Parliamentary Question: DoT: Minister Address

2081

Address by the Minister of Transport, Sibusiso Ndebele during the Department of Transport’ International Investors’ Conference held at the Cape Town International Convention Centre

Programme director

Cabinet Colleagues

Directors-General of the departments

Our Investors

Ladies and gentlemen

A warm welcome to you all, to this the Department of Transport’ International Investors’ Conference being held here at the Cape Town International Convention Centre (CTICC).

We welcome in particular, our International participants and hope that you enjoy the hospitality of our country beyond this conference.

We hope the next few days will provide a platform for all of us to exchange ideas and produce innovative financing plans that will meet both your commercial objectives and the objectives of our government.

The President of the Republic, President JG Zuma, speaking at the World Diamond Summit in Antwerp, Belgium recently said, “South Africa offers investors a huge growth potential and proven economic and political stability”.  President Jacob Zuma, Antwerp World Diamond Centre.

President Zuma, in his 2011 State of the Nation address, further said “. despite the economic growth in the past 10-year, poverty and unemployment still persists. To address these concerns, we have declared 2011 a year of job creation through meaningful economic transformation and inclusive growth.” (President Zuma in his 2011 State of the Nation).

The role of the transport as a key factor for economic and social transformation has long been established. This principle is not only applicable to “developing” countries as one may think, but it applies to developed economies as well.

In the global context, Weisbrod further indicated, “There is no doubt that infrastructure in general and specifically transport infrastructure plays a role in the economic development, as well as in social development of a country” (Weisbrod 1997, Chapman P et al 2002) (UNCDF).

Speaking for a well-developed world economy, in 2008 President Obama stated that, “We will create millions of jobs by making the single largest investment in our national infrastructure since the creation of the federal highway system in the 1950s. We will invest your precious tax dollars in new and smarter ways, and we will set a simple rule – use it or lose it. If a state does not act quickly to invest in roads and bridges in their community, they will lose the money”. President Barack Obama 6 December 2008 – A radio address.

Challenges faced by transport systems in the various countries require specific responses in order to solve particular economic problems. In our context, the root cause of the current status of our transport system is the historic under-investment of our country in its transportation sector; this especially in the face of ageing infrastructure, growing urban population, global trading and the expansion of the economy.

As an example, Gauteng province, which is considered South Africa’s economic hub, experiences 10% growth in vehicle population per annum. However, investment in the development and maintenance of the road network is not in keeping with this growth.

The effect is congested roads, an unsafe road environment and a negative impact on the economy.

Long-term development planning and effective resource allocation are critical for the realisation of the economic and social goals of our Transport Sector.

The introduction of ‘Life Cycle Design and Costing,” combined with effective routine and preventative maintenance will ensure that we optimise Transport Sector infrastructure in providing cost effective service delivery. Effectively, Life cycle design and costing is a tool for assessing the total cost of an asset over the design life of that asset.

This would include costing for acquisition, operating maintenance and disposal of that asset. Life cycle design and costing would achieve better value for money from the building to the final constructed asset that we procure and deliver for the utilisation by our communities.

This is the stark challenge that our country faces. We gather at this conference therefore to explore the various financing innovations which when implemented shall address the needs of our country and its economy.

Transport and its related services is a catalyst for economic growth as well as direct and indirect job-creation in South Africa. The provision of affordable, safe and reliable transportation of goods and people within our economy are critical to the development of our country.

After decades of established urban planning and development, which marginalised rural communities, the current changing human settlement patterns and economic challenges require us to reconnect communities with each other; with economic opportunities and social amenities, to ensure that we develop sustainable communities. Addressing this challenge will require an integrated and collective effort by all spheres of government – national, provincial and local.

An affordable, safe and effective public transport system will reduce costs, create job opportunities and increase the quality of life of our communities, a priority of government.

It has been noted in recent years that investors have shown a greater interest in investing in projects that combine a commercial and a social return. Investors consider and evaluate the social and environmental impact of a project in relation to their commercial return, an approach that clearly fits in with our government objective of creating a better life for all.

South Africa’s transport infrastructure and system currently falls well short of the contribution it could be making to the social and economic well-being of our country. Historical under-investment and maintenance, outdated systems and lack of integration impact negatively on the potential of our transport system as a whole.

A business-as-usual approach will not assist us to transform our sector into one that will help South Africa to realise its full economic potential and contribute to the economic reawakening of the African Continent as a whole.

The Department of Transport is mandated to provide safe, affordable, reliable, efficient, and fully integrated transport systems and infrastructure that best meets the needs of its users. As a consequence, the Department of Transport is tasked with providing transport infrastructure and services that are efficient and affordable to individuals and corporate users, while ensuring that we provide increasing levels of safety and security across all transport modes.

The challenges facing our transport system are understood and have been documented over the years. They can be categorised into three main categories namely:

Demand outstripping supply with regards to infrastructure

The lack of appropriate investment in the transport sector over the past decades, resulting in poorly maintained infrastructure

Limited or in some cases, absence of investment into the various modes.

We understand that the country’s fiscus cannot be in a position to fund the entire needs of the transport sector.

As a result, government’s ambitions need significant support from the private sector, notably in terms of sustainable investments. It has now become critical that the private sector be considered as a financial partner in the implementation of the overall turn-around strategy for the transport sector. Research indicates that a large part of private sector investment, in developing countries, is made up of foreign investment into the various sectors.

What has government done?

The challenges facing our transport sector in our various government spheres range from budget constraints, ageing transport infrastructure and lack of modal integration. Notwithstanding these challenges, our government continues to aggressively address the transport sector needs.

Let me briefly highlight some of our key transport sector projects, which will give a context within which to understand some of the projects which will be presented to you for investment at this conference.

The completion of the ultramodern, state of the art Gautrain rapid rail network,  link 1 between Sandton and OR Tambo Airport which was opened in June 2010 and link 2 from Johannesburg to Pretoria to be opened by June/July 2011, ushers in a new era in public transportation matching world standards for rapid rail transport.

Travelling at 160 km per hour, taking 38 minutes between Johannesburg and Pretoria, will set a benchmark for such developments in South Africa in the future.

The Gauteng Freeway Improvement Project, valued at R22 billion, is an initiative that aims to encourage people to use public transport, in an effort to alleviate traffic congestion on Gauteng’s freeways. SANRAL, together with its Partners, the Provincial Government of Gauteng, and the Metro authorities in Tshwane, Johannesburg and Ekurhuleni developed a project to upgrade or construct approximately 500 km’s of road around these three Metros.

The successful implementation of the Rea Vaya Bus  Rapid Transit System, currently transporting 30 000 people per day, has been awarded the “Encouragement Award” by the International Association of Public Transport (UIPT) in Dubai in May 2011.

Another achievement of the Rea Vaya Bus Rapid Transit System relates to the Empowerment of the taxi industry. Earlier this year, the taxi industry in Johannesburg became a 66% shareholder of the Rea Vaya Bus Rapid Transit System Company. This constitutes one of the most significant Broad-Based Black Economic Empowerment (B-BBEE) transactions that our country has seen in the transport sector.

The Department of Transport’s flagship project – S’hamba Sonke – (Moving Together programme / Vamos Juntos) has seen the Department of Transport implementing a new roads upgrade and maintenance initiative to fix and upgrade the entire secondary road network of South Africa.

This programme will create new opportunities for emerging contractors and create jobs across the country. In this financial year, 68 675 jobs will be created through this programme. This ring-fenced conditional grant will be implemented with a focus on the following key areas:

The rehabilitation of key arterial routes that support the rural economy through labour intensive projects

Prioritising the use of labour absorptive construction methods

Introducing road asset management systems, including a “know your network programme”

Fixing potholes on our roads

Creating access to schools and clinics and other public amenities.

The S’hamba Sonke programme has been allocated R22 billion for the current Medium Term Expenditure Framework (MTEF) cycle, with the allocation for 2011/12 being R6.4 billion. Business plans have been received from all provinces supported by all the MECs.

In rail, a significant proportion of the existing rolling stock is due for de-commissioning between 2013 and 2015. Passenger Rail Agency of South Africa (PRASA) will spend R97 billion over 18 years on the purchasing of new rolling stock, to address this scenario. This programme will create 100 000 jobs and develop skilled and semi-skilled people, within the fields related to the manufacturing and maintenance of the rolling stock.

In respect of Airports Company South Africa (ACSA), they actively participate in numerous projects and programmes within Africa and the world.

ACSA’s interventions range from providing airport management skills transfer to Kenya and Nigeria airports, to transferring best practice on airport security management to Gabon and Equatorial Guinea who will be hosting the AFCON Cup. Of interest is the planned visit to ACSA by the Brazilian 2014 World Cup organising committee, to engage ACSA on the lessons learnt when we hosted the 2010 World Cup.

Our government has invested in the development and maintenance of transport infrastructure to the extent possible within available budgets and the competing social demands within our country. However, the lack of investments into our sector pre-1994 has created huge backlogs.

It is important to find a new impetus in investments into our sector in order to completely modernise our transport system so that our economy is able to be internationally competitive. In order to address this challenge, it is necessary to attract new investments into our sector.

In this regard, in the days ahead, at this International Investors’ Conference, delegates and potential investors will be exposed to identified project packages that when implemented will transform the transport sector  to provide safe, affordable, reliable, efficient, and fully integrated transport systems and infrastructure that best meet the needs of its users.

The conference will showcase different transport projects that are critical to the delivery of transport infrastructure objectives, at the same time impacting positively on development of community social cohesion. Of critical importance is that these projects will attract potential investors that will play a key role alongside government.

The conference provides a platform for government, Investors and stakeholders to engage each other formally and informally in discussing the identified projects. 

Flagship projects – investor guideline

By the time this important conference ends, all the participants will have been exposed to the transport sectors flagship projects that are an opportunity for investors to engage in, actively transforming the transport sector and participating in the development of social cohesion within our communities, indeed creating a better life for all. 

In addition, from our perspective, this conference must ultimately become a platform for investors to come into the transport space in South Africa; this conference is about raising the region’s investment profile and that of the whole continent. We have in this regard identified a number of key strategic areas for investment including rail, roads, public transport and maritime.

Key strategic areas for investment 

Strategic transportation projects

Tendering authority

Status feasibility study

Estimate Capital Cost ( ZAR  Billions)

New Commuter Coaches

PRASA

June 2011
86

Shosholoza Meyl new coaches / Locomotives

PRASA

June 2011
11

N1/N2 Winelands

SANRAL

Complete
8-10

R 72 / N2 Toll Road

SANRAL

Complete
5.35

R 200 Ring Road

SANRAL

Complete
4.16

N2 Wild Coast Project

SANRAL

Complete
8-10

Sandal’s Domestic Medium Term Note

SANRAL

Not Applicable
55 by  2016

Wild Coast Meander

Eastern Cape Dept R&T

Complete
1.35

Mahatma Airport Development project

Dot and Eastern Cape R&T

Work in progress
0.5

West Rand Logistics Hub

Blue IQ

May 2011
3.19

Cape Town Rail Link

PRASA

Complete
3.5

Financial principles

As we collectively go forward seeking investment and funding partnerships, it would be important that we achieve an effective and comprehensive funding strategy that would take into account a wide range of factors and competing demands within South Africa. As funding models are developed we need to ensure that the broader objectives of government are an integral element of the proposed solution.

Areas that would need to form part of the discussion would include:

The funding framework should support the overall objective of enhancement of commuter mobility

The objective to establish or enhance easy access through an integrated intermodal system is fundamental

The current funding gaps clearly are larger than the indicated ‘project funding’ being considered, hence any funding framework could consider additional interventions

The funding framework would articulate the role and responsibilities of all the role players in relation to the project implementation, in line with the funding methodology being proposed for example build, operate transfer, versus build operate and lease

The funding framework would need to ensure that all the social and transformation objectives of government will be adequately addressed within the project scenario. These would include but not be limited to job creation, skills development and transfer, local content manufacture, local manufacture development and industry transformation. 

At this stage programme director please allow me to give an insight into some of our thinking around transport and in particular what future we envisage for our infrastructure and services.

Master planning remains a key activity in any transport sector environment all over the world. The situation we find ourselves in today which is occasioned by lack of and sustained investment in our transport infrastructure is a symptom of our own failure to accord transport its rightful place as a fundamental role player in the economic growth of our country.

This requires visionary planning with a 40-50 year horizon, to ensure that the Transport Sector modes compliment the ever dynamic changes and needs of the country.

Our master plan takes a 40 year view and considers the supply and demand side of transport infrastructure, services and operations. It seeks to make recommendations and give guidance on infrastructure investments on the space economy, informed by population, economic, and social growth projections as well as institutional, financial and environmental considerations. It is informed by the plans of other sectors that are transport demand generators e.g. agriculture, minerals, energy, etc.  

A new Africa is being born

As the International Marketing Council (IMC) recently indicated, there are many reasons why the world must now look at Africa differently and I quote:

In the past few decades, Africa has taken significant strides towards more democratic governance, more transparent economic systems and eliminating some of the more crippling bureaucratic barriers to trade and investment.

The invitation of South Africa to become the fifth member of the BRICS – Brazil, Russia, India, China and South Africa – and the South African seat on the United Nations Security Council will ensure that Africa has a voice in all key global forums.

The potential of Africa as an investment destination has been long recognised and supported both in terms of investment and soft loans by China.

In a world where there is growing consensus that future wars will be fought over food and water resources – rather than territory or ideology – Africa is well-placed to play a key role with its huge water reserves and vast tracts of arable land.

With a population approaching 1 billion, Africa represents the world’s third-largest market after China (1.3 billion) and India (1.1 billion).

South Africa played a key role in the 2009 climate change summit (COP15) in Copenhagen. The next critical session of the COP17, will be held in Durban in November 2011.

Ladies and gentlemen we have prepared a list of projects in the various modes which we believe could be the basis for investment into the future. These will be outlined in greater detail later today and tomorrow through presentations from the modal champions and the various Chief Executive Officers. 

Under the leadership of the Director-General Mr George Mahlalela, and his team of officials present here today, they are available to engage with you and your representatives, to discuss possible partnerships, to implement these strategic transport infrastructure projects.

In closing I wish all participants a robust and constructive dialogue over the next two days as you discuss new funding methodologies and innovations that will lead to the development of effective and dynamic transport infrastructure

In closing let me thank the Director-General Mr George Mahlalela, and all the relevant department officials who have worked tirelessly to put this investors conference together.

My thanks also goes to the print and electronic media, for their support, and last but not least to all the participants that will be with us for the next two days to discuss and tackle this world-wide phenomenon, that of “How do we effectively fund transport infrastructure”, at the same time developing partnerships with all other stakeholders and government.

Let us together use this transport investors’ conference to forge a new partnership for investing into a common future, for a better South Africa and prosperity for all our people.

I thank you!



Issued by: Department of Transport
13 Jun 2011