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FUNDING INSTITUTIONAL & LEGAL FRAMEWORK
PHASE 3: FORWARD PLANNING

Final Report: September 2010
REFERENCE No: NAT/PH3/Sep. 10
FORUM BUILDING, 159 STRUBEN STREET, PRETORIA, 0001, GAUTENG, SOUTH AFRICA
DOCUMENT SUMMARY SHEET
Electronic Phase 3 Report\Final
Reference:
Status: Final Report
Document Title: NATIONAL TRANSPORT MASTER PLAN 2005 – 2050:NATIONAL

PHASE 3: FORWARD PLANNING
Date: September 2010
Prepared For:
Department of Transport
Forum Building, cor Struben and Bosman Streets, Pretoria
Private Bag X193, Pretoria, 0001
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Ingérop South Africa,

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National Transport Master Plan 2005-2050 FILM Phase 3 Report (Final Report) September 2010
TABLE OF CONTENTS
1. FUNDING FRAMEWORK ................................................................................................... 1

1.1 FRAMEWORK RATIONALE .................................................................................................. 1
1.1.1 NATMAP 2050 Transportation Funding Criteria ........................................................ 2
1.1.2 2010 Medium Term expenditure Framework (MTEF) Budgeting Guidelines ............ 4
1.1.3 Dedicated mode funding – or not ............................................................................... 4
1.2 ECONOMIC EVALUATION AND INVESTMENT FRAMEWORK ................................................... 5
1.2.1 Project Definition and Derivation of the Reference Model ......................................... 6
1.2.1.1 Objectives............................................................................................................ 6
1.2.1.2 The reference model........................................................................................... 6
1.2.1.3 Operations........................................................................................................... 6
1.2.2 Harmonization of Inter-sectoral Project Hypotheses.................................................. 6
1.2.2.1 Macro-economic scoping.................................................................................... 6
1.2.2.2 The escalation rate and public funding constraints............................................ 7
1.2.3 Project Analysis........................................................................................................... 7
1.2.3.1 Market study, traffic forecast and project time horizon ...................................... 7
1.2.3.2 Tax/subsidy regime and tariff policy ................................................................... 7
1.2.4 Public Socio-Economic Scorecard ............................................................................. 8
1.2.4.1 Principal beneficiaries ......................................................................................... 8
1.2.4.2 Determination of principal indicators .................................................................. 8
1.2.4.3 Sensitivity analysis .............................................................................................. 9
1.2.5 Financial Feasibility, Financial Risk & Impact on Fiscal/Public Resources ............. 10
1.2.5.1 Indicators to be determined are:....................................................................... 10
1.2.5.2 Determining financial feasibility ........................................................................ 11
1.2.5.3 Financial risk analysis ....................................................................................... 11
1.3 NATMAP 2050 GOAL ACHIEVEMENT MATRIX ................................................................... 12
1.4 CAPITAL VS. OPERATIONAL EXPENDITURE (CAPEX VS OPEX) FUNDING ............................ 14
1.5 NATMAP 2050 FUNDING PRINCIPLES ............................................................................... 14
1.5.1 SECTORAL FUNDING SOURCES ....................................................................................... 15
1.5.1.1 Road Mode........................................................................................................ 15
1.5.1.2 Rail Mode .......................................................................................................... 18
1.5.1.3 Rail Infrastructure capex ................................................................................... 18
1.5.1.4 Maritime Mode .................................................................................................. 19
1.5.1.5 Pipeline Mode ................................................................................................... 19
1.5.1.6 Air Mode ............................................................................................................ 19
2. INSTITUTIONAL AND LEGAL FORWARD PLANNING ................................................. 20
2.1 INTRODUCTION ............................................................................................................... 20
2.1.1 Terms of Reference .................................................................................................. 20
2.1.2 Approach to Phase 3 ................................................................................................ 20
2.2 PROPOSED ALTERNATIVE STRATEGIES ........................................................................... 20
2.2.1 Proposed New Institutions ........................................................................................ 21
2.2.1.1 Multimodal Transport ........................................................................................ 21
2.2.1.2 Roads ................................................................................................................ 31
2.2.1.3 Rail .................................................................................................................... 33
2.2.1.4 Aviation.............................................................................................................. 34
2.2.1.5 Maritime............................................................................................................. 34
2.2.2 Proposed Changes to Existing Institutions............................................................... 34
2.2.2.1 Multimodal ......................................................................................................... 35
2.2.2.2 Roads ................................................................................................................ 35
2.2.2.3 Rail .................................................................................................................... 38
2.2.2.4 Aviation.............................................................................................................. 42
2.2.2.5 Maritime............................................................................................................. 43
2.3 CONCLUSIONS AND RECOMMENDATIONS ........................................................................ 47
3. LIST OF REFERENCES.................................................................................................... 48
LIST OF FIGURES
Figure 1.3.A: Objective - Improve mobility and access to employment opportunities for low-
income earners ...................................................................................................................... 12
Figure 1.3.B: Policies Strategies Plans Matrix ............................................................................. 13
Figure 1.5.A: The ABC of Securitization....................................................................................... 16
Figure 2.3.A: Institutional Change Timescales and Activities ....... Error! Bookmark not defined.
GLOSSARY OF TERMS
ACSA Airport Company of South Africa
ATNS Air Traffic and Navigation Services Company Limited
BOT Build Operate & Transfer
CMIP Consolidated Municipal Infrastructure Programme
DEAT Department of Environmental Affairs and Tourism
NDOT National Department of Transport
EBITDA Earnings before Interest, Taxes, Depreciation, and Amortization
GIS Geographic Information Systems
GPS Geographic Positioning System
ICT Information and Communication Technology
IRR Internal Rate of Return
ITS Intelligent Transportation System
LDO Lease Develop Operate
MIG Municipal Infrastructure Grant
MPF Multimodal Policy Forum
MTBPS Medium Term Budget Policy Statement
MTEF Medium Term expenditure Framework
NRFA Namibian Road Fund Administration
NT National Treasury
NATMAP National Transport Master Plan 2005 - 2050
2050
NER National Economic Regulator
NLTTA National Land Transport Transition Act
NLTB National Land Transport Bill
NMT Non Motorised Transport
NPA National Ports Authority
NPV Net Present Value
National Transportation Development Planning & Investment Clearing
NATCH House
PPP Public Private Partnerships
PFMA Public Finance Management Act
PRASA Passenger Rail Agency of South Africa
PTIS Public Transport Infrastructure & Systems Fund
PTOG Public Transport Operations Grant
RWDCE Road Weight Distance Charging Entity
SABOA South African Bus Operators’ Association
SALGA South African Local Government Association
SAMSA South African Maritime Safety Authority
SANRAL South African National Roads Agency Limited
SARCC South African Rail Commuter Corporation
TER Transport Economic Regulator
TICH Transport Investment Clearing House
UTF Urban Transport Fund
VAT Value Added Tax
VUC Variable User Charging
1. FUNDING FRAMEWORK
1.1 FRAMEWORK RATIONALE
The funding analysis of Phase 2 concluded that:
“…Except for the air mode, transportation investments have trailed economic growth
and, in fact, come in the wake of general ‘divestment’ when considered against
requisite spend just to maintain installed infrastructure and operational capacity. It is
fair to conclude that current flurry of investments are – for the most – a very
necessary attempt to restore lost capacity and as such must be lauded. As a longer
term planning and investment programme, NATMAP 2050 builds on these efforts,
but seeks to ensure sustainability and capacity expansion to 2050. In this respect, a
fundamental recast of funding solutions along the lines proposed below is
mandatory, alongside a review and recalibration of the institutional dispensation to
support and sustain transportation investments as the country prepares to face a
future weaned of fossil fuel dependency, long-term environmental degradation and
the finite nature of funding resources available to address a larger demand accruing
from a fairer and more equitable access regime to transportation for all citizens than
was policy in the past.
International experience in market economies indicates some common practices,

i.e., that public funding of transportation infrastructure is much more common than
for transport operations. Further, that private ownership of transportation services is
broadly common for freight than for passenger transport; predominant in road
haulage, freight forwarding and air travel, but exceptional for railway services.
Except for road passenger services, South Africa mirrors these international
tendencies.
Government provision of transport services faces a number of constraints which

distort optimal funding options adopted, and are exacerbated in a developmental
state, viz.,
• Competition for resources from core government functions, and the

inherent contradictions in trying to be policy maker or/and regulator of the
subject operations;
• Managerial tensions of seeking commercial viability concurrently with

social goals. This is further pronounced where subsidies underpin
operational sustainability or/and where public service norms and
procedures rather than operational needs drive/influence management
practices;
• Technical efficiency losses/compromises where the activity creates

surpluses which are then used to cross-subsidise other – often at the
expense of capital formation and re-investment in the profitable activity,
etc.
National Transport Master Plan 2005-2050 FILM Phase 3 Report (Final Report)
September 2010
Fundamental to above issues is the reality that governments pursue many policy
objectives in transportation – sometimes even parallel objectives that embody
dynamic tensions, if not contradictions.
With regard to transport infrastructure, NATMAP 2050 recognises that much of it

has attributes of natural monopolies, and, that the costs of provision more often than
not are difficult to recover from users and hence engender distributive outcomes. As
such, the funding options adopted for infrastructure provision impact more
significantly on the achievability of NATMAP 2050 Funding Postulates prescriptions
than is commonly the case for operational investments…”
1.1.1 NATMAP 2050 Transportation Funding Criteria

The analysis of the status quo of transportation funding in SA confirms that funding
resources are finite and the different spheres of government tasked with various
responsibilities of providing transportation infrastructure and operation often do not
have the funding wherewithal to discharge their functions at adequate levels and on
sustainable bases.
Since taxation is a fundamental source for transportation funding, applicable taxes

must exhibit a fair structure to enjoy universal legitimacy among South Africans. To
achieve this, the structure must contain elements of the following criteria – equity,
efficiency, adequacy and ease of administration and compliance. There may, of
course, and often there will be conflict between the criteria, but such conflicts only
serve to underline the imperative, which is, to give sufficient consideration to them to
guide the design/evaluation of taxes and/or user charges levied to fund
transportation investments. This holds true with respect to forecasting funding
sources to 2050. Summarized, the funding criteria require:
1.1.1.1 Equity
In modern, democratic SA, there does seem to be general acceptance that each
taxpayer should pay his/her fair share of the cost of government. This ‘consensus’
rests on the ‘twin-notions’ of “benefits received” and “ability to pay”. NATMAP 2050
advocates that both notions should apply when deriving equity in the funding of
transportation investments, i.e., the amount that a user pays should be proportional
to the benefits received and, payments should be in accord with some measure of
capacity to pay.
1.1.1.2 Efficiency
Efficiency is concerned with the avoidance of undesirable economic side effects,
i.e., the tax/charge is neutral in its effects on market behaviour, and does not
introduce any “excess burden” or loss in economic welfare above that resulting from
the tax/charge payment itself. Such effects should be kept at a minimum, unless, the
objective is to induce a change in economic behaviour.
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Departure from efficiency in transportation investments for the purpose of inducing
societal desirable economic behaviour is foreign to South Africa, but is gaining
currency and momentum elsewhere, e.g., the congestion pricing in London – UK, for
the purpose of curbing congestion and reducing the need for expensive capacity
expansion. Whilst NATMAP 2050 endorses the departure from efficiency to achieve
wider societal goals, any purpose of a tax/charge other than to raise revenues to
fund transportation infrastructure and/or operations should be clearly delineated, its
distorting economic effects carefully examined, clearly understood and factored into
the decision.
1.1.1.3 Adequacy
A tax/charge must raise sufficient revenues to support the programme it is designed

to support. Limited value transportation charges/taxes do not provide stable and
predictable sources of revenue.
Whilst most adequate taxes are generally levied on a broadly-defined base, and are
thus difficult to circumvent, a narrowly defined and/or dedicated transportation
tax/charge is not difficult to avoid through a change of economic behaviour.
Nonetheless, South Africa’s only ‘quasi’ dedicated tax - the fuel tax - is stable, but,
given the conclusions of the energy and environmental analysis, it also is likely to
undergo structural changes which will affect its adequacy during the NATMAP 2050
planning period.
The adequacy criterion is further entangled by the multi-modal and integrated

approach to transportation planning that NATMAP 2050 prescribes. Indeed, any
perception of inequity may render politically sensitive the pooling of funding for one
mode to the perceived benefit of another. Consequently, attendant potential political
trade-offs that may ensue are bound to dilute any envisaged economic net gains
inherent in an integrated approach to delivering transportation benefits to society at
large, as discussed above.
Hence, the adequacy norm, whether in form of taxes or user charges requires that
these bear a degree of correspondence to the costs of providing target
facilities/services for which funds are being raised.
1.1.1.4 Ease of Administration and Compliance
The second World Bank report – “Paying Taxes 2008: The global picture”, measures
how easy it is for companies to pay tax (SA at 61st of 178 countries). It also ranks
countries according to tax burden on companies’ corporate income (SA at 65% of a
company’s total tax rate – against a global average of 37%). At an average of 350
hours a year spent on compliance against less than 50 hours in countries generally
considered as our traditional trading partners, SA’s compliance cost is singularly
uncompetitive. It is against this background that the significance of transportation
related taxes/charges must be evaluated, and, NATMAP 2050 proposals take due
regard of compliance and charge/tax collection costs.
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1.1.2 2010 Medium Term expenditure Framework (MTEF) Budgeting
Guidelines
In order to properly situate the NATMAP 2050 Funding Framework, it is useful to
summarize the current Treasury practice as it applies to the 2010 MTEF. The
Treasury guidelines are “designed to promote efficiency in infrastructure planning
and budgeting, supporting a better allocation of resources across government”.
They apply to equally to mega-projects of between R300m and R900m as well as
large projects of between R50m and R300m. In setting out full project costs –
including annual operational costs over the lifetime of the asset, the following
evaluated/analysed:
• Needs – or the problem(s) that have given rise to the need;
• Cost benefit analysis – including externalities (“only externalities that result in

a significant effect should be included”), as well as the discounted value as
represented by the project’s net present value (NPV)
• Options analysis to determine cost-effectiveness;
• Sensitivity analysis and risk assessment, and lastly
• The implementing entity’s own readiness and capacity to implement the

project and the attaching timelines.
These guidelines incorporate all elements that NATMAP 2050 would wish to have
included in a discreet project evaluation. However, NATMAP 2050 requires that
projects be evaluated to take account of the multi-modal nature of delivering
transportation investments, emphasising integration and seeking inter-/intra-modal
efficiencies. As a funding framework, it also is concerned with equity, adequacy as
well as ease of administration and compliance of the funding instrument as set out
under 1.1.1 above - in addition to intrinsic project finance efficiencies.
1.1.3 Dedicated mode funding – or not

Dedicated infrastructure funding, such as the traditional Road Funds, were often set
up at the behest of the World Bank in 1960s and 1970s in Africa, Latin America and
Asia. These funds were typically financed by earmarked taxation to protect Bank-
financed investments. Later, during the 1980s and 1990s, the so-called “second
generation Road Funds were established, these were characterised by being funded
by levies or surcharges designated as user charges and identified separately from
general taxation. “Earmarked” budgetary arrangements invariably limit macro-
flexibility and - often in times of economic austerity – aggravate the prevailing
constrained fiscal circumstances leading to inefficient allocation of resources.
It must be noted that the South African practice of issuing “Conditional

Grants” does not constitute an “earmarked” budgetary arrangement in the
sense of a dedicated fund.
Equally, the concept of user charges advocated here-below does not
constitute earmarking as the relationship between the infrastructure being
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subjected to charges and the behaviour to be influenced is direct and the
charge functions as a “price” rather than a “tax”.
“First generation” road funds can be rejected outright as they, not only constrain
leverage and flexibility in managing macro-policy or reallocating resources in the
light of changing national priorities, but are contrary to the multi-modal and balanced
transport system that NATMAP 2050 advocates.
The use of “second generation” dedicated funds and a decision to introduce such
funds in future must be based on practical and systematic assessment of the
context and ability to minimize abuse and misallocation of resources over time. The
significant operational efficiency gains in overcoming uncertainty in the level and
timing of funding inherent in second generation dedicated funds would contribute to
the NATMAP 2050 adequacy criteria, and is often cited as favouring second
generation dedicated funds. However, as discussed under 1.1.1.3 above, other
factors often outweigh this utility. The judicious application of the NATMAP 2050
funding framework as advocated herein is therefore deemed sufficient without the
use of dedicated mode-specific funds.
1.2 ECONOMIC EVALUATION AND INVESTMENT FRAMEWORK

The Goal Achievement Matrix described under chapter 1.4 below entails financial
outcomes that may in some instances be beneficial or not in monetary investment
terms, and/or in societal economic terms. Rigorous evaluation and assessment of
said outcomes becomes not only necessary but mandatory when the contemplated
investment is sufficiently large in absolute terms or/and in ongoing resource
commitment to secure the investment’s sustainability to continue rendering the
benefits ensconced.
Large transportation projects, frequently, exhibit value added outcomes that may, in
and of themselves, be desirable from a societal and socio-economic perspective.
Such outcomes are referred to as structuring, i.e., they cause/induce secondary
beneficial effects on the productive economy. In such cases, a large transportation
project may not entail sufficient monetary investment benefits, or these may be not
sufficient to justify the investment, but its economic structuring benefits may be
nonetheless beneficial to the region/sector/country - enough to counter-balance the
insufficient project’s direct economic/financial benefit, and as such worthy of being
pursued.
Put in perspective, the socio-economic scorecard prescribed hereunder does not

dictate the decision to make when faced with large transportation project proposals,
but, offers transparent norms and monetized values that, when taken into account,
may lead to a positive decision, notwithstanding a less than favourable monetary
internal return from the required investment.
The economic evaluation methodology advocated hereunder draws from

accepted theoretic economic evaluation methodologies and practices, on the
one hand, and, - in terms of best practices - on the other hand, borrows from
legislated French prescription – as amended, updated and enhanced in 2005,
in particular. Indeed, even superficial examination of French practices quickly
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reveals a surprising degree of suitability, and institutional compatibility with the
South African local circumstances that French practices embody.
The proposed framework is thus as follows:
1.2.1 Project Definition and Derivation of the Reference Model

This step describes the objectives pursued, alternative solutions available to achieve
said objectives, and sets out the reference model, i.e., the situation in the absence
of the proposed project (or do-nothing situation).
1.2.1.1 Objectives
Large transportation projects must contribute to furthering South Africa’s overall
transportation policies, and, to the country meeting its
regional/continental/international obligations. At a micro-level, user needs (travel
time, security, mobility, etc) as well as economic productivity gains constitute some
of the objectives. The quantification of the requisite investment must be
comprehensive and encompass both capex and opex estimates (including ongoing
demands on public funds), externalities and savings due to the project’s
implementation. In addition, any investment that, whilst required for the proposed
project’s viability, but would – at any rate – have been made even in the absence of
the project (termed “eluded investments”) is accounted for in the investment sum
build up, but subsequently excised from the project budget.
1.2.1.2 The reference model

The reference model serves to benchmark the project. Its utility is directly
proportional to the rigour and coherence of its construction. Hence, it must present
an optimized and most probable situation in the absence of the project and
encompass the same time horizon that the project’s utility contemplates.
1.2.1.3 Operations
Comprising the total project costs and benefits, the socio-economic evaluation will
also factor in anticipated ongoing commitments arising from the project’s
implementation, including savings from non-implementation of competing
investments as well as eluded investments.
1.2.2 Harmonization of Inter-sectoral Project Hypotheses

To conclusively compare inter-sectoral project alternatives, the macro-economic
parameters modelled must have the same values, and, values attaching to
externalities must be normalized.
1.2.2.1 Macro-economic scoping

The macro-economic scoping will comprise indicators such as transport demand,
inflation, GDP, long-term interest rates, etc.
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1.2.2.2 The escalation rate and public funding constraints
The escalation rate is in constant money, fixed at a uniform X% for all public project
investments. This rate is equivalent of a risk-free rate approximated by Treasury
bonds. This rate will continually decrease to X-n% over the planning period to 2050.
For project evaluations with a greater than a 50-year horizon, a constant rate of Y%
will be applied for the period beyond 50 years.
To be factored in are risk factors, opportunity cost of public funds and the budgetary
constraint.
1.2.3 Project Analysis

Project analysis must satisfy the imperatives of a long-term traffic forecast and
corresponding tariff sensitivity. As such, it constitutes the most delicate stage of the
economic evaluation as forecasts have to allow for flexibility to manage an
uncertain/unknown future.
1.2.3.1 Market study, traffic forecast and project time horizon

a) Particular attention must be paid to research and formulate the most
adapted model to the particular project, having due regard to
modal/multimodal parameters. The structure of the model and its
underlying principles and characteristics – such as the chosen
parameters, values and their calibration, must be well defined.
b) Market analysis departs from the base of existing flows, factoring in
their evolution over time, mode share and competitive conditions. The
forecast must identify strategic points that may disrupt a linear
evolution as well as project risk factors and uncertainties. In order to
maximize prospects for attaining the project’s commercial objectives,
necessary complementary investments and support activities – such
as promotional campaigns – must be factored into the market study.
c) The forecast traffic modelling results must distinguish and present a
reference traffic model, distinct from that captured from the
competition as well as induced traffic resulting from implementation of
the project.
d) Multiple project time horizons are necessary to take into account
different time periods due to the investment’s technical lifespan
or/and economic useful life on the one hand and financing modalities
and practices on the other. Traffic forecasts are dependent on
fluctuations in economic activity and tariff policy, both of which impact
decisively on transport demand. It is thus sensible to model the short
to medium term and only record some indications on long-term
tendencies.
1.2.3.2 Tax/subsidy regime and tariff policy
The tax/subsidy regime applied to transportation must be taken into account.
Tariff setting policies that seek to achieve other objectives than to recoup project
costs may be applied to effect and advance broader transportation policies and
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objectives. These include sectoral interventions and land-use policy goals, traffic
demand management and multi-modal channelling of competition.
Tax/subsidy regime and tariff setting are powerful tools of public policy seeking to
induce user behavioural change. It is capable of attaining an economic structuring
effect.
1.2.4 Public Socio-Economic Scorecard

It is important that a public cost-benefit (monetary or monetized and where
appropriate qualitatively defined) scorecard be evaluated to account for the project’s
total costs. It is equally important to analyze the various impacts on the different
categories of beneficiaries and aggregate the normalized indicators. For this
purpose, principal beneficiaries are grouped into three coherent categories and their
respective collective utilities determined. The collective benefit will thus be the sum
total of these three categories of beneficiaries, computed in constant money and
determined annually over the project’s lifespan.
1.2.4.1 Principal beneficiaries

a) Users of project’s transportation and users of alternative transport mode
User socio-economic benefits may be commercial (defined as the transport cost

differential) or non-commercial (for this purpose confined to value of time – for
freight and passengers, value of human life, noise and pollution and carbon tax
– as per the Kyoto protocol). The collective surplus for this beneficiary group is
a function of:
Traffic as per the reference model, i.e., evolution of existing traffic in the
absence of the project;
Induced traffic, i.e., as a result of the implementation of the project, and
Impact on users of alternative modes (“losers”).
b) Transport enterprises and transport infrastructure managers

The surplus accruing to transport enterprises and infrastructure managers is
constituted by the variance in producer surplus resulting from project
implementation.
c) The State at all its spheres
For this group, the surplus arises from the variation in tax collected, the state’s
participation in funding the project as well as the project’s ongoing commitments
– e.g., subsidies, repair and maintenance, etc.
1.2.4.2 Determination of principal indicators

Large transport project investments are characterised by an initial investment cost
and the annual recurring costs and benefits – monetary and expressed in constant
money, or/and qualitative, which are expressed in constant money.
a) Escalated collective benefits
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Escalated benefits accruing to the collective are defined as the difference
between total project costs and benefits. This indicator provides the best
criteria for accepting or rejecting a project proposal. It is expressed as
Definitions:
: year preceding the commissioning of the service provided by
the project , or the project’s first phase
E: duration of construction
T: project lifespan
I: initial project cost (escalated, if it is implemented over several

years or if it entails a multi-year commissioning), i.e.,
: sum of eluded investments. (eluded investments are

investments that would be/have been undertaken irrespective of the
project’s go-ahead)
: the variation in large maintenance investments in year t not

accounted for in the build up of operational expenses
: the project’s economic benefits in year t, excluding operational

expenses
r: the risk-free rate i.e., the escalation rate applicable to all

public investments – for NATMAP 2050 purposes, it is set at 50% of the
yield of government bonds
R: residual value of the investment at the end of the project’s lifespan

(can be negative, if there is a cost of rehabilitation at the end of the
project’s lifespan
b) Benefit to the collective per Rand invested
Expressed as the ratio B/I.
c) Internal rate of return
1.2.4.3 Sensitivity analysis

It is imperative that a sensitivity analysis be conducted to account for uncertainties in
the economic analysis. The most important parameters to be tested include:
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GDP growth,
Project costs – capex/opex,
Traffic,
Energy costs,
Tariff evolution and competitive action, as well as
Monetized effects of pollution, noise, human life, etc.
1.2.5 Financial Feasibility, Financial Risk & Impact on Fiscal/Public

Resources
Financial feasibility is calculated in constant money and exclusive of Value Added
Tax (VAT), taking into account assumptions of inflation, traffic scenarios, tariffs,
competitive behaviour/response assumptions, and time – which is, however, limited
to the amortization period (or the concession period for PPPs. In the case that the
amortization period does not coincide with the concession period, a separate
computation is necessary).
1.2.5.1 Indicators to be determined are:

a) Escalated net value - VAN
VAN= - - +
Whereas:
i: is the reference escalation rate, representative of the
financing cost for the operator
: the applicable operational duration (amortization or

concession period)
EBE: EBITDA
: the operator’s total investment costs, including financing costs
: the escalated value of the operator’s eluded investments
: variation in large maintenance investments in year t (not included in

the operational expenditure)
: residual value of the investment accruing to the operator at

the end of the project’s lifespan (can be negative, if the cost of rehabilitation
at the end of the project’s lifespan is charged to the operator)
September 2010
From an operator’s perspective, the VAN is the best criteria for accepting or
rejecting the investment.
b) The internal rate of return & payback period
c) State subsidies and/or support measures external to the project
In cases where the project’s VAN is insufficient to underpin project operation,
further evaluation w.r.t tariff levels (taking due regard of socio-economic
affordability effects, adapting the project duration in the case of PPPs, or/and
subsidies.
1.2.5.2 Determining financial feasibility

Project viability
VAN, IRR and payback periods allow for the determination of the project’s
intrinsic feasibility and compare different project proposals before making the
financing choices and determining the amortization policy and cash flows.
1.2.5.3 Financial risk analysis

Financial risk analysis tests the project’s robustness i.t.o its capacity to
endure deterioration in underlying forecasts and/or environmental changes –
such as deregulation. In addition to evaluating specific risks attaching to
public operation of the project as opposed to a concession, a battery of
standard ratios – such as debt, liquidity, coverage ratios, as well as
sensitivity/trend analyses – need to be determined and evaluated. Finally,
certain simulations need to be run to test the project’s capacity to withstand
economic cycle fluctuations, competitive pressure from a new entrant,
significant loss of custom, etc.
September 2010
1.3 NATMAP 2050 GOAL ACHIEVEMENT MATRIX
Figure 1.3.B below seeks to illustrate how objectives harness policy principles and
appropriate strategies to produce intended outcomes. Its hallmark is the rigour and
discipline that it engenders in the consistency of multi-modal policy application and
inclusion of “non-transport” (in the stricter sense) support policies and measures in
pursuit of prescribed objectives.
In Figure 1.3.A, a typical NATMAP 2050 Action Agenda to improve low-income

earner mobility is illustrated.
Figure 1.3.A: Objective - Improve mobility and access to employment

opportunities for low-income earners
Institutional Policy/Measure:
DLA to prescribe national land use norms in favour of high density urban development
Provincial institutional capacity support to under-resourced DMs and policy execution oversight
Planning & investment Policy/Measure:
Derive indicative national average minimum wage & 10% monthly quantum of disposable income
New developments and re-developments to comprise of integrated work-live-recreation precincts
New road developments and periodic road maintenance programmes in urban areas to include
NMT set-asides
Operational, regulatory, concession Policy/Measure:
Regulator to set commuter fare band at R.x at constant prices for 5-years to Year Y
High Occupancy Vehicle lanes on all major corridors
Pricing, Cost-recovery, Taxation & Subsidy Policy/Measure:
Tolling
Mass Rapid Transit subsidies
Strategy 1.1
Charge differentiated user fees which favour public transport on the road network
Strategy 1.2
Prioritize NMT in all new and urban renewal developments
NATMAP 2050:
95% of urban and peri-urban dwellers access to passenger transport at 500m walking distance;
rural access at once-daily availability of village-to-nearest town transport
All local authorities to implement NMT strategies by 2025
PRASA medium-term Plan/Measure:
Improve reliability of scheduled commuter transport to 10 minute interval at peak and 30 minutes
non-peak
18-hour service availability
5-year investment Plan/Budget Provision:
Prioritization of network and rolling stock upgrade and maintenance spend
Demand responsive capacity and service expansion
Investment in service quality and customer-centric delivery
Treasury/DoT subsidy to PRASA to cover shortfall, conditional grants for service delivery
enhancement capex/opex
September 2010
13
Figure 1.3.B: Policies Strategies Plans Matrix
Institutional Planning & Operationa Pricing

Institutional Planning & Operationa Pricing
measures Investment lRegulation Cost-recvy
measures Investment lRegulation Cost-recvy
measures & Taxation
measures & Taxation
Licensing Subsidy
Licensing Subsidy
Measures Measures
Measures Measures
Analysis of existing strengths and weaknesses, opportunities and strengths
Strategy 1.1
Objective Strategy 1.2

s
Strategy 1.3
5-year
Strategy 2.1 Investment
Objective Plans
s Strategy 2.2
Objective etc Medium

s term
Sectoral
Plans
Institutiona Planning & Operationa Pricing
l Policies Investment lRegulatio Cost-recvy
NATMAP
Policies n& Taxation
Licensing Subsidy
Policies Policies
1.4 CAPITAL VS. OPERATIONAL EXPENDITURE (CAPEX VS OPEX) FUNDING
Transportation investment considered under the NATMAP 2050 Funding Framework are
constituted by five categories, viz., creation (construction) and rehabilitation of the
infrastructure – which is considered to be capital expenditure, as distinct from operational
expenditure, typically – periodic maintenance, routine maintenance and operational
management. Therefore, the framework considers funding modalities of capex distinct from
opex.
1.5 NATMAP 2050 FUNDING PRINCIPLES

International experience in market economies indicates some common practices, i.e., that
public funding of transportation infrastructure is much more common than for transport
operations. Further, that private ownership of transportation services is broadly common for
freight than for passenger transport; predominant in road haulage, freight forwarding and air
travel, but exceptional for railway services. Except for road passenger services, South Africa
mirrors these international tendencies.
Government provision of transport services faces a number of constraints which distort
optimal funding options adopted, and are exacerbated in a developmental state, viz.,
Competition for resources from core government functions, and the inherent
contradictions in trying to be policy maker or/and regulator of the subject operations;
Managerial tensions of seeking commercial viability concurrently with social goals.

This is further pronounced where subsidies underpin operational sustainability or/and
where public service norms and procedures rather than operational needs
drive/influence management practices;
Technical efficiency losses/compromises where the activity creates surpluses which

are then used to cross-subsidize other – often at the expense of capital formation
and re-investment in the profitable activity, etc.
Fundamental to above issues is the reality that governments pursue many policy objectives
in transportation – sometimes even parallel objectives that embody dynamic tensions, if not
contradictions.
With regard to transport infrastructure, NATMAP 2050 recognises that much of it has
attributes of natural monopolies, and, that the costs of provision more often than not are
difficult to recover from users and hence engender distributive outcomes. As such, the
funding options adopted for infrastructure provision impact more significantly on the
achievability of NATMAP 2050 Funding Postulates prescriptions than is commonly the case
for operational investments.
Notwithstanding the above, public ownership and operation of transport infrastructure is a

legitimate and common policy choice. However, if chosen, the state-owned infrastructure
provider must be subject to tests of efficiency and sustainability that NATMAP Funding
Postulates prescribe. It is in this light that contributions calling vertical separation must be
evaluated. Indeed, there is a prima facie case for vertical separation where the infrastructure
is seen as a natural monopoly, but the service provision thereupon may be rendered
competitively or, at least, periodically contestable. International evidence supports such a
stance, for example, in port and airport infrastructure. However, in the case of rail, and mass
transit (metros and tram systems), the evidence is more complex. The technological and
economic interface between the infrastructure and the rolling stock that uses it is complex.
When separated, the management of this interface can be difficult and/or costly. Also,
15
international practice does not provide incontrovertible best practice of long-term sustainable
on-track competition - especially for passenger rail. Of course, this does not preclude the
introduction of periodic contestability of concessions or franchises.
1.5.1 SECTORAL FUNDING SOURCES

Deriving from the notion of basic level of service and the efficiency criterion discussed in
Phase 2 as well as from the NATMAP 2050 Funding Postulates:
1.5.1.1 Road Mode
1.5.1.1.1 Road Infrastructure Capex

Road infrastructure (construction, rehabilitation) capex is expected to continue to be funded
by the public sector – including state agencies, during the planning period to 2050. However,
the funding tools need to be reviewed and expanded to include (as may be appropriate for
each discreet investment):
1.5.1.1.1.1 Current commitments
Projects in the current MTEF and/or contained in approved capex of State Agencies will be
concluded using the assigned funding instrument.
1.5.1.1.1.2 New projects
All new infrastructure investment proposals for all modes must be subjected to a rigorous
economic and financial analysis following the guidelines outlined under Sections 1.2.1 to
1.2.5 above. Since most – if not all proposals will be compiled by sector or mode, each such
proposal will need to be submitted to the centralized National Transportation Development
Planning & Investment Clearing House (NATCH) at the Department of Transport.
NATCH will:
• not only verify the proposed economic and financial feasibility, but will be responsible
to subject the sectoral investment proposal to a cross-modal cost benefit analysis to
determine if the proposal is best delivered through the originating mode or another,
or even a combination of modes;
• ultimately arbitrate the proposed timing of the investment, taking into account the
finite resources at hand in relation to the recorded priorities in NATMAP 2050 – at
first, then within the Medium term Sectoral Plans and finally the rolling 5-year
Transportation Investment Plan for the country as a whole;
• present and motivate the investment as part of a package for inclusion in the overall
country-wide multi-disciplinary investment programmes to be considered by the
National Planning Commission, before ratification and approval by Cabinet.
In terms of public funding of the creation and rehabilitation –capex - of road infrastructure,
NATMAP 2050 endorses the current practice of not applying the Fuel Levy as a dedicated
fund as discussed under 1.1.3 above. The primary funding source for this function remains
the national fiscus, as long as the current revenue collection principles continue in existence,
with national collection being the dominant methodology.
In complement to public funding, the opportunity to involve the private sector should be
explicitly explored in the funding mix of new projects. This may take the form of a Public
Private Partnership:
• Build Operate & Transfer (BOT) or a variation thereof most suited to the project
profile, such as the Lease Develop Operate (LDO);
16
• As the bulk of future road infrastructure will most likely be developed along corridors,
especially with respect of terminal nodes along the corridors, the underlying land-use
enhancements should be pro-actively harvested through value capture techniques
that tax the increased economic activity entail;
• Securitization is an innovative funding instrument to be factored in – especially with
respect to funding of facilities (terminals, stations, ports and inland ports, etc). assets
that are able to be ring-fenced, generate discreet and predictable cash-flows which
can be packaged into a debt instrument and on-sold to investors are prime
candidates for securitization – see diagram below.
Figure 1.5.A: The ABC of Securitization
1.5.1.1.1.3 Road Infrastructure Operation (Opex)

NATMAP 2050 recommends a complete overhaul of funding instruments for road opex as
identified and analysed in Phase 1 & 2. The underlying basic concept espoused hereunder
derives from the NATMAP 2050 Transportation Funding Criteria and Principles, discussed
under Phase 2 and summarized above under section 1.1.1 above, viz., equity, efficiency,
adequacy as well as ease of administration and compliance. International best practice
made relevant to the South African environment provides calibration for reality and practical
implementation to obviate disruptive experimentation or/and unrealistic system performance
expectations. These funding criteria seek to make reality the basic right of all South Africans
to access to transportation – including the right to choose the preferred instrument(s) of
access to transportation – both for private mobility and the transportation of goods and
passengers for economic gain. With its country-wide reach (in excess of 750’000 kilometres
of paved and unpaved roads), the road mode deserves particular attention as the most
accessible transportation network in the country, and as such – the most “democratic” mode
17
that must be delivered in as strict adherence to the NATMAP 2050 Funding criteria as
practically feasible.
The NATMAP 2050 Road Mode Opex approach is two-fold.
First the approach considers the funding of access to the road network through an access
right fee.
• This fee is graduated to reflect personal utility to the road user, i.e., private access
not for economic gain using a private vehicle is charged at a lower rate than for an
equivalent vehicle accessing the network for commercial gain – whether for
passenger or goods movement; and
• In the case of access for commercial gain, the access fee is further graduated to
reflect a higher personal utility accruing to the user as the road network now serves
as a capital asset to the creation of earnings that accrue discreetly a particular
vehicle owner;
• In addition to this graduation of personal utility accruing to the commercial user of the
road infrastructure, the fee is adjusted to reflect the potential stress on the road
surface caused by the commercial and hence the inherent ability to damage the
infrastructure that accrues and is aggravated by the relative weight-carrying ability of
the heavy duty vehicle being licensed to access the road network. Finally,
• A further graduation in access costs makes adjustment for equity in providing mobility
to all citizens of South Africa, viz., passenger vehicles access the network at a
discount to their equivalent heavy duty goods carrying trucks, in order to compensate
for the access becoming a barrier to affordability and hence lowering individual
mobility.
• A further consideration could be a “punitive” element to the fee build-up to
compensate for and/or discourage noxious effects of externalities on the
environment. This would be based on a “carrot & stick” formula to encourage
migration towards cleaner technologies for automotive mobility needs and so
introduce pus-pull factors in favour of public transport in the case of passengers and
rail goods transport in the case of haulage.
Secondly, the approach applies the principle of user charges to the usage of the road
network. Again, for reasons of equity and efficiency, similar adjustments to the user charge
rates are applied in accordance to the NATMAP 2050 funding criteria which prescribe that
equity, efficiency, adequacy and ease of compliance must underpin all funding instruments
for all modes of transport. NATMAP 2050 proposes to harness 21st century technology to
leapfrog the application and collection of user charges.
Road Opex funding is proposed to be shared between the 3 spheres of government as
follows:
For Access rights fees:
• National government: 0%
• Provincial government: 0%
• Local government: 100%
Access rights fee collection is to continue in form of yearly renewable licences. The
applicable quantum is however to be guided by the graduation as discussed above, and
accrue solely to local authorities.
For user charges:
• National roads/government: Actual kilometres travelled
18
• Provincial roads/government: Actual kilometres travelled

• Local roads/government: Actual kilometres travelled
User charge collection is proposed as follows:

In accordance with NATMAP 2050 funding criteria, a new revenue collection approach is
proposed. To achieve the quantum leap that the modern technologies promise, user charge
collection will be through the application of intelligent transportation system (ITS) smart-
vehicle technology to the task of fairly assessing road user charges, in a more stable and
flexible way. Succinctly, the basic operation of the distance-based road user charge relies on
geographic positioning system (GPS) signals – through triangulation – to determine the
vehicle’s position. A simple on board computer stores the file consisting of data polygons,
using geographic information systems (GIS). These data polygons define the boundaries of
provinces, district municipalities and metros – as applicable. At the time of vehicle
registration/licence renewal, an account is established and road user payment options fixed
with the billing and dispersal centre.
(This capability allows for fairer user charge application across the length and
breadth of the country – irrespective of uneven capacity endowment of each region
and sub-region. Also, in this way a potentially skewed user charge regime, which
would unwittingly distort the prevailing natural inter-regional geographic competitive
advantage(s) can be avoided within the country).
The computer continuously applies the per kilometre charge rate to the distance travelled
within a given polygon and thus jurisdiction. What is stored in the on-board computer is the
total amount owed to the jurisdiction. On a programmed schedule, the vehicle is interrogated
and stored data uploaded to a billing and dispersal centre, which bills the owner and
apportions the revenue among the jurisdictions within which the vehicle has actually
travelled.
(Significant enhancement of public policy effectiveness can be achieved through
electronic user charging proposed hereunder, whilst achieving one or more of
NATMAP 2050’s funding criteria – such as the ease of administration and
compliance criterium. For instance, in terms of implementing travel demand
management, the system allows for variation of user charge rates to influence
behaviour, such discouraging peak period network overload through differentiated
charge rates that favour off-peak periods, raising the applicable rate to encourage
night time goods delivery in congested CBDs, push-pull private traffic to public
transport through lane dedication for high occupancy vehicles use at peak times in
addition to differential charge rates, etc).
1.5.1.2 Rail Mode

Rail infrastructure includes tracks, marshalling yards, power supply and catenaries,
telecommunications and control systems, bridges and tunnels. International experience with
vertical separation is not compelling, to a great extent due to the operational complexity that
ensued where it was attempted.
1.5.1.3 Rail Infrastructure capex

For both passenger and freight operations on existing infrastructure, the integrated formula
is best left in tact. However, access financial arrangements between PRASA and FreightRail
must be regulated, with access charge regime biased in favour of passenger transport, and
19
freight gradually migrating towards an economic rates regime to better reflect the cost of
infrastructure provision.
As a matter of policy and deference to rail efficiency for mass goods/passenger

transportation, the charge regime should be consciously favoured against road.
The Gautrain and Moloto Corridor high speed rail on standard gauge lead the rail
rejuvenation in SA. The momentum must be sustained. Future green-field rail projects such
as high speed lines, new freight lines, major station developments and re-developments
must consider incorporating PPPs and/or concession parties other than incumbents to instil
a measure of competition in the provision of service – as well as infrastructure, where
financially feasible.
With regard to branch line infrastructure, there needs to be an instance that will house these
assets in a dedicated rail infrastructure agency, whilst alternative operation is sought. The
agency could evolve into an institution servicing both passenger and freight rail operations
holding the entire rail infrastructure park in South Africa.
1.5.1.3.1.1 Current commitments & new rail projects

Much the same as for the road mode, remarks made under 1.5.1.1.1.1 & 1.5.1.1.1.2 above
obtains for rail capex funding.
1.5.1.4 Maritime Mode

NATMAP 2050 favours the landlord model. In this model, the infrastructure provision is for a
corporatized and commercially run ports landlord to provide navigation infrastructure,
channel maintenance, wharves, utilities and common areas – such as the internal roads.
However, the incumbent should look to enhance efficiency through outsourcing of non-
core/support activities such as tug services and maintenance. Shipping/barge and
stevedoring services would be leased and/or competitively concessioned.
1.5.1.5 Pipeline Mode

The Pipeline mode infrastructure and operation should remain vertically integrated, but new
capacity must be competitively concessioned.
1.5.1.6 Air Mode

Current ACSA – airport infrastructure and operation, and ATNS – air navigation
infrastructure and operation should be retained under the regulated regime. As already the
case, airport services – baggage handling, catering, aircraft refuelling, etc should be
competitively concessioned. Car parks should be also tendered out. In essence, save for the
ATNS function at airports, the preferred airport infrastructure provision model would simulate
that of the maritime ports under 1.5.1.3 above.
20
2. INSTITUTIONAL AND LEGAL FORWARD PLANNING

2.1 INTRODUCTION
2.1.1 Terms of Reference
The terms of reference (TOR) define the scope of work of phase 3 as follows:
“…the Consultant task is to recommend the most cost effective, homogenous and
dynamic institution structure that will enhance land use/transportation integrated
administration, planning, and operations for the planning period of 2005-2050.
Create a homogenous Department of Transport in all its aspects by land and sea and air
to embrace Railways, Road Transportation, Shipping and Civil Aviation in all their
general aspects including various Agencies dealing with specialised aspects of
transportation in this country.”
2.1.2 Approach to Phase 3

During Phase 2 an analysis of the existing institutions and their legal support mechanisms
was performed. The need for changes in institutional and legal support was clearly identified
and informed by the different land-use, infrastructure and operations of the different modes.
As effective institutions are reliant on sustainable funding this chapter contains alternative
strategies as well as supportive proposed new institutions or proposed changes to existing
institutions to give effect to the needs identified during analysis. In cases where current
institutions cannot be improved upon currently, no changes are proposed.
2.2 PROPOSED ALTERNATIVE STRATEGIES

The following alternative strategies are proposed:
• To introduce institutions and instruments where modal choice decisions are taken for
“mega transport infrastructure investment projects”.
• To introduce homogenous economic regulation to the different modes of transport
where pricing is distorted due to lack of competition.
• To ensure homogenous safety regulation entities for the different modes.
• To take responsibility for the strategic development of different modes by producing
Integrated National Master Plans for infrastructure and facilities of each mode.
• Ringfencing of infrastructure and operational costing in areas (like rail and pipelines)
where vertical separation of existing entities is not currently possible due to lack of
proven viable alternatives at this point in time.
• To introduce mechanisms to transfer the “real cost of transport” to transport
operators by charging for the use of infrastructure in terms of weight distance
charging.
• To introduce user representation onto the boards of institutions that provide transport
infrastructure.
• Evaluate effectiveness of provincial departments/agencies responsible for spending
on transport infrastructure to ensure effective spending of public funding. From
evaluation to develop delivery and spending criteria.
• Ensure that existing institutions execute on existing mandates by highlighting areas
where they are currently failing in their duties.
21
• To benefit from the effectiveness and proven delivery of institutions for the provision
of transport infrastructure of national importance (SANRAL, ACSA), by expanding
their responsibilities by enlarging their portfolios by transferring infrastructure from
less effective institutions.
• Ensure effective coordination structures between National, Provincial and Local
government levels. Also ensure coordination with other relevant government
departments takes place that ensures alignment, cooperation and coordination of
service delivery.
The statement “structure follows strategy” requires that each strategy be sufficiently
supported by structures for delivery. The above strategies are now discussed in terms of the
proposed new institutions, changes to existing institutions to give effect to them, according to
modes: multi-modal; roads; rail; aviation and maritime.
2.2.1 Proposed New Institutions

A need has been identified for new institutions in areas or where there is currently a lack of
capacity to meet the needs of the proposed strategy:
2.2.1.1 Multimodal Transport

There is a clear need to identify institutions on the multimodal level. From analysis it is clear
that there are “turf wars” between the different modes. “Referees” are required to balance
the optimisation of modes and national interests. Such institutions should be in a position to
give guidance to the different modes where the national interest wants them to focus. A
need has been identified for the following institutions:
Department of Transport - Multimodal Policy Forum

Introduce a forum where multimodal policy can be formulated. The aim is to limit duplication
of government service delivery and infrastructure provision and to reduce “turf-wars”
between modes by providing clear policy guidance.
Institutional Issues:
The proposed roles, functions and responsibilities of the forum should inter alia include:
• Develop policy in terms of the roles, responsibilities and boundaries of the “playing
fields” of the different modes.
• Give guidance to the different modes to understand their “playing fields” and allow
the modes to develop operational policy and strategy where most appropriate and
limit “turf-wars” between modes. It is expected to channel energy away from modal
pre-occupations and infighting to focused relevant and credible infrastructure
delivery.
• Ensure overarching alignment of modes in a multimodal transport environment.
• Ensure multimodal policy support to inter alia land-use and environmental issues.
• Coordination of Master Plans of Transport Modes
The proposed forum should be part of the future Department of Transport structure in order
to centralise transport policy formulation in a cost effective and homogenous way inside a
22
dynamic structure. This would enable the DOT to enhance inter alia land use/transportation
policy coordination.
The composition of the forum should consist of policy experts for the different modes with
experience in a multimodal environment. It should also contain representation from other
government departments like Land-use, Environment, etc.
Legal Issues:
This institution, as well as other proposed institutions, must be seen in the light of the roles
of the spheres of government as set out in section 11(1) of the National Land Transport Act
5 of 2009 (NLTA). This section came into operation on 31 August 2009, along with other
sections on contracting for public transport services. In terms of section 11(1)(a), the role of
the national sphere of government is, among other things, to─
a) Formulate national transport policy and strategy

b) Be responsible for national strategic transport planning and co-ordination
c) Co-ordinate between provinces and address arrangements between the three
spheres of government
d) Assign functions to the most appropriate sphere of government
e) Liaise with other government departments, and
f) Monitor and capacitate provinces and municipalities.
As regards the intergovernmental relations aspect of the proposed Multimodal Policy Forum
(MPF), MINMEC already exists as a national intergovernmental forum contemplated in
section 9(2) of the Intergovernmental Relations Framework Act 13 of 2005. MINMEC has
sub-committees to involve municipalities, and these could be expanded or adapted to
incorporate other government departments and the aspirations of the proposed Multimodal
Policy Forum (MPF). However, a forum is needed that also incorporates the various modal
entities, including PRASA (rail passenger), Transnet (rail freight), SANRAL (national roads)
as well as private entities such as SABOA (SA Bus Operators’ Association) and taxi
associations.
The proposed forum could either be established by statute, i.e. by an act of Parliament, or
informally by the Minister as a non-statutory structure. There is probably no need for it to be
established as a formal public entity in terms of the PFMA, but rather as a consultative
forum. However, if the forum is to have “teeth” to take decisions or give approval for actions
or to undertake planning that is binding on landowners etc. legislation will be needed to
provide for this. It may also be necessary to fund certain activities of the Forum, in which
case legislation will be needed unless the funding can be sourced from the DoT’s normal
budget. An alternative would be for the Minister to establish the Forum informally as a
consultative body, but it would then lack the power to take binding decisions and all funding
would have to come from the DoT’s normal budget.
If it is decided to establish the MPF by statute, a Bill must be prepared to set out its
functions, powers and duties, the membership of the forum and “housekeeping” matters
such as holding of meetings, procedures, quorums etc. and provisions on funding. The
procedure for preparing and passing Bills is set out below.
23
If the Forum will fall within the definition of “public entity” in the PFMA, the Department will
have to follow the steps listed below in respect of the proposed Transport Investment
Clearing House (TICH) and National Economic Regulator (NER), and the Forum will have to
be listed in Schedule 3 of the PFMA.
Provincial Issues:
This institution would provide the necessary guidance to the provincial institutions that are
currently contributing to turf-wars in the provincial and municipal spheres.
In line with section 11 of the NLTA, the Forum, as a national institution, will be able to co-
ordinate between provinces and municipalities and assign functions to them. It can also
assist with capacity building and other assistance. Legislation in each province will have to
be examined to see if it needs adjustment to accommodate the objectives of the Forum.
Provincial legislation can only be repealed or amended by the relevant provincial legislature,
but national legislation can override provincial legislation if it falls within the categories listed
in section 146(2) of the Constitution.
Transport Investment Clearing House (TICH)

The purpose of this institution would be to give effect to the strategy:
‘to introduce institutions and instruments where modal choice decisions are taken for
“mega transport infrastructure investment projects”’.
It would serve as a clearing house for transport infrastructure projects that require
investment. The institution would be “mode neutral”. Projects would be evaluated in terms
of appropriateness of the mode, integration with other modes and land-use in order to
ensure best solution in the national interest.
The proposed roles, functions and responsibilities of the institution should inter alia include:
• Assist, support and advise transport institutions with limited skills in the formulation of
transport investment proposals that could ultimately be presented to the fiscus for
funding.
• Technical and financial evaluation of alternative modal solutions to transport
problems of a national nature.
• Motivation to the National Planning Commission and/or the fiscus to ensure funding
is obtained for mega transport infrastructure projects after determining the best or
appropriate mode.
• Ensure appropriate procurement policy
• Perform other functions necessary for the realisation of its objectives.
• Additional functions which may include:
o Provide technical, management and financial advisory services, training and
other support services to transport infrastructure management institutions and
the DOT.
o Subject to approval by the minister provide its services outside the Republic
of South Africa
USE OF TRANSPORT INVESTMENT CLEARING HOUSE (TICH) IN THE NATMAP 2050
DEVELOPMENT PLAN APPROVAL PROCESS
Application of overarching criteria as
Given and within NATMAP 2050 objectives provided for in NATMAP 2050 long- Match with
National, Provincial Departments, DMs and term strategic goals and objectives for Macro policies,
Metros & Agencies the entire country, e.g., say sectoral strategies
Formulate their strategic goals,
Growth, and targets
project/programme objectives Poverty alleviation, Resource availability
o Projects proposals Regional distribution, – physical / financial
o Set out their financial requirements Infrastructure to support specified / human
goals, etc
Provs/ DMs TICH/

Organs & Agencies/Provs/
Agencies DMs/Organs
TICH Political
Authority
Approval by
Review Review Assess Allocate Integrate into Cabinet –
Plan Investi- Select resources National Planning Parliament ..
Formulate gate Recom- Prioritize Commission’s Imple-
funding Consult mend development plan mentation
requests
Provide implementing
Match with overall financial organs/agencies with
Objectives & resources list of
issues Multi-modal assessment and programmes/projects
Concepts resource levelling among Provinces, Assist with
Scope Metros, DMs and Agencies implementation
Costs List of programmes/projects Monitoring
• The institution may perform additional functions that are incidental to its primary
functions only if it:
o Does not limit its capacity to perform its primary functions.
o Is not to the financial prejudice of itself or detrimentally affects another
transport infrastructure management institution.
• In the execution of its activities it must:
o Be customer orientated.
o Ensure compliance with national policy
• Interact with the NPC on planning and investment in mega infrastructure projects.
The proposed structure is to consist of permanent officials with multimodal, financial and
mode specific experts in infrastructure and operations.
The entity is expected to bring savings to government in preventing duplication of

infrastructure. It should have a clear understanding of evaluation criteria as applied by
Treasury to ensure that appropriate issues are addressed in the clearing process and that
projects are motivated in terms of Treasury requirements, therefore shortening
implementation time and costs.
It should not own any infrastructure but ensure that infrastructure created complies with
national transportation needs.
Legal Issues:
This institution would share similarities with Transfund New Zealand and the Namibian Road
Fund Administration.
In order to establish its powers, functions and duties clearly, the TICH should be set up by
statute, i.e. by a national act of Parliament. In terms of section 48 of the Public Finance
Management Act 1 of 1999 (PFMA), it would be classified as a national public entity i.e. an
entity which is not a national business enterprise (it will not carry on a business activity) that
is─
- Established in terms of national legislation
- Fully or substantially funded from the National Revenue Fund or from a tax, levy or
other money imposed by national legislation, and
- Accountable to Parliament.
The entity will have to be listed in Schedule 3, Part A of the PFMA. Prior to its establishment,
a business case should be compiled and submitted to the National Treasury for approval to
motivate the establishment of the Clearing House. The business case should deal with the
following issues, among others, which will be incorporated into the Bill establishing the TICH:
a) A motivation of the need for the TICH, its proposed purpose and functions and why
the functions cannot be undertaken by the DoT in terms of its constitutional mandate.
b) Other possible institutional options – such as a more informal national
intergovernmental forum established in terms of section 9 of the Intergovernmental
Relations Framework Act 13 of 2005.
c) The corporate structure and an explanation of how it will comply with the National
Guidelines for Public Entities and the King II/King III recommendations, whichever is
applicable.
26
d) The governance structure, i.e. the board or other structure that will govern the TICH
and its proposed composition and proposed committees of the Board.
e) Accountability – to the Minister and to Parliament, and requirements for strategic
plans, business plans, performance agreements, auditing and reporting.
f) Chief Executive Officer (CEO) and staffing, i.e. the organisational and human
resource implications.
g) Funding of the entity and financial controls.
Once Treasury and other necessary approvals have been obtained, a draft Bill must be
prepared to establish the TICH. This Bill should contain the following clauses as a minimum:
a) Definitions
b) A clause establishing the TICH as a public entity
c) The objects/goals of the entity
d) Its functions and objectives, i.e. more specific measures to attain its objects
e) Powers of the entity, i.e. powers necessary to achieve its objectives and ancillary
powers, such as whether it may own immovable property. These will include the
powers listed above to set policy etc.
f) Service level agreement (if it is decided to have one)
g) Power of the Minister to give directives to the entity
h) Structure of the board, appointing members, term of office, disqualifications,
termination of membership etc.
i) Meetings of board and board committees. In terms of the PFMA certain committees
are compulsory, such as an audit committee
j) Board charter (if applicable)
k) Appointment of CEO, conditions of office, delegations etc.
l) Appointment of personnel
m) Assets of the entity (if applicable). It may need to own offices and equipment etc.
n) Finances – i.e. how will the entity be financed, e.g. by grants from Parliament. Assets
may be transferred from the DoT
o) Bank account, auditing and financial management
p) Strategic plan, monthly, quarterly or annual reports
q) Liquidation or termination of the entity
r) Other provisions, such as exemption from taxes.
The Bill must be discussed with interested parties/stakeholders such as the National
Treasury, PRASA, SANRAL and other entities that will be affected, etc. It should also be
published for comment in the Government Gazette. The Bill once finalised must be
submitted to Cabinet for approval and to the State Law Advisers for certification. It is then
introduced to Parliament. It will probably be designated as a “section 76” [of the Constitution]
Bill as affecting the provinces. It should be noted that if it is proposed to raise taxes or levies
to fund the entity, these provisions must be contained in a separate Bill, called a “money bill”
which is introduced by the Minister of Finance under section 77 of the Constitution.
The Bill and the proposed entity will have to comply with Part 9 of the Treasury Regulations
on listing of the entity, responsibilities of the accounting officer, internal control and corporate
management, auditing etc.
Provincial Issues:
27
Care should be taken to ensure that the TICH functions are in line with section 11 of the
NLTA. Legislation in each province will have to be examined to see if it needs adjustment to
accommodate the objectives of the Forum. Provincial legislation can only be repealed or
amended by the relevant provincial legislature, but national legislation can override
provincial legislation if it falls within the categories listed in section 146(2) of the Constitution.
Provincial Transport Investment Funds

Provincial entities are finding it difficult to fund transport investments and maintenance to
existing infrastructure. The current financing arrangements provide no dedicated funding to
transport and it is left up to the provincial governments to do the necessary allocation in
competition with other provincial priorities. It is proposed to create a transport investment
fund for each province to provide the necessary dedicated funds to fund new and maintain
existing transport infrastructure in the provinces.
The proposed roles, functions and responsibilities of the institutions should inter alia include:
• Receive the access charges and user charges that accrue to the province and which
are collected by inter alia the Road Weight Distance Charging Entity.
• Manage the funds dedicated to transportation infrastructure in accordance with
statutory requirements.
• Have borrowing powers in light of the extensive amounts that would accrue to the
province annually.
• Prioritise provincial transport projects for funding from the fund.
• Projects that cannot be funded from the provincial funds could be referred to the
Transport Investment Clearing House for possible funding.
Legal Issues:
Legislation will be needed to establish these provincial funds. It will not be necessary to
establish new entities, as the funds can be managed by the relevant provincial MEC. The
legislation could also provide for specialised personnel to be appointed within each
provincial department to manage the fund.
It should be noted that the National Treasury has opposed the creation of similar funds in the
past. For example, when the National Land Transport Act, 2009 was introduced to
Parliament as a Bill it included provision for provincial land transport funds to be created.
This was opposed by the Treasury, on the basis that the type of funding envisaged could be
dealt with by conditional grants made by the Division of Revenue Act each financial year.
However, the idea of the funds as suggested above is supported because provision can be
made for a number of sources of funding for the funds and the use of the funds will be
dedicated to the purposes stipulated in the proposed legislation.
The legislation should deal with the following inter alia:
- Creation of the funds

- Provisions on which person or persons should manage the fund
28
- Sources of funding, including the user charges referred to above

- Purposes for which the fund may be used. These should be strictly confined to the
purposes outlined above for which the funds are created
- Investment of funds and interest
- Accountability, accounting and auditing
- Restrictions on certain activities, such as borrowing or making certain payments
- Authorisations or permissions required for certain payments, e.g. over a specified
amount.
It should be noted that in terms of section 228 of the Constitution, provincial taxes or levies
may only be imposed in terms of national legislation, i.e. the Provincial Tax Regulation
Process Act 53 of 2001. This Act provides for a process that must be followed before such
taxes or levies may be imposed, including approval by the Minister of Finance. If the
proposed access and other charges can be seen as user charges, this process will not
apply. This applies to the tolls raised on national roads in terms of the SANRAL Act, 1998
which are seen as user charges.
The funds will also have to operate within the framework of the Public Finance Management
Act 1 of 1999 (PFMA), which, for example, has limitations and restrictions on borrowing by
provinces. Regard should also be had to the Borrowing Powers of Provincial Government
Act 48 of 1996.
Provincial Issues:
Legislation in each province will have to be examined to see if it would affect the creation or
the management of the fund. If amendments are required, they will have to be effected by
the relevant provincial legislature. National legislation can override provincial legislation if it
falls within the categories listed in section 146(2) of the Constitution, for example if it is
necessary for the promotion of economic activities across provincial boundaries.
Transport Economic Regulator (TER)

There are a number of modes in transport where government or its agencies are involved in
both infrastructure provision and operations and where lack of competition is present in the
mode. This is for example present in the following modes: rail freight, commuter rail,
passenger rail, pipelines, harbour services, airports services, etc.
Economic regulation in the transport field consists of generic issues which apply across
different modes as well as modal specific issues which require special attention. The terms
of reference require the Consultant “to recommend the most cost effective, homogenous
and dynamic institution structure”. In support of this requirement it is therefore proposed
that a multimodal Transport Economic Regulator be created with divisions responsible for
the different modes.
The regulator would have the following roles, functions and responsibilities:
• Economic regulation of transport systems/modes for both freight and passenger

sectors.
• Promote equity of access to operators.
29
• Hear appeals and complaints against decisions or activities of government’s

infrastructure management entities.
• Approve tariffs of government infrastructure management.
• Approve regulatory fees of mode safety regulators (i.e. Railway Safety Regulator,
Civil Aviation Authority, etc.) to ensure that fees are fair and a true reflection of the
cost of rendering the service.
• Promote “regulated competition” in the mode.
• Promote competition between infrastructure facilities like ports and airports.
• Compare regulated costs/fares with international benchmarks to ensure that South
Africa can compete on the international market.
• Aim to reduce logistics costs of doing business in South Africa by promoting
efficiencies etc.
• Allow for cross-border regulation in order to serve the interests of the South African
Development Community (SADC) and the African Union (AU).
• Evaluate the need for subsidies and ensure that subsidies are applied where
appropriate.
• PPPs and concession agreements.
• Managed access or open access to the respective infrastructure.
• Regulate access and management of non-core lines (branch lines).
• The Multimodal Economic Regulator would be more cost effective as overheads and
management can be shared by the different modes and duplication of resources
between specialised regulators per mode can be reduced.
• Allow for homogenous generic principles to apply across modes.
• Allow flexibility in structure as resources can be applied across modes and limiting
the need for specific experts for rail, pipelines, harbour services, airports services,
etc.
• Regulate services i.t.o maximum price, minimum quality and possibly also safety.
• Regulate use of infrastructure and facilities i.t.o fair access, cost recovery, efficient
access pricing.
• Control monopolistic behaviour.
• Ensure that any restructuring is strategically acceptable and aligned with government
goals and objectives.
• Consider extent and size of operations of modes.
• Focus each mode where most economic and efficient.
• Introduce and promote competition in the mode.
• Promote affordability and financial sustainability of operations.
• Create a balance between service quality and cost.
• Ensure public and consumer protection.
• Facilitate an environment that would attract private sector investment.
• Monitor and analyze performance of mode.
• Promote transformation.
• Promote improvements in service performance.
• Protect interests of users.
• Promote the role of the mode.
• Promote integration of systems.
Legal Issues:
30
In order to set out its powers, functions and duties clearly and to provide for the necessary
powers and funding arrangements, the TER should be set up by statute, i.e. by a national
act of Parliament. In terms of section 48 of the PFMA it would be classified as a national
public entity, as with the TICH.
The entity will have to be listed in Schedule 3 Part A of the PFMA. Prior to its establishment,
a business case should be compiled and submitted to the National Treasury for approval to
motivate the establishment of the Regulator. The business case should deal with the
following issues, among others, which will be incorporated into the Bill establishing the TER:
a) A motivation of the need for the Regulator, its proposed purpose and functions and
why the functions cannot be undertaken by the DoT in terms of its constitutional
mandate.
b) Other possible institutional options – such as a more informal national
intergovernmental forum established in terms of section 9 of the Intergovernmental
Relations Framework Act 13 of 2005.
c) The corporate structure and an explanation of how it will comply with the National
Guidelines for Public Entities and the King II/King III recommendations.
d) The governance structure, i.e. the board or other structure that will govern the TER
and its proposed composition and proposed committees of the Board.
e) Accountability – to the Minister and to Parliament, and requirements for strategic
plans, business plans, performance agreements, auditing and reporting.
f) Chief Executive Officer (CEO) and staffing, i.e. the organisational and human
resource implications.
g) Funding of the entity and financial controls.
Once Treasury and other necessary approvals have been obtained, a draft Bill must be
prepared to establish the Regulator. This Bill will contain the following clauses as a
minimum:
a) Definitions
b) A clause establishing the TER as a public entity
c) The objects of the entity
d) Its functions and objectives, i.e. more specific measures to attain its objectives
e) Powers of the entity, i.e. powers necessary to achieve its objectives and issues such
as whether it may own immovable property. These will include the powers listed
above to approve tariffs and regulatory fees, to hear appeals and complaints,
evaluate the need for subsidies and approve subsidy allocations, etc.
f) Service level agreement (if it is decided to have one)
g) Power of the Minister to give directives to the entity
h) Structure of the board, appointing members, term of office, disqualifications,
termination of membership etc.
i) Meetings of board and board committees. In terms of the PFMA certain committees
are compulsory, such as an audit committee
j) Board charter (if applicable)
k) Appointment of CEO, conditions of office, delegations etc.
l) Appointment of personnel
m) Assets of the entity (if applicable). It may need to own offices and equipment etc.
n) Finances – i.e. how will the entity be financed, e.g. by grants from Parliament. Assets
may be transferred from the DoT
31
o) Bank account, auditing and financial management

p) Strategic plan, monthly, quarterly or annual reports
q) Liquidation or termination of the entity
r) Other provisions, such as exemption from taxes.
The Bill must be discussed with interested parties/stakeholders such as the National
Treasury, PRASA, SANRAL and other entities that will be affected, etc. It should also be
published for comment in the Government Gazette. The Bill once finalised must be
submitted to Cabinet for approval and to the State Law Advisers for certification. It is then
introduced to Parliament. It will probably be designated as a “section 76” [of the Constitution]
Bill as affecting the provinces. It should be noted that if it is proposed to raise taxes or levies
to fund the entity, these provisions must be contained in a separate Bill, called a “money bill”
which is introduced by the Minister of Finance under section 77 of the Constitution.
The Bill and the proposed entity will have to comply with Part 9 of the Treasury Regulations
on listing of the entity, responsibilities of the accounting officer, internal control and corporate
management, auditing etc.
Provincial Issues:
Certain provincial legislative amendments may have to be effected as a result of the
introduction of such an institution. Provincial legislation will have to be amended to reflect the
additional roles and responsibilities granted to the TER.
2.2.1.2 Roads
Road Weight Distance Charging Entity
The proposed institution would be responsible for charging weight distance related charges
for the use of the roads infrastructure (on all levels) in a way that allows for the maintenance
and future expansion of the network.
The following mandate is proposed:
“Within 5 years to develop a revenue collection design, funded through user pay
methods, acceptable and visible to the public, that ensures a flow of revenue
sufficient to annually maintain, preserve and improve highway and road system”
Internationally, traffic congestion is costing countries a lot. On the other hand high
international fuel prices increase pressure on fuel levies as an acceptable source for
infrastructure spending. It is therefore time to move towards “Variable User Charging” (VUC)
to capture externalities like congestion, air pollution, greenhouse gas emissions and safety.
The collection system should have inter alia the following characteristics:
• Vehicles in future to be charged by their weight and the distance they travel and not
solely by the fuel they use. This takes care of economic efficiency, fairness, etc.
• Charges should be closely related to the use made of the roads.
• It should be possible to vary prices for different roads (or areas), at different times of
day, week or year and for different classes of vehicle.
32
• Prices should be stable and readily determinable by road users before they embark
on a journey.
• Incidence of the system upon individual road users should be accepted as fair.
Method should be simple for the users to understand.
• Equipment should possess a high degree of reliability.
• Should be reasonably free from evasion and fraud.
• Should be able to be applied across the country and for an ever growing vehicle
population.
• Should also allow for alternative energy sources.
• Zero charging on some roads while existing contracts on the toll gate system are
managed out of the system.
• In Oregon (USA) charging is proposed at the fuel pumps based on GPS distances of
roads used and charges.
• Use existing GPS technologies and networks for movement tracking. Include
collection station (propose fuel station) onto the network to measure and charge.
• Prepaid should be possible.
The following traveller responses can be expected, depending on the structuring of the
system and charges:
• change in departure time,
• changes in routes,
• changes in modes,
• reduce number of trips,
• work from home,
• change destination,
• move to another location to reduce travel implications,
• find another job, etc.
The institution should inter alia have the following roles, functions and responsibilities:
• Develop a cost effective system for the collection of “weight distance charges”.
• Use existing technologies and infrastructure as far as possible.
• Apply variable pricing on infrastructure and allow for zero charging on parts of the
road network.
Legal Issues:
A precedent for the Road Weight Distance Charging Egency (RWDCE) is to be found in the
Namibian Road Fund Administration (NRFA), which was created by Namibian Act 18 of
1999. The objects of the NRFA are to “manage the road user charging system in such a
manner as to secure and allocate sufficient funding for the payment of expenditure” on the
national road system, and on related matters such as funding the traffic information system,
road traffic law enforcement etc. The NRFA has wide powers to determine road user
charges, which include weight distance charges, entry fees on foreign vehicles, motor
vehicle licence fees and fuel levies. The NRFA and Transfund New Zealand can be used as
useful precedents in drafting the necessary legislation and establishing the RWDCE.
33
It may not be necessary to establish a new agency: SANRAL is currently allocated the
function of planning and funding national roads, and for recommending tolls to the Minister in
terms of the South African National Roads Agency Limited and National Roads Act 7 of 1998
(SANRAL Act). This Act could be amended to give SANRAL the power to raise weight
distance charges. One limitation is that SANRAL is only responsible for national roads, while
the RWDCE could be given powers to raise money for provincial roads as well, although it
should be noted that “provincial roads” is an exclusive provincial function in terms of
Schedule 5 of the Constitution.
If the decision is taken to establish the RWDCE, and it is to be established as a national

public entity, the provisions of the PFMA and other legislation mentioned above apply
(business case, Treasury approval, issues to be included in the establishing legislation etc.).
The RWDCE will need powers to raise taxes and levies. These provisions must be contained
in a separate Bill, called a “money bill” which must be introduced to Parliament by the
Minister of Finance under section 77 of the Constitution. However, this will not apply if the
charges are seen as user charges. This is why the provisions of section 77 were not applied
to the SANRAL Act in 1998: tolls are seen as user charges, and not as a tax or levy.
Treasury will have to be asked to take a decision on this issue. If the charges are seen as a
tax or levy, there will have to be two pieces of legislation: one establishing the RWDCE and
providing for its governance, powers, duties, staffing etc. and another providing powers for it
to raise levies or impose weight distance charges. It is obvious that prior approval from the
National Treasury will be necessary for this legislation.
If the RWDCE is to become responsible for tolling of national roads, the SANRAL Act will
have to be amended accordingly. Currently SANRAL is allocated the function of
recommending tolls to the Minister and for the funding of national roads. The SANRAL Act
will have to be amended substantially if this function is to be transferred to the RWDCE.
Provincial Issues:
As stated above, the RWDCE could be given powers to raise money for provincial roads as
well, although it should be noted that “provincial roads” is an exclusive provincial function in
terms of Schedule 5 of the Constitution. A national agency raising money for provincial roads
and transferring the money to provinces should not be a problem. However, provinces have
the power to plan provincial roads. National funds could be given as a conditional grant,
where conditions are imposed on the receiving province. A precedent for this is the Public
Transport Operations Grant (PTOG) which was introduced on 1 April 2009 by the Division of
Revenue Act 12 of 2009, as a conditional grant to provinces.
2.2.1.3 Rail
Rail Infrastructure Agency (RIA)
From analysis it is clear that the rail transport environment is not accessible to private rail
transport operators. In order for the rail mode to play its optimum role to provide for the
needs of the South African economy up to 2050 it would need to become more responsive to
market forces. It is therefore inevitable that rail infrastructure and rail operations would have
to be separated before 2050. In order to prepare for such an ultimate process an
appropriate agency should be created to which rail infrastructure assets can be transferred.
34
The roles and responsibilities of such an agency should inter alia consist of the following:
• It should ultimately manage all government rail infrastructure in one entity.

• Manage the national rail networks to meet the economic, social and developmental
needs of the country.
• Allow for fair access to all rail operators that want to render services to freight and
passenger clients.
• Would be regulated by the proposed Transport Economic Regulator (Rail Division) to
ensure access and charges are fair.
• Manage the roll-out of the future “standard gauge” rail network for the country.
• Manage the branchlines to the advantage of the country by ensuring that it is
accessible to all rail operators.
• Maintain the integrity of the rail network in the interest of the country.
Legal Issues:
National Legislation will have to be drafted to provide for the establishment of a rail
infrastructure agency as contemplated above the Act will have to provide for, amongst other
things, the following:
• Establishment of the agency and providing for its membership
• The functions, powers and duties of the agency
• “Housekeeping matters” such as holding of meeting, procedures coreames etc and
provisions on funding
If the recommendation that there should be a “vertical” separation between the management
of Rail Infrastructure and Rail Operations is accepted then the legislation governing Transnet
and PRASA will have to be amended to make provision for the new dispensation
Provincial Issues:
Provincial legislation will have to be scrutinised and amended (if required to provide for the
transfer of assets to the newly established RIA and other relating matters).
2.2.1.4 Aviation
No new institutions are proposed.
2.2.1.5 Maritime
No new institutions are proposed.
2.2.2 Proposed Changes to Existing Institutions

Proposed changes to existing institutions are discussed below in terms of the different
modes.
35
2.2.2.1 Multimodal
DEPARTMENT OF TRANSPORT
In order to allow for a competitive transport environment it is necessary to re-organise the
structure of the DOT. The proposed restructuring should promote regulated competition in
those areas/modes where market forces are failing.
The changes that would be required include:
• Create or reorganise Freight Regulation Division to cover road, rail, ports, pipelines
and air transport
• Reorganise safety regulation for Road, rail, ports, pipeline, air and provide
multimodal/homogenous guidance to regulators.
• Create a Transport Economic Regulator with divisions for road, rail, ports, pipeline,
air as discussed elsewhere.
• Organise State Asset Agencies i.e. Roads Agency, Rail Infrastructure Agency, Ports
authorities, Pipeline Agency , Airports Agency under an Asset Management Division
in the DOT.
The restructuring should be achieved by retraining and deployment of existing staff.
Consultants will be needed to assist with the integration of existing entities and agencies into
a cohesive system as well as the development of the management and monitoring systems
required to create registers and define procedures.
Legal Issues:
The Minister has the discretion to restructure the Department as he sees fit. If so desired,
legislation could be drafted to provide that specialist divisions must be created within the
Department with officials having specified qualifications, knowledge, training or experience.
Provincial Issues:
The provinces should be consulted before restructuring the Department, both to obtain their
input as to co-ordination and liaison, and as input to the restructuring of their provincial
transport departments.
2.2.2.2 Roads
SANRAL
SANRAL is a very effective instrument in the delivery of road infrastructure. There are
opportunities to extend the impact of this agency by extending its responsibilities.
The following changes are required in this institution:
• Include freight and passenger operator representation onto the board.
36
• Expand the road network so that SANRAL is responsible for roads of national
importance on the primary and secondary networks and continuously add to those
networks.
Legal Issues:
With regard to the first institutional issue it must be noted that SANRAL is governed and
controlled by a Board of Directors consisting of the following members:
the Chairperson;
a person representing the Department of Transport;
a senior officer of the Department of Finance;
the Chief Executive Officer, of SANRAL; and
four other persons having special qualifications, skills, expertise or experience in
matters concerning national roads, corporate governance, financial management,
business or operations of the Agency.
If the proposed institutional issues are implemented, then Section 12 of Act no. 7 of 1998
(The SANRAL Act) must be amended to include freight and passenger operators to be
represented on the board.
With regard to the second institutional issue, SANRAL has the ability to declare provincial
and/or municipal roads as national roads and as toll roads, if the need arises and therefore it
already has the legislative power to enlarge their portfolio. No amendments for this act will
thus be required.
The TICH will have an influence in terms of the act creating it which will regulate the
SANRAL Act, for it is proposed that TICH should serve as a clearing house for
transport infrastructure projects that require investment. Projects would be
evaluated in terms of appropriateness of the mode, integration with other modes
and land-use in order to ensure best solutions in the national interest.
One of the many main functions of SANRAL as an agency is to appoint any private
person, institution or body, in terms of a contract concluded for that purpose, in
order to perform any work on behalf of the Agency with regard to the planning or
design of a national road or proposed national road or the construction,
operation, management, control, maintenance or rehabilitation of a national road,
or in order to perform any work in the execution of a project or in connection
therewith, and to monitor the execution and the work performance. It may also
charge a levy or fee for services done by SANRAL.
If the proposed TICH is established, it will have an enormous impact on the managing and
regulation of the appointment of contractors and entities to fulfil certain work for or on behalf
of SANRAL.
Provincial Issues:
No legislative amendments at the provincial sphere are foreseen at this stage.
37
Provincial Departments of Roads (or Agencies)

Concerns have been raised in terms of the service delivery of some provincial roads
departments and the disparity in cost structures.
The following is recommended for the Provincial Departments of Roads (or Agencies):
• Maintain equitable share contributions to provinces to ensure that “social” and “rural”
roads are maintained in the interest of the country.
• Commission a national study to evaluate or audit the cost, effectiveness and
efficiency of the provincial departments.
• After completion of the evaluation or audit study, to commission the development of
standards that would allow for more effective and efficient operations on the
provincial level, if applied.
Legal Issues:
With regard to the first institutional issue, no amendments have to be made to legislation at
this point in time, because if the institutional proposal is accepted, a national study must first
be completed and standards have to be developed.
According to the Appropriation Act, 2009, budgets are divided as set out underneath. In the
light of section 33 of The Appropriation Act 2009 the purpose of transportation budgets is to
lead the provision of an integrated, sustainable, reliable and safe transport system, through
safety and economic regulation, planning, development and coordination.
After the proposed study has been completed it will become clear if any institutional changes
to any Provincial Department need to be effected or not. The recommendations of the study
could also result in certain legislative amendments.
It is however very important to remember that section 26 of the PFMA provides for annual
appropriations in a way that Parliament and each provincial legislature appropriate money
for each financial year for the requirements of the state and the province, respectively.
According to the Constitution there is a National Revenue Fund into which all money
received by the national government must be paid, except money reasonably excluded by
an Act of Parliament.
Money may furthermore only be withdrawn from the National Revenue Fund in terms of an
appropriation by an act of Parliament, or as a direct charge against the National Revenue
Fund, when it is provided for in the Constitution or an act of Parliament.
A province's equitable share of revenue raised nationally is a direct charge against the
National Revenue Fund.
The Constitution furthermore provides that there is a Provincial Revenue Fund for each
province into which all money received by the provincial government, except money
reasonably excluded by an Act of Parliament, must be paid.
38
Money may be withdrawn from a Provincial Revenue Fund only in terms of an appropriation
by a provincial Act, or as a direct charge against the Provincial Revenue Fund, when it is
provided for in the Constitution or a provincial act.
The abovementioned Constitutional stipulations must be borne in mind before any provincial
act regulating appropriations is amended.
Provincial Issues:
Depending on the exact content of the Act establishing the TICH, it is possible that certain
provincial acts will need to be amended to be in line with the TICH Act.
2.2.2.3 Rail
There are two major government owned rail entities in South Africa. They are:
• Transnet: responsible for the national rail freight network consisting of a rail network,
freight loading and distribution facilities and other support structures.
• PRASA: responsible for the primary commuter rail networks in the major metropolitan
areas of South Africa, consisting of commuter station infrastructure and commuter
lines.
There is also some sharing of rail networks in some areas, with freight trains running on
metropolitan commuter networks and commuter and long-distance passenger trains running
on freight lines.
Transnet (Pty) Ltd

Concerns have been raised about the lack of competition in the freight rail industry, as
Transnet is the only service provider at this stage.
The following changes are proposed to address some of the concerns:
• Ringfencing of costs and activities w.r.t. Infrastructure and operations.

• Ringfencing the branch lines into a separate infrastructure business unit in order to
allow for government to manage it as a social asset similarly to the rural roads.
• Introduce a national transportation (social) composite agreement between Transnet
and the Department of Transport.
• Allow for greater DoT representation on the Transnet Board.
• Promote third party operations on Transnet network by using the Transport Economic
Regulator to guide charging and accessibility issues.
• Allow for open access to rolling stock where operators can lease/buy rolling stock for
use on an open access network.
• Allow Transnet to develop logistics support systems to allow it to compete with the
flexibility of road modes which can do door-to-door services.
Legal Issues:
Transnet Limited was established by the Legal Succession to the South African Transport
Services Act 9 of 1989 (Legal Succession Act) as a company of which the state is the only
39
shareholder. It has the following divisions: rail freight, pipelines, national ports (soon to be a
separate entity) and SA Airways (soon to be a separate statutory body – a company called
SA Express has been created by Act 34 of 2007).
The long-distance passenger rail service (Sosholoza-Meyl) has been incorporated into
PRASA. Transnet is a government institution, but is an operating company focused on
making profits and reducing losses. It has no statutory obligation to protect the public
interest, although this is certainly implied. The Act states that the commercial enterprise of
the former SA Transport Services was transferred to Transnet.
Transnet is an operating or business agency and is listed in Schedule 2 of the PFMA as a

major public entity. It is thus a government institution, but is an operating company focused
on making profits or reducing losses. It is obliged to provide services at the request of the
PRASA, a state department or a municipality designated by the Minister as a transport
authority.
Transnet must plan for the infrastructure and activities under its control.
Transnet is a statutory company, incorporated under the Companies Act, 1973 and currently
with the State as only shareholder. It may establish subsidiary companies and participate in
the ownership of other companies.
Transnet accounts to the Minister of Public Enterprises.
The provision in the Legal Succession Act that required Transnet to provide services in the
public interest to the SARCC or a transport authority (section 15) has been repealed. This
indicates that Transnet is now more autonomous and accounts only to the Minister of Public
Enterprises.
Transnet is supposed to operate on a commercial basis and show a profit. Profits accrue to
the State as shareholder and, as stated above, the Minister of Finance may distribute some
or all of this profit to PRASA. Transnet may issue financial instruments, including stock,
securities, bills, promissory notes, debentures, debenture stock, bonds, annuities and
negotiable certificates of deposit (s. 19). This may be done only as long as the State holds
all of the shares in Transnet. The Minister must consent and obtain the concurrence of the
Minister of Finance. Transnet may also raise loans. Its financial activities are subject to the
controls and restrictions in the PFMA.
Although Transnet is a state-owned company, its main focus is on generating profit. It has
thus been reported that some dedicated passenger lines which are important national assets
have been neglected pending their transfer to PRASA.
Because TRANSNET is a Public Company operating in terms of the Companies Act, no

legislation will have to be amended if the proposed institutional issues are implemented.
However, the TER Act will have to contain certain provisions to facilitate the implementation
of some of the institutional issues above.
Provincial Issues:
40
Passenger Rail Agency of South Africa (PRASA)

A number of concerns have been raised due to the lack of competition and the high subsidy
dependency of the passenger rail mode.
The following changes are proposed to address some of the issues:
• Ringfencing of costs and activities w.r.t. infrastructure and operations.

• Ensure metros are effectively represented on board.
• Performance agreements between metropolitan entities and PRASA for the delivery
of passenger services to ensure accountability.
• Promote third party operations on PRASA network by using Transport Economic
Regulator to guide charging and accessibility issues.
• Work towards rail fares covering operational costs and limiting subsidisation to the
provision of infrastructure.
Legal Issues:
PRASA is a statutory corporation with separate legal personality. Its affairs are managed by
a Board of not more than 11 members appointed by the Minister. The Act stipulates the
following about Membership of the Board:
• At least one member must be an officer in the DoT.

• At least one member must be an officer in the Department of Finance (now the
National Treasury - NT).
• At least one member must be an officer in the Department of State Expenditure. This
Department has been incorporated into the NT, so presumably there are now two
members from the NT.
• At least one member must be nominated by the SA Local Government Association
(SALGA).
• At least three of the members must have expertise and experience in the
management of a private sector enterprise.
Thus, if the proposed institutional issues are implemented, amendments should be made to
the composition of the Board to include metros to be effectively represented on the Board.
PRASA controls a large section of rail infrastructure, and must plan for the establishment
and maintenance of rail passenger infrastructure, as well as for its rail services.
The Passenger Rail Agency of South Africa, PRASA, merges the operations, personnel and
assets of the former South African Rail Commuter Corporation, Metrorail, Intersite Property
Management Services, Shosholoza Meyl and the long distance bus company, Autopax.
If any of the proposed institutions, especially the proposed TER, is established it is quite
possible that legislation will have to be amended in order to correlate with the powers and
functions of the TER.
41
Price determination in commuter transport falls within the domain of PRASA in consultation
with the DoT.
The arrival of the planned TER on the rail transport scene will provide the rail industry with
an added feature. However such expected arrival is not within the framework of current
legislation and therefore legislation must be either drafted or it needs to be amended.
Currently there is no authorisation in the Act providing for third parties to use PRASA’s lines.
This however can be agreed between the parties by an agreement.
If the proposed institutional issues are implemented, the Act may have to be amended to
regulate the utilisation of passenger rail infrastructure. However it is also possible that no
amendments to the Act are required if it is decided not to regulate this issue by legislation.
Provincial Issues:
Rail transport is a national competency and therefore there is no provincial legislation
regulating this matter. The only exception is the Gautrain Management Agency, created by
the Gauteng Gautrain Management Agency Act 5 of 2006 of the same name. This Agency
was created in terms of the provincial function of public transport listed in Schedule 4 of the
Constitution.
Department of Transport - Rail

A need has been identified for policy guidance and performance management of the rail
transport mode by the Department of Transport.
The following is proposed:
• Integrated Master Plan for Rail Infrastructure taking into account the standard gauge
objectives.
• Performance contract with Transnet on social needs of rail freight system inclusive of
the branch lines.
• Government to introduce incentives to draw freight back to rail. This can be done
through careful regulation of rail pricing and through introducing real costs to the road
freight users that levels the playing fields to some extent.
• Ensure that the Rail Economic Regulator’s functions are performed by the Transport
Economic Regulator and that the industry is managed on a free access basis.
• Manage the funding of a future standard gauge network for the country.
• Investigate the possible introduction of a standard gauge freight corridor between
Gauteng and the harbours on the east coast (Durban, Richards Bay or Maputo) to be
funded through a BoT arrangement in order to fast track the introduction of new
technologies to the country, to create competition for the current rail operators and to
provide alternatives to the South African economy.
• To create a clearing house for fares between passenger operators that would make it
possible for commuter rail operators to run in direct competition with one another.
42
• Investigate regional standard gauge networks that can integrate with the needs of the
AU (Transnet with its current profit motive is not expected to advance this issue).
• Reduce the fare gap between passenger road and rail modes in order to promote
competition of modes. Move towards subsidising the passenger rather than the
mode.
Legal Issues
In terms of the National Railway Safety Regulator Act, the functions of the Regulator,
amongst other, include the following:
provide, on such conditions as the Regulator deems fit, financial or other assistance
in connection with the training of persons in so far as is necessary to ensure that a
sufficient number of trained persons is available to enable the Regulator to perform
its functions;
conclude contracts, enter into agreements or perform any act, whether in the
Republic or elsewhere, whereby its objects are furthered or which is calculated,
directly or indirectly, to enhance the value of the services which the Regulator
renders towards the achievement of its objects or perform any other act which may
be prescribed;
adopt standards submitted by an operator or industry association following
compliance with a procedure prescribed by the Minister;
require an operator or a railway industry association to consult with organised labour
during the development of standards and provide them with an opportunity to
comment on those standards prior to submission to the Regulator for approval;
formally recognise an association representing operators, including other railway
industry enterprises, to act on its behalf in respect of the development of standards.
If the proposal relating to the substitution of the Rail National Safety Regulator by the TER is
accepted, the National Railway Safety Regulator Act will have to be repealed and provision
will have to be made in the TER Act for the execution of the first mentioned bodies by the
TER.
The implementation of a Clearing House would also have an enormous impact on the acts
and regulations that regulate PRASA and TRANSNET.
Provincial Issues:
No legislative amendments in the provincial sphere are foreseen at this stage.
2.2.2.4 Aviation
The Airports Company of South Africa (ACSA)
The performance of ACSA is generally acceptable and hence it is proposed to expand its
influence by increasing the size of its portfolio.
The following changes are proposed:
43
• To expand the network of airports managed by ACSA, by transferring airports from

other organs of state in order to benefit from the experience and success of ACSA.
• Allow for competition between airports.
Legal Issues:
If the TICH and the TER are established, it will have an impact on the Airports Company of
South Africa as well as the ATNS Company because fees and tariffs will be regulated by the
TER whereas the development of aviation infrastructure will be affected by the provisions of
the proposed TICH Act. The existing legislation will therefore have to be amended to bring it
in line with the new institutional dispensation.
Provincial Issues:
Department of Transport - Aviation

The Department of Transport is to improve the guidance and national policy with respect to
aviation.
The following changes are proposed:
• Ensure the strategic management of airports infrastructure.

• Initiate a National Airports Development Master Plan.
• Develop national criteria for the classification of airports.
• Coordination structures with international agencies as well as local departments with
an interest in aviation.
Legal Issues:
No legislative issues in the national sphere are foreseen at this stage.
Provincial Issues:
2.2.2.5 Maritime
SA Maritime Safety Authority (SAMSA)
A formal review of SAMSA’ role is proposed in order to expand its role to do away with
overlaps with other institutions and to ensure that the whole spectrum of marine safety
issues is addressed.
Legal Issues:
44
With reference to the proposal that functions must be rationalised it would be necessary to
review all legislation regulating to shipping and marine related issues to identify legislative
amendments that will have to be effected.
Provincial Issues:
National Ports Authority

Concerns have been raised about the lack of competition between ports.
The following changes are recommended to promote a level of competition:
• Competition to be allowed between different ports.

• Individual ports to be structured into separate business entities which compete for the
same business.
• Allow for specialisation and niche markets between ports.
• Follow landlord model.
Legal Issues:
Some of the functions of the NPA Board are to manage finances as well as the managing of
legal and economic matters.
The National Ports Act establishes the Port Regulator to exercise the economic regulation of
ports, promote equity of access to ports and monitor the activities of the NPA.
The NPA must determine tariffs for its services and facilities, which must be approved by the
Ports Regulator. These may vary between ports. The NPA may charge fees for the
provision of port and other services in accordance with the tariff.
If the proposed institutional recommendations are accepted, then this Act will have to be
amended.
Provincial Issues:
Ports Regulator
Merge the Ports Regulator into the proposed Transport Economic Regulator.
The generic nature of regulation can benefit from a homogenous and dynamic institution and
in this regard it is proposed that:
45
• The regulation of ports be done as part of the proposed Transport Economic

Regulator by a division/department that focuses on the specific port related issues.
• This would limit overhead costs and allow for alignment in approach to regulation of
different transport modes.
Legal Issues:
The main functions of the Regulator are, amongst others, the following:
• exercise economic regulation of the ports system in line with government's strategic
objectives;
• promote equity of access to ports and to facilities and services provided in ports;
• monitor the activities of the Authority to ensure that it performs its functions in
accordance with this Act;
• consider proposed tariffs of the Authority;
• promote regulated competition;
• regulate the provision of adequate, affordable and efficient port services and facilities;
• filing fees for the lodging of complaints or appeals with the Regulator.
The Regulator may enter into an agreement with any other statutory body in order to co-
ordinate and harmonise the performance of functions similar or related to those of the
Regulator.
Whenever necessary or required by the Minister, the Regulator must report to the Minister
on any matter relating to the application or purposes of this Act.
If the proposed institutional recommendations are implemented, then the Act must be
amended or the abovementioned functions in the Act must be repealed and must be taken-
up in the proposed TER Act.
Provincial Issues:
Department of Transport - Maritime

Clarify the roles and responsibilities of the Department of Transport w.r.t. maritime issues.
In order to clarify the maritime roles and responsibilities of the Department of Transport the
following is required:
• Create a functional area responsible for the promotion of inter-coastal shipping.

• Create coordination structures between DOT, Provinces and Metropolitan
Municipalities; as well as with DEAT, SA Navy and other local and international
institutions to effectively manage activities in this mode in the interest of the country
and stakeholders.
46
Legal Issues:
To implement proposed institutional recommendations, no legislative amendments are
foreseen.
Provincial Issues:
47
2.3 CONCLUSIONS AND RECOMMENDATIONS

The abovementioned recommendations should be discussed and workshopped with a view
to drafting the necessary legislation in the form of bills, and seeing it through the process of
consultation and approval by Parliament. In the case of provinces, they should investigate
their provincial legislation to determine the impact of the proposals on their existing
legislation and then amend it if necessary. Where non-statutory structures, such as co-
ordination committees, are proposed, the necessary steps should be taken to establish
them.
48
3. LIST OF REFERENCES
Adler, Hans A. Economic Appraisal of Transport Projects: A Manual with Case

Studies, 1971;
Belli Pedro, Anderson Jock, Barnum Howard, Dixon John and Tan Jee-Peng:
Handbook on Economic Analysis of Investment Operations, 1998;
Bladikas Athanassios K. and Pignataro Louis J.: Efficiency and Equity Issues in
Special Fees for Financing Transportation Infrastructure, Transportation Research,
Vol. 24A, No.4, 1990;
Chia-pei, Chou, Yi-hsien Chen and I-Chang Chen: Integrating weigh-in motion and
electronic toll collection for commercial vehicle operation in Taiwan, Journal of the
Institute of Engineers, Singapore, Vol 44, Issue 2, 2004;
Department of Transport, Moving South Africa, 1998;
Farrell, S Financing European Transportation Infrastructure – Policies and Practice in
Western Europe, 1999;
Financial Mail – September 11 2009: Time to measure up;
Forkenbrock, David J. and Norman S.J. Foster: Economic benefits of a corridor
highway investment, 1990;
Heggie Ian G, and Vickers Piers: Commercial Management and Financing of Roads,
World Bank Technical Paper No. 409, 1998;
Hensher David A: Road Pricing and Road Funding, Presentation to the Transport
Forum SIG, Johannesburg, 15th September 2009;
Hoel Lester A.: Financing Transportation Infrastructure, Transportation Research,
Vol. 24A, No.4, 1990;
Jorgensen Allen A: Transport cost Externalities, a discussion paper of the RailRoad
Association of South Africa, 2009;
Kuhl Jon G. Professor: National evaluation of a Mileage-based Road User Charge,
May 2009;
NATMAP 2050: Phase 2 provincial reports;
Olson Mancur Jr: The Principle of “Fiscal Equivalence” – The Division of
Responsibilities among Different Levels of Government, The American Economic
Review – Vol. 59, No.2, Papers and Proceedings of the Eighty-first Annual Meeting
of the American Economic Association, pp 479-487, May 1969;
Pisarski, Alan E. Associates (AEP): A survey of New Technologies to Support Truck
Taxation Data Requirements, 1984;
49
Roads Infrastructure Strategic Framework for South Africa – A discussion Document,

Department of Transport, 2002;
The Presidency – Republic of South Africa: Improving Government Performance –
Our Approach, September 2009;
The Presidency – Republic of South Africa: National Strategic Planning – a green
paper, September 2009;
The Miami Hearald: Study tests alternatives to traditional gas tax, July 2009;
Thompson Louis S.: The Benefits of Separating Rail Infrastructure from Operations,
World Bank Viewpoint Note No. 135, 1997;
TRB Special Report 285: The Fuel Tax and Alternatives for Transportation Funding,
2006;
Varma, Amiy and Kumares C. Sinha: On user charges for highway financing, 1990;
Walton Michael C. and Euritt Mark A.: Highway Finance and the Private Sector –
Issues and Alternatives, Transportation Research, Vol. 24A, No.4, 1990;
Welch Greg & Foxlin Eric: Motion tracking – No silver bullet, but a respectable
arsenal, December 2002;
World Bank: Paying Taxes 2008 – The Global Picture, 2008
Comprehensive Regulatory Framework for setting up the Rail Economic Regulator –
6 August 2007 Khuthele Projects (Pty) Ltd
Draft Economic Regulator (RER) Framework – June 2008

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FUNDING INSTITUTIONAL & LEGAL FRAMEWORK

PHASE 3: FORWARD PLANNING

Document Title: NATIONAL TRANSPORT MASTER PLAN 2005 – 2050:NATIONAL

Date: September 2010

Ingérop South Africa,

SSI Engineers and Environmental Consultants

1. FUNDING FRAMEWORK ................................................................................................... 1

International experience in market economies indicates some common practices,

Government provision of transport services faces a number of constraints which

• Competition for resources from core government functions, and the

• Managerial tensions of seeking commercial viability concurrently with

• Technical efficiency losses/compromises where the activity creates

With regard to transport infrastructure, NATMAP 2050 recognises that much of it

1.1.1 NATMAP 2050 Transportation Funding Criteria

Since taxation is a fundamental source for transportation funding, applicable taxes

A tax/charge must raise sufficient revenues to support the programme it is designed

The adequacy criterion is further entangled by the multi-modal and integrated

• Cost benefit analysis – including externalities (“only externalities that result in

• Options analysis to determine cost-effectiveness;

• Sensitivity analysis and risk assessment, and lastly

• The implementing entity’s own readiness and capacity to implement the

1.1.3 Dedicated mode funding – or not

It must be noted that the South African practice of issuing “Conditional

1.2 ECONOMIC EVALUATION AND INVESTMENT FRAMEWORK

Put in perspective, the socio-economic scorecard prescribed hereunder does not

The economic evaluation methodology advocated hereunder draws from

The proposed framework is thus as follows:

1.2.1 Project Definition and Derivation of the Reference Model

1.2.1.2 The reference model

1.2.2 Harmonization of Inter-sectoral Project Hypotheses

1.2.2.1 Macro-economic scoping

1.2.3 Project Analysis

1.2.3.1 Market study, traffic forecast and project time horizon

1.2.4 Public Socio-Economic Scorecard

1.2.4.1 Principal beneficiaries

User socio-economic benefits may be commercial (defined as the transport cost

Induced traffic, i.e., as a result of the implementation of the project, and

Impact on users of alternative modes (“losers”).

b) Transport enterprises and transport infrastructure managers

1.2.4.2 Determination of principal indicators

a) Escalated collective benefits

I: initial project cost (escalated, if it is implemented over several

: sum of eluded investments. (eluded investments are

: the variation in large maintenance investments in year t not

: the project’s economic benefits in year t, excluding operational

r: the risk-free rate i.e., the escalation rate applicable to all

R: residual value of the investment at the end of the project’s lifespan

b) Benefit to the collective per Rand invested

Expressed as the ratio B/I.

c) Internal rate of return

1.2.4.3 Sensitivity analysis

Project costs – capex/opex,

Tariff evolution and competitive action, as well as

Monetized effects of pollution, noise, human life, etc.

1.2.5 Financial Feasibility, Financial Risk & Impact on Fiscal/Public

1.2.5.1 Indicators to be determined are:

: the applicable operational duration (amortization or

: the operator’s total investment costs, including financing costs

: the escalated value of the operator’s eluded investments

: variation in large maintenance investments in year t (not included in

: residual value of the investment accruing to the operator at

1.2.5.2 Determining financial feasibility

1.2.5.3 Financial risk analysis