August 28, 2000
Sarcc And Metrorail Sign Concessioning Agreement
In a trend-setting development set to change the face of commuter rail in South Africa, the South African Rail Commuter Corporation (SARCC) and Transnet trading as Metrorail signed a negotiated concessioning agreement today (August 28, 2000).
The agreement was signed at a ceremony held in Johannesburg and attended by the Minister of Transport, Dr Dullah Omar and the Minister of Public Enterprises, Mr Jeff Radebe. The agreement is for the period between April 1999 to March 2003.
Metrorail will, inter alia, retain revenues generated from fares and thus carry the revenue risk, which in the past rested with government, through the SARCC.
SARCC managing director, Wynand Burger, says the agreement is a result of years of planning and negotiations by teams from both organisations as well as government.
"This negotiated agreement is based on concessioning principles. Accordingly, Metrorail will now carry the risk on the revenue. The onus is on Metrorail to provide a good service to commuters to optimise efficiency and attract those passengers who have completely left rail as their mode of transport to other transport modes.
"In the past, under the deficit subsidy system, the difference between costs and profit was paid for by government. This will no longer be the case. In the tender, Metrorail have fixed their expenditure. It is up to them to ensure profitability," says Burger.
The key tenets of the agreement for which Metrorail assumes responsibility include infrastructure and facilities maintenance, customer services and train operations, security services, IT systems and financial results as well as reporting.
"A positive spin off to this agreement is that Metrorail will still receive a subsidy of some R800-million per annum from government through the SARCC to augment the revenue generated from fares. There are a great deal of incentives linked to this agreement for all the stakeholders including passengers, who should receive an improved service," he said.
According to Burger, the main purpose of the concessioning agreement is to eventually achieve a decreased subsidy dispensation.
"There is no precedent both locally and internationally in terms of the way this agreement has been structured. We believe that it will serve as a blueprint for future agreements post 2003 when we will move into open concessioning. Until March 2003 we will have this exclusive agreement with Metrorail, with the exception of a pilot project due to be awarded to a successful bidder in early 2002.
