New Gautrain operator
NO EXTENSION: GAUTENG GOVT WANTS COMPETITIVE CONTRACT POST 2026 Initial 15-year concession involved developing rail system in ‘open veld’.
The Gauteng provincial government plans to follow competitive procurement processes for any post-2026 contracts for the Gautrain, and does not intend to extend the concession period with Bombela Concession Company (BCC), the current operator of the rapid rail system.
JSE-listed multinational engineering and construction group Murray & Roberts (M&R) owns a 50% stake in BCC, which holds the 15-year concession for operating and maintaining the Gautrain. It expires in March 2026.
Greater focus on operating environment
Gautrain Management Agency (GMA) chief executive William Dachs said the GMA entered into a public-private partnership (PPP) agreement with BCC to build, integrate and operate the Gautrain system.
Dachs said this PPP has a financial model with particular characteristics, because it included a lot of capital investment to take open veld and develop an operating rail system.
“It doesn’t make sense to even look at extending it because you are basically extending a concession that had this massive build programme in it.
“Post 2026 you will be looking at something completely different – much more of an operating
environment than a construction one,” he said.
Options
Dachs said the GMA also has to follow all National Treasury prescripts on PPPs, which involved following a regulated process of appointing transaction advisers, doing a feasibility study, and deciding on what is the best option.
He said the main options for the future of the Gautrain were:
The Gauteng provincial government taking over and operating it;
Entering a contract with a private sector operator to operate it; or
Doing a new type of PPP if further capital investments were required for the Gautrain.
Dachs said the GMA has appointed a team of transaction advisors to do a feasibility study and supply data on the cost, viability,
and best value for money of each of the options to enable a decision to be taken. “Whichever procurement we do, it’s going to be competitive. We can’t just go back to Bombela [and negotiate an extension]. So, it will go out to tender again.”
Ridership levels
The pandemic and lockdowns have had a dramatic impact on Gautrain ridership levels. M&R reported earlier this month they are now at about 10 500 a day, a notable decline from the about 13 000-per-day ridership levels achieved in June.
Ed Jardim, group investor and media executive at M&R, confirmed current Gautrain ridership levels were below the threshold at which the patronage guarantee kicked in. The patronage guarantee is a subsidy to the BCC when its total revenue from
the Gautrain is below a contractually agreed amount.
According to the latest GMA annual report, the patronage guarantee payment by the GMA increased to R1.971 billion in the year to end-March last year from R1.667 billion in the previous year.
Jardim said M&R’s model was forecasting Gautrain ridership levels would return to a level where the patronage guarantee applied in 2023.
M&R in June confirmed it had successfully finalised a Gautrain business disruption insurance claim and received R285 million.
Dachs agreed with M&R’s forecast, adding that there would probably be a two-year recovery period for Gautrain ridership levels but with “a huge caveat” in that this still depended on what happened with the pandemic and the extent of any further lockdowns.