Reconstructing Spoornet Joint labour proposals from its Operational Efficiency Committee members Submitted to Spoornet Human Resources & Turnaround Management, 14 September 2000

Background to this document

This document reflects the consensus reached in discussions held by the four recognised trade unions in Spoornet - Safsa, Salstaff, SATAWU, TWU - in a workshop on 5^th September 2000. There were 24 participants present - fifteen of whom were shop stewards. The combined years of service in our railway system of the 15 shop steward participants was 369 years! The balance of participants were either full-time trade union officials or researchers representing NALEDI (the National Labour and Economic Development Institute).

At the beginning of the workshop, the participants brain-stormed their vision of a good railway system. This is what emerged:

• A rail system that is part of an integrated transport system
• A system that provides predictable service
• A system that boasts good customer relations
• A system that retains and even creates jobs
• A system that workers feel they belong to and that is co-managed
• A system that is socially responsible an that supports sustainable social development
• A system that is closely connected to the community
• A system that is customer focused and that markets itself well
• A system that is flexible in its tariff structure
• A system that provides efficient service delivery to all
• A system where adequate investment in infrastructure is matched with updated skills training
• A system that is effectively planned
• A system that supports regional Southern African development
• A system that is not an undue financial burden to the state

The document reflects the conclusions reached by the participants in discussing how to achieve this vision.

Labour regrets that the Spoornet Turnaround Team (including its consultants Halcrow), did not build in a consultative process with workers via the four unions from the start of its deliberations on Turnaround. We hope that our input today is enough to convince the Turnaround Team that workers in Spoornet take the future of the company very seriously, and that they have some significant insights into how to make it work better.

The reconstruction of Spoornet: Labour's plan

September 2000

This is a plan for the reconstruction of Spoornet that puts the following principles and objectives at its heart:

• Socio-economic development
• Efficient and quality service
• Job retention/creation
• Democracy in the workplace
• Quality of working life

The plan involves

1. Developing a framework for reconstruction that addresses ownership, volumes, integrated transport solutions, development of regional transport markets, investment in infrastructure, investment in human resources, improvements in the quality of management, job security, and proper consultation with labour.

2. Improving the way in which the OEC operates.

3. Identifying projects that support the framework.

1. A framework for reconstruction

Labour's framework covers the following areas:

• Ownership
• Volume
• Regulation of road transport
• Integrated transport solutions
• Regional transport markets and development
• Investment in infrastructure and technology
• Investment in human resources
• Poor quality management
• Job security
• Union co-operation

1.1 Ownership

Labour's position is that government should retain the state ownership and operation of rail transport so that it can have the required socio-economic impact. We are sceptical that a private sector operator would be prepared to undertake the business and developmental strategies described under 1.2, 1.3, 1.4 and 1.5 below, but would rather be tempted to cherry-pick by concentrating on profitable lines and running down all others. The negative impact of this on socio-economic development would be unacceptable. Currently Government appears intent on concessioning Caol-link, Orex, LuxRail, and MLPS and concessioning General Freight Business (GFB) or entering into a Strategic Equity Partnership (SEP) after turnaround.

We require:

1. Agreement that Government's mind is open on this question, so that we can use the three years turnaround period to demonstrate that an efficient state owned Spoornet is viable and necessary.

1.2 Volume

We believe that the Spoornet turnaround strategy should be based on increased volume rather than closing unprofitable lines.

Our observation is that Spoornet management has, both as a result of mismanagement and intentionally, adopted a narrow focus on a core of highly profitable lines, withdrawing capacity and attention from smaller regional and branch lines and their customers and potential customers. For example, marketing and sales functions have been withdrawn from the regions and centralised in head office. The result is poor client management in the regions and the complete absence of strategies for developing new clients there. There also appears to be no effort to market space on empty return freight trains at a discount.

This is an unacceptable business strategy, which concentrates all resources on the massive clients and high-density lines which are easily profitable, and runs down the rest of the network and ignores regional lines and smaller customers. It then becomes all too easy for management to motivate closing down "unprofitable lines" which have been run down by its own strategies.

We propose a different strategy which recognises a differentiated transport market and aggressively seeks to identify new markets, market niches and customers and develop these. This would mean actually putting into practice Transnet' s mission to provide '' total freight solutions", and would entail a complete reconfiguration of marketing, customer management and operations. (See also 1.4 - Integrated Transport Solutions.) We must also note that Labour has frequently made proposals for increasing business along these lines, but is usually ignored by management.

Increased volumes would:

• Increase revenue
• Make some unprofitable lines profitable
• Retain the socio-economic role of Spoornet
• Serve to retain jobs
• Reduce the negative impact of road freight on the road infrastructure, on road accidents and on the balance of payments (petrol imports).

We require:

1. The commitment of management to increasing volumes
2. Information about the rail network, and the traffic, revenue and costs of the different lines
3. Agreement on targets for increased volume
4. Agreement on strategies for achieving these targets
5. Commitment to establishing joint management-Labour projects for improving efficiency and customer management on specific lines (for example, Durban-Johannesburg, specific regional lines)
6. Agreed criteria and procedures for closing/opening lines
7. Government endorsement of the strategy for increased volumes
8. Union input into the White Paper process on this issue.

1.3 Regulation of road transport

Since the deregulation of road freight in 1988 Spoornet has lost significant market share to road hauliers. Several factors need to be considered:

• There is inadequate policing of road tonnage limits
• Heavy freight traffic and overloading damage the roads
• Road hauliers do not have to pay for the road infrastructure they use, whereas Spoornet provides its own infrastructure
• Spoornet is not exempt from the diesel levy which subsidises road construction, although it does not use the road infrastructure
• The high cost to the nation of road accidents and over-congestion on roads
• The dangers of transporting hazardous chemicals by road.

We require:

1. Government commitment to provide the resources for proper policing of the road tonnage limits
2. Government commitment to a reassessment of the regulation of road freight to take account of the above factors.

1.4 Integrated transport solutions

Transnet' s mission requires it to provide 'integrated transport solutions'. Spoornet does not do this. Instead, Transnet has established separate companies, such as Autonet, which competes directly with Spoornet instead of providing integrated solutions to customers which would add value to Spoornet services. Many examples can be found where the competition (or lack of complementary planning and costing) between the different businesses of Transnet has actually resulted in a loss of business altogether.

One such example is the loss of the fuel transport contract between Umtata and East London. Because Autonet was not geared to the provision of a supplementary feeder/delivery service from the rail heads, the contract was lost by Spoornet to a private sector road operator. The impact of the transfer of large quantities of fuel from rail to road transport in a region where the state of the roads is poor and where the road accident rate is particularly high, should be obvious.

Spoornet needs to take the initiative in providing innovative solutions for the speedy, efficient and convenient movement of both freight and passengers between railhead and final destination (or point of origin). This would mean:

• making use of a range of new technology (for example, the more widespread use of side loader trucks)
• new operations (for example, short-haul trucks to move freight between railhead and factory)
• and partnerships (for example, instituting through-tickets with taxi or bus operators, so that passengers need buy only one ticket for a rail trip plus onward transport to final destination).

Again it must be noted that Labour has made several suggestions along these lines, only to be ignored by management. One such example was proposals put by Labour to MLPS and Translux that Translux should provide feeder services. This proposal was rejected out of hand on the basis that Translux and MLPS compete for long distance passengers.

We require:

1. A strategic focus within the company on developing integrated freight and passenger solutions, and developing innovative partnerships where necessary
2. Commitment to putting in place the necessary capacity (marketing/customer management, operations and technology) to expand volumes through this strategy
3. Commitment from management to take Labour's proposals seriously and work in partnership on developing them.

1.5 Regional transport markets and development

As noted above under 1.2, management decisions, such as withdrawing regional marketing/sales capacity, implies downgrading the importance of regional business. However, the current project, sponsored by the Eastern Cape government, to assess the viability and impact of increasing the utilisation of the East London - Umtata line, as well as the interest shown by the KwaZulu Natal government in extending this line into southern Natal indicates the enormous developmental potential of regional and branch lines for regional and local economies. Spoornet needs to develop the strategic capacity to work closely with provincial governments in identifying business and developmental opportunities in regional transport.

We require:

1. Spoornet to undertake a systematic engagement with all provincial governments concerning the actual and potential role of rail transport (both freight and people) with a view to expanding volumes and services
2. The re-establishing of regional capacity to develop solutions for customers, at the levels both of marketing/customer management and operations (this point is closely related to section 1.4 on integrated transport solutions above)
3. Management commitment to take Labour's proposals on regional transport seriously, and co-operate with Labour on projects to increase volumes and efficiency on regional lines.

1.6 Investment in infrastructure and technology

Under-investment is running down the capacity of the company and is a major cause of poor service and inefficiency. Spoornet cannot increase volumes or win back market share without a high level of investment.

It is also our experience that Spoornet has sometimes made unnecessary investments, or invested in inappropriate or impractical technology (such as two different radio systems that cannot 'speak' to each other). It is important that Labour be included in the assessment of technology needs and specifications.

We require:

That management develop an investment plan including:

• An analysis of current infrastructure and technology needs
• Investment priorities
• An investment programme
• Sources of finance
• Union access to relevant information to assess this plan
• Management commitment to implementing the plan
• Government endorsement of the plan.

1.7 Investment in human resources

We have identified inadequate training and skills development, low morale, poor work organisation, weak supervision, authoritarian management, racial tension, and poor industrial relations as important sources of inefficiency in the company. To overcome these problems will require a major investment in human resource development.

We require:

1. That management develop a human resources development plan, including proposals on how to deal with the above problems
2. Management agreement to engage seriously with labour's proposals, to be put forward as projects in the OEC
3. Commitment to an agreed level of investment in human resources development
4. Joint management – labour audit of the quality and relevance of current skills training
5. Joint management - labour monitoring of HR investment and development against agreed targets and benchmarks.

1.8 Poor quality management

We have identified low levels of managerial skill as important sources of efficiency problems at Spoornet. We are aware of innumerable cases of poor management, including:

• The quality, style and accountability of management
• Marketing, sales and customer management
• The lack of a flexible, customer-centred and business-orientated approach to operations and planning
• Ineffective response to breakdowns and repairs

Spoornet will not become a productive or efficient organisation until this is improved.

We require:

1. That management table a plan as to how it intends to upgrade managerial skills and capacity
2. Management commitment to respond seriously when Labour presents specific aspects of managerial weaknesses.

1. 9 Job security

One of our key objectives in co-operating with the turnaround is to increase volumes and efficiency, and thereby save jobs. If short term productivity gains lead to job reduction, this will undermine the ability of the unions and their members to co-operate with productivity improvements. Real productivity and efficiency gains can only take place in a climate of job security.

We require:

1. A three-year moratorium on retrenchments in Spoornet.

1.10 Union co-operation in the process of turnaround

Points 1.1 - 1.9 above outline our major concerns about the turnaround strategies of management. They also outline the necessary preconditions for SATAWU, Salstaff, TWU and Safsa to commit ourselves to active participation and co-operation in improving efficiency at Spoornet.

We require:

1. The commitment of management and government to the above so that we as Labour can fully participate in turning Spoornet around.

2. Improvements to the functioning of the Operational Efficiency Committee (the OEC)

The OEC is an important forum for union participation in operational issues in Spoornet. Labour is committed to improving the co-ordination and functioning of the trade union delegations to the OEC.

The work of the OEC also needs to be restructured to include regular consultations over the overall performance of Spoornet, as well as an overview and assessment of progress made with the projects. This should also provide an opportunity to deal with the issues raised in section one, the framework for reconstruction.

Accordingly:

1. The Labour caucus should meet once per month to assess OEC meetings and to plan for future meetings.
2. The quarterly information briefings in Spoornet should be replaced with quarterly plenary sessions of the OEC, attended by the CEO and the executive committee. Such a meeting would review Spoornet' s performance, review the framework for reconstruction, and assess progress made in the implementation of OEC projects

3. Projects for possible consideration by the OEC

These suggested projects are included in the document to give management an idea of some of the concrete areas that the Labour feels could be effectively dealt with in the OEC. The precise details of such projects requires further deliberation by the four unions and are not therefore officially tabled by Labour to the OEC at this stage. The project proposals should also be read together with the many practical suggestions listed under the "we require" headings above.

Volume and efficiency projects

3.1 Volume and efficiency on the Durban - Johannesburg corridor

Since this is the most profitable corridor for GFB, it is important to investigate ways of increasing efficiency, quality of service and traffic capacity as part of a strategy for increasing volume. Establish a joint management - Labour project team to identify problems and solutions, and ensure their implementation.

3.2 Volume and efficiency on a selected regional line

Establish a similar Joint management - Labour project team for a selected regional line to demonstrate the potential for growth in business on such lines.

3.3 Workplace pilot projects

Select 2- 3 workplaces as pilot projects for workplace reconstruction focusing on efficiency, quality of working life etc. The workplaces selected should be key workplaces identified in terms of projects 3.1 and 3.2 (for example, City Deep, Durban Marshalling yard, Central Rand, specific workplaces on the selected regional line, etc).

Human resource projects

The implementation of several of these projects could be focused on the workplaces/lines identified in 3.1 - 3.3.

3.4 Improving supervision

The lack of competent supervision is a major problem at Spoornet. The OEC should consider devising a plan for the reconstruction of supervision in specific workplace/function as a pilot project.

3.5 Training/grading

Training and upgrading of workers would make a significant contribution to improving efficiency and the quality of workers jobs. Specific job grades/categories should be targeted for improved training. A medium-term plan for the upgrading of the skills of existing general workers is critical in this regard. Currently general workers are being unsuitable for existing vacancies in higher grades, and are therefore being made redundant.

3.6 Work organisation

It is important to introduce new forms of work organisation that improve workers' skills, their control of work, and the quality of their working life. Pilot project should be selected in specific workplaces.

3.7 Grading

We need the OEC at some stage in the future to do a full review of the grading structures, starting with an overview of the existing grades. Labour in the meantime is committed to finding out as much information as possible internationally about trends in grades in railway systems. It should be noted that the question of attaching grades to wage rates is obviously a matter for the Bargaining Council.

3.8 Improving race relations

Poor race relations is creating some tension and conflict on the shop floor, and also creating barriers to the advancement of black workers. The OEC needs to develop strategies for dealing with this issue.

3.9 Improving the implementation of the equity plan

This to be on a project by project basis.

3.10 Improving security and loss control

The lack of adequate security allows a high level of theft and corruption. The OEC should discuss ways of improving security. Labour is committed to assisting to eradicate theft and corruption, but to really take effect, workers need to feel reassured about their future in the company.

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