1. Parliamentary Committee for Finance
Presentation by Andrew Marsay
Arup Transport Planning
20 February 2007

2. This presentation covers ...
Lessons from 30 years’ international experience of transport
infrastructure and economic development
Application of some of these lessons to some important
transport concerns in South Africa today
Conclusions regarding the relationship between transport
investment and economic growth and job creation

3. International experience - general findings
Transport investments make the biggest contribution to economic growth in areas with high economic growth potential
Transport investments with high benefit cost ratios make the biggest contribution to economic growth and job creation
Transport investments do not automatically lead to growth and job creation; collateral support actions are needed

4. 1. Growth potential lessons
Transport investment cannot create economic growth potential where this does not already exist
Transport investment can help release, and accelerate existing economic growth potential

5. Growth potential lessons – (contd)
For freight transport, investment has its greatest economic impact in connection with points of access to a country: ports, airports and major trading/industrial areas
For passenger transport, investment has the greatest economic impact when the underlying trends are towards urbanisation and especially CBD consolidation

6. 2. Benefit cost lessons - financial cost performance
Rail transport can only ever cover its full costs when used for bulk trades; rail generates little tax revenue
Road transport can nearly always cover its full costs via either taxes or tolls; road generates huge tax revenues

7. Benefit cost lessons - financial cost performance (contd)
UK (£)
RSA (ZAR)
road
rail
Tax revenue
20bn
1bn
26bn
0.3bn
Public spend
5bn
15bn
3bn
Revenue/spend
4:1+
1:5 -
2:1+
1:10 -

8. Benefit cost lessons – social cost benefit performance
Rail transport projects rarely score Benefit Cost Ratios (BCR) greater than 3:1; some less than 1!
Most highway projects score BCRs greater than 10; some as high as 20

9. Benefit cost lessons - environmental performance
The environmental advantages of rail over road are rarely sufficient to make up for rail’s high cost
An exception is very high density urban areas

10. Benefit cost lessons - environmental performance (contd)
Congested motorways
Main urban roads
Main rural roads
Environment cost – roads
13.9
36.2
12.1
Environment cost - rail
8.8
Road - operation + congestion
79.0
121.9
45.8
Source: Strategic Rail Authority (now part of UK DOT) ‘Sensitive lorry miles’, 2002

11. 3. Collateral support lessons
Public interface supports needed for passenger transport investments: good ticketing; good stations; good info’
Secondary routes/services must be developed at the same time as primary routes/services
Without good project management and monitoring the benefits of transport investments will rapidly fritter away

12. Application of lessons in South Africa
Is there a sound case for Gautrain?
How to expand freight capacity on the Gauteng – Durban transport corridor?

13. SA application 1: Is there a sound case for Gautrain?
South Africa is one of the world’s low density capitals with
a weak public transport culture except for minibus taxi
Global experience shows that transit investment cannot
arrest urban sprawl
Heavy investment in transit is only sensible only in support
of pre-existing existing urbanisation/agglomeration trends

14. What are the trends in Gauteng?
Although land use policies favour densification people are
still moving away from public transport. However …
Consolidation of urban agglomerations is taking place and
CBDs are seeing some commercial recovery
Property market is seeing rising densities and trend to CBD
living. Can the trends be ‘captured’ - and optimised?

15. Getting to work in Gauteng …
Public transport use
From 55% in 1985 to 45% in 2005
Bus – 15%
Trend …
Private car use
Train – 15%
From 45% in 1985 to 55% in 2005
Minibus-taxi – 70%

16. Current metropolitan consolidation
Source: CSIR research for DOT + Gauteng Province

17. Residential and employment land use trends (2025 projection) show that the role of the CBDs is set to be more dominant in future than now
Source: Plan Associates research for Gauteng Province

18. Gautrain’s ‘footprint’ aligns well with the emerging metropolitan shape

19. Market retention?? (vs winning share)
Gautrain a quality service that can raise the profile and quality of all PT?
Market retention?? (vs winning share)
Gautrain
Bus
Train
Minibus-taxi

20. So, Gautrain may be a unique opportunity for PT investment
Opportunity to implement NLTTA aims
Opportunity to work with spatial trends
Opportunity to consolidate the PT market
But, collateral support needed to realise aims

21. Collateral supports called for in the Gautrain Integration Report
Implement the National Railplan’s Priority Rail Corridors so
that people can use Metrorail to access Gautrain
Accelerate investment in other quality road-based public
transport systems because Gautrain capacity is limited
Expand the freeway system because most transport will
continue to be road-based
Most importantly, make sure the stations become integral,
quality parts of the surrounding urban environment

22. Gauteng Transport Precincts Initiative
Sets an institutional framework for securing development
at and around Gautrain and other interchanges
Sets criteria for identifying and pursuing development
opportunities that will serve public and private interests
Sets design principles by which transport functionality and
property development opportunities are creatively blended
Commits to the objective of making transport interchanges
integral parts of the surrounding urban environment

23. SA application 2: Durban Freight Corridor: Road or Rail?
Currently 85% of freight is by road and volumes could
double in 12 years - how should capacity be provided?
Transnet is planning to spend billions to win back market
share to rail. Would this be an economic investment?

24. Rail rarely pays its infrastructure costs ..
General cargo rail freight business can require up to
100% infrastructure subsidy
Road transport can almost always cover infrastructure
costs - if required to do so
Rail management often blamed but real explanation is
changed market realities
Need to give examples here: quote from my paper and restructuring table

25. Rail brings in very little tax revenue ..
UK (£)
RSA (ZAR)
road
rail
Tax revenue
20bn
1bn
40bn
0.3bn
Public spend
5bn
15bn
3bn
Revenue/spend
4:1
(1:5)
+/-3:1
(1:10)
Source: UK & RSA Departments of Transport + consultant’s analysis

26. But is rail a ‘special’ investment case?
Socio-economic benefits of rail?
Environmental performance of rail?

27. Socio-economic benefits?
UK multimodal studies in the 1990s sought to level the
road/rail playing field
Strong Government policy steer led to two thirds of all
Investment proposals being rail and other public transport
Rail projects had BCRs of 3:1 or less and did not even
meet UK Treasury’s socio-economic investment criteria
(While most road investments had BCRs well over 10:1!)

28. Environmental benefits?
Monetarisation of environmental criteria shows rail’s impact
is just 25% that of road - in other words rail is better
But of the environment costs are just 15-25% of the total lifetime cost of creating new transport capacity
So rail’s environmental advantage will be rarely sufficient to
compensate for low BCRs
In very dense urban areas the case favours rail more

29. Environment costs – road vs. rail
Congested motorways
Main urban roads
Main rural roads
Environment cost – roads (p/mile)
13.9
36.2
12.1
Environment cost – rail (p/mile)
8.8
Congestion cost
79.0
121.9
45.8
Main point here is that the monetarised environment cost is not a major component of total costs
Source: Strategic Rail Authority - now in UK’s DOT: ‘Sensitive Lorry Miles’

30. Enhancing corridor freight capacity
The Gauteng-Durban transport corridor carries about
60mt of general freight
Of this, 8mt (13%) is rail and 52mt (87%) road, of which
the majority, say 36mt, is on the N3
What would be the most economic way to significantly
increase the freight carrying capacity of the corridor?
Source of data: DOT National Freight Logistics Study + consultant

31. Road capacity enhancement …
A freight-only dual-2 carriageway to high load-bearing
standard would cost +/-R12bn
At an average of R5m/lane-km x 600km this could cover
civil works, structures, junctions and land1
Would create capacity for +/- double the current N3 freight
load, or 72mt p.a.2, i.e. all N3 freight + 100% new capacity
Note 1: Land costs - 600km x 0.1 x R250,000.00/ha = R1.5bn Note 2: 5 veh/min x 60min x 30t x 14hrs/day x 300 days/year = +/- 40 mt 1-way

32. Road capacity enhancement (cont)
A R4.00/km toll could pay capital, operating +
maintenance costs over 25 years
Additional benefits:
Much reduced maintenance cost and extended pavement life on the existing N3
Large amount of new capacity on the existing N3
Much improved passenger safety on the existing N3
+/- R200m p.a. saving in current rail subsidies, + investment funds available for more economic investment in bulks

33. Rail capacity enhancement …
Transnet quote investment of between R10bn and R60bn for
freight, some of which is to win back general cargo share
Gauteng-Durban rail corridor capacity could be doubled to
16mt (relatively) inexpensively, say +/- R1.5bn
But to win back much more rail business is likely to require
huge investment in terminals plus operational subsidies

34. Rail capacity enhancement (cont)
My estimate is that win a further 16mt back to rail Transnet
could spend R10bn
With the (relatively) inexpensive initial 8mt this total spend
of R11.5bn (R1.5bn + R10bn) yields a total gain of 24mt
But note:
the investment would not generate the revenue to pay for itself
turnaround time, availability may still not be as good as road
congestion, safety and maintenance costs on the N3 will continue to grow if extra road capacity is not also created

35. Implications 1 … R11.5/R12bn could buy 72mt capacity in road mode but
only 24mt rail capacity
A major increase in general cargo capacity can be
achieved far more economically in the road mode
It would be a misuse of national resources to pump
billions of rands into general cargo rail freight capacity

36. Implications 2 …
Invest in rail only in sectors where rail is still efficient, i.e.
bulk freights, focusing available funds on coal and ore
Use regulatory policies to encourage Transnet to
implement these changes
Invest heavily in dedicated highway infrastructure for
general cargo freight
Use regulation to maximise road freight’s efficiency and
mitigate its environmental impacts

37. Summary and conclusion
Transport investments make the biggest contribution to economic growth in areas with high growth potential
Transport investments with high benefit cost ratios make the biggest contribution to economic growth and job creation
Transport investments do not automatically lead to growth and job creation; collateral support actions are needed

38. Questions please!