E-tolls: Zuma opted for economy over election
President Jacob Zuma took more than just a calculated risk this week by signing into law the controversial Transport Laws and Related Matters Amendment Bill, commonly known as the e-tolls Bill.
It not only saved the South African National Roads Agency [Sanral], which has debt it needs to repay, but also potentially the government's reputation because a prolonged delay in signing the Bill would have had consequences for the economy.
The Act will provide for the electronic tolling of the country's roads. Government and ANC sources said that, though the Bill was unpopular among the ANC's own Gauteng membership and its alliance partner Cosatu, in the long run, not signing the Bill would have been more costly.
"It's possible that there were people from the ANC who tried to push the president not to sign, but remember that when Sanral is downgraded it has consequences for everyone and other government institutions such as the treasury, who are the guarantors of Sanral's debt," said a senior government official who did not want to be named.
The official said it would have been difficult for the government in the future to borrow money because financial institutions would say: "Why must we believe you when you have a history of signing these bonds and not honouring them?"
Another ANC source in Parliament said Zuma's signing of the Bill was a risk worth taking to save Sanral.
The source was surprised by Zuma's move this week, saying that even the ANC's political committee had been informed recently that the Bill would be sent back to Parliament for further work.
"But I suppose there's too much at stake."
Earlier this month, ratings agency Moody's downgraded Sanral's global long-term issuer rating from Baa2 to Baa3, and its national scale rating from A2.za to A3.za. It also placed the agency on review for a further possible downgrade.
The failure to implement e-tolling had led to a "significant deterioration" of the road agency's cash flow, which it needs to pay off the extensive debt it incurred to complete the Gauteng Freeway Improvement Project, Moody's said.
Sanral took on R20-billion in debt to finance the improvement project, half of which is guaranteed by the government.
It had, however, increased this debt stock to R36.2-billion as of March 2013, according to Moody's.
The ratings agency expected that debt levels could increase even further to about R39-billion by the end of the 2014 financial year.
"E-tolling was initially expected to begin in June 2011 and its revenue was expected to absorb the company's mounting debt-service costs," Moody's said.
The resultant financial strain on Sanral casts doubt "on the company's financial health in the medium term", the ratings agency said.
Last month, the Mail & Guardian reported that Zuma was unlikely to sign the e-toll Bill into law before elections next year because of a procedural flaw, which required the legislation to be sent back to Parliament for consideration.
Sources had claimed that Zuma's lawyers had advised him against signing the Bill because it would not survive a Constitutional Court challenge.
The problem, according to M&G sources, is the tagging of the legislation as a section 75 Bill – that is, a Bill of national competence.
Tagging is used by Parliament to classify Bills for the purpose of determining the procedure to be followed in enacting a piece of legislation.
The Bill should have been tagged as a section 76 Bill, which would make it a Bill of provincial competence, so that public hearings in the provinces could have been held.
This week, a senior government official said Zuma had received the advice that the Bill was wrongly tagged from outside lawyers, not from the state's.
"After that advice, he went to check with others; Parliament's lawyers and state advisors were always confident that it was correctly tagged," the official said.
The source added: "If he had not signed the Bill in order to win the elections, it would have been even more costly for the ANC.
"This would have had consequences for the economy more generally. If you weigh the short-term benefits of not signing the Bill because of elections against the long-term implications of not servicing debt, you will see that the president had to take the right course of action."
Zuma signed the Bill in the same week that the media reported on an ANC parliamentary caucus strategy document that proposes that the party in Parliament should prioritise Bills that "noticeably enhance" its profile in the eyes of the electorate ahead of the 2014 general elections – it said draft legislation that had the likelihood of raising controversy or could be used against the ANC in the elections campaign be held over.
A senior ANC MP said the understanding was that, though the e-tolls Bill and the Protection of State Information Bill had already been passed by Parliament, Zuma would not sign them off at least until after the elections.
The transport department's Tiyani Rikhotso said the department would be publishing the final toll tariffs and regulations soon.