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Gauteng overcharged 321% for freeway upgrade - Outa

Feb 23 2016 14:50
Eugenie du Preez

Cape Town - The South African public has been overcharged to the tune of 321% for the construction of the Gauteng Freeway Improvement Project (GFIP), according to civil rights body the Organisation Undoing Tax Abuse (Outa).

A research paper on benchmarks and comparisons of the GFIP to road construction pricing around the world, published by Outa on Monday, has brought it to the conclusion that the project was "severely and significantly overcharged for the construction costs".

According to Outa, its initial research indicated that the South African Roads Agency (Sanral) put a "highly inflated" price tag of R17.9bn - or R96.7m per kilometre - to the freeway upgrade "to the detriment of society at large and specifically, the Gauteng road user".

Outa explains: "Outa’s own research and assessment has generously pitched the GFIP cost at being no higher than R7bn, which is lower than the earlier estimation of the project in 2015 at R18.8bn, now that more information has come to light. According to Outa’s new estimates, Sanral’s price tag of R17.9bn was an overpayment of R10.8bn, i e 152%."

Sanral spokesperson Vusi Mona maintained that “there is no unit cost for road construction that was an international benchmark that Sanral was aware of”.

However, "in reality there are a number of reports, benchmarks and international baselines that have been established by the World Bank and other institutions since 2000", said Outa.

The civil rights body conducted 11 case studies to benchmark and compared Sanral’s GFIP costs, which are listed in the 26-page research paper.

“The research went to lengths to ensure that we compared like with like,” said Outa chairperson Wayne Duvenage. "We factored in conversions from miles to kilometers and applied the rand exchange rates applicable in 2010 (when the bulk of the GFIP project was nearing completion). We also added in year-on-year inflation rates at 7%."

The 11 case studies Outa used in its comparison include a database developed by the World Bank with data from 65 developing countries on road construction and maintenance costs, a Netherlands study comparing road construction costs in 10 European countries and a further World Bank analysis of road construction costs across sub-Saharan Africa sampling 115 road projects in 24 countries, including South Africa.

For comparison purposes with international benchmarks, Outa reduced the total GFIP (road) cost of R17.9bn to R16.3bn. This equated to R88.1m per kilometre over 185km.

To name just a couple of examples, the Netherlands study found Sanral overpaid on the GFIP by 217%, while a study of urban road construction in Tanzania indicated that Sanral overpaid by 201%. The lowest differential comparison came in at 136% from a report by the Idaho Department of Transport report, while the highest - a comparison to the Trans-Kalahari road project in Namibia) stood at 832%.

In its conclusion, the civil rights body said: "From Outa's research and comparisons to international studies, we have summarised the variations to the GFIP cost on 11 projects and come out at an average of 321% as the overcharge for GFIP (see table above), excluding the results of Outa's own exercise on the GFIP costing".

Outa has come to the conclusion that the South African road user has "every right to feel ripped off to the tune of a minimum of R10.8bn on the GFIP project".

Said Duvenage: “This research and position paper tells us there is something grossly wrong with the cost of road construction under Sanral’s watch.”

In the light of this information, Outa has called on the minister of transport to consider the following steps:

 - A thorough and totally independent investigation to get to the bottom of these concerns as Sanral's acceptance of such a high road costing is a "serious problem for the public";
 - Applying Treasury oversight rules to Sanral in future;
 - Conducting all future contracts and bills of quantities, pricing etc for all road projects in the country in an open and transparent manner, "with invitations to civil society to scrutinise";
 - Cancelling Gauteng's e-toll scheme;
 - Making Sanral abandon its plans to toll the Western Cape Freeway project; and
 - Placing all toll road projects and major road construction projects undertaken by Sanral under investigation.

In response to the report, Outa points out that had the GFIP construction costs come in at the figure of R7bn, "the bond repayment would have been substantially lower at well below R1bn per annum (20 years at 10% interest). This, in turn, is significantly lower than the e-toll administration and collection charges which are at over R1bn per annum."

Apart from giving Gauteng motorists greater justification to refuse to pay for e-tolls, it also places a question mark over Sanral's integrity and its role in ensuring the lowest prices and best deals for the South African public in building the country's roads, said Outa.

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outa  |  sanral  |  gauteng  |  tolls  |  infrastructure

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