OUTA: SANRAL INTRODUCES NEW PUNITIVE e-TOLL TARIFF

OUTA (Opposition to Urban Tolling Alliance) Press Release

15 April 2012

SANRAL INTRODUCES NEW PUNITIVE e-TOLL TARIFF
Department of Transport published the Gauteng e-Toll tariffs in the Government Gazette (#35263) on Friday 13th April and have displayed tactics to try and force the public to register their vehicles with SANRAL, by introducing a new tariff which is almost 6 times higher than the tagged user. To date, the upper limits were indicated at R0.58c per kilometre for non-tagged light vehicles and discounted rate of R0.30c for tagged users. SANRAL have now introduced a new “alternate user” category which has never been mentioned before, of R1.74c per km. This is a shocking new rate for those who do not register their vehicles on the SANRAL database, tag or no tag.

download: Toll-tariff-Gazette April-13 2012 _1-35263 13-4-Transp.pdf 3MB

This brings a whole new dimension to the matter and begs the question, what is the difference between an e-tag and non e-tagged vehicle (ie Vehicle License Number – VLN) when registering with the SANRAL e-Toll system? Clearly this new category rate of R1.74c / km for the road user who chooses not to register their vehicle with SANRAL will be seen as exorbitant and a ‘bully-boy’ tactic to force people to register. One wonders on what grounds are these gross variances are justified. No doubt this is a new issue that may have to be urgently brought before the National Consumer Commissioner and will probably have implications for the engagement process that took place with the Commission last week between the DA and SANRAL.

It is also important to note that the Gazette has made no mention of the tariff exemptions for minibus taxis and commuter busses. In the absence of any details at this late stage, it must be assumed that they are in fact not exempt. The absence of clarity on the criteria for exemptions has further implications for both vulnerable groups (e.g. pensioners, mobility impaired). In addition, the tourism industry which has numerous permitted vehicles and drivers similar to minibus taxi operators, have good reason to expect that they should also qualify for exemptions.

This once again highlights the lack of transparency and insincere approach by SANRAL which may further drive a wedge between the citizens of Gauteng and the authorities on the matter of e-tolls.

Issued by: Wayne Duvenage

Chairperson- OUTA (Opposition to Urban Tolling Alliance)
Cell: 082 884 6652

OUTA FILES LEGAL APPLICATION TO HALT E-TOLLS

Press release: OUTA FILES LEGAL APPLICATION TO HALT E-TOLLS

Friday 23 March 12

Since the proud birth of our new democracy in South Africa, we have not seen such resistance and public outcry against a decision taken by our government. The calls to oppose e-tolling of Gauteng’s Freeway Improvements (GFIP) are loud, filled with anger and a growing resentment toward this unnecessary burden.  It is a sad day when a nation’s government develops a tense and threatening relationship with its people, when trying to force an unjust and unpopular decision into being, as is the case with this e-tolling project. 

The Opposition to Urban Tolling Alliance (OUTA) was recently formed out of a necessity for business organisations and people of similar mind to coordinate their efforts and consider a legal challenge to the e-tolling matter.  Our investigation has unpacked a number of issues and transgressions that highlight a disregard for protecting the interests of the public.

Challenging the actions of one’s government in court is a most unpleasant stance to take and in this case, it is our last and very necessary resort.Our application to interdict the decision to toll Gauteng’s Freeways was issued from the Pretoria High Court on Friday 23rd March 2012.

Our opposition to e-tolling must not be confused with the Gauteng Freeway Improvement Project.  We congratulate SANRAL on a job well done in the upgrading of our freeways.  The benefits of time saving, reduced vehicle running expenses and improved road safety from GFIP are not being disputed, although claims of an 8 to 1 beneficial return as espoused by some requires serious challenging.  We also know and accept that we, the taxpayers, will have to pay for the GFIP.

Our issue and objection however, is with the e-tolling plan as a means of generating funds to pay for the GFIP.  Our court application seeks to halt the tolling of GFIP and is undertaken largely on the following grounds:-

  • The planned e-toll process is grossly expensive, inefficient and a waste of citizen’s money. It makes no sense to pay between 30% and 50% in administration and operating costs to collect the revenue for the GFIP, when existing revenue collection mechanisms will cost virtually nothing to apply.
  • It is fundamentally wrong to apply an additional tax or toll against citizens along their daily commuter routes.
  • The e-toll project is unfairly punitive to Gauteng citizens who contribute significantly more in taxes than the value and spending they receive in return.  This region has more than paid for their freeway upgrade.
  • Mention has been made by SANRAL of the research conducted by the University of Cape Town – School of Business, on which they based much of their decision to toll.  We believe this report was insufficient in detail, much of it untested and its proposals have even questioned by the authorities themselves.
  • The ‘user pays principle’, as declared by SANRAL as a motive totoll the GFIP, is flawed.  The productivity and efficiency of Gauteng’s economy, of which its freeways are integral, has significant benefits for the entire economy and well being of all in South Africa.
  • Tolling the GFIP under the guise of a ‘user pays principle’ implies that every single urban road improvement project going forward will need to be tolled.  This will never be functional or tolerated.
  • While SANRAL have told us that they did engage and consult sufficiently before making their decision to toll, we will show that the extent of their engagement, consultation and assessments – for a project of this magnitude – was dismal and fell far short of that which was required of them. In simple terms they failed in this area and it would appear that they gave scant regard for other funding mechanisms that would be less burdensome to the road user.
  • SANRAL’S plan to toll these urban routes appears not to have heeded the requirements for a reasonably suitable alternative road network as well as the provision of sound public transport infrastructure in and around the GFIP.

We have heard suggestions that in the absence of tolling, the fuel price will have to increase by R1.00 per litre to fund the GFIP.  We refute this figure and do so by applying simple arithmetic to show that an increase of between R0.08c and R0.11c per litre to the fuel levy will raise between R1,8 to R2bn per annum, which is more than sufficient to cover the repayment of the initial R20bn capital including the interest cost (at a rate of 9%), over 15 years.

Furthermore, it is a fallacy to suggest that our government cannot ring-fence levies and taxes for specific needs and purposes.  It has done so for many years through our efficient revenue services department.

We sincerely believe the funding of our road infrastructure will be best conducted through a hybrid model which incorporates the national treasury as well as the fuel levy, vehicle license fees and long distance toll roads, the latter three being the best application of a ‘user pays’ mechanism in this regard.

Some proponents of e-tolling suggest the e-tolls will mainly affect the wealthy and will be of minimal burden to the poor.  These statements are outrageous in the extreme and need to be challenged.

To imply that e-tolling is good because it creates 1200 jobs is a farce. These arguments and reasons thrown into the debate are red herrings and signify a desperate attempt to justify the e-toll project.   If it is job creation one seeks, there are far better ways to create up to four times as many productive jobs from the estimated R1,5bn required for e-toll administration and operations.

It must be noted that SANRAL have been very economical and rather evasive when requested to provide detailed information related to the funding models, revenue streams,anticipated expenses, expected levels of non-compliance, application of enforcement, dispute resolution mechanisms  and other pertinent questions related to e-tolling. The people and business have every right for total transparency in this regard.

In conclusion:-

  • We trust and have faith that the legal process will expose these serious shortcomings of the plan to toll Gauteng’s freeways and thereby set aside this plan for the benefit of the country’s citizens and our economic development.
  • We support the government when its actions are for the betterment of society and believe it should be challenged when this is not so.
  • We believe that not all is lost with the construction costs of the gantries as these can be put to other constructive use.
  • Finally, we trust the authorities will see this challenge for what it is – a protection of the rights of its citizens, and realisation that the purpose of the public service is to serve the public,in the most efficient manner possible, at all times.

SAVRALA CONTESTS CLAIMED TOLL BENEFITS AND CALLS FOR INDEPENDENT ECONOMIC STUDY

Press release TWO –  issued 14-03-2012

SAVRALA CONTESTS CLAIMED TOLL BENEFITS AND CALLS FOR INDEPENDENT ECONOMIC STUDY

SAVRALA (Southern African Vehicle Rental and Leasing Association) representing approximately 450,000 vehicles continues to be very surprised by the ongoing e-Toll benefit motivations presented by SANRAL, its principal, the Department of Transport and more recently Transport Economist Dr Roelof Botha.

These parties often refer to a Gauteng Freeway Improvement Project (GFIP) 8.4 benefit cost ratio. Simply put, this hypothesis claims that for every R1 spent on the tolls, motorist will receive  a benefit of R8.40. This claimed benefit is sourced from the Economic Analysis of the Gauteng Freeway Improvement Scheme prepared in August 2010 by the Graduate School of Business (University of Cape Town) for both the South African National Roads Agency (Pty) Ltd and the Provincial Government of Gauteng. This claimed benefit cost ratio was also presented in last year’s GFIP Steering Committee Report.

As this claimed benefit is one of the key motivations for the e-Tolling project, SAVRALA would encourage these parties to take note of the Minister of Transport’s reply, tabled on 31 October 2011, to a Democratic Alliance question on the claimed GFIP benefits raised at the National Assembly (Question no 2598);

“As can be seen, the key assumption of the 2007 feasibility study was that the GFIP Project would reduce congestion. In my considered view, and in retrospect, the original feasibility study did not sufficiently weigh up international evidence suggesting that freeway expansion often does not in the medium term resolve congestion challenges, and often induces greater demand.

It also failed to consider alternative solutions to congestion – improved public transport provision, moving more freight onto rail and a curb on urban sprawl. The project benefits to road users may, therefore, unfortunately not be forthcoming. This is the subject of further assessments and consultations by the Department of Transport and a Cabinet Task Team”.

The claimed GFIP benefits of time savings, reduced vehicle expenses and lower accidents are again based on questionable assumptions derived in many instances from information unchallenged by SANRAL itself. It is also important to note that the Economic Analysis of the Gauteng Freeway Improvement Scheme did not request any input from any of the affected stakeholders like SAVRALA.

 

Surely it is time for a proper public and independent economic analysis to be conducted?

It is also essential to separate the actual construction of the roads from their funding model.  SAVRALA agrees with SANRAL on the need for the GFIP and that it will provide some benefit, but how much and at what cost is now a moving target. In reality, the viability and efficiency of the proposed e-Tolling model is now well beyond any economic argument.

After the Minister of Finance last month contributed almost R6billion from Treasury to fund SANRAL’s outstanding GFIP debt, the balance now due is approximately R14bn (excluding interest payments). Unfortunately, SANRAL have not made the actual impact of the contribution from the Minister of Finance to the total GFIP debt public. This means one has to determine the relative economic efficiencies of the e-Toll model at a rather crude level – however, the message is clear. Economically, it is irrational to continue with a revenue collection scheme that will very conservatively cost the GFIP users just over R6billion (although it has been estimate to be as much as R11billion), to collect the outstanding R14billion, resulting in an e-Toll administration cost to revenue ratio of 43%!

This is an unacceptable percentage for administration costs and contradicts the Minister of Finance’s earlier call this year for all parties to be wise with scarce resources.

SAVRALA, and many other business and civil associations, have never disputed the need to pay for the costs of GFIP, however, jointly they continue to oppose the unacceptable levels of cost for a wieldy administration imposed by the e-Tolling funding mechanism. SAVRALA therefore calls on the Government to seriously consider other less costly funding models like, the revenue raised from the Fuel Levy, as one of several other funding mechanisms.

Further, SAVRALA remains perplexed as to why the Government remains obstinate in the extreme about the drive to implement such an inefficient and costly system, given the extensive and growing resistance to e-Tolling across South African society, including some elements of Government itself.

It is also of great concern that our Government agencies and their various spokespersons are reverting to verbal bullying and threats against its citizens should they wish to exercise their rights and not register for an e-Tag but rather pay the non-discounted rate given the concerns about individual/account information protection etc.

What is needed, is greater transparency regarding the terms and conditions of the ETC (Electronic Toll Collection) tender document and the extent of the potential financial penalties, should the e-Toll project not proceed.

 

 

The current stance only corroborates Government’s stubbornness to proceed despite all logical and economic reasons to rethink the project.

It has however become painfully obvious, that this is the biggest public uprising against a decision taken by government since the birth of our new democracy 18 years ago.

Editorial contact: Paul Pauwen 083 250 0333 (www.savrala.co.za)

Notes to editor:

1)      DA Question 2598, reply by Minister of Transport can be found at   http://www.pmg.org.za/node/29123

2)      GFIP Economic Analysis available at http://www.nra.co.za/live/index.php

ALLIANCE FORMED IN OPPOSITION TO URBAN TOLLING

Press release issued 14-03-2012

ALLIANCE FORMED IN OPPOSITION TO URBAN TOLLING

Following anger and outrage against the e-Tolling of Gauteng’s freeways, an alliance has been formed to coordinate the strategies of a number of organisations and associations who share a common view about this unjust action.

Numerous organisations have been strongly opposing the e-toll program from various channels, yet a unified platform has been lacking to share and combine the efforts of business. The launch of OUTA (Opposition to Urban Tolling Alliance) will be this platform and will provide a united front which will lend significant support to the cause.

The web site URL for the Opposition to Urban Tolling Alliance (OUTA) is www.outa.co.za.  It is a concise informative portal and one that also allows organisations to sign up and display their support accordingly.  It will be dynamic and updated regularly.  In addition, individuals can also lend their support on the “support us” page as well as link through to the OUTA Facebook page to express their concerns, comments and views.

While there are a number of electronic petitions and web sites denouncing e-tolling in Gauteng (and these are all very necessary in their respective efforts), the OUTA platform is one that will provide clarity around the misleading and ambiguous statements and questions about e-tolling. The public and organisations have a desire and a right to know much more than that which has been ‘fed’ to them by the authorities.  The OUTA.co.za web site will also be the platform that provides updates of the legal challenge when this is lodged.

OUTA encourages organizations and the public view the site and sign up.
SUBMITTED BY SAVRALA

SAVRALA REFUTES REDUCED TOLL FEES

Press release issued 23-02-2012

SAVRALA REFUTES REDUCED TOLL FEES

Following the Finance Minister Pravin Gordhan’s reference to reduced toll fees for the Gauteng’s Freeway Improvements (GFIP), the South African Vehicle Renting and Leasing Association (SAVRALA) is adamant that “this funding mechanism is inefficient, impractical and unacceptable” says Wayne Duvenage, vice president of SAVRALA.  “We salute the Minister for apportioning R5,8bn of our taxes toward the GFIP, but ask why stop at a quarter of the amount required, especially in light of the extra 20c added to the fuel levy?”

It is incorrect to assume that because the improved freeways will reduce congestion, save costs and improve safety, we must now accept the funding thereof to be conducted through a complicated, inefficient and extremely costly process.  The GFIP urban tolling plan has been ill-conceived and thrust upon the Gauteng road user with minimal consultation or consideration to its impact.  It’s not about the fee. Even at 10c per kilometre, it is the principal of tolling our urban daily routes to work and back that is wrong. The implementation of an efficient road infrastructure is one of the roles of Government, and they are tasked to do this in the most efficient manner possible for its citizens.

More frustrating is the double whammy of the additional 20c to fuel levy.  The current R1.77c fuel levy will increase to just under R2 per litre from April.  This will secure around R27bn per annum going forward.  Combine this with the existing long distance toll revenues, local licence fees and some input from the national treasury pot (yes, it’s not strange to expect some of our general taxes to contribute toward roads) and you have sufficient funding for our national road infrastructure upgrading and maintenance, if the money is spent wisely.

The fuel levy is the most efficient and equitable user-pay principle, which, when applied ensures that all road users contribute to all our roads in direct proportion of their usage.  Every time one fills a tank with fuel, they contribute approximately R140 toward the maintaining and building an efficient road system. To toll the GFIP suggests that all road upgrades in future should be tolled – unless SANRAL plans to be inconsistent with this principle.  Does one detect a quandary in the making?

Why on earth would Gauteng citizens want or need to pay an additional R1,6bn per annum to manage the collection of these funds when the fuel levy can be applied almost free of administration costs?  Gauteng citizens more than pay their way toward the total tax basket of the country’s economy and yet receive much less in return. To now burden this economic hub with a cumbersome, expensive and inefficient urban toll system is immoral and blatantly wrong.

It is also wrong to assume that because the gantries are built, there is no turning back.  To press on with tolling our urban roads will be throwing good money after bad. There is a far more viable alternative and SAVRALA, along with a number of other business associations will now seriously consider a joint legal challenge against this process.  Initial consultations have revealed significant transgressions of the law and the constitutional rights of the public in this regard.

Editorial contact: Paul Pauwen 083 250 0333 (www.savrala.co.za)

 

SAVRALA ENCOURAGED BY E-TOLLING DELAY

 Release date: 13-01-12

SAVRALA ENCOURAGED BY E-TOLLING DELAY

Southern Africa Vehicle Rental and Leasing Associations (SAVRALA) is encouraged by today’s announcement by the new South African National Roads Agency Limited (SANRAL) Board to apply its mind to the serious concerns raised by the great range of both local and national stakeholders who have opposed the current GFIP eTolling implementation plan which is now delayed. SAVRALA would welcome any opportunity to present its concerns to the new Board and have a constructive discussion about the funding of the Gauteng Freeway Improvement Project (GFIP). SAVRALA looks forward to further updates on this development and in particular the applicable timelines.

At a special SAVRALA members meeting yesterday, it was agreed that the Association would continue to oppose the current GFIP eTolling implementation plan and, if necessary, take legal action. The members confirmed that they were not unwilling to pay for the GFIP (or other road) improvements but wanted a more cost efficient funding model which the national fuel levy presents.

Further SAVRALA believes that only a very small number of about 20,000 Gauteng public road users are included in the reported 213,000 etags registered with SANRAL to date. It believes that the very large majority of etags may be held by financial institutions and a few mid-sized corporates, however, SAVRALA awaits further detail from SANRAL in this regard. It is, however, obvious that the general public, despite the expensive SANRAL marketing campaign, have given a clear signal to SANRAL that it rejects its eToll plans.

SAVRALA also believes the current investments in etags, infrastructure, staff and vehicles need not go to waste. Should the new SANRAL Board recommend to the Minister of Transport that the national Fuel Levy be used for the immediate SANRAL funding requirements, the current GFIP Open Road Tolling (ORT) infrastructure and etags, for example, could be used to assist in several Gauteng pilot projects to help better manage the current traffic violation process and even the pre-payment of vehicle license discs. We should look to try and utilize the available technology in a more value adding and innovative manner.

SAVRALA hopes that the very contentious GFIP funding debate can be resolved quickly, without any legal action, so that the momentum and energy now mobilized by the broad range of interested parties on tolling can be refocused on tackling the unacceptable loss of life on our roads. We need to all work together to ensure that South Africa meets its Decade of Action for Road Safety 2011-2020 commitments and reduce the carnage on our roads.

Editorial contacts:

Paul Pauwen

Email: manager@savrala.co.za

NO TO OPEN ROAD TOLLING – GAUTENG PAYS MORE THAN ITS FAIR SHARE (Synopsis)

Release date: 12-01-12

NO TO OPEN ROAD TOLLING – GAUTENG PAYS MORE THAN ITS FAIR SHARE

The Medium–Term Budget Policy Statement in October 2011 expressed Governments clear intention to now focus on national infrastructural spend over the next three years by allocating just over R800bn.

In this context, on 18 April 2011, the Minister of Transport Mr. Sbu Ndebele launched the S’hamba Sonke – ‘Moving Together’ Programme. R22bn was allocated to this programme in last year’s Medium Term Expenditure Framework (MTEF) cycle and was described as ‘the Department of Transport launching a new roads upgrade and maintenance initiative to fix and upgrade the entire secondary roads network of South Africa’.

The earlier call for ‘a collective engagement of thoughts, ideas and alternatives in construction and funding methodologies’ was followed, by an announcement less than a month later, ahead of the final stakeholder consultation meeting, that toll tariff recommendations would now be presented to both the Minister of Transport and Finance.

Unlike the S’hamba Sonke Programme, the GFIP program will follow the ‘user-pay principle (tolling) to repay the loans and will be used for future operation and maintenance of these roads’.

This highlights the inconsistency and almost subjective nature of the ‘user-pay’ principle which was undermined further by the exemption of certain minibus taxis and commuter buses by the Minister of Transport late last year.

Gauteng roads users were advised that they will now have to finance the costs for both the estimated R23bn construction costs for the Gauteng Freeway Improvement Project (GFIP) Phase 1a and a further R6bn (over five years) for the administration of the Open Road Tolling system (ORT).

Under the veil of Public Private Partnerships (PPP), the plans to implement a national ORT structure seems like another finance scheme to help Government source much needed funds despite the fact that road users already pay for vehicle license fees, drivers license fees, multiple fuel levies (incl the RAF and Transnet fuel pipeline) and carbon taxes, excluding the personal income tax contributions which go to the central fiscus, to fund the operation of Government which, many would argue, includes all roads.

The majority of the opposition to ORT, which includes a cross section of society including business (e.g.: Business Unity South Africa, Road Freight Association and Automobile Association) unions (more notably COSATU), civil society groups (e.g.: South African National Consumer Union), opposition politicians and indeed some within Government (e.g.: Deputy Minister for Transport, Jeremy Cronin), have called for the total suspension of the ORT project.

All acknowledge the need for significant road improvements, as one tool to deal with modern day city traffic congestion; however, the funding of such projects remains the key missing piece to the national transport puzzle.

The parties opposing ORT (excluding most of Government) are unanimous about the need to consider more seriously the national fuel levy as an exponentially more administratively efficient method of both collection and funding. SANRAL’s own research conducted by the Graduate School of Business in Cape Town concedes that ‘paying for roads through taxes or a dedicated fuel levy is simply cheaper than imposing tolls on a road even if this is through an ORT system. The cost of collection is far lower because it does not incur the cost of the toll collection system’. In terms of efficiency, as a benchmark, SARS’s cost of revenue collection is just over 1% unlike the proposed ORT collection process which is expected to be around 35%.

Accepting the fuel levy as a funding option some suggest that only Gauteng road users should pay an additional fuel levy to fund GFIP. It can be very strongly argued that Gauteng road users already contribute significantly more to the national funding of the operation of Government and by implication, all other provinces, than what it receives back to fund Gauteng’s own needs.

Using various reasonable assumptions, Gauteng contributes approximately R260bn (39%), via SARS, to the central fiscus at Government.

If one assumes that each region gets a proportionate benefit from the National Departments, then the next big consideration is the Provincial allocations. Including conditional grants of R14,5bn, Gauteng will receive a total of approximately R65bn (18%) during 2010/11 in stark contrast to the estimated R260,834bn, contributed by the province to SARS.

Consolidating all revenues, Gauteng Provincial Government is budgeting to spend only R6,2bn (9.2%) on Roads and Transport in 2011/12, a far cry from the R9,4 bn (18%) spent in 2008/09. A reduction of R3,2bn for roads and transport in three years despite the growing needs.

At the end of the day, the national interest is not served by revenue raised in a province being ring-fenced and kept within that province for their own hospitals, schools, transport (incl roads) etc. Rather National Projects like GFIP and other national projects under SANRAL could be and should be paid nationally via an additional cost allocation from the fuel levy by all road users.

In summary, Gauteng residents and road users already contribute both 44% of the total national fuel levy generated and significantly more, at an estimated R261bn (39%), to the central fiscus via SARS compared to the approximate R65bn it receives back from central Government.  Gauteng pays more than its fair share.

Editorial contacts:

Paul Pauwen

Email: manager@savrala.co.za

 

 

NO TO OPEN ROAD TOLLING — GAUTENG PAYS MORE THAN ITS FAIR SHARE

Release date: 12-01-12

NO TO OPEN ROAD TOLLING — GAUTENG PAYS MORE THAN ITS FAIR SHARE

The Medium–Term Budget Policy Statement in October 2011 expressed Governments clear intention to now focus on national infrastructural spend over the next three years by allocating just over R800bn. Areas highlighted include a key focus on the desperate need to tackle the aging rail network and plans to support both national and provincial road network upgrade programs. The details of the road network investments will help give clarity to the division of roles and responsibilities between central Government, Province and its citizens.

In this context, on 18 April 2011, the Minister of Transport Mr. Sbu Ndebele launched the S’hamba Sonke – ‘Moving Together’ Programme in Durban, KwaZulu-Natal. R22bn was allocated to this programme in last year’s  Medium Term Expenditure Framework (MTEF) cycle and was described by the Minister in his 1 June 2011 Budget vote speech (in the National Assembly) as ‘the Department of Transport launching a new roads upgrade and maintenance initiative to fix and upgrade the entire secondary roads network of South Africa’.

The earlier call, in the same speech, for ‘a collective engagement of thoughts, ideas and alternatives in construction and funding methodologies’ was followed, by an announcement less than a month later, on 30 June 2011 by the Transport Director-General and Chairperson of the Gauteng Freeway Improvement Project (GFIP) Steering Committee, George Mahlalela, ahead of the final stakeholder consultation meeting, that toll tariff recommendations would now be presented to both the Minister of Transport and Finance.

Unlike the S’hamba Sonke Programme, the GFIP program, said DG Mahlalela, will follow the ‘user-pay principle (tolling) to repay the loans, as well as for future operation and maintenance of these roads’.

This highlights the inconsistency and almost subjective nature of the ‘user-pay’ principle which was undermined further by the exemption of certain minibus taxis and commuter buses by the Minister of Transport late last year.

Gauteng roads users were advised that they will now have to finance the costs for both the estimated R23bn construction costs for the Gauteng Freeway Improvement Project (GFIP) Phase 1a and a further R6bn (over five years) for the administration of the Open Road Tolling system (ORT) which is currently viewed by many as a very conservative figure.

Under the veil of Public Private Partnerships (PPP), the plans to implement a national ORT structure seem like another finance scheme to help Government source much needed funds. The more cynical view is that it can be seen as additional extortion of road users who already pay for vehicle license fees, drivers license fees, multiple fuel levies (incl the RAF and Transnet fuel pipeline) and carbon taxes excluding the personal income tax contributions which go to the central fiscus, to fund the operation of Government which, many would argue includes all roads.

The majority of the opposition to ORT, which includes a cross section of society including business (e.g.: Business Unity South Africa, Road Freight Association and Automobile Association) unions (more notably COSATU), civil society groups (e.g.: South African National Consumer Union), opposition politicians and indeed some within Government (e.g.: Deputy Minister for Transport, Jeremy Cronin), have called for the total suspension of the ORT project.

All acknowledge the need for significant road improvements, as one tool to deal with modern day city traffic congestion in the current absence of an integrated public transport infrastructure; however, the funding of such projects remains the key missing piece to the national transport puzzle.

 

The parties opposing ORT (excluding most of Government) are unanimous about the need to consider more seriously the national fuel levy as an exponentially more administratively efficient method of both collection and funding. SANRAL’s own research conducted by the Graduate School of Business in Cape Town concedes that ‘paying for roads through taxes or a dedicated fuel levy is simply cheaper than imposing tolls on a road even if this is through an ORT system. The cost of collection is far lower because it does not incur the cost of the toll collection system[1]’. In terms of efficiency, as a benchmark, SARS’s cost of revenue collection is just over 1%[2] unlike the proposed ORT collection process which is expected to be around 35%.

Accepting the fuel levy funding option, some suggest that only Gauteng road users should pay an additional fuel levy to fund GFIP. In the context of the fuel levy being an equitable way of raising funds for major national transport infrastructure projects, as such projects will have a national economic multiplier effect, it can be very strongly argued that Gauteng road users already contribute significantly more to the national funding of the operation of Government and by implication all other provinces than what it receives back to fund Gauteng’s own needs.

FUEL LEVY

The  Fuel Levy for the 2010 tax year ending February 2011, amounted to R34,4bn of which typically Petrol accounts for almost 58%. At a regional volume analysis[3] of both petrol and diesel purchases, Gauteng is the single biggest proportionate consumer at 36.5% and 23.4% respectively and consequently contributed R15,3bn (44%) to the total figure.

Despite the many statements late last year, the Department of Transport has still not indicated when it will convene a Roads Fund Summit with stakeholders to discuss road funding options.  This must take place before any ORT implementation takes place.

SARS PAYMENTS

Interestingly enough, Gauteng as the smallest province at 1.4% of the national land area, with the largest population at over 11 million, contributes over 35% to the national Gross Domestic Product (GDP) [4].

Using the 2009 statistics as a proxy, over 40% of taxpayers are registered in Gauteng and contribute in excess of 51%[5] towards the R228bn in Personal Income Tax collected in the 2010/11 tax year.[6]

Using various reasonable assumptions, Table 1 below highlights that Gauteng contributes approximately R260bn (39%), via SARS, to the central fiscus at Government.

Table 1: Tax revenue performance for 2010/11 by product[7]

Tax Revenue Collection National contribution to SARSR millions Gauteng contribution factor and source Gauteng contribution to SARS R millions
Pers Income Tax 228,096 40% of national assessed tax payers are registered in Gauteng and contribute 51% 116,329
Company Income Tax 134,635 Gauteng contributes 35% to national GDP 47,122
Secondary Tax on Companies 17,178 Gauteng contributes 35% to national GDP 6,012
Other 32 Gauteng contributes 35% to national GDP 11,2
VAT 183,571 Gauteng contributes 35% to national GDP 64,250
Fuel levy 34,418 Gauteng contributes 44% of Fuel Levy receipts 15,3
Excise duties 22,968 Gauteng contributes 35% to national GDP 8,038
Custom duties 26,637 Gauteng contributes 35% to national GDP 9,323
Skills Development Levy 8,652 40% of national assessed tax payers are registered in Gauteng 3,461
Other taxes and duties 17,996 Gauteng contributes 35% to national GDP
Total 674,183 260,834

 

Once collected, using several factors and weights, the Division of Revenue Act determines the division of nationally raised revenue between the three spheres of government, namely National, Provincial and Local Government and in 2010/11 the allocations were revised to 48.3%, 43.5% and 8.2% respectively[8].

GAUTENG REVENUE

If one assumes that each region gets a proportionate benefit from the National Departments, then the next big consideration is the Provincial allocations. Including conditional grants of R14,5bn, Gauteng will receive a total of approximately R65bn (18%) during 2010/11 in stark contrast to the estimated R260,834bn, contributed by the province to SARS.

Gauteng Province itself plans to raise R3bn of its own revenue in the 2011/12 budget. Vehicle license fees alone are expected to contribute, R1,8bn (59%)  in addition to the expected R0,6 bn (19%) from gambling and betting taxes.

Consolidating all revenues, Gauteng Provincial Government is budgeting to spend only R6,2bn (9.2%) on Roads and Transport in 2011/12[9], a far cry from the R9,4 bn (18%) spent in 2008/09. A reduction of R3,2bn for roads and transport in three years despite the growing needs.

In the smallest Province with the largest population and the greatest proportion at 39% (3,9m)[10] of nationally registered vehicles, the allocation of just over R6bn seems out of line. Indeed, a further revenue opportunity of multiple billions exists if some of the 132,416[11] unlicensed Gauteng registered vehicles could be renewed.

At the end of the day, the national interest is not served by revenue raised in a province being ring-fenced and kept within that province for their own hospitals, schools, transport (incl roads) etc. Rather National Projects like GFIP and other national projects under SANRAL could be and should be paid nationally via an additional cost allocation from the fuel levy by all road users.

In summary, Gauteng residents and road users already contribute both 44% of the total national fuel levy generated and significantly more, at an estimated R261bn (39%), to the central fiscus via SARS compared to the approximate R65bn it receives back from central Government.  Gauteng pays more than its fair share.

Editorial contacts:

Paul Pauwen

Email: manager@savrala.co.za


[1] The Graduate School of Business, An Economic Analysis of the Gauteng Freeway Improvement Scheme: August 2010 (p36) http://www.nra.co.za/content/Gauteng_GFIP_final_economic_report.pdf

[2] South African Revenue Service (SARS) Annual Report 2010/11,Graph 2 (p18)  http://www.info.gov.za/view/DownloadFileAction?id=152203

[3]  South African Petroleum Industry Association (SAPIA), Annual Report 2009, Figure 5 and 6 (p 16) http://www.sapia.co.za/publications/annual-reports.html  (note: this regional volume breakdown was discontinued in subsequent Annual Reports)

[4] Gauteng Estimates of Provincial Revenue and Expenditure: 2011/12 Budget Statement (p8): 3.4 Gauteng economic review and outlook. http://www.treasury.gov.za/documents/provincial%20budget/2011/Budget%20Statements/GT/GT%20-%20Budget%20Overview%20of%20Prov%20Expenditure.pdf

 

Concerns that PRE cannot manage GFIP exemptions

07 DECEMBER 2011 SAVRALA PRESS RELEASE

Tourism concerned that PRE does not have the systems to manage exemptions from GFIP

Encouraged by the positive statements made by the MEC for Roads and Transport in Gauteng, Ismail Vadi, at the recent Gauteng Public Transport Regulatory Entity (PRE) launch, the Tourism industry remains concerned about PRE’s capacity to serve both their customer’s needs and SANRAL in Q1 2012.

The Southern African Vehicle Rental and Leasing Association (SAVRALA) representing approximately 450,000 vehicles, the Southern Africa Tourism Services Association (SATSA), the Coach Owners Association South Africa (COASA) and the Federated Hospitality Association of Southern Africa (FEDHASA) were represented at the launch by the umbrella association Tourism Business Council South Africa (TBCSA). Several transport association spokespeople criticised the previous Gauteng Operating Licensing Board (GOLB) for long delays and arrogance when processing permit applications but the MEC assured guests that the new PRE board will seek partnerships with its stakeholders and operate with ‘efficiency; professionalism; integrity, and strict adherence to the regulatory regime’.

The concerns were raised in light of the fact that the TBCSA (Tourism Board Council of South Africa) have many members who operate transfer and chauffeur-drive services, which, like metered taxis, require both vehicle and driver permits. Although the TBCSA looks forward to a constructive and efficient engagement with the new entity, they remain concerned about how the PRE will cope with plans by the Department of Transport (DoT) to implement GFIP (Gauteng Freeway Improvement Project) open road tolling in February 2012.

Admitting that the current entity has an ‘outdated and obsolete IT system’ the MEC did not give any clarity on how the proposed toll exemption for commuter buses and mini-bus taxis will be managed by the PRE. This is important as the new entity will need to maintain, at least daily, the validity status of vehicle permits allocated to certain vehicle license plates for the SANRAL tolling system to ensure that expired or withdrawn permits do not continue to receive exemptions from the proposed GFIP toll fees. Failure to maintain a high level of integration is likely to see a real risk of increased cloned minibus taxi and commuter bus license plates if the exemption is to be applied only to a narrow group of permit holders.

It is also unclear at this stage how the toll exemption status of minibus taxis and commuter buses, with permits issued outside of Gauteng, travelling on GFIP, will be managed. Will these road users be exempt? These types of questions become real issues for inter-provincial minibus taxi and commuter bus operators and could likely require national integration with SANRAL by all PRE’s and remaining Operating Licensing Boards. Operators would, for example, need to understand whether their Mpumalanga issued permit will be cancelled due to non-payment of GFIP tolls.

The DoT, after changing all its ‘user pay’ model descriptions, is yet to issue any detailed directive in the Government Gazette to help the various metered taxis, transfer and chauffeur-drive services understand why they may not be exempted from tolls.

A further question mark remains around whether the growing number of scholar transport operators, who will require permits, will be exempt from GFIP tolls?

It seems ironic that one of the potential new priorities for the Gauteng PRE in early 2012 may well be to invest in systems and resources (at vast cost) to accommodate integration into the proposed SANRAL GFIP toll system, for the purposes of tracking and administering exemption from toll fees. PRE will therefore be investing in major IT infrastructure without earning any revenue for this obvious administrative minefield.

The TBCSA feels that this is once again an example of wasteful and thoughtless expenditure and a further reason why urgent discussions need to take place between the DoT and the broad transport industry regarding the use of the national fuel levy to fund GFIP and other infrastructure projects in a much more cost-effective and administratively streamlined manner. SANRAL has estimated GFIP administration costs to be over R5bn for the next five years. TBCSA feels that this estimate is very conservative and will be far exceeded when the cost of collection and enforcement as required by the Criminal Procedure Act (CPA) is considered. This excludes the additional costs that will have to be passed on to Gauteng consumers. The billions to be spent on administration should rather be used for the construction and maintenance of highways around the country.

By utilising the existing fuel levy and increasing this by an acceptable margin to fund additional road expansion and upkeep would avoid all the above mention infrastructure costs and could save the country billions of Rands in additional expenditure.

Editorial contacts:
Paul Pauwen
Email: manager@savrala.co.za