Home South African Prasa flags further losses ahead as it rebuilds its decimated infrastructure

Prasa flags further losses ahead as it rebuilds its decimated infrastructure

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The Passenger Rail Agency of South Africa has flagged a reported R5 billion in over-expenditure in the 2022/23 financial year with the likelihood of overspending in the year ahead.

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THE PASSENGER Rail Agency of South Africa (Prasa) has flagged a reported R5 billion in over-expenditure in the 2022/23 financial year with the likelihood of overspending in the year ahead.

This is expected on the back of impairments as the parastatal refurbishes and replaces infrastructure vandalised at the peak of Covid-19.

In its report to the Portfolio Committee on Transport, Prasa, currently embroiled in accusations of illegally evicting more than 100 people off its rail tracks in Wynberg, Cape Town, said other than personnel expenses, which took 70% of its subsidy from the government, the entity was spending far more on security of its assets.

Prasa chief financial officer Lesibana Fosu said, “Employee costs, as in prior years, is a major item, probably 70% of the cost base. The second biggest item is security as we bring in more boots on the ground to deal with from a security perspective.”

Current indicators on Prasa’s third quarter expenditure point to the entity already overspending on capital and financial assets, while second quarter indications are of over-expenditure in administration and integrated transport planning.

Presenting its delayed 2022/23 Financial Report to Parliament’s Portfolio Committee on Transport, Prasa said it was under pressure with post Covid-19 rehabilitation of vandalised infrastructure, exponential increases in security costs, insurance premiums increasing consummate with the growing asset base as well as repairs and maintenance.

Prasa said it was hard-pressed to afford the fixed energy costs and municipal charges which it said were over the consumer price inflation (CPI).

However, parliamentarians were left unimpressed by Prasa’s reporting that it had reopened 26 out of 40 corridors with estimates increasing the routes to 32 before the end of the year. Prasa reported it had a capital spend of R13.5 billion against the R12.6bn allocation.

The state-owned enterprise had recovered 18 service lines and 22 service lines in operation, although its interest and rental income were far greater than revenue from fares.

The entity reported there was a declining trend in crime incidents, mostly of theft and vandalism, which had come down from 4,477 incidents in the 2018/19 year to 958 in the 2022/23 year.

Prasa’s operating loss was widening because asset write-offs and impairments arising from clean up of assets which had begun in the 2020/21 year and been rolled over to the reporting year.

The entity still faced challenges with its signalling system and said it was working on completing it by the end of the current year.

Fosu said Prasa was still heavily dependent on the operating subsidy from the government, which had increased since after the Covid-19 pandemic in 2021 and would be the main source of revenue as fare income would still take some time to stabilise to previous levels, largely due to high repairs and maintenance being undertaken.

He said interest payment of R1.6bn played a pivotal role in the balance sheet and was being aided by rental income.

Prasa said it had updated its asset register, which had been lagging for the past 10 years and was in better stead to manage its more than 350,000 properties.

Acting Prasa Group Rail CEO, Nelson Malefane, said passenger numbers were picking up: with 16.5 million recorded last year, while January alone had accounted for 29 million tickets and with projections of 35 million users by the end of the year.

“We are helped by the rapid roll-out of the EMUs,” Molefane said in reference to the 146 Electric Motor Units that Prasa is buffering its rolling stock with.

– BUSINESS REPORT

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