Drop in demand during lockdown costing Gautrain partners millions

The Gauteng provincial government and Bombela Concession Company (BCC) will both take multi-million rand ‘hits’ because of low commuter patronage on the Gautrain caused by the Covid-19 lockdown.

JSE-listed Murray & Roberts (M&R) has a 50% stake in the BCC, which holds the 15-year concession for operating and maintaining the Gautrain.

M&R group investor and media executive Ed Jardim confirmed on Tuesday the group will take a financial hit because of low patronage.

He said the BCC carries the risk on actual revenue up to a certain level, and from this level up to the guaranteed level, the revenue gap is covered by the Gautrain Management Agency’s [GMA] ‘patronage guarantee’.

Jardim added that under the lockdown restrictions, ridership is down significantly from pre-lockdown levels “to the extent that actual revenue is below the level from which the patronage guarantee applies.”

“This shortfall between actual revenue and the level from which the patronage guarantee applies is carried by BCC,” he said. “Unfortunately, we are in a closed period and cannot provide any financial detail. Our results are out on August 26, where we will provide detail on this matter.”

However, GMA CEO William Dachs said the province “paid R92-million more than budgeted for the patronage guarantee in the first quarter of the 2020/21 financial year and “Bombela lost approximately R171-million in revenue.”

Dachs said the financial cost of the patronage guarantee for the 2018/2019 financial year was R1.64-billion. The cost of the guarantee for the financial year to March 31 is not yet available.

Provisions?

Dachs was guarded in his comments on whether the GMA has made any provision for the expected increase in the cost for the patronage guarantee in its 2020/21 financial year and, if not, where it will get the money to pay for it.

He said the GMA is engaging with the Provincial Treasury on a revised budget and is monitoring the revenue coming from the system.

Dachs said during a ‘Public Transport in the Time of Covid-19’ interview on CNBC Africa this week that between 55,000 and 60,000 passengers a day normally travel on the Gautrain, but this has declined to between 6,000 and 8,000 people a day “depending on people’s movements on the day”.

“We track our numbers daily and can draw a direct correlation between the [Covid-19] infection rate and usage.

“When infection rates spike, people stop using the trains,” he said.

“People are very responsive to what they perceive as the risk of going out. The weather is also a factor and a cold week impacts on us,” he said.

Dachs said despite the BCC taking the bulk of the Gautrain revenue losses, it is performing “really well” and providing as much of the services as possible without laying off its staff.

He said the Gautrain has been operating for 10 years and from both a government and private sector point of view they are trying to “get through this” and “do another 20 years”.

“It’s that kind of approach. The commitment is there from both parties to make sure that Gautrain survives and comes through this,” he said.

Dachs said the Gautrain would normally have transported about four million people in the period from the end of March up to July 20 but had only transported about 12% of that.

Move back to cars

He said a lot of people have observed the directives given by government and stayed at home, but the GMA also suspects that many people have moved back to using their private cars.

Dachs stressed that using a private car will never be cheaper than the Gautrain, because there are so many hidden costs in private car usage and many of those costs are imposed on other people, such as through accidents and environmental harm.

He agreed the freeways are much less congested and the Gautrain competes on both time and cost compared with a private car.

“For us to be most effective on time, we need congested roads. We are not seeing that at the moment,” he said.

“We have had a look at some of the Sanral [South African National Roads Agency] data. It looks like road usage is up to about 50% to 60% of normal levels.

“Depending on how long the lockdown lasts and how long people stay at home, we would expect to see road congestion levels go up again in the next four to five months – and we will be working on restoring confidence and getting people back onto public transport, particularly the Gautrain,” he said.

Theft, vandalism

Railway Safety Regulator acting CEO Tshepo Kgare said addressing theft and vandalism is at the heart of restoring confidence in the public transport system, particularly the railways sector, and attracting commuters back onto rail after the lockdown.

Kgare said its statistics show there has been an increase in the last few years in security-related incidents to about 9 000 incidents, and 90% of those were theft and vandalism.

“In the first quarter alone, we have about 1 400 incidents of theft and vandalism within the railway space,” she said.

Dachs said theft and vandalism is “a huge issue” and there were three incidents this past weekend of people coming into the rail reserve and “risking their own life and limb trying to steal signalling cables.”

“A year ago we probably had three a month,” he said.

“If we lose the battle to cable theft now, if we lose the battle to private car usage now, without having a plan to crowd people back into good public transport systems, then Covid-19 will be much more harmful than it should be.

“The challenge for us in the rail industry is to firstly get through Covid-19 and keep people safe. Then secondly it’s to come back stronger with functional, smarter working public transport and rail systems,” he said.

This article first appeared on Moneyweb and was republished with permission.

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