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DA pushes for better Gautrain subsidy deal

DA pushes for better Gautrain subsidy deal

November 5 2017 – TAXPAYERS will, over and above the R30 billion Gautrain construction price tag, have paid well over R50 billion for this service if current subsidy levels continue, the Democratic Alliance said on Sunday.

The current Gautrain subsidy was the largest single item of expenditure in the budget of the Gauteng roads and transport department, making up roughly 35 percent of its budget for the past financial year, DA spokesman Justus de Goede said.

The recent announcement of the expansion plans for the Gautrain had focused attention on the possibility that this high subsidy would be perpetuated should a new contract be signed.

This contribution made it possible to subsidise each passenger trip by around R60, according to the auditor general’s estimation.

“Virtually all public transport systems worldwide are subsidised, but this is an unusually high proportion, to the extent that the Competition Commission will be looking into the matter in its current investigation into public transport in South Africa,” he said.

“If the annual subsidy for Gautrain maintains a level of between R2 billion and R3 billion for the duration of the concession, the taxpayer would, over and above the R30 billion construction price tag, have paid well over R50 billion for this service.”

The Gautrain was an efficient and extremely well-run public transport mode, but unaffordable for many residents of the province.

The root of the problem lay in the contract that the province signed initially with the consortium of concessionaries; the subsidy contained a large component known as the ridership guarantee, which effectively protected the concessionaries against ridership figures falling below a threshold determined before the system started operating.

The demand cycle of Gautrain unfortunately depended entirely on the two daily peak passenger periods, with low demand in between. The current system was unlikely to breach the key ridership threshold and the guarantee would almost certainly continue to operate for the expanded network envisaged.

“The way out of this dilemma will be, whenever new contracts are signed, not to repeat the mistake of being dazzled by passenger projections, but to make a realistic assessment of ridership. To simply let the current subsidy continue without reanalysing the framework and doing the feasibility groundwork would be equivalent to perpetuating a debt trap for Gauteng taxpayers,” De Goede said. -ANA

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