e-tolling: Resolution or revolution? | Fin24
 
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e-tolling: Resolution or revolution?

Feb 07 2017 13:51
Glenda Williams

Wayne Duvenage is the chairman of the Organisation Undoing Tax Abuse (Outa). (Lucky Nxumalo)

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The e-tolling of Gauteng’s freeways has sparked fierce resistance. By and large, despite the ongoing receipt of e-toll bills, road users have refused to pay up since the toll’s inception over three years ago.  

Around 80% of South Africa’s 750 000km of roads are non-tolled and funded largely by allocations by government. The balance is tolled, split between concession tolls and the South African National Roads Agency Limited (Sanral’s) managed tolls, with about 10% of tolled roads falling under the direct management of Sanral.  

In total, 22 000km falls under Sanral management. Of this, 3 000km are tolled, while Sanral maintains the 19 000km non-tolled roads via its annual grant of R13.5bn from the fiscus, Alex van Niekerk, manager: planning, toll and transport at Sanral, tells finweek.  

Ultimately that means taxpayers fund the roads, collected through a user pay mechanism, a fuel levy – each time the average vehicle is filled, around R120 goes towards the fuel levy.   

Unsurprisingly, Gauteng motorists were hopping mad when it came to light they were expected to pay tolls to travel the Gauteng Freeway Improvement Project’s (GFIP’s) improved and upgraded urban freeways – freeways that the vast majority use on a daily basis to commute to and from work.  

Every day, says Sanral, around 900 000 individual vehicles carrying an estimated total of 1.2m people travel the 201km of GFIP’s freeways. The GFIP freeways include R17.9bn in road construction and the R2.7bn e-tolling infrastructure project.   

But 80% of motorists are refusing to pay to use it, and close to 3m people haven’t paid their e-toll fees.  

Backing their stance is the Organisation Undoing Tax Abuse (Outa), which while supportive of freeway upgrading and infrastructure, is opposed to e-tolling as a means of collecting revenue for urban freeways.   

Outa’s members run to the “tens of thousands”, and pay what they can afford to support the organisation and be afforded legal representation should this become necessary as a result of unpaid e-tolls. The average monthly contribution is R146 but that includes higher contributions from business, explains chairman Wayne Duvenage.  

The pinch of non-participation

Three years down the e-toll road, outstanding (discounted) e-toll fees amount to R9.4bn, Sanral deputy CFO Dumisani Maluleke tells finweek.   

Sanral’s target at the inception of the GFIP e-toll project was R300m per month. But with a compliance level of around 20%, it brings in only around R60m to R70m per month, says Duvenage.  

“Resistance to the scheme is significant and too large to ignore. It is pretty much businesses that are still paying. They just don’t have the appetite to cross swords with government and technically they pass the costs on to the consumer.”  

With revenue streams nothing more than a trickle, Sanral debt is an eye-watering R50bn, forecast to go up to around R100bn (without any added new projects) before it starts to come back down, according to Maluleke.  

What will help that figure turn – if it turns – is an increased participation rate and inflation. But until then Sanral has to capitalise its costs and sink further into debt.  

“Sanral has very limited ability to do much beyond reducing its planned capital expenditure and marginally reducing operational expenditure on toll roads,” Elena Ilkova, RMB credit analyst, tells finweek.   

“The solutions are in the hands of government – in my opinion, additional direct support in some form will be required. Government has provided direct cash support in the past to compensate for the delay in the start of e-tolls and adjustment to fees, and ongoing support is in place for the last announced adjustment in fee structures.”   

There’s also the thorny issue of what effect this will have on Sanral’s borrowing capacity for new projects and whether Sanral can continue to roll over unpaid e-toll debt.  

“The uncertainty about Sanral’s long-term ability to repay the debt related to the toll road portfolio is a limiting factor when it comes to investor willingness to buy the bonds, and has an impact on pricing (Sanral has to pay higher rates on debt),” says Ilkova.    

Given that the HWAY-listed bonds are directly guaranteed by government, an extension of the term and increased size of the existing guarantee will provide borrowing capacity for Sanral, says Ilkova. This allows Sanral to roll over debt despite the shortfall in e-toll revenue until a permanent solution is found.   

Explains Van Niekerk: “Sanral’s focus is to develop and maintain the national road network in order to stimulate economic growth. It is not the intention of the scheme to make profits. The intention is to have a balance sheet and revenue stream against which we can borrow money to roll out roads when necessary.” 

e-toll costs

The perception that Gauteng’s e-tolls are expensive is misguided, says Van Niekerk: “They are possibly among the cheapest in the world.”  

Given ferocious public resistance, Sanral had to make tariff concessions. Having started out at 50c/km for light motor vehicles, the tariff now is down to 32c/km.  

“For e-toll registered users, the cap for a light vehicle user is R236/month. If everyone was compliant, only 6% of users would reach that cap. 78% of compliant users would pay less than R100/month,” says Philip Gildenhuys, Sanral’s treasury manager.  

GFIP benefits

Tolling aside, the upgrading of Gauteng’s freeways is state-of-the-art, with potential benefits for both road users and the economy.  

The project allows for growth in vehicle numbers, accessibility has improved and expanded, traffic congestion alleviated, travelling time shortened and vehicle operating costs reduced.   

There are economic benefits too. Development follows on road infrastructure, jobs are created and property values increase as a result of accessibility.   

And only those that use these roads pay to do so. It’s a “direct user charge”, like paying for water or electricity. Sanral says they are barely able to maintain good road conditions on the non-tolled 19 000km with their R13.5bn allocation for these roads. With no subsidy for toll roads, the road agency is reliant on toll revenue.  

Fuel levy vs e-tolls

Outa has advocated raising the fuel levy as opposed to e-tolling. But, says Van Niekerk, if the fuel levy is increased, everyone pays more.   

Had the fuel levy been raised by R0.09 in 2007/08 when the GFIP decision was taken, at roughly 22bn litres of fuel sold per annum, the capital amount of the bond attributed to the road construction of R17.9bn would have been raised by today, says Duvenage.  

“The fuel levy has also been increased by around R1.50 per litre since then, so we believe the money is there and Treasury should agree to increase its allocation to Sanral by R2bn per annum to cover the GFIP bond debt for 20 years.  

“We don’t believe it would be wise to have both a fuel levy and e-tolls. The lower the e-toll tariff, the higher the percentage of the revenue that goes into the administration costs. We believe it is either the fuel levy or the e-toll scheme, and government should use the fuel levy to fund urban freeway infrastructure development.”

In pursuit of defaulting motorists

A court challenge in response to Sanral issuing over 6 000 summonses for motorists in default for non-payment could drag on for months, even years.   

But until the outcome of this test case between Outa and Sanral is heard, it may prove problematic for Sanral to begin the enforcement order process.   

Tellingly, since the end of the third quarter of 2016, it appears Sanral has not issued any further summonses.  

Sanral’s pursuit of defaulting motorists also includes a plan to block the reissuing of licence discs for offenders. But this too comes with its own set of problems, says Duvenage. “We believe this matter will trigger a serious conflict between national and local governance entities, whereby municipalities will have every right to reject the resultant enforcement orders to ensure their revenues are not negatively impacted by the Gauteng e-toll debacle.”   

That’s aside from a possible mass defiance of the vehicle licensing process.  

Outa is upbeat about the inclusive approach taken by new Sanral CEO, Skhumbuzo Macozoma, who stated that Sanral will be “looking to achieve a balanced funding portfolio with fuel tax based revenue as well as toll income”.  

“He is having to deal with a number of serious issues facing Sanral and his approach is a fresh and constructive one, which is a far cry from that adopted by his predecessor,” says Duvenage.  

Outa believes that Sanral, along with minister of transport Dipuo Peters, will be looking at a number of options to fund the GFIP bonds, and one of these will include the fuel levy, a decision that will need Treasury’s involvement.  

For Gautengers, the issue of raising the fuel levy may appear a simple one. But other provinces might have a different take on contributing to Gauteng’s e-tolled roads.   

That, then, might mean a provincial rather than a national levy. Either way, those road users currently exempt from paying e-tolls – like public transport and registered mini-bus taxis – are also going to be forking out extra money… and passing this on to consumers.   

The GFIP infrastructure has been built, the money spent. One way or another road users will be coughing up for these urban freeways.

This is a shortened version of an article that originally appeared in the 2 February edition of finweek. Buy and download the magazine here.

e-toll  |  wayne duvenage  |  sanral
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