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Sanral: Tolling only option to fund N1/N2 upgrades

Sanral’s lawyer told the court that the roads agency does not have the money to upgrade the highways.

The face off between Sanral and the City of Cape Town continues at the Western Cape High Court. Picture: Rahima Essop/EWN.

CAPE TOWN - The South African National Roads Agency Limited (Sanral) has argued that tolling is the only option to fund upgrades to the N1 and N2 highways, because the alternative would be to abandon revamping the roads.

In legal papers before the Western Cape High Court, the roads agency explained why borrowing money and relying on the fuel levy are not viable alternatives.

It's opposing the City of Cape Town's application for a legal review of the Winelands Toll Project.

Sanral's lawyer Chris Loxton told the court on Thursday that the roads agency does not have the money to upgrade the highways.

He said Sanral has two choices; to toll the N1 and N2 or to scrap the project, which would result in the roads deteriorating over time.

Sanral explained in legal papers that its funding is limited to money appropriated by Parliament, tolling and loans.

Funding for road infrastructure, it says, has decreased significantly since 1987.

It added the fuel levy can't meet the agency's funding needs.

But the city believes tolling is not the best option.

It's challenging the validity and lawfulness of the decisions that led to the project being approved.

It said the public will, over a 30 year concession period, pay between R44,9 billion and R48,4 billion in toll fees.

It added motorists will pay nearly three times the tariff that road users' pay for e-tolls in Gauteng.

However, Loxton argued the concession contract has not yet been concluded so these figures quoted by the city amount to speculation.

He dismissed the contention that Sanral had engaged in an irrational process and willfully bound itself to spend money unnecessarily.

About 180 km of highway will be upgraded as part of the project.

In 2013, Sanral was interdicted from going ahead with plans to toll about 180 km of highway pending the outcome of the city's review application.

UNREASONABLE DELAY

Sanral also argued the city's delay in challenging the toll project will set the prospect of upgrades to the N1 and N2 highways back by at least 13 years.

The roads agency's lawyer Bruce Leech told the court on Thursday, the city is trying to reverse several years of planning by attempting to send Sanral back to the starting blocks.

The city launched its legal challenge just short of three and a half years after the N1 and N2 were declared toll roads in 2008.

The city has admitted it could have launched the application sooner, but it's asking the court to condone the delay.

One of the hurdles that the city will have to overcome, as it fights to have the toll project scrapped, is the argument that it waited too long to bring the legal challenge.

On Wednesday, the City's lawyers argued the minister of transport and Sanral's Board failed to consider "key issues" related to the proposed project.

THESE INCLUDE:

* The potential reimbursement for which Sanral would be liable: the concession contract addresses the risk that the National Minister of Transport may determine lower values than the concessionaire is entitled to charge under the concession contract. It provides that if this occurs Sanral must reimburse the concessionaire by an amount that will place the concessionaire in the same economic position that the concessionaire would have been in had the failure, refusal or delay on the part of the Minister not happened. The potential reimbursement is calculated to be R32,8 billion (2010 real values excl. VAT).

*"The financial viability of the project: the fact that the public will, over a 30 year concession period, pay between R44,9 billion and R48,4 billion in toll fees (2010 values excluding VAT).

* The affordability of the toll tariffs: the base toll tariff in the draft concession contract is equivalent to 74 c/km (2013 values, excl. VAT). This is almost three times the tariff of 26 c/km (excl. VAT) of the Gauteng Freeway Improvement Project.

* The fact that tolling is a financially inefficient means of upgrading and maintaining a road. If Sanral undertook the upgrades and operated and maintained the highways on a non-toll basis, the cost would be R22,5 billion (2010 values, excluding VAT) as opposed to nearly R50 billion.

* The macro-economic impact of tolls on the Western Cape.

* The impact of traffic diversions: motorists will avoid the toll roads and the City will thus face an additional burden to maintain secondary roads. Furthermore, the residents in the vicinity of the secondary roads will be adversely affected by the increase in traffic on these roads.

* The social impact of toll.

* The fact that toll would result in unfair discrimination as the residents who are living along the N1 and N2 freeways are predominantly poor and black, given the fact that poverty is still racially distributed.