GAUTRAIN - ISSUES TO BE RAISED BY TRANSPORT PORTFOLIO COMMITTEE AT PUBLIC HEARINGS (8^th –9^th November 2005)

1. Serious shortcomings in the overall policy, consultation and oversight process

1.1 A project of "national interest"

While the Transport PC has been following the Gautrain project with great interest (and concern) for several years, we have not become involved in detailed oversight or direct engagement on the grounds that hitherto the project has been run by the Gauteng province and presented as essentially a provincial project.

On 25^th October 2005, the Minister of Finance, however, announced in parliament that the Gautrain project had a "national" status, and that it would be costing the national fiscus an estimated R20 billion. It has also been indicated that a final cabinet decision will be made in mid-December. If cabinet agrees, the roll-out of the project will commence in January 2006. We now have only two weeks of the final parliamentary session of the year remaining. This means that Parliament will have a few hours in which to assess what will be (if the project goes ahead) the largest ever budgetary allocation (by a considerable amount) to a public transport project.

In the present budget 2004/5, for instance, we have allocated a total amount of R4.67 billion to all public transport modes (trains, buses, and taxis) throughout the country. These modes presently carry some 6 to 7 million regular passengers every single week-day in seriously under-capitalised, often unsafe and uncomfortable conditions.

This should be compared with the projected (and perhaps optimistic) daily ridership of 120,000 passengers in 2010 for the Gautrain.

While these comparisons do not in themselves necessarily call into question the Gautrain project, they do underline the sense of seriousness and responsibility with which the Transport PC (and indeed national government) should approach the Gautrain proposal. We cannot lightly give approval for such a costly project that will be directed at the wealthier upper segments of the market in the wealthiest province, against the background of such pressing needs. Two mornings of public hearings are totally inadequate.

1.2 Has there been effective participation and buy-in in other spheres of government?

The PC is uncertain whether or not this hurried and inadequate oversight process here in Parliament has, at least ,been somewhat compensated for by extensive public hearing at the Metro and/or Provincial legislature level.

Our own oversight engagement with leading transport officials in two of the three affected Metros (Tshwane and Johannesburg) suggests that there is a strong sense of inadequate consultation, and perhaps even of resentment. Indeed officials in at least one of these Metros said that they had been "bullied" into line, and that "although the Gautrain was not part of their own spatial and transport vision", there was little that they now could do "because digging will be starting in January".

Reading between the lines (and indeed, sometimes simply reading the lines) of the City of Johannesburg's Integrated Transport Plan 2003/2008 (Updated 2004) it is clear that the CoJ is less than enthusiastic about the Gautrain project, and indeed concerned about a number of key features (which we will refer to below).

The City of Tshwane Integrated Transport Plan 2004-2009 is quite explicit about several difficulties that it has with the Gautrain proposal. In section 7.6.2 of the Plan, it is noted that the City of Tshwane Metropolitan Municipality (CTMM) Economic Development Department has committed itself to assisting with a successful implementation of the Gautrain project, but then adds:

"This undertaking was given despite the fact that the Department's Transport Division was not proactively involved, or invited, in the feasibility and planning studies undertaken for the project by Gautrans. During the initial stages of planning, the former Greater Pretoria Metro Council and related sub councils indicated that the transportation-planning model being used by the province's consultants appears to be too coarse to provide suitable results. The Transport Division-offered its own, and more refined, metropolitan land use and transport model... "

The Tshwane research suggested that there was a significant demand for a rapid rail connection between Menlyn and Sandton/Johannesburg. They recommended the extension of the Gautrain line from Hatfield to the Menlyn node.

"However this request was not incorporated into the Gautrain proposal.. .Instead of a link to Menlyn, the proposal made public only indicated an extension of the line from Pretoria station that terminates at Hatfield. The Transport Division does not consider an extension to Hatfield as financially and practically viable. It moreover forces a park and ride facility into an area with major traffic congestion, whereas such park and ride facilities are usually provided at the edge of cities. "

The Portfolio is not in a position to assess the validity or otherwise of the Tswhane proposals. What we do wish to draw attention to are the indications of a serious buy-in from the Metro.

1.3 What precedent is being set?

In the light of all of the above, we urge Cabinet, when making a decision in mid- December, to consider the danger of setting a precedent in which a province runs ahead with a multi-billion rand project on the assumption that the provincial equitable share (along with private sector investment) will be largely sufficient (perhaps wittingly or unwittingly disguising the real cost), and then at the eleventh horn- expecting the national fiscus to carry the burden without a comprehensive national or

indeed Metro-level process of evaluation and oversight.

But why the rush?

2. The Gautrain and the 2010 World Cup Soccer Final

2.1 "A moral and legal obligation"?

While growing congestion on the Nl between Johannesburg and Tshwane does indeed present an important challenge, it is the World Cup 2010 date that is being used to instil a sense of great urgency. Gautrain project leader Jack van der Merwe has been quoted in The Star of 4^th November 2005 as saying that South Africa has a "moral and legal obligation" to complete the train by 2010 as it forms part of the 2010 Bid Conditions.

As far as the Transport PC is aware there is absolutely no contractual commitment for South Africa to build the Gautrain for the World Cup.

No reference is made in South Africa's Bid Boot. (see Chapter 13, Transport) to the Gautrain Rapid Rail project. In the Bid Book the only specific transport promises that are made refer to the high quality of transport to meet the levels required by the FIFA Family and these are set out in the "FIFA Requirements". Regarding spectator transport, FIFA's requirements are less specific and rely on the Local Organising Committee and the host country.

In the Transport Technical Report a brief reference (under 4.4.6) is made to the Gautrain as part of a review of things that might be provided for spectator transport during 2010. As far as we know the Transport Technical Report was not actually submitted to FIFA, it was compiled as a background source document for the Bid Book, which itself is a marketing document, and not a list of contractual undertakings.

2.2 What ARE the real public transport priorities for a successful 2010?

It is interesting, however, to note the public transport issues that the Bid Book does highlight:

13.4.4 Rail travel

Best use will be made of all local commuter rail services which can provide access to World Cup stadia in Johannesburg, Pretoria, Cape Town, Durban and Port Elizabeth

13.4.6 Transport Concept Plan

World Cup transport plans will focus on making the best use of existing air, road and rail infrastructure, supplemented with additional services to ensure fast and efficient access between venues. Large improvements to the transport system infrastructure beyond what is already planned will not be necessary

...A dedicated World Cup Bus System, operating in the venue cities for the duration of the tournament to provide visitors with quick, safe and reliable links between hotels, airports, stadia and other main attractions. This system will supplement the existing local transportation system.

We should not, obviously, allow a three-week event to determine our long-term national transport strategic agenda. The Transport PC agrees with the Minister of Transport that we should rather use the 2010 World Cup as an opportunity to do the things we have to do in any case. However, a brief consideration of the relevant chapter of the Bid Book suggests that there are much more relevant transport priorities than the Gautrain that require upgrading and recapitalisation if we are to host a successful 2010.

2.3 A raw construction site in 2010?

But assuming, for the moment, that the Gautrain project does go ahead, how realistic is completion by the first half of 2010? Key spokespersons for the project over the last several years are on record as saying that the time-frames were very tight indeed.

• Gautrain project leader Jack van der Merwe: "We have found that a project of this nature usually takes 14 years. We will do it in nine years." (The Star, 25 June 2004). What are the grounds for this optimism?

• In March and April 2005 the major construction engineering groups associated with the two rival bids both warned that meeting the 2010 would be "very difficult ". "Both construction companies have warned that the development of the rail link -would be extremely challenging, as it would involve tunnelling through the hard rock, beneath Johannesburg", "the size and complexity of the project ...was immense" (quotations taken from Business Day story - "Contruction giants anxious not to miss out on Gautrain tenders", I April, 2005)

• In July this year, a UK-based consultant, John Carlisle told the Financial Mail'. "My firm was a partner on the great Hong Kong metro extension. This world-class, 12,5 km rail extension project took nearly four years to build and cost R23bn. The 80 km Gautrain line ...has to be delivered in less than five years. Gautrain has all the hallmarks of an adrenaline-driven disaster. " (FM, 8 July 2005)

If construction now starts in January 2006, are we really sure that we can complete by March 2010? If we fail to complete, are we likely to have a raw construction site rather than a high-speed rail system? Will an incomplete system create greater congestion? What kind of international message will this send?

3. The cost of the project

3.1 Escalating estimates

The estimated costs of the project have risen spectacularly from around R7 billion to the present R20 billion plus. The Transport PC is aware of some of the explanations provided for this very significant increase. We note that it is said that the lower figure ofR7 billion (now R12 billion) represents the net present value for the train in 2005, while the R20-billion is "the total exposure of government over the life of the project" (see project leader Jack van der Merwe, cited in Mail & Guardian (4 November 2005).

Other factors are also mentioned for the escalation - the absence of VAT in the 2002 calculation, the cost of re-alignments, and the need to not disclose to bidders, while the tendering was still under way, government's "affordability" threshold.

While each of these explanations might have some relevance, do they really provide persuasive explanations for the dramatic increase in the estimated cost of the project? The Transport PC has some experience (with the earlier version of the Taxi Recapitalisation programme) of the argument that government "cannot make public its affordability threshold, lest this ratchets up the bidders' prices". In this case, the argument ended up concealing for some years the real affordability issues, and postponed an honest discussion about the predicament of the project, leading to prolonged and fruitless delays.

3.2 Specific questions regarding costs

• Why, even accepting for the moment the lower estimate, has the net present value jumped from R7 billion to R12 billion?

• Why did the Gautrain project dismiss consistent concerns over several years raised by informed transport experts' that the R7 billion was hopelessly underestimating the cost of 12 km of tunnelling and other major construction challenges? (See, for instance, Romano Del Mistro and Louis Roodt, Alternative road based public transport between Johannesburg and Pretoria, SATC, 2001; and R Del Mistro, Taking a spin on the Gautrain, Civil Engineering, July 2002, and Urban Transport International, September/October 2002).

• Is it true that the Cabinet memo on which in-principle approval was based made no mention ofR20 billion, with a figure of around R3,5 billion being mentioned? (See Mail & Guardian, 4 Nov 2005, citing DoT Deputy Director General for Public Transport, Lucky Montana)

• When project leader Jack van der Merwe says that the R20 billion figure is "indicative of the total exposure of national and provincial governments combined over the life of the project" - what is the "life" as referred to here? Does it refer to the construction period up to 2010? Or does it refer to the entire life of the Gautrain project?

• Related to the last question, how will different ridership levels affect the financial viability of the project? What levels of ongoing subsidy (if any) will be required to keep the Gautrain (and its feeder systems) operating, especially if ridership is not as high as projected? Will these subsidies be a government responsibility?

• To put the same question in a different form - what do the private sector participants expect to make the bulk of their profits from: construction, or actually operating a public transport system?

• Why, with the escalation of estimated costs has the private sector contribution not escalated commensurately? Initially, we are told, the R7bn was to be equally shared between the public and private sector. Why is it that the public fiscus contribution bears the brunt of the escalated costs?

• How will the BEE component of the project be financed? Does the estimated contribution of the private sector include the 25% BEE share-holding? Does this not mask the fact that a significant proportion of this BEE share-holding might also be publicly financed via public entities like the DBSA and IDT?

4. Collateral Costs - "We've got the money, why not spend it?"

4.1 We have sometimes heard (in informal engagements with senior colleagues in government) that, while the estimated costs of the Gautrain have escalated and while they do not necessarily accept the accuracy of the projected ridership levels, "we've got the money, and we're under pressure to spend on transport infrastructure, so why not spend it?". The Transport PC has certainly welcomed government's commitment in the past two years to spearhead a major infrastructural spend over the period of the Medium Term Budget. We also note that this year government has a R30 billion tax revenue surplus.

4.2 We also accept that significant infrastructure and transport projects, like the Gautrain, can have an important growth-catalysing and job-creating impact on the economy of Gauteng and indeed the country as a whole. We have seen the estimates produced by the Gautrain project in this regard. In other words, it is possible to see R20-billion spent on the Gautrain project not in zero-sum terms, i.e. not as R20-billion subtracted from some other project, or projects.

4.3 However, a R20-billion rand spend on the Gautrain may also have a negative impact on other infrastructural programmes that should, perhaps, enjoy greater priority. We hope that Cabinet (and specifically officials advising Cabinet from Treasury) will factor in possible collateral costs to other projects - in particular, we have in mind the spiralling cost of cement (prices have more than doubled in the past seven years), and steel. Scarce engineering skills and the danger of the Gautrain project crowding out other infrastructure projects in this regard must also be considered. (In our recent engagement as the Transport PC with the Airports Company of South Africa we were told that they were rushing to contractually lock-in their own major 2010-related infrastnictural projects as quickly as possible as they expect significant cost escalations, and skills shortages - and the Gautrain was specifically mentioned as a cost-driver).

5. Relieving Congestion on Ben Schoeman Nl Freeway

5.1 While a wide-array of motivations are offered in the promotion of the Gautrain (from World Cup 2010, to job creation, to CBD revival), the central objective of the project appears to be relieving congestion on the Ben Schoeman Nl Freeway between Johannesburg and Tshwane. The over-riding objective of the project is, therefore, to develop a rail-based public transport mode that will attract at least a proportion of affluent car-users off the freeway.

5.2 This objective has then led logically (but perhaps problematically) to a series of technical and design choices based on the assumption that the project must pander to the interests of the most affluent.

5.3 This has resulted in a choice of rail gauge that is not compatible with the gauge in use on the Metrorail system (in order to ensure operating speeds of up to 160-180 km/h).

5.4 The choice of gauge also means that a great deal of the R20-billion will not remain within our country, as the manufacturing of the train will occur in Europe, despite the fact that we have an extensive (but seriously under-utilised) train manufacturing capacity within South Africa.

5.5 Pursuing affluent car-users has also impacted on the route choices - for instance, the line will not run into the Tshwane CBD (a problem raised with the Transport PC when we interacted with officials from the Metro), but branches off eastwards to Hatfield (but without then going further to the Menlyn node).

5.6 The branch-line between Sandton and Johannesburg International Airport also seems to have a prestige motivation rather than a congestion alleviation objective.

6. The City of Johannesburg's Integrated Transport Plan's approach to congestion relief

6.1 It is interesting to compare the CoJ's ITP approach to congestion with the assumptions that appear to be embedded in the Gautrain project.

6.2 Specifically on the Gautrain's potential contribution to congestion relief on the N1, the Integrated Transport Plan 2003/2008 (Updated 2004) notes:

"Whilst major public transport initiatives such as Gautrain can be expected to attract private transport users, this attraction will at best only slow down the growth in private transport demand (i.e. private transport demand will continue to grow albeit at a marginally reduced rate " (Executive Summary, p.42)

The COJ's ITP also notes that major congestion challenges are not confined to the N1:

"The development of East/West linkages are just as important to the sustained growth of the City as the North/West corridor... " (ibid.p.39)

6.3 The ITP further notes that: "Capacity bottlenecks generally occur at intersections and interchanges (as opposed to mid link sections of freeways and arterials) due to inadequate geometry or malfunctioning/mistimed traffic signals. " (p.57)

6.4 As opposed to a rapid rail system, the CoJ's approach to congestion challenges and growth in car ownership focuses largely on much less costly road based systems:

"A major focus in promoting public transport will be the promotion of road based public transport proposals (80% of current public transport demand being road based). Consequently the need exists to free-up roads and to utilise road space to incorporate Bus and other High Occupancy Vehicle (HOV) lanes, which in turn can be used to provide efficient and reliable public transport services. " (p.42)

7. General concerns

Many questions arise from all of the above:

• Are we sure that the Gautrain will indeed impact effectively and positively on congestion?

• Are there not cheaper alternative public transport answers to the Ben Schoeman congestion challenge - bus rapid transit systems are increasingly being used in Third and First World cities, costing 10 to 20 times less?

• If we are so optimistic about the Gautrain relieving congestion, why is there now also a go-ahead on the PWV 9 road? And what is happening to the planned Ben Schoeman toll-way, which might be a more effective transport management solution?

• Is congestion best solved through construction and transport answers? What about a much more integrated spatial planning approach? Underpinning all of the concerns noted above is the following cluster of central questions:

• Can the Transport Portfolio recommend to Cabinet that we proceed with a R20-billion plus project that might attract some affluent car-users (reckoned at an optimistic 120,000) off one of the congested axes in Gauteng, while some 6 – 7 million existing regular public transport users experience public transport that we all admit is inadequate, often unreliable, unsafe and under-funded?

• Can we recommend a project whose technical specifications and ticket prices are likely to widen the gap between the so-called "first" and "second" economies?

• Can we recommend a project that seems not to be integrated into the comprehensive Integrated Transport Plans of the affected Metros, and which may well drain scarce resources away from other more integrated initiatives and, indeed, actively undermine spatial planning and land-use plans?