ATC150812: Report of the Standing Committee on Appropriations on its oversight visit to Gauteng Province from 20 to 24 July 2015, Dated 12 August 2015

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on its oversight visit to Gauteng Province from 20 to 24 July 2015, Dated 12 August 2015
 

The Standing Committee on Appropriations, having undertaken an oversight visit to Gauteng Province from 20 to 24 July 2015, reports as follows:

 

1.         Introduction

 

The Standing Committee on Appropriations (the Committee) undertook an oversight visit to Gauteng in order to determine the progress made by National Treasury with regard to supporting large cities to accelerate economic growth and integrated development through its Cities Support Programme. To this end, site visits to the City of Tshwane and the City of Johannesburg were conducted on 21 July 2015 and the projects visited were the Mabopane Station Modal Interchange and the Diepsloot Development.

 

Furthermore, the Committee sought to track expenditure on the rail modernisation programme being implemented by Passenger Rail Agency of South Africa (PRASA); assess the readiness of the PRASA for arrival of the first 20 trains at the end of November 2015 that forms part of the Rolling Stock Fleet Renewal Program; and determine the progress made by PRASA on the delivery of infrastructure projects under the Station Modernization Project where 135 stations have been prioritised for upgrades. Phase 1 of this project consists of 27 stations around South Africa. The Committee conducted inspections at the following sites:

 

• Braamfontein Rolling Stock Depot (22 July 2015);
• Shosholoza Meyl Junction (22 July 2015);
• Park Station (23 July 2015); and
• Gauteng Nerve Centre (23 July 2015).

 

The Committee held a stakeholder meeting with the National Treasury, City of Tshwane and City of Johannesburg on the 21st of July 2015. On 22nd and 23rd July 2015, the Committee held a meeting with PRASA to discuss the Rolling Stock Fleet Renewal Programme as well as the Station Modernisation Programme. The briefing on the 22 of July 2015 was held jointly with the Portfolio Committee on Transport and a presentation, in addition to the aforementioned, was made by the Railway Safety Regulator. Furthermore PRASA made a presentation on Height Specifications of the locomotives which were recently imported from Spain for long distance purposes as part of Shosholoza Meyl.

 

 

2.         Delegation

 

2.1. Committee Delegation

 

The delegation was as follows: Mr P Mashatile (Chairperson); Mr NE Gcwabaza

 ( ANC); DR CQ Madlopha (ANC); Ms RE Nyalungu (ANC); Ms MNS Manana (ANC); Ms S Shope-Sithole (ANC); Dr MJ Figg (DA); Mr A McLoughlin (DA); and Mr AM Shaik-Emam (NFP). The delegation was accompanied by the following parliamentary officials: Mr D Arends (Committee Secretary); Ms Z Hulley (Committee Secretary); Mr T Masoeu (Content Advisor); Mr M Zamisa (Committee Researcher); and Ms N Chaso (Committee Assistant).

 

 

 2.2. Stakeholders

 

The Committee met with the following stakeholders at the various sites and stakeholder meetings during the oversight visit:

 

National Treasury: Ms MT Ngqaleni (Deputy Director General); Ms S Naidoo (CSP Stakeholder Manager); Ms L Lechuba (NDPG Project Manager); Mr DJ David (Chief Director: NDPG); Mr A Sitshaluza (NDPG Project Manager); and Mr MC Sekele (Director).

 

City of Tshwane:  Mr RT Mashego (MMC: Community Safety); Mrs IM Matlawe (Assistant Executive Director); Dr M Sefora (Executive Head: IGR & IR); Ms N Mokete (Executive Director: Budget); Mrs H Koch (Deputy Director); Ms LV Kegakilwe-Piki (Executive Director); and Mr HD Vorster (Acting Strategic Executive Director).

 

City of Johannesburg:  Mr MG Makhubo (MMC Finance); Mr FC Vondo (MMC Community Development); Ms H Makhubele (Councillor); and Ms MS Mulaudzi (Chairperson Development Planning).

 

Johannesburg Development Agency: Mr TT Mendrew (Chief Executive Officer); Mr LA Visagie (Senior Development Manager); and Mr C Botes (Executive Manager).

 

Axton Matrix Construction: Mr O Aitievba (Chief Executive Officer); Mr G Rambanduli (Chief Operations Officer); Mr LE Kolobe (Project Planner); Mr MA Ngozo (Project Manager);  Ms TC Lekgale (Personal Assistant); and Ms F Solomons (Administrative Manager).

 

Mametlelelo Investments: Mr LM Mpolokeng (Project Manager)

 

Gorogang: Ms SA Armstrong (Chief Legal Officer)

 

Passenger Rail Agency of South Africa: Mr P Molefe (Board Chairperson); Mr N Khena (Acting CEO); Mr S Zamxaka (CEO: PRASA Technical); Ms PT Ngubane (CEO: PRASA Cres); Mr EM Mofi (CEO: Rail Operations); Mr ZA Mayaba (Executive: Strategic Projects); Mr N Kondlo (Senior Manager: Business Performance); Ms NP Sebola (Group Executive); Mr S Sithole (Group Chief Strategy Officer); Mr V Kobuwe (Executive Manager); Mr ZA Mayaba (Executive Manager); Mr LL Gantsho (Acting Executive Manager); Ms N Zenani (Senior Manager: Communications); Mr KE Chinnappen (General manager: Office of CEO); Mr H Emeran (General Manager); Mr RP Malaudzi (Programme Director);

 

Department of Transport: Mr PG Selepe (Director-General); Mr JD de Villiers (Acting Deputy Director-General: Rail Transport); Ms MC Maleho (Director: Rail Infrastructure); Ms MD Tselapedi (Deputy Director); Ms G Semenya (Deputy Director); and Mr M Mkalipi (Director: Strategic Support and Stakeholder Management);

 

Railway Safety Regulator: Ms TN Msisi (Chairperson of the Board); Mr N Poya (Chief Executive Officer); and Ms T Kgare (Chief Operations Officer)

                                                       

 

3.         City Support Programme

 

3.1        Terms of Reference:

 

The National Development Plan states that urban sprawl should be “contained and possibly, reversed, as denser forms of development are more efficient in terms of land usage, infrastructure usage and environmental protection”. The major concentrations of the urban poor should be spatially linked into the mainstream of city life through investments in transport infrastructure, and the connecting corridors of development.

 

South Africa’s cities continue to reflect the spatial legacy of apartheid, which impedes economic growth. As such the Standing Committee on Appropriations in its Report on the 2015 Division of Revenue Bill welcomed efforts at improving planning and alignment through the introduction of the Built Environment Performance Plan (BEPP) which seeks to bring together local government Integrated Development Plans and the policy priorities identified in the budget. The Committee also welcomed the introduction of the new fiscal package aimed at supporting cities to implement spatial restructuring and increase their contribution to infrastructure development.

 

The Committee recognises the importance of the role of cities in catalysing inclusive economic growth.  Therefore, in its oversight the Committee sought to determine the progress of the Cities Support Programme being implemented by National Treasury and also gauge the extent to which this new fiscal package translates into realities on the ground.  As such, the approach was to focus on the Neighbourhood Development Partnership Programme which intends to support the development of economic hubs in large urban townships. The 2015 Division of Revenue Act contains the following outcome statements and outputs for the Neighbourhood Development Partnership Grant (NDPG):

Outcome Statements

Output

Spatially integrated cities and towns Diversity of public and private capital investments leveraged into targeted locations Improved ratio of NDPG to third party capital investments into strategic locations Improved municipal capacity to support infrastructure investment planning, prioritisation, and ability to drive long-term spatial transformation

Targeted locations with catalytic projects, defined as either: Urban hub precincts with secondary linkages Built environment upgrade projects in urban and rural townships Leveraged third party capital investment into targeted locations The production and dissemination of toolkits, guidance and/or good practice notes and supporting knowledge sharing events Enhanced municipal strategic competencies in investment targeting, implementation and urban management.

 

 

3.2        National Treasury

 

In its engagement with the Committee, the National Treasury contextualised how cities can play a more leading role in stimulating inclusive growth by focussing on massive investments in urban areas through the following:

 

• Maintenance and renewal of basic urban infrastructure to reduce supply disruptions & support growth;
• Restructuring of settlement patterns to build more productive, inclusive and sustainable cities;
• Universal access to basic services; and
• Revival of investment in affordable housing in partnership with the private sector.

 

It was however highlighted that given fiscal consolidation, metros would have to do more with less and expand access to non-grant sources of finance through own contributions and partnerships.

 

In supporting cities to become engines of the economy, the National Treasury Cities Support Programme (CSP) focuses on the city space economy with the following aims:

 

• Improve urban resource allocation across sectors and spheres (with a focus on municipal project delivery and sustainable city governments);
• Improve fiscal intergovernmental alignment to improve returns on investment and long term impact and work with the Department of Cooperative Governance & Traditional Affairs (COGTA) to strengthen intergovernmental coordination; and
• Improve collaboration with the private sector to increase financing to municipal projects and catalyse private sector investment in targeted urban spaces.

 

Reforms introduced by National Treasury which act as guiding, enabling and incentivising tools to give effect to policy and regulation deliverables include the Urban Network Strategy (UNS), Built Environment Performance Plans (BEPP), and the Integrated City Development Grant (ICDG). These reforms are all closely aligned with the Integrated Urban Development Framework which is co-ordinated by COGTA.

 

The Urban Network Strategy (UNS) is directed towards the agglomeration of public and private investment towards a more inclusive urban form. At city level, it entails the identification of primary networks (CBD, Corridors, Urban Hubs) and prioritisation of integration zones as well as secondary networks (Urban Hubs, Secondary link). Furthermore, it facilitates precinct planning through the identification of catalytic projects and precinct management of targeted network elements/zones. The Neighbourhood Development Programme therefore assists metros and secondary cities with precinct planning of urban hubs and the development of a precinct concept which involves the planning and phasing in of public and private sector land uses based on anticipated pedestrian behaviour and then followed by the identification and prioritisation of catalytic projects and strategic public interventions. Thereafter a project pipeline is established for funding purposes across sectors and spheres. The BEPP process enables the alignment of local government grants, public incentives and provincial and state owned entities funds.

 

The National Treasury reported that nationally a catalytic project pipeline is emerging and investments of R128.5 billion have been identified across 232 projects. These projects are predominantly funded by own sources (41 per cent), loans (34 per cent), and grants (21 per cent) with some contribution from provinces and State Owned Entities, however thus far there are no Public-Private Partnerships and private sector leverage remains low at R8 billion. The majority of projects are at the preparation (44 per cent), and selection (30 per cent) stages with 25 per cent being at construction stage and 13 per cent have been completed. National Treasury reported the following challenges though emphasised that Metros must lead in demonstrating the alternatives:

 

 

Intergovernmental Challenges	City-level Challenges
Fragmented national activities Housing accreditation & megaprojects Stalled public transport devolution Slow release of state owned land Frustrating slow regulatory/licencing systems Planning misalignment (city, provincial and national spheres) Weak coordination of SOE investments in cities Grants not yet aligned with inclusive economic growth priorities	Governance Institutional fragmentation continues Rising personnel costs, creditors days, irregular expenditure and qualified audits Weak alignment with private sector investment decisions Insufficient capacity dedicated to project preparation and pipeline Lack of innovation in financing and implementation modalities

 

In terms of addressing some of the above challenges National Treasury indicated that it will continue to provide fiscal and technical support to metros through the following initiatives:

 

• Continuing to reform the fiscal framework to support accelerated project implementation: grant reforms, DBSA financing, funding for project preparation and the re-regulation of development charges;
• Working with COGTA to prioritise the resolution of intergovernmental coordination issues;
• Expanding the programme of technical assistance from the CSP to:
  • Provide transaction advisory, governance & financial management support;
  • Review regulatory and other obstacles to project implementation; and
  • Strengthen private sector participation and financing leverage.
• Increased support to improve prioritisation of targeted integrated zones and improved catalytic project identification.
• Work with the Department of Human Settlements towards the alignment of their policy and grant framework with the targeted built environment optimisation process.
• Work with metros and the Department of Transport to improve public transport prioritisation within targeted urban network routes.
• Catalyse spatially targeted private sector investment to align public incentives such as the UDZ tax incentive, Jobs Fund and the range of Department of Trade & Industry incentives.

 

 

3.3        City of Tshwane

 

The Committee visited the construction site of the new Mabopane Station Modal Interchange. This project is financed by the NDPG and own revenue from the City of Tshwane. It is located approximately 40km from Pretoria Central Business District (CBD) and consists of a local taxi rank, a long distance taxi rank, a bus rank and adjacent to the modal interchange is the Mabopane Station which is currently being upgraded by PRASA. It serves the communities of Mabopane, Soshanguve, Winterveldt and various other destinations from the station and is reported to be the third busiest interchange in South Africa, with a large railway facility and multiple taxi and bus facilities.

 

The new modal interchange aims to change the current configuration of the taxi ranks so as to accommodate bigger taxis, reduce pedestrian-vehicle conflict, improve traffic circulation, alleviate shortage of drop-off and pick up bays, construct bus facilities as well as provide shelters for passengers and trading stalls. The scope of the development includes water and sewer reticulation, electricity reticulation and lighting, storm water, earthworks, kerbing and paving, structural steel canopies/structures, management building, hawker facilities, ablution facilities, landscaping and security points, access roads and traffic circles.

 

It is envisaged that the intermodal public transportation node will facilitate access by residents to distant employment opportunities in the CBD and it is expected to serve between 120 000 and 150 000 passengers on a daily basis.

 

Table 1: Mabopane Station Modal Interchange Project Budget

 

Financial Year	Source	Budget
2012/13	City of Tshwane own revenue	R 3 900 000
	Neighbourhood Development Partnership Grant	R 2 458 667
2013/14	City of Tshwane own revenue	R   500 000
	Neighbourhood Development Partnership Grant	R24 733 239
2014/15	City of Tshwane own revenue	R20 500 000
	Neighbourhood Development Partnership Grant	R7 765 892
2015/16	City of Tshwane own revenue	R55 000 000
	Neighbourhood Development Partnership Grant	R0
	Total	R114 857 798
Note:	The budget includes preliminary designs, detailed designs, consultant fees and construction costs. Estimated Construction costs =R52 542 818.17

Source: Roads & Transport Department, City of Tshwane

 

Table 1 above reflects the budget for the project and the relevant sources of revenue spanning four financial years from 2012/13 to 2015/16. The total budget for the period amounts to R114. 86 million and R34. 96 million thereof is from the NDPG and R 79.90 million is financed by the City of Tshwane’s own revenue. The City of Tshwane reported that spending progress to date is 60 per cent, whilst overall progress on site is 73 per cent, and the time lapse is 84 per cent.  The value of work that has been allocated to local emerging contractors is R6.07 million and 144 jobs have been created thus far entailing skills transfer in brick laying, pipe laying, concrete/steel fixing, kerbing and paving, and occupational health and safety.

 

The City of Tshwane cited the following challenges during the implementation of the project, which have subsequently been resolved:

 

• Formation of project steering committee due to non-participation of stakeholders (taxi and hawkers),
• Delays in relocation of taxis, buses and informal traders,
• Agreements on sub-contracts for local emerging subcontractors.

 

 

1.     City of Johannesburg

 

One of the NDPG programmes under the City of Johannesburg is the Diepsloot Development. Diepsloot is located some 30km north of the CBD. Diepsloot ‘proper’, consists of the Diepsloot West and Tanganani townships and is co-located with Diepsloot South and Diepsloot East. The Diepsloot Development programme intends to establish the area as a socially, economically and environmentally sustainable human settlement that is spatially integrated into the City of Johannesburg, with access to basic services and opportunities for social mobility and economic development. The programme entails the following completed projects, namely: a public environment upgrade of Ingonyama Road, the construction of two pedestrian bridges, and upgrading of the taxi rank with trading stalls; and the Ingonyama Link Road Extension and vehicular bridge which is still underway.

 

Table 2: Diepsloot Development projects

Project Name	Financial Year	Budget Allocation
Taxi Rank and Pedestrian Bridges		R20 000 000
Ingonyama Upgrade: Phase 1 Phase 2 Phase 3	2009/10 2010/11 2011/12	R10 000 000 R20 000 000 R10 000 000
2nd Ingonyama: Phase 1 Phase 2	2013/14 & 2014/15 2014/15 & 2015/16	R23 000 000 R24 000 000
Internal Roads:	2014/15 & 2015/16	R15 000 000
Total		R122 000 000

Source: Johannesburg Development Agency, City of Johannesburg

 

The above table reflects projects under the Diepsloot Development and the respective budget allocations. It was reported that expenditure of R8.73 million of the total budget of R122 million relates to goods and services procured from Small, Micro, and Medium Enterprises (SMMEs) and 821 local labour were employed as part of the development. 

 

The Committee undertook a site visit to the Ingonyama Activity Street and Bridge.   This project’s budget allocation is R83 million and entails a road of 3.5 km and a 600 m vehicular bridge. It is envisaged that the Ingonyama road link extension will stimulate economic activity for both formal and informal businesses. The bridge links two previously separated sections of Diepsloot community.  

 

It was reported that the Ingonyama Activity Street and Bridge is a landmark feature with regards to social integration, mobility & accessibility and promotion of the township economy and would also incorporate public facilities such as parks. The project manager reported that delays were experienced with the construction of the bridge due to technical requirements for the Environmental Impact Assessment and challenges with excavations for the foundations which required the re-routing of the river. The project is to be completed by the end of August 2015.

 

 

4    Committee Observations and Findings on the Cities Support Programme

 

The following issues related to the Cities Support Programme were highlighted by the Committee on the various sites and at the stakeholder meetings which were held on 21 July 2015:

 

4.1        The Committee views it as critical that Metros strategically use infrastructure to support environmentally sustainable urban development, overcome apartheid spatial planning, build integrated communities, reduce public transportation costs and time, and promote the creation of economic opportunities. This should also include the integration of township economies into the main economic hubs of cities.

 

 

4.2        The Committee welcomes National Treasury’s key role in supporting cities and views intergovernmental collaboration and alignment as critical. The Committee notes with concern that financing instruments such as the Housing Subsidy still focus on the number of houses completed and do not yet fully embed spatial targeting principles.

 

4.3        The Committee welcomes the development of innovative financing instruments meant to encourage the agglomeration of funding for city infrastructure. Specifically, the Committee notes the development of 15 year loan period financial instruments earmarked to assist cities expand developmental reach.

 

4.4        The Committee is of the view that private sector partnerships are important for cities to be able to build a competitive and efficient economic infrastructure network and thus the Committee remains concerned at the prevailing weaknesses in aligning cities’ urban infrastructure plans with private sector investment decisions. The Committee impressed upon the City of Tshwane and the City of Johannesburg and indicated that the benefits of an integrated and sustainable city economy was beneficial to both government and the private sector.

 

4.5        The Committee notes and supports the finalisation of Memorandum of Understanding between the Metros and various private sector groupings such as banking associations and property associations.

 

4.6        Overall, the Committee impressed on the Cities of Tshwane and Johannesburg that the expansion of revenue sources is critical and revenue projections should form part of infrastructure planning requirements.

 

4.7        The Committee views the maintenance of good governance principles as a fundamental enabler for cities in achieving their development objectives.  The Committee gauged the extent to which the cities complied with the relevant legislative and regulatory instruments with regard to key control and financial management mechanisms as well as good governance structures such as internal audit, audit committees and municipal public account committees.

 

4.8        The Committee supports the City of Tshwane’s policy which prescribes an allocation of 25 per cent of the total value of each infrastructure project’s budget to local emerging contractors and local labour. However, the Committee observed with concern that the value of work (R6.07 million) allocated to emerging contractors in the Mabopane Station Modal Interchange project was significantly below the 25 per cent requirement. The Committee views the integration of Small Medium Micro Enterprises as critical and that these should be involved in every phase of each infrastructure project.

 

4.9        The Committee indicated to the City of Tshwane that skills transfer should be an integral part of each infrastructure project of the Metro and that there should be linkages with local Technical and Vocational Education Training institutions and training colleges. The Committee was also of the view that internships targeting critical technical skills could be incorporated into bid specifications for infrastructure projects to ensure that contractors contribute towards skills transfer and development.

 

4.10      While the Committee welcomes the City of Tshwane’s submission that it maintains sound relations with the taxi industry and remains committed to broadening the transport sector in an inclusive manner; the Committee noted with concern delays experienced with the construction of the Mabopane Station Modal Interchange due to complexities in stakeholder coordination and participation.

 

4.11      The Committee welcomed the City of Tshwane’s positive spending outcomes which show that the capital budget for the 2014/15 financial year has been expended. However, the Committee pointed out to the Metro that spending should be aligned with budget projections and funds should not be spent only in the last quarter of the financial year.

 

4.12      The Committee welcomed the City of Johannesburg’s indication that R3 billion of the City’s capital budget is targeted for the implementation of capital projects by women, youth and cooperatives. The Committee also noted that the City endeavours to upskill emerging contractors who may have not succeeded in the tender awarding processes with the view of developing them to access future opportunities. Furthermore, there are long term partnerships with universities in the province to build a skills pipeline for the Metro.

 

4.13      The Committee gauged the impact of the Neighbourhood Development Programme in Diepsloot and conducted a walkabout on the construction site of the Ingonyama Road bridge. The Committee welcomed the observed developments which would facilitate social integration and mobility, and economic development for the informal economy through provision of infrastructure such as trading stalls and the upgrade of public spaces and social facilities. However, the Committee noted with concern the slow progress of the construction of the bridge which raised concerns about the achievability of the targeted completion date set for the end of August 2015.

 

4.14      The Committee notes the City of Johannesburg’s submission that there are a number of large scale infrastructure projects in Diepsloot. The Committee further notes that the infrastructure projects are collaborative and include the Metro, government departments and public entities as well as the community in Diepsloot and the projects are aimed at providing economic opportunities,  facilitating job creation and  entrepreneurship development. 

 

4.15      The Committee notes the unique challenges facing urban development in Johannesburg as increases in population numbers have resulted in increases in backyard room rentals rather than stand-alone informal settlements. The Committee notes that backyard rooms in townships put a lot of pressure on infrastructure, such as electricity, water and sanitation.

 

4.16      The Committee notes that there was an infrastructure project which included a road and a bridge that was being implemented by the Johannesburg Development Agency and alongside that was a road project being implemented by the Johannesburg Roads Agency. The Committee is of the view that this may result in overlaps or duplication which could have serious cost implications. Value for money principles should be an integral part of the mandates and functions of all municipal development agencies.

 

1. Rail Modernisation Programme

 

5.1        Terms of Reference: Rail Modernisation Programme

 

In the quest to build inclusive growth, rail modernisation is very critical in sustaining and ensuring efficiency gains of travelling in major cities. It is also vital to reduce congestion and improve productivity of the workforce across the economic spectrum. Whilst reducing government expenditure on infrastructure, road building and maintenance, rail equally creates an environment attractive to business and is an essential part of strengthening the economic development. PRASA reported at its briefing of the Committee on 25 March 2015 that prolonged under-investment in passenger rail infrastructure of almost 30 years has led to a deterioration of the rolling stock and infrastructure, signalling and telecommunications, and electrical systems. This has resulted in services experiencing continued decline, primarily due to poor availability and reliability of rolling stock and ageing infrastructure. The lack of investment in the asset base has also had a negative impact on the skills base of the passenger rail industry over a period of time. To this end, it is projected that PRASA will invest R123 billion on the procurement of 7 224 new rolling stock over 20 years in the Rolling Stock Fleet Renewal Program to address the said issues. The first consignment of 20 trains are expected to be delivered at the end of November 2015. These 20 trains are in the process of being manufactured at the Alstom (Brazil) plant. It was reported that over 500 South African technicians, engineers and other professionals will be trained in the skills and competencies required to build and deliver modern trains of the standard of the X’Trapolis Mega which will be delivered to PRASA.

In addition to the above, there has been under investments in the maintenance of stations over the years. To this end, PRASA was allocated a capital baseline of
R310 million in 2013/14, R308 million in 2014/15 and R423 million in 2015/16 for the rollout of the station modernization program. It is estimated that over the medium-term, 135 stations will be modernized under the Corridor Modernization Program. The work planned will allow for improvement of universal access, security enhancement, platform heights and rebranding.

 

5.2        Rolling Stock Fleet Renewal Programme

 

PRASA reported that it will invest approximately R172 billion over a ten year period (from 2013/14) which will encompass the following:

 

• Acquisition of new rolling stock;
• Station improvements;
• Network improvement;
• Signalling system upgrades;
• Communication and marketing; and the
• Renewal of the Metrorail brand.

 

PRASA reported that it will migrate from the 1950’s technology to a modern fleet where 7 224 coaches would be procured at around 360 coaches per year through two 10 year contracts, totalling R123.5 billion over a 20 year period. An estimated 65 000 direct and indirect jobs would be created and 65 per cent of the total value of each coach would be produced locally.

To this end, a Manufacture and Supply Agreement (MSA) and a Technical Support and Spares Supply Agreement (TSSSA) have been entered into between PRASA and the Gibela Rail Transport Consortium (Gibela). The said consortium consists of Alstom (61 per cent), New Africa Rail (9 per cent) and Ubumbano Rail Proprietary Limited (30   Per cent). It was reported that the MSA had a contract value of R51 billion (including Value-Added Tax, excluding Foreign Exchange movement and inflation) for the supply of 3600 coaches (600 new train sets) over a duration of 10 years. Twenty trains will be manufactured at the Brazil plant of Alstom with the 580 being manufactured at the Dunnottar Plant in Ekurhuleni. The TSSSA will govern the maintenance of the new trains, including at least one overhaul of each train and will span about 18 years.

 

In terms of the economic impact of the Rolling Stock Fleet Renewal programme, it was reported that R35.8 billion will be allocated towards empowered entities, R5.3 billion to Small Medium and Micro Enterprises (SMMEs); and R1.7 billion to women owned companies. An amount of R892 million will be spent on enterprise development and R323 million will be spent on socio-economic development. In terms of the impact of localisation, PRASA reported that Gibela has contracted with a South African supplier for 38 components thus far including couplers, passenger door, seats, braking resistors, cables, and the master controller amongst others. It was further reported that the trains built in Brazil have South African components as follows; stainless steel car bodies, seats, and passenger doors. PRASA indicated that the new train’s manufacturing local content is projected to reach 75% in the last delivery year.

 

PRASA reported that the local manufacturing plant to be constructed at the Dunnottar Park in Ekurhuleni will be situated on a property totalling 288 hectares and 78 hectares is allocated for the factory and will be operational by July 2016. PRASA indicated that Gibela will be responsible for the development of the local manufacturing plant with the agency retaining the factory, tools and equipment at the conclusion of the contract. PRASA reported that the Record of Decision (RoD) for environmental authorisation for the factory was received in March 2015 with a condition prescribing a 30 meter buffer zone from the wetlands area which forms part of the site. This has led to a redesign of the factory site’s layout to ensure compliance and that an amendment RoD will be received by the end of July 2015 where after the site will be handed over to Gibela.

 

With regard to job creation and skills development, PRASA reported that an estimated 8 088 direct jobs would be created from this programme and 19 500 individuals would be skilled as follows:

 

• Artisans:                                   6 800

• Engineers:                                5 200
• Engineering technicians:            2 000
• Trade workers:              3 400
• Production staff:                       1 500
• Technologists:                             600

 

 

5.3        Signalling Programme - Gauteng Nerve Centre

With regards to the Signalling programme, Gauteng Nerve Centre (GNC), will act as the signalling control centre of the Passenger Rail Agency of South Africa’s (PRASA) Gauteng passenger rail network. The work on this project commenced in 2011/12 and its estimated duration is 7 years with a total cost of approximately R3.8 billion (excluding inflation). The construction of the GNC building was 99 per cent complete at the time of the oversight visit. As the upgrade process is being completed on the various train lines, the lines will require phase-in integration first into the satellite control centres and then into the GNC.

 

 

5.4        AFRO 4000 Locomotive Safety Compliance

 

PRASA reported on the 20 AFRO 4000 diesel locomotives which have been acquired from Spain in 2015 of which 13 have been delivered thus far. The AFRO 4000 diesel locomotives have received extensive media attention as a result of allegedly not meeting the safety standard specifications requirements. PRASA submitted that 50 hybrid locomotives would be delivered from 2016.

 

PRASA further elaborated on the rationale behind the procurement of the locomotives which was mainly to service long distance and regional routes. It was reported that the current locomotives have reached the end of their useful life cycle and as such needed to be replaced. In respect of the safety standard of the locomotives, reference was made to the Transnet Electrical Safety Instructions which was agreed to and signed by PRASA and Transnet in 2012 and submitted to the Railway Safety Regulator.

 

The Transnet Electrical Safety Instructions specifies that the normal height between rail and electrical wire for the rail network is 5 meters and the maximum is 6 meters with the minimum being 4.5 meters.

 

At the discretion of a senior engineer, the electrical contact wire can be lower than the minimum standard of 4.5 meters. The minimum clearance between the electrical contact wire and the top of rolling stock (roof) should be 150 mm. To this end, PRASA reported that the height of the AFRO 4000 is 4.1 meters against the 4.5 meters minimum safety standard with a distance of 360 mm between the electrical contact wire and the top of the rolling stock. Therefore, it was reported that the AFRO 400 locomotives does meet the minimum electrical safety standards. PRASA also submitted that it remains in continuous engagement with the Railway Safety Regulator.

 

 

5.5        Railway Safety in South Africa

 

The Railway Safety Regulator (RSR) reported that an evaluation process is underway regarding the safety of the AFRO 4000 locomotives which should be finalised towards the end of 2015. It was further stated that the RSR was also part of the evaluation and technological reviews of the new rolling stock that would arrive from Brazil with special emphasis on safety, efficiency and effectiveness. The RSR further reported on the overall railway safety in South Africa and stated that there were over eleven thousand accidents and incidents during the 2014/15 financial year from which 473 fatalities and around 1700 injuries were reported. With regard to fatalities reported, the point was made that 394 were pedestrians who crossed the railway lines.

 

The RSR submitted that the South African railway lines were generally safe.  The RSR pointed out that recent collisions which occurred in various train stations including Booysens and Denver are under investigation. The RSR indicated that signal infrastructure maintenance needs to be prioritised in the envisaged expansion of rail services. The RSR emphasised that inadequate funding for signalling infrastructure will result in non-maintenance of signalling which could cause further risk of accidents which could bring about the discontinuation of train services. In respect of technology reviews, the RSR reported that the AFRO 4000 locomotives were in the process of undergoing dynamic tests under actual operational conditions. It was also reported that these dynamic tests could not be conducted in Spain where the said locomotives were manufactured due to this country not utilising the same gauge as in South Africa.

 

 

5.6        Station Modernisation Programme

 

PRASA reported that it has identified 135 stations for modernisation which will translate into a real benefit for commuters through an improved customer experience and value added to the services offered. The Station Modernisation Programme (SMP) which is being implemented by PRASA Technical Division has been allocated R2.23 billion over the 2015 Medium Term Expenditure Framework (MTEF) and R722.99 million has been allocated for the 2015/16 financial year. The table hereunder provides a summary of the stations which have been prioritised for the current financial year.

 

Table 3: 2015/16 prioritised stations (Station Modernisation programme)

Region	No.	Station Name	Approved Budget (R ’m)	Current Status	Planned Procurement	Planned Construction start	Estimated Completion
GP	1	Limindlela	35	Stage 4[1]	December 2015	February 2016	24 months
	2	Kempton Park	30	Stage 4	December 2015	February 2016	24 months
	3	Vereeniging	34	Stage 4	December 2015	February 2016	36 months
	4	Roodepoort	33.90	Stage 4	December 2015	February 2016	24 months
	5	Oakmoor	67.50	Construction
	6	Germiston	39.26	Stage 4	December 2015	February 2016	24 months
	7	Leralla	52	Stage 4	December 2015	February 2016	24 months
KZN	8	Duff’s Road	30	Construction
	9	uMlazi	5.02	Stage 2[2]	December 2015	June 2016	24 months
	10	Berea Road	60	Stage 4	December 2015	February 2016	24 months
WC	11	Nolungile	40	Stage 4	December 2015	February 2016	24 months
	12	Phillipi	20	Construction

PRASA (2015)

 

PRASA provided detailed progress reports on the three stations which were under construction during the time of the oversight visit which are briefly discussed hereunder.

 

5.6.1     Oakmoor Station

 

The above site is situated in Tembisa and was handed over to the contractor in December 2014 with the practical completion date set for end November 2015. It was reported that 45 jobs have been created to date as follows: 42 African Males; 2 Coloured Males; and 1 White Male.

 

5.6.2     Duff’s Road Station

 

The above site is situated in Phoenix, Durban and was handed over to the contractor in September 2014 with the practical completion date set for end of April 2016. To date, 38 jobs have been created under the project as follows: 23 African Males; 5 Coloured Males; 2 Indian Males; 5 White Males; and 3 African Females.

 

 

 

 

5.6.3     Philippi Station

 

The above station is situated in the Phillipi Township of Cape Town and was handed over to the contractor in October 2013 with the practical completion date set for April 2015. However, due to delays experienced in the project the newly anticipated completion date is set for October 2015. A total number of 76 people have thus far been employed in the project as follows: 57 African Males; 15 Coloured Males; 3 African Females; and 1 Indian Female.

 

 

5.7        National Station Upgrade Programme and National Station Improvement Programme

 

The National Station Improvement Programme (NSIP) and National Station Upgrade Programmes (NSUP) are implemented by PRASA Corporate Real Estate Solutions (PRASA CRES). The NSIP was introduced for quick visible station improvements aimed at improving the commuter experience at stations such as painting and tiling. The NSUP programme is intended for major station upgrades which addresses both service excellence and revenue generation which usually consist of multi-year projects. The NSIP has been allocated R1.09 billion over the MTEF of which
R334.43 million has been allocated for the 2015/16 financial year. The NSUP has been allocated R1.28 billion over the MTEF and R484.16 million has been allocated for the 2015/16 financial year. Table 2 below will provide the number of stations completed under the NSIP and NSUP between 2010/11 and 2014/15.

 

 

Table 4: Number of Stations under the NSIP and NSUP

	Completed
Programme	2010/11	2011/12	2012/13	2013/14	2014/15
NSIP	41	49	80	65	50
NSUP	5	8	14	14	15
Total	46	57	94	79	65

 

The Committee undertook a site visit to Park Station which is the second largest station in Africa and situated in the heart of Johannesburg. PRASA reported that it had committed R1.27 billion over the 2015 MTEF to this station with an allocation of
R360.5 million for the 2015/16 financial year for infrastructure upgrades and retail expansion.

 

With regard to the NSIP, PRASA reported that there were challenges regarding theft and vandalism which often result in the programme’s efforts and gains being undermined. Furthermore, it was reported that the cost of management, maintenance and security of stations was relatively high with the main cost drivers relating to recurring repairs, cleaning, water and electricity.

 

 

1. Committee Observations and Findings on the Rail Modernisation  programme

 

The Committee highlighted the following matters after its deliberations with the Passenger Rail Agency of South Africa (PRASA) and related site visits:

 

1. PRASA’s capital expenditure is financed from government grants and external borrowings. The agency spent R6.2 billion on capital investment during 2013/14 after spending R6.3 billion in the prior financial year.

 

1. The Committee notes that the first train from the Rolling Stock Renewal Programme is scheduled for delivery by 30 November 2015. In terms of testing and commissioning of the new trains, the Wolmerton Test Facility will be ready by November 2015 and the Test Track for dynamic tests and the 120 km per hour test section will also be ready by November 2015. The Committee also notes PRASA’s indication that it will be ready to deploy the new trains for commuter use by July 2016 and that all train drivers will be trained in this regard before the arrival of the first train in November 2015.

 

 

1. The Committee welcomes the submission by PRASA that its current contract for 600 new trains sets (3600 units) for 10 years will have no hedging exposure and that 580 of the said trains will be manufactured locally while 20 will be built in Brazil. Furthermore, the Committee welcomed the agreements between Gibela and a local supplier for the supply of 38 components and that there is already local content in trains currently being manufactured in Brazil.

 

1. The Committee raised concerns at the delays with the commencement date of the construction of the local manufacturing factory in Dunnottar Park, Ekurhuleni as planned for July 2015, as the selected site was yet to be handed over to the contractor at the time of the oversight visit. PRASA submitted to the Committee that the factory will be operational by July 2016 as per the plan. The Committee impressed upon PRASA that it will closely monitor the process of finalising the Dunnottar Park manufacturing facility and also the localisation of the manufacturing of trains.

 

 

1. The Committee views long term state procurement as a key lever of the state in driving industrialisation and localisation and supports PRASA’s commitment regarding its aims of attaining an average percentage share of local manufacturing content in the new fleet of between 65 and 75 per cent.

 

1. The Committee welcomes PRASA’s submission that the black economic empowerment partner in the manufacture and supply of the 600 new train sets constitutes largely of Small Micro Medium Enterprises.

 

1. The Committee impressed upon PRASA to improve its communication strategy to the public on the phasing in of new rolling stock in the different provinces. This should also include communications on the importance of railway safety.  

 

1. The Committee views the planning and implementation of PRASA’s station modernisation strategy as critical and that this should also include detailed projections of revenue estimates and issues of sustainability should be fully incorporated into plans.

 

1. The Committee commends PRASA on the excellent infrastructure in place at Park Station, the low levels of crime, security, tidiness, functionality, and revenue generation. The Committee notes that there remain challenges in supply chain management which often results in delays in the timeous maintenance of station facilities such as lifts and other amenities.

 

1. The Committee commends PRASA on the submission that Park Station is self- sustaining wherein it generates enough revenues to cover all its operational expenses. PRASA submitted that revenue targets for 2014/15 from its revenue generating property portfolio have been met.

 

 

1. The Committee commends PRASA on the envisaged capability, functionality and the quality of the workmanship of the Gauteng Nerve Centre. The Committee notes that the Gauteng Nerve Centre is 99% complete.

 

1. The Committee welcomed the seamless integration between Park Station commuter facilities and Gautrain commuter facilities. The Committee pointed out to PRASA to encourage and establish similar synergies with municipalities in respect of the implementation of the Station Modernisation Programme in relation to links with taxi ranks and other transport modes.

 

1. With regard to the Station Modernisation Programme, the Committee impressed upon PRASA to communicate effectively around the envisaged upgrades to stations. The Committee however notes that PRASA will be rolling out its marketing strategy from August 2015.

 

1. The Committee expressed concerns about theft and vandalism which PRASA highlighted to be a challenge in some of the upgraded stations. The Committee also notes that the South African Police Services is present in most stations. However, the Committee urges PRASA to be more innovative in addressing vandalism and security issues at its assets.

 

1. The Committee raised concerns on the general state of rail safety in the current commuter rail network and also raised specific concerns regarding the newly acquired AFRO 4000 locomotives and their height specifications. The Committee was of the view that the compatibility of the locomotives with South African safety standards should have been incorporated as part of the prototype testing phase. PRASA submitted that the new trains do meet regulated safety specifications though the overhead power lines in some areas may be lower than the required standard height due to maintenance backlogs. PRASA reported that it is in continuous discussions with the Rail Safety Regulator on ensuring that the safety of commuters will not be compromised in the rolling stock fleet renewal programme implementation.   

 

1. The Committee notes with concern the submission by the Railway Safety Regulator with regard to the lack of maintenance of existing signal structures and the risks posed by this trend. Furthermore, the Committee expressed concerns at the fatality rate in terms of pedestrians which was 394 during 2014/15 and gauged the measures introduced to mitigate against same.

 

1. The Committee impressed upon PRASA that compliance with legislated compliance and governance reports including internal audit reports as critical.  PRASA indicated that it complied with all relevant compliance and governance prescripts.

 

1. The Committee notes that the Station Modernisation Programme is implemented through two subsidiaries of PRASA, namely PRASA Technical and PRASA CRES. The Committee pointed out that there may be possible duplication in functions and these components may require reassessment.

 

1. The Committee notes that there is work underway by PRASA to get youth cooperatives to be stationed at various train stations and provide cleaning services. The Committee also notes the report from PRASA that the new stations will be designed to be as vandal proof as possible so that they require little in terms of maintenance and security costs.

 

7.         Recommendations

 

The Standing Committee on Appropriations, having undertaken an oversight visit to Gauteng and deliberated with the various stakeholders, recommends as follows:

 

7.1.      That the Minister of Finance ensures that:

 

7.1.1     The National Treasury develops mechanisms to create a conducive environment for private sector investment in urban development through the following:

• Extensively promote the use of Private Public Partnerships policy and ensure an optimal risk/return profile for the private sector and the state;
• Rigorous monitoring of the implementation of local government governance frameworks as an accountability mechanism;
• Support and improve transparency and competitiveness in local government procurement.

 

7.1.2     The National Treasury in partnership with relevant stakeholders ensure that Metropolitan municipalities utilise proactive measures such as the provision of timeous information, education and public participation throughout the planning and rollout of urban infrastructure and urban precincts.

 

7.1.3     The National Treasury in partnership with relevant stakeholders ensure that Metropolitan municipalities embed revenue generation capabilities in the rollout of economic infrastructure. 

 

7.1.4     The National Treasury strengthen and improve budget planning and expenditure management in Metros so as to ensure that spending projections are aligned with budget projections and thus prevent fiscal dumping.

 

7.1.5     The National Treasury consider incentivising cities to take advantage of the following:

• Strategies that pursue inclusive economic growth and social development through urban activities targeting environmental issues e.g. participation of cooperatives in waste sorting, recycling & disposal processes, planting of trees etc.
• Efficient and green construction practices when expanding city infrastructure and building stock in order to realise the development of environmentally-sustainable cities.
• Extending partnerships with business groups to also include taxi associations and informal traders.
• Extending partnerships with tertiary institutions to include Technical and Vocational Education and Training institutions.

 

 

7.2       That the Minister of Transport ensures that:

 

7.2.1     The Passenger Rail Agency of South Africa reviews its corporate structure to eliminate overlaps and realise efficiencies in work undertaken by its divisions such as the PRASA Technical & PRASA corporate real estate.

 

7.2.2     The Passenger Rail Agency of South Africa in collaboration with the Department of Transport and other relevant stakeholders investigate technical and funding solutions with regard to the maintenance of signalling infrastructure in the rail network.

7.2.3     The Passenger Rail Agency of South Africa in collaboration with the Office of the Chief Procurement Office improve and enhance internal supply chain management capacity and practice.  

 

 

7.3       That the Minister of Public Enterprises and the Minister of Transport ensure that:

 

7.3.1     The partnership between Passenger Rail Agency of South Africa and Transnet is strengthened and formalised in the procurement of new rolling stock, the modernisation and upgrading of rail infrastructure and on the overall operations and maintenance of the rail network.

 

 

8.         Conclusion

 

All the responses to recommendations as set out in section 7 above need to be submitted to the National Assembly within 60 days of this report being adopted in the House. 

 

 

 

Report to be considered.

 

 

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[1] Stage 4 – detailed design and contractor tender documents

[2] Stage 2 – Concept design