Spoornet Restructuring: briefing by Department

Meeting report

PUBLIC ENTERPRISES PORTFOLIO COMMITTEE; LABOUR & PUBLIC ENTERPRISES SELECT COMMITTEE: JOINT MEETING
20 March 2002
SPOORNET RESTRUCTURING: BRIEFING BY DEPARTMENT

Chairperson: Mr Martins (ANC)

Document Distributed:
Spoornet's Restructuring briefing document

Department of Public Enterprises delegation: Mr Andile Nkuhlu, Chief Director: Restructuring Unit; Mr Richard Goode, Director: Restructuring Unit; Mr Riad Khan, Unit Deputy Director responsible for transport matters.

SUMMARY
The Department said that formulation of the restructuring plan had been a fully participative process among all stakeholders, and is a model for future similar efforts, particularly in addressing difficult topics such as labour retrenchments. Retrenchments had been lessened because concessioning parts of rail operations had been selective (Luxrail/Blue Train will be concessioned but not Orex and Coallink), and the planned reduced 10,000 km system was not endorsed but instead a 15,000+ km extended rail network including "low density" lines was preserved. This maintenance of rail capacity was a positive for the national economy. It was noted that a review of safety standards and conditions in the passenger rail sector by the Department of Transport is near completion.

MINUTES
Mr Nkuhlu (Department) observed that the formulation of the restructuring plan had been a fully participative process including all stakeholders, and is a model for future similar efforts, particularly in addressing difficult topics such as labour retrenchments. There has been selective "concessioning" of parts of rail operations (for instance, the Luxrail/Blue Train unit will be concessioned, but not the Orex and Coallink units). By preserving a 15,000+ km extended rail network including "low density" lines, rather than endorsing a reduced 10,000 km system, as had been considered, retrenchments have been lessened.

At the same time the restructuring plan has ensured maintenance of rail capacity, which is a positive for the national economy and facilitates South Africa's position as a player in the global economy. It was also noted that a review of safety standards and conditions in the passenger rail sector is being undertaken by the Department of Transport, and is near completion.

Mr Riad Khan presented the briefing on Spoornet's restructuring (see document).

Discussion
Ms Botha (ANC, NCOP) remarked that plans for the Blue Train, under Spoornet's Luxrail unit, appear to keep changing, and asked whether the concession plan was final.

In reply Mr Nkuhlu asserted that the plan to concession Luxrail to a private operator is firm, and reiterated that while the Blue Train is an important "brand", it is not a "strategic asset".

Ms Botha commented that she had thought Spoornet would retain the Blue Train.

Mr Nkuhlu clarified that under a "concession" arrangement Spoornet retains ownership, unlike in a "privatization" arrangement where no reversionary interest would be held. He also stated that a concession structure had always been contemplated for the Blue Train, and that a term to be negotiated would be for the operator to at times price the services so that South Africans, and not just foreign tourists, could afford it.

Mr Kompela (ANC) commended the Department for its position on concessioning and negotiating better access for locals.

In response to a question from Mr Louw (ANC), the officials indicated that while the process of inviting offers from travel industry concessionaires had only just begun, the Department was confident that there would be interest. It was also noted that the Blue Train is currently operating at an annual loss of roughly R15million, which amounts to a subsidy for the foreign tourists who chiefly enjoy the service.

Responding to a query from Ms Botha as to whether the rail line to the Eastern Cape's Coega port project will be profitable, it was noted that the project in principle involves no inherent Spoornet subsidisation. However, there are ongoing commercial negotiations concerning Coega, all of the details of which are not currently available to the Department.

In reply to a question from Mr Mohlala (ANC) about planned retrenchments, Mr Goode stated that much time had been spent in formulating a well-founded restructuring that maintains an extended rail network which functions more efficiently. Increased efficiency of an extended network maximises job preservation throughout the system, so that under the plan a maximum of 8,000 people may be retrenched as a last resort. Retrenched workers will go on a Spoornet redeployment list, and will be covered by a Transnet social plan which covers a range of issues and options for such workers. Full details of the Transnet social plan will be supplied to Committee members.

Responding to another question from Mr Mohlala, the officials were unaware of specific plans for a passenger rail link between Pretoria and Mpumalanga, but will confirm the status of such project and advise the Committees.

Mr Kompela asked about the "lack of financial transfer transparency" related to Coallink, as noted in the briefing materials, and stressed the importance of financial transparency when public money is involved.

It was explained that this does not refer to misfeasance, but to inefficient specific cost accounting practices which need to be improved so that the Department and the Transnet Board can determine the profitability of individual units and divisions.

In conclusion the Chair noted that this meeting was a part of an ongoing process of interaction with the Department, and thanked the officials and the Select Committee members for their efforts before adjourning the meeting.