Address by Mr. Sibusiso Ndebele, MP, Minister Of Transport, During Prasa’s Market
Engagement With Manufacturers and Financiers of New Rolling Stock
Gallagher Estate, Johannesburg, 5 April 2011
Deputy Minister of Transport, Mr. Jeremy Cronin;
Director-General of the Department of Transport, Mr. George Mahlalela;
Group CEO and Executives from our Passenger Rail Agency, PRASA;
Government Officials present;
Representatives of Local and Global Manufacturing firms and Financing Houses;
Members of the Media;
Ladies and Gentlemen,
Today marks a significant milestone in the history and development of passenger
rail transport in South Africa. The market engagement we are launching today is
a major step in the rollout of our rail modernization strategy. It forms an integral
part of the development of a feasibility study for the acquisition of new and modern
rail rolling stock for South Africa.
Today we stand on the brink of a major overhaul of our rail system in a way that
will radically change the way South Africa travels. The acquisition of R97billion
new stock for Metrorail and long-distance rail services will serve as the catalyst
for the implementation of a major rail investment plan.
Today’s historic event also provides a solid platform for cementing the role of
rail as the backbone of our public transportation.
Many of you have travelled from all corners of the world to express your willingness
and commitment to partner with us in this historic journey. I would like therefore
to take this opportunity to extend a special welcome to those manufacturers and
financiers who have travelled across oceans to make this engagement a success.
We welcome you to our beautiful country and hope that the few days you spend here
enable you to enjoy the hospitality of our people as well as give you an opportunity
to understand our transport and railway systems.
To the local manufacturers and financiers, thank you for your commitment and the
support you have already shown to the people of South Africa.
MARKET ENGAGEMENT PROCESS
As you are aware the Department of Transport, through its Agency the Passenger Rail
Agency of South Africa (PRASA), is embarking on a bold and ambitious programme to
invest in new rail rolling stock over a period of eighteen (18) years at an estimated
cost of R97billion.
This programme will enable PRASA to procure new rolling stock and locomotives for
the Metro service and the long-distance rail services. This will enable us to significantly
increase the country’s passenger rail transport network, offering new routes and
destinations throughout South Africa.
e cannot over-emphasise the fact that this will create opportunities for business,
stimulate the rail engineering industry and related suppliers in the value-chain
as well as contribute to our industrial policy objectives, especially the revitalization
of our own industry, employment creation as well as development of new skills.
TAPPING INTO FIFA WORLD CUP LEGACY ON PUBLIC TRANSPORT
Government’s public transport plans are not a promise for the next millennium. Government
is already implementing key elements of our rail investment strategy.
Many of you who witnessed the performance of our public transport system during
the recent 2010 FIFA World Cup will confirm that we out-performed ourselves.
In fact, we should say unequivocally that the history of the 2010 FIFA World Cup
will never be written without an acknowledgement of the enormous contribution of
our modern upgraded road network, airports, municipal buses, Autopax’s new bus fleet,
Bus Rapid Transit (BRT) system in cities like Johannesburg, and of course, the massive
movement of fans and passengers to the soccer games on our refurbished trains and
The Transport Family played a significant role and made South Africa proud. South
Africa used the 2010 FIFA World Cup to create a lasting legacy for its people!
Today, we have transport infrastructure and modern systems that never existed 5
- Through its commitment to FIFA and its Guarantees, our Government invested over
R100 billion in our public transport system over the past five years.
- Passenger rail received over R25 billion to upgrade, among others, over 2000 commuter
coaches, to enhance capacity on key corridors, improve the infrastructure and stations
and implement relevant operational plans in preparation for the 2010 FIFA World
- The commuter route of the Gautrain Rapid Rail Link will open in June 2011. It will
enhance passenger comfort between Pretoria and Johannesburg carrying over 40000
passengers each way in under 38minutes. The Gautrain signals a major beginning where
rail is the backbone of our transport system.
- The Gautrain represents the first significant introduction of new rail technologies
in our environment and we intend to build on this and extend it further to the east
to ensure that through modern and reliable transport, the commuting masses of the
former KwaNdebele area are able to participate meaningfully in the economy whilst
bringing up their children in viable and better communities.
- Government has allocated R30.2 billion to PRASA over the next three years, with
R19.5 billion earmarked for capital spending to further upgrade existing infrastructure,
signaling system and rolling stock.
CASE FOR REFURBISHMENT OF RAIL
Today’s market engagement, however, comes against the backdrop of massive historical
underinvestment in the sector, and is only one step in a series planned for the
retooling and revitalisation of rail in our country.
To this end, we plan to engage further with the domestic and international market
in June this year when we host an International Investors’ Conference in Cape Town.
The Investors’ Conference is meant to attract investment into the broader transport
sector and through partnerships place our sector as the true engine for economic
growth and development.
The commuter rail service (Metrorail) provides over 2.4 million passenger trips
daily, with passenger trips growing at an average of about 7.1% over the past 3
years and is expected to average 5% over the medium term.
The Metrorail service is affordable to low-earning workers who travel to and from
work. Metrorail also enables many of the unemployed masses to access areas of economic
and job opportunities.
These are mainly South Africans who are captive to rail transport and do not have
the choice to switch to other available public transport modes.
Elsewhere, on the Moloto Road between Tshwane and the former KwaNdebele, over 40000
commuters are ferried in over 500 buses every day. They are subsidized to the tune
of about R400million by the taxpayer.
Most commuters leave home at 3am and only get home after 9pm with destabilizing
effects on family and society.
Both means of travel, by public rail and by the Moloto Road bus service, have been
with us for many years prior to and since 1994. Both the Moloto Road example and
that of Metrorail remind us of the extent to which we operate inefficient publicly
funded transport systems.
In the case of Moloto, in 2009/10 we spent about R200million on bus subsidies on
the Moloto Road. Put differently, we are spending per passenger more than the average
wages of the commuters we transport every day.
The economic benefits of investment in rail transport are immeasurable. The benefits
of an efficient transport system are many in terms of improved safety, reliability,
productivity, employment creation and increased economic activity.
JOB-CREATION THROUGH RAIL PROGRAMME
key element of long-term investment in the New Rolling Stock Programme is to create
new employment in the rail sector. It is expected that through this programme, between
72 000 – 100 000 “job opportunities” for skilled and semi-skilled labour force will
be created over an 18year period.
Stimulating local rail industry will facilitate the up-skilling of South African
engineers – training of mechanical and electrical engineers, technologists and technicians.
There are enormous benefits from the Industrial Policy perspective as outlined by
the Department of Trade and Industry. The nature and size of the Acquisition Programme
will enable South Africa to leverage on these initiatives to stimulate various industries,
especially Rail Engineering and related industries in South Africa and within the
The long-term benefits of developing rail infrastructure will advance Government
Policy to promote local manufacturing capacity.
Manufacturing and vehicle systems technology upgrade is critical to the modernisation
of South Africa’s and Southern African railways.
ROLLING STOCK ACQUISITION TO REVITALISE RAIL INDUSTRY
I am pleased to announce that PRASA has begun to rollout its National Signalling
Upgrade Programme, with the 1st Phase commencing in the Gauteng Province this April
and the rest to be implemented in the Cape Town Region and eThekwini region.
There must be effective coordination and sequencing of our strategic interventions
under these programmes so that the modernization of rolling stock and infrastructure
goes hand in hand. At the moment, the current rolling stock is old and dilapidated,
with the majority of the current fleet built between the 1960s and late 1970s and
still driven by 1956 technology.
- The major challenge we face today is that the current fleet and our entire rail
system has reached the end of its design life. The system (technology, operations
and service design) is no longer able to meet effectively passenger and economic
demands and reached a stage where it must be replaced.
- The current fleet remains largely unreliable and characterized by overcrowding and
poor on-time performance.
- It is therefore vital that we embark on this replacement strategy by 2013/14. There
is an obligation for Government to act and to act now.
- South Africa procured a limited set of trains during the mid 1980s, which were bought
from the Japanese and manufactured through a local company Dorbyl. This fleet, consisting
of about eight train 8M sets, is still running effectively in the Cape region.
- Accompanying the effects of so many years of under-investment, we have seen how
the fleet has deteriorated over the years, how its level of reliability has declined
due to deferred maintenance and poor maintenance practices.
- This means that our commuter rail service continues to under-perform, to under-service
the commuting public, undermine productivity in the workplace and restrict new business
prospects throughout the country and region.
In order to deal with the historic under-investment in passenger rail, Government
implemented a number of interventions, some of them already mentioned, which include
- The Accelerated Rolling Stock Programme – which have already upgraded over 2000
coaches and improved on availability of trains;
- The Preventative Maintenance Programme on existing Rolling stock to deliver greater
levels of reliability; and
- The Station Upgrade and improvement Programme.
Government has, in the recent Budget Speech of the Minister of Finance, made an
additional allocation of R350 Million for the Accelerated Rolling stock programme,
and an allocation of R1.1 billion for the signaling upgrade programme in the current
financial year. These are major drives to ensure that our people enjoy better public
transport in their lifetime.
It is one of the essential foundations to the continued growth and economic development
of our country. There is no other way around this.
- The procurement of the rolling stock is a massive undertaking and will cost in the
region of ninety seven billion (R97bn) ZAR.
- Such investment decisions cannot be taken lightly and must be done in the interests
of the nation while providing long-term sustainable investment opportunities for
the private sector manufacturers and financiers.
- Let us be clear, the coffers of the state are not sufficient to fund such a large
progamme. Therefore, a significant and sustained commitment from local and international
financiers will be required to complete the rolling stock renewal programme.
- To accomplish the goals of the programme, government will ensure that procurement
is in line with our industrial policy objectives, such as the National Industrial
Action Policy Plan (IPAP2) and the New Growth Path, which seek to enhance the growth
and development of industry through local manufacturing and sourcing of local content.
- As important to our industrial policies is our commitment to Broad Based Black Economic
Empowerment (BBBEE). This policy is the bedrock of our plan to return previously
disadvantaged South Africans to meaningful participation within society in general
and the economy in particular.
- This fits in with government’s long standing policy of meaningful job creation to
reverse unemployment and to end poverty. Creating jobs and including all South Africans
in the mainstream economy is an essential part of empowering our people.
- Through the current programmes such as the Accelerated Rolling Stock Programme,
Station Upgrade Programme and the Signal Upgrade Programme, amongst others, we aim
to create 5 000 jobs in the short-term. We aim to create 15 000 direct jobs over
the next 18 years through the Fleet Acquisition Programme.
INCENTIVES FOR INVESTING IN ROLLING STOCK
We, however, are not unreasonable in our requirements for this programme. In fact,
we have sought to achieve a delicate balance between our demand for modern, reliable
trains with the commercial interests of rolling stock manufacturers and financiers.
As you may well know, the acquisition of new rolling stock comes a few months after
our President, HE Jacob Zuma, outlined his vision on the occasion of his State of
the Nation Address in February 2011.
As part of Government plans to promote investment, foster growth and create jobs
for South Africans, the President outlined a number of incentives to be implemented
this year. Among the key incentives from which our rail investment programme stands
to benefit are:
Along with our demands, we offer significant incentives to those who wish to become
our partners. Within our industrial polices we offer tax based allowances.
Government has put in place a twenty (R20bn) billion ZAR tax incentive to promote
industrial investment through new manufacturing facilities and the expansion and
upgrading of existing factories.
In addition, we offer grant-based incentives through the Enterprise Investment Programme
for medium to large scale investment projects which exceed five (R5m) million ZAR.
This investment grant, which ranges between fifteen (15) and thirty (30) percent
of a project and which cannot exceed thirty (30) million ZAR is also available for
Furthermore, the Industrial Development Corporation (IDC), a Development Finance
Institution (DFI) offers loan incentives for qualifying industrial investments.
These loans come in the form of mezzanine financing and performance bonds which
are customized for individual projects. Financing options also include Revolving
Credit Facilities, Acquisitions and Equity Transactions and Fixed Interest Rate
Whilst we do anticipate that significant support will need to be solicited through
international partners, we have not forgotten about the local capacity within our
For ordinary working South Africans and emerging contractors, this is your programme.
You need to use this major initiative to ensure that it opens opportunities for
By the time the first train is delivered, I want to see many of our own people involved
in the rail engineering industry: they must manufacture, maintain and refurbish
wheels, seats, components for propulsion systems, body building and maintenance
Most of all, we want to see this programme as a major opportunity to produce new
skills in engineering, artisans and technologists from among our own people.
Ladies and Gentlemen, of utmost importance is that this intervention will restore
public confidence in our public transport system and enhance the mobility of our
people to reach their places of employment, enable them to access opportunities
and contribute to building better and sustainable communities.
To make sure that all the issues I have raised are properly addressed and realized,
Government, through PRASA, has already engaged the services of a professional team
of Advisors to undertake a Feasibility Study for the procurement of the new rolling
This is a goal which we intend to achieve within reasonable timeframes. We aim to
complete the feasibility study by June 2011, with the Minister of Transport expected
to take the matter to Cabinet immediately thereafter and commencement of the procurement
process once Cabinet Approval is obtained.
In terms of the draft programme, we therefore expect the procurement process to
commence immediately thereafter with March 2012 being the latest for the commencement
of this important process. We have decided to engage with the rolling stock industry
to determine what kind of new technologies are available.
We are keen to determine which of them are appropriate to provide sustainable services
in the South African environment and importantly, how best to finance the preferred
procurement option. In short, this is the purpose of the Market Engagement.
- I cannot express how important your contribution will be over the next couple of
days. We sincerely wish that the engagement will add significant value to the contents
of the feasibility study and will inform the procurement documentation which will
eventually be released to the marketplace.
- We have structured this market engagement such that each of the participants who
have requested a meeting can engage with government to exchange ideas and gain further
In conclusion, I would like to personally wish everyone all the best of luck over
the next few days and I am confident that you will have useful and mutually rewarding
interactions with one another.
Again, my best wishes for this engagement and thank you for the opportunity to address
you on this matter.