Financing IRPTN operations : considerations for cities implementing I(R)PTNs in South Africa

Abstract

The case for investment in road-based public transport in South Africa is provided in the Public Transport Strategy for South Africa (2007) and subsequent policy positions by the national Department of Transport (DOT). This gave rise to the Integrated (Rapid) Public Transport Networks (I(R)PTNs) to be implemented in then 12 (now 13) priority cities. To support this implementation, the national Department of Transport created a conditional grant to the priority municipalities, first called the Public Transport Infrastructure Fund (PTIF), then the Public Transport Infrastructure and Systems Grant (PTISG) and now the Public Transport Infrastructure Grant (PTIG) and the Public Transport Network Operations Grant (PTNOG). Planning, establishment and rollout of the I(R)PTNs in the 13 cities, over the seven years to 2014, has highlighted the real costs of these systems. There is an emerging recognition of the extent of the I(R)PTN operational costs. Initial expectations were that fare income from passengers would cover the operating costs (at least the direct operating costs) of the system. However, implementation in a number of cities to date has shown that the fare box is not sufficient to cover the direct operating costs of the I(R)PTNs, unless the fares in the new system are increased significantly above the current costs of existing public transport. Such an increase would not be economically feasible for passengers and consequently introduce unacceptable affordability issues and open the way for competition with the I(R)PTN. As a result, cities have to consider alternative avenues to finance the direct operating costs of their I(R)PTNs. Some income sources are directly related to the new transport system (including advertising on the I(R)PTNs and congestion charges), some are commercial revenue options, and some are funding options from Municipal resources (eg increases in the rates bill, equitable share, services income). This paper explores the range of income options available to cities and the potential contribution to offsetting the shortfall. Based on the evidence to date, the operational shortfalls of I(R)PTNs in South Africa are greater than anticipated and, despite the opportunities for additional funding explored here, it is likely that significant shortfalls will remain. This presents a financial risk for city treasuries with whom rests the ultimate responsibility for covering the I(R)PTN costs. A continued conversation about funding for I(R)PTNs is therefore urgently required.