Prasa seeks state aid for its rail plan

[Steve Appleton]

From Business Day, 01 September 2011. http://www.businessday.co.za/Articles/C ... ?id=152172

Prasa seeks state aid for rail plan.
The R107bn plan would be the most ambitious modernisation of SA’s rail network in 30 years.
NICKY SMITH
Published: 2011/09/01 06:42:29 AM

THE government will need to spend R107bn over the next 20 years to revitalise SA’s 40-year-old commuter rail fleet.

A study commissioned by the Passenger Rail Agency of SA (Prasa) on plans to buy new coaches and locomotives had found that it would be too expensive for the agency to do so on its own, CEO Lucky Montana said. The plan would be the most ambitious modernisation of SA’s rail network in 30 years.

The R20m feasibility study by KPMG, completed last month, found that the operator of Metrorail was optimistic about its ability to finance fleet renewal through borrowing and on the strength of its own balance sheet. Prasa had previously estimated it would need to spend about R97bn over the next 18 years to replace the aging locomotives and coaches it uses to move up to 2.4 million commuters a day.

"The feasibility study shows that it is too expensive to go private," Mr Montana said in Johannesburg this week, and that "even with government guarantees, it would be too costly".

In April, Prasa held a "market engagement exercise" to gauge the private sector’s appetite for helping to fund the programme.

Over the past 30 years, limited stock has been purchased, primarily from abroad, which means SA has lost the capacity and skills to make rolling stock. Prasa needs to buy about 8600 coaches and 2200 locomotives. Mr Montana said in April that, to get the procurement programme started, the agency would need at least a R5bn cash injection from the government. "Before the feasibility study we thought one thing, but it has shown us something completely different," he said.

A memorandum setting out the findings of the study had been prepared for the cabinet and submitted, Mr Montana said. Having the state buy the coaches and locomotives would be R20bn to R25bn cheaper than if Prasa were to pursue the procurement programme alone, he said.

Department of Transport spokesman Logan Maistry said yesterday that the findings of the 800-page study had been delivered to the office of Transport Minister Sbu Ndebele. Mr Maistry said officials would brief Mr Ndebele on the feasibility study and the proposed way forward "soon".

The investment required by Prasa was enormous but the rail agency faced a greater expense if it did nothing, Mr Montana said. "The … system will collapse. What remains will deteriorate if we do nothing. The cost of the system going down will be huge for the economy," he said.

A third of the current fleet of 3600 coaches needs to be retired as they have reached the end of their design life. Prasa wants delivery of the first coaches in 2013-14 to avoid disruption to its passenger rail services.