In defence of the Gautrain
Gautrain operators have been accused of milking the taxpayer by gobbling up hundreds of millions for what is effectively a subsidy for elite commuters. A plan to extend the service has been slammed as a waste
DESPITE initial public scepticism, the Gautrain has become a symbol of pride for South Africa and a catalyst for significant ancillary economic development in the areas it serves. There are few infrastructure projects in South Africa that compare to the Gautrain in size and technical complexity.
The value of property development projects that have been approved in the vicinity of the Gautrain’s Sandton station alone exceeds the capital cost of the entire Gautrain system.
To date, the system has transported 38 million train passengers and about 11 million bus passengers.
Its trains have completed nearly 1.2 billion kilometres (the equivalent of almost 30 000 trips around the world) and consistently achieved train punctuality approaching 99%.
Since its inception, only two passenger-related contact crimes have been reported in the system. Statistically, this makes the Gautrain one of the safest public spaces in South Africa.
A recent independent survey conducted by Catalyst Research has indicated that passengers rate the Gautrain’s punctuality, value for money, safety and security and cleanliness above 90%.
In short, the Gautrain is probably the best example in the past 30 years in South Africa of how the public sector conceived a development vision, the private sector invested in it and constructed it and is now being held accountable to operate it efficiently.
That said, the Gautrain has often been the subject of strong public debate, most recently regarding its finances.
Taxpayers should be vigilant to ensure that their tax con- tributions are put to the most efficient and beneficial use possible.
But they should also avoid the simplistic assumption that individual public utilities should be profit centres in their own right.
The Gautrain is a public service, like the Passenger Rail Agency of South Africa, Metrobus, the bus rapid transit system and, in some ways, your local school, hospital and sewerage works. These facilities are not implemented to make profits; they are implemented so that society can function and do so efficiently.
Published data on 62 passenger train systems around the world reveal that in only six does the farebox revenue cover the operating costs. All six are in Asia and each carries well in excess of a billion passengers a year. The London Underground, which carries more than 1.2 billion passengers a year, covers only about 50% of its operating costs through farebox revenue. The Gautrain, with only 14 million passengers a year, covers about 60% of its operating costs.
Ongoing tax support for a public service does not imply a crisis or mean it should be shut down.
Imagine shutting down the London Underground simply because its revenue does not cover its operating costs. London would grind to a halt in hours, as would its economy and, shortly after that, the economy of the entire subregion.
On the contrary, the London Underground is an essential enabler of the regional economy. It is not a profit centre in its own right and no thinking person expects it to be. Everyone does, however, expect that it must be operated efficiently and costeffectively. The same applies to the Gautrain.
It is self-evident that you cannot grow big cities (or economies) without efficient, safe and reliable public transport. As JF Kennedy once said when commenting on how the US had attained such economic pre-eminence: “Wealth does not create infrastructure; infrastructure creates wealth.”
At the time that the concession agreement was being negotiated about 10 years ago, each party conducted a demand forecast to try to predict the patronage — and, by inference, the revenue — that might be expected. Even at that stage, neither party expected that the Gautrain’s revenue would cover its costs. Based on international precedent, it would have been a completely unrealistic expectation.
It was, however, agreed that if actual revenue fell below Bombela’s forecast, the company would be financially penalised. This was an incentive mechanism to ensure that
Ongoing tax support for a public service does not imply a crisis
Bombela promoted passenger usage of the system.
In broad terms, the shortfall between the operating revenue and the operating and financing costs is funded by the provincial government and is called the patronage guarantee.
The patronage guarantee is directly comparable to the funding that supports most other public utilities both here and internationally.
It is important to note that, apart from inflationary adjustments, the operating and financing costs of the Gautrain are fixed in the concession agreement. Bombela carries the risk of its own costs, as well as cost increases from utilities (such as electricity), labour and system renewals.
For example, Bombela will need to replace the entire bus fleet at its own cost during the currency of the concession period.
Also, any increase in farebox revenue (owing to increased patronage or fare prices) primarily benefits the provincial government by effectively reducing the patronage guarantee payable by it. Bombela receives a fraction of this benefit as an incentive to increase patronage.
The continued growth of the Gautrain is unquestionably in the interests of the province.
There is a desire to extend the Gautrain network to bring the transport and development benefits of the train to other locations. The proposed rail network will ultimately consist of a high-speed rail link between Durban and Johannesburg and rapid rail links to Westgate, Boksburg, Naledi in Soweto and Mamelodi in Pretoria, and a link to Randburg.
It is understood that the first phase of the feasibility studies for these extensions will begin this year.
Taking into account the completion of the feasibility and environmental studies, construction might begin in six to eight years’ time.
Braithwaite is technical and marketing executive at Bombela Concession Company