Metrorail & SA Rail Commuter Corporation (SARCC) Merging Process: Department of Transport briefing

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
19 October 2005
METRORAIL AND SOUTH AFRICAN RAIL COMMUTER CORPORATION (SARCC) MERGING PROCESS: DEPARTMENT OF TRANSPORT BRIEFING

Chairperson:

Department of Transport: Passenger Rail Consolidation 19 October 2005

SUMMARY
The unbundling of Transnet to enable it to concentrate on its core business of freight transport entailed the consolidation of all passenger rail transport into one entity, the South African Rail Commuter Corporation (SARCC), which would include Metrorail for commuters and Shosholoza Meyl for long distance. Huge under-investment over 30 to 40 years had to be caught up with, and a short-term stabilization programme installed. Ongoing state subsidies would be required.

Members expressed concern about the low standard of service to passengers by Metrorail and Shosholoza Meyl. Safety, cleanliness and reliability were far below acceptable standards. Grave concern was expressed about the huge capital outlay, financial viability, market acceptance and time-frame for the construction of the proposed Gautrain project

MINUTES
Department of Transport briefing
Mr L Montana (Deputy Director General: Public Transport) explained that in June 2004 a ministerial agreement had been reached that public transport should be improved by harmonising operations between the South African Rail Commuter Corporation (SARCC), Metrorail and Shosholoza Meyl. Passenger rail transport would be taken out of Transnet which would enable Transnet to focus on its core business of freight movement. SARCC had subsidised to the amount of R 2,2 billion per annum of which R 600 million was for capital expenditure. The target date of 1 June 2005 for the incorporation of Metrorail into SARCC had been missed, but the intention was to have the consolidated entity in place by the target date of 31 March 2006. They were faced with under-investment in commuter transport infrastructure going back thirty to forty years. Some signalling and communication systems dated from the 1960s. For the short term a stabilisation intervention programme had to be put in place to avoid total collapse. Although fares only contributed one-third of the cost of commuter rail transport, it was important that fare collection be improved. For the medium to long term capital expenditure would have to be raised far above the present R 600 million per annum. Strategic corridors for long-distance passenger transport would be identified such as Tswane to Cape Town, perhaps initially in the shape of pilot projects. Shosholoza Meyl posed a problem for Spoornet as it was not subsidised by the Government but had to be cross-subsidised by the freight activities of Spoornet. The transfer of Metrorail into SARCC was complex as it involved existing travel benefits, job security and so on. It was disappointing that no improvement had been achieved by the enhanced funding over the previous few years. Operational risks were not well managed and accountability was not good.

Discussion
Mr S Farrow (DA) said that under one Minister (of Transport) with one Board and one CEO the tendency towards a we/they approach could disappear and a better, more efficient service should emerge. Strong leadership was required. It was frustrating that funds were going in with no improvement resulting.

A Member asked whether there would be a separate Chief Executive Officer for Intersite Properties. Reducing the number of highly-paid Managers for the three entities to one was going to be problematical, as were other possible labour casualties. He was sceptical about the target date of 31 March 2006.

Mr Montana replied that by 31 March 2006 there was to be one Minister and one Board. The holding company SARCC had three divisions: commuter, long distance and property (Intersite). Security, operational safety, rolling stock and infrastructure would be improved. In some instances SARCC were changing stations to accommodate police stations. The user profile was mainly men because women would rather use taxi or bus. The Constitutional Court decision against Metrorail in November 2004 had shaken Metrorail.

Mr M Swathe (DA) asked who was taking responsibility for successful implementation of the transition.

Mr O Mogale (ANC) asked how much was budgeted for the huge project.

Ms B Thompson (ANC) was concerned that people who burned trains and stations to vent their frustration at poor service would go unidentified and unpunished. How could these actions be stopped?

Ms M Mbombo (ANC) said that old people and children suffered most through dangerous and indifferent service. The facilities on Shosholoza should be clean to attract customers, but toilets were filthy.

Mr Montana regretted that the long-distance market had been lost. Trains had to be clean, on time and safe. Train operators were investigating themselves in cases where they were involved in accidents, which was untenable. The contract between Metrorail and SARCC had expired and would be renegotiated and changed significantly. Railway reserves had been occupied by informal housing and theft was rife. The 31 March 2006 date had been decided on by Cabinet. Certain legal processes had to be finalised by then.

The Chair said that consolidation would not by itself solve problems. The State Owned Enterprises under the Department of Public Enterprises generated surplus profits whereas SARCC would require subsidies. The Gautrain project had a completely different logic, with a different rail gauge, and would be dependent on international skills. It was said that its budget would be exceeded three times and more, which would take up huge amounts of public money. Was it still possible to reopen the Gautrain decision to proceed? What were the current passengers levels on Shosholoza Meyl, and was it just being kept afloat? Metrorail was more critical.

Mr Farrow asked whether the identities of the receivers of goods stolen from the railways were not known
His experience was that change management should come from the outside, with, in this case, the Department just overseeing the process. Would it not be feasible to have Shosholoza continue in Spoornet in the shape of a few passenger wagons added to goods trains?

Mr Montana replied that Shosholoza had been consolidated with Spoornet in 2002. During that year it had losses of R 200 million which was subsidised by Spoornet. Although volumes were too low, it rendered an important service. Subsidisation would be negotiated with Government. Putco ran 500 to 600 buses for commuter transport which could be better served by rail. Spoornet was not going to run all branch lines which could be utilised by small local private enterprise. The Gautrain project was of immense national economic importance. The province could not afford it. It had the potential to transform the public transport system, and could bring relief of a 30 to 40% reduction in congestion. Integration with public transport, cost and the opportunities for Black Economic Advancement had to be considered. Financial closure would be reached by December 2005. There was a concern that public transport resources would be drained by Gautrain where it might be needed more urgently elsewhere.

The Chair observed that from an 2010 perspective, there was too little time left to have Gautrain up and running by then. It remained an uncertain project and not aimed at relief for the poorest of the poor.

Meeting adjourned.