Gautrain Management Agency report; National Transport Master Plan: Departmental update

Meeting report

Gautrain Update Presentation to the Portfolio Committee on Transport:
Mr Jack van der Merwe, Chief Executive Officer, Gautrain Management Agency reported to the Committee that the Gautrain was the largest Greenfields rail infrastructure project in the world. However, the R25-billion Gautrain project may not be ready in time for the 2010 FIFA Soccer World Cup.

He noted that the Gautrain would have an international standard gauge to ensure safety when travelling at high speed. The train’s top speed was 160 km/h. It would run from OR Tambo International Airport, via Sandton, to Pretoria Station. It would run every 10 to 30 minutes, and the minimum operating hours were going to be from 05:30 to 20:30 daily.  In addition to this, 125 Gautrain buses would be integrated with the Gautrain rail, and these would run in relation to train times.

The Gautrain was aimed at alleviating severe traffic congestion, as the traffic volumes on the freeway between Johannesburg and Pretoria were growing at 7% per year. The Gautrain project's goal would also highlight Government's commitment to the promotion of public transport.

The Gautrain had five sources of funding. These were Central Government, Gauteng Provincial Government, private sector equity, private sector borrowing and Provincial borrowing. The total cost of the project was R25.1 billion. It was run on a fixed-time concession contract.

Part of the project also aimed to ensure skills development and capacity building for the labourers working on the project. Once they had completed this project, they would then be able to work with other Accelerated Shared Growth Initiative for South Africa (ASGISA) projects.

Mr van der Merwe noted that the project was facing challenges, largely because of the nature of the contract, which was a Public Private Partnership (PPP). The link to external events also put pressure on the project and placed Government at a disadvantage. One of those external events was the 2010 World Cup. The continuous consultation with stakeholders also resulted in decisions taking time to be implemented. Due to the nature of the bedrock beneath the surface, the project also faced technical challenges as it involved the creation of tunnels. The acceleration to open the airport link in time for the FIFA Soccer World Cup was also going to lead to future claims.

Department of Transport’s National Transport Master Plan 2005-2050: First Draft presentation
Mr Clement Manyungwana, Deputy Director General, Department of Transport, and Ms Elsie Neluvhalani, Director: National Transport Master Plan, Department of Transport, tabled the first draft of the National Transport Master Plan (NATMAP). They told the Committee that the transport infrastructure in the country was deteriorating. The Department of Transport (DOT or the Department) was facing problems due to poor land use and lack of integrated transport planning. They further cited institutional fragmentation as a major cause of the problems faced by the Department. South Africa had a lot of cost ineffective infrastructure facilities with massive infrastructure problems. The country still had inaccessible areas due to lack of road maintenance.
Other problems that the Department faced included unclear and overlapping responsibilities. Planning authorities had no implementation powers, and there were limited human resources and financial capacity at provincial levels.

Ms Neluvhalani told the Committee that it was evident that certain radical decisions had to be made in order for the transportation sector to meet its national, regional, continental, and global obligations. There was an urgent need for a homogenous, inclusive, interactive and rapid demand-responsive decision making command post for all facets of transportation, in order to save or arrest the rapid deterioration of all infrastructure facilities. This applied particularly to the secondary road network, and the railway network. There was a need to ensure adequate integration of transportation policies, planning, and operations facilities, rolling stock and equipment. There was a further need to attend to development of growth points and avoid poor coordination between different transportation modes and land use developments.

Discussion
The Chairperson thought it was important to outline what criteria were being used by the Committee to determine if a programme implemented by the Department was successful. The Committee would be looking into whether the programme was effectively narrowing the gap between the rich and the poor, how the project would improve the social and economic conditions of the people, and whether the programme was aligned to other government interventions. The Committee also looked at how the project helped with relieving the poor from depending in the long term on Government for their livelihood. Government aimed to ensure the right conditions that would allow people to uplift and care for themselves.

Ms Neluvhalani said that the Department was aware of the policy fragmentations between government departments, and the matter was going to be addressed in the DOT Phase 3 Report. The Department acknowledged that there was no co-operation between the National Department and provinces.

Mr S Farrow (DA) said that the Committee was deeply concerned about the escalation in price figures for the Gautrain. On 8 November 2005, Mr van der Merwe told the Committee that the bid received from the preferred bidder had a fixed price. This surely should have meant that after financial closure had been reached in December 2005, there would be no further price increases, not even following rises in the Consumer Price Index (CPIX)or foreign exchange changes. He asked then what was the cause of the price increases.

Mr van der Merwe said that the project had a financial model. In the financial model, and the CPIX as predicted by the Reserve Bank was used. Any construction project was subject to escalations, for instance the stadiums now being built. The Gautrain Management Agency had allowed for escalations, as predicted by the Reserve Bank. The difference occasioned by the escalations had to be paid. When the project was completed, all the implications of the escalations would become known. The project cost R 25.1 billion, of which a component was paid by private sector and a component was paid by the public sector.

Mr Farrow asked what the financial implications were, if the Gautrain project was going to be hastened to meet a 2010 deadline, and whether this had an impact on the model.

Mr van der Merwe said that it was up to the Government to pay the money. If this was not done, then the project would not be brought forward. However Gautrain Management Agency had a plan in place if the project did not meet the 2010 targeted date of completion. The plan involved ferrying people in buses on the Gautrain route.

Mr Farrow asked what the cost per kilometre was going to be to be on the train. He asked whether the number of passengers targeted was going to meet the capital costs of the project, or whether Government would need to subsidise the operator.

Mr van der Merwe said that Gauteng was busy with a freeway improvement plan, and by 1 January 2011, every freeway in Gauteng was going to have a tollgate. It was going to cost 60 cents per kilometre to be on the freeway. The cost for a motorist who lived in Tshwane yet worked in Johannesburg would be around R1000 per month in toll fees. However, the cost of using the train would be R800 to R1000 per month, so it was going to be economically viable for a commuter to use a train rather than his or her own car. The cost per kilometer was around 50 or 60 c.

The Chairperson said that the public asked questions of the Members of the Committee. He asked what were the other advantages of using Gautrain rather than own cars.

Mr van der Merwe said that the train was safe, dependable and cost effective. It was possible, as was done in London, to charge people for bringing their cars into the city centre, in order to encourage people to use the train. It was not desirable to wave a stick without also supplying a carrot; the stick represented the charges for cars and the carrot was the option of using the train.

Mr Farrow asked how many jobs were going to be created by the Gautrain Project, and he noted that since these were short term jobs at the moment, he would like to hear about the future opportunities.

Mr van der Merwe said that employment in construction was always based on the duration of the project. The project aimed to develop technical skills. The Gautrain project was not giving jobs, but was equipping people for future careers, by training people to be employable in other projects once the Gautrain project was completed.

Mr Farrow asked who the shareholders of the Black Economic Empowerment (BEE) strategic companies were, noting that the Committee had a role to play in oversight and wanted to prevent conflicts of interests.

Mr van der Merwe said that he would give the information to the Chairperson within two days, after he had arrived back in Johannesburg. He was not aware of any conflict of interests. The taxi industry was also a shareholder.

The Chairperson said that the question was about the issue of ownership in those companies, and not about the taxi industry. The matter concerned the Committee because South Africa had produced only a few black millionaires who kept appearing in every project, and that was not the reason behind the struggle.

Mr van der Merwe said that he would get back to the Committee with the information.

Mr M De Freitas (DA) asked why Gautrain tracks were the different to other train tracks. The presentation by the Department of Transport had said that there was a move towards standardised train tracks.

Mr van der Merwe said that the country's trains were running on a narrow gauge. Because of the speed that the Gautrain would be travelling, it was necessary for this train to run on a wide gauge. The Gautrain gauge was the standard gauge. It was safer for the Gautrain to run on the wider gauge. The rest of the country was still using old rail stockpiles from 1960.

The issue of power was also another reason that the Gautrain Project was not using the Metrorail infrastructure for the Gautrain. Metrorail was using 3 000 volts direct current; but the new technology that was used in the Gautrain and the world was 15 000 volts to 25 000 volts, so it was necessary to run to power systems. It was cheaper to buy railroad stocks off the shelf.

He noted that all high-speed trains ran on their own tracks in France and in Japan. However many countries were in the same situation, having some trains running on non-standard gauge and some on standard gauge. The rest of the world was also changing over.

Ms Neluvhalani said that standard gauge was like a “brand name”. The narrow gauge used to be called the “Cape Gauge”. The Department had wanted to move from the narrow gauge to the standard gauge also to facilitate business with other countries. Most of the Southern African Development Community (SADC) counties were moving to standard gauge. It was also very difficult to get parts for narrow gauge trains.

She added that the Gautrain was a step toward the future as many countries were moving towards having speed trains. All the rail networks that were going to be built in the country in future were going to be on standard gauge.

Mr De Freitas asked how many jobs were going to be created once the Gautrain had started running.

Mr De Freitas asked how confident the Department and the Gautrain Management Agency were that the train route between OR Tambo and Sandton would be completed by 2010

Mr De Freitas stated that the DOT had pointed out a number of problems in their presentation, however did not mention any solutions.

Mr De Freitas said the Department had told the Committee about a National Transport Central Planning Agency, and requested that they elaborate on that issue.

Ms Neluvhalani said that issue would be elaborated on in Phase 3 and Phase 4. The NATMAP was still in the process of implementation and it was not possible to elaborate on it at the moment.

The Chairperson, noting members of the delegation whispering to each other, advised that the women delegates had the right to speak for themselves, and anyone wanting to add to what was being said should speak on their own.

Mr Manyungwana said that there was an urgent need to develop the rail network in the country. The investment requirement had increased over the years. There were goods being transported on the road even though this should not happen, simply because the rail service was inefficient. For this reason, the Department could not tell freight companies that they had to use trains to transport those goods.

Mr Manyungwana said that Government was investing in some programmes that were not benefiting the itself. Investing in railroads would change the life of every South African. The Department had revived a number of rural railway networks, such as in the Eastern Cape, and the pilot projects were successful

Ms N Khunou (ANC) said that when Mr van der Merwe produced the list of BEE companies, he should also bring to the Committee a breakdown of the monies contributed by each of the funders towards the Gautrain project.

Ms Khunou noted that Mr van der Merwe had told the Committee that the project would be completed by 2010. She enquired, in that case, who would be paying for the buses that would be used the during the 2010 World Cup if the Gautrain project was not completed.

Mr van De Merwe said that the Gautrain was never intended to cater for 2010, as the intention to start the project was announced in January 2000 by the then-Premier of Gauteng. South Africa only won the bid to host the Soccer World Cup in 2004. Even the former Minister of Finance, Trevor Manuel, had said that Gautrain was not to be seen as a “soccer project”. When the concession documents were signed in 2006, the dates for the 2010 World Cup were not known. There were still negotiations with FIFA on the dates. However, it was desirable that the Gautrain be ready by 27 May 2009.

Mr van De Merwe said that the Gautrain Management Agency had originally thought that 250 buses would be provided; however, 125 had been secured. The original busses were going to be smaller, but those secured carried more passengers. The buses were going to be used even if the Gautrain was ready on time. However if the Gautrain was not ready, the 125 buses alone would be used. No extra money was needed for the buses.

Ms Khunou asked how the Gautrain project was developing Small Medium and Micro Enterprises (SMMEs).

Ms Khunou asked what skills were being transferred to South Africans by the foreign workers on the Gautrain project.

Mr van der Merwe said that there were only about 300 foreign engineers on the Gautrain project, and there were 10 000 people employed on the Gautrain project. The Management Agency had trained the local people on skills that would be needed. If a particular skill was not in demand, then no local people would be trained in that skill.

Ms Khunou asked how Gautrain was going to ensure that other companies would employ the people currently working on the Gautrain project, once it was completed. 

Ms Khunou asked how the people of Gauteng were going to benefit from the Gautrain. She noted that the cost of the tickets was quite high.

The Chairperson asked in what skills was the Gautrain Management Agency training the people who were involved in its training programmes. There was a need for boilermakers in the country.

Mr van der Merwe said that at every construction site in South Africa, there was always a tower crane. It had been found that there was no one conducting training for tower crane controllers in South Africa. Gautrain Management Agency was therefore training people in this skill, as it was a practical skill that was needed in South Africa. When this construction project was complete, the workers could seek employment in other ASGISA projects.

The Chairperson asked how the Gautrain Management Agency training skills development programme was linked to the Indigent Register of the municipalities around Gauteng. She noted that the project had to be linked to those, if it was aimed at uplifting the poor. It could not just be a policy on paper. She further asked how it was linked to the Social Grant Register

Mr van der Merwe said that he was formerly the Director General of the Public Works Programme, and during that time he went to Soweto with the then-Premier. While in Soweto, the Premier promised the people jobs. There were large numbers of people lining up for three days to get on the register, so he was fully conscious of the need. The Gautrain project was employing 10 000 people on a daily basis. The project managers had also spoken to Councillors in the areas in which the building was taking place, asked to be provided with a list of people to train.

The Chairperson said that this was the exact point that she wanted to address. This was a problem, as a person not on good terms with the Councillors would then not be employed.

Ms Khunou asked how the BEE partners were participating in the relationship, and whether they were fronting companies, or were actually productive.

Mr van der Merwe told the Committee that the project had an independent monitoring company that checked up on performance. Fronting was a real threat, but there were measures in place to ensure that there was no fronting.

Mr Farrow noted that there was going to be more money needed to speed up the completion of the Gautrain construction project. He asked how additional cost was that going to be accommodated in the existing budget.

Mr van der Merwe said that the extra cost would not be added on to the project. The Provincial or National Government would have to fund it. It would also not be recouped from the tickets. However the Gautrain Management Agency could not engage further on the debate until they were told that it would have to go ahead.

A Member of the Committee asked whether the Gautrain Management Agency had a plan to deal with electricity black outs.

Mr van der Merwe told the Committee that there were some strange media reports to the effect that the Gautrain project would have to involve the construction of a new power station. The Gautrain, on average, would use 6 to 10 megawatts of power. There were three electricity feeds going into the train system, and black outs never occurred all over simultaneously, so the Gautrain could get electricity from at least one other feed in the event of a blackout. However, if there was a complete power failure, there was a system for pulling the trains out of the tunnel.

Mr Manyungwana requested that the Committee should support the Department in formulating policies that would result in railroads being a priority. The Department found it difficult to get funding from the National Treasury for railroad projects, because policy did not put railroads as a priority. There was a need in the country for a road freight strategy that would ensure that any cargo that did not really belong on the road would not be found there. However, Transnet was not ready, and would never be ready as it was still focusing on the old technology. It was necessary for the country to think beyond the existing technology in order to improve transport.

The Chairperson appreciated that input, saying that it was important. The Committee was available to assist the Department in its mandate. There was a need for government to prioritise its real needs.

The Chairperson asked how familiar the Department was with the Masakhane campaign document, and the section in that document that spoke about the uneven distribution of resources in the country. She asked also how the Department would use the document to prioritise projects.

Mr Manyungwana said the Department was familiar with the Masakhane document. The problem was that the Department's rural transport strategy was not visible. The Department had a transport specific project in rural Limpopo and KwaZulu Natal.

Mr Farrow wanted to know if there were any plans in place to use the Gautrain to transport freight during off-peak hours.

Mr van De Merwe said that the only freight that the Gautrain would be able to carry was light freight, which was airport freight. Logistically, it would be difficult to have freight on the Gautrain. A further problem was the station layout, and the fact that the train stopped only for 40 seconds at a station.

Ms Khunou said that there were so many things DOT could do to make the lives of the people in rural areas easier. She was from Free State and noted there was a railway line from Bloemfontein to N’Tabanchu, which, if revised, would make a substantial contribution to the lives of the poor.

Mr Manyungwana said that DOT did receive a request from the Free State Provincial Government. DOT provided funding for feasibility studies. This project was reported to be feasible. However the Department was constrained by priorities because of funding. The Department had met with provincial representatives and told them that if the province could source funds, the project would be started.

Ms Khunou further said that Mr van der Merwe had told the Committee that the Gautrain project was for 2010.

Mr Farrow said that when the Committee was scrutinising the Gautrain's proposal document, he had questioned the point on the fixed-price arrangements. He asked what was fixed in the contract. He did not want to get into an argument about what he had told Mr van der Merwe at the time, save to say that the Committee had asked and wanted to know what the total cost of the project was going to be. If the Government was going to be subsidising the Gautrain, the Committee needed to know in advance.

Mr van der Merwe told the Committee that the Gautrain project would cost R25.1 billion. The original cost had risen because of forex adjustments, rises in the CPIX and claims. It was never possible to recover capital costs. Metrorail only recovered 26% of the capital costs. He noted also that the nature of public transport meant that it had to be subsidised.

Ms Neluvhalani said that part of NATMAP was to restructure the movement of trucks on the road. There was a proposal that trucks would not be on the road during the day, but were only going to be allowed on the road between 00:00 and 5:00 am.

The Chairperson asked if that would require the Department to draw up policies and legislation for the proposal to be implemented.

Ms Neluvhalani said legislation would indeed be required, as the matter would require policing.

The Chairperson said that the Department would need to give the Committee a written submission, stating challenges and interventions, so that it could consider the matter.

Mr Farrow asked if it was possible for the Committee to go on an oversight visit to see the progress made on the Gautrain project.

The Chairperson said that if the Committee had already approved a programme without having made plans for that, and it would be impossible to add this, due to budget restrictions

Committee business: adoption of Minutes
The Committee considered and adopted the minutes of meetings on 5 and 12 August, with no changes

The meeting was adjourned.