MANAGING DIRECTOR'S REVIEW
Introduction
The 1991/92 financial year was the Corporation's second year
of existence. After the initially difficult first year, the achieved
successes were built upon. Due to the fact that the Corporation
and its activities are an inseparable part of the greater South
African social and economic macro-environment, the Corporation
succeeded in carrying out its statutory task, namely to ensure
that rail commuter services were provided in the public interest
in the RSA.
Operational Environment
Given external factors such as an extremely low growth rate,
a high inflation rate, rising unemployment and a resulting decline
in disposable income, as well as increasing urbanisation, the
Corporation operates in an environment where an ever-increasing
need exists for affordable mass mobility.
However, civil disobedience is also on the increase, and this
has contributed to an unprecedented wave of train violence. As
a further consequence, fare evasion increased considerably.
Positioning and Strategic progress
In its first year the Corporation took a strategic decision
to enter a phase of drastic recovery in order to eliminate historic
backlogs and to address service levels. During the year under
review considerable progress was made on the maintenance and capital
investment fronts. R19 m was spent on a quick short term upgrading
programme.
In order to enable the South African Police to execute their
policing functions at stations more effectively, several stations
were made suitable for policing during the period under review.
Numerous discussions were held with interested parties such as
local and regional authorities and organised trade and industry
regarding mutual relations. Community groups, women's groups and
press groups were addressed and involved in order to position
the Corporation positively in the eyes of the community. Great
successes and acceptance of our efforts were achieved by our public
involvement programmes where, for example, all proposed changes
and improvements at stations were discussed with the public and
consensus was reached.
Financial position
The projected fare revenue for the financial year was R393m.
Eventually only R330m was realised, compared to R310m for 1990/91.
This weak performance can be ascribed to an escalating trend of
fare evasion, coupled with insufficient access control. The unrest
situation, train violence and stay-aways also impacted significantly
on revenue. As far as expenditure is concerned, we succeeded in
limiting the contract fee negotiated with Transnet Ltd as the
service provider to R1 192m - an increase of only R6,8% over the
previous financial year. The small increase was due to the fact
that negotiations were decentralised and based on expected costs.
Full divisionalisation of the Metro activities within Transnet
Ltd was also finalised during the 1991/92 financial year.
In the coming financial year expenditure will reflect actual
costs rather than contract amounts. In order to cope with rising
costs, a fare increase of 15% was introduced on 1 January 1992.
An amount of R166,5m was included in the contract fee of R1 192m
as part of reimbursement of historical pension fund shortages
of Transnet Ltd as at 31 March 1990 (prior to the establishment
of the Corporation) in respect of past services of Metro employees.
Funding remains the Corporation's biggest problem. The financial
year started with debt amounting to R948,5m. During the course
of the financial year the position deteriorated to such an extent
that the year-end debt load was R1 489,2m. This can be ascribed
mainly to a R100m shortfall in the 1990/91 Transnet Ltd dividend,
and to the fact that the 1991/92 Transnet Ltd dividend of R500m
did not materialise, while the State subsidy amounted to only
R50m. Consequently the Corporation had to resort to money market
activities to continue funding the deficit. The associated interest
charges totalled R162,6m for 1991/92. If sufficient subsidy funds
are not obtained, debt will increase dramatically, resulting in
finance charges that will erode the operating budget even more.
Organisational Structures
As previously mentioned, the commuter activities of Transnet
Ltd, which provide the commuter service under the "Metro"
name on behalf of the Corporation, were fully divisionalised during
1991/92. The Metro division consists of a head office with decentralised
Metro regional offices. The allocation of staff to the Metro division
took place on a zero-base principle. A dedicated cost system exists
for this process. The advantage is that few, if any, excess staff
are employed and that, in future, expenditure will be determined
on the basis of actual cost.
The Corporation employed the services of a consulting company
to conduct an in-depth functional analysis. The study led to the
approval of a proposed new organisational structure that provides
for essential additional functions. In addition, considerable
strengthening of existing functions was recommended in order to
enable the Corporation to perform its function more effectively
and to pursue its goals. The growth in the staff complement in
turn necessitated the relocation of the head office.
Vision for the future
These is clearly an increasing need for transport capacity
management in urban areas. The Corporation, thanks to its expertise
in this field, is ideally positioned to play an important role,
together with local and regional authorities, in the integration
of various modes of transport.
The sound management of relationships is also important in a
new South Africa and the Corporation should, through active community
involvement and consultation with all role players, establish
itself as an essential link in the total spectrum of urban transport.
As a result of the prevailing social, political and economic
conditions, the Corporation functions in a difficult security
environment. Considerable operating and capital funds have been
allocated to security, but more funds will be required to address
the Goldstone Commission's findings and recommendations on train
violence. The Government has been approached for an additional
grant in this regard. It is envisaged that the necessary investment
in security will not only help to stop the violence, but will
also contribute to increased confidence in rail transport as a
means of commuting. The investment should also help to curb the
high incidence of fare evasion.
A property division within the Corporation has achieved many
successes with the management and development of the Corporation's
fixed assets, which are strategically located in the major metropolitan
areas. To give this effort more focus, it was decided to establish
a property company as a full subsidiary of the Corporation in
the new year.
In order to gain more control (in the long term) over the management
of its operational activities, the Corporation joined Transnet
Ltd in considering options for longer term restructuring. The
declared policies of devolution of power and greater local and
regional involvement, as well as other modes of transport, all
play a part in this future approach.
Sympathy
The Corporation continued its proud record of 1990/91 in that
no passengers died or were injured as a result of operational
accidents during 1991/92. Unfortunately one Transnet Ltd employee
was killed and another injured in an operational accident. In
addition, hundreds of rail commuters lost their lives, and many
more were injured as a result of continuing train violence. The
Corporation wishes to express its sympathy to everyone affected
by these tragic events.
Conclusion
In conclusion, I would like to pay tribute to our able and
dedicated staff and, in particular, to my senior management team,
as well as to my predecessor who, in difficult and unenviable
circumstances, worked unremittingly to help steer and manage the
organisation. I am confident that we will accept and conquer the
challenges presented by a new dispensation.
Wynand Burger
Managing Director
27 August 1992
