GAUTRAIN CEO PROVIDES UPDATE ON ITS RAPID RAIL PROJECT

UNCLAS SECTION 01 OF 02 PRETORIA 000737

SIPDIS

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: ETRD ELTN EIND EINV SF
SUBJECT: GAUTRAIN CEO PROVIDES UPDATE ON ITS RAPID RAIL PROJECT
LINKING JOHANNESBURG AND PRETORIA



1. (U) Summary. Gautrain CEO Jack van der Merwe outlined strategic
objectives and current project developments for the Gauteng
Province's new rapid rail project at the National Press Club on
April 1, 2008. Van der Merwe expected the first-phase of the
project to be completed in time for the 2010 FIFA World Cup, despite
delays due to electricity shortages. He described the project's
impact on sustainable growth and addressed the issue of improving
the image of public transport. Van der Merwe conceded that its
target market segment is limited and further investments will have
to be made to improve public transport infrastructure and safety to
assure commuters that this is a preferred means of transport. End
Summary.

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Project Overview
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2. (U) Gautrain CEO Jack van der Merwe provided a briefing on the
Gauteng Province's new rapid rail project at the National Press Club
on April 1, 2008. Van der Merwe outlined the project's strategic
objectives and provided an update on the status of project
developments. The Gautrain will link Pretoria and Johannesburg with
ten stations. The 80-kilometer route will have three anchor
stations: one at OR Tambo International Airport and one each in
central Johannesburg and Pretoria. The airport link will provide
non-stop service between OR Tambo and Sandton Station. Eight other
stations at Rosebank and Marlboro in Johannesburg, at Rhodesfield in
Kempton Park, at Midrand, at Centurion, and at Pretoria Station and
Hatfield in Pretoria will transport commuters between Pretoria and
Johannesburg.


3. (U) Strategic objectives include the promotion of economic growth
through the decongestion of Gauteng traffic, business tourism, and
Black Economic Empowerment (BEE). To date, the project has created
28,000 jobs and 2,000 apprenticeships. He expected job creation to
total 93,000 and to contribute R6 billion ($780 million) to business
sales by the time the Gautrain project is completed. Van der Merwe
stated that the project would be contributing between 0.7-1.0
percent to gross domestic product (GDP) growth during a five-year
period. Signs of increased economic development are already visible
near the Midrand and Marlboro stations. He noted that the Gautrain
Project is the second largest Public-Private Partnership (PPP) in
the world and the largest transport PPP.

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Gautrain on Track for 2010
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4. (U) Van der Merwe expected the OR Tambo airport link to be
completed in time for the 2010 FIFA World Cup, despite delays due to
load shedding activities by Eskom. The project timeline had some
built-in delays and he stated that construction had not come to a
complete standstill. Gautrain's 43 construction sites have
generators on-site and are not completely reliant on Eskom. However,
an area of special concern is Rosebank, where the Gautrain's tunnel
boring machine runs completely on electricity. Eskom has provided
Guatrain with a predictable four-hour window for power disruptions
at this site. The project has scheduled maintenance for the machine
to coincide with this window to minimize disruptions. He conceded
that certain portions of the construction were behind schedule. He
hoped to make up for lost time since other sections were running
ahead of schedule. Van der Merwe also noted that the Guatrain Rapid
Rail system will need steady a power supply once it is operational.


5. (U) The trains for the Gautrain link are being constructed in
Q5. (U) The trains for the Gautrain link are being constructed in
Darby, England and the first train is expected to arrive in October

2008. Van der Merwe stated that construction has begun on all ten
Gautrain stations. Spending on the Gautrain Project in the 2006/07
financial year was R5.6 billion ($727 million). The forecasted
spending for financial year 2007/08 is R7.7 billion ($1.1 billion).
The total budget for the project is R25 billion ($3.2 billion).

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Promoting Sustainable Growth and Changing
Public Perceptions
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6. (U) Van der Merwe described the Gautrain link as the "flagship
public transport project of national importance" since it would
stimulate growth and reduce traffic congestion in a booming
province. He explained that Gauteng Province represented 1.46
percent of South Africa's land mass, but accounted for 33 percent of
South African and 10 percent of all African GDP. According to Van
der Merwe, the traffic congestion in Gauteng Province is growing by
seven percent per year. Therefore, Van der Merwe advocated for
improving and linking the existing public transport infrastructure.
He explained that the Gautrain Project would be linked to other
existing public transportation networks in South Africa. Van der
Merwe also noted that the Cabinet had recently approved a rapid

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transport link for the Cape Town International Airport.


7. (U) Van der Merwe spoke about the need to improve the image of
public transportation. He explained that currently there is a
captive public transport audience. He noted that "spatial
development has occurred in a way that poor South Africans are
housed far from city centers and have to pay a lot for transport to
and from work." Van der Merwe envisioned moving toward a public
transport system similar to European models. He emphasized that
South African public transport should be based on a "choice model,
not a captive audience model". The "market segment that Gautrain is
targeting is the one that currently drives between Pretoria and
Johannesburg. The cost of a one-way ticket between the cities will
be about R19 ($2.50). The one-way ticket between OR Tambo Airport
and Sandton Station will be about R80 ($10.50).


8. (U) Van der Merwe also noted that public transportation had to be
predictable for effective utilization. He said that the problem
with the current South African Metrorail system was its
unpredictable service. The Gautrain trip between Pretoria and
Johannesburg would take approximately 40 minutes and would run on a
predictable schedule. The Gautrain system will include
park-and-ride facilities and 150 buses to provide local transport in
a ten-kilometer radius around each station. Consumers will be able
to utilize the same train tickets to access these buses.


9. (U) In response to media questions, Van der Merwe agreed that
safety concerns had to be addressed to improve public perception and
utilization. The Gautrain will incorporate safety features similar
to the Jubilee line in London. Four hundred closed-circuit TVs and
300-500 security personal will be monitoring the stations and
trains. He also commented that the SAG is considering reinstating
its Railway Police to improve public transport safety.


10. (SBU) Comment. The Gautrain Rapid Rail Project aims to provide
improved public transport in the Gauteng Provence in time for the
2010 FIFA World Cup and to support long-term economic development.
However, challenges such as access to adequate power supplies will
affect its ability to deliver the project on time and operate on a
predictable basis. Gautrain management also concedes that its
target market segment is limited, that further expansions to the
rail system need to be made, and that improvements to existing
public transport systems will have to be made. A final challenge
for this project is the poor state of public security in Gauteng
Province. Very few members of the targeted segment are willing to
use the existing Metrorail system due to concerns for their personal
safety. A few highly publicized muggings of business executives on
their way to work are all that would be needed to turn this showcase
public transport project into an embarrassing white elephant in the
Gauteng government's front yard. End Comment.


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