SA Railcommuter Corporation 2006/07 Annual Report: briefing

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24 October 2007
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

24 October 2007

Chairperson: Mr J Cronin (ANC)

Documents handed out:
South African Rail Commuter Corporation Ltd Annual Report 2006-2007[available shortly at]
South African Rail Commuter Corporation Ltd Presentation on its Annual Report 2006-2007

Audio recording of meeting

The Committee received a delegation from the South African Rail Commuter Corporation Ltd to hear a presentation on the entity’s 2006-2007 Annual Report. The delegation included representatives from Intersite, the Corporation’s 100% owned property management services subsidiary. The Corporation listed its significant achievements, which included signs of stabilisation, a reduction in fare evasion, an improvement in passenger security, a shift back towards rail passenger transport, its handling of the complicated merger of Metrorail (the operating division) into the Corporation’s structure, and an unqualified report from the Auditor-General. The Corporation’s major anxieties included the upcoming take-over of Shosholoza Meyl (the long-distance passenger rail operator), which the Corporation felt was a high risk, and the need to accelerate investment in rolling stock and infrastructure to avert the risk of serious accidents and improve punctuality, reliability and quality of services to passengers. Further investment should include providing crossovers. Technical staff retention against competition from Gautrain and Transnet was a concern.

The Committee was convinced that there must be an immediate commitment to purchase new rolling stock. They stressed that passenger rail transport was vital, that it should not just be for the poor, and there must be commitment to recognising inter-modality of commuter transport. Questions were raised why the Corporation was not part of the consortium for bus rapid transit in Johannesburg, and why 500 buses were purchased for 2010, especially in the light of the saturation of the market for disposal after the World Cup. Members also expressed concerns about accessibility problems for disabled users, even in Premier Class, on the poor facilities at many train stations and on the lack of a direct Durban to Cape Town train service. Further questions would be answered in writing.

South African Rail Commuter Corporation Ltd (SARCC) presentation
Mr Zukile Nomvete, Chairperson, South African Rail Commuter Corporation Ltd (SARCC) introduced the presentation by saying that the fundamental change for SARCC for the year under review was that SARCC had become the owner-operator of its own asset. Mr Nomvete had joined SARCC in October 2006, when the Board had been reconstituted. He had previously worked for Metrorail in 1995.

Mr Lucky Montana, Chief Executive Officer (CEO), SARCC, said that 2006-2007 had been a crucial year for the rail sector. The successful transfer of Metrorail to SARCC in May 2006 with integration of regional offices was a significant development that made sound business sense. SARCC now was both custodian of commuter rail assets and operator of Metrorail services. Cabinet had approved the Rail Plan in 2006. SARCC hoped to arrest the decline in passenger commuter rail services. It had received an unqualified Audit Report for two successive years, and received increased capital funding for rolling stock and infrastructure. A new Public Transport Strategy had been approved in February 2007. SARCC was convinced that good public transport was good for the economy.

SARCC operated in five regions – Wits (Johannesburg and Ekurhuleni), Tshwane, Port Elizabeth, East London, Cape Town, and Durban. It owned 2 200 kilometres of rail network, only 20% of the amount owned by Spoornet but by far the most important strategically. The other assets included rail assets, stations, coaches (of which only a portion were in active service because of maintenance backlogs). It provided almost 2.2 million passenger trips daily, and employed over 10 000 people. It reported to the national Ministry of Transport, but provincial and local government also had a role to play in its operation.

A notable achievement had been the increase in the number of passenger trips, despite insufficient availability of rolling stock and insufficient infrastructure. It had also been encouraging to see some improvements in punctuality, an increase in fare revenues, and a reduction in fare evasion. Two new services had been introduced: the Soweto Business Express and a Malmesbury to Cape Town service, operated initially as a pilot project and now extended to five days a week.

SARCC’s biggest challenge lay in poor availability and lack of reliability of rolling stock, which was 38% responsible for poor performance of train services. The number of train cancellations and delays remaineded unacceptably high Accessibility to rail services and facilities for people with special needs remained a major challenge. SARCC faced a shortage of technical skills.

The deployment of the Railway Police remained on course with an additional 500 new recruits currently in the Police Training College. Prosecutions had increased. Cable theft had been reduced. Passengers’ use of laptop computers and taking their shopping on trains had reflected the improvements in security. Since 2002 there had been a declining trend in railway crime (with the exception of the security strike in 2006) SARCC’s main concern regarding the 2010 Soccer World Cup was that urgent funding was required for installing critical systems such as closed circuit television to enhance safety and security.

Railway fatalities were largely due to suicides and people crossing railway lines in front of trains. There were huge operational risks such as overcrowding and stampedes. The encroachment of informal settlements on railway property, even alongside tracks, and stopping of trains to take on passengers at informal settlements, was a problem. Overcrowding and stampedes were further problems.

SARCC had streamlined its procurement process and adopted a new supply chain management policy. It had achieved ISO 9001 quality management certification.

Main institutional challenges included changing the ‘old culture’ and integrating Metrorail staff and practices into the Corporation. Further challenges included the overall decline over a period of ten years. Because of under-investment, especially in coaches, there was a high failure rate of rolling stock. This had caused anger among passengers, inciting them to burn trains. Uni-directional signalling meant that if one train failed, all trains behind it were delayed until the line was clear. SARCC wanted to invest in crossovers, so that following trains could overtake a failed train. 16 000 trains had been cancelled, an increase from 6000 in 1998/1999, affecting more than one million passengers a month. The needs of people with disabilities had to be addressed. Too few stations had ramps, and the structure of stations had to be improved. There was a shortage of technical skills and SARCC was attempting to retain staff in the face of severe competition form Transnet and Gautrain.

Mr Montana tabled the accelerated programme for rolling stock refurbishment, which aimed to rebuild capacity as a whole. SARCC now was granting three to five year contracts to companies contracted to undertake refurbishments, and was placing more emphasis on pricing and delivery dates, with contracts including penalty clauses. There were not sufficient train sets, and the backlog of coaches needing repair was causing problems in reliability and availability. 310 coaches were completed at a cost of R715 million. R299 million was provided for infrastructure, but this was clearly not enough.

In five years SARCC however had shown positive gains, including no increase in fares for the past four years, whilst there had been a steady increase in fare income, overall increase in passenger journeys, and reduction of fare evasion to 9%. However the increase in passengers was a further challenge requiring urgent rehabilitation of infrastructure to avoid catastrophic accidents with loss of life.

The statistics for delays and cancellations were tabled and it was noted that in South Africa, because punctuality was important to employers, services would be cancelled rather than delayed.

SARCC had submitted to the National Treasury a request for an increased allocation in the grant for maintenance, which was essential to reduce cancellations and delays. SARCC was also seeking a change in condition of employment to enable maintenance to be carried out at off peak times or at night.

In its previous presentation to the Committee, the SARCC had described its plans for a modern fleet. If by the end of the next year, SARCC had not placed a formal order for new rolling stock, then SARCC would be in very serious trouble form 2011 onwards.

Black economic empowerment (BEE) was increasing, in spite of the fact that rail transport was a capital-intensive industry. SARCC, criticised in the past for under-spending, had spent 91% of its capital allocation in the 2006/2007 financial year. An additional R1.3 billion had been allocated to the SARCC over three years for the 2010 World Soccer Cup preparations. About R40 million had already been spent on 2010 projects, with the bulk of spending going to the construction of contact points.

Shosholoza Meyl's losses were a major concern. South Africa could not afford to lose its long distance passenger rail services. Services such as Durban to Pietermaritzburg and Umtata to East London were very important. From April 2008 SARCC was to take over Shosholoza Meyl.

SARCC’s current initiatives aimed to address the problems already outlined. In addition, with regard to the 2010 preparations, projects were to be brought to the construction stage and appointment of contractors finalised by January 2008. The transfer to SARCC of Shosholoza Meyl was to be effected in April 2008. SARCC would continue to enhance safety and intensify the rollout of the Railway Police. Priorities included the legacy projects of revitalizing Cape Town station, and the Cape Town International Airport Rail Link, the Bridge City development, and the Moloto Rail corridor, which sought to relieve the high number of road accidents on that route.

SARCC believed that a solid foundation for turnaround had been laid during the 2006/2007 financial year. Commuters had gained confidence in rail transport. Investment in passenger rail had increased significantly, and the focus was now on the quality of investments and on ensuring that it was now directed in areas that would support change. With 2010 preparations and the new passenger transport strategy, there were now great expectations for rail transport and the sector had to live up to the challenge.

Mr S Farrow (DA) asked about the disparate issues raised concerning staff discipline. He wanted to know how SARCC had unified its staff. He asked what had been the effect and implications of the many executive resignations.

Mr Nomvete replied that the process of unifying staff had begun in 2006. SARCC had implemented a policy of open plan offices. However, it would take a considerable time to produce a new culture. Metrorail employees tended to perceive SARCC as remote. Each employee had been set performance targets. SARCC had amalgamated two executive committees. He had found it necessary to ask some non-productive executives to resign. Others had left for personal reasons. Other executives had demonstrated a lack of urgency in their approach to their work, which may have been acceptable in a declining rail industry, but was no longer appropriate in the more challenging and encouraging climate of the present.

Mr Farrow asked about the passenger subsidy, and why it had not decreased, and to what extent it could be used to finance off peak reductions for pensioners and the unemployed.

Mr Nomvete replied that It was intended under the Act to reduce passenger subsidies, but there would always remain a certain level of subsidy.

Mr Farrow addressed worries over rolling stock refurbishments, about coach building, and if it was possible to avoid importing carriages.

Mr Nomvete replied that the refurbishment programme presented South Africa with an economic opportunity to develop its own capacity. He said, however, that over the years there had been a considerable loss of skills, and now on-the-job training was very important. SARCC was weak in its command of technological resources. It did not have ready access to famous manufacturers of rolling stock such as Bombadier. The cost of rolling stock was enormous, whether it was manufactured locally or imported. He said that the Union Carriage Works, a South African company, was investing in its own production, and performing an important role in maintenance.

Mr Farrow asked about safety and security, and whether SARCC was now complying with the 2005 High Court ruling on responsibility for the safety of passengers so that there was no danger of SARCC being held in contempt of court.

Mr Montana replied, with regard to safety and security, that the Minister had welcomed the 2005 High Court decision to hold SARCC and Metrorail responsible for the safety of passengers. SARCC had responded by taking various steps to ensure that it complied with the Court’s decision, including the rollout of railway police and measures such as ensuring that all doors were closed before trains departed from stations. Unfortunately, the pilot circuit television project had been discontinued because of cost factors; in this regard, a national project was deemed essential, not just one to benefit the Cape Town area.

Mr Farrow asked about the issue of cancellations in Durban and the vandalism that had followed; he gave as an example the breakage of windows that had occurred on Monday, 23 October 2007. He asked about deaths that occurred when pedestrians crossed the line in front of trains: he asked how the Committee might help; he said that railway property was surely private property, and asked what rights SARCC had to remove trespassers from the permanent way.

Mr Montana said that moving people off land adjacent to the railway track was very difficult, and a great effort had to be made to enforce SARCC’s rights in that regard.

Ms Nonyameko Mandindi, Chief Executive Officer, Intersite, (SARCC’s property management services subsidiary), said the process of enforcing SARCC’s legal rights was ongoing.

Mr Zukile Nomvete said that SARCC had as a board member an official from the National Treasury.

The Chairperson advised SARCC to be vigilant about treasury officials.

Ms N Khunou (ANC) challenged SARCC on transformation in the industries supplying trains and refurbishing them. SARCC was effectively giving tenders to the suppliers of 40 or 50 years ago; this meant that there was no transformation. Secondly, she asked when the new trains would be delivered.

Mr Montana said that, if SARCC had not had a crisis situation with regard to delays and cancellations, it would have put out its accelerated rolling stock programme out to tender. In the short term it was essential to stabilise the situation. Nevertheless, the industry was in the process of transformation. A black lady owned Commuter Transport Engineering. Two other suppliers were black-owned, one in Cape Town, one in Johannesburg. However, SARCC faced a dilemma in that such companies relied on recruiting technical staff from SARCC, so it had been necessary to include in contracts with such companies clauses prohibiting poaching of staff. Over the years, such companies would face stiff competition. He considered that R1 million profit per coach was excessive. There were, however, constraints on transformation, such as the work required on undercarriages, which required specialised technology. Gautrain was reliant to a large extent on overseas suppliers.

Mr S Mshudulu (ANC) asked about the issue of inter-modality of transport. He said that congestion made rail passenger transport very important in Gauteng. He asked about feeder stations and challenged the assumption that passengers were concentrated in Johannesburg. He called for an imbizo in which transport and housing departments would discuss how to deal with the problems of settlements alongside railway lines. The National Council of Provinces had been acquainted with the need for crossover lines. He gave as an example the station at Vereeniging. He asked how SARCC prioritised stations for improvement. An integrated approach was a first priority to nodal points. He asked how best SARCC could use its resources, about the impact of legislation, and how SARCC could improve its interaction with the Committee in order that the Committee could assist SARCC. Whilst the government was under pressure to deliver, landowners were unwilling to release land; hence land owned by other government departments had been identified as appropriate for development. He asked how SARCC could best obtain the co-operation of other government departments.

Ms Khunou said that she was impressed with the challenges faced by SARCC and its responses to them. However, she said that one of the challenges omitted was that of accessibility of stations especially for people with disabilities and expectant mothers. It was essential to make such accessibility a priority. She herself had conducted her own oversight visits while travelling; it was gratifying to see that the railway police were deployed. She called for a crossover bridge at Rustenburg so that cars and people would not have to share the same road. She called for a vigorous approach to the shortage of technical skills. There were not enough women employed by the SARCC, and asked if women were not capable of working for SARCC.

Mr M Moss (ANC) said that Mr Lucky Montana had given the most positive report that he had heard. Ms Khunou had already raised some of the issues concerning access for persons with disabilities. It was important, however, to consider the needs not only of those with permanent disabilities but those with temporary disabilities. If the latter were included, the proportion of the population affected was much higher. He had visited Lentegeur station the previous week and found the security cameras stolen and the lift broken. On the other hand the station at Khayelitsha to be fully operational with all special needs accommodated including those of persons who were deaf or blind. At Mandalay station the ramps were too steep. He stressed the importance of engaging with persons with disabilities, not just with ‘the experts’. The rate of improvement to stations was too slow. One wished to make use of improved stations within one’s lifetime. Office accommodation at Cape Town station could be better used.

Mr Nomvete referred to train statistics for 2006-2007. Since 1998 train statistics had been ‘a nightmare’. SARCC was in the position of having to apply ‘first aid while waiting for the ambulance’, and was operating fewer trains than before. Gautrain paid its staff more highly than any other company in the industry.

Mr Enos Ngutshane, Group Executive:Operations Compliance, Safety and Security, SARCC, said that the Corporation was debating the issue of level crossings. However, the train had the right of way. The Corporation lacked the funds to build bridges everywhere; however, the Corporation sought to protect level crossings and educate motor car drivers, who frequently underestimated the speed of an approaching train and tried to weave between the barriers as the train approached.

Mr Montana said that SARCC had sent two of its infrastructure group abroad. He admitted that SARCC was not doing enough to meet the needs of persons with disabilities, and was meeting with members of community forums, even late at night to accommodate working persons, to discuss such matters.

Mr Nomvete said that Mr Mshudulu and he had a common interest in Vereeniging station. He had often himself experienced delays there.

Ms Mandindi said that there was a totally integrated approach to the needs of persons with disabilities for access to stations.

Mr Ngutshane said that SARCC had identified stations in all the regions where ramps were needed. SARCC was also identifying needs to accommodate persons with disabilities on trains, and investigating ways to provide lower grab poles, wheel chair access and space. He acknowledged the need to work with other entities. He said that SARCC had already given a presentation to the Joint Standing Committee, and could return to the Transport Committee to give a similar presentation.

Mr O Mogale (ANC) asked whether SARCC complied with labour relations regulations. He asked in what skills SARCC was training the 2 000 people that it claimed to be training, and if the Corporation had submitted a work skills plan.

Mr Mogale pointed out that although the Auditor-General had given SARCC an unqualified report, there were, nonetheless, weaknesses in the Corporation’s information technology (IT) systems. He asked if the Board were paying ‘handsomely’ for the services of Oracle and Dimensions Data, and, if so, why there were still weaknesses.

Mr B L Mashile (ANC) asked about the accounting deficiencies that the Auditor-General had queried. He asked if the Auditor-General was now satisfied with SARCC’s management of its assets.

Mr Mogale questioned the figure of 3 000 arrests by the Railway Police given on page 11 of the Annual Report; it did not appear to match the figure given by Mr Montana in his presentation.

Mr Mogale asked how safe was SARCC’s park and ride scheme.

Ms B Thomson (ANC) asked what was the impact of SARCC’s training and development programme. She asked if there was any plan to remedy the skills deficit.

Ms Thomson asked for information on penalties and when they were applied.

Mr Montana said that no penalties would be applied to contracts until June 2008.

Ms Thomson asked if reduced fare evasion was the result of increased security.

Ms Thomson asked how much SARCC spent on black economic empowerment.

Ms L Moss (ANC) asked about the shortage of technicians and artisans.

Ms Moss indicated that she supported the Malmesbury to Cape Town service, especially since taxis were expensive and unsafe, and passengers previously had often had no choice but to sleep overnight at Cape Town station while waiting for the next train home.

Ms Moss noted that Cape Town station left much to be desired. It was important to strategise, to make use of unused facilities and to create jobs for the youth.

Mr Farrow said that he did not require immediate answers to the questions he was going to ask. He asked about the Finance Procurement Committee, and why the CEO had been absent from every meeting.

Mr Farrow wanted comment upon a letter, written anonymously to the Portfolio Committee, complaining about employment practices. The Committee was perturbed and wanted to investigate if the letter was the result of ‘sour grapes’.

Mr Farrow did not think it appropriate at the present time for SARCC to sponsor jazz concerts as promotional activities. He said that it was essential to focus on realignment of processes.

Mr Farrow said that the Shosholoza Meyl merger was reflected against SARCC’s account for the year under review and asked why.

The Chairperson said that the Committee felt passionate about commuter rail travel, the station facilities and its surroundings. He congratulated SARCC on its Annual Report and its highly transparent presentation on the issues. In particular he commented upon SARCC’s signs of stabilisation, the encouraging reduction in fare evasion, the shift back to rail, concerns regarding the complicated merger, and the unqualified Auditor-General’s report.

The Chairperson was glad that a Treasury official had been appointed to the SARCC Board, but he asked about the implications.

The Chairperson noted that the funding of SARCC had improved, but that it was still well below need. It was essential to have Government’s support in increasing funding to a meaningful level. Rolling stock dated back 40 or 50 years ago, and there must be an immediate commitment to purchase new stock.

The Chairperson said that there was still a tendency to think in terms of only one mode of transport at a time. This tendency he referred to as ‘uni-modalism’. Instead, it was important to think in terms of inter-modalism. He had in mind the example of the bus rapid transit (BRT) system in Bogota, Columbia, and asked why SARCC could not form part of the consortium for bus rapid transit in Johannesburg. The Committee, on its oversight visit, had noted that the cities lacked experience in transport issues and that there was a need to pool experience. While SARCC’s core business should remain as it was, the Corporation should, nevertheless become involved in other transport undertakings in order to be multi-modal.

In the light of the saturation with buses of the long-distance passenger transport market, the Chairperson questioned the purchase of 500 buses for 2010 and their disposition after the World Soccer Cup. Bus operators had not been consulted about the purchase of the 500 vehicles. At the same time Shosholoza Meyl remained very important. He asked if those concerned were really committed to integration in long-distance passenger transport. He said that people liked trains, but did not like Cape Town station. While commuter rail transport was widely accepted as ‘the transport of last resort’, one wanted it to be the public’s first choice.

The Chairperson said that the following week the Khayelitsha Express would be launched. With the rise in oil prices, taxi fares were sure to increase. Thus SARCC was strategically important. Moreover, it was important to think in terms of one economy, resist dualism, and consider that rail transport was for all; and thus he questioned why SARCC should be separate from Gautrain. It was essential to have a completely different mindset with regard to public transport, and he called upon SARCC to help the Committee to state its case to assist the Corporation, especially in negotiations with the Treasury.

Mr Nomvete commented briefly on these questions and said that he would furnish detailed responses in writing.

Mr Nomvete said that SARCC was inevitably preoccupied with consolidating its funding position. Currently SARCC lacked borrowing powers and was investigating ways to remedy that deficiency. SARCC had inherited the stigma that rail transport was only for the poor. He said that Shosholoza Meyl was a high risk to the SARCC, but he agreed that SARCC should become inter-modal.

SARCC had identified the need for 14 new railway lines, and wished to cater additionally for rural areas. SARCC had completed its asset verification process and dealt with the IT security issues. It was important to sustain innovations such as the Soweto Express, which served as an example that commuter rail transport was not just for poor people: the Soweto Express provided internet facilities, newspapers, and secure parking, but there were no buses to distribute passengers from the terminus.

Ms Mandindi said that poor people deserved better than the present facilities afforded by Cape Town and Durban stations. The quality issue would be addressed. This year a three-year rolling plan of improvements to stations would begin.

The meeting was adjourned.


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