Nazir Alli: The real benefits of open road tolling
There have been a lot of untruths, myths and often uninformed statements made about e-tolling in the last few years. There has also been a lot focus on the costs of e-tolling rather than on the benefits. I'm taking this opportunity to give you the other perspective highlighting the benefits of open road tolling, as well as share some success stories in other parts of the world.
The first point I would like to make is that the democratically elected government made a clear policy choice that part of road infrastructure, especially those roads that can be classified as economic, would be best funded through the user-pays principle. This was in recognition of the fact that our fiscus is limited and has to address other social needs such as education, health, social grants and housing, among others.
This policy is contained in the 1996 White Paper on Transport Policy. Tolling in South Africa did not start with the Gauteng Freeway Improvement Project (GFIP). Open road tolling, where motorists drive at highway speeds without having to stop at a physical toll plaza to pay their toll fees, started with the GFIP. In order to make open road tolling possible, a new method of payment is necessary and that method is called e-tolling. It simply means an electronic method of paying your toll fees.
As an agency of government, our job is to implement policy. Do we advise on that policy? Of course we do. However, the ultimate custodian of policy is Parliament. The South African National Roads Agency Limited (Sanral) can never implement that which has not been passed into law by Parliament.
Secondly, there is the accusation that Sanral did not do public consultation. But a degree of frankness is required here. How many of us respond to invitations to comment on draft laws and policies that may be before Parliament and the executive respectively? Not many. What then unfortunately happens is that when decisions are made, citizens turn around and say they were not consulted.
This was the basis of the argument by the Opposition to Urban Tolling Alliance (Outa) in the courts, which ruled in our favour. At Sanral, we respect the rulings of our courts. It is sad to see Outa and others who are opposed to e-tolling calling into question court rulings, outside our court system, and in the process undermining the integrity of the judiciary.
Thirdly, it must be understood that Sanral has both toll and non-toll portfolios within the 19,704 km national road network which forms its mandate. Of these, only 3,120 km (16 percent) are tolled. The rest (84 percent) is funded through an allocation from the fiscus. The assertion that national roads in South Africa are being privatised is not true. Of the 3,120 km, an estimated 1,800 km are state tolls operated directly by Sanral - and this includes the 201 km e-tolled roads - and less than 1,300 km have been concessioned. At the end of the concession contracts, the concessionaires will hand back these roads - at no cost - to the government in a specified condition.
Our laws make it illegal to take money from the non-toll portfolio and use it to fund the toll portfolio and vice versa. The myth that tolling revenue for the GFIP will end up in the coffers of a foreign company is simply that: a myth. Toll revenue is ring-fenced for the maintenance and improvements of the roads and, more importantly, for the repayment of the debt incurred for the construction of the toll roads.
Fourthly, there is the myth that tolling sections of the Gauteng freeway network will cost individual households upwards of R1,000 to R1,500 a month. How can this be when the monthly tariff has been capped (that is, a maximum monthly amount has been set)? I invite every road user to go to our website and use the e-toll calculator to see how much they will pay. The stories about R1,000 and R1,500 a month will be revealed for the urban legends they are.
In fact, our own survey based on the actual data of 2.5 million vehicles that have gone under toll gantries over a two-month period shows that 83% of people will pay not more than R100 a month provided they have an e-tag and a registered account. Another fact which many people are not aware of is that government has capped the cost at R450 a month for light motor vehicles provided, of course, the motorist is tagged and has registered an account. All the other vehicle categories also have monthly caps beyond which they will enjoy a 100 percent discount. Our survey shows that only 0.59 percent of light motor vehicles will actually reach the maximum cap of R450 a month.
Fifthly, why was this project undertaken? Contrary to the view that the roads in Gauteng were built for the 2010 Soccer World Cup, the reasons were economic. In fact, this project was conceptualised in 1996 when we did not even know there would be a World Cup event coming to South Africa. One of the economic imperatives stated in the policy decision was the need to improve our infrastructure, particularly road infrastructure in Gauteng, the country's economic hub. Moreover, the growing number of vehicles, particularly on Gauteng's highways, made congestion a real cost to the economy.
A study by the Automobile Association showed that motorists were spending 40 hours stuck on the Ben Schoeman highway, that is a whole week of time lost in traffic. We also asked the Graduate School of Business in Cape Town to do an economic viability study of the GFIP. They found that the project would return R8.40 for every R1 spent. It is in this context that we should see the user-pays principle.
It means you pay for the infrastructure in order to enjoy the benefits such as expanded lanes and reduced travel time. However, you do not have to use e-tolled roads as there are alternative non-tolled routes in Gauteng.
Finally, we had some options in terms of funding the project. The project could have been funded through tax-based revenues. However, bearing in mind that our tax base is limited and that Treasury already funds the 84% non-tolled portfolio, this option fell away. The fuel levy was also considered but was ultimately rejected because of the break between usage and payment that it will introduce. Also, government considered it to be unfair to use a nationally raised tax to build one road in one province.
We chose to borrow money from the financial markets by issuing bonds. These bonds are listed on the stock exchange and one can go to the JSE website to see the details. Our debt is estimated at R20 billion and we estimate that we will repay it over 23 years. In addition to servicing the debt, we have to upgrade and maintain the infrastructure.
For every rand collected from e-tolls, only 17c will go towards the cost of collection. The rest of the money goes to initial capital cost of the road upgrades, road maintenance, interest payable on debt and other operational costs related to overhead lighting, the Intelligent Transport System and Incident Management Services.
Australia and Chile provide us with case studies for the success of urban road tolling. If you go to those countries you will see the benefits of open road tolling. In conclusion, I would urge all South Africans to think about the current and future benefits of open road tolling. We have a young population and we all would want to hand them good infrastructure in a thriving economy and prosperous country. The reality is we have to fund that infrastructure. It is not for free. Please go out and obtain an e-tag and take advantage of the discounts.
Nazir Alli is CEO of the South African National Roads Agency Limited. To read Cosatu General Secretary Zwelinzima Vavi's views against e-tolling click here.
To read Cosatu General Secretary Zwelinzima Vavi's views against e-tolling click here.
To read Efficient Group Chief Economist Dawie Roodt's opinion on why e-tolling does not make economic sense _ click here._