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Parliament Transport Portfolio Committee Budget Presentation

Parliament Transport Portfolio Committee Budget Presentation. 29 May 2002. SARCC Presentation.  Presentation Overview.  Challenges Identified.  Solutions - Critical Requirement. Shortfall. 79. 245.  Rail Commuter Business - Funding. Rm 2001/2002. Rm 2002/2003. %. 2 838.

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Parliament Transport Portfolio Committee Budget Presentation

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  1. Parliament Transport Portfolio Committee Budget Presentation 29 May 2002

  2. SARCC Presentation  Presentation Overview  Challenges Identified  Solutions - Critical Requirement

  3. Shortfall 79 245  Rail Commuter Business - Funding Rm 2001/2002 Rm 2002/2003 % 2 838 2 970 4.6 • Income • Subsidy • Operational • Capital • Fare Revenue (Metrorail) • Rental of assets (SARCC) • Property (Intersite) • Interest 1 856 1 951 5.1 1 366 490 1 386 565 744 783 60 66 151 170 27 0 • Expenditure • Operational • Commuter Services • Metrorail Management Fee • Asset Rental • Heavy Repair • Property • Insurance • Administration and Other 2 917 3 215 10.2 9.2 2 427 2 650 1 828 1 995 79 86 48 54 163 198 147 171 99 120 42 47 Capital 490 565 15.3

  4. 98/99 Rm 99/00 Rm 00/01 Rm 01/02 Rm 02/03 Rm Normal Allocation 300 300 355 355 405 • Additional Allocations • 10 M’s • Khayelitsha extension • Other 135 60 20 80 TOTAL 565 300 300 355 490 01/02 Rm 02/03 Rm Capital Expenditure Rolling Stock Stations Perway (track) Signals Electrical OH Telecommunications Information Technology 281 296 99 148 29 25 26 48 18 19 4 13 16 33 TOTAL 565 490  Rail Commuter Business - Capital Subsidy

  5. Rm 1998/99 Rm 1999/00 Rm 2000/01 Rm 2001/02 Rm 2002/03 1 140 1 277 (12%) 1 372 (7.4%) 1 366 (-0.4%) 1 386 (1,5%) Total Allocation 1 247 1 407 (12.8%) 1 422 (1.1%) 1 461 (2.7%) 1 631 (11.6%)* Requested Original Allocation 840 845 1 322 1 266 1 386 Shortfall Additional Allocation 407 562 100 195 245 300 432 50 100 Adjusted Shortfall Savings Effected 107 130 50 95 245 23 82 28 16 Final Shortfall 84 48 22 79 245  Operational Subsidy Resumé * Increased insurance premiums (vandalism) and imported rolling stock components

  6.  Operational Subsidy (Excl Capex & Interest) The Effect of Inflation 1990/91 Base Year Rand Million 94/95 Base Year Actual Subsidy

  7.  Challenges Identified • Financial/Funding Challenges • Short-term operational shortfall (Current and following year) • Long-term - Inadequate capital investments • Business Challenges • Manage capital programme as best we can. • Priorities/trade-offs between standards, service quality, an obsolete • signalling system and ageing rolling stock • Increasing pressure of maintenance cost of a deteriorating system • Dysfunctional regulatory and institutional regime • Passenger safety from crime - initiative with SAPS • Integrity of the system (assets, operations and management), in relation to accidents • Integrated public transport plan - Partnerships with local government

  8. 2000/2001 • Subsidy Requirement = 1 777 • Take over loans = less budgeted interest = - 355 1 422 • NT further reduced allocation as a forced = - 100 saving 1 322 (100) • Request/Intervention for additional allocation = + 50 1 372 (50) 1372 2001/2002 • Subsidy Requirement = 1 461 (2.7%) (No interest and Mercer savings) • Request to TCom - Plus R100m = 100  Short Term - Immediate Operational Shortfall • Subsidy allocated = 1 266 1 366 (95) Result: Base line established for MTEF in 2001/02 inadequate

  9. Increase in requirement Requirement Allocation • Increase 98/99 - 99/00 • (First year of contract) • Increase 99/00 - 00/01 (Mercer) • Increase 00/01 - 01/02 (Mercer) • Increase 01/02 - 02/03 • Increase 02/03 - 03/04 • Increase 03/04 - 04/05 1 407 12.8% 1 422 1,1% 1 461 2.7% 1 631 11.6% 1 771 8.6% 1 930 9.0% 1 277 12% 1 372 7.4% 1 366 -0.4% 1 386 1.5% 1 477 6.6% 1 672 3.2%  Inadequate MTEF Allocation Shortfall Projected: 2002/2003 R245m 2003/2004 R295m 2004/2005 R258m + R79 = R324 R79m shortfall - Options submitted by NDOT (Transnet Management Fee) Implications = BOC in default of PFM Act. = Approve budget at end of Feb which is not finalised. = 2002/03  Very serious service reductions and rationalisations.

  10. Funding level01/02 02/03 Base allocation 355 405 Additional allocation 135 160 490 565  Long Term - Inadequate Capital Investments Actual Requirement - Backlogs and Current needs = R1 400 - R1 700 ad infinitum Actions to identify and quantify the problem: • Analysed requirements since the 1990’s. • SIG Consortium investigation on Rolling Stock - 1997. • Audit: Capital Investment Programme - 1999. • NDOT: Request investigation: • Consultants investigate and verified backlog and investment needs. • Utilised asset condition assessments. • Proposed investment scenarios and impact on business (safety • and risk)

  11. Requirement Realistic Solution (20 Yr Plan) Allocation ito limitations (Annual Average) Critical Issues Assets Backlog 10 Yrs pa 11 - 20 Yrs pa • 40 Year threashold • (Average 27 yrs). • Overhaul cycle 12 yrs • (Currently = 17 yrs) • 45% contribution to train • cancellations. • 1300 coaches out of • service (70% vs 95% • Int nom) Rolling Stock 5 109 850 1 400 220 • Obsolete system. • 25% contribution to • train performance. • Create abnormal • operational conditions. • Cable theft. • System capacity (less r/s) • (Need less rolling stock) Signalling 1 568 200 20 60  Capital Investments (R’m) (all figures in 2000 rands)

  12. Requirement Realistic Solution (20 Yr Plan) Allocation ito limitations (Annual Average) Critical Issues Assets Backlog 10 Yrs pa 11 - 20 Yrs pa • Commuter experience. • Development (socio + • economic - empowerment) • Station effectiveness. • Security/safety. • Ticket verification/control Stations 1 560 200 100 80 Electrical OHS 237 80 100 20 • Reliability • Cable theft  Capital Investments (R’m) (all figures in 2000 rands)

  13. Requirement Realistic Solution (20 Yr Plan) Allocation ito limitations (Annual Average) Critical Issues Assets Backlog 10 Yrs pa 11 - 20 Yrs pa Perway (Track) 10 20 20 10 • Safety • Operability • Efficiency • Management IT 20 35 35 10 Total (Maintain System) 8 504 1 385 1 675 400  Capital Investments (R’m) (all figures in 2000 rands)

  14. Requirement Realistic Solution (20 Yr Plan) Allocation ito limitations (Annual Average) Critical Issues Assets Backlog 10 Yrs pa 11 - 20 Yrs pa Total Maintain System) 8 504 1 385 1 675 400* • Network Development • Infrastructure • Rolling Stock • Static rail system. • Access to basic mobility. • Development. • Road based solutions. 3 750 4 000 375 400 375 400 19 Total 16 254 2 160 2 450 419  Capital Investments (R’m) (all figures in 2000 rands) * Nominal value investments = R350 - R400m per annum

  15.  Effect of Inflation on Capital Allocation Inflation - 1990/91 Base Year 560 Rand Million 495 Inflation - 1994/95 Base Year Base Capital Allocation

  16. Dynamic Growth Scenario R2100 - R2 400 m/a Indefinite Survival Scenario R1 400 - R1 700 m/a Limited Survival Scenario R950 - R1 050 m/a Decline Scenario R355 - R400 m/a  Investment Scenarios Investment Scenarios 0 5 10 15 20 30 40 50 Business Survival Years

  17.  Actions Taken • Divert continuing pressure for improvements/expansion. • Manage system best to ability, within constraints. • Switched to condition based maintenance. • Optimisation investigations - Reduce need for rail services and assets. • Efficiency opportunities - (Initial investment required however). • Prioritise investments - Balance between operability, critical needs, safety and • improvements. • Audits - Stations (critical safety improvements) • - Condition and integrity • - Crashworthiness • - Extend Life cycle processes • - Cost effective/alternatives as a result of limitations (10M - R2m vs R12m)

  18.  Actions Taken (continue) • Rail plans in relation to Local Transport Plans (Total system optimisation • alternatives). • Alternative funding mechanisms (R1,2bn in station upgrades and developments). • Reduction in vandalism (actions and materials used) Fibreglass overhead • structures - reduce rust tendencies). • Regulatory and Business structure options to introduce incentives for effectiveness • and investment possibilities. • Involving private sector in cost effective and sustainable alternatives and funding • options with Treasury.

  19.  Implications of Underinvestment • Maintain degenerating system. • Jeopardising operability and safety. • Impact on efficiency and effectiveness. • Does not assist in addressing poor • Image of the rail system. • Decreasing patronage and market share, which effects the cost effectiveness of • system and subsidy deployment. • System not corresponding with developmental changes. • Becoming technically obsolete - Availability of components and basic safety of the • system. • Increasing maintenance costs.

  20.  Solutions - Critical Requirement How could the committee assist in maintaining the current rail commuter system towards a growth and development scenario? • Support in resolving the immediate short term operational shortfall (R79m) and MTEF • shortfalls based on an inadequate base. • Support for long term solution/intervention on the backlog and immediate investment • requirements.

  21. Rm 2001/2002 Rm 2002/2003 % 214 236 10.3 Income Rental of Assets Property Development 60 154 66 170 10.0 10.1 • Less Expenditure • Commuter Services • Metrorail Management Fee • Asset Rental • Heavy Repair • Property • Insurance • Administration and Other (SARCC) 2 914 3 210 11.5 1 107 1 212 9.5 79 86 8.9 48 54 12.5 164 198 20.7 154 171 9.6 79 99 25.3 42 47 11.9 Operational Subsidy (1 461) (1 631) 11.6  SARCC Budget Request to NDOT

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