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Ratings downgrade could affect Prasa’s turnaround strategy

The Passenger Rail Agency of SA (Prasa) has plans to go ahead with a multibillion-rand modernisation and recapitalisation programme, however the country’s recent sovereign credit ratings downgrade might impact this.

At the recent launch of Prasa’s new passenger train service in Pretoria, the company’s acting CEO Lindikhaya Zide said Prasa planned to reduce its operational expenditure and expects to have its turnaround strategy ready by July.

In previous interviews, the agency said that until its new strategy is implemented, it will seek the advice of independent experts to help reduce its expenditure and improve its services.

Modernisation programme and finances

Prasa’s R173 billion modernisation programme is being used as the basis of its turnaround strategy. This plans to help the company address its financial losses, declining income and improve its poor service. The turnaround strategy is also said to include a revised supply chain management process.

In the last financial year, the company posted a R312 million loss. This was R1 billion less than the previous year.

In previous interviews Zide said Prasa acknowledged that it has to manage issues of efficiencies better, however he added that investing in such technologies was costly, but would help decrease operational expenditure. He said the agency was looking at undertaking an analysis of the cost of introducing these technologies.

Prasa’s general manager of corporate services, Tiro Holele said the agency has committed to reduce its costs by R1.285 billion and has projected a revenue increase of R555 million in the next financial year.

In Prasa’s draft expenditure figures, it has to reduce the following costs in the next financial year:

  • Employee costs by R579m
  • Energy costs by R210m
  • Security costs by R184m
  • Haulage costs by R53m

Prasa also indicated that it aims to increase maintenance costs by 48% (R221m) for the next financial year.

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