Critical success factors for rail infrastructure public private partnership projects in South Africa.

Abstract

South Africa has been in pursuit of building a consensus between society, government and business on key obstacles (namely unemployment, inequality and poverty) to achieve what was required to overcome the socio-economic problems. One of the methods proposed was the increase use of Public-Private Partnerships. The research is focused on Rail infrastructure Public Private Partnerships in South Africa using Gautrain as case study, which was in a strategic position to catalyse growth through creation of opportunities. The author Farlam (2005), added that given the PPP projects strategic position, which played a leadership role in driving programs that catalyse socio-economic, they had an opportunity to transform the economy in South Africa. Whereas Burger (2006) ultimately believed that the objective of a healthy PPP project was a baseline which is constructed for a win-win solution. The business problem is the debate around critical success factors for Rail infrastructure Public Private Partnership projects as there was an increase of projects that were competing for value for money. The problem identified was the unpredictability of the project outcome given that each PPP project contracted had a common shareholder which was the government presenting the Public sector. In 2011 Burger and Hawkesworth case study research settings were based in France, Germany, Korea and the United Kingdom. The results showed that governments were increasingly using PPP’s to pursue value for money. However, value for money according to their findings is mainly the driving force behind traditional infrastructure procurement. This prescribed that any project, whether it was a PPP or a traditional procurement process, should be undertaken only if it creates value for money. The practice of creating value-for-money objective may be distorted by other factors other than value for money. This dynamic brings the consistency question towards the critical success factors that define a feasible public private partnership projects that are able to absorb most of the risks MBA Research topic: Critical success factors for Rail infrastructure Public Private Partnership Projects in South Africa Class of 2015 Page | iii Galetlolwe Semenya Moeketsi: 526631 (concept, financing, designing, construction, maintenance and operation). Given the limited experience with PPP in Rail infrastructure projects, the main problem is to identify the critical success factors for Rail infrastructure Public Private Partnership projects in South Africa. The interview process for data collection was gathered from additional government, private partner’s documents and relevant newspaper articles about the Rail infrastructure PPP in South Africa, to lead towards triangulation. The interview results reported were not presented as statistical results, but rather with accompanying explanations of those interview response results in relation to the research propositions in the literature review chapter. The Gautrain project gave the society an understanding that the operation of Gautrain would pay itself off, which it should not have done due to lessons learnt from countries like Germany and UK where government subsidised projects of this nature. The value for money for the Gautrain was indicated through the rate of return being higher than the discount rate. In other words the Gautrain benefits exceeded the costs, where the major beneficiaries were high income earners and did not provide much value for the lower income earners. The low income earners were forced to use the Metrorail instead of the Gautrain which did not alleviate the congestion on the highways and the Gautrain was built for low capacity levels. Overall the results for both research propositions show the importance and relationship between the PPP unit policies, reference to previous lessons learnt from similar PPP projects and ownership of the project. The quality of the PPP unit policy provided a clear and robust process with key characteristics that influenced the Gauteng Provincial government to make a sound PPP contracting decision. If the three policies (National Rail, PPP unit and the PFMA) were not aligned, the PPP Rail infrastructure project may have had a high probability of making an uninformed investment decision. This flaw may have led to a costly financing source and then finally uneconomical PPP procurement contract model.