THE RAIL COMMUTER CORPORATION GRAPPLED WITH A TOUGH OPERATING ENVIRONMENT DURING THE PAST YEAR. THE OPERATING SUBSIDY FOR COMMUTER RAIL TRAVEL WAS REDUCED BY 12,3% WHILE AT THE SAME TIME PASSENGER NUMBERS GREW AND COSTS ROSE IN LINE WITH THE INCREASED ACTIVITY AND THE NEED TO MAINTAIN A PUBLIC SERVICE FOR THE POOREST.

Nonetheless, the Corporation and Metrorail have emerged with a determination to drive down costs through initiative and energetic management and with a vision of new efficiencies in a commuter rail service operated on a concession basis.

The year was also marked by significant successes, specifically the settling of the long- standing dispute with Transnet over penalties imposed by the Rail Commuter Corporation in terms of an agreement. This was a learning experience for both sides and has produced a new spirit of co-operation that will help to structure a better management and performance regime in the future. The fruits of this new spirit can be seen in improved punctuality and reliability of the trains.

SUBSIDY AND FUNDING

The radically reduced funding from government resulted in the Corporation having to borrow money to cover the deficit of about R70 million for the year. Unfortunately, borrowing like this to meet operating needs has eroded the Corporation's borrowing capability and this will have a deleterious effect on finances in the next financial year.

At the same time, the Corporation acknowledges that the level of the annual subsidy from government - about 1% of the national budget - is not sustainable and costs are constantly being managed downwards.

Once the concessioning agreement with Metrorail is in place, together with the demonstration project which will place about 10% of the commuter rail operation under a private concessionaire, the Corporation should reduce costs by between R200 and R300 million a year. This will be achieved through concessioning and leaseback of equipment and assets as well as operational savings.

But a major challenge that the financial constraints have raised is what to do with routes that are particularly costly to run. Since commuter rail provides a public service that extends affordable mobility to as many of the poorest as possible, the decision on whether to rationalise and thus close certain costly routes has major implications beyond the purely monetary. The era of concessioning and reducing subsidies makes it imperative to tackle this difficult challenge while also looking at ways of substantially increasing productivity, introducing one-man trains and other innovations.

RESTRUCTURING

The transformation of the Corporation, begun during the year under review, will be completed in 1998. There will be four divisions, in line with its new role and functions, covering management services, financial services, contract development and management and asset management and development.

This will also entail staffing up the contract and asset management divisions to undertake research and development, planning and acquisition of rolling stock in line with the Corporation's mission and strategy. The result will be an increase in staff members to 70 during 1998, from the 47 at the beginning of the financial year. This will give a powerful boost to re-establishing in-depth urban rail expertise which had been lost over the past decade.

CONCESSIONING

THE PROCESS LEADING TO THE FORMAL SIGNING OF A CONCESSION AGREEMENT WITH METRORAIL HAS BEEN A PARTICULARLY LENGTHY, COMPLEX AND CUMBERSOME ONE.

However, the detailed and extensive documentation required is almost complete and it should be signed within the next financial year. As part of its preparation, the Corporation has prepared a shadow bid for the concession, a process that has been a very useful learning one for all involved.

As far as the demonstration project is concerned - offering about 10% of the current operations to private tender - the criteria for selecting a specific project have been largely agreed with the trade unions and the stakeholders. The process of identifying the possible routes, deciding on the best one and selecting the concessionaire will be finalised in the new year. The project should be up and running early in the year 2000.