MANY AARTO QUESTIONS YET TO BE ANSWERED

Press release issued 20-01-2012

MANY AARTO QUESTIONS YET TO BE ANSWERED

“The Southern African Vehicle Rental and Leasing Association (SAVRALA) representing 450,000 vehicles is astounded by the RTMC’s intention to implement AARTO nationally on Sunday, 1 April, given the extent of the outstanding issues. Without question, the current level of road carnage is unacceptable, but it would be naïve to think that AARTO, as last presented in early 2011, offers the solution to changing driver behaviour. SAVRALA has repeatedly indicated its full support for the successful implementation of AARTO and has shown its willingness to engage further in order to achieve the desired result: safer roads for all; and not for the purpose of providing an additional source of revenue for the metros and/or putting people out of jobs.

 

SAVRALA is a member of the Business Unity South Africa (BUSA) transport task team that attended several NEDLAC (National Economic Development & Labour Council) discussions on AARTO last year.  Government, represented by the Department of Transport, seems to have effectively dismissed both the NEDLAC process and its participants by choosing not to present the results of the AARTO Pilot Study and various other critically important documents, in order for NEDLAC members to consider AARTO and make a positive contribution.

 

SAVRALA expects that the public will have an opportunity to comment on any revised AARTO regulation in advance of the national implementation.  In the context of road and transport related matters, the continued lack of effective partnership between Government and society in likely to polarize further the current broad-based opposition to problematic legislation and un-implementable regulations.  The 1 April launch would be a missed opportunity to exploit the synergies between stakeholders and we urge government to consider effectively engaging further.

 

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

Cell: 0832500333.

 

 

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: paul@savrala.co.za

Cell: 0832500333.

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: paul@savrala.co.za

Cell: 0832500333.


[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