Click to edit Master subtitle style 4/30/12 PRESENTATION BY PRASA GCEO PRASA’s Strategic Approach to the Development of Rail Transport in South Africa

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4/30/12

PRESENTATION BY PRASA GCEO

PRASA’s Strategic Approach to the Development of Rail Transport in South Africa and its Impact on Job

Creation and Poverty Reduction

24 APRIL 2012

<Rolling Stock Fleet Renewal Feasibility Study, June 2011>

Introduction

• The Transport Family Celebrated an extraordinary event last week• The Honorable Minister of Transport, Dr Sibusiso Ndebele, formally

Launched the RFP for the RS Renewal Programme• The Minister Described the launch as a proud and significant

moment for the Transport family and the Commuting Public• The RS Renewal Programme is Central to Government’s

Infrastructure Modernization Drive• The Honourable Minister:

• Invited Domestic and International Manufacturers to bid to build 7 224 Metro coaches at a cost of R123 Billion

• Announced that the programme will revitalise the local rail engineering industry, create skills, create an esitmated 65 000 jobs and develop a new generation of railway workers i.e. artisans and engineers

• The programme will contribute to meeting Government objectives of strengthening SA’s manufacturing base and contribute to creating long term competitiveness and prosperity for the country

22 Rolling Stock Fleet Renewal Programme

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NEW ROLLING STOCK PROGRAMME IN BRIEF:

New Fleet requirement 7224 procurement at ~ 360 coaches per year for two x 10 year contracts

Creating~65 000 direct and indirect jobs

Total R123.5bn over the 20 year period

Long term procurement will allow local capability to evolve to above 65% of the value of a coach produced locally

33

The Programmatic procurement will result in:

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MODERNIZING RAIL TRANSPORT TO MEET SOCIAL NEEDS AND SUSTAINABLE ECONOMIC DEVELOPMENT IN SOUTH AFRICA


Development of Rail Transport (1)

• PRASA’ s Rolling Stock Fleet Renewal Programme is but the first major step in the transformation of Rail Transportation in South Africa

• Focus should be on both Passenger and Freight Rail Transport

• Investment by Transnet and PRASA to serve as catalysts for the

Rail Programme to be Implemented over the next 30 years.

• Policy Defining Rail as the backbone of the Transport System

• Rail critical to support Government’s Economic Development

objectives




Development of Rail Transport relates to a number of Critical Factors:

• Efficient and Reliable Passenger and Freight Rail Operations

• An Industry of Suppliers

• Appropriate Rail Skills (Training and Development)

• Research and Development (Universities and Institutes of Technology)

• Modern Rail Technology

• Rail Engineering Industry with the capacity to Design, Manufacture and Export Rail Products

• Economics of Rail Transport




• Key is the Formal adoption of the country’s Rail Strategy and Model to meet Social Needs and Economic Development

• Example of Rail Model is the work in the People’s Republic of China and Spain in how rail could fulfill its role as the backbone of the transport system e.g. High-Speed Rail

• The model seeks to address the country’s economic development and transport objectives

• Development objectives should be appropriately defined to include rural development, access for the rural and urban poor, employment creation and sustainable economic development

• Linking the developed and undeveloped regions of the country

• Participation of the people in the implementation of the Rail Strategy

• Projects should not be isolated but be informed and driven by the Overall Rail Strategy and Model



PRASA Intervention in the Development of Rail Transport

• Rehabilitation and Upgrade of Existing Rail Infrastructure and Fleet

• Investing in New Capacity (2020)

• Technology and Systems Modernization

• Expansion of the Rail Network (New Railway Lines)

• Revitalisation of the Rail Engineering Industry

• Improving Operational Effectiveness

• Unlocking the Value of Rail Properties

• Development of Skills (Cadre of Railway Workers)

• Linking Airports and other Transport Systems

• Employment Creation 88 Rolling Stock Fleet Renewal Programme


Investing in New Capacity

Modernization of Technology:

1. Acquisition of a New, Modern Rolling Stock Fleet

2. National Signaling Upgrade Programme

3. Modern Operating Systems:

i. Traffic Control Systems

ii. Speed Gates,

iii. Ticketing Systems

iv. Telecommunication Systems

4. Capacity Enhancement Programmes

i. Bridge City

ii. Mamelodi Doubling of Line

iii. Station Upgrades

iv. Capacity Enhancement Projects e.g. Umlazi – Durban - KwaMashu

v. Accelerated Rolling Stock Programme

5. Light-Rail and High-Speed Rail


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The RS Renewal Programme will contribute to Government’s Industrial Policy Action Plan (IPAP2) – by strengthening Local Manufacturing & Production, Skills Development and Job Creation


PRASA’s strategy to local production and local development

• Alignment of procurement initiatives to the Government primary objective for localization – high level local content relative to import content;

• Assist in creating local industries that can sustain local production – setting high local content targets;

• Focus on manufactured and non-manufactured areas such as engineering, technology transfer, design and components manufacturing;

• Long-term investment outlook – create long term certainty in the market – procure new rolling stock over a 20 year period;

• Set high targets for BBBEE participation in the recapitalization programme



PRASA’s strategy to local production and local development (Cont)...

• Set a minimum target of 65% local content for the manufacturing – identify certain components for local manufacturing;

• Skills development and transfer for local labour to sustain local production; and

• Commitment to stimulate local economic development.



Key areas of 65% local content

• Foreign currency spend on localization;

• Local job opportunities;

• Skills development and training;

• Technology transfer;

• Development of new manufacturing plants and facilities;

• Enhance the existing manufacturing plants and facilities; and

• Sourcing of locally manufactured components.


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• Car Body• Car body shell• Door system• Windows• Seats• Heating and ventilation• Lighting• Grab pillars and rails• Interior cladding• Passenger gangways• Cable and wire• Coupler and draft gear

• Bogies

• Bogie frame• Traction motors and gears• Wheels• Axles• Bearings• Suspension• Braking system

Electric System• Air System• Auxiliary converter and batteries• Electric propulsion• Dynamic regenerative brake• Control, diagnostic and

communication system

Targeted components for local production

Rolling Stock Fleet Renewal Programme


Impact on the Economy

Total economy wide impact on operational and capital expenditure

Results Total impact - 60% local

contentTotal impact - 65% local

contentTotal impact - 70% local

content

Initial impact (Rb) R 95.6 R 103.2 R 110.7

Economy wide GDP impact at basic prices (Rb)

R 236.7 R 255.2 R 273.9

GDP multiplier 2.5 2.5 2.5

Total employment created (no. of jobs)

61 046 65 992 70 937

General government revenue (Rb)

R 73.3 R 79.1 R84.9

Indirect taxes R31.6 R34.1 R36.6

Company taxes R23.9 R25.8 R27.7

Personal taxes R17.8 R19.2 R20.6

2

1

3

1515


Economic Multipliers

• 40.8% employment opportunities within the Transport sector;

• 15.8% within Wholesale and retail trade;

• 11.8% within Business Services; and

• 9.6% Community, Social and Personnel services.



Broad Based Black Economic Empowerment Opportunities (Cont)

SPV

• Ring fence the cash flows;

• To create space for BBBEE participation;

• Ease of monitoring and evaluation; and

• Enables measurement across the entire value chain



Broad Based Black Economic Empowerment Opportunities

• Equity in the SPV

• Equity in the supplier base as per value chain

• As a supplier in the value chain

• As an SMME/Cooperatives from which suppliers can source products



Operational Effectiveness

Changing the Nature of Operations, amongst others, through:

1. Service Excellence

i. Service reliability

ii. Safety & Security

2. Preventative Maintenance Programme

3. Focusing resources on High-Volume Corridors

1. Revitalisation of Long-Distance Rail Services:

• Increased Running Speeds – 160 km/h• Prioritizing Passenger Services on Rail Network• Modernization of Services



Network Expansion

• Johannesburg – Durban High Speed Rail

• Moloto Rail Corridor (High Speed Rail)

• Bara Rail Link

• Daveyton Rail Extension

• Hammanskraal (Rehabilitation of Existing Rail Line)

• Motherwell Rail Extension

• Johannesburg – Queenstown – Mthatha Rail Project

• Cape Town International Airport Rail Link

• King Shaka International Airport Rail Link



PRASA will use the Rolling Stock and Infrastructure investment to

contribute to the goal of Employment Creation:• Through encouraging and promoting labour-intensive

methodologies, adopting Principles of the Community Based Public Works Programme and through Co-operatives

• Targeting Local and Surrounding Communities and Women• 5 to 7 000 jobs will be created in the short term through the

implementation of the rolling stock and infrastructure upgrade programmes- the following programmes will yield job creation and development opportunities:

– Greenview – Mamelodi Gardens Doubling of Rail Line and stations.– Bridge City rail link and station – KZN. – Signalling Project. – Refurbishment of Coaches.– Cleaning of Rail Corridors.

• 65 000 direct and indirect jobs to be created through the fleet renewal programme


Employment Creation Initiatives


Employment opportunities

Employment sector break-down: Top 20 sectors -OPEX

Employment sector break-down: Top 20 sectors -CAPEX

Total economy wide impact of capex and opex on employment

Opex Capex Total

Total employment created (no. of jobs) 13 226 52 766 65 992 Direct impact 6 217 21 675 27 892 Indirect effect 2 701 18 083 20 784 Induced impact 4 308 13 007 17 316



Employment Creation…..(Cont)

Wheels Refurbishment Programme:– Bringing wheels refurbishment in-house in partnership with

private providers – The Joint Venture will supply PRASA and private parties such as

mining houses etc with wheels refurbishment services– The programme will be set up at cost of R14 Million per annum– It will create 341 Jobs at inception during this current financial

year

Modernisation of Old SMEYL Coaches :• 447 staged old SMEYL Coaches to be refurbished and given a new

modern look and feel • This programme will add an additional 1 131 jobs to the current 4

558 in SMEYL • The programme will cost R1.3 billion



Cleaning of Railway Stations and Corridors

• 50 Co-operatives to clean 75 stations in the first phase of this programme

• To ensure their sustenance, the Co-operatives will be supplied with cleaning materials, protective clothing, etc, by related co-operatives

• Households Headed by Women and Children and Households solely dependent on grants will benefit from the programme

• This programme will contribute to inculcating a civic and development culture in communities

• It will enable communities to take ownership of key rail stations whilst improving their lives for the better on a sustainable basis


Cooperatives in the Rail Sector


Cooperatives in the Rail Sector ….Cont

Iketsetseng Cooperative

• Over 300 traders (hawkers) in key stations within Gauteng (Park Station, Germistan and PretoriaStations) have formed themselves into an organisation known as “Iketsetseng”, of which 100 later established themselves into the Iketsetse Cooperative.

• Iketsetseng is in the process of being registered as a Cooperative.

• PRASA will provide the traders with resources, training and provide space to establish their own wholesale store from which the traders will be able to buy goods sold at stations from their own company and re-invest back into their own activities

• Iketsetseng Cooperative intends establishing a Trust from which members and their families will grow themselves further

• The formal launch is expected in June 2012



Skills Development Plan

• In the process of developing a skills development plan which will form part of the fleet renewal programme;

• Engagement with Higher Education regarding skills development for local production in the manufacturing;

• Skills development within PRASA in areas of maintenance and operations – targeting engineers, artisans and technologists;

• Established a comprehensive Bursary scheme aimed at young people from disadvantaged communities – 250 students – R9 million Per Annum

• Training of engineers, artisans and technologists by the successful bidder; and

• Partnership with third parties.



Delivering With and Through the People

PRASA has to date undertaken the following to ensure Community-based

organizations Input into the PRASA Functioning and Transformation:

• Encouraged a progressive Labour Relations/Shop Floor Environment – through fruitful engagements, interactions, dialogue and support for Labour

• Support, engagements and dialogue with Rail Commuter Fora and Community Structures

• Developed a platform Marshall Programme aimed at reducing Youth Un-Employment

• Support and engagements with Community and Civic Structures such as the South African Civic Organisation, the South African Commuter Organisation , The South African Women in Transport, the South African Women in Construction, Hawkers Associations

• Launched the Women in Rail Programme 2727 Rolling Stock Fleet Renewal Programme


Concluding Remarks

• Empowerment is a priority of PRASA Board and Minister of Transport;

• Empowerment issues are critical – especially Community empowerment and participation ; and

• Strengthening local manufacturing capacity.



Thank You

Documents

Click to edit Master subtitle style 4/30/12 PRESENTATION BY PRASA GCEO PRASA’s Strategic Approach to the Development of Rail Transport in South Africa