The government has begun market engagement with manufacturers and financiers as it seeks to overhaul the country’s commuter rail system, which it has described as unreliable and as one characterised by overcrowding and a failure to run on time.
This is in preparation for the capital expenditure programme of the Passenger Rail Agency of South Africa (Prasa), which will spend R97 billion purchasing new rolling stock over the next 18 years.
Yesterday Transport Minister Sbusiso Ndebele addressed 354 local and international manufacturers and financiers who could partner the government in the project. He said the state could not afford to carry out this project on its own.
“Let us be clear, the coffers of the state are not sufficient to fund such a large programme. Therefore, a significant and sustained commitment from local and international financiers will be required to complete the rolling stock renewal programme,” said Ndebele.
Ndebele added that the programme would create up to 100 000 jobs for skilled and semi-skilled people over the next 18 years. Prasa provides 2.4 million passenger trips daily and the number of trips has grown at an average of 7.1 percent in the past three years.
Prasa spokeswoman Nana Zenani said the parastatal was aiming to deliver the first new trains in five years. She said details that had to be finalised included how much of the R97bn would go to local businesses and empowerment players and whether the private sector would have some shareholding.
“The market engagement process will be used by Prasa, in partnership with national departments… not as an expression for proposals or tender process, but to conduct market feasibility studies for the future rolling stock fleet renewal programme with both rolling stock manufacturers and financiers,” Zenani said.
The exercise would also gauge the market’s ability to supply adequate numbers of rolling stock to specifications suitable to local requirements. A professional team of advisers was undertaking a feasibility study for the procurement of the new rolling stock. The plan was to complete the study by June and thereafter it would be submitted to the cabinet for approval. Procurement would commence by 2012 at the latest.
Ndebele gave examples of other major transactions structured as public-private partnerships, such as the Gautrain, which is currently under the Bombela Concession. In the case of the Gautrain, the government put in R25bn, while the rest of the financing and risk was carried by the private sector because the government could not afford the burden.
“That is the kind of structure we are leaning towards as Prasa,” Zenani said.
A significant proportion of Prasa’s rolling stock was due to be retired between 2013 and 2015. The current fleet of 5M28 wagons was manufactured by Union Carriages and was made between the 1950s and 1970s.
The government has allocated R30.2bn to Prasa over the next three years, with R19.5bn earmarked for capital spending to further upgrade existing infrastructure, signalling systems and rolling stock.
In the mid-1980s, the government bought a limited set of trains from Japan, which were manufactured through local company Dorbyl. Ndebele said this fleet of about eight 8M train sets was still running effectively in the Cape region.
There were significant incentives for those people interested in partnering Prasa, such as the R20bn tax incentive to promote industrial investment through new manufacturing, grant-based incentives for medium to large-scale investment projects exceeding R5 million, and investment grants ranging between 15 percent and 30 percent of a project but not exceeding R30m.
The purchasing of rolling stock is one of two major rail projects that the government is starting. There is also a plan to introduce a high-speed rail network between Johannesburg and Durban, Johannesburg and Cape Town and Johannesburg and Musina, and a rail corridor between Tshwane and Moloto in Mpumalanga. - Business Report