OUR JOURNEY TO A BETTER

SADC - DFRC Presentation on Gautrain December 2016 Contents 1. The Past – Africa’s Largest PPP 2. The Present – Managing Complexity 3. The Future – Creating a Vision The Past: Africa’s Largest PPP Key Success Factors 1. Political leadership and will 2. Continuous and strong project leadership and technical team 3. Doing Gautrain as a PPP 4. Treasury involvement in funding Existing Routes Pre Gautrain- a challenging future Gautrain: More than Just Another Transport Project

The project stimulates Design to Economic growth Restructure urban areas Investment Reduce travel distances, New development time and cost Job creation Improve sustainability

The Gautrain will promote Public Transport SMME & BBBEE Development Tourism Business development Public Private Partnership

• Gautrain is a PPP Project • Leading to a Concession Agreement • Of the DBFOM type • PPP Projects on National and Provincial levels are regulated by South African Public Finance Management Act Regulations (TR 16) PPP Requirements • Feasibility – Value for money • Public Sector Comparator (PSC) (What will it cost if Government does the work through normal procurement process; and including completion and integration risk and cost) – Affordability – Total cost of project, expressed in Net Present Value (NPV) – Yearly cost to the province (contingent liability) – Maintain the 80/20% ratio in social vs.. rest split in budget – Risk transfer • Identify, cost and allocate various risks to the role players best equipped to mitigate and manage them PPP Contracts

• Public-Private-Partnership (PPP) contracts – Output specification – Client (authority) only defines the problem (essential minimum requirements) – Turnkey project – Contractor (concessionaire) bids to design, build, operate the project for the concession period PPP Contracts (2) • Concessionaire takes all completion and integration risks • Concessionaire offers a fixed price, fixed specification and fixed time frame (turnkey) contract • Concessionaire is fully involved in the operation and maintenance of the system for the full concession period • Concessionaire must hand over the system to the client at the end of the concession period in a prescribed condition

PPP Contracts (3)

• PPP contract allows for Concessionaire innovation and world-best-practice during design, construction, operations and maintenance • PPP’s give access to private sector funds (local and international) • However, potential problems, e.g. value engineering/scope changes, variations, less opportunity to claim, etc.

Major Phases of Project

PROVINCE PHASE PHASE NAME AND PERIOD SUPPORT PROCUREMENT 1 Apr 2000 – Sep 2006 Transaction Financial Close only in February 2007 Advisors CONCESSION DEVELOPMENT GMA staff and 2 28 Sep 2006 – 7 June 2012 Provincial Plus defects/liability/retention period Support Team OPERATION & MAINTENANCE 3 7 June 2012 – 27 March 2026 GMA Procurement Process • Request for Prequalification (RFQ) – February – May 2002 – Premier Shilowa announced on 2 May 2002 the Bombela and Gauliwe consortia as pre- qualified bidders • Request for Proposal (RFP) I – Discussions May – September 2002 • RFP II – Issued 29 November 2002 – Submitted 30 September 2003 Procurement Process (2) • RFP III (Best and Final Offer/BAFO) – Constructive engagement with bidders – Draft Documents July 2004 – Final Documents Dec 2004 – Submit 26 Jan 2005 – Bidder Presentations 9+10 Feb 2005 – FBAFO March 2005 – Clarification Questions: briefing notes and meetings – Analysis/Evaluation of proposals Procurement Process (3)

• Negotiations with preferred bidder

• Sign Concession Agreement and Commence Construction (28 September 2006)

• Financial Close (January 2007) Project partners

PUBLIC

PRIVATE

33% 17%

8% 25% 17% Provincial Structure during Procurement Phase Political Committee

Project Leader

Transaction Advisors

Project Co-ordinator

Technical Legal Financial SED Committee Team Team Team Project Cost

• Gautrain is a fixed price turn key project – Price had been fixed at the signing of the Concession Agreement on 28 September 2006 • Provincial contribution ,9 bn • Private sector contribution R 3,2 bn • R25,1 bn is expressed in nominal terms over the next 54 months • Only the following increases in cost will be allowed: – Extra work through a Variation Order (only 2.1% of Project Value) – Escalation higher than the escalation prediction of the Reserve Bank Funding

• The public sector funding of the Gautrain's capital costs over the five year development period will be sourced from three places: – The GPG’s equitable share (i.e. the provincial budget (MTEF)); – provincial borrowing from the National Treasury; and – a conditional grant from National Treasury via the National Department of Transport • The conditional grant via the Department of Transport's budget makes up 50% of the public sector's capital costs of the project, with the provincial budget and provincial borrowing sums making up the remaining 50% Project Financing

Provincial borrowing Private Debt 18.4% 9.5% Equity 1.8% MTEF 26.1% DoRA 44.2% Gautrain Socio economic development success (Construction) Gautrain Socio economic development (Construction) The Present – Managing Complexity

Key Lessons 1. Keep the customers happy 2. Contract management drives Value for Money 3. Empowered public sector essential 4. Public sector drives change in a PPP 5. External dispute resolution poor value for money Snap -Shot 1. 99% Availability and 98% Punctuality 2. Less than 0,4% fare evasion 3. Less than 1 security incidents / 1 million trips 4. Strong ridership Growth 5. Operating cost recovery ratio 1,1 6. Overcrowding and capacity constraints currently using entire fleet of trains 7. GMA established and about 82 staff Gautrain - Ridership Gautrain – Revenue (Nominal) Gautrain Annual Fare Income With year on year growth rate indicated R 900 000 000 7.9% R 800 000 000 15.0% R 700 000 000 25.3% R 600 000 000

R 500 000 000 GPS R 400 000 000 APS

R 300 000 000

R 200 000 000

R 100 000 000

R 0 FY 12/13 FY 13/14 FY 14/15 FY 15/16 Fare Comparison Comparison of Orange Single Train Fares : 2011 to 2016 80.0

70.0

60.0

50.0

40.0 Trip Cost,R

30.0

20.0

10.0

- - 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Distance, km Minimum - Schedule 20 Maximum - Schedule 20 2015 2016 2014 2013 2012 2011 Managing Capacity

As the following slides show, Gautrain has addressed capacity issues by: ― August 2011 ― March 2012 • Introducing 8-car trains ― May 2102 ― September 2012 ― April 2013 ― August 2013 ― April 2014

• Structuring the fares to encourage travel outside of peaks

• Introducing a 10 minute timetable

Additional Rolling Stock

– Province has identified a latent demand and capacity constraint in relation to the Gautrain Rapid Rail Link system – The actual passenger demand on the Gautrain system has exceeded realistic expectations and predictions – To manage the provision of capacity, Province will require a total of 48 coaches, expanded depot and upgrade signalling Being done as a Variation spanning over the end of the concession DBSA is GMA financing partner R4,5 billion project Currently in procurement Gautrain’s operations Socio-economic development success Source: GMA SED report 2013/14 financial year Gautrain’s operations Socio-economic development success Source: GMA SED report 2013/14 financial year Gautrain’s operations Socio-economic development success Source: GMA SED report 2013/14 financial year The Vision for the Future Key Success Factors 1. Political leadership and will 2. Build on Gautrain lessons learned – what worked and what didn’t 3. Stick with PPP but tweak the model 4. Partner with the best we can 5. Lead the integration as a Province 6. Follow TR 16 closely

Gauteng Rail Network (Gautrain/ PRASA)

A new modern Gauteng is in the making • Gauteng premier’s first State of the Province Address on 27 June 2014 in Thokoza, Ekurhuleni – Radically modernise the way Gauteng residents live and work – Ten pillars of radical transformation • Gauteng has a 25 year Integrated Transport Master Plan with Rail as its Public Transport backbone • Use public transport as an economic growth stimulant Five key GRRIN outputs

• Integrated safe, affordable and reliable rapid rail public transport • New transport orientated development nodes promoting higher density living • Greener transportation solutions for a healthier community • Enhancing economic integration and development • Increase in local content, Business Development Job creation/opportunities

Dreaming Of a World-class Rail System To Connect Our People throughout Gauteng • Integrated public transport • At its core a rapid rail link system • Increased infrastructure investment • Spatial Development Initiatives to stimulate economic growth and job creation Gauteng future

1. Car/ vehicle growth and 2. Road Congestion 3. Travel time savings if GRRIN implemented 4. Population Growth and land use 5. GRRIN model 6. Connectivity Challenges in Jhb North Western Sector Car growth and Congestion in Gauteng

• 3,9 million 2014 to 6,6 million 2037 • 300/ 1000 population to 450/1000 • Significant car growth • Congested road network “The Cost of Doing Nothing”

• Analysis of the transport situation in 25-years’ time, shows that the consequences or “cost of doing nothing” will be severe, i.e. if current trends continue • Vehicle population predicted to grow from 3.65 mil. to 6.57mil. • Peak hour person trips to grow from 2.2mil. to 3.9mil. Base Year 2025 Demand on 2037 Demand on Base Year • Weighted average peakBase hourYear Network road network speedNetwork will reduce from 7% 9% 9% 48km/h to below 10km/h 23% 11% 0 - 20 km/h 39% • Weighted public transport48% travel speed decline from 38km/h to 20 - 40 km/h 53% below 14km/h30% 22% • Congestion nightmare, with the31% transport network, the economy40 - 60 km/h 17% and the natural environment eventually choking > 60 km/h • Major interventions and management of travel choices and demand will be required to avoid this scenario

“The Cost of Doing Nothing” Gautrain Public transport system

Rapid Rail / Gautrain Gautrain Feeder System Speed profile: • 160 km/h Optimal distance • 62 – 75 km Feeder Bus Passenger per hour • 7,500 – 20,000 pph Feeder Taxi • Marlboro • Rosebank Gautrain

GRRIN Integration with BRT in CoT, EMM and CoJ as part of feeder and distribution bus network.

REA VAYA Harambee BRT A RE YENG

HAZELDEAN

TSHWANE IRENE EAST

SAMRAND OLIEVENHOUTBOSCH

SUNNINGHILL FOURWAYS ORTIA LANSERIA LANSERIA COSMO 2 LITTLE FALLS MIDFIELD RANDBURG ROODEPOORT EASTRAND MALL SOWETO SANDTON 2 (JABULANI) BOKSBURG GRRIN Extensions Phase 1 Western Core Network MAMELODI

LEGEND HATFIELD HAZELDEAN North – South Commuter TSHWANE EAST East – West Commuter IRENE Airport CENTURION Phase 1 SAMRAND

OLIEVENHOUTSBOSCH

SUNNINGHILL RHODESFIELD LANSERIA FOURWAYS O.R. TAMBO

COSMO MODDERFONTEIN SANDTON MARLBORO

LITTLE FALLS RANDBURG EAST RAND MALL SANDTON 2 ROODEPOORT ROSEBANK

JABULANI PARK BOKSBURG GRRIN Extensions – Phase 2

MAMELODI

LEGEND HATFIELD HAZELDEAN North – South Commuter TSHWANE EAST PRETORIA East – West Commuter IRENE Airport CENTURION Phase 2 SAMRAND Metrorail

OLIEVENHOUTSBOSCH MIDRAND

SUNNINGHILL RHODESFIELD

LANSERIA FOURWAYS O.R. TAMBO

COSMO MODDERFONTEIN SANDTON MARLBORO

LITTLE FALLS RANDBURG EAST RAND MALL SANDTON 2

ROODEPOORT ROSEBANK

JABULANI PARK BOKSBURG GRRIN Extensions: Phase 3-5

MAMELODI

LEGEND HATFIELD HAZELDEAN North – South Commuter TSHWANE EAST PRETORIA East – West Commuter IRENE Airport CENTURION Phase 3- 5 SAMRAND Metrorail

OLIEVENHOUTSBOSCH MIDRAND

RHODESFIELD SUNNINGHILL

LANSERIA FOURWAYS O.R. TAMBO

CRADLE COSMO MODDERFONTEIN SANDTON MARLBORO

LITTLE FALLS RANDBURG EAST RAND MALL

ROSEBANK SANDTON 2 ROODEPOORT

BOKSBURG JABULANI PARK Structure

• GRRIN is an ‘extension’ to the current network and therefore is considered a Brownfield project; • Expected to be phased over a long construction period in order to consider both ridership demand and funding availability ; • Expected lower government capital contribution for GRRIN in comparison to Gautrain, – hence the sourcing of non-government (external funding) is paramount; • Passenger demand, • Economic impact and • Funding/financing ability for the specific line sections Contract structure Thank You

William Dachs COO Gautrain Management Agency [email protected] www.gautrain.co.za