Gautrain Project: briefing

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
8 November 2005
GAUTRAIN PROJECT: BRIEFING

Chairperson:

The Gautrain Rapid Rail Link PowerPoint Presentation
Committee Document on Issues to be raised by the Transport Committee on the Gautrain

SUMMARY
The Gautrain Project delegation provided background information on the Gautrain Rapid Rail Link Project. Following this, they provided an overview of the proposed Gautrain system. It was estimated that approximately 130 000 passenger trips would be made on the Gautrain each day. It was noted that the Project would be conducted through a public private partnership. The Bombela Consortium had been selected as the preferred bidder, and it was hoped that the final contract would be signed in late 2005. If this took place, construction could begin in early 2006. It was hoped that the entire project would be completed by April/May 2010. The estimated cost of the Gautrain was R 20 million. However, this estimate probably would not rise any further as the contract with the Bombela Consortium would be a fixed cost contract. The delegation added that the Gautrain would form part of an integrated provincial transport system. A Departmental delegation briefly outlined their view of the Gautrain Project. Cabinet had not yet approved financial assistance for the Gautrain Project. It first wanted to ensure that the Project would lead to economic development, promote investment in infrastructure, contribute to South Africa’s transport system; alleviate the use of private cars; and create jobs. The Department noted that Cabinet would be taking a decision on the Gauteng Project before the end of the year.

In the ensuing discussion, Members raised issues around the Gautrain Project and the 2010 World Cup. It was noted that there were no legal obligations on South Africa to complete the Gautrain by the 2010 World Cup. Members also enquired about certain details surrounding the public private partnership and funding. Some Members were concerned that government would perhaps be burdened with an unequal share of the risk. Members also enquired why the Metrorail could not be updated to operate rapid link trains; what the provincial patronage guarantee entailed; how many sustainable jobs would be created; and whether the middle class target market would use the train. The Committee was also concerned about the huge expense of the Project. There were other transport issues, relating to the needs of poorer commuters, which also needed to be addressed.

MINUTES
The Chairperson noted that the Committee had been following the developments around the Gautrain Project. To date, the Gautrain Project had been conducted as a provincial initiative and, as a result, most of the oversight work had been undertaken by the provincial legislature and local government authorities. Nonetheless, the Committee had called the Gautrain Project to Parliament because it was of national interest.

The Chairperson stated that Cabinet would be taking a decision on whether to commence with the Gautrain Project during December. Indeed, it was possible that construction on the Gautrain could begin in January 2006. Ideally, the Committee would have wanted greater engagement with the Gautrain Project, but due to time constraints this would not be possible.

The Chairperson noted that the Minister of Finance had stated that the Gautrain Project would cost approximately R 20 billion. However, the entire 2004/05 transport budget was only R 4.67 billion. This money would be spent to ensure that six to seven million passengers a day received some form of transport. He noted that public transport was under-capitalised and, at times, unsafe. Indeed, there was an ongoing crisis with transport in South Africa. In the light of this crisis, the Committee needed to be responsible in its approach to the Gautrain Project.

The Chairperson noted that the Tshwane, Johannesburg, and Ekurhuleni municipalities officially supported the Gautrain Project. Nonetheless, during a Committee oversight visit to Johannesburg and Tshwane certain municipal officials had privately, and in their personal capacity, expressed reservations about the Gautrain Project. They felt that it complicated their spatial planning. Nonetheless, they felt that the Gautrain Project would commence, despite their reservations. Added to this, certain concerns about the Gautrain Project had been raised in the City of Johannesburg’s Integrated Transport Plan. Similar sentiments were also expressed in the Tshwane Integrated Transport Plan. In fact, the Tshwane Plan stated that the City supported the Gautrain Project, despite their perception that there was little consultation. The Committee’s caution appeared to be shared by some other entities, but for different reasons. Indeed, the estimated costs of the Gautrain Project had risen over the years. In addition, there was now a certain degree of pressure for the Gautrain Project to be undertaken. The Chairperson added that one perhaps needed to guard against the Gautrain Project being used by other provinces as a precedent to embark on similar projects.

Gautrain Rapid Rail Link Project: Briefing
Mr J Van Der Merwe (Gautrain Project Leader) provided background information to the Gautrain Project. This included highlighting the objectives of the Gautrain Project, which were to alleviate severe road traffic congestion; to demonstrate government’s commitment to public transport; to increase Gauteng’s economic growth; to create employment, to promote black economic empowerment (BEE); and to promote the growth of small and medium sized enterprises (SMMEs). Added to this, the Gautrain Project would contribute towards urban restructuring, link Tshwane to Johannesburg; uplift the Johannesburg and Tshwane central business districts; and link Johannesburg to the International Airport. The Gautrain Project could also be a catalyst to generate new resources for the promotion of public transport. Mr Van Der Merwe highlighted that the Tshwane, Johannesburg and Ekurhuleni municipalities officially supported the Project.

Mr Van Der Merwe provided an overview of the Gautrain’s proposed system. The Gautrain would run on an international standard gauge line and would be capable of reaching 180 km/h. It was estimated that there would be 134 000 passenger trips on the Gautrain per day. Most of these passengers would be people that were currently using motor vehicles to travel to and from work. In order to attract these people, ample park and ride facilities would be constructed. Approximately 250 buses would be commissioned to shuttle these people from the parking facilities to the Gautrain stations. Added to this, international tourists and business people would be the target market for Gautrain running between Rosebank and the Johannesburg International Airport. Mr Van Der Merwe added that the Gautrain would have a positive impact on the province’s economy. Approximately 130 000 permanent and temporary jobs would be created. It was estimated that the Gautrain would increase Gauteng’s gross domestic product by approximately one percent.

Mr Van Der Merwe discussed the details of the Private Public Partnership (PPP) process that surrounded the Gautrain Project. The Project could not be funded entirely by the government; hence there was a need for a PPP. In order for the Project to be a success, there needed to be political will, practical viability, community buy-in, and funding. Part of the goals of the PPP would also be to ensure broad-based BEE and socio-economic development. Mr Van Der Merwe then outlined the processes that had been followed to select the preferred bidder. He noted that there had been two pre-qualified bidders, which were the Bombela Consortium and the Gauliwe Consortium. In July 2005, the Bombela Consortium was selected as the preferred bidder, while Gauliwe was selected as the reserve bidder. He noted that the Bombela Consortium comprised of a partnership between a number of companies, which included Bombardier Transportation; Bouygeus Travaux Publics; Murray & Roberts; RATP International; the SPG Group; Loliwe Rail Contractors/Rail Express; Standard Bank, Rand Merchant Bank; and ABSA Bank.

Mr Van Der Merwe noted that the cost of the Gautrain Project had initially been estimated at R 7 billion. However, there had been various cost increases, which had occurred due to Environmental Impact Assessment (EIA) requirements, the rising cost of property, and the inclusion of VAT into the construction elements. In 2002, the estimated cost had risen to R 12 billion. Recently, the Minister of Finance had estimated that it would cost government R 20 billion to develop the Gautrain over a five-year period. However, it was unlikely that the estimated cost would not rise any further, as the contract with the preferred bidder would be a fixed price lump sum contract. Mr Van Der Merwe then discussed the affordability of the Gautrain. It was noted that the Gauteng government would have to borrow funds for the Gautrain. The Minister of Finance had agreed to this in principle. Added to this, the Department of Transport’s Cabinet memo had been approved in principle. Mr Van Der Merwe added that the Gautrain formed an integral part of South Africa’s 2010 World Cup bid. The International Federation of Football Federations (FIFA) had recommended that the Gautrain form the backbone of the Gauteng public transport system for the World Cup.

Mr Van Der Merwe outlined the Gautrain Project’s funding details. Public sector funding for the Project’s capital cost would be garnered from three sources, which were from the Gauteng Province’s budget; Provincial borrowing from national government; and a conditional grant from the National Treasury via the National Department of Transport. The private sector would be investing approximately R 3.9 billion in the capital costs; however, they would be undertaking the operational risk.

Mr Van Der Merwe highlighted that the Gautrain was incorporated into certain sections of the Provisional Land Transport Framework (PLTF). Indeed, it was also aligned with the Gauteng Spatial Development Framework; the Gauteng Transport Strategy; the Gauteng Strategic Public Transport Network; and the Gauteng Integrated Land-use and Transport Framework; the affected municipalities’ Integrated Transport Plans; the affected municipalities’ Integrated Development Plans; and the Airport Company’s plans. A Public Transport Integration Task Team had also been established to investigate how the Gautrain could be integrated within strategic land-use and transport interventions.

Mr Van Der Merwe noted that negotiations were underway with Bombela Consortium to finalise the concession agreement. It was hoped that construction on the Project would begin in early 2006. The construction period would be approximately 54 months. As a result, it was hoped that the entire Gautrain system would be operational by April/May 2010.

Departmental comments on the Gautrain Project
Mr L Montana (Deputy Director-General: Public Transport) raised certain issues around the Gautrain Project’s presentation. He noted that the Cabinet memo, on the Gautrain Project, had not mentioned an actual cost figure for the Project. Cabinet had recognised the potential benefits of the Project; however, it had not yet approved financial assistance. Cabinet wanted to first ensure that the Project would lead to economic development, investment in infrastructure, and job creation. The Cabinet instructed the Department to undertake a detailed study on how the Gautrain would link to the broader Gauteng public transport network. The Department had completed this report and it would be tabled with Cabinet. The issues around funding were also still being discussed. Indeed, the Department was undertaking a study of the funding requirements, which would be submitted to Cabinet. The Cabinet would first examine these reports, before it took a formal decision on whether to approve the Gautrain Project.

Mr Montana noted that South Africa’s public transport system needed to be improved. The Department had undertaken a detailed study on how to achieve this. There were three critical issues that needed to be addressed in order for a country to acquire an efficient public transport system. These were:
- There needed to be sustained funding and investment in the public transport system.
- There needed to be an appropriate choice of technology, and strategy, to ensure that a country had appropriate transport modes.
- The issues that are causing people to use cars needed to be addressed. Indeed, motorists were receiving various hidden subsidies and this needed to be addressed.

The Department was not approaching the Gautrain Project in an arbitrary fashion. The Gautrain would entail a number of positive benefits. However, there were four concerns that the Department had around the Gautrain Project. These were being discussed with the Project itself. The Department’s concerns were:
- To what extent would the Gautrain promote the use of public transport over private car use?
- To what extent would the Gautrain link to Gauteng’s overall transport strategy? Would the Gautrain help alleviate traffic congestion to the east and south of Johannesburg?
- To what extent would the Gautrain assist the urban and rural poor?
- Would there be enough passengers to justify the investment that would have to be made in the Gautrain Project?

It was noted that the Transport Minister would be considering these issues before compiling a recommendation memo for Cabinet. This memo would be submitted to Cabinet before the end of the year.

Discussion
The Chairperson commented that it would be wonderful if the Gautrain was completed by the 2010 World Cup. However, he commented that the 2010 World Cup was perhaps putting pressure on the government to undertake, and complete, the Gautrain Project. Mr Van Der Merwe explained that the plans for the Gautrain were initially drafted in 1997/98. Hence, the idea of the Gautrain existed before South Africa won the bid to host the World Cup. The Gautrain was not being built specifically for the World Cup. Indeed, it would be ludicrous if it were being built primarily for the World Cup. The Gautrain was aimed at addressing the problem of traffic congestion in Gauteng. It was a long-term project, which would have a lifespan of at least 75 years.

The Chairperson commented that Mr Van Der Merwe had stated in the Star Newspaper that South Africa had a moral and legal obligation to complete the Gautrain for the 2010 World Cup. However, the Committee had a different interpretation. The Chairperson noted that he had examined the World Cup bid book, and could not find any clause that stipulated that South Africa was legally obliged to complete the Gautrain as part of its tournament preparations. All of FIFA’s transport requirements were road-based. Nonetheless, he enquired whether South Africa would lose the bid if it did not complete the Gautrain. Mr Van Der Merwe responded that there was no legal contractual obligation between South Africa and FIFA around the completion or non-completion of the Gautrain for the World Cup. Hence, South Africa would not lose the bid if the Gautrain were not complete by 2010. FIFA evaluated the bid on the existing infrastructure, but also trusted that the promises that were made would be delivered. Hence, South Africa had a moral obligation to deliver the Gautrain.

The Chairperson observed that the delegation had stated that projects, such as the Gautrain Project, normally took fourteen years to complete. South Africa was attempting to complete the Gautrain Project within ten years, for the 2010 World Cup. The construction and engineering firms had indicated that they wished to de-link their commitments from the 2010 World Cup. They felt that the 54-month period, which was set aside for construction, was tight. The Chairperson added that it took four years to complete the construction of a 12 km rapid rail link in Hong Kong. In the light of this, he enquired whether South Africa would meet the 2010 deadline. Mr Van Der Merwe responded that if the contract with the Bombela Consortium were not finalised in the next year, then the deadline of 2010 would not be achieved. However, if the deal were closed in the near future, then it would be possible to meet the deadline. Nonetheless, one could not rush into a deal simply to meet the 2010 World Cup deadline. The legacy of the Gautrain would last far beyond the World Cup. As a result, the government needed to ensure that it negotiated the best possible deal.

The Chairperson asked whether visitors to South Africa, for the World Cup, would find a large construction site if the Gautrain was not completed by 2010. Mr Van Der Merwe responded that the construction phase of the Gautrain would be completed within 40 months. As a result, if the deal were finalised in January 2006, visitors for the World Cup would not find a large unfinished construction site. The worst-case scenario would be that the train was not fully operational. In such a case, the 250 buses, which would be part of the Gautrain Project, would be used to transport World Cup visitors.

Mr L Mashile (ANC) enquired whether the Gautrain would be extensively tested before it entered into service. One did not want a situation whereby visitors to the World Cup were riding on an untested system. Added to this, would there be enough time to market the Gautrain before 2010? Mr Van Der Merwe replied that the actual construction phase of the Gautrain would be completed within 40 months. Following this, there would be approximately 12 months of testing.

Mr D Schneemann (ANC) commented that most of the World Cup spectators would be from lower-income backgrounds. In the light of this, he asked whether these spectators would be able to afford to catch the Gautrain to the World Cup matches. Mr Van Der Merwe responded that the World Cup tickets would be expensive. The cost of catching the train would be nominal when compared to the price of the football tickets.

Mr Schneemann asked why a bus-based transport system, such as the one that operated during the World Summit on Sustainable Development (WSSD), could not be used for the World Cup. This would perhaps be a more viable option than the Gautrain. Mr Van Der Merwe replied that one could take two different approaches to deal with the transport around an event such as the World Cup. The first approach would be to implement a short-term transport plan. This would involve closing off intersections and using buses to transport spectators. The problem with such an approach was that it would leave no legacy. The other approach would be to develop a comprehensive transport system that would leave a legacy. It was planned that the Gautrain would form part of such a comprehensive transport strategy.

The Chairperson commented that the Committee felt that the government needed to ensure that the Gautrain was a quality undertaking. It was, therefore, perhaps not essential to rush to complete the Gautrain by 2010 if the quality of the Project was going to be compromised.

Mr O Mogale (ANC) noted that many of the residents of Alexandria were concerned that the Gautrain line, from Sandton to the Johannesburg International Airport, would run through the township. Indeed, some residents were concerned that they would be forcibly removed from Alexandria to accommodate the Gautrain line. In the light of this, he asked whether the Gautrain line would run through Alexandria. If so, would some of the residents be removed to accommodate the line? Added to this, he asked whether removing people from certain areas of Alexandria would hamper the 54-month deadline. Mr Van Der Merwe responded that the Gautrain would pass to the north of Alexandria. No Alexandria residents would have to move to accommodate the Gautrain.

Mr S Farrow (DA) enquired whether there would be any penalties for Bombela Consortium if they did not finish the construction of the Gautrain by 2010. Mr Van Der Merwe responded that penalties and timeframes would be included in the final contract with Bombela. There would also be an incentive, in terms of operational income, for the Bombela Consortium to promptly finish the construction of the Gautrain.

Ms N Khunou (ANC) and the Chairperson asked what would happen if the Gautrain was not economically viable. Would the government be saddled with a white elephant? Mr Van Der Merwe answered that the structure of the PPP, around the Gautrain, would ensure that government was not saddled with a white elephant. The private partners in the PPP would have equity, worth billions of Rands, in the Project. It was, therefore, unlikely that the private partners would abandon the Project.

Ms Khunou noted that the Gautrain delegation had stated that 130 000 jobs would be created around the Project. She enquired how many of these jobs would be sustainable. Mr Farrow added that the current employment levels at Metrorail were far in excess of the number of permanent jobs that the Gauteng Project promised to create. Mr Van Der Merwe responded that there was a lot of capital flowing into the construction industry. The Gautrain would also be creating construction work, which was sustainable.

Mr Farrow observed that a French contractor would be undertaking a substantial portion of the work around the Gautrain. He enquired whether there would be any skills transfer from the French company to South Africans. Mr Van Der Merwe replied that the construction work would be undertaken by three entities, which were the French company, Murray & Roberts, and the SPG Group. He added that skills transfer was an integral part of the Gautrain Project.

Mr S Mshudulu (ANC) asked for a percentage breakdown of the number of South Africans that would be employed on the Project compared to the number of foreigners that would be employed on the Project. Added to this, he enquired how much local content would be included in the Gautrain. Mr Van Der Merwe noted that 99% of the jobs would be undertaken by South Africans. Approximately, 80 percent of the Gautrain infrastructure would also comprise of locally built equipment. However, the hi-tech equipment would have to be imported.

Mr Mashile noted that the construction of the Gautrain infrastructure would take a minimum of three years. There would, inevitably, be certain delays around the construction process. Would there be any cost implications for the government if there were delays? Mr Van Der Merwe responded that cost escalation would be calculated into the fixed cost. Any issues, such as rain delays, would be the financial responsibility of Bombela. In fact issues, such as rain delays, would be built into the fixed cost contract. The only way that the Consortium could claim additional costs from the government, would be if the government caused a delay during the Project.

Mr Schneemann observed that Sao Paulo had attempted to build a rapid rail link. However, they had underestimated the cost. In fact, they had never completed the rapid rail link. He asked whether a similar situation could happen around the Gautrain. Were there hidden costs that were perhaps being overlooked? Mr Van Der Merwe answered that the Sao Paulo project was not a PPP and, as a result, the Brazilian government had ran out of funds. It was unlikely that the Gautrain Project would experience a cash shortfall because it was a PPP. Mr Van Der Merwe reassured the Committee that there would be no hidden costs.

Mr Farrow noted that the original estimated cost of the Project was R 7 billion; however, the latest estimate was now R 20 billion. When the initial estimate of R 7 billion was released, various academics calculated that there would be a cash shortfall. This would mean that the National Treasury or the Provincial government would have to offer some form of subsidy. Using the figure of R 7 billion, these academics calculated that it would cost the government approximately R 1.5 million a day to subsidise the Gautrain Project. In the light of this, Mr Farrow enquired whether a viability study had been undertaken using the new estimated cost of R 20 billion. Mr Van Der Merwe replied that the capital costs of the Project were sunken. There was no rail transport system in the world that could recover the capital costs. As a result, the construction of rail systems was usually funded by national governments. Mr Van Der Merwe added that the calculations that the academics had made were based on the assumption that there would be a recovery of the capital costs. However, the government would not be responsible for providing any subsidies to the concessionaire to recover the capital costs. It was only the operational costs that would be recovered.

The Chairperson asked how the risks would be spread between the public sector and the private partners. The public sector viewed the Gautrain Project as a transport development initiative. The private sector; however, viewed it as a construction project, and was driven by profit. They would perhaps attempt to make their profits on the construction phase of the Project, and not on the operational phase of the Project. Mr Van Der Merwe explained that the structure of the Bombela Consortium meant that it would be committed to both the construction phase and the operational phase of the Gautrain Project. The construction firms could not reap all the profits before operations began because the operating companies would object to such a practice. The construction companies could only extract their equity once the 15-year operation contract was completed.

Mr Farrow and Mr Schneemann asked how much it would cost to upgrade the Metrorail. They enquired why one could not upgrade the Metrorail to carry high-speed trains. Perhaps the Metrorail should be upgraded instead of building the Gautrain. Mr Van Der Merwe responded that numerous cost benefit analysis studies had been conducted around the Gautrain Project. He added that the option of upgrading the Metrorail had been examined. It was discovered that it would be difficult to extend and upgrade the Metrorail to service the Johannesburg-Rosebank-Sandton-Tshwane route. The actual Metrorail line was also not conveniently located for the proposed Airport –Johannesburg-Tshwane route. In addition, if high-speed trains were to run on Metrorail, the other normal speed trains would have to be slowed to allow the high speed trains to by-pass certain stations. As a result, there would be disruptions for the commuters of the normal speed trains. Nonetheless, Metrorail needed to be upgraded, but this could be done alongside the Gautrain Project.

Mr Farrow stated that he had been informed that the Metrorail would be capable of operating rapid link trains alongside its normal service. In the light of this, he asked why a Metrorail line could not be built from Johannesburg to Sandton. Mr Van Der Merwe replied that a considerable amount of track would have to be built to link the Metrorail Johannesburg station with Sandton. Added to this, the Metrorail rolling stock was 30 years old, while its signalling system was 40 years old. The signalling system would have to be upgraded to accommodate rapid link trains. However, one would then have to upgrade the Metrorail rolling stock to ensure that it would be compatible with the new signalling system. This would be extremely costly.

Mr Farrow observed that the private sector had originally committed R 3.9 billion towards the capital costs of the Gautrain Project. Now that the estimated cost had risen to R 20 billion, was the private sector going to increase its contribution to the capital costs? Ms S Lund (National Treasury Senior Project Advisor: Public Private Partnership Unit) responded that one needed to understand the concept of a PPP before one could understand the split in funding between the public and private sector. The government had decided to explore the use of PPPs to deliver public services. National Treasury had established guidelines that could be used to decide when a PPP should be initiated. The government would begin by examining how much a project would cost for the public sector to undertake. Following this, it would examine the costs of the possible risks. This would then be used as a benchmark to compare how the private sector would undertake the same project. After considering this, the government would decide whether to initiate a PPP or whether to use the Department of Public Works to undertake the project. On very large projects there was an optimum mix around public and private sector money.

Ms Lund added that the quantum of private sector money would be a factor of the Gautrain’s operating costs, plus the return on equity for shareholders, plus the cost of servicing the debt. These three factors were calculated into the 15-year operating period to determine the quantum of private money that could be sustained in the Project’s capital costs. One also needed to examine the combination of debt equity and public money. In PPP projects it was beneficial to use a certain percentage of private sector debt even though it was more expensive than public finance. Private lenders tended to play a strong oversight role when their finance was being used in a project. They monitored the use of their money far more effectively than government could. Indeed, private lenders had a debt service recovery ratio, which they would not allow to be breached. If this was breached, they had the power to replace the operator. This would be written into the concession agreement. The private financiers brought protection measures into the project. Treasury, therefore, examined the best mix of financing. This also ensured that the risk was spread and managed. The bids were also evaluated against the feasibility study. Indeed, the feasibility study was used to establish the affordability limit. In the case of the Gautrain Project, a PPP was the most viable option.

Mr Farrow noted that the government would still be assuming most of the risk. As a result, the National Treasury needed to consider whether R 20 billion could be better spent to improve the general transport system. Mr Van Der Merwe noted that a number of cost benefit studies had been conducted. However, it was extremely difficult to make comparisons between two different projects. One needed to examine the internal rate of return of the projects. Added to this, the projects that were undertaken needed to be politically accountable.

The Chairperson asked the Gautrain delegation to explain the details around the provincial patronage guarantee. Would there be liabilities for government if a certain level of usage was not reached? Mr Van Der Merwe noted that passenger levels were an issue for any rail link project. The Gautrain Project had developed a provincial patronage forecast. The preferred bidder had established their minimum required total revenue to fund the project. If the patronage forecast was not met, and the bidder did not receive the minimum required total revenue, the provincial government would cover the shortfall. However, there would be a cap on the amount that the provincial government would cover.

Mr Mashile stated that it seemed as if the patronage guarantee was a form of subsidy. This meant that government would be allocating funds to the construction side and operational side of the Project. He was concerned that if the passenger level were zero, government would be funding the entire project. Mr Van Der Merwe replied that the concessionaires also had their own demand forecast. Any ridership level below that figure was the patronage risk of the concessionaire. Indeed, this figure represented a large number of passengers. Hence, the government would never be saddled with the entire operating costs of the project; even if ridership levels were zero.

The Chairperson commented that it was critical that the ridership level estimation was accurate. Indeed, the success of the Project hinged on its accuracy. Mr Van Der Merwe assured the Committee that the estimation was sound. Mr Farrow questioned why the bidders would require guarantees if the model and estimates were sound. Mr Van Der Merwe responded that the private sector wanted guarantees because there was no precedent for the Gautrain Project in South Africa.

Mr Mogale noted that in order to build the Gautrain many houses would have to be demolished, and the owners would have to be compensated. In recent years, house prices had risen dramatically in Gauteng. He enquired whether the Gautrain Project had taken this into account. Mr Van Der Merwe responded that the increase in house values had been included in the latest cost estimates.

A Member questioned whether the middle class would use the Gautrain. They would perhaps be unwilling to use the park and ride system. Indeed, the middle class would perhaps prefer to use their own vehicles. Mr Van Der Merwe replied that there would be four ways of getting to the Gautrain stations. These would be the park and ride system; to walk; to be dropped off; or to catch the Gautrain buses. To accommodate the park and ride system, nine thousand parking bays would be built around the stations. Added to this, the bus services of the municipalities would be linked to the Gautrain stations. Mr Van Der Merwe noted that in order to get the middle class to use the Gautrain, the travelling experience would have to be on par with private cars. In addition, the Gautrain would be cheaper than operating a car. Mr Van Der Merwe added that in order for public transport to be successful, one needed to implement certain mechanisms to ensure that people would use it. These mechanisms could include punitive measures, such as a congestion tax, for people that continued to use private cars as their main form of transport. However, one then needed to provide viable high quality forms of public transport.

The Chairperson noted that 69% of people in Gauteng did not own cars. They wanted a safe and reliable public train system.

Mr Schneemann enquired why someone, who lived in Randburg, would travel to a station in Rosebank to take a train to Pretoria. Rosebank was already heavily congested. Such a person would rather take their car and drive to Pretoria on the N14. Similarly, why would someone with a car drive to a station in Sandton to catch a train to Pretoria? Sandton was also already congested. Mr Van Der Merwe replied that the aim of the Gautrain was to facilitate economic growth in Gauteng. If Gauteng started experiencing traffic gridlocks, its economic growth would be adversely affected. Hence, the aim of Gautrain would be to alleviate congestion. However, it was only part of the solution. There needed to be other initiatives that were also aimed at addressing congestion. Mr Van Der Merwe added that the target market for the Gautrain would be people that lived within a ten-kilometre radius of the stations.

The Chairperson commented that the Committee needed more details about the punitive steps, such as congestion taxes, that could be used to entice middle class people to use the Gautrain. Added to this, the Committee was concerned that the Gautrain could perhaps negatively impact on the finances that were available for other infrastructure projects. This issue needed to be examined. The Committee realised that the Project would have benefits, but there were also other valuable projects. The Committee felt that the needs of less wealthy consumers also needed to be addressed.

The meeting was adjourned.