Covid-19’s work-from-home plans hit Gautrain

The advent of the Covid-19 pandemic has wrought havoc across sectors of the South African economy, from property owners saddled with empty office buildings, low footfall in malls and low ridership on public transportation. The Gautrain has not been spared.

The project to construct the world-class express commuter train service was announced in 2000 and there was an accelerated push to complete it just in time for an influx of foreign visits in 2010 when South Africa hosted the 2010 Fifa World Cup. 

Since then, the fast, clean and efficient train has been a godsend for commuters travelling between Johannesburg and the capital, Pretoria, for work, and those rushing to catch a flight at OR Tambo International Airport. 

But its prohibitive pricing structure has kept the majority of working-class South Africans out, and since the advent of the pandemic, passenger numbers have plummeted even further as millions of its commuters have been working from home.

“The work-from-home strategy by many employers has negatively impacted ridership numbers. As the Covid-19 vaccination process unfolds, Bombela envisages that working arrangements may change and ridership numbers will then increase,” said Eduard Jardim, group investor and media executive at engineering company Murray & Roberts, which holds a 50% stake in the Gautrain’s owner, the Bombela Concession Company.

At the beginning of a hard lockdown in late March 2020 in response to the pandemic, the Gautrain service was halted, only reopening in early May of the same year with reduced capacity as per lockdown regulations. Before Covid‑19, ridership numbers stood at around 55 000 per day, but now the Gautrain carries only about 16 000 people a day.

However, thanks to a contract signed at the inception of the project, the government has been effectively subsidising Bombela’s losses from reduced revenue.

The main contract regulating the Gautrain project was signed between the private partner  Bombela Concession Company and the Gauteng provincial government as the public partner. The Gautrain Management Agency was then established to manage, coordinate and oversee the project. 

According to Jardim, Gautrain funding is derived from a blend of ticket sales and support from the provincial government in the form of a patronage guarantee. This effectively means when ridership declines, the Gauteng government must pay the shortfall to the Bombela Concession Company.

This guarantees the Gautrain a minimum required total revenue for it to continue operating. The Daily Maverick reported that in 2018 the provincial government paid out R1.5-billion under the patronage guarantee. 

“The patronage guarantee that the government pays for the Gautrain includes provision for the repayment of loans that were raised to fund the infrastructure, operational and maintenance costs and asset renewals and replacement,” Jardim told the Mail & Guardian this week.

“It is linked to revenue and not ridership, the details of which are confidential as per the provisions of the concession agreement.”

But organisations such as the Automobile Association (AA) see the patronage guarantee as merely a mechanism “whereby Bombela is compensated for sub-par ridership levels of their trains”.

“This means they can rely on the Gauteng provincial government as a funder of last resort regardless of how well or badly their business fares,” the AA said in a recent statement.

“It’s a disgraceful and outrageous agreement, which has cost taxpayers close to R12-billion since 2012 just because not enough people see value in using the Gautrain.”

According to Jardim, the patronage guarantee has a cap set to it, limiting the amount the province has to pay in any month. This cap is the point at which Bombela also takes the risk of revenue losses.

In its 2021 budget review, the national treasury said  Bombela was expected to lose about R700-million  in the 2020-21 financial year and the provincial government’s patronage  guarantee was expected to exceed its current budget by R400-million. The Gauteng  department of roads and transport is expected to absorb this amount. 

“The overall  impact  of  Covid-19  on  projects  such  as  the  Gautrain  is  unknown  and  will  need  to  be  assessed  and  quantified in future,” the treasury said.

The AA is up in arms, noting that the low usage of the Gautrain puts additional pressure on the province’s transport budget, meaning other transport options are not properly funded. 

Meanwhile, the Bombela Concession Company successfully lodged a business interruption insurance claim for the hard lockdown, Jardim said.

“The business interruption claim was capped at R285-million and the funds upon receipt were used to reduce Bombela’s debt. The debt repayments have not been negatively affected to date as a result of Covid‑19,” he said.

Expansion plans go ahead

With the dwindling ridership numbers it would be easy to assume that any expansion plans would be halted but the Gautrain Management Agency (GMA) told the M&G that the proposed Gauteng Rapid Rail Network Extension Project is still on track.

“The Gautrain Management Agency is currently in the process of proclaiming the route for phase one of the project, so that when the required treasury approvals come through, the GMA will be ready to move into procurement mode,” said Tlago Ramalepa, the agency’s senior manager for reputation. 

The proposed phase one extensions in Johannesburg will run from Marlboro through Sandton, Randburg, Cosmo City and Little Falls.

The AA is opposed to this proposed extension, arguing that it will only perpetuate a system that caters for a minority of citizens in a province that doesn’t need it.

“Simply put, the Gautrain doesn’t carry enough passengers currently — certainly not as many as it had projected when it started. Spending valuable financial resources now to continue with a system that doesn’t have a demand … does not make any sense,” it said.

A transport industry analyst who wished not to be named said there was an appetite for expansion, but it might not happen right now. 

“The expansion is inevitable because this is a concession agreement and over time there will be another concessionaire that has to be permitted to continue with this project,” the  analyst said.

Anathi Madubela is an Adamela Trust business reporter at the M&G

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Anathi Madubela
Anathi Madubela is a business journalist with a keen interest in the retail sector.

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