Business Report, August 25th 2010
By Samantha Enslin-Payne, Roy Cokayne and Bloomberg
Quoted: Dr Martyn Davies, Chief Executive Officer – Frontier Advisory
The building of a $30 billion (R220bn) high-speed rail link between Johannesburg and Durban will enable China to export its technology and give South Africa the means to effectively link the economic hubs.
Talks have begun between the government and China Railway Group on the feasibility of the project.
China Railway chairman Li Changjin said discussions were at an early stage and no funding was in place. Li was speaking on the sidelines of the China-Africa investment forum in Beijing, to which President Jacob Zuma is leading a delegation of 13 ministers.
Martyn Davies, the chief executive of Frontier Advisory, said yesterday the high-speed railway link was "very viable", depending on how the project was structured.
Erik Larsen, a spokesman for Standard Bank, said a memorandum of understanding signed with China Railway, which was announced yesterday, did not relate to any specific project, but was a general undertaking between Standard Bank and China Railway to co-operate across a broad spectrum of opportunities.
Davies said although it was premature to talk about the details, Standard Bank was positioning itself as the preferred financier for the project.
The Industrial & Commercial Bank of China holds a 20 percent stake in Johannesburg-based Standard Bank.
Li said South Africa was hoping that Chinese state-owned banks could provide loans for the project. China Railway wants South Africa to contribute 30 percent to 40 percent of the capital, he said.
Davies said South Africa needed to look at how to integrate the economy through infrastructure development, which the Chinese had been doing through a significant roll-out of high speed trains. China was looking to take its technology global, Davies said.
The New York Times reported earlier that China intended to link its own provincial capitals with bullet trains and was also building high-speed rail routes in Turkey, Venezuela and Saudi Arabia.
Henk Langenhoven, a senior economist at the SA Federation of Civil Engineering Contractors, said the precedent was that if the Chinese financed a project, they would also build it, excluding the local construction and engineering sector.
He said the biggest benefit to the South African economy was the financing because the country "did not have big financial muscle behind the construction industry, which is a uniform problem in Africa".
Langenhoven said many technical details on the project were not known but if the principle was to move freight from road to rail it was sound.
Phillip Taaibosch, the general secretary of the SA National Taxi Council (Santaco), said the taxi industry was not opposed to the project, provided the industry was engaged.
"With the diversification programme within Santaco, we are very open to discussions to see how we can participate in programmes of this nature that will benefit taxi operators who use long haul routes."
He said "a fairly high proportion" of Santaco's members operated on the route.
Taaibosch said the reason for the taxi industry's negative response to bus rapid transit systems was that the industry was not approached in a way that allowed it to "play a pivotal role in the discussions".
Passenger volumes on trains between Johannesburg and Durban are about 270 000 people a year, meaning that a high-speed train service would also target business travellers and holidaymakers who fly. About 2.7 million people fly between Durban and Johannesburg each year.
Gidon Novick, the joint chief executive of Comair and kulula.com, its low-cost division, said a high-speed train was "very much a pie in the sky concept".
He added that the government had spent about R20bn on upgrading airports and building the new airport in Durban and it would want to recoup that investment.
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