new stations would be disabled friendly, with automated ticketing and security cameras. There are currently 4 000 railway police to address crime, with 22 police stations being developed at train stations, which had led to crime being reduced by 38%. PRASA was also developing high speed corridors for trains to reach speeds of 160km/h.

It was pointed out that urbanisation was putting increasing pressure on the country’s transport systems. Rail would be vital in alleviating this pressure as it was the backbone of an integrated transport network. It was also more environmentally friendly. The railway track and reserve was 9m wide, while a new car network was 175m wide, and a bus system was 35m wide.

PRASA was in talks with rail operators in Mozambique, Zimbabwe and Swaziland to run routes through to these countries.

Members asked for details of PRASA’s maintenance plans for the new trains, and sought assurance that a transfer of skills was taking place during their manufacture.  How would small businesses benefit from the manufacturing programme? What was being done about stopping cable theft? It was also suggested that more should be spent on rail, and less on road.

Meeting report

The Chairperson welcomed the Committee, the Department of Transport (DOT) and the Passenger Rail Agency of SA (PRASA). Transport was critical, so this meeting was vital for the country.

Briefing by Passenger Rail Agency of South Africa (PRASA)

Dr Popo Molefe, Chairman of PRASA, said he hoped that the Committee would be persuaded that the Department was on the right track and that it may even argue that PRASA needed to do more and spend more. The local manufacturing arm of trains would be focused on producing trains initially for local consumption only, as this was their mandate.

Mr Lucky Montana, CEO of PRASA, said PRASA focused on public transport and the National Development Plan (NDP). It was the implementing arm of the National Department of Transport, providing transport via road and railway. As a government entity, the initiatives for PRASA were driven by policies and transport strategy. The rail sector took up 80% of the business of PRASA, mainly through Metrorail.  They had a few bus services, including Translux and City to City. They also had a property division.

He provided statistics highlighting the work of PRASA. It had 22 300 km of rail network, 4 638 metro coaches, 550 million trips a year for Metrorail passengers, 16 500 employees, 589 stations, and assets of R36 billion. The biggest challenges for PRASA were its old and dilapidated railway infrastructure, long queues, overcrowding and unreliable trains. People could lose their bread and butter if they were late for job opportunities because of late trains. Line, train and signal capacity were limited. Most of the stations were isolated and did not run in conjunction with other forms of transport, like taxis and buses. The average age of the fleet was 40 years. This frustration led to vandalism and acts of outrage.

The new programme had three phases:

- 2007-2010 – Stabilize commuter rail by bringing all the different passenger railway networks into one;

- 2011-2014 – Focus away from refurbishment to replacement;

- 2015-2018 – Growth and expansion.

There had been a history of under-investment in rail over the last 40 years. This was now the area of focus. Now PRASA was spending around R40 billion on rail infrastructure, which was line with the NDP. They were looking to reduce the demand for private cars, and to renew the fleet.

The current PRASA subsidy from the government was around R3.5 billion, and internal revenue was around R3.5 billion, which gave them R7 billion for operations -- a 50/50 split. Costs included employee costs, energy costs and rates on land usage. The amount received for capital allocation was R10.5 billion and actual expenditure was R11.3 billion for the year, and overspending of around R800 million.

The rolling stock fleet had been allocated R5.7 billion, and new stations and signals were being developed. In total, R44 billion (or 80% of the capital budget) had been allocated over the next couple of years to fixing the fleet.

The first contract of R51 billion for the rolling stock renewal programme had been signed. They were building local factories for the manufacture of new trains in SA which would generate 65 000 jobs, with 65% local content. 3 600 coaches and 600 trains were to be built over ten years at the cost of R51bn.  New trains were already being built and would be running in 2015. They were testing them firstly in the Gauteng area. There was R123 billion allocated for new stock over the next 20 years. The trains would be modern and be able hold more people, as they would have an open design, not closed like the current trains, with 1 346 passengers per train. They would also have automatic anti-crash systems, a 40-year design life and 31% energy savings. They would have air conditioning and communication about stations coming up. There would be five modern new depots that would be able to support and service these trains. This would cost around R1.9 billion.

Over R7 billion would be spent on the signalling renewal programme. There would be four nerve centres, Gauteng 1, Gauteng 2, Western Cape region and Durban region. There would be a replacement of the current signalling, and new train control centres.

There were corridors where one could run 160km/h trains -- Pretoria to Germiston, for example -- and other corridors were being upgraded to R120km/h. The budget for this was R1.6 billion. The cost of importing rails was expensive, and should therefore be made locally. The government needed to get the steel industry to make the local rails and wheels. New sub-stations would inform the Agency about energy usage. 135 stations would be upgraded.

The consolidated development plan included getting cities to act as the hub for rail. They needed to get the bus/taxi/rail mix right. Today, 50% of the population lived in the cities, but by 2030, 60 to 65% would be urbanised. Rail would be vital in alleviating this pressure as it was the backbone of an integrated transport network. It was also more environmentally friendly. The railway track and reserve was 9m wide, while a new car network was 175m wide, and a bus system was 35m wide. The technology choice framework needed to be specific to each area, whether it was heavy rail or light rail. A long distance rail network from Cape Town to Johannesburg, for example, was a priority going forward and required future funding. The regional and long-distance services were currently costing PRASA money, and needed more funding. There was a need for a high-speed rail system in SA.

Discussion

Ms S Shope-Sithole (ANC) asked whether PRASA had a maintenance plan for all this expenditure. This was where the costs would escalate. Did they have a plan to transfer skills for the building of the trains? What was the safety plan for the new rail network?

Ms R Nyalungu (ANC) asked what measures PRASA were putting in place to stop cable theft. Was the new system going to accommodate disabled people? Had they started recruiting young professionals?

Dr C Madlopha (ANC) queried what percentage of the budget was going to small businesses. This was where the focus needed to be. Did they have a plan for public participation?

Mr M Figg (DA) was concerned that government would have to fund this expenditure going forward, as PRASA could not pass on the cost to the public. He queried why the local content was so low, stating that it needed to be higher that 65%. He commented that it could not be too difficult to make wheels and railway lines locally. He asked what would happen to the road budget if PRASA got what they wanted.

Mr M de Freitas (DA), a member of the Transport Portfolio Committee, said that the South African National Roads Agency Limited (SANRAL) should ask for less, and that more should go into rail. He asked why Transnet and PRASA used the same lines for different purposes. It should all be under one roof.  With regard to the local manufacturing in Nigel, there were issues that indicated that the local community were not benefiting. He suggested that once the local budget was met for manufacturing, why could PRASA not then look to export trains?

Mr C Hunsinger (DA), also from the Transport Portfolio Committee, said that the reduction in the PRASA budget was around 7%according to the Minister of Finance, and asked where this would affect their budget?

Ms D Magadzi (ANC), Chairperson of the Transport Portfolio Committee, said that it was very important to discuss the Moloto rail corridor and the bus service. Accountability was key going forward for PRASA.

Ms M Manana (ANC) said that PRASA’s involvement in corporate real estate and property acquisitions needed clarity. What was being spent? She asked PRASA to clarify the Moloto situation?

Mr N Gcwabaza (ANC) queried whether other professionals were going to benefit from PRASA’s programmes, other than those in the Gauteng area? Why had PRASA gone over budget? What was the plan for a long distance railway network into Africa? He said that corruption could not be allowed as a scare tactic to prevent BEE companies from benefiting. The Committee would be watching PRASA closely.

Mr A McLoughlin (DA) asked about the duplication of roles and whether there were any plans to unite the railway bodies into one. He asked that the Committee should get a business model for property acquisitions going forward. Further to this, he queried whether this would ever become a profitable investment? Was this first class system appropriate for a third world country like SA?

The Chairperson asked if there was also a focus on smaller cities and towns?

Dr Molefe said that he had not meant to imply that PRASA could not export, just that they must adhere to the timeframes of the contract, first and foremost. The Chairman was adamant that the bidding process for fleet renewal had been transparent and would develop small businesses.

Mr G Maluleke, Acting DDG, Department of Transport, said the DOT busy with a Bill that would be completed in the next financial year. There would be a Rail Act that managed the process between Transnet and PRASA. Moloto had been transferred to PRASA. There were no plans to consolidate Transnet and PRASA.

Mr Montana commented that the second part of the contract for the new trains dealt with maintenance, and the budget would cover supporting it. Internally PRASA had a maintenance plan. They had been working with the University of Stellenbosch to discover five key areas of maintenance, and were using the university to train engineers in maintenance. Safety was a priority. There were 4 000 railway police, and there were 22 police stations being developed at train stations. Crime had been reduced by 38%. The current trains were designed to cater for disabled people and the stations were being amended to raise the platforms for wheelchair accessibility. They could be used by blind and deaf people too.

PRASA had started a skills development programme. They were advertising at schools and universities for graduates. They were looking at being able to export trains into Africa which would lead to small business development. Nigel was becoming an industrial park. With 39% of the renewal programme being BEE related, and 30% involving women, youths and disabled organisations, the question of integrated growth was being addressed. With these BEE deals, one could not sell within the first three years, to promote sustainability. The local content target was 70% in the first two years, and progressed steadily upward in the future. PRASA could intervene in order to make sure SA companies benefited from manufacturing.

They were trying to leverage real estate to help cross-subsidise revenue and increase rail volumes. PRASA had followed the regulations in the deals. The media had focused on the BEE company and not the international companies. The process had been fair and competitive; the Auditor General had helped by pointing out a few areas that needed to be fixed in the internal process. The numbers for Moloto were not in the presentation numbers. It had a road and rail system of R1 billion. Once the Treasury approval had come through, they could work on it and integrate it into PRASA.

The property strategy would increase revenue to around a R1 billion. It would revolve around the commercialisation of stations. PRASA had bought back a number of leases (10). PRASA would need subsidies but they were hoping it could reduce its reliance on them going forward in order to become more self-sustainable and less of a drain on the Treasury. What would help with this was the multiplier effect, where R1 spent on rail, would generate R4 going forward.

Passenger and freight were separate, due to the different funding models. Freight generated its own income and did not need a subsidy. PRASA was running trains in the smaller cities and towns.  The process of getting locomotives moved quicker than expected had led to spending more than budgeted for. They were talking to rail operators in Mozambique, Zimbabwe and Swaziland to run routes through to these countries. The CEO would provide the Committee with the strategy for property going forward.

The bus company continued to play a role, and was very competitive. They were taking away business from taxis, which had become a problem. A train costs R65 million, so when it is lost through vandalism, it really affects PRASA. Speed gates are being developed to beat fraud on trains. The new system was coming with cameras.

The meeting was adjourned.

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