Opinionista Wayne Duvenage 7 July 2019

The e-toll impasse – square pegs, round holes and ostrich mentality

Claims by Finance Minister Tito Mboweni and a handful of others that the e-toll scheme should remain in place indicates a lack of comprehension as to why the scheme has failed to achieve its purpose of financing the Gauteng Freeway Improvement Project bond.

Dear Honourable Ministers Tito Mboweni and Fikile Mbalula.

Last week’s social media spat among government leadership over the failed Gauteng e-toll scheme is pretty embarrassing and signifies the crisis of legitimacy our government continues to suffer over a debacle that has lingered for far too many years.

The incessant claims by Minister Tito Mboweni and a handful of others that the e-toll scheme should remain in place indicate a lack of comprehension as to why the scheme has failed to achieve its purpose of financing the Gauteng Freeway Improvement Project bond.

Taking time to engage with organised civil society — which has compiled substantive research and reasons for the scheme’s failure — may assist the authorities to realise why this insistence on e-tolls to finance urban freeway construction in South Africa is tantamount forcing square pegs into round holes. Some of these reasons are:

  • Sanral’s poor research and an appalling approach to the scheme’s launch gave rise to a substantial loss in public support and trust, without which the scheme stands no chance of relative success or revival. Aside from a meaningless attempt at the public consultation, Sanral lacked the necessary transparency during the scheme’s planning and implementation stages and instead opted for a coercive and threatening approach against those who decided to challenge the scheme.

  • The e-toll scheme’s success relies on an accurate and efficient national vehicle registry system. In South Africa’s case, the eNatis system that provides this backbone to the e-toll scheme is one that is sorely lacking in the accuracy of information. E-tolls also rely on an efficient postal service (no need for comment on this situation), as well as an effective regulatory and enforcement environment (tested, but unable to be applied with any success to date).

  • Adding more distance from public trust and co-operation, has been the knowledge that Sanral overpaid for the Gauteng Freeway Improvement Project to the tune of about double the price. OUTA’s research estimated the price-tag to be around R9-billion to R10-billion, yet society was lumbered with price-tag of R17.9-billion, plus an extra few billion for the e-toll infrastructure, giving rise to a R21.5-billion government-backed bond provided by the PIC.

  • But here’s where matters get worse. The repayment of a R21.5-billion bond for the Gauteng Freeway Improvement Project bonds over 20 years would have equated to about R2.6-billion a year. And yet the five-year contract awarded to the Austrian-owned Electronic Toll Collections (ETC) company amounted to R8.2-billion (or an average of R1.6-billion a year), for the administration portion of the scheme. You do the maths, Minister Mboweni. That’s an extra 61% fee on top of the financing costs of the project, which the motorists were expected to suck up and pay, before R1.00 was to be allocated to the freeway upgrade bonds. It might surprise you to know that the average administration cost of electronic tolling schemes around the world is between 7% and 11%. Diabolical and outrageous are words that come to mind.

Society’s beef is not with the “user pays” principle, but rather with a user-pays scheme that would never be able to ensure that the majority of users would pay and which was grossly overpriced and irrational.

Sanral’s research fell short of noting why these schemes collapse in other parts of the world, especially when they lack the support of the public. Examples of this can be found in the City of Manchester which in 2008 planned to introduce the exact same inner-city electronic tolling system that had successfully been launched in London a few years earlier.

It failed to get off the ground and was scrapped before launch due to among other reasons, public rejection. The same happened to a planned e-toll scheme in Edinburgh and other cities around the world.

Context matters for complex e-toll schemes that require a framework of administrative competence and a society that trusts its government to work in the best interest of its citizens. This was clearly not the case in Gauteng’s e-toll scheme and the compounding effect of numerous factors has given rise to the scheme’s demise. It is such a failure that even the taxi industry, which was given free passage on the e-toll routes, has refused to comply with the required conditions to qualify for full credit.

The extent of the scheme’s collapse was evident within eight months of its December 2013 launch when the compliance levels (Sanral indicated a 93% level was achievable), maxed out at 40% by June 2014. Today the scheme limps along at about 20% compliance – which means that only one in five road users comply with the law — and it’s getting worse, now that the Credit Bureau Association has ruled that Sanral’s e-toll debt and default judgments will not feature on its blacklist database.

And if all of this was not enough, the defensive court challenge, now underway, seeks to obtain a ruling that will set aside the criminalising of e-toll defaulters. To get a strong sense of which way this defensive challenge might go, please take some time to read each of the judgments in the High Court, Supreme Court and the Constitutional Court, in the e-toll case of City of Cape Town vs Sanral. The latter lost horribly in every court and the reasons within these rulings do not bode well for Sanral in the Gauteng matter.

Finally, Minister Mboweni, if it is an alternative solution you seek to settle the Gauteng Freeway Improvement Project bonds, then please know that Sanral has been managing and financing the building, upgrading and maintaining of about 18,000km of its non-tolled road portfolio from Treasury allocations, which is extensively propped up by the fuel levy. This existing road financing mechanism has been in use for decades and heaven only knows why it was overlooked or ignored as an option when it came to the 186km Gauteng freeway upgrade.

Government’s lack of action in addressing the failed scheme over the past five years has unfortunately racked up a sizeable interest bill for the excessive bonds. Nonetheless, it’s never too late to reverse a bad decision — and one imagines that the PIC will be willing to renegotiate the terms of the settlement with its masters, in a manner that will assist the country to find a solution to this most unnecessary and unfortunate impasse.

Fortunately, however, the ETC five-year contract period is over and the government is now free to scrap the e-toll scheme and thereby negate the obscene contractual administration cost of R1.6-billion a year to a foreign company. This will indeed elicit extreme public delight, especially knowing that the administration fees attached to the “Treasury allocations” alternative equate to “not one cent”.

Treasury’s ability to find R23-billion a year to attend to Eskom’s financial woes has given the public every confidence in its ability to find about 10% of that, to enable the financing of the freeway upgrade of South Africa’s economic hub. DM

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