An Insider's View into Gautrain Management Agency - Mr. Jack van der Merwe CEO: Gautrain Management Agency - South ...
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An Insider’s View into
Gautrain Management Agency
Mr. Jack van der Merwe
CEO: Gautrain Management Agency
1st November 2019
A: South Africa’s Political Imperative
South African Labour Market Q2: 2019
Total Labour Force - 38.4 million
(Age 15 – 64)
12,8
16,3
Employed
2,7
Unemployed
6,7
Discouraged Work Seekers
Not Economic Active
South African Political Imperatives • The STATS SA unemployment rate of our youth is a staggering 55.2%. • This is one of the highest unemployment rates in the world! which is a ticking time-bomb that threatens the future of South Africa. • How can South Africa, within the current global environment, address this crisis? • Everything we do must be linked back to this crucial issue.
B: Gautrain Rapid Rail
Link (Gautrain I)
Gautrain Governance
• Background
– The Gautrain Rapid Rail Link project was one of the 10 Blue IQ long
term economic development projects announced by the Premier in
February 2000.
– The project was registered as a PPP project with National Treasury in
April 2000.
– It followed an extensive approval process with multiple approvals from
Provincial and National Treasury.
– An Executive Council decision (2000) created an Exco Committee,
the Gautrain Political Committee, to oversee the development of the
Gautrain project.
– The Gautrain Political Committee was chaired by the MEC for
Finance, with the MEC’s for Transport, Local Government, Economic
Development as members.
Gautrain Governance
• Background (continued)
– The Gautrain project was initially planned as a Provincial project, but at
the end of 2005 National Cabinet agreed to fund 50% of the CAPEX
cost of the project.
– This was conditional to the establishment of a single point accountable
Provincial Public Entity (GMA).
– GMA Act was developed, approved & promulgated and the GMA was
finally established on 01 January 2009.
Provincial
Executive Council
Infrastructure Political
GMA: Structure
Committee
Audit & Risk Com. MEC
Public Transport
& Roads Infrastructure
Finance & Assets Com.
Internal Audit
HC & Remuneration Com. GMA Board
Social & Ethics Com. Company Secretariat
Chief Executive Officer
Independent Adjudicators
IC
ISEM
IECP
DRB Chief SEM Current
Operating Financial Staff of
Officer (COO) Management (CFO) GMA 92
SEM SEM SEM SEM
SEM
Technical Compliance & Communications Corporate
CIO
Services Legal Services & Marketing Services
9
Implementation Process
• Four pillars
– Political will & commitment;
– Viable project (base case design):
• Technical;
• Financial;
• Legal/Institutional; and
• Socio-economic Development.
– Funding (for Infrastructure & Operations):
• Show Government’s portion; and
• Private Sector’s appetite to invest in the project.
– Community acceptance & buy-in:
• “sell” Socio-economic benefits; and
• Power of expropriation.C: Key Deliverables
Gautrain: More than Just Another
Transport Project
The project stimulates Design to
Economic growth Restructure urban areas
Local & Foreign Investment Reduce travel distances,
New development time and cost
Job creation Improve city sustainability
The Gautrain will promote
Public Transport
SMME & BBBEE Development
Tourism
Business developmentD: Public-Private-Partnership
RequirementsPublic 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 Contracts
• Public-Private-Partnership (PPP) contracts
– Output specification
– Client (authority) only defines the problem (essential minimum requirements)
– Concessionaire bids to design, build, operate the project for the concession
period a fixed price, fixed specification and fixed time frame (turnkey) contract
– Concessionaire takes all completion and integration risks
– 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 conditionMajor 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 GMAPPP Requirements (Schedule 16 of the PFMA)
• Feasibility (Treasury Authorisation: TAI):
– Value for money:
• Public Sector Comparator (PSC):
(What will it cost if Government does the work through the 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); and
• 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 Advantages (1)
• What each party brings to a PPP
Design &
Land Build innovation
Operation &
Legislation
Public Maintenance
Private
Concession Financing
Sector Subsidies & Sector
Guarantees (SPV)
Rights of way Capital
Long term Access to the market
vision
Revenue
UsersPPP Advantages (2)
• What each party gets from a PPP
Taxes Design &
Construction Contract
People
Mobility Operation
Contract
Public Economic Private
development Concession Servicing
Sector of Debt Sector
Socio-economic (SPV)
Benefits Incomes
Life-cycle Funding Profit
Time/cost saving Environment protection
Service Quality
UsersE: The Deal
PPP - Project partners: Equity
(Initially)
PUBLIC PRIVATE
25%
25%
25%
25%PPP - Project partners: Equity
(First Change)
PUBLIC PRIVATE
17% 8%
25%
25% 8%
17%PPP - Project partners: Equity
(Second Change)
PUBLIC PRIVATE
17% 8%
33%
25% 0%
17%PPP - Project partners: Equity
(Third Change)
PUBLIC PRIVATE
0% 12.2%
50%
37.8%
0%Contractual Structure Private Sector Finance
Bombardier 25%
Bouygues 25%
Province M&R 25%
SPG 25%
Shareholders Lenders
Concession Shareholders Loan
Agreement Agreement Agreement
Common Terms
Bombela “Family” Concessionaire Agreement
Bombela
Common Terms
Agreement
Co-operation
Bombardier 25%
Agreement RATP Dev 51%
Bouygues 25%
M&R 25% Turnkey SPG 25.1%
Operator
SPG 25% Contractor M&R 23.9%
E&M
Maintenance
Sub Contract
Bouygues 45% Civil E&M
E&M Feeder &
Bombardier
M&R 45% Contractor Bombardier 90%
Contractor Maintainer Distribution
SPG
SPG 10% SPG 10%
Onshore Onshore Onshore Onshore Onshore Onshore Onshore Onshore
Sub- procure Sub- procure Sub- Procure Sub- procure
supplier supplier supplier supplier
Offshore Offshore Offshore Offshore Offshore Offshore Offshore Offshore
Sub- procure Sub- procure Sub- procure Sub- procure
supplier supplier supplier supplierComplex problems have simple, easy to
understand, wrong answers.
No. 4 Grossman’s MisquoteF: Funding
Funding
• Gautrain has 5 sources of funding:
– DoRA (Division of Revenue Act) money from central government via the
Department of Transport (only for construction - CAPEX);
– MTEF (Medium Term Expenditure Framework) from Gauteng Provincial
Government;
– Private Sector Equity;
– Private Sector Borrowing; and
– Provincial Borrowing.Project Financing
Private Debt
9,5% Provincial
borrowing
18,4%
Equity
1,8%
MTEF
26,1%
DoRA
44,2%G: Socio-economic Development
(SED)SED Commitments • The SED strategy contains 21 SED elements based on the broad-based SED objectives of Government, grouped into the following 6 Clusters: – Procurement and sub-contracting; – Local Content; – Black Enterprise and Equity Participant; – Participation in management; – Direct Employment; and – Training. • The competitive bidding process was used to solicit the bidders (Bombela’s) commitment to each of the SED elements.
Verified % Compliance
SED01:Shares held by BEEs/ Black Persons 100%
SED02:Shares held by Black Women 119%
SED03:Procurement from BEEs/ Black Persons 179%
SED04:Sub-contracting to BEE 223%
SED05:Procurement & sub-contracting to New BEE 197%
SED06:Procurement & sub-contracting to SMMEs 411%
SED08:Employment of Local People 180%
SED09:Procurement of RSA Materials 190%
SED10:Procurement of RSA Plant & Equipment 176%
SED11:HDI staff seconded by SPG 186%
SED12:Expenditure by SPG on Plant & and Equipment 124%
SED13:Procurement from, or Sub-contracting to SPG 216%
EEP01:HDIs in Management Positions 266%
EEP02:Women in Management Positions 397%
EEP07:HDIs in Occupational Level C 411%
EEP03:HDIs employed 215%
EEP04:Women employed 225%
EEP05:People with Disabilities employed 127%
EEP06:Expenditure on Human Resource Development 117%
EEP08(a): Women trained & mentored 98%
EEP08(b):Women Learners employed & mentored 166%
0% 50% 100% 150% 200% 250% 300% 350% 400% 450%Economic Impact (1)
• After five years of operations GMA appointed
KPMG to assess the Economic Impact of the
Gautrain system.
• The study was centred around:
– Gautrain’s contribution to Gauteng’s long-term economic
development;
– Gautrain’s contribution to public transport becoming the mode
of choice; and
– Gautrain’s contribution to Gauteng’s improved spatial
development.Economic & Social Impact (2) • After eight years of operations GMA appointed Hatch to assess the Economic and Social Impact of the Gautrain system. • The study was centred around five pillars of Impact: – Delivering Jobs & Social Investment; – Influencing Transport Choices; – Reinforcing Development Nodes; – Integrating the region & its Communities; and – Changing Perceptions & Attracting Investments. • (we are launching their report today at the press conference)
H: Economic Impact
(KPMG)Economic Impact
• The GMA have commissioned two independent studies to verify
the impact of the SED component of the project:
– Gautrain’s contribution to Gauteng’s long
term economic development:
• R20 billion total GDP impact during construction;
• 34 800 direct and 87 000 indirect and induced jobs created
(78% skilled and semi-skilled and 22% unskilled jobs)
• Each year of operations R1,7 billion added to the provincial economy
• 922 direct and 5 200 indirect and induced jobs created and sustained during 15
years of operations
• R617 million of the R3,2 billion household income generated from Gautrain’s CAPEX
and OPEX contributes to poverty alleviation in GautengEconomic Impact
– Gautrain’s contribution to public
transport becoming the mode of choice:
• Clear move towards quality public transport;
• 24 200 fewer cars on the road, at least 13 fewer fatal crashes per year and 14 fewer fatalities
• Timesaving of between 10 to 12 working days per year
• Reduction of carbon footprint by 52% for Gautrain commuter
– Gautrain’s contribution to Gauteng’s
improved spatial development:
• R46 billion total GDP impact added to the Provincial economy through property development
induced by Gautrain;
• 245 000 total jobs were created as a result of property development (85% were skilled and 15%
were unskilled jobs)
• R4.9 billion of the R28 billion household income generated from property development contributes
to poverty alleviation
• 1% - 3% faster growth in residential property value in close proximity to stations and 100% higher
office rental rates
• R10 billion retail property development close to stationsEconomic Impact
• Gautrain’s contribution to Gauteng’s long term
economic development:
– Current impact:
• R20 billion total GDP impact during construction;
• 34 800 direct and 87 000 indirect and induced jobs created
(78% skilled and semi-skilled and 22% unskilled jobs);
• Each year of operations R1,7 billion added to the provincial economy;
• 922 direct and 5 200 indirect and induced jobs created and sustained during
15 years of operations; and
• R617 million of the R3,2 billion household income generated from Gautrain’s
CAPEX and OPEX contributes to poverty alleviation in Gauteng.Economic Impact
• Gautrain’s contribution to Gauteng’s long term
economic development:
– Future Impact:
• 0.73 Total GDP multiplier for the construction phase of
Gautrain;
• 5 jobs per R1.0 million spent for the expansion of Gautrain;
• 0.96 total GDP multiplier for operation phase of Gautrain; and
• 4 jobs per R1.0 million spent during 15 years of operations.Economic Impact
• Gautrain’s contribution to public transport becoming
the mode of choice:
– Current Impact:
• Clear move towards quality public transport;
• 24 200 fewer cars on the road, at least 13 fewer fatal crashes
per year and 14 fewer fatalities;
• Timesaving of between 10 to 12 working days per year; and
• Reduction of carbon footprint by 52% for Gautrain commuter.Economic Impact
• Gautrain’s contribution to Gauteng’s improved
spatial development:
– Current Impact:
• R46 billion total GDP impact added to the Provincial economy
through property development induced by Gautrain;
• 245 000 total jobs were created as a result of property development
(85% were skilled and 15% were unskilled jobs);
• R4.9 billion of the R28 billion household income generated from
property development contributes to poverty alleviation;
• 1% - 3% faster growth in residential property value in close proximity
to stations and 100% higher office rental rates; and
• R10 billion retail property development close to stations.Economic Impact
• Gautrain’s contribution to Gauteng’s improved
spatial development:
– Future Impact:
• 1.91 total GDP multiplier for property development around
Gautrain stations;
• Additional investment in property development around stations
will create 10 jobs for every R1 million spent; and
• 17% of additional household income generated from property
development will flow to poverty alleviation.I: Economic & Social Impact
(Hatch)Influencing Transport Choices
Gautrain represents a new era in Each person who has chosen to make a trip
public transport on the Gautrain instead of in a car has
Quality of service rating (Max score = 10)
delivered...
R74 of economic benefit per
trip
Reduced CO2 emission Saves 22
costs from savings minutes on
fatal average
87% of Gauteng residents think accidents
that Gautrain is a good idea
Sources: GMA Market Segmentation Report; GMA Perceptions Survey; Hatch CalculationsEconomic & Social Impact
• Reinforcing Development Nodes;
– Office: + 820 000 m2 floorspace; 45% increase in median sales value per
m2
– Retail: + 31 000 m2 floorspace; 32% increase in median sales value per
m2
– Other Commercial: + 805 000 m2 floorspace; 109% increase in median
sales value per m2
– Residential: + 138 000 m2 floorspace; 52% increase in median sales
value per m2
• 1 656 000 m2 more commercial space, with 87% occupancy rates. Which
supports 66 000 jobs
• 59% of all office development activity in major South African nodes in
2018 was located around Gautrain stationsIntegrating the Region and its
Communities
Why do people use Gautrain to
cross city boundaries?
Shifting from car to Shifting from car to Shifting from car to
Gautrain typically Gautrain typically Gautrain typically
saves saves saves
43 minutes 44 minutes 31 minutes
between Pretoria Station between Rhodesfield between Pretoria
(Tshwane) and Sandton Station (Ekurhuleni) and Station (Tshwane) and
Station (Johannesburg) Sandton Station Rhodesfield Station
at typical 7am peak (Johannesburg) at (Ekurhuleni) at typical
typical 7am peak 7am peak
Sources: GMA Ticketing Information; Google MapsSummary of Key Impacts Achieved to Date
Delivering Jobs
and Social
Investment
Guatrain has already created
35,000 direct construction jobs
and 10,900 direct operational
jobs
Changing
Influencing
Perceptions and
Transport Choices
Attracting Investment
87% of residents believe
FDI investment into Gauteng
Gautrain is a good thing
increased to over R44bn
Each trip on Gautrain
in 2016
instead of a car delivers
Now over 80
R74 in economic benefit
conference centres
in Gauteng
Reinforcing
Integrating Development Nodes
the Region
New commercial space
and its around stations = 66,000
Communities jobs
70% of all trips on Gautrain 59% of office development
cross a city boundary activity in SA nodes in 2018
was located around
stationsJ: Gautrain Operations
Existing Routes
Gautrain: Operations
• Gautrain is the biggest PPP project and is seen as one of the
best examples of a Transport PPP in the World.
(World Bank, Harvard & Oxford)
• Gautrain Brand is well established:
– High level of service:
• We run 6 800 trains per month, Average of 60 000 rail & 23 000 bus passengers per day;
• Punctuality of 98,6% & Availability of 99,5%;
• Fare evasion of less than 0,04%
– Steady growth in ridership (currently constrained by capacity challenges during
peak periods);
– Gautrain is a public transport mode of choice (77% of ridership have moved from
private vehicles to the Gautrain)
• Small organisation (92 staff members)Gautrain: Operations
• Gautrain is part of an integrated public transport system in Gauteng
– Modal integration at stations with other modes:
• MetroRail at Hatfield; Pretoria; Park & Rhodesfield
• BRT at Park; Rosebank; Sandton; Midrand; Centurion; Pretoria; Hatfield and Rhodesfield;
• Mini-bus taxis; at Marlboro; Sandton; Rosebank; Centurion and Pretoria (UITP
International Award 1st Place)
• Metered taxis & e-hailing services at all nine stations
– Development of an electronic ticketing system for Gauteng;
– Development of an electronic route-finding App (Where-is-my-transport UITP
International award; 2nd Place)
• GMA is a single-point accountability entity with a well functioning
governance structure
• Good working relationship with the mediaK: Gauteng Rapid Rail Integrated Network (Gautrain II)
Gautrain II (GRRIN)
• The GMA has developed an extension of 150km and
19 new stations to the existing system
(Gauteng Rapid Rail Integrated Network (GRRIN))
– Registered the project as a PPP project with National Treasury;
– Completed the feasibility study and submitted it to National Treasury for TA1
Authorisation (Schedule 16 of the PFMA)
– Registered it as a SIP project of the NDP (SIP 7)2014 Socio-economic Density with Existing
Rail and Future GRRIN
Population Density Job Density
Gautrain
PRASA
GRRIN2037 Socio-economic Density with Existing
Rail and Future GRRIN
Population Density Job Density
Gautrain
PRASA
GRRINGRRIN Extensions Phasing
Phase 1 MAMELODI
LEGEND
HATFIELD HAZELDEAN
North – South Commuter
TSHWANE EAST
PRETORIA
East – West Commuter
IRENE
Airport
CENTURION
Phase 1
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 BOKSBURGPhase 2: Soweto link
MAMELODI
North – South Commuter HATFIELD HAZELDEAN
East – West Commuter PRETORIA
TSHWANE EAST
IRENE
Airport Service CENTURION
Metrorail integration SAMRAND
Phase OLIEVENHOUTSBOSCH
MIDRAND
SUNNINGHILL RHODESFIELD
LANSERIA
FOURWAYS O.R. TAMBO
COSMO MODDERFONTEIN
CRADLE
SANDTON MARLBORO
MIDFIELD TERMINAL
LITTLE FALLS RANDBURG
SANDTON 2 EAST RAND MALL
ROSEBANK
ROODEPOORT
JABULANI PARK BOKSBURGGRRIN Extensions: All Phases
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
MIDFIELD TERMINAL
LITTLE FALLS RANDBURG
EAST RAND MALL
ROSEBANK SANDTON 2
ROODEPOORT
BOKSBURG
JABULANI PARKAlternative Funding Analysis • Additional sources of Alternative funding were identified per the DBSA report (“Gauteng Rapid Rail Network Extension (GRRNE) Funding Options Analysis”) • The potential categories of “Alternative” revenue/funding are as follows: – Tax Increment Financing (TIR) (New & existing stations) – Special Rating Areas (SRA) (New & existing stations) – Vehicle License Fee – Airport Tax – Sales Tax - VAT – Property Asset and Management Agency (Property Development) – Station Auctioning
Alternative Funding Analysis
• The accompanying charts quantify the impact of ‘Alternative’ funding
sources on the project funding/financing split
DEFAULT FUNDING INFRASTRUCTURE SPLIT ALTERNATIVE FUNDING INFRASTRUCTURE SPLIT
Provincial MTEF;
Provincial MTEF; 12%
Private Sector; 27% Alternative Funding;
33% National DoRA; 17%
38%
National DoRA;
40% Private Sector; 33%L: Closure
The Seven Stages of a Mega Project • Enthusiasm • Promises & Programmes • Disillusionment • Panic • Hunt for the guilty • Punishment of the innocent • Reward for those who had nothing to do with it
Whatever it is that hits the fan will not
Be evenly distributed.
No. 2 Law of Probable Dispersal“The philosophers have only interpreted the world; the
point however is to change it”
Karl Marx
“The Future is not for the faint hearted.”
R Reagan
“It always seems impossible until it’s done.”
Nelson Mandela
Thank YouEND
M: Leadership
Leadership
• Deliberate Practice: the 10 000-hour rule
(if you want to be an expert in a field you need 10 000 hours to
acquire the skills)
• Successful people’s recipe:
– Set aside 1 hour / day, 5 hours / week, for the rest of their lives
– They set aside these hours over their entire career for activities that can
be classified as; Deliberate practice of learning
• 5-hour rule
– Read;
– Reflect;
– ExperimentWho will Develop into Leaders?
• The Discipline of Finishing
• Psychologist Walter Mischel of Stanford in the late 1960’s
developed an unique test with children that has proven to be an
excellent method of predicting future successful adults
– The marshmallow test:
• A child, between the age of three and four, is put into a room, given a marshmallow
by an adult and then told he / she could eat it but, if they waited for the adult to
return they would get another marshmallow.
– These are the results:Who will Develop into Leaders?
Marshmallow Test
Choice One Marshmallow choice
50% 50%
Decision Eat
Wait
Now
Stare at the Don’t look at the
Behaviour Marshmallow Marshmallow
At this young age they already They become
Result realise how little power they more successful
have over themselvesWho will Develop into Leaders? • But how do you determine if an adult will be successful and become a leader? • Warren Buffett, with a Nett worth of $87 billion is one of the four richest people on earth • When he decides to invest in a company, he uses three criteria on their senior management to determine whether he will or he won’t.
Warren Buffett’s three criteria for success • Criteria Two: Energy – Someone who is biased to taking action; – Tendency to taking action over thinking over action; – Healthy, don’t get ill often. • Criteria Three: Intelligence – Not business school intelligence – Adaptive intelligence, can make key decisions on the go • But if you don’t meet criteria One, you might as well be lazy and dumb, because you will not succeed
Warren Buffett’s three criteria for success
• Criteria One: Integrity
– Say no to most things;
– If you say yes to most requests your life is divided into thousand little
pieces and spread amongst the priorities of other people;
– Alignment what your calendar says you do and what you say you do.
• But what are the tools that you should employ to achieve and
maximise these three criteria?
– Connor Neill, Professor of Leadership Communication, at the IESE
Business School in Barcelona, Spain, suggests the use of the following
tools in order to maximise the impact on the three criteria:Tools to achieve Warren Buffett’s
three criteria
• Intelligence
– Write stuff down, your thought list;
– If you write down ideas you had today, If you write down people you
have met, describe things that are going on. In six months you will have
the accumulated intelligence of six month and not just of the moment.
– Start writing down your life, it’s the most valuable resource you haveTools to achieve Warren Buffett’s
three criteria
• Energy
– What do high performance athletes do? They focus on one step at a
time. Successful ultra-distance runners never think of the total race, they
think about the next 15 minutes, anyone can run for 15 minutes.
– Always deal with the next unit;Tools to achieve Warren Buffett’s
three criteria
• Integrity
– How do Children spell love?
• TIME.
– The world is full of good intentions.
– The way you can see if an executive is behind an initiative is to let him
show you his diary;
– If you say your parents are important, open your diary and show the
hours;
– Your diary and your values must be in sink;
– success is hundreds of little good decisions that are repeated, consistent
to form good habits
– If you write a page a day, you will write a book per yearYou can also read
