The Gautrain project consists of the Gautrain Rapid Rail Link (Gautrain), which is a state-of-the-art rapid rail network operating in Gauteng. The Gauteng Provincial Government (GPG) undertook the Gautrain project, between 2007 and 2010, starting with partial operation in 2010 and full operation in 2012. The project comprised the construction, operation and financing of approximately 80km of railway lines with 10 stations between Johannesburg and Pretoria, and between Sandton and OR Tambo International Airport (ORTIA), with extensive feeder and distribution services at each station.
The system has been operating for eight years and performance has exceeded expectations, as evidenced by higher-than-projected passenger demand and a standing-to-seated passenger ratio that is now breaching comfort levels during peak hours. The growth experienced to date and that projected by Gautrain Management Agency (GMA) management indicates that Gautrain capacity is stretched to the point that, in the peak periods, the available rolling stock is now close to maximum capacity and, therefore, not able to meet further market demand (current and forecast). Given the current capacity constraints during peak hours and future passenger growth projections made by the GMA, GMA management has determined that the Gautrain system will require 48 new coaches and related infrastructure at an estimated cost of R4 billion, where debt funding requirement is approximately R3.5 billion.
The DBSA’s catalytic role
The current concession ends on 31 March 2026. This leaves approximately eight years to fund the additional rolling stock and related infrastructure under the current structure. Given the timeframe left on the current concession, it is not economical for Bombela Concession Company (BCC) to fund the additional rolling stock and there is no incentive for BCC to encumber itself with further debt.
The GMA, therefore, appointed the DBSA mandated lead arranger (MLA) to develop a funding solution independent of the current concession and that can be funded over 15 years through an SPV that will avail the additional rolling stock and related infrastructure to the system via a lease agreement. This structure will allow for the assets to be funded across concessions, given the constraints noted above.
As the MLA, the DBSA approved a facility of R3.5 billion to meet the full debt requirement of the project, allowing the GMA to implement the procurement process with assurance that the project is fully funded. In addition, the approved facility allows the GMA to perform an independent value-for-money benchmarking exercise (i.e. debt funding competition – DFC) to ensure that the DBSA’s funding is priced competitively.
The DBSA’s funding proposition meets the need for a funding solution that:
- Takes a view on provincial government risk
- Funds across concession periods
- Provides long-dated funding, in this case 15 years In addition, in November 2016, the DBSA, in its capacity as the Secretariat for IIPSA, further secured a R40 million project preparation grant from IIPSA to:
- Assist the GMA with direct transaction costs for outstanding project preparation activities
- Provide funding for the reimbursement of bidder costs incurred in the design of depot enhancements required as part of the bidder’s response to the request for proposal (RFP).
The concept of partial bidder reimbursements was used in the original Gautrain project and proved highly effective in accelerating and reducing risk, and improving the quality and pricing of bidder responses. As such, the GMA will do so in return for commitments from bidders to expedite the design process and in return to achieve financial close faster.
Other project support to GMA Gautrain
The DBSA is currently involved in providing project preparation support to GMA on Gautrain expansion phase two, which will entail Gautrain expanding the current rail network into new suburbs/locations in the province.
DBSA established the Infrastructure Delivery Division (IDD) in 2013, to enable the Bank to support government in the effective and efficient implementation and delivery of infrastructure projects. The IDD accelerates the planning, design, construction and maintenance of infrastructure projects, promotes employment creation and ensures projects are delivered on time, quality and within cost.
IDD services are targeted at national, provincial and local government clients, donor agencies and private sector funding providing:
- Implementing agent services focussing on construction, recruitment, maintenance and repairs
- Programme management services that indirectly support infrastructure delivery planning and programme management units
- Capacity building services that promote and build Capacity