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IOLProperty - South African Property For Sale
Monday May 17, 2010

Cape Town's IRT team rethinks plans to cut losses

The management team of Cape Town's integrated rapid transit system, MYCiTi, is drafting a revised business plan to ensure it does not run at a loss.

The business plan will go before the council next month. Project head Mike Marsden said the team had been "quite successful" in modelling different routes to ensure an "optimum service" was delivered at "the best price".

A recent due-diligence report by PriceWaterhouse-Coopers raised concern over MYCiTi's projected annual operating deficit of R118 million.

A city summary of the report, which contains its response to concerns raised, noted: "The business plan for the project will be reviewed taking into consideration whichever (of the report's) recommendations are relevant and possible to implement."

The due-diligence report came up with numerous recommendations:

  • The city's potential exposure to VAT.

  • The need for a dedicated management team.

  • Various business and financial model recommendations.

  • Issues for officials to consider when determining fare revenue and changes to tariffs.

    Marsden said that within the first phase of the project there were many permutations of routes and different ways of implementing sub-stages, all with cost implications.

    The report explained that, depending on how the fare system and control centre contracts were concluded, the annual deficit could be lowered, while larger vehicles for feeder routes could reduce trip frequency and therefore operating costs.

    "The order of the rollout is being reviewed to prioritise more lucrative routes," the city said in its response.

    It was, however, noted that if the operating deficit could not be sufficiently reduced while still maintaining an acceptable level of service, city subsidies could be needed.

    The PriceWaterhouseCoopers report also suggested other potential sources of revenue, including charging for parking at MYCiTi stations.

    "These matters are being pursued and political guidance from council, in the context of the revised business plan, regarding key issues will be requested," the city said in response.

    The city would also investigate the possibility of aligning its transport plans with those of the provincial education department, and the possibility of benefiting from pupil subsidies.

    Marsden said several avenues to ensure viability were being investigated, particularly the issue of transferring bus subsidies from existing operators to the IRT.

    As to whether the 43 buses ordered for the World Cup would be ready in time, he said he could answer "yes, with confidence, provided there are no unforeseen eventualities".

    Half the buses had already arrived, and production of the rest was ahead of schedule.

    Cape Argus

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