#199 PRASA: The importance of separating transport infrastructure from operations

PARK STATION– The waiting game, security, trolley pushers and terrible seats. This is Park Station on a not so busy day, before the security guard says: “you’re not allowed to take photos here”. When will we rise to the occasion and reform the long-distance passenger market? What needs to happen before the ports are truly treated the same? How can reform take place without investment in both infrastructure and service? More questions than answers.

“A fallacy of development is that development depends on existing market conditions, when, in fact, markets can be “created” or leveraged through public investments (such as infrastructure) that help to create future asset value.”

— The South African Cities NETWORK, Value Capture report 

To start the conversation off with a view on what land-use actually is for and is capable of, should not be underrated. Some years back, Jesse Harber and I had a tense debate with Ayabonga Cawe on PowerBusiness, in which he argued that railways needed patronage to survive and my position was that they depended on how land is used. A diversified market position for a rail company is only natural in a competitive market where operators pay a specific price to use the infrastructure. Every square metre counts when it comes to transport terminals and interchanges— hence Primedia and other advertising agencies are investing heavily in such assets. The asset is not only the number of vehicles using the interchange, but instead the number of eyes which come in and out of the terminal. 

CASE STUDY: Johannesburg’s International Transport Interchange (JITI) is set to bring a new player into the long-distance and cross-boarder passenger transport market. The 50 000sqm building, with 3 300sqm of retail space (probably more including advertising) and a capacity for over 500 taxis and 20 buses. It is part of the Johannesburg Development Agency’s (JDA) efforts to reform the inner city and and create great places. Particularly in an attempt to achieve their Strategic Economic Node Programme wherein “the JDA will focus on strengthening the position of the inner city as a critical business and residential node and the primary gateway to transit networks for the city; financial services networks for the City Region; and cross-border trade networks for the African continent”. Understanding this, the JDA found justification in the project, and this is not done in isolation from a regional mandate to reform the ease of movement through the urban centre at a continental scale. JITI is part of the Park Station Precinct effort to coordinate transport-land-use developments and to enable efficient and inclusive public transport access at scale. This is reinforced by changes in how the area is designed, and accessed– but it may bring competition to the existing Park Station and surrounding short and long distance facilities if both are not consolidated. However, one of the advantages of Park Station is that it is integrated with both the Gautrain, Shosholoza Meyl and Metrorail– this may be an important selling point for incumbent operators. However, having another point of contact may enable the decongestion of the inner city especially as populations and regional travel continue to rise. I’ll look into this issue in more detail in future.

Beyond the service edge, operators need a competitive market for the use of such infrastructure: paying a higher price for the most convenient boarding areas. This is how many airports set their markets up, and this price is the difference between a first class experience and a long walk to the edges of the airport. It does become unfair once an operator owns the infrastructure and everyone else is expected to compete when preferential treatment is unavoidable. 

While the White Paper on National Rail Policy argues that rail should separate infrastructure from operations; the narrative is within the arms of Transnet Ltd. Largely because Transnet operates on the national tracks and owns much of the infrastructure. In another note around National Treasury’s economic policy position paper, this issue was highlighted in the form of an ‘access price’ for the use of rail infrastructure. One study which highlights this issue with some great detail is a paper from Chauke and Maluleke presented at the Southern African Transport Conference years back. They argue that in order to appropriately reform rail transport, separating infrastructure from operations is important. The economic principles around this issue are pivotal. 

Yet, here we are taking note of the Competition Commission’s recent press release: “THE COMPETITION COMMISSION PROSECUTES PRASA FOR ABUSE OF DOMINANCE” . This comes after the long awaited outcomes from the Land Public Passenger Transport Inquiry and is worth considering for discussion. In a recent interview with Ms Tshegofatso Mathe for the Mail & Guardian, one of the key points in her article was that Autopax is in dire financial strain and commuters are feeling the crunch we see between the stage curtains as researchers. However, PRASA’s choice to distort the market in Johannesburg’s Park Station is typical for an entity that plays both the role of operator and owner of the platform upon which everyone else operates. In the same breath, Airports Company South Africa (ACSA) could have done the same with South African Airways if they were in one basket, but that has never happened historically. Such non-occurrence is a good thing because it may have been plausible to find that in addition to its subsidised nature it is also receiving market distorting favour for the platform. 

Why was this tolerated in the long distance passenger market? Simply because the industry potentially has deeper industrial politics and competition is so rife that PRASA had to find other ways to “regulate” the market to protect AutoPax’s services (City to City and Translux). The other reason is because we need a long-distance passenger transport strategy— or at least a measure of understanding the regulatory needs in this market. This is something one of our Transport People tweeted last week @Mosadiwahophela asked why we don’t simply regulate it.

The role of the Single Transport Economic Regulator (STER) will largely be to investigate the market and explore ways to regulate it. The Competition Commission’s behaviour now is part of the precedence setting process to justify the role of the STER. One big question for me is how far this competitive behaviour goes in terms of land-use and the value that operators and users capture at public transport interchanges. So then, how do we develop competitive terminals and interchanges that diversify the incomes of the owners of the infrastructure and the respective operators? Without the operators, there would be no eyes. But without the infrastructure there would be no place to operate– unless if a new competitor enters the market.

What a time to be alive. 

Thank you for keeping an eye-out in the transport industry. Please comment, share, like if you know someone who may find this interesting. Big up to Tshegofatso Mathe from the Mail & Guardian for her piece. 

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