THE CHAIRMAN'S REPORT
Commuter Rail is an essential public transport mode and its
systems generally serve the lower income groups of the economy,
providing them transport at an affordable cost. Thus, how this
mode is financed, managed and developed is an important indicator
of economic health progress.
The Corporation and its contracted operator, Metrorail, have suffered
from a difficult economic environment, facing reduced subsidy
and increasing costs. This unfortunate situation was partly offset
by better patronage and fare revenues, which because of the nature
of the majority of rail commuters cannot be increased to levels
comparable with other transport modes. It has meant further emphasis
on labour and cost control, and consequently improvements to services
could not be implemented. Unfortunately the funding problem is
forcing us to look at curtailing some services.
Despite the financial difficulty, our contribution this year
to the fiscus from VAT and services levies was in the order of
R90 million and other indirect taxes amounted to more than R180
million.
During 1998, the Department of Transport finalised a detailed
strategy study of transport, called Moving South Africa, which
will provide the first comprehensive framework in decades for
taking train, bus and minibus taxi transport forward into the
millennium. At the same time the Cape Metropolitan Council has
been involved in a similar project, called Moving Ahead, in the
Western Cape. Other provinces will no doubt follow suit.
From the point of view of the Rail Commuter Corporation, these
studies will underpin commuter rail as an important public transport
mode and establish the conditions for a fully concessioned commuter
rail transport scenario.
REVIEW
In the year under review, negotiations between Metrorail and the
unions finally reached consensus on the key aspects of the exclusive
concessioning agreement to be concluded with Metrorail and on
the demonstration project that will see about 10 percent of the
business put out for private tender.
The progress made on the concessioning agreement has been disappointing,
reason being that the negotiation process was hindered by complexities.
I am similarly disappointed by the progress made on the demonstration
project, however, I realise the importance of consulting widely.
Management has been able to achieve the wide communication that
was necessary and I am hopeful that the demonstration project
will become a reality in the year 2000.
While movements on this front may have been slow, other issues
continued to move in the right direction and show satisfactory
results. I am pleased that the dispute with Transnet over penalties
was settled in a satisfactory manner, a good win-win solution.
The Japanese OECF loan of $60 million for five new train sets
has been finalised and allocation to the Corporation for capital
expenditure has, therefore, increased. The tenders have been published
and the date for the final tender acceptance is mid-1999. The
introduction in time of these train sets will provide a much needed
improvement to services rendered to rail commuters.
I commend the dynamic approach of the Intersite managernent team
to generate income for the Corporation from sources other than
the Corporation. Negotiations with the National Roads Agency to
manage its property portfolio have been finalised and the benefits
will be realised in 1999.
At the same time, the Corporation's transformation programme
has been finalised and it will address the past imbalances in
employment and ensure that more black people occupy decision-making
positions throughout the management structure.
REVIEW
"Management has been able to achieve the wide communication
that was necessary and I am hopeful that the demonstration project
will become a reality in 2000."
CHALLENGES
A problem that faces the Corporation is the ageing rolling stock
and a need to ensure sufficient passenger coaches. The financial
implications are high. Therefore, innovative ways of financing
rolling stock need to be found. While the Corporation fully understands
that it is not realistic to maintain the current level of the
commuter rail subsidy over the longer term, it therefore has to
balance its determined reduction in costs with fixed infrastructure
and input expenses and the need to service routes that are essential
and economical. It is disappointing that the subsidy was not sufficient
to meet costs, of which Metrorail as the contractor carries the
lion's share.
FUTURE
The Corporation airns to achieve and demonstrate effective and
efficient managernent of the Metrorail contract frorn the service
and cost aspects. Our focus in this regard, combined with our
determination to succeed with a major concession agreement (the
demonstration project), should benefit the Corporation's stakeholders
and in particular enhance the quality of service observed by the
rail commuters. We want to be closer to transport authorities
at all levels and to become the champion in ensuring the provision
of world-class commuter rail services for these transport authorities.
THANKS
As always, it has been my pleasure to have the guidance and input
of the Minister of Transport, Mac Maharaj, and his Director-General,
Khetso Cordhan. It is with sadness that we have said goodbye to
Gordhan who has moved on to other pastures. At the same time,
we welcome the opportunity to work with the new Director-General,
Dipak Patel. My thanks to these gentlemen and their officials
for what they have done for us during the past year.
The Board of Control has also continued to show its fine calibre
with excellent input and advice to me. My sincere thanks to the
Board for its support this year. We were sad to say goodbye to
a stalwart in the person of Dr Malcolm Mitchell, the representative
of the Department of Transport since the inception of the Corporation
in 1990, who retired in March 1998. Dr Mitchell gave fine support
and input for which we are most grateful. We also say farewell
to Charles Reynolds, the provincial representative of the Eastern
Cape provincial government, who resigned from the Board. In their
places I welcome Harald Harvey from the Department of Transport
and Dr Vanguard Mkosana representing the Eastern Cape government.
I hope their stay with the Corporation will be long and fruitful.
The part played by the Participant Observers who represent provinces
has been invaluable.
Also, to Zandile lakavulu, Metrorail's Chief Executive Officer,
and his staff, my thanks for their efforts for their endeavours
to provide the commuter rail service. We look forward to signing
the new agreement. This agreement must enhance the rail commuter
experience.
Finally, I must thank the Corporation's Managing Director, Wynand
Burger, for his management of the corporation, intersite's managing
director, Jack Prentice, for his contribution, and the executive
managers and staff for their dedication and hard work. We have
a good team in place and look forward to a successful 1999.
THE FUTURE
"We want to be closer to transport authorities at all levels
and become the champion in ensuring the provision of world-class
commuter rail service for these transport authorities."
John Edwards
Chairman
