Soweto Monorail

The new monorail project between Soweto and Johannesburg is an innovative way of solving one of the biggest problems in Gauteng and a big constraint for faster economic growth in future. Most of the mainstream media has complained of the traffic problems in northern Johannesburg and between Pretoria and Johannesburg, but very few have highlighted the serious problems in the southern part of Johannesburg. The following excerpt from the M&G Online describes the project:

A R12-billion monorail will be built between Johannesburg and Soweto in the next two years … no one from Soweto should have to wait more than 15 minutes for transport … Work on the 44,7km monorail and its 39 stations will start in September. The monorail is intended to complement and not compete against existing forms of transport … The problem in South Africa when it comes to public transport is ... people queue for three to four hours [for transport]. … "We want to move people ... efficiently; ... safely; ... in an affordable way." It is hoped the monorail will move 1,5-million passengers a day between Soweto and Johannesburg, to ease congestion on the roads.

The monorail service will consist of 4,5m-high, rubber-wheeled, carbon-fibre carriages, 10m long and 3m wide -- able to carry 107 passengers each. These will run on concrete beams atop 6m-tall pillars situated mainly on the centre medians between road carriageways, and will dock at aerial stations accessed via escalators. The hybrid variety used in South Africa will run on a combination of electricity and solar-powered batteries.

What is unique about this project is that it is privately funded, compared to the Gautrain that is using public / government funds. Congratualations to the Gauteng Economic Development Agency (GEDA) who has identified the need, found a possible solution and worked hard behind the scenes to source a willing private investor for such a big project. Indeed, GEDA is one of the main driving forces behind the recent spate of investments in Soweto, Newtown, the Innovation Hub and other places.

What would be interesting to watch is the reaction from the taxi associations and operators. Despite what public officials are saying, it will compete directly with these taxi operators that provide the service between Joburg and Soweto. Ideally one should get the taxi operators to complement the service and one way is to ensure they also benefit from the project. Here is my suggestion to the investors:

Get the taxi associations and operators in as your BEE partners in the operations. Negotiate / decide on what % of shares should be allocated to the BEE partners (say initially 40% with the option to purchase more shares at a later stage). Only registered taxi operators should be invited to bid for the shares. Various financial tools could be used to achieve this. The taxi operators will have representatives on the board to ensure their participation in operations are guaranteed. It is also in their interest to ensure that the monorail is profitable and will be more likely to align their own operations to that of the monorail. In addition, they also offer a unique insight into the everyday commuter between Joburg and Soweto - which should benefit the project. It is also more broad-based BEE than other BEE deals that involve the usual BEE candidates. This will not negatively affect the project, as most existing taxi operators are entrepreneurs who understand the dynamics and pressure of business. The taxi operators' knowledge of and networking with existing black enterprises will also assist the project in identifying potential sources of supply.

I hope this project is a massive success to spur more private capital going into the grey area between private and public goods, as well as taking initiative to address some of the identified constraints to further economic growth and not always waiting for government to take the initiative. Another example would be private schools that is based on volume of scholars rather than high cost per pupil.