Financing agreement period: 11 years
The Tshwane Rapid Transit (Pty) Ltd (TRT) required R786 million to procure 171 buses and for driver training required for the first phase of the A Re Yeng BRT project in Tshwane. The TRT signed a R786 million agreement with the DBSA in May 2015 to fund the purchases of 40 Mercedes-Benz compressed natural gas (CNG) buses as well as the local content of 131 Volvo diesel buses. To date, R394 million, which is about half the loan facility amount, has been disbursed.
At the inception of the project, buses will run from Paul Kruger and Nana Sita streets in the Pretoria Central Business District to the Hatfield Gautrain Station in Arcadia Street. The A Re Yeng BRT is forecast to transport about 127 000 passengers a day once phase one is operational.
The DBSA is committed to investing in public transport networks to ensure safe, efficient and green transport systems. Tshwane BRT project is the first of 12 BRT projects across South Africa earmarked for further DBSA support.
South Africa's PTS is aimed at migrating transport towards an improved quality, integrated mass rapid public transport network, which includes rail, taxi and bus services. Rapid transit systems have been identified by national government as a viable transportation option that can ensure sustainable, equitable and uncongested mobility in the country. The 2020 vision is for 85% of the metropolitan cities' population to be within 1km of a public transport service network line. Through a dedicated trust, the beneficial shareholders of the TRT are taxi and bus operators, on routes serviced by private buses and taxis, known as affected operators, through shareholding equivalent to their market share. TRT is managed as an independent corporate entity.
The NLTA provides the legal framework for the development and implementation of the IRPTN by the metropolitan cities in South Africa. The NLTA provides the framework for the negotiated 12-year contracts into which municipalities can enter during the implementation of the BRT projects. City of Tshwane's IRPTN strategy sets out the network plan for BRT corridors and integration with rail services such as the Gautrain and the Passenger Rail Agency of South Africa (PRASA) commuter rail links in the short-, medium- and long-term. Other key strategic objectives are to facilitate the corporatisation of affected operators and to provide them with value-adding opportunities through training, so as to assist them to access sustainable income prospects.
City of Tshwane is rolling out the buses in phases, with phased bus delivery in batches over two years. Ownership of the buses vests in TRT, which procured the vehicles and will charge a user fee on a take-or-pay basis using a fee-per-kilometre payment system that guarantees a minimum number of kilometres to cover debt services, all operating costs and a profit element.
Development outcomes and measurable impacts
The project, once complete, will have a significant impact on the socio-economic and economic development of the city and its inhabitants as well as Gauteng as a whole, with the following development impact:
• An estimated increase of the provincial GDP by R437 million
• An estimated provincial capital formation of R1.324 billion
• An estimated 1 114 additional employment opportunities, 275 of which will be for unskilled workers
• An estimated additional R259 million in household income, R48 million of which might accrue to low-income households
• A potential additional fiscal impact for government of R125 million
• Improved quality of life through an efficient, safe and affordable transport system
• Empowerment, skills development and local economic development (TRT is 100% owned by a trust whose beneficiaries are the affected taxi and bus operators on the planned BRT routes).
In November 2010, at the launch of the project, Mayor Gwen Ramokgopa expected more than 10 000 jobs to be created during the construction phase, and about 1 000 sustainable jobs once the system was live. These included 529 bus operators and related personnel, 94 employees for the call centre and about 300 workers managing and maintaining the ticketing system.
The loan period of 11 years, including availability and grace periods, is in line with typical development finance practice. As a leading metro, City of Tshwane has a good credit rating with a stable outlook, thus the risks associated with this project are mitigated. With 127 000 passengers daily, the BRT will have dedicated income throughout the project's lifespan. The take-or pay model will also provide sustainable earnings to the company and ensure debt servicing.
Lessons learnt and critical success factors
Transport is a critical success factor in South Africa's economy, thus this project is important to the country and received the DBSA's full support. The Tshwane project drew lessons from the Rea Vaya and MiCiti projects to avoid repeating earlier mistakes made in Johannesburg and Cape Town, respectively. Government support is key to the success of this project as it allows City of Tshwane to use a portion of its grant income to cover the deficit in initial operating costs and for the A Re Yeng system. The project has the support of the affected operators and has trained a number of taxi drivers to operate the buses. This provides a more sustainable income for the drivers and a buy-in for the taxi industry. The trust will provide capacity building for affected operators, who will become drivers as the project progresses. The critical success factor is a long, complex negotiated settlement through a process involving all stakeholders.