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