Financial analysis was carried out in order to assess the feasibility of the project in terms of profitability and investment efficiency, etc.
As a result of this, it is concluded that the project exceeds the profitability guidelines prescribed in South Africa and is financially feasible, assuming the preconditions adopted in the analysis.
Having said that, the project cannot be described as overwhelmingly advantageous in terms of the profitability on investment cost, and it is foreseen that it may be difficult finding investors if the project is viewed solely as a private sector profit making concern. Private sector-based preconditions were assumed in the analysis, however, as a transport project that serves the public good and has a great external impact, the project easily suffices the conditions required for participation of the public sector, and it is desirable that the Cape Town city administration, etc. take part in the project to promote its realization.
In terms of risk, it is first absolutely essential to secure borrowed funds at a low rate of interest, and it is necessary to apply favorable loan conditions that consider the public benefit to be gained from the project.
With respect to reducing risk factors, as a great effect can be gained from reducing construction costs, it is considered important to strive for the reduction of rolling stock costs, which account for a large share of the construction cost. To achieve this, it is thought that raising the ratio of domestic procurement on the manufacture side or introducing foreign technical licenses, and so on, are areas that deserve consideration.
