RAILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015 · 5 RAILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015 GLOSSARY OF TERMS APP Annual Performance Plan BLOEMCON Bloemfontein

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RA ILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015

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TABL

E O

F CO

NTEN

TS

4 GENERAL INFORMATION

5 GLOSSARY OF TERMS

7 FOREWORD BY THE BOARD CHAIRPERSON

9 CHIEF EXECUTIVE OFFICER’S REPORT

11 STATEMENT OF RESPONSIBILITY

12 STRATEGIC OVERVIEW

13 LEGISLATIVE AND OTHER MANDATES

14 NATIONAL STRATEGIC IMPERATIVES

15 OUR LEADERS

16 ORGANISATIONAL STRUCTURE - EXECUTIVE TEAM

17 PERFORMANCE INFORMATION

19 AUDITOR GENERAL’S REPORT

21 SITUATIONAL ANALYSIS

29 STRATEGIC OUTCOME ORIENTED GOALS

37 CORPORATE GOVERNANCE REPORT

45 HUMAN RESOURCES INFORMATION 59 FINANCIAL OVERVIEW

63 ANNUAL FINANCIAL STATEMENTS

69 ACCOUNTING POLICIES

76 NOTES TO THE ANNUAL FINANCIAL STATEMENTS

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GENERAL INFORMATION

Registered name of the Public Entity Railway Safety Regulator

Registered O�ce Address 1 Gordon Hood Avenue, Centurion, 0157

Postal Address P O Box 11202, Centurion, 0051

Contact Telephone Numbers 012 848 3000

E-mail address [email protected]

Website address Http://www.rsr.org.za

External Auditors InformationAuditor General of South Africa

271 Veale Street, Muckleneuk. 0181

Bankers Information ABSA

Company Secretary Mr Hulisani Murovhi

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GLOSSARY OF TERMSAPP Annual Performance Plan

BLOEMCON Bloemfontein Container Terminal

BOI Board of Inquiry

BBBEE Broad Based Black Economic Empowerment

CEO Chief Executive O�cer

DoT Department of Transport

DPSA Department of Public Service Administration

ECSA Engineering Council of South Africa

EDMS Electronic Document Management System

EECF Employment Equity Consultative Forum

EI Enabler Index

FOT Federal O�ce of Transport

FY Financial Year

GE General Electric

GFB General Freight Business

GGE Guides for Governance Excellence

IAA Internal Audit Activity

ICT Information Communication Technology

ILDP International Leadership Development Programme

IRSC International Railway Safety Council

KASCON Kaserne Container Terminal

KPI Key Performance Indicator

LEREGO Legal, Regulation and Governance

MDS Minimum Data Set

MQS Management Quality System

Mtpa Million tons per annum

MTSF Medium Term Strategic Framework

NATCOR Natal Corridor

NATMAP National Transport Master Plan

NDP National Development Plan

NIMS National Information Monitoring System

PDCA Plan-Do-Check-Act

PFMA Public Finance Management Act

PRASA Passenger Rail Agency of South Africa

QIP Quality Improvement Plan

RI Results Index

RIA Regulatory Impact Assessment

RSA Republic of South Africa

RSR Railway Safety Regulator

RTCK Results, Targets, Comparison KPI Matching

RTO Radio Train Order

SADC Southern African Development Community

SDIX Service Delivery Index

SMS Safety Management System

SSP Sector Skills Plan

TCO Train Control O�cer

TETA Transport, Education and Training Authority

TFR Transnet Freight Rail

USA United States of America

VDU Video Display Unit

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FOREWORD BY THE BOARD CHAIRPERSON

This has been a remarkable, yet challenging year for the Railway Safety Regulator (RSR). Challenging because the Regulator has had to do more with less as its budget was reduced by R30 million while its targets remained unchanged. Remarkable, because it was also the year that the RSR demonstrated its maturity by asking some tough questions, which would inform its regulatory approach for the next coming years. In addition, despite budget constraints, the Regulator has managed to meet most of its set targets for the 2014/2015 Financial Year.

This report, therefore, speaks to the commitment of the Regulator to improve safety on our railway and to lay the foundation for a regulatory approach that takes into account the changing landscape of the railway industry in South Africa and the Southern African Development Community.

It is important to note, the testing time that any organisation goes through to deliver on its mandate while at the same time looking outward and asking the uncomfortable questions about whether its interventions are achieving the desired impact.

Often during their existence, maturing organisations which are about continuous learning and growth do � nd themselves at this crossroad. Required to focus on achieving the set objectives for the year, but at the same time, conducting serious introspection on whether the current approach is the best to turn the tide on railway safety in South Africa. However, how an organisation handles this juncture in its existence is the stu� that great organisations are made of. I am proud to announce that trying as the year has been, the RSR rose to the occasion and proved its commitment to service delivery.

It is my pleasure to report that despite the � nancial constraints, the Regulator managed to achieve 85% of its targets. It is also during this challenging year that the RSR reviewed its regulatory approach, opting for a more outward-focused, risk-approach which will enable the RSR to respond better to the challenges of the growing and changing railway sector in South Africa.

All of this would not have been possible without the continued support of the Minister of Transport, Ms Dipuo Peters, the RSR Board of Directors and the commitment of the RSR employees.

I am proud of the Regulator’s contribution to improving railway safety, however, as occurrence statistics indicate, we are nowhere near zero occurrences. One thing I can promise is that it is the commitment of the Regulator to ensure that railway safety becomes second nature to every operator, citizen and visitor in our country.

I am proud to announce that testing as the year has been, the RSR rose to the occasion and proved its commitment to service delivery.

_______________________________________

THEMBELIHLE MSIBI

CHAIRPERSON: BOARD OF DIRECTORS

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Railways are complex socio-technical systems with multiple interfaces. It is simply not su�cient to understand the technicalities and operating requirements of one aspect of a railway without an adequate comprehension of the e�ects of that particular aspect on the railway system as a whole and the e�ects of other aspects of the railway system on it. Not only is this knowledge of the railway system a necessity for each of the key sector players, but it is also a fundamental requirement for a railway safety regulatory authority, who bears the responsibility for assuring safety through its oversight function. Thus, to e�ectively regulate railway safety, the supervision of a national railway system must rely on a risk-based approach.

This Annual Report di�ers from previous reports in that the 2014/15 �nancial year served as a landmark in the RSR’s history. The Report pays homage to a �nancial year that represents a watershed between the Regulator’s previous compliance driven regulatory approach and its newly adopted risk-based regulatory philosophy. In conceptualising its 2014/15 strategic plan to guide and direct its strategic, tactical and operational activities and decisions, the RSR identi�ed and acknowledged the limitations of its previous regulatory design and formulated a more outward-focussed plan. The plan prioritises the risks in the external environment as well as encourages and enhances inter- and intra-departmental/organisational collaboration.

In 2014/15, the RSR rede�ned its strategic purpose as working towards Zero Occurrences to meaningfully impact on those it regulates in order to signi�cantly reduce serious railway occurrences. This risk-based approach, framed by a results-based performance monitoring and evaluation system, bears testimony to the RSR’s commitment to performance excellence by endeavouring to achieve the same levels of excellent management it seeks from the operators it regulates. The RSR’s risk-based regulatory approach can be de�ned as:

Systematic and systemic decision

making frameworks and procedures to

prioritise and direct regulatory activities

and deploy resources (capitals),

primarily pertaining to oversight, safety

promotion, engineering solutions and

enforcement, based on an assessment

of the risks in the rail environment

CHIEF EXECUTIVE OFFICER’S REPORT

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The 2014/15 Financial Year was both industrious and transformational where various best-practice strategic initiatives were implemented, among those being the much-needed critical modules of the National Information and Monitoring System (NIMS), the risk-based permit fee model, the implementation of the penalty regulations and the introduction of an ISO 14000 concordant Management Quality System (MQS) to monitor and evaluate service delivery excellence, to name but a few. At tactical and operational levels, much e�ort went into ensuring that the RSR delivered on its strategic targets and mandatory functions. All this hard work yielded a triumphant conclusion to a productive year where an above-average performance score of 85% was achieved - a testament of the RSR’s commitment to good governance and performance excellence.

However, when re�ecting on the past year’s successes, it is also important to take cognisance of the challenges experienced in achieving some of the targets in order for the RSR to learn, develop and improve its regulatory capabilities. An overarching lesson that was learnt was the need to align the organisation’s culture with that of its strategic intent and direction in order to support the entity’s drive towards signi�cantly reducing risks in the external landscape. For this to happen, the RSR’s values need to be understood, adopted, accepted and lived by all employees. Having recognised the importance of values in instilling and anchoring a culture of performance excellence and safety in the RSR, an intense Values Alignment and Culture Programme was implemented to establish the direction of the organisation and to facilitate a collective interpretation of the organisation’s values.

The RSR’s focus on value creation over the short, medium and long term needs to be supported by an enabling environment where leadership, culture, measurement and technology play central roles in supporting and sustaining e�ective and productive business processing and functioning. With attention dedicated to these performance enablers, I have no doubt that the 2015/16 �nancial year will prove to be more productive and rewarding to both our internal and external stakeholders. It is on this high note that I thank and applaud the Department of Transport and the RSR’s Board of Directors for their continued support, collective wisdom and guidance. To each and every RSR employee, thank you! Without you, this exemplary performance record would not be possible. Your dedicated e�orts in working towards our “Zero Occurrences” ideal takes us one step closer in making our railways the preferred mode of transport.

_______________________________________NKULULEKO POYACHIEF EXECUTIVE OFFICER

Empowering the RSR’s leadership to nurture and support a values driven culture of continuous improvement and excellence in service delivery

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STATEMENT OF RESPONSIBILITY

To the best of my knowledge and belief, I con� rm the following:

1. All the information and amounts disclosed in the Annual Report are consistent with the annual � nancial statements audited by the Auditor General.

2. The Annual Report is complete, accurate and is free from any omissions.

3. The Annual Report has been prepared in accordance with the guidelines on the Annual Report as issued by National Treasury.

4. The Annual Financial Statements have been prepared in accordance with the standards applicable to the public entity.

5. The accounting authority is responsible for the preparation of the Annual Financial Statements and for the judgements made in this information.

6. The accounting authority is responsible for establishing and implementing a system of internal control that has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, human resources information and the Annual Financial Statements.

7. The external auditors are engaged to express an independent opinion on the Annual Financial Statements.

8. In our opinion, the Annual Report fairly re� ects the operations, performance information, human resources information and the � nancial a� airs of the entity for the � nancial year ended 31 March 2015.

Yours faithfully

____________________Nkululeko PoyaCHIEF EXECUTIVE OFFICER

____________________Thembelihle MsibiCHAIRPERSON: RSR BOARD

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STRATEGIC OVERVIEW

Transparency

Effectiveness

Integrity

Our People

Innovation

Social Responsibility

Reliability

Professionalism

To be a sustainable recognised authority overseeing and enforcing railway safety in South Africa

To oversee and promote safe railway operations through appropriate support, monitoring and enforcement, guided by an enabling regulatory framework.

The core values of the RSR are:

VALUES

VISION

MISSION

We are open and accountable in our interactions with our stakeholders and sta�.

We achieve our set goals and objectives with desired outcomes.

We are professional, honest, fair, and do not tolerate crime and corruption.

We are committed to building and supporting our employees in an endeavour to becoming an employer of choice.

We are innovative and passionate about performance.

We seek to contribute towards the greater good of our country and continent by supporting social development and economic growth.

We are dependable, trustworthy and value our customers.

We are professional about how we perform our work and about how we deal with our customers.

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Reliability

Professionalism

LEGISLATIVE AND OTHER MANDATESCONSTITUTIONAL MANDATES

The RSR was established in terms of the National Railway Safety Regulator Act No 16 of 2002 as amended (the Act), to establish a national regulatory framework for South Africa and to monitor and enforce compliance within the rail sector. The primary legislative mandate of the RSR is to exercise oversight and enforce safety performance by all railway operators in South Africa, including those of the neighbouring States whose rail operations enter South Africa. Notwithstanding, in terms of the Act, operators are primarily responsible and accountable for ensuring the safety of their railway operations.

In executing its legislative mandate, the RSR performs the following duties and functions:

• Issues and manages safety permits, conducts inspections and audits and investigates railway occurrences;

• Develops regulations, safety standards and related documents which form the basis of the regulatory regime;

• Issues notices of non-conformance and non-compliance and will in future impose penalties for non-compliance with the Act and safety standards adopted by the Board of Directors of the RSR.

• Safety and security matters are interconnected. the RSR plays a primary role in safe railway operations and a supporting role in occupational health and safety and security;

• The RSR must cooperate with relevant organs of state to improve safety performance and oversight functions; and

• The RSR must play a leading role in the harmonisation of the railway safety regime of South Africa with those of the Southern African Development Community railways.

In order to achieve its objects in terms of the Act, the RSR may conduct any other activity relating safe railway operations.

LEGISLATIVE MANDATES

The RSR was established by the State and thus primarily derives its mandate from its constitutive legislation, the National Railway Safety Regulator Act No 16 of 2002 as amended. In addition, the RSR must comply with legislative prescripts that have an impact on the RSR’s business and operations, including but not limited to the:

• Occupational Health and Safety Act,1993 (Act No. 85, 1993);

• Mines Health and Safety Act, 1996 (Act No. 25, 1996);

• Legal Succession to the South African Transport Services

Act,1989 (Act No. 9, 1989) as amended;

• Public Finance Management Act,1999 (Act No. 1, 1999)

as amended;

• National Nuclear Regulatory Act, 1999\ (Act 47, 1999);

• Explosives Act, 2003 (Act 15, 2003);

• National Environmental Management Act, 1988 (Act 107,

1988);

• National Disaster Management Act,2002 (Act 57, 2002);

• National Road Tra�c Act, 1996 (Act 93, 1996);

• Promotion of Access to Information Act, 2000 (Act 2, 2000);

• Various labour legislation, including the Labour Relations

Act, 1995 (Act 66, 1995); Basic Conditions of Employment

Act, 1997 (Act 75, 1997); Skills Development Act, 1998

(Act 97, 1998); Employment Equity Act, 1998 (Act 55, 1998);

• Protected Disclosures Act, 2000 (Act 26 of 2000); and

• Promotion of Administrative Justice Act, 2000 (Act 3 of 2000).

POLICY MANDATES

The RSR as a tate entity is also governed and directed by various policies developed and approved by the State at varying spheres. The following are some of the policy mandates:

• The National Development Plan (NDP)

• The National Transport Management Plan (NATMAP)

• The Draft National Rail Policy

• The National Growth Path

• Various national and international policies within the

railway sector

• National Government’s Strategic Outcomes

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NATIONAL STRATEGIC IMPERATIVES

O�ce of the Presidency: Medium Term Strategic Framework

The Medium Term Strategic Framework (MTSF) is de�ned as a statement of intent identifying the development challenges facing South Africa and outlining the medium-term strategy for improvements in living conditions and contributions towards economic growth and prosperity. South Africa requires investment into an e�ective network of economic infrastructures aimed at supporting the country’s medium and long term economic and social objectives. This economic infrastructure is a precondition for providing basic services such as electricity, water, sanitation, telecommunications and public transport. It needs to be robust and extensive enough to meet industrial, commercial and household needs. The RSR is committed to making a substantial contribution towards the goals as stated above, with speci�c focus on MTSF Outcome 6: An e�cient, competitive and responsive economic infrastructure network. Therefore, the RSR Strategy for the period going forward will aim at ensuring that the safe expansion of rail as mode of both passenger and freight, transport contributes towards:

• Improved management and accountability by all stakeholders involved in the rail

industry.

• Focusing on enforcing sector-wide compliance and encouraging contracted operators

and independent service providers to invest and provide a commuter-friendly

experience; and

• Renewing the commuter rail �eet on a corridor to corridor basis with new technology,

high-capacity rolling stock, supported by an infrastructure modernisation programme

(new signalling systems, station upgrades and intermodal facilities) to enhance

integration between road and rail based services.

Department of Transport Strategic Outcome Oriented Goals

In terms of the Department of Transport (DoT) Strategic Outcome Oriented Goal 1, which aims to ensure an e�cient and integrated infrastructure network that serves as a catalyst for social and economic development, the RSR will align its strategic goals and objectives to ensure that all rail industry activities are completed with safety as the main consideration.

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OUR LEADERSBOARD OF DIRECTORS

MAJOR - GENERALW.A VENTER

MS T.N MSIBICHAIRPERSON

MR N.A.S POYACHIEF EXECUTIVE OFFICER

MR H MASINDI

MS M SOMARUMR N BALOYI MS M MBONAMBI

MS N SKEEPERS MR A HARRISONMS J BARRETT

MR B. MAHLALELADEPUTY CHAIRPERSON

MS N MBIZA

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PE RFORMANCE INFORMATION

In striving towards signi� cantly reducing the number and probability of serious occurrences in the South African rail environment, the 2014/15 Financial Year’s strategic drive was premised on safety, education, enforcement and engineering. It has been internationally recognised and accepted that these three critical parameters determine the success of safety interventions in the railway landscape. The Annual Performance Plan was informed by among others, the RSR’s legislative mandate, which is to oversee safety of railway operations and to promote improved safety performance in the railway transport industry in order to promote the use of rail as a safe mode of transportation. It was the aim of the 2014/15 Financial Year’s targets to provide a clear strategic direction to the rail industry in reducing serious occurrences and to support industry reforms while promoting improved safety and economic performance.

The strategic outcomes for the Financial Year were:

• Risks in the railway landscape have been mitigated;

• Railway safety is e� ectively promoted;

• New investments in rail infrastructure and technologies impact positively on railway safety; and

• Sustainable institutional growth and development had been enabled.

It was the aim of the 2014/15 financial years’

targets to provide a clear strategic direction

to the rail industry in achieving the strategic

goal of zero occurrences‘

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Report on the financial statements

Introduction1. I have audited the �nancial statements of the Railway Safety Regulator set out on pages 66 to 95, which comprise the statement of �nancial position as at 31 March 2015, the statement of �nancial performance, the statement of changes in net assets, cash �ow statement and the statement of comparison of budget and actual amounts for the year then ended, as well as the notes, comprising a summary of signi�cant accounting policies and other explanatory information.

Accounting Authority’s responsibility for the �nancial statements2. The accounting authority is responsible for the preparation and fair presentation of these �nancial statements in accordance with the South African Standards of Generally Recognised Accounting Practice (GRAP) and the requirements of the Public Finance Management Act, 1999 (Act No 1 of 1999) (PFMA), and for such internal control as the accounting authority determines is necessary to enable the preparation of �nancial statements that are free from material misstatement, whether due to fraud or error.

Auditor-general’s responsibility3. My responsibility is to express an opinion on these �nancial statements based on my audit. I conducted my audit in accordance with International Standards on Auditing. Those standards require that I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the �nancial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the �nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the �nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the �nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the e�ectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the �nancial statements.

5. I believe that the audit evidence I have obtained is su�cient and appropriate to provide a basis for my audit opinion. Opinion6. In my opinion, the �nancial statements present fairly, in all material respects, the �nancial position of the Railway Safety Regulator as at 31 March 2015 and its �nancial performance and cash �ows for the year then ended, in accordance with GRAP and the requirements of the PFMA.

Report on other legal and regulatory requirements7. In accordance with the Public Audit Act of South Africa, 2004 (Act No 25 of 2004) (PAA) and the general notice issued in terms thereof, I have a responsibility to report �ndings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report, non-compliance with legislation and internal control. The objective of my tests was to identify reportable �ndings as described under each subheading but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters.

Predetermined objectives8. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected objectives presented in the annual performance report of the public entity for the year ended 31 March 2015:

• Objective 1: Risks in the railway safety landscape have been mitigated on pages 31 to 32 • Objective 2: Railway safety e�ectively promoted on page 33 to 34 • Objective 3: New investments in rail infrastructure and technologies impacts positively on railway safety on page 34 • Objective 4: Sustainable institutional growth and development on pages 35 to36

9. I evaluated the reported performance information against the overall criteria of usefulness and reliability.

10. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives. I further performed tests to determine whether indicators and targets were well de�ned, veri�able, speci�c, measurable, time bound and relevant, as required by the National Treasury’s Framework for managing programme performance information (FMPPI).

11. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 12. I did not identify any material �ndings on the usefulness and reliability of the reported performance information for the selected objectives. Additional matter13. Though I identi�ed no material �ndings on the usefulness and reliability of the reported performance information for the selected objectives, I draw attention to the following matter:

AUDITOR GENERAL’S REPORT

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Achievement of planned targets14. Refer to the annual performance report on pages 30 to 35 for information on the achievement of the planned targets for the year.

Compliance with legislation15. I performed procedures to obtain evidence that the public entity had complied with applicable legislation regarding �nancial matters, �nancial management and other related matters. My �ndings on material non-compliance with speci�c matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows:

Material misstatements in annual �nancial statements subsequently corrected16. The accounting authority submitted �nancial statements for auditing that were not prepared in all material respects and supported by full and proper records, as required by section 55(1)(a) and (b) of the PFMA. Material misstatements were subsequently corrected.

Internal control17. I considered internal control relevant to my audit of the �nancial statements, the annual performance report and compliance with legislation. The matters reported below are limited to the signi�cant internal control de�ciencies that resulted in the �ndings on non-compliance with legislation included in this report.

Financial and performance management18. Inadequate review of �nancial reporting information to ensure that accurate and complete �nancial and performance reports are prepared.

Pretoria31 July 2015

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SITUATIONALANALYSIS

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SERVICE DELIVERY ENVIRONMENT

This section of the Annual Report will attempt to illustrate the progress made by the RSR in its journey towards achieving performance excellence. The entity’s commitment to good governance is re�ective in its intent to both enable and execute its strategic imperatives. The four medium-term strategic outcomes listed below contextualizes the supervisory approach employed by the entity to provide safety assurance:

i. Risks in the railway landscape have been mitigated;ii. Railway safety is e�ectively promoted;

iii. New investments in rail infrastructure and technologies positively impact on railway safety; and

iv. Sustainable institutional growth and development had been enabled.

It is these four strategic outcomes that determine the RSR’s ability to improve its oversight function as they promote integrated systems thinking, decision-making and actions in the RSR that focus on the creation of value over the short, medium and long term.

1. KEY ACHIEVEMENTSThe Situational Analysis reports on the entity’s ability to create value over the short and medium terms by examining the range of activities that the RSR undertook in striving towards its long-term strategic purpose – to signi�cantly reduce serious occurrences in the rail space. To create value over time, an enabling environment is essential where strategy, performance, governance and opportunities are integrated and adequately supported. Only then can the RSR meaningfully demonstrate value add to its external stakeholders.

1.1 RISKS IN THE RAILWAY LANDSCAPE HAVE BEEN MITIGATED

1.1.1. Inspections, Audits and Investigations

It is well understood worldwide that the 3E’s approach in dealing with safety is e�ective and all the elements for the triangle must be e�ective for e�ective safety management. Enforcement is one of the triangle anchors. The RSR ensures enforcement by means of inspections, audits and investigations.

The RSR exceeded the number of inspections, audits, follow-up investigations and occurrence investigations it had

planned to conduct in the 2014/15 Financial Year. Although this achievement was made possible by an increase in human resource capacity during the year under review, it should be noted that this was no easy feat. The number of inspections, audits, occurrence investigations were increased by 33%, 32% and 60% respectively, from 2013/14 to 2014/15.

1.1.2 Safety Critical Grades

The certi�cation of safety critical grades is critical to the RSR’s strategic intent to reduce the number of railway occurrences. During the 2014/15 Financial Year, a functional strategy, project charter and project implementation plan were developed in collaboration with industry stakeholders. This strategy is essential for the successful execution of the project as it provides the basis and framework to engage with stakeholders.

1.1.3 Drafting of New Regulations

The RSR planned to develop four Regulations, namely, the Rail Security Management, Railway Reserves, Certi�cation of Train Drivers and Rail Environmental Regulations. Three out of four Regulations were developed.

1.1.4 Implementation of the Penalty Regulation

The RSR, through its Legal, Regulation and Governance Department (LEREGO) was responsible for the implementation of the penalty regulation. Having adopted a re�ective and lessons learnt approach in its implementation strategy, LEREGO worked closely with all the relevant departments and business units in the RSR. The team-based implementation process resulted in a well-controlled and managed penalty regime where unresponsive defaulters were engaged and operators were a�orded an opportunity for fee negotiations and to present mitigating circumstances.

1.2 RAILWAY SAFETY EFFECTIVELY PROMOTED

During the year under review, the RSR planned stakeholder engagement sessions in the form of education and awareness initiatives, pro�ling campaigns, an annual Railway Safety Conference and Technical Safety workshops. Although 29 sessions were planned for 2014/15, the RSR exceeded this target by 140%. The Technical Safety workshops, requested by the industry for training on Safety Standards, constituted

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33 of the safety promotion sessions. The countrywide Change Management workshops on the National Information and Monitoring System (NIMS) modules also contributed to the overachievement on this target. The sessions focused on the Permit Fee Automation module and the Pre-implementation of the Occurrence Management module.

1.3 NEW INVESTMENTS IN RAIL INFRASTRUCTURE AND TECHNOLOGIES IMPACT POSITIVELY ON RAILWAY SAFETY

1.3.1 Technological Developments and New Works

The RSR has an obligation to ensure that all New Works and technological changes are introduced into the railway system in a safe manner. A model for recovering the costs related to conducting reviews on changes to rail operational systems, Operators’ Safety Management Systems (SMSs), technological developments and New Works was developed during the year under review. This model is premised on the guiding principles to prevent permit fee cross subsidisation, equity, project values and percentages and computes complexity as the sum total of project duration in years, number of lifecycle phases involved and the number of rail disciplines involved. It also takes into consideration the scope, impact and complexity of the changes to be introduced. The model was published for public comment in the Government Gazette, under Section 17 of the National Railway Safety Regulator Act, No. 16 of 2002 as amended.

All the projects for review are aligned with Vision 2030 that is contained in the National Development Plan (NDP) and included in Transnet Freight Rail’s (TFR) Market Demand Strategy initiatives as well as the Passenger Rail Agency of South Africa’s (PRASA) Corridor Modernisation projects. These projects are highlighted as follows:

1.3.1.1 PRASA’s New Fleet Project (Commuter trains)

PRASA started with the manufacturing of the new �eet of commuter trains and submitted all the necessary documentation required by the RSR. Gibela Consortium and PRASA submitted a request for a Testing and Commissioning safety permit for the Wolmerton area. The Operator also con�rmed its intent to submit the designs for the Pretoria Olifantsfontein upgrade programme for review purposes. The line will be used for the testing and commissioning of the new �eet.

1.3.1.2 PRASA AFRO 4000 Diesel Locomotives (Long distance trains )

PRASA purchased 20 Diesel Electric Locomotives from Vossloh in Spain to be used for long distance mainline passenger services. PRASA was also advised to apply for a Testing and Commissioning safety permit for these locomotives.

1.3.1.3 TFR submitted an early noti�cation for the following rolling stock acquisitions:

TFR noti�ed RSR that a total of 233 Class 44 diesel locomotives from General Electric (GE) with the majority planned for General Freight Business (GFB) corridor operations will be acquired. The �rst two locomotives will be delivered in December 2015 and the remainder before October 2017. The �rst six locomotives will be manufactured in the USA and the rest in South Africa.

A contract between TFR and Bombardier Transportation for the supply of 240 23E Dual locomotives was signed on 17 March 2014. All the locomotives will be manufactured locally, with the �rst prototypes expected during December 2015.

The 23E procurement project is progressing well. The RSR provided a No Objection statement for the prototypes to be operated, subject to the submission of action plans aimed at addressing excessive noise and vibration levels in the driving cabs.

1.3.1.4 TFR One-Man Two-Man Train Crew

TFR made a submission to operate one-man trains. If this proposal goes ahead, it will be a notable deviation from current train operational practice. TFR contracted the University of Witwatersrand to conduct a study on the implications to safe train movement and the e�ects of the additional workload on drivers, including tasks currently requiring two people to execute. RSR objected to the signi�cant change until tests are completed.

1.4 SUSTAINABLE INSTITUTIONAL GROWTH AND DEVELOPMENT

1.4.1 Safety Permit FeesThe 2014/15 Financial Year saw the implementation of the RSR’s risk-based permit fee model. As part of the medium-term, i.e.

24


�ve-year, phased-in approach that was adopted to implement the model, a permit fee data veri�cation/audit process was conducted. The aim of this data veri�cation process was to improve the integrity and accuracy of the data contained in the permit fee database. The results obtained from this exercise informed the 2015/16 - 2018/19 implementation plan of the risk-based permit fee model as well as the schedule for the determination of safety permit fees for the 2015/16 Financial Year that was published in the Government Gazette in March 2015 for comments.

In designing the �ve-year permit fee migration plan, the costs required to conduct the following mandatory activities for the period 2015/16 – 2016/17, were computed: Follow-up investigations; Board of Inquiry investigations; compliance audits and inspections; Safety Management System (SMS) audits; and the costs incurred in administering safety permits. Using a base of R100 million for the 2015/16 �nancial year and adjusting annually for in�ation over the next �ve years, the RSR’s permit fee revenue base for each of the �nancial years in the migration period could be determined.

1.4.2 Partnerships

Despite its intentions to signi�cantly reduce railway operational occurrences, the RSR is acutely aware that it cannot achieve its vision of zero occurrences in operational isolation. To e�ectively execute its mandatory imperatives as prescribed by the National Railway Safety Regulator Act, No 16 of 2002 as amended and implement key strategic risk reduction initiatives, the RSR identi�ed the need to partner with established railway safety regulators and research institutions. These institutions will assist the RSR in developing a pro-active risk management framework that informs the development of innovative risk assessment technologies, namely, risk models that are premised on hazard identi�cation and analytical methods and tools, occurrence causality risk models, as well as the relevant regulatory instruments required to support the prevention or mitigation of railway safety risks.

The focus of these partnerships are premised on knowledge and information creation, dissemination and sharing in order to stimulate the production of railway safety knowledge and innovative risk reduction solutions. For the partnership/network approach for capacity building and innovation to work optimally, initiatives need to arise from the bottom-up within, and between, each of the partner institutions.

Within this partnership approach, whether as a joining partner or a driver, the RSR will be better capacitated to address both the current and potential safety challenges emanating from the country’s rail revitalisation programmes, systems, technologies and infrastructure as well as contribute to the broader goal of developing capacity (both human and intellectual) within the wider rail sector.

25


To date, the RSR has forged a collaborative alliance with the Swiss Federal O�ce of Transport (FOT). The basis of this knowledge sharing and capacity building partnership was developed during the 2013 International Railway Safety Council (IRSC) that was held in Vancouver, Canada and has since been used as a knowledge and information-sharing lever within the RSR.

The success of the RSR-FOT partnership provided the motive for the entity to pursue collaborative partnerships with other safety regulators and accident investigation authorities. The RSR was approached by Business-Sweden, the Swedish Trade and Investment Council, to determine the Regulator’s interest in collaborating with Sweden’s railway safety regulator (within the framework of the Railway to Port Programme) to facilitate technology and capacity building in order to strengthen the railway and port sectors in both countries.

The formulation of a mutually bene�cial partnership with Transportstyrrelsen, the Swedish National Safety Authority (NSA), and its Accident Investigation Authority is presently being investigated and potential partnership alliances with the Canadians and Americans are also being explored.

1.4.3 Management Quality System (MQS)

The RSR designed and implemented the �rst phase of its MQS during the 2014/15 Financial Year. This phase of the project resulted in an annual assessment of the following Governance processes: leadership, strategic planning, customer focus, human resource management, �nancial management, and operational & technical support.

The MQS Enabler Index (EI) and Results Index (RI) were computed by means of(causality algorithms) to yield a baseline RSR performance score i.e. Service Delivery Index (DSIX). The overall EI baseline SDIX was determined as 30.4. SDIXs in the range of 21-30 indicate an average service delivery performance and those in the range of 31-40 indicate above average performance.

The RI measures results and the extent to which the RSR achieves and sustains its business process objectives using the following elements: Results, Targets, Comparison and KPI Matching as evidence control, e�ectiveness and e�ciency. The information used in the assessment included the results achieved, targets set, the results compared and key indicators satis�ed. As with the Enablers, the RSR obtained a RI SDIX of 30.2 indicating a borderline average to above-average level of service delivery performance.

Of note, the SDIX scores need to be interpreted within the context of newly introduced performance measurement system and not viewed in isolation of the conventional performance measurement method that examines the number of strategic targets achieved. The MQS reinforces the conventional performance monitoring and reporting method with a distinct aim of identifying operational areas that need to be strengthened.

1.4.4 National Information Monitoring System (NIMS)

The RSR has acknowledged that Information Communication Technologies (ICT) have a crucial role to play in advancing the mandate and e�ectiveness of the RSR. This acknowledgement led to the design and implementation of the NIMS project to support, integrate and enable the RSR’s core business processes. The following Modules were developed as part of Phase 2 of the NIMS project:

(a) Permits Automation Module

The RSR launched the Permit Management Module in June 2014. Since then, the operators have been using the system to apply for their permits.

(b) Occurrence Management and Inspection and Audit Module

The Occurrence Module went live on the 30th of October 2014. This module is responsible for facilitating, among others, the capturing of Occurrences, the reporting of Occurrence statistics, and the spatial representation/viewing of Occurrences. The Occurrence module is integrated with the Audit and Inspections Module.

1.4.5 Internal Change Management Initiatives

Monthly Change Management meetings were held with the entire RSR sta� complement to inform, and discuss, various changes within the RSR that a�ected sta�. These included, but were not limited to, the RSR’s risk-based strategic direction and operational programmes, projects and activities; the RSR’s �nancial status and the importance of aligning employee values with that of the organisation to collectively contribute to the RSR’s risk-based regulatory approach.

26


ORGANISATIONAL ENVIRONMENT

2. CHALLENGES2.1 Financial Constraints

The RSR operated in an environment characterised by a severe shortage in both �nancial and human capital. Despite this disadvantage, the entity managed to deliver against most of the predetermined strategic targets that were set for the 2014/15 Financial Year. Given the insu�ciency of the Government Grant, coupled with the R30 million reduction in the permit fee revenue base for the 2014/15 Financial Year, the RSR requested for certain targets to be removed from the Annual Performance Plan (APP). Though this request was declined, it should be noted that RSR still managed to achieve 85 % of its set targets for the �nancial year.

2.2 ICT Support Challenges

The RSR’s sta� complement to manage the ICT environment, as well as to provide internal support services in the 20141/15 Financial Year, was found to be cripplingly insu�cient. With ICT providing an enabling environment for facilitating communication within the RSR and between the RSR and its stakeholders, as well as integrating the organisation’s various business processes, it is essential that this support service operates optimally. Ine�ciencies in the functioning of this service could have damaging rippling and snowball e�ects on the RSR’s ability to perform. The 2014/15 Financial Year saw the RSR being plagued with ICT challenges that included limited network and e-mail support as well as inadequate regional ICT infrastructure. These challenges compounded those that the Regulator experienced with regards to its �nancial and human resource capacity constraints.

3. INTERVENTIONS IN 2015 AND BEYOND3.1 NIMS

3.1.1 Safety Critical Grades Module

Based on a body of empirical evidence, the RSR identi�ed the su�ciency, or competence, (or both) of Safety Related and Safety Critical Grades among railway operators as posing a signi�cant threat to the safety of railway operations. The RSR embarked on a Human Factors risk reduction project that will ensure the design and implementation of relevant and appropriate regulatory instruments for the accreditation, certi�cation and/or licensing of Safety Critical Grades (or persons) to systematically improve the safety of railway operations, as well as to include quality control in its oversight function. The project will be implemented in phases over three years with the �rst phase focusing on the issuing of licences to train drivers. For the project to be sustainable, the RSR identi�ed the need to develop and implement a Safety Critical Grades Management NIMS module to support the implementation of the project in the 2015/16 Financial Year.

3.1.2 Asset Management Module

This module will be developed to support the e�ective maintenance of the assets. This module will be implemented by the end of the 2015/16 Financial Year.

3.2 Regulatory Impact Assessment

Despite the non achievement of this target for the 2014/15 Financial Year, this critical regulatory strengthening project has been prioritised for execution in the 2015/16 Financial Year.

27


3.3 International Railway Safety Council (IRSC) 2015

The International Railway Safety Council (IRSC) provides railway stakeholders with an apt platform to share their safety risks and the e�ects of technical, political, economic and social developments on railway safety. Furthermore it assists them in considering alternative approaches as potential solutions to complex safety problems. In addition to highlighting recognised and/or perceived safety challenges, the annual meetings also stimulate creative thinking as well as provoke engaging discussions and constructive debates on legislative issues, the evolution of safety culture, measures to identify/assess, control and mitigate risks, and the lessons learned from daily routines and practices.

The RSR was represented at the 2014 IRSC in Berlin. This meeting provided delegates with an opportunity to learn about the innovations in rail technologies and safety systems, to build on existing relationships formed with the delegates from Canada, Switzerland and Saudi Arabia and to forge alliances with delegates from regulatory and investigation agencies that can assist and support the entity in re�ning and improving its risk-based regulatory philosophy, mechanisms and tools. In addition, it provided the RSR with a pro�ling platform as well as the opportunity to share with delegates the 2015 IRSC hosting agenda and tourist attractions. South Africa was nominated as the 2015 IRSC hosting country at the 2012 IRSC that was held in London.

Much time and e�ort has been expended in conceptualising and planning for what promises to be an exciting and dynamic IRSC.

4. WAY FORWARDDespite having started the 2014/15 Financial Year on a signi�cantly reduced operational budget due to an enforced reduction in the permit fee revenue base, the RSR weathered its challenges and managed to make signi�cant strides in meeting its mandatory obligations. Many institutional strengthening initiatives were designed and put into action and by year-end, the RSR had achieved most of its strategic targets. In some cases, targets were even exceeded.

A huge part of the Regulator’s success can be attributed to the attention paid to implementing lessons learnt from past successes and non-achievements. Lessons learnt from previous �nancial years were factored into the development of the 2014/15 Strategic Plan and operational targets. By investing considerable time and e�ort in planning and implementing critical institutional strengthening leadership and governance processes as well as modifying and improving regulatory and compliance instruments, the RSR endeavoured to institute quality regulatory management. Quality regulatory management is about creating a positive regulatory culture where issues of trust, teamwork, continuous learning and re�ection, people and behaviour, and compliance procedures/processes are given due recognition and attention. The 2014/15 Financial Year paid homage to these essential, and often neglected, value creating management elements.

With a current and future focus on strengthening the leadership capability by aligning employee values with the RSR’s mission, there’s no doubt that the 2015/16 Financial Year will bear the fruits of all the hard labour. It is on this high note that the Regulator thanks and applauds the DoT and the Board for their collective wisdom and guidance, as well as each and every employee of the RSR for the e�ort made in working towards our Zero Occurrences ideal.A summary of the 2014/15 performance information is detailed below:

29


29


OUTCOMESTRATEGIC

ORIENTED GOALS

30


STRATEGIC OUTCOME ORIENTED GOALS OF THE RSR

Ultimate Purpose ASPIRE TO ACHIEVE “ZERO OCCURRENCES”

Purpose Statement:

The focus on “ZERO OCCURRENCES” is a pro-active approach to make a conscious e�ort to signi�cantly reduce the number and frequency of operational occurrences and security incidents in order to promote rail as the preferred transport choice in South Africa. It is about a mind-set, a value, an aspiration and a culture change in the railway industry.The underpinning philosophy that informs this vision is that “every occurrence can be avoided and that every occurrence is everybody’s responsibility”.

Strategic Outcome 1: RISKS IN THE RAILWAY LANDSCAPE HAVE BEEN MITIGATED

Outcome Goal Statement:

Mitigate risks of occurrences by designing and establishing an appropriate regulatory approach to oversee, monitor and enforce railway safety within the regulatory framework provided by the NRSR Act, policies, procedures, standards and other operating guidelines.

Strategic Outcome 2: RAILWAY SAFETY EFFECTIVELY PROMOTED


Address the lack of awareness regarding railway safety through education, communication and training initiatives within the community and among industry role-players

Strategic Outcome 3: NEW INVESTMENTS IN RAIL INFRASTRUCTURE AND TECHNOLOGIES IMPACT POSITIVELY ON RAILWAY SAFETY

Outcome Goal Statement: Ensure investments in rail infrastructure and technologies address safety improvements

Strategic Outcome 4: SUSTAINABLE INSTITUTIONAL GROWTH AND DEVELOPMENT


Enrich organisational governance processes and procedures to promote integrated thinking and collaboration, and to enable the sustainable growth and development of the RSR

31


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2014

/201

5 A

nnua

l Tar

get

Act

ual P

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rman

ceRe

ason

for D

evia

tion

/Co

mm

ent

Act

ion

Plan

9Ed

ucat

ion

Awar

enes

s Ca

mpa

igns

con

duct

edN

ew In

dica

tor

2 Ed

ucat

ion

Awar

enes

s Ca

mpa

igns

con

duct

ed o

n a

spec

i�ed

saf

ety

topi

c

19 O

pera

tor w

orks

hops

wer

e co

nduc

ted

Targ

et A

chie

ved

Addi

tiona

l ses

sion

s w

ere

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d to

edu

cate

O

pera

tors

on

the

NIM

S M

odul

es th

at w

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impl

emen

ted

10N

umbe

r of S

take

hold

er

Enga

gem

ents

con

duct

edN

ew In

dica

tor

4 St

akeh

olde

r Eng

agem

ent

sess

ions

con

duct

ed4

Stak

ehol

der E

ngag

emen

t se

ssio

ns c

ondu

cted

Targ

et A

chie

ved

11Pr

o�lin

g ca

mpa

igns

co

nduc

ted

New

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cato

r

12 P

ro�l

ing

cam

paig

ns

cond

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Pro

�lin

g ca

mpa

igns

co

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ted

Targ

et A

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ved

1 Ra

ilway

Saf

ety

Conf

eren

ce

plan

ned

and

host

ed1

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ay S

afet

y Co

nfer

ence

pl

anne

d an

d ho

sted

Targ

et A

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ved

Stra

tegi

c O

bjec

tive

2.2

: In

form

sta

keho

lder

s on

Sta

te o

f Saf

ety

in ra

il

Obj

ecti

ve S

tate

men

t: U

se th

e St

ate

of S

afet

y Re

port

to in

crea

se p

ublic

kno

wle

dge

and

guid

e st

akeh

olde

rs o

f the

issu

es a

nd c

halle

nges

in th

e ra

il en

viro

nmen

t to

incr

ease

saf

ety

awar

enes

s

No

Stra

tegi

c Ke

y Pe

rfor

man

ce In

dica

tor

(KPI

)

Base

line

as a

t 20

12/2

013

2014

/201

5 A

nnua

l Tar

get

Act

ual P

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rman

ceRe

ason

for D

evia

tion

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mm

ent

Act

ion

Plan

12Re

port

to R

SA n

atio

n on

th

e St

ate

of S

afet

ySt

ate

of S

afet

y Re

port

de

velo

ped

Stat

e of

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ety

Repo

rt

diss

emin

ated

Stat

e of

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ety

Repo

rt

diss

emin

ated

Targ

et A

chie

ved

34


Stra

tegi

c O

bjec

tive

2.2

: In

form

sta

keho

lder

s on

Sta

te o

f Saf

ety

in ra

il

Obj

ecti

ve S

tate

men

t: U

se th

e St

ate

of S

afet

y Re

port

to in

crea

se p

ublic

kno

wle

dge

and

guid

e st

akeh

olde

rs o

f the

issu

es a

nd c

halle

nges

in th

e ra

il en

viro

nmen

t to

incr

ease

saf

ety

awar

enes

s

No

Stra

tegi

c Ke

y Pe

rfor

man

ce In

dica

tor

(KPI

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Base

line

as a

t 20

12/2

013

2014

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5 A

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l Tar

get

Act

ual P

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rman

ceRe

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for D

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tion

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ion

Plan

13N

umbe

r of E

xter

nal

Tech

nica

l Saf

ety

wor

ksho

ps

cond

ucte

dN

ew In

dica

tor

10 E

xter

nal T

echn

ical

Saf

ety

wor

ksho

ps c

ondu

cted

33 E

xter

nal T

echn

ical

Saf

ety

wor

ksho

ps w

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rget

Ach

ieve

d

Addi

tiona

l ses

sion

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held

due

to th

e de

man

d fr

om O

pera

tors

requ

iring

tr

aini

ng o

n St

anda

rds.

Th

ese

sess

ions

wer

e pa

id

for b

y th

e O

pera

tors

STRA

TEG

IC O

UTC

OM

E 3:

NEW

INV

ESTM

ENTS

IN R

AIL

INFR

AST

RUCT

URE

AN

D T

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NO

LOG

IES

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CTS

POSI

TIV

ELY

ON

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ILW

AY S

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TY

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com

e D

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on:

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re in

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men

ts in

rail

infr

astr

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re a

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chno

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es a

ddre

ss s

afet

y im

prov

emen

ts

Stra

tegi

c O

bjec

tive

3.1

: A

pro

cess

for R

SR s

afet

y as

sura

nce

of ra

il in

vest

men

t and

tech

nolo

gy c

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es

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ve S

tate

men

t: G

uide

indu

stry

inve

stm

ent a

nd te

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cha

nges

to e

nsur

e sa

fety

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plia

nce

and

impr

ovem

ents

No

Stra

tegi

c Ke

y Pe

rfor

man

ce In

dica

tor

(KPI

)

Base

line

as a

t 20

12/2

013

2014

/201

5 A

nnua

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get

Act

ual P

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rman

ceRe

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for D

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Plan

14Te

chno

logy

Rev

iew

s co

nduc

ted

80 %

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y Re

view

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aken

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view

s re

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r the

�n

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of t

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et A

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ved

72 o

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ived

w

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plet

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Addi

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l rev

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s w

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d du

e to

the

dem

and

from

Ope

rato

rs

for R

SR to

revi

ew th

eir n

ew

wor

ks

35


STRA

TEG

IC O

UTC

OM

E 4:

SU

STA

INA

BLE

INST

ITU

TIO

NA

L G

ROW

TH A

ND

DEV

ELO

PMEN

T

Out

com

e D

escr

ipti

on:

Enric

h or

gani

satio

nal g

over

nanc

e pr

oces

ses

and

proc

edur

es to

pro

mot

e in

tegr

ated

thin

king

and

col

labo

ratio

n an

d to

ena

ble

the

sust

aina

ble

grow

th a

nd d

evel

opm

ent o

f th

e RS

R

Stra

tegi

c O

bjec

tive

4.1

: A

ssur

e co

rpor

ate

sust

aina

bilit

y an

d gr

owth

Obj

ecti

ve S

tate

men

t: D

evel

op c

orpo

rate

inst

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nal c

apab

ilitie

s to

ens

ure

sust

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y an

d to

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ctiv

ely

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age

orga

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l gro

wth

and

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t

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tegi

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y Pe

rfor

man

ce In

dica

tor

(KPI

)

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as a

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5 A

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get

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ual P

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ason

for D

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15N

umbe

r of I

nitia

tives

to

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st S

AD

C co

untr

ies

3 In

itiat

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plet

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rget

Ach

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d

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unic

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ted

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stom

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are

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Cent

re

esta

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hed

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re

esta

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hed

Targ

et A

chie

ved

4 Br

andi

ng In

itiat

ives

co

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4 Br

andi

ng In

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ives

co

nduc

ted

Targ

et A

chie

ved

17Co

-ope

rativ

e Ag

reem

ents

be

twee

n RS

R an

d ex

tern

al

part

ies

impl

emen

ted

Num

ber o

f Agr

eem

ents

re

new

ed, c

oncl

uded

and

im

plem

ente

d11

Agr

eem

ents

impl

emen

ted

11 A

gree

men

ts im

plem

ente

dTa

rget

Ach

ieve

d

36


Stra

tegi

c O

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tive

4.2

: G

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ntee

e� e

ctiv

e re

sour

ce m

anag

emen

t

Obj

ecti

ve S

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men

t: E

nabl

e e�

ect

ive

and

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ient

man

agem

ent o

f org

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atio

nal r

esou

rces

to s

uppo

rt th

e su

stai

ned

grow

th a

nd d

evel

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ent o

f the

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Stra

tegi

c Ke

y Pe

rfor

man

ce In

dica

tor

(KPI

)

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line

as a

t 20

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2014

/201

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l Tar

get

Act

ual P

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rman

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ason

for D

evia

tion

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ion

Plan

18Pe

rcen

tage

of R

even

ue

e� e

ctiv

ely

colle

cted

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cato

r95

% o

f Rev

enue

gen

erat

ed

from

exc

hang

e tr

ansa

ctio

ns

colle

cted

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of R

even

ue g

ener

ated

fr

om e

xcha

nge

tran

sact

ions

co

llect

edTa

rget

Ach

ieve

d

19N

IMS

impl

emen

ted

% Im

plem

enta

tion

of th

e IC

T St

rate

gy10

0 %

NIM

S Ph

ase

2 im

plem

ente

dTa

rget

not

Ach

ieve

d

The

impl

emen

tatio

n of

this

m

odul

e w

as d

elay

ed d

ue

to p

ilotin

g th

e O

ccur

renc

e M

odul

e w

ith O

pera

tors

th

at to

ok lo

nger

than

an

ticip

ated

.

The

targ

et is

fore

cast

ed to

be

dev

elop

ed in

the

2015

/16

� nan

cial

yea

r

20Pr

ocur

emen

t fro

m B

lack

O

wne

d En

terp

rises

% Im

plem

enta

tion

of th

e BB

BEE

Stra

tegy

60 %

of n

ew p

rocu

rem

ents

fr

om B

BBEE

Ent

erpr

ises

90.5

3 %

of n

ew

proc

urem

ents

from

BBB

EE

Ente

rpris

esTa

rget

Ach

ieve

d

RSR

regi

ster

ed m

ore

BBBE

E En

terp

rises

on

thei

r dat

abas

e an

d co

uld

ther

efor

e pr

ocur

e m

ore

serv

ices

from

BBB

EE

Ente

rpris

es

37


37


REPORTGOVERNANCE

CORPORATE

38


Introduction

The RSR, is governed by the Board of Directors appointed through the National Railway Safety Regulator Act No 16 of 2002 as amended (“the Act”) and reports to the Minister of Transport. The Board of Directors provides strategic guidance to achieve the safety mandate with which the RSR is entrusted and provides a framework for improving the corporate governance of the RSR as prescribed in the Act.

Contained in this corporate report, are the activities of the Board and those of the RSR as a whole. It re�ects the corporate governance performance in respect of its conduct both in terms of processes as they relate to board meetings and committees, as well as the conduct of the RSR in pursuing its legislative role, mandate and obligations.

The Board of Directors

The RSR is committed to good governance and practises ethical standards in discharging its mandate through its Board of Directors. The Board is appointed by the Minister of Transport in terms of the National Railway Safety Regulator Act No 16 of 2002 as amended. In executing its mandate, the Board is guided by the Board Charter and terms of reference of its subcommittees.

All of the non-executive directors are independent and are expected to contribute an unfettered and independent view on matters considered by the Board. They have signi�cant in�uence in deliberations at meetings and bring a wide range of experience and professional skills to the Board. They are required to execute their duties properly and to participate actively in the proceedings at Board meetings.

Board meetings are scheduled annually in advance. Special meetings are convened as and when required to address speci�c issues.

In terms of the Board Charter, the Board retains full control over the RSR, its plans and strategy. The Board acknowledges its responsibilities to strategy, compliance with internal policies, external laws and regulations, performance management, e�ective risk management, transparency and e�ective communication, both internally and externally, by the RSR

The information needs of the Board are considered on a regular basis and directors are given access to company information, records, documents and property. Directors also have access to all members of management of the entity.

It is important to note that the CEO is an ex-o�cio member of the Board.

During the year under review, the Board reviewed and approved its Charter and the terms of reference of its subcommittees to ensure that they are in line with King III and best practices, in terms of good corporate governance. An independent evaluation of the performance of the Board and its subcommittees, against its Charter and the terms of reference, was satisfactory conducted.

39


NAME APPOINTMENT DATE

Matodzi Ratshimbilani* 01 November 2013 (Re-appointment)

Jane Barrett 01 November 2013 (Re-appointment)

Mala Somaru 01 November 2013 (Re-appointment)

Willem Venter 01 November 2013 (Re-appointment)

Thobile Lamati** 01 November 2013 (Re-appointment)

Thembelihle Msibi**** 01 November 2013 (Re-appointment)

Mitesh Patel*** 01 March 2012

Herry Masindi 01 November 2013

Norman Baloyi 01 November 2013

Masaccha Mbonambi 01 November 2013

Natalie Skeepers 01 November 2013

Ex O�cio Member

Nkululeko Poya Appointed as the CEO in October 2011

* Mr Matodzi Ratshimbilani resigned on 15 August 2014** Mr Thobile Lamati resigned on 28 November 2014*** Mr Mitesh Patel resigned on 30 June 2014****Ms Thembelihle Msibi appointed Board Chairperson in March 2015

40


Boar

d M

eetin

gsTh

e fo

llow

ing

tabl

e de

pict

s RS

R Bo

ard

Mee

tings

whi

ch to

ok p

lace

for t

he p

erio

d un

der r

evie

w. F

our B

oard

mee

tings

wer

e pl

anne

d as

wel

l as

spec

ial m

eetin

gs, w

hich

are

list

ed b

elow

:

NA

ME

29/0

4/14

09/0

5/14

29/0

5/14

09/0

7/14

24/0

7/14

31/0

7/14

15/0

8/14

03/0

9/14

04/0

9/14

30/1

0/14

06/1

1/14

02/1

2/14

27/0

1/15

26/0

2/15

Mat

odzi

Ra

tshi

mbi

lani

PP

PP

PA

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Jane

Bar

rett

PP

PP

PP

PP

PP

AP

AP

Mal

a So

mar

uP

PP

PA

PP

PP

PP

PP

P

Thob

ile

Lam

ati

PP

PA

AA

PP

AP

AN

/AN

/AN

/A

Them

bi M

sibi

PP

AA

AP

PA

AP

PP

AA

Mite

sh P

atel

PP

PA

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Nku

lule

ko

Poya

P

PP

PP

PP

PP

PP

PP

P

And

re

Har

rison

PP

PP

PP

PP

PP

PP

PP

Mas

acch

a M

bona

mbi

AA

PP

AA

AA

AP

AP

PA

Her

ry M

asin

diP

PP

PP

PP

PP

PP

PP

P

Will

em V

ente

rP

PP

AP

PP

AA

PA

PA

A

Nor

man

Ba

loyi

PP

PP

PP

PP

PP

PP

PP

Nat

alie

Sk

eepe

rsP

PP

PP

PP

PP

PA

PA

P

41


Other Board Activities

NAME

31/07/14(Corporate Governance Training)

03/09/14(Strategic Plan Workshop

04/09/14(Strategic Plan Workshop)

23/09/14(AGM)

30/10/14(Ministers Meeting)

19/02/15 (Procurement Training)

Matodzi Ratshimbilani A N/A N/A N/A N/A N/A

Jane Barrett P P P P P A

Mala Somaru P P P P P P

Willem Venter P A A P P A

Thobile Lamati A P A A P N/A

Nkululeko Poya P P P P P A

Andre Harrison P P P P P A

Masaccha Mbonambi A A A P P P

Herry Masindi P P P P P A

Norman Baloyi P P P P P P

Natalie Skeepers P P P A A A

Legend: P = Present, A = Apology

Board CommitteesThe Board has established its Committees with various performance functions to assist in the execution of its responsibilities.

The reports and recommendations of the committees to the Board ensure transparency and full disclosure of committee and business related activities. Each committee operates within terms of reference that set out the composition, role, responsibilities, delegated authority and the requirements for convening meetings.

Committee meeting agendas, papers and minutes are made available to all members of the Board on request. Sub-committees may also be formed on an ad hoc basis to deal with a speci�c matter.

There are four Committees and the Board oversees the RSR through these Committees. The Committees provide an e�cient and proactive space for the processing of information before Board meetings. Of critical importance is the fact that all Committees have enhanced their performance to optimal levels and that the available human resources in terms of Board members were utilised e�ectively and e�ciently during the year under review.

42


Audit and Risk Management Committee

MEMBERS 16//04/14 22/04/14 16/05/14 22/07/14 20/10/14 26/01/15

Mmathebe Moja (Chairperson-Independent)

P P P P P P

Tshepo Mofokeng (Independent) P P A P P P

Mitesh Patel P A P R R R

Masaccha Mbonambi P A A A P A

Norman Baloyi P P P P A P

Nkululeko Poya P P P P P P

Procurement CommitteeMEMBERS 25/04/14 28/05/14 11/06/14 19/07/14 23/02/15

Mitesh Patel (Chairperson) P P P N/A N/A

Mala Somaru P P P P A

Masaccha Mbonambi A P P P P

Norman Baloyi P P P P P

Nkululeko Poya P P P P P

Jane Barrette N/A N/A N/A N/A P

Railway Safety CommitteeMEMBERS 11/04/14 10/07/14 10/10/14 12/02/15

Natalie Skeepers (Chairperson) P P P P

Mala Somaru P P P P

Thobile Lamati A A A N/A

Willem Venter P P P A

Jane Barrett P A A P

Nkululeko Poya P P P P

Andre Harrison P A P P

Human Resources and Remuneration CommitteeMEMBERS 15/04/14 24/04/14 18/06/14 30/07/14 17/09/14 10/02/15

Thembi Msibi (Chairperson) P P P P P P

Nkululeko Poya P P P P P P

Natalie Skeepers P P P P P P

Andre Harrison P P P P P P

Herry Masindi P P P P P P

Legend: P – Present, A - Apology, R - Resigned

43


Integrated Risk ManagementThe Board is responsible for entrenching RSR-wide risk management governance through e�ective leadership. Management accounts to the Board for the integration of risk management into the RSR’s daily operations and for the implementation and monitoring of the risk management process.

The Board Audit and Risk Committee considers all risk matters and provides advice and guidance on the overall risk management system, with particular attention on risk that have been measured as above acceptable tolerance levels. The Audit and Risk Committee further independently monitors the e�ectiveness of the risk management system and reports to the Board accordingly.

The RSR has implemented an integrated internal risk management strategy through which risks and opportunities are identi�ed on an ongoing basis. This strategy is underpinned and guided by the following key principles:

i. A strong and solid risk culture is a critical pillar of good governance;

ii. Consideration of real and potential risks in decision making processes;

iii. The acceptance that risk management is mandatory;

iv. Continuously monitoring of the risk exposure as impacted by the changing internal and external environments;

v. Acceptance that accountability for risk management cannot be deferred or shifted; and

vi. The importance of maintaining appropriate balance between risk and control.

Governance of Risk ManagementThe Audit Committee is responsible for the oversight of the risk management function. The Risk Management Unit reports to the Committee on RSR’s management of risk. The Committee has reviewed the risk register and it was satis�ed with the risk management process of the RSR.

The RSR ensures progress in the management of risks through its risk monitoring activities. It is committed to improving its risk performance on an ongoing basis, where high risk areas are targeted through focused resources and e�ort.

Fraud PreventionThe RSR has implemented a Fraud and Corruption Prevention Strategy as part of the overall governance strategy. The e�ectiveness of the Fraud and Corruption Prevention Strategy monitored on an ongoing basis. Management is responsible for the prevention of incidents and occurrences of fraud and corruption, and it does this through the design, implementation and monitoring of a sound system of internal control.

A risk assessment with speci�c focus on fraud and corruption is conducted annually and monitoring and reporting is done continually. The education and awareness of potential incidents of fraud and corruption is conducted in a regular basis.

Internal AuditThe RSR has established an Internal Audit Activity (IAA) in line with the Public Finance Management Act (PFMA) and the Treasury Regulations. Internal Audit is an independent and objective assurance and consulting activity, established to add value and improve RSR operations. It assists the RSR to accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the e�ectiveness of risk management, internal control and governance systems, which must be managed in a manner that ensures:

• The e�ectiveness and e�ciency of operations, investments and projects;• The safeguarding of RSR assets;• The reliability and integrity of �nancial and non- �nancial information;• Processes regarding compliance with laws and regulations.

The IAA reports functionally to the Board Audit and Risk Committee and administratively to the CEO. The IAA report to the Committee includes performance against the approved risk based plans, providing the Committee with reasonable assurance that the high-risk areas have been reviewed.

Audit and Risk Committee MembersThe Audit and Risk Committee (ARC) consists of the members listed in the table on page 42 and should meet at least four times annually as per the adopted charter of the RSR. During the year under review six meetings were held and the attendance is re�ected in the table on page 42

44


Audit Committee ResponsibilityWe report that we have adopted appropriate formal terms of reference in our Audit and Risk Committee Charter in line with the requirements of section 51 (1) (a) (ii) of the Public Finance Act No. 1 of 1999 and Treasury Regulation 27.1. We further report that we conducted our a� airs in compliance with this charter and have discharged our responsibilities as contained therein.

The Effectiveness of Internal ControlThe system of internal controls is designed to provide the cost e� ective assurance that assets are safeguarded and that liabilities and working capital are e� ciently managed.

In line with the requirements of the PFMA and King III Report as adopted by management, Internal Audit Activity provides the ARC and Management with assurance that the system of internal controls are adequate and e� ective. This is achieved by means of evaluating the e� ectiveness of the risk management process, as well as the identi� cation of corrective actions and suggested enhancements to the controls and processes.

From the various reports of the Internal Auditors, the audit report on the Annual Financial Statements and management letter of the Auditor-General, we can report that the system of internal control for the period under review was e� ective and e� cient.

Effectiveness of Internal Audit ActivityThe following internal audit work was completed during the year under review:

Detailed Annual Plan Deliverables 2014/2015:• Leave Management• Employee Performance Management• Legislative Compliance Review• Supply Chain Management• Contract Management• Performance Information• Revenue Management• Penalty Management• Budget and Expenditure Management• Follow-up Audit: Auditor General Management letter• Asset Management

Ad-hoc Audits• Asset veri� cation review• Payroll Migration Audit• NIMS IT Audit• Review of AFS

The internal audit function was e� ective and addressed the risks pertinent to RSR.

In-Year Management and Monthly/Quarterly ReportWe are satis� ed with the content and quality of the quarterly reports prepared and issued by the Accounting O� cer of RSR.

Evaluation of Financial StatementsThe Audit and Risk Committee has:

• Reviewed and discussed with the Auditor-General and the Accounting O� cer the audited annual � nancial statements to be included in the annual report;

• Reviewed the accounting policies and practices;• Reviewed the Auditor-General’s management letter

and management’s response thereto; and• Reviewed the RSR’s compliance with legal and

regulatory provisions.

Matters of ConcernThe Audit and Risk Committee noted the unfavourable moves in the � nancial ratios with concern. Management reported the cause to the unfavourable moves are debtors that are related to the penalties levied to operators. The operators previously disputed the penalties until the matter was resolved on the publication in the gazette recently. Other signi� cant debtors relate to the technical reviews introduced by the RSR following a review of internal processes. These debts were collected post year end.

The Audit and Risk Committee resolved to monitor these areas

closely during the new � nancial year.

Auditors ReportWe have met with the Auditor-General to ensure that there are no unresolved issues.

We concur with and accept the Auditor-General’s report on the Annual Financial Statements and are of the opinion that the audited Annual Financial Statements should be accepted and read together with the report of the Audit-General.

_________________Mmathebe MojaChairperson of the Audit and Risk Committee

45


45


INFORMATION

HUMANRESOURCES

46


Introduction

Organisational Environment

During the period under review, the Human Resources Department successfully facilitated a major job evaluation exercise throughout the organisation, followed by a remuneration benchmarking exercise. In order to ensure that the RSR is able to attract and retain the required skills to achieve its strategic objectives, it was important to consider the remuneration paid to comparable skills in the market. The remuneration benchmarking exercise was further reinforced by the fact that the RSR employs a number of specialised technical skills that makes it di�cult to compare with direct comparable positions. This exercise resulted in RSR employees being satis�ed with the current reward process as it recognises their e�orts and thus puts the organisation in a favourable position in as far as its Employee Value Proposition (EVP) is concerned.

The identi�cation of engineers as a scarce and critical skill has led to the RSR implementing internship programmes to ensure the availability of a talent pipeline of engineers and technicians.

Among the critical challenges currently confronting the organisation from a human resources perspective is the high vacancy rate, informed by the lack of su�cient budget, to �ll critical vacancies. The Department is to embark on a rigorous employee wellness strategy and programme to mitigate organisational risks, particularly those relating to executives and the inspectorate. An Executive Health Programme is to be embarked on in the new �nancial year to mitigate the risks associated with executives and the inspectorate, such as stress management.

Youth DevelopmentThe National Skills Development Strategy prioritises the strategic interventions and government transformation imperatives to address the current skills requirements and equity in the transport sector. Following promulgation of the funding regulations, the Transport, Education and Training Authority (TETA) may determine and allocate discretionary grants in support of the Sector Skills Plans (SSPs). In this regard, the funding of interns was advertised by 15 October 2014. The RSR’s submission for grant funding was successful and was allocated a grant of R756 000 for the placement of fourteen interns. An advertisement inviting students to apply for intern positions in the RSR was placed in the relevant media and on the RSR’s website.

Training

In April 2014, the Human Resources department responded to an invitation extended by TETA to nominate female employees in the engineering �eld for its prestigious international leadership development programme (ILDP). A submission motivating for the RSR’s three female Safety Inspectors to participate in the programme was submitted. Following a rigorous selection process, only one candidate from the RSR was nominated. This programme was an initiative of TETA aimed at accelerating the development of future leaders in the Transport Sector. It was an intense and accelerated training programme that targeted prospective managers from the historically disadvantaged groups, as articulated in the TETA strategic document.

Employment EquityThe RSR’s Employment Equity Plan was developed and submitted to the Department of Labour. The Plan made special provisions for the appointment of females and people with disabilities in the RSR. The set target for the 2015/16 �nancial year is that at least 2% of the total sta� complement should be people with disabilities. To achieve this target, the RSR engaged with disability associations in possession of databases of skilled people with disabilities, with regards to posts that will be advertised.

Policy DevelopmentThe following policies were developed during the �nancial year under review and presented to the HRRC for adoption and recommendation to the Board for approval, subject to minor additions and/or editions:

• Remuneration Policy;• Policy on Training, Education and Development;• Acting Policy; • Payroll Policy; and the• Conditions of Service.

47


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48


Personnel Costs by Salary Bands

SALARY BANDS PERSONNEL EXPENDITURE (R’000)

% OF TOTAL PERSONNEL COST

AVERAGE PERSONNEL COST PER EMPLOYEE (R’000)

Lower skilled 631,105 0.010% 4,058

Skilled 622,989 0.73% 31,555

Highly skilled production 12,017,788 14.14% 343,365. 37

Highly skilled supervision 20,266,359 23.86% 921,198

Senior Management 28,587,780 33.64% 1,191,157

Professionals 23,480,295 27.63% 757,429

TOTAL 84,983,327 100% 643,813.08

Salaries by Department 2014/15

DEPARTMENTSALARIES

Amount (R’000) Salaries as a % of personnel cost

Office of the CEO 7,883,100 9%

Corporate Affairs 12,125,729 14%

Investigations 6,844,412 8%

Research and Technical Services 15,724,066 19%

Operations 26,211,595 31%

Human Resources 3,564,422 4%

Finance 9,051,072 11%

Regulation and Governance 3,578,931 4%

TOTAL 84,983,327 100%

49


Employment and Vacancies

DEPARTMENT

NUMBER OF POSTS 2014/15 STAFF PLAN

NUMBER OF POSTS FILLED

VACANCY RATE

NUMBER OF POSTS FILLED ADDITIONAL TO THE ESTABLISHMENT

O�ce Of the CEO 15 9 40% 0

Corporate A�airs 63 10 84% 0

Investigations 43 9 79% 0

Research and Technical Services 67 16 76% 0

Operations 247 64 74% 0

Human Resources 18 5 72% 0

Finance 25 15 40% 0

Regulation and Governance 9 4 56% 0

TOTAL 487 132 73% 0

Employment and Vacancies by salary bands

SALARY LEVEL NUMBER OF POSTS NUMBER OF POSTS FILLED VACANCY RATE


Unskilled 27 20 26% 13

Administrative Sta� 150 36 76% 0

Middle Management 56 22 61% 0

Top Management 61 24 61% 2

Professionals 193 31 84% 0

TOTAL 487 132 27% 15

Employment and Vacancies by Critical Occupation

CRITICAL/ TECHNICAL POSITIONS

NUMBER OF POSTS NUMBER OF POSTS FILLED VACANCY RATE


Intern Inspectors 13 13 0% 0

Trainee Inspectors 73 3 96% 0

Railway Safety Inspector 41 13 68% 0

Principal Inspector 66 2 97% 0

TOTAL 193 31 84% 0

50


Profile whose salary positions were upgradedGENDER AFRICAN ASIAN COLOURED WHITE TOTAL

FEMALE 2 0 0 0 2

MALE 3 0 0 0 3

TOTAL 5 0 0 0 5

Annual turnover rates by salary level

SALARY LEVEL

NUMBER OF EMPLOYEES PER LEVEL AS AT 31 MARCH 2014

APPOINTMENTS TERMINATIONS TURNOVER RATE

Unskilled 5 15 0 0 %

Administrative Sta� 27 9 2 1.5 %

Middle Management 21 1 0 0 %

Top Management 17 10 2 2.2 %

Professionals 25 6 0 0 %

TOTAL 95 41 4 3.7 %

Reasons for Termination of Employment

TERMINATION TYPE NUMBER % OF TOTAL

Death 0 0

Resignation 2 2.2 %

Expiry of Contract 0 0

Dismissal operational changes 0 0

Dismissal ine�ciency 2 1.5 %

Discharged due to ill health 0 0

Retirement 0 0

Other 0 0

Total 4 3.7 %

51

RA ILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015Re

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53


Summary of all Human Resource Development InterventionsThe primary aim of Human Resource interventions is to assist the organization to achieve its purpose by adding value to its key resources and its employees. This means investing in people through training and development to enable them to perform better and empower them to make the best use of their natural abilities.

The following HRD interventions were implemented during the �nancial year under review.

Training Provided

Occupational Categories Gender

Number of Employees as at 31 March 14

Training

Learnerships

Skills Programmes and other short courses

Other forms of training Total

Top Management

Female 10 0 1 0 1

Male 17 0 0 0 0

Middle Management

Female 13 0 6 1 7

Male 9 0 5 0 5

ProfessionalsFemale 10 0 6 0 6

Male 21 0 10 0 10

Administrative Sta�

Female 23 0 7 0 7

Male 13 0 3 0 3

Elementary Occupations

Female 14 4 5 0 9

Male 6 8 2 0 10

People with Disabilities

Female 0 0 0 0 0

Male 0 0 0 0 0

TOTAL 132 12 45 1 58

54


Training needs identified

Occupational Categories Gender

Number of Employees as at 31 March 15

Training

Learnerships

Skills Programmes and other short courses

Other forms of training Total

Top Management

Female 10 0 2 0 2

Male 17 0 1 0 1

Middle Management

Female 13 0 11 0 11

Male 9 0 4 0 4

ProfessionalsFemale 10 0 7 0 7

Male 21 0 11 0 11

Administrative Sta�

Female 23 0 15 0 15

Male 13 0 10 0 10

Elementary Occupations

Female 14 4 5 0 9

Male 6 8 2 0 10

People with Disabilities

Female 0 0 0 0 0

Male 0 0 0 0 0

TOTAL 132 12 68 0 80

Bursaries A total of �ve (5) bursaries were awarded to employees who enrolled for the Master’s Degrees. Of these employees, four (4) are at Middle Management level and one (1) in the technical role.

55


LEAVE TABLES

The tables below depict the utilisation of annual, sick, family responsibility, maternity and study leave for the period under review:

Annual Leave April 2014 – March 2015

The table below depicts the utilization of leave by RSR employees. As part of the process to monitor absenteeism levels within the organization, all employees are required submit annual leave plans to the HR Unit. This planning process will assist in controlling the utilization of leave within the organization.

The table below indicate the number of employees in each occupational category and number of annual leave days taken in each of these categories

Occupational Category Total Days Taken Average days taken per Employee

No. of employees

Top Management 449 18 25

Middle Management 512 19 27

Professionals 578 19 30

Administrative Sta� 494 16 30

Elementary Occupation 222 11 20

TOTAL 2,255 17 132

Leave Payouts for Period, 1 April – 31 March 2015

Reason Total Amount R Number of Employees Average Payment per Employee

Leave payout for Termination of service 86,447.00 4 21,611.75

TOTAL 86,447.00 4 21,611.75

56


Sick Leave April 2014– March 2015The table below indicates the total number of employees in each occupational category and the number of sick leave days used in each category

Salary Band Total Days No. of Employees

% Total Employees using Sick Leave

Average Days per Employee

Total number of Employees using Sick Leave

Top Management 95 28 43% 8 12

Middle Management 250 24 63% 15 14

Professionals 112 30 77% 5 23

Administrative Sta� 144 30 77% 6 23

Elementary Occupation 70 20 45% 8 9

TOTAL 671 132 62.5% 8 81

Cost of sick leave

Salary Band Total Days No. of Employees Total Cost of Sick Leave

Top Management 95 28 356,439

Middle Management 250 24 695,452

Professionals 112 30 282,915

Administrative Sta� 144 30 49,531

Elementary Occupation 70 20 24,997

TOTAL 671 132 1,409,335

Family Responsibility Leave April 2014 – March 2015This table indicates the number of family responsibility leave days taken in each occupational category

Occupational Category Total Days Taken Average Days per Employee Number of Employees

Top Management 5 0.18 28

Middle Management 6 0.25 24

Professionals 7 0.23 30

Administrative Sta� 9 0.30 30

Elementary Occupation 3 0.15 20

TOTAL 30 0.22 132

57


Maternity Leave April 2014 – March 2015 The table below indicates the number of Maternity Leave days taken in each occupational category

Occupational Category Total Days Taken Average Days per Employee Number of Employees

Top Management 80 3.2 25

Middle Management 0 0 26

Professionals 80 2.7 30

Administrative Sta� 0 0 30

Elementary Occupation 0 0 20

TOTAL 160 1.2 132

INJURY ON DUTYThis table indicates the number of employees injured on duty

Nature of injury on Duty Number % of Total

Required basic Medical attention only 0 0

Temporary total disablement 2 100%

Permanent disablement 0 0

Fatal 0 0

Total 2 100%

59


59


OVERVIEWFINANCIAL

60


Overview

The �nancial statements are prepared in a manner required by the Generally Recognised Accounting Practice (GRAP), Public Finance Management Act, 1999 and also incorporate responsible disclosures in line with accounting practices of Railway Safety Regulator.

The RSR’s positive bottom line as shown in the statement of Financial Performance can be attributed to the e�ective internal controls and e�cient operational measures in place complimented by the revenue drive in ensuring sustainability of the entity. The main operating cost drivers are salaries, professional services and travel and accommodation.

The operating results for the year ended 31 March 2015 re�ect a surplus of R 11, 9 M which demonstrate an increase as compared to the adjusted surplus of R 719K for 2013/14 �nancial year. The reported surplus at 31 March 2014 has been adjusted from R 2, 9 M to R 719K because of the prior period error (see note 23 for details).

The surplus is mainly due to:

• Additional revenue gained from conducting Technology Reviews

• Procurement of capital items such as NIMS software and other ICT equipment contributed to the surplus as these depreciate over a longer time and the expenditure to that e�ect is minimal per year, and they are accounted for in the Balance Sheet leaving the Income Statement with only operating costs.

The table below illustrates the historic trends of Revenue versus Expenditure for the past �ve years:

FINANCIAL YEAR REVENUE EXPENDITURE

2010/11 R 47, 854, 464 R 47, 541, 698

2011/12 R 59, 532, 986 R 56, 058, 593

2012/13 R 78, 296, 754 R 81, 554, 679

2013/14 R 108, 263, 040 R 107, 544, 074

2014/15 R 150, 654, 328 R 138, 718, 760

The RSR does not budget for a surplus nor de�cit, the budget variances are disclosed on the Statement of Comparison of Budget and Actual amounts in the Annual Financial Statements.

61


The organisation has two main streams of revenue which are:

• Grant from the Department of Transport (34%);

• Safety Permit Fees from rail operators (53%).

The Operating Budget is focused more on resources available and used in the current period presented. The Budget does not include certain expenses that are paid over a long term and certain pledged contribution revenue that might not be received within the next �nancial year.

Total revenue increased by 39,16% as a result of technology reviews and technical workshops conducted by RSR as well as the increase in annual fees payable as published by the Minister of Transport in the Government Gazette. RSR has renewed operator permits in the year under review with a total revenue of R 79, M (2014: R 57, 9M)

Total expenditure increased by 28,99%, in the current �nancial year mainly due to an increase in sta� costs and consulting fees incurred by the core departments of RSR in achieving set targets.

COMMITMENTSRSR had a total of R 4, 8M in commitments at 31 March 2015 on goods and services already procured but awaiting delivery from the service providers.

BANK BALANCEAt the end of the �nancial period, RSR had a favourable bank balance of R 5 214 714 (2014: R 3 086 371)

OTHER FINANCIAL INDICATORS• A net surplus for the period was achieved;

• A net asset position was achieved (total assets exceeded total liabilities);

• RSR is able to pay its suppliers and creditors as they come due (on average 43.6 days).

63


63


ANNUAL

STATEMENTSFINANCIAL

64


STATEMENT OF FINANCIAL POSITIONNOTE(S) 2015 2014

R R

ASSETS

Current Assets 21, 078, 398 7, 166, 103

Trade and other receivables (exchange transactions) 2 15, 048, 508 3, 641, 263

Prepayments 3 815, 176 438, 469

Cash and cash equivalents 4 5, 214, 714 3, 086, 371

Non-Current Assets 17, 554, 760 9, 645, 170

Property, plant and equipment 5 6, 014, 828 6, 744, 003

Intangible assets 6 9, 119, 932 76,182

Intangible assets: work-in-progress 7 2, 420, 000 2, 824, 985

TOTAL ASSETS 38, 633, 158 16, 811, 273

LIABILITIES

Current Liabilities 24, 396, 133 14, 509, 815

Trade and other payables (exchange transactions) 8 20, 896, 133 14, 509, 815

Deferred Income 9 3, 500, 000 -

TOTAL LIABILITIES 24, 396, 133 14, 509, 815

Net Assets 14, 237, 025 2, 301, 458

Accumulated surplus 14, 237, 025 2, 301, 458

TOTAL NET ASSETS 38, 633 158 16, 811, 273

65


STATEMENT OF FINANCIAL PERFORMANCE

NOTE(S) 2015 2014

R R

REVENUE

Administration grant (non-exchange) 11 51, 504, 000 46, 513, 000

Administration of permits and application fees (exchange) 12 79, 709, 896 57, 918, 700

Revenue from technology reviews (exchange) 13 15, 417, 000 -

Penalties 14 1, 121, 333 3, 280, 001

Interest earned 15 373, 392 281, 295

Other Income 16 2, 528, 707 270, 044

Total Revenue 150, 654, 328 108, 263, 040

Personnel costs 17 (84, 983, 327) (65, 060, 023)

Provision for doubtful debt 18 (1, 075, 000) -

Depreciation, amortisation and write-o�s 19 (3, 984, 797) (1, 601, 690)

Other operational costs

Finance costs

20&22

21

(48, 673, 329)

(2, 307)

(40, 881, 269)

(92)

EXPENDITURE (138, 718, 760) (107, 543, 074)

SURPLUS FOR THE YEAR 11, 935, 568 719, 966

66


STATEMENT OF CHANGE IN NET ASSETS

NOTE(S) Accumulated Surplus

Total

R R

BALANCE AS AT 1 APRIL 2013 1, 581, 492 1, 581, 492

Surplus for the year 2, 919, 966 2, 919, 966

BALANCE AS AT 1 APRIL 2014 4 ,501, 458 4, 501, 458

Prior period error correction (refer to note 23) 23 (2, 200, 000) (2, 200, 000)

BALANCE AS AT 1 APRIL 2014 (RESTATED)

Surplus for the year 2014/15

2 ,301, 458

11, 935, 567

2, 301, 458

11, 935, 567

BALANCE AS AT 31 MARCH 2015 14, 237, 025 14, 237, 025

67


STATEMENT OF CASH FLOWS

NOTE(S) 2015 2014

R R

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts

Administrative grant 51, 504, 000 46, 513, 000

Revenue: Permits, Penalties and Technical Workshops 31.1 82, 672, 553 58, 151, 583

Other income received 31.2 7, 145, 130 44, 434

Interest received 347, 583 281, 295

141, 669, 266 104, 990, 312

Payments

To employees (82, 900, 525) (64, 288, 882)

To suppliers (49, 591, 101) (37, 893, 854)

Interest paid (2, 307) (92)

(132 ,493, 933) (102, 182, 828)

Net cash in�ows/(out�ows) from operating activities 31.3 9, 175, 333 2, 807, 484

CASH FLOWS FROM INVESTING ACTIVITIES

Property, plant and equipment purchased (937, 113) (363, 454)

Intangible assets purchased (6, 231, 381) (1, 874, 985)

Insurance claims from loss of property, plant and equipment 121,504 222, 807

Net cash out�ows from Investing activities (7, 046, 990) (2, 015, 632)

Net increase in cash and cash equivalents 2, 128, 343 791, 852

Cash and cash equivalents at the beginning of the year 3, 086, 371 2, 294, 519

Cash and cash equivalents at the end of the year 31.4 5, 214, 714 3, 086, 371

68

RA ILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015ST

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69


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1. PRESENTATION OF ANNUAL FINANCIAL STATEMENTS

The Railway Safety Regulator is a statutory organisation and primarily derives its mandate from its constitutive legislation, the National Railway Safety Regulation Act, Act 16 of 2002 (as amended), and a schedule 3A public entity in terms of the Public Finance Management Act (No. 1 of 1999), as amended.

The annual �nancial statements are based upon appropriate policies consistently applied and supported by reasonable and prudent judgements and estimates.

1.1 Basis of preparation

The annual �nancial statements have been prepared in accordance with the Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with section 55 of the Public Finance Management Act, (Act No. 1 of 1999), as amended including any interpretations, guidelines and directives issued thereof. Accounting policies for material transactions, events or conditions not covered by the GRAP reporting framework have been developed in accordance with paragraphs 7, 11 and 12 of GRAP 3 and the hierarchy approved in Directive 5 issued by the Accounting Standards Board.

The annual �nancial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention, unless speci�cally stated otherwise. They are presented in South African Rand, which is the functional currency of the entity. They are prepared on a going concern assumption and will continue operating in the foreseeable future.

A summary of signi�cant accounting policies, which has been consistently applied, are disclosed below.

The accounting policies applied are consistent with those used to present the previous year’s �nancial statements, unless explicitly stated. The details of any changes in accounting policies are explained in the relevant policy where applicable.

The cash�ow statement has been prepared in accordance with the directive method. The amount and nature of cash balances are disclosed.

1.1.1 Comparative information

When the presentation or classi�cation of items in the annual �nancial statement is amended, prior period comparative amounts are restated. The nature and reason for the reclassi�cation is disclosed. Where the accounting errors have been identi�ed in the current year, the correction is made retrospectively as far as is practicable, and prior year comparatives are restated accordingly. Where there has been a change in accounting policy in the current year, the

adjustment is made retrospectively as far as practicable, and the prior year comparatives are restated accordingly.

1.1.2 GRAP standards issued but not yet e�ective

The following standards have been issued but are not yet e�ective and have not been early adopted by the entity with the exception of GRAP 20.

GRAP 18 Segment Reporting

This standard requires additional disclosures on the various segments of the business in a manner that is considered with the information reported internally to the management of the entity. This standard where applicable would be compiled with from 1st April 2015.

GRAP 20 Related Party Disclosure

The objective of this Standard is to ensure that a reporting entity’s �nancial statements contain the disclosures necessary to draw attention to the possibility that its �nancial position and surplus or de�cit may have been a�ected by the existence of related parties and by transactions and outstanding balances with such parties. The entity is allowed to use this standard to disclose information in the �nancial statements.

GRAP 32 Service Concession Arrangements: Grantor

The objective of this Standard is to prescribe the accounting for service concessions arrangements by the grantor, a public sector entity. RSR does not participate in such business transactions and therefore no signi�cant impact is expected.

GRAP 105 Transfer of Functions between Entities under Common Control

The objective of this Standard is to establish accounting principles for the acquirer and transferor in a transfer of functions between entities under common control. No signi�cant impact is expected as the entity does not participate in such business transactions.

GRAP 106 Transfer of Functions between Entities not Under Common Control

The objective of this Standard is to establish accounting principles for the acquirer in a transfer of functions between entities not under common control. No signi�cant impact is expected as the entity does not participate in such business transactions.

GRAP 107 Mergers

The objective of this Standard is to establish the accounting principles for the combined and combining entities in a merger. No signi�cant impact is expected as RSR does not participate in such business transactions.

ACCOUNTING POLICIES

70


GRAP 108 Statutory Receivables

The objective of this Standard is to prescribe the accounting requirements for the recognition, measurement, presentation and disclosures of statutory receivables. Preliminary investigation indicate that the impact on the � nancial statement will be minimal.

Standards not applicable to the entity include:

GRAP 18 Segment reporting (Not required by the Accounting Standard Board)

GRAP 103 Heritage assets (RSR does not hold any Heritage assets)

Standards adopted by the entity

In the current year the entity has adopted e� ective standards and interpretations issued by the Accounting Standards Board (ASB) that are relevant to RSR. The adoption of these standards and interpretations has been consistent with those applied in the previous � nancial year.

Standards approved e� ective from 1st April 2015

The Minister of � nance has announced the e� ective date for GRAP 105,106 and 107 and where applicable will be complied with on the e� ective � nancial year.

Standards early adopted

GRAP 20 is not yet e� ective and has been used to disclose information in the � nancial statements.

1.1.3 Signi� cant accounting judgements and estimates

In preparing the annual � nancial statements, management is required to make estimates and assumptions that a� ect the amounts presented in the annual � nancial statements and related disclosures. Use of available information and application of judgement is inherent in the formation of estimates. Signi� cant judgements include the following:

Property, plant and equipment

In determining the useful life and residual values of each property, plant and equipment, management took into consideration the nature of each asset type and the usage of assets.

Intangible assets

In determining the useful life of the computer software, management assumed that software will have to be upgraded every three to � ve years. The residual value of computer software is regarded as zero due to the fact that computer software is not resalable.

Useful life is based on past experience as well as benchmarking with the other organisations. The residual value is de� ned as the estimated resale value or market value of an asset at the end its useful life.

Budget variances

Variance of 10% or more between budget and actual amounts are regarded as material. All material di� erences are explained.

1.2 Revenue Recognition

Revenue consists of:

Administration grant – non-exchange

Non-exchange transaction are de� ned as transactions where the entity receives value from another entity without directly giving approximately equal value in exchange. Revenue from non-exchange transaction is generally recognised to the extent that the related receipt or receivable quali� es for recognition as an asset and there is no liability to repay the amount. Revenue from administration grant are considered to be revenue from non-exchange transaction.

Revenue from non-exchange transaction is recognised when there is reasonable assurance that the grant will be received and the value thereof can be reliably measured. Revenue from non-exchange transaction is recognised to the extent that there is no obligation

71


arising from the receipt of the grant. Where a grant is subject to conditions RSR recognises a liability until the condition is ful� lled and grant is disclosed as deferred income.

Administration of permit and application fees – exchange.

Exchange transaction are de� ned as transactions where the entity receives asset or service or has liabilities extinguished, and directly gives approximately equal value to the other entity in exchange. Revenue from administration of permit and application fees is considered to be revenue from exchange transaction.

Revenue arising from permit fees as published in the Government Gazette by the Minister of Transport on an annual basis is recognised on an accrual basis, when economic bene� t is probable. This is presented as a credit in the statement of � nancial performance, used for organisation operational requirements.

Revenue received from conducting technology reviews and technical workshops (exchange)

The entity conducts technology reviews and recover costs in accordance with Section 17(1)(bB) of National Railway Safety Regulator Act of 2002, (Act No. 16 of 2002) as amended.

Penalties

This comprise of revenue arising from penalties charged as a result of failure by operators to comply with any provisions of the National Railway Safety Regulator Act of 2002, (Act No. 16 of 2002) as amended, the regulations and the standards that inhibit or prevent the Regulator’s ability to perform its mandate.

Finance costs

Finance costs comprise of interest charged on late operator’s payments. Interest on late payments is recognised using the e� ective interest rate of 9.25% calculated on a monthly basis as per section 80 (1) (b) of the PFMA. Finance costs also comprise of interest expense levied by service providers on late payments.

Deferred income

Conditional grants are classi� ed as deferred income until such time as the conditions attached to the grant are met. Once the condition have been met, the liability is transferred to revenue.

1.3 Property, plant and equipment

Initial Recognition

Property, plant and equipment are tangible non-current assets that are held for use in the production or supply of goods and services, rental to others or for administrative purposes, and are expected to be used during more than one period. The cost of an item of property, plant and equipment is recognised as an asset when:

• It is probable that the future economic bene� ts or services potential associated with the item will � ow to the entity, and the cost of the item can be measured reliably;• Property, plant and equipment is initially measured at cost or at fair value; and • When signi� cant components of an item of property, plant and equipment have di� erent useful lives, they are accounted for as separate items (major components) of property, plant

and equipment.

Initial Measurement

Property, plant and equipment is initially measured at cost at the acquisition date. The cost of item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and the condition necessary for it to be capable of operating in the manner intended by management. The cost also includes the necessary cost of dismantling and removing the asset and restoring the site on which it is located.

Cost include costs incurred initially to acquire or construct an item of property, plant and equipment, and cost incurred subsequently to add to, replace part of, or service

72


it. If a replacement costs is recognised in the carrying amount of an item, the carrying amount of the replaced part is de-recognised.

Subsequent Measurement – Cost Model

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The depreciation charge for each period is recognised in surplus or de�cit.

Depreciation

Property, plant and equipment, is depreciated on a straight line basis over their expected useful lives to their estimated residual value. The useful lives of items of property, plant and equipment have been assessed as follows:

Item Years

Computer Equipment 1.167 – 8

Furniture & Equipment 5 – 10

O�ce Equipment 3.33 – 9

Motor Vehicle 6

Capitalised leased asset 5

Leasehold improvement 5

The residual value, the useful life of an asset and the depreciation method are reviewed annually and any changes are recognised as a change in accounting estimate in the statement of �nancial performance.

1.4 Intangible assets

Initial recognition

An intangible asset is identi�ed as an intangible asset when it:

• Is capable of being separated or divided from and sold, transferred, licensed, rented or exchanged either individually or together with a related contract, asset or liability, or arises from contractual rights or other legal right regardless of whether those rights are transferable or separated from the entity or from other rights and obligations.

An intangible asset is recognised when:

• it is probable that the expected future economic bene�ts and or service potential that are attributable to the asset will �ow to the entity, and

• the cost or fair value of the asset can be measured reliably.

Intangible asset is initially measured at cost. When an

intangible asset is acquired through a non-exchange transaction, the cost shall be its fair value as at the date of acquisition (refer to de�nition of a non-exchange transaction under accounting policy no. 1.2)

Subsequent Measurement

Intangible assets are carried at cost less accumulated amortisation and any impairment losses.

Amortisation

Amortisation is provided to write down the intangible assets on a straight line basis to the residual values as follows:

Item Years

Computer Software 3 – 5

Intangible assets are considered to have a �nite useful lives. The depreciable amount of an intangible asset with a �nite useful life is allocated on a systematic basis over its useful life. Amortisation begins when the asset is available for use and ceases at the earlier of the date on which the asset is classi�ed as held for sale, or included in a disposal group that is classi�ed as held for sale, and the date on which the asset is de-recognised.

Computer Software

Expenditure on internally developed software is recognised as an asset when the entity is able to demonstrate its intention and ability to complete the development and used the software in a manner that will generate future bene�ts, and can reliably measure the costs to complete the development. The capitalised costs of internally developed software, included all costs directly attributable to developing the software and are amortised over its useful life.

Internally developed software is stated at capitalised cost less accumulated amortisation and impairment. Subsequent expenditure software assets is capitalised only when it increase the future economic bene�ts embodied on the speci�c asset to which it relates.

Amortisation is recognised in the statement of �nancial performance on a straight line basis over the estimated useful life of the software, from the date that it is available for use since this mostly closely re�ects the expected pattern of consumption of the future economic bene�ts embodied in the asset.

Amortisation methods, useful lives and residual values are reviewed at each �nancial year end adjusted if appropriate and any changes are recognised as a change in accounting estimate in the statement of �nancial performance.

73


1.5 Asset impairment

The carrying amount of the assets are reviewed at each reporting date to determine whether there is an indication for impairment. If there is an indication that the asset is impaired, its recoverable services amount is estimated. The estimated recoverable services amount is the higher of the assets fair value cost to sell and its value in use.

When the recoverable services amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. The reduction is an impairment loss.

The value in use is determined through depreciated replacement cost, restoration cost approach, or service units approach. The decision to the approach to use is dependent on the nature of the identi�ed impairment.

The impairment loss is recognised immediately in the statement of �nancial performance. After the recognition of the impairment loss, the depreciation usage for the assets is adjusted in future periods to allocate the assets revised carrying amount, less its residual value if any, on a systematic basis over its remaining useful life.

An impairment loss recognised in prior period for an asset (is reversed if there has been a change in the estimates used to determine the assets) recoverable amount since the last impairment loss was recognised. If this is the case, the carrying amount of the asset is increased to its recoverable services amount. The increase is the reversal of the impairment loss and is recognised in the statement of �nancial performance. The increased carrying amount attributable to a reversal of a loss, shall not exceed the carrying amount that would have been determined, net of depreciation, had not impairment loss been recognised in the prior periods.

The National Information Monitoring System is considered to be a cash generating asset as the commercial return is expected from the use thereof. All other items of intangible asset are considered to be non-cash generating assets as no commercial return is expected from them, including items of Property, plant and equipment.

1.6 De-recognition

Items of property, plant and equipment are de-recognised when asset is disposed or where there is no further economic bene�t or service potential expected from the use of the asset.

The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in surplus or de�cit when the item is de-recognised.

1.7 Financial Instruments

Initial recognition

The entity classi�es �nancial instruments, or their component parts on initial recognition as a �nancial asset, a �nancial liability or an equity instrument in accordance with the substance of the contractual arrangement, �nancial assets and �nancial liabilities are recognised in the Statement of �nancial position when the entity becomes party to the contractual provisions of the instrument. Financial assets are initial measured at fair value plus transaction costs. The entity’s principal �nancial assets are trade and other receivables, cash equivalents and trade and other payables.

Cash and cash equivalents

Cash comprises of cash on hand. Cash equivalents are investments amounts of cash in the bank subject to insigni�cant risk of change in value.

Trade and other receivables

Trade and other receivables are classi�ed as receivables and are subsequently measured at amortised cost less provision of doubtful debts. Write-down of these assets is expensed in the statement of �nancial performance.

Trade and Other Payables

All �nancial liabilities are measured at amortised cost, comprising original debt less principle payments and amortisation.

1.8 Unconditional Grant

Unconditional grant are recognised when the resources that have been transferred meet the criteria for recognition as an asset. A corresponding liability is raised to the extent that the grant is conditional. The liability is transferred to revenue as and when the conditions attached to the grant are met.

74


1.9 Employee bene�ts

Short term employee bene�ts

The cost of short term employee bene�ts (those payable within 12 months, after the service is provided, such as paid vacation leave, bonuses and non-monetary bene�ts such as medical aid) are recognised in the year in which the service is provided and are not discounted. The expected cost of compensated absences is recognised as an expense as the employee provides services that increase their entitlement or, in the case of non-accumulating absences, when the assets occur.

An accrual is recognised for the amount expected to be paid under a short term cash bene�t if the entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee.

The liability for employee entitlement to performance bonus and annual leave represents the amounts which RSR has a present obligation to pay as a result of employees’ services provided to the statement of �nancial position.

Post-employment bene�ts

The RSR provides de�ned contribution plan for the bene�t of employees. The plan is generally funded by payments form the employees and the entity. The entity does not provide for post- retirement medical bene�ts to its retirees.

De�ned contribution plan

The entity’s funding of the de�ned contribution plans is charged to sta� costs in the statement of �nancial performance in the year to which they relate.

1.9 Leases

Finance lease

A lease is classi�ed as a �nance lease if it transfers substantially all the risk and rewards incidental to ownership. Finance lease are recognised as assets and liabilities at the lower of the fair value of the assets and the present value of the minimum lease payments at the date of acquisition. Finance costs represents the di�erence between the total leasing commitments and the fair value of the assets acquired. Finance costs are charged to the statement of �nancial performance over the term of the lease at interest rate applicable to the lease on the remaining balance of the obligations.

Operating lease

A lease is classi�ed as an operating lease if it does not transfer substantial all the risk and rewards incidental to ownership. Operating lease payments are recognised in the statement of �nancial performance on a straight line basis over the time of the relevant lease taking into account any �xed price escalation.

1.10 Related parties

The entity operates in an economic sector currently dominated by the entities directly or indirectly by the South African Government. As consequence of the constitutional independence of the three spheres of Government in South Africa, only entities within the National sphere of government are considered to be related parties.

Key management is de�ned as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. All individuals at the level of the Chief Executive O�cer and Executive Management are regarded as key management per the de�nition of the �nancial reporting standard.

Close members of the family of the person in key management are considered to be those family members who may be expected to in�uence, or be in�uenced by that individual in their dealings with the entity.

Related party disclosures are provided in respect of transactions and balances with identi�ed related parties, other than transactions that would occur within a normal supplier or client/ recipient relationship. A related party transaction is a transfer of resources, services or obligations between related parties regardless of whether a price is charged.

1.11 Irregular and Fruitless and Wasteful Expenditure

Irregular expenditure is expenditure that is contrary to the PFMA, (Act no 1 of 1991) as amended or is in contravention of the RSR’s supply chain management policy. Irregular expenditure is accounted for in the statement of �nancial performance and where recovered it is subsequently accounted for as revenue in the statement of �nancial performance.

75


Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised.

1.12 Provisions and Contingencies

Provisions are recognised when:

• the entity has a present obligation as a result of

past events,

• it is probable that an out�ow of resources

embodying economic bene�ts or service potential

will be required to settle the obligation and

• a reliable estimate can be made of the obligation.

The amount of the provision is the best estimate of the expenditure expected to be required to settle the present obligation of the reporting date.

Where the e�ect of the time value of money is material, the amount of the provision is the present value of the expenditures expected to be required to settle the obligation.

Provisions are reviewed at each reporting date and adjusted to e�ect the current best estimate. Provisions are reversed if it is no longer probable that an out�ow of resources embodying economic bene�t or service potential will be required to settle the obligation.

Contingent asset and liabilities are not recognised, but are disclosed in Note 33. The RSR is required to disclose provisions for claims arising from a present legal or constructive obligation as a result of past events and is probable that this will result in an out�ow of economic bene�ts that can reasonably be estimated.

1.13 Budget information

The annual budget �gures have been prepared in accordance with the applicable GRAP standard and are consistent with the accounting policies adopted by the Board for the preparation of these �nancial statements. The amounts are presented as a separate additional �nancial statement named statement of Comparison of Budget and Actual Amounts. Explanatory comments are provided

in the Notes to the annual �nancial statement, stating the reasons for overall growth or decline in the Budget and secondly, explaining overspending or under spending on the line items. The annual budget �gures included in the �nancial statements are for the entity. These �gures are those approved by the Board at the beginning and during the year.

1.14 Events after reporting date

Recognised amounts in the Annual Financial Statements are adjusted to re�ect events arising after the reporting date that provide evidence of conditions that arose after the reporting date are dealt with by way of a note.

1.15 Translation of the foreign currency

A foreign currency transaction is recorded on initial recognition in Rands by applying to the foreign currency the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

1.16 Prepayment

A prepayment is a payment that is made in one accounting period, for goods and services that are expected to be received in future period. It is recognised as an asset in the Statement of �nancial position until the services are consumed. At the end of the �nancial year, the portion of the prepaid asset that has been rendered is expensed in the Statement of Financial Performance.

76


NOTES TO THE ANNUAL FINANCIAL STATEMENTS 2015 2014

R R

2. TRADE AND OTHER RECEIVABLES (EXCHANGE)

Trade debtors (Permit fees) 783,047 401,052

Trade debtors (Technology Reviews) 11,967,000 -

Trade debtors (Penalties) 2,150,000 3,190,001

Trade debtors (Workshops/Conference) 498,900 -

Other receivables 98,581 50,210

Accrued Income 4,647 -

Accrued Income: - Penalties 621,333 -

Provision for doubtful debts (1,075,000) -

15,048,508 3,641,263Trade debtors ageing

Current 12,183,205 186,800

0 to 30 days 350,190 60,100

31 to 60 days 74,849 -

61 to 90 days 361,160 7,000

Over 91 days 2,429,543 3,337,153

15,398,947 3,591,053

*50% provision for the penalty fees outstanding have been provided as at 31 March 2015.

3. PREPAYMENTS

Pre-paid expenses – ICT Licenses 657,149 438,469

Fire-wall solution build – advance payment 158,027 -

815,176 438,469

4. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

Bank balance 5,207,714 3,081,371

Petty cash 7,000 5,000

5,214,714 3,086,371

77


5. PROPERTY, PLANT AND EQUIPMENT

2015 2014

Cost Accumulated Depreciation

Carrying Value

Cost Accumulated Depreciation

Carrying Value

Computer Equipment 4,364,055 (2,548,296) 1,815,759 5,126,970 (3,667,051) 1,459,919

Furniture & Fittings 3,448,545 (1,956,319) 1,492,226 3,500,192 (1,679,651) 1,820,541

Office Equipment 803,291 (684,225) 119,066 865,905 (729,504) 136,401

Building Leasehold Improvements 3,696,825 (1,109,048) 2,587,777 4,860,103 (1,532,961) 3,327,142

Finance Lease Equipment - - - 1,507,430 (1,507,430) -

Motor Vehicle 165,239 (165,239) - 165,239 (165,239) -

Total 12,477,955 (6,463,127) 6,014,828 16,025,839 9,281,836 6,744,003

Reconciliation of PPE 2015 Opening Balance Addition Depreciation Written o� Total

Computer Equipment 1,459,919 1,296,283 (885,061) (55,382) 1,815,759

Furniture & Fittings 1,820,541 74,558 (373,370) (29,503) 1,492,226

Office Equipment 136,401 52,165 (65,941) (3,559) 119,066

Building Leasehold Improvements 3,327,142 - (739,365) - 2,587,777

Finance Lease Equipment - - - - -

Motor Vehicle - - - - -

Total 6,744,003 1,423,006 (2,063,737) (88,446) 6,014,828

Reconciliation of PPE 2014 Opening Balance Addition Depreciation Written o� Total

Computer Equipment 1,182,495 996,428 (663,512) (55,492) 1,459,919

Furniture & Fittings 1,290,843 852,243 (315,738) (6,807) 1,820,541

Office Equipment 112,069 100,568 (62,186) (14,050) 136,401

Building Leasehold Improvements 1 3,696,824 (369,683) - 3,327,142

Finance Lease Equipment 2 - (2) - -

Motor Vehicle 2 - (2) - -

Total 2,585,412 5,646,063 (1,411,123) (76,349) 6,744,003

Pledge as security

As at the reporting date, RSR had no property, plant and equipment pledged as security.

78


6. INTANGIBLE ASSETS

2015 2014

Cost Accumulated Amortisation

Carrying Value

Cost Accumulated Amortisation

Carrying Value

Computer Software 11,431,181 (2,311,249) 9,119,932 2,374,150 (2,297,968) 76,182

Total 11,431,181 (2,311,249) 9,119,932 2,374,150 (2,297,968) 76,182

Reconciliation of Intangible Assets: 2015

Opening Balance Addition Amortisation Written o� Total

Computer Software 76,182 10,876,366 (1,832,601) (15) 9,119,932

Total 76,182 10,876,366 (1,832,601) (15) 9,119,932

Reconciliation of Intangible Assets: 2014

Opening Balance Addition Amortisation Written o� Total

Computer Software 190,399 - (114,217) - 76,182

Total 190,399 - (114,217) - 76,182

The bulk of computer software relates to the National Information Management System Software (NIMS) which is being custom designed. NIMS is comprised of the following modules:

• Permit module was completed and put into use in June 2014.

• Occurrence module was completed and put into use in March 2015

• Operating concurrently with the NIMS module is the Electronic Document Management System which was pu

into use in June 2014.

7. INTANGIBLE ASSETS: WORK IN PROGRESS

2015 2014

R R

Documentum (EDMS) System - 1,874,985

NIMS 2,420,000 950,000

2,420,000 2,824,985

• The Audit and Inspection was completed in April 2015 and was not in use at year end.

79


8. TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS

2015 2014

R R

Trade Payables 5,807,659 2,895,285

Operating Lease 1,188,768 470,545

Accrued leave pay due to employees 2,656,460 2,081,504

Accrued bonuses (13th cheque optional) due to employees 482,487 597,189

Accrued expenses

NIMS: Occurrence Module 1,820,000 -

Travelling & Accommodation: 1,993,661 -

South African Revenue of Services 1,737,992 -

Rental 620,693 -

NIMS: Change Management 468,167 -

NIMS: Audits & Inspection module 2,420,000 -

Other: Municipal services, Telephone services, personnel claims 1,700,246 779 217

Centurion o�ce con�gurations - 5,815,109

Marketing and Communication - 794,090

NIMS – Management fees and analysis - 592,008

Legal fees including settlement - 484,868

20,896,133 14,509,815Trade and other payables are normally settled within 30 days terms.

9. DEFERRED INCOME

Total amount received 3,500,000 -

Total amount utilised during the year - -

Total deferred amount 3,500,000 -

During the year under review, additional funds was provided by Department of Transport to be utilised for the development of the asset module in NIMS.

10. LEASES

Payments recognised as an expense

Minimum lease payment: O�ce Accommodation 6,451,521 5,623,510

Minimum lease payments: Printing Solution 550,182 412,637

Minimum lease payments: Vehicles 699,364 188,235

80


2015 2014

R R

Non-cancellable operating lease commitments

up to 1 year

Property group 6,152,893 5,670,869

Properties 318,051 42,452

Properties 583,314 102,454

Printing Solution 550,182 550,182

Standard Bank: Vehicle - 48,102

Fleet: Vehicle 883,261 -

from 2 to 5 years

Property Group 17,688,543 23,841,436

Properties - -

Printing Solution 137,546 687,728

Fleet: Vehicle 6,257,905 -

32,571,695 30,943,223OPERATIONAL LEASE COMMITMENTS

Description Start Period End Period Contract Period Total Contract Amount (R)

Centurion 1 October 2013 1 September 2018 60 32,232,146

Cape Town 1 June 2012 31 March 2016 46 885,229

Durban 1 March 2013 31 March 2016 37 1,531,099

Printing Solution 1 July 2013 30 June 2016 36 1,650,547

Vehicle Lease (old) 10 February 2011 13 March 2014 36 17,225 pm

Vehicle Lease (new) 30 June 2014 29 June 2019 60 7,840,530

11. ADMINISTRATION GRANT (NON-EXCHANGE)

Administrative grant – Department of Transport 51,504,000 46,513,000

12. ADMINISTRATION OF PERMITS AND APPLICATION FEES (EXCHANGE)

Permit issuing fees 78,928,500 57,870,700

Permit application fees 781,396 48,000

79,709,896 57,918,700

13. REVENUE RECEIVED FROM TECHNOLOGY REVIEWS

AFRO-4000 7,700,000 -

New Fleet 7,717,000 -

15,417,000 -

81


2015 2014

R R

14. PENALTIES FOR NON-COMPLIANCE

Penalties 1,121,333 3,280,001

Contravention of the category 2(i) of the penalty fee regulations (“Penalty Regulations”) relating to the failure to comply with any other provision of the Act (Act No. 16 of 2002 as amended, “The Act”), the regulations and the standards that inhibit or prevent the Regulator’s ability to perform its mandate.

15. INTEREST EARNED – CURRENT ACCOUNT

Finance income comprises interest received from:

Current account 347, 583 281,295

Overdue customer accounts @9.25% per annum 25,809 -

373,392 281,295

16. OTHER INCOME

Other income includes the following:

Technical Awareness Workshops

Tender documents and conferences

1,875,500

503,703

-

63,780

Insurance claims 121,504 206,264

Unallocated income 28,000 -

2,528,707 270,044

17. PERSONNEL COSTS

Salaries and wages 68,155,380 51,822,530

Employee bene�t contributes includes: Medical Aid, Pension Fund 7,041,416 5,911,814

Expenses related to de�ned contribution plans 5,008,183 4,196,245

Performance Bonuses 1,343,330 -

13th Cheque (optional) 1,156,375 1,262,408

Increase in leave pay provision 574,957 70,940

Acting Allowance 178,317 267,589Leave Pay-out 97,732 187,744

Non-executive directors’ remuneration

83,555,691

739,584

63,719,270

593,004

Internship program 520,000 396,557

Temporary Personnel 168,053 351,192

1,427,636 1,340,753

84,983,327 65,060,023

82


2015 2014

R R

18. PROVISION FOR DOUBTFUL DEBTS

Provision for doubtful debts 1,075,000 -

19. DEPRECIATION, AMORTISATION AND WRITE-OFFS

Depreciation on property, plant and equipment 2,063,737 1,411,124

Amortisation of intangible assets 1,832,601 114,217

Write-o�s on property, plant and equipment 88,459 76,349

3,984,797 1,601,690

20. OTHER OPERATIONAL COSTS

Municipal Services: Electricity, Water and Rates 1,438,267 1,609,766

Personnel Motivation Values alignment 131,839 8,829

Advertising and Marketing

A�liation fees

3,140,275

177,937

7,143,721

38,671

Catering – Refreshments 330,904 171,144

Compensation Commissioner 101,605 62,411

Computer Expenses – Software 1,398,059 666,702

Conference and Seminar Fees 2,040,477 2,346,377

Corporate Stationery

Consulting and Professional fees

Equipment Rental

1,018,522

16, 072, 603

550,182

2,021,766

11,496,923

458,485

Insurance Premiums 489,199 610,975

Lease payments – Vehicle 699,364 188,235

Library and Literature 323,906 4,721

O�ce Rental 7,169,744 5,694,646

Printing and Stationery 713,724 444,022

Recruitment Costs 298,862 151,145

Sta� Training and Development 421,616 466,464

Telephone, Cell phones and Data Services 2,318,961 1,989,068

Travel and accommodation – Local 6,857,859 2,745,585

Travel and accommodation – International 1,186,135 630,504

Write-o� – Stolen petty cash money - 200

Other Administrative expenses 363,038 645,294

47,243,077 39,595,654

83


2015 2014

R R

21. FINANCE COSTS

Interest on late payments 2,307 92

22. AUDIT FEES

Regulatory audit by AGSA 1,430,252 1,285,614

23. PRIOR PERIOD ERROR

During the �nancial year ended 31 March 2014, RSR management erroneously recognised in the Statement of Financial Performance, unrealised Revenue amounting to R2,200,000 which arose from Penalties. The prior period error was adjusted retrospectively and comparative information has been restated.

Presented below are the statement of Financial Position and Performance items that have been a�ected by the prior year adjustment.

As previously stated Corrected Error Restated

Statement of financial PerformanceRevenue on penalties 5,480,001 (2,200,000) 3,280,001

Surplus for the year 2,919,966 (2,200,000) 719,966

Statement of financial PositionTrade and other Receivables 5,841,263 (2,200,000) 3,641,263

Accumulated Surplus 4,501,458 (2,200,000) 2,301,458

24. TAXATION

The entity has obtained income tax exemption from the commissioner of the South African Revenue Services under Section 10 (i) (cA) (1) of the Income Tax Act, 1962 as amended.

25. EMPLOYEE BENEFIT

The RSR provides a bene�t for all its employees through the Government Employee Pension Fund, membership of the fund is compulsory.

The fund consists of both de�ned bene�t and de�ned contributions fund. The fund is regulated by the provisions of the Government Employees Pension Law of 1996.

25.1 DEFINED CONTRIBUTIONS PLANS

The employees of the Railway Safety Regulator are members of a state-managed retirement bene�t plan operated by the Government Employees’ Pension Fund (GEPF). The entity is required to contribute a speci�ed percentage of payroll costs to the retirement bene�t scheme to fund the bene�t. The only obligation for the entity with respect to the retirement plant is to make the speci�ed contribution.

84


The RSR does not o�er a post-retirement medical aid bene�ts to its employees. The total expense recognised in the statement of �nancial performance of R5, 008,182 (2014: R4, 196,245) represents contributions payable to the plan by the entity at rates speci�ed in the rules of the plan. There were no amounts due as at year end.

25.2 RELATED PARTY TRANSACTIONS

The Railway Safety Regulator is a schedule 3A public entity in terms of the Public Finance Management Act. The related parties of the RSR consists of the following:

Board Members Refer to the report of the Board members

Executive Authority Honourable Minister of Transport, Dipuo Peters (MP)

Controlling Entity Department of Transport

Other governmental departments None

Public Entities Passenger Rail Agency of South Africa (PRASA)

Members of the key management

Nkululeko Poya – Chief Executive O�cer

Tshepo Kgare – Chief Operating O�cer

Solomzi Maye – Chief Financial O�cer

Isaac Shai – Executive Manager: Regulations and Governance

Samuel Nxazonke – Executive Manager: Human Resources

Thanduxolo Fumbata – Executive Manager: Occurrence and Investigations

Stompie Xulu – Executive Manager: Corporate A�airs

Renaire Huntley – Executive Manager: O�ce of the CEO

During the year the RSR in the ordinary course of its business entered into the following transactions:

NAME OF RELATED PARTY NATURE OF THE TRANSACTION AMOUNT

2015 2014

Department of Transport Government grant received 55,004,000 46,513,000

Passenger Rail Agency of South Africa Safety permit fees 24,764,100 23,360,000

Passenger Rail Agency of South Africa Technology reviews 15,417,000 -

85


BOARD MEMBERS AND KEY MANAGEMENT EMOLUMENTS

KEY MANAGEMENT REMUNERATION

Basic Salary Bonuses Performance Bonus Allowance Other

Total

2015

Total

2014

R R R R

N A POYA CEO 2,126,729 - 112,800 36,675 66,409 2,342,613 1,750,779

EXECUTIVE MANAGEMENT REMUNERATIONBasic

SalaryBonuses Performance

BonusAllowances Other Total 2015 Total

2014

R R R R R R

T Kgare* Chief Operating O�cer

690,317 - - 2,497 68,760 761,574 -

S Maye Chief Financial O�cer

913,666 62,824 - - 141,787 1,118,277 1,051,626

SA Xulu Executive Manager: Corporate A�airs

978,994 108,451 - 720 130,864 1,219,029 1,147,594

I Shai Executive Manager: Regulation and Governance

1,241,299 87,779 73,340 - 151,357 1,553,776 1,124,908

TH Fumbata Executive Manager: Occurrence and Investigations

1,080,583 56,380 - 4,915 58,427 1,200,305 1,131,209

S Nxazonke** Executive Manager: Human Resources

978,812 8,632 - 1,880 50,175 1,039,499 -

RS Huntley*** Executive Manager: O�ce of the CEO

694,079 - - 15,544 95,988 805,611 -

MS du Plessis****

General/ Manager: Operations

- - - - - - 1,271,469

LP Rathaba***** Executive Manager: Research and Technical Services

- - - - - - 1,422,205

TOTAL 6,577,751 324,067 73,340 25,556 697,357 7,698,071 7,149,011

*Appointed in November 2014

**Appointed as Executive Manager HR from 1 April 2014

***Appointed as Executive Manager OCEO from 1 June 2014

****Due to structural changes the General Managers does not form part of the Executive Management Team.

*****Resigned March 2014

86


NON-EXECUTIVE DIRECTORS’ EMOLUMENTSFee Claim Cell phone Claim Expense Claim Total 2015 Total 2014

R R R R R

M B Madumise* - 47,935

C J de Vos* - 63,402

M A Hermanus* - 27,696

M V Ratshimbilani** 28,835 2,000 - 30,835 58,591

W A Rasool* - - 40,423

T N Msibi 63,023 4,000 3,885 70,908 67,539

K J Barrett 63,752 2,500 242 66,493 57,947

M M Patel** 30,885 750 1,436 33,071 20,121

A B Harrison 107,089 2,750 7,265 117,104 24,545

K G Mbonambi 55,287 2,500 4,482 62,269 12,850

T N Baloyi 93,253 2,750 - 96,003 46,274

N C Skeepers 93,937 2,750 13,704 110,390 29,418

T H Masindi 87,678 2,750 4,659 95,087 17,928

Total 623,739 22,750 35,672 682,160 514,669

*Term ended October 2013

**Resigned

EXTERNAL AUDIT COMMITTEE MEMBERS – (NON-EXECUTIVE DIRETORS)

Fee Claim Cell phone Claim Expense Claim Total 2015 Total 2014

R R R R R

T M Mofokeng 19,029 1,000 283 20,313 21,889

M A Moja 35,612 1,500 - 37,112 56,447

Total 54,641 2,500 283 57,424 78,336

87


26. RISK MANAGEMENT

The entity manages its net assets to ensure that it will be able to continue as a going concern, while meeting its overall objectives. Funding is obtained primarily from grants and administration of permit fees. The strategy is consistent with that applied in prior years.

The entity has exposure to the following risk from its use of �nancial instruments:

• Credit Risk

• Liquidity Risk

• Market Risk

This note presents information about the entity’s exposure to each of the above risks. Further quantitative disclosures are included throughout these �nancial statements. The Board has the overall responsibility for the establishment and oversight of the entity’s risk management framework. The Board has established the Audit and Risk Committee which is responsible for the development and monitoring the entity’s risk management policies.

The entity’s risk management policies are established to identify and analyse the risks faced by the entity to set appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to re�ect changes in the entity’s activities. The entity through its training and management standards and procedures aims to develop a disciplined and contractive control environment in which all employees understand their roles and obligations. The Audit and Risk committee oversees how management monitors compliance with the entity’s risk policies and procedures, and review the adequacy of the risk management framework in relation to the risk faced by the entity.

The entity’s Audit and Risk committee is assisted in its oversight role by the internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures. The results of which are reported to the Audit and Risk committee.

Market Risk

Market risk is the risk that changes in the market prices such as interest rate, will a�ect the entity’s income or the value of its holdings of �nancial instruments. The objectives of market risk management is to manage and control market risk exposure within acceptable

parameters, while optimising the return. Then the entity is exposed to one primary type of market risk namely, interest risk.

Interest rate risk

Interest rate risk is the risk that the value or future cash �ows of a �nancial instrument will �uctuate because of changes in the market interest rate. The entity’s exposure to the risk of changes in market rates is limited to cash and cash equivalents that have �oating interest rates.

Credit risk

The risk that a counterparty will not meet its obligations under �nancial instruments, leading to a �nancial loss. The entity is exposed to credit risk from its operating activities primarily for trade receivables. The entity’s maximum exposure to credit risk as at 31 March 2015 was R15, 863,684 (31 March 2014:R4, 079,732)

Liquidity risk

Liquidity risk is the risk that the entity will encounter di�culty in meeting obligations associated with �nancial liabilities that are settled by delivering cash or another �nancial asset. Liquidity risk is considered medium due to the entity’s conservative funding structure and its own cash generating from permit fees and technology reviews conducted. Management monitors rolling forecast of the entity’s cash and cash equivalent on the basis of the expected cash �ows. RSR engages with the rail operators on a continuous basis to ensure that it has the cash �ows to meet the expected payments as the fall due.

Cash and cash equivalent

The entity only deposit cash with major bank with high quality credit standing. The entity does not consider there to be any signi�cant exposure to credit risk.

Financial assets

The entity’s principle �nancial assets are accounts receivables and cash and cash equivalents. At 31 March 2015, the carrying amounts of cash, accounts receivables and accounts payables approximated their fair values due to the short term maturities of these assets and liabilities. The net fair value of the assets and liabilities of the RSR are stated below

88


2015 2014

R R

Assets

Trade and other receivables 15,863,684 4,079,732

Cash and cash equivalents 5,214,714 3,086,371

Liabilities

Trade and other payables 20,896,133 14,509,815

27. FRUITLESS AND WASTEFUL EXPENDITURE

27.1 Reconciliation of fruitless and wasteful expenditure

Opening balance 92 2,157

Fruitless and Wasteful Expenditure: current year 2,307 92

Fruitless and Wasteful Expenditure – condoned: current year - (2,157)

Closing balance 2,399 92

27.2 Fruitless and wasteful expenditure

During the year, interest to the value of R2, 307 (2014:R92) was charged by service providers on late payment of accounts. Investigation conducted and no person was found responsible for this fruitless and wasteful expenditure, therefore the expenditure was written o�. The National Treasury will be noti�ed in terms of TR 9.1.2 as required by the PFMA. Refer to note 26 – liquidity risk on controls implemented by management to enhance the control environment.

28. IRREGULAR EXPENDITURE

28.1 Reconciliation of irregular expenditure

Opening balance -

Irregular Expenditure: current year 11,917,398 -

Irregular Expenditure – condoned: current year (11,340,000) -

Closing balance 577,398 -

28.2 Irregular expenditure

This relates to the services acquired without following proper Supply Chain Management (SCM) processes. The disciplinary hearing has been initiated and is ongoing.

29. UNAUTHORISED EXPENDITURE

There was no unauthorised expenditure.

89


30. COMMITMENTS2015 2014

R R

Professional fees 3,013,965 -

Conference 164,988 -

Travelling and Accommodation 1,418,734 -

Other operational costs 157,153 307,456

4,754,840 307,456

Other Commitments

• NIMS – two companies were awarded a tender. The tender for the development of the system over three (3) years was R20.1million.

• Marketing and Communications tender was awarded for a period of three (3) years at a tender price of R23.6 million.

31. NOTES TO THE CASH FLOW STATEMENT

31.1 Revenue for: Permits, penalties and technical awareness workshops

Permits and Technical workshops 81,042,553 58,151,583

Penalties 1,630,000 -

82,672,553 58,151,583

31.2 Other income received

Technology reviews 3,500,000 -

Additional grant for NIMS: Fixed Asset Register Module 3,500,000 -

Payment for lost laptops, tender documents and TETA sponsorship 145,130 44,434

7,145,130 44,434

90


2015 2014

R R

31.3 Cash generated from (utilised) in operations 9,175,333 2,807,484

Net Surplus for the year 11,935,567 719,966

Adjustments for

Other assets purchased (4,725,892) (6,232,609)

Depreciation 2,063,737 1,411,124

Amortisation 1,832,601 114,217

Gain on disposal of plant and equipment and other income (121,504) (222,807)

Write-o�s of assets 88,459 76,348

Finance charges on �nance lease - -

11,072,969 (4,133,761)

Movements in working capital (1,897,636) 6,941,245

(Increase)/decrease in trade and other receivables (11,783,953) (3,667,691)

(Increase)/decrease in trade and other payables 6,386,317 10,608,936

Increase/(decrease) in deferred income 3,500,000 -

31.4 Cash and cash equivalents

Bank and Cash 5,214,714 3,086,3715,214,714 3,086,371

32. GOING CONCERN

The going concern basis was adopted in preparing the annual �nancial statements. Based on the forecast and available cash resources, the Board of Directors has reasonable expectation that the entity has resources to continue with its operations in the foreseeable future.

33. CONTINGENT LIABILITY

O�ce Rental in Bruma

There is a contingent liability arising from legal proceedings instituted by the landlord for claim for damages arising from the Bruma lease agreement, as a result a reliable estimate cannot be determined.

34. EVENTS AFTER REPORTING DATE No events after reporting date

91


35. RECONCILIATION OF BUDGET WITH THE SURPLUS IN THE STATEMENTS OF FINANCIAL

PERFORMANCE

R

Surplus as per Statement of Financial Performance 11,935,567

Adjustment for:

Depreciation and Amortisation

Provision for bad debts

3,984,797

1,075,000

Assets purchased (11,894,388)

Net variance against budget (5,100,977)

Income variance against budget (17,350,327)

Revenue from safety permits (709,896)

Interest received (73,392)

Other income (16,567,040)

Expenditure variance against budget (12,249,351))

Sta� costs

Other operating expenses

1,053,608

(3,408,571)

Capital expenditure (9,894,388)

Net surplus as per budget -

36. REVENUE

- Administration of permits and application fees

Permit fee budget is based on class A operator’s fees only. The variance is mainly due to Class B operators and the application fee charged when applying for a permit – these fees are not included in our budget.

- Penalties Operators have been penalised for contravention of the conditions of the Railway Safety Regulator Act 16 of 2002.

- Revenue from Technology Reviews

Accelerated Planned Technology Reviews for PRASA’s rolling Stock Renewal Programme and AFRO 400 series locomotives

Technical awareness workshops, unplanned insurance claims, payments for lost laptops and sale of tender documents

92


EXPENDITURE

- Personnel CostsPositions for Senior Management and Engineering division could not be �lled as per approved sta�ng plant 2014/15 and will be only be �lled during the 2015/16 �nancial year

- Consultation & Professional Fees

The saving is due to the overall initiative being budgeted under professional/administrative and capital expenditure. The operational activities linked/related to initiatives had to be correctly classi�ed and accounted for under operational cost. This was to ensure consistency in the classi�cation of expenses.

- Operational Costs

More travelling and accommodation for audits, inspections and investigations due to rail incidents.

International trips to USA and Germany for Global Level Crossing Safety and Trespass Prevention Symposium, and the International Rail Safety Conference.

Additional telephone and data services for new o�ces and new personnel.

Advertising, Marketing and Communications

Additional ICT Security software

Annual Rail Safety Conference

- Capital Expenditure

Additional modules for NIMS project – Occurrence and Audits and Inspections.

New furniture for new o�ces in KZN and Western Cape regions

New computer equipment for personnel

94


Documents

RAILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015 · 5 RAILWAY SAFETY REGULATOR | ANNUAL REPORT 2014 - 2015 GLOSSARY OF TERMS APP Annual Performance Plan BLOEMCON Bloemfontein