Sanral is still facing e-toll hole

 

 

NEWS ANALYSIS

As the South African National Roads Agency (Sanral) continues to struggle with the hole that unpaid e-tolls have left on its books, expectations are that the fiscus will have to fill the gap if Gauteng’s e-tolls are scrapped.

Sanral chief executive Skhumbuzo Macozoma said in response to questions from the Mail & Guardian that the refusal to pay e-tolls has affected Sanral’s liquidity over recent years and continued nonpayment will continue to affect it.

“We have used various mechanisms to deal with the liquidity problems and will continue to explore options, including development finance institutional loans,” Macozoma said.

In its latest set of financials released last year, Sanral indicated that a series of steps taken by the treasury to tide it over financially would ensure that it could meet its obligations until July 2019.

The company made a loss of R260-million in 2017-18, but according to the national estimates of expenditure, released with this year’s main budget in February, Sanral could be headed for losses of R7.6-billion for 2018-19.


The treasury said it is in “constant contact” with the department of transport — Sanral’s shareholder — on the matter. The department of transport did not respond to requests for comment.

Sanral’s financial health has again been zeroed in on after a “twar” between Finance Minister Tito Mboweni — who backs the user pays principle — and Gauteng Premier David Makhura, who has promised that the province would scrap the system.

This has again resurrected debate on the viability of scrapping e-tolls, and whether other taxpayers should pay for Gauteng’s roads.

In response to the altercation, President Cyril Ramaphosa has tasked new Transport Minister Fikile Mbalula, and his peers from the treasury and the province, with finding a lasting resolution to the matter. The task team has a deadline of the end of August.

But citizens who do not live in the country’s economic heartland have already started to pay for the public resistance to pay e-tolls as a recent City Press article revealed.

Sanral’s business is divided into its toll portfolio where e-tolls are applied, including the Gauteng Freeway Improvement Project (GFIP), and its non-toll portfolio. Its toll network accounts for 13% of the kilometres in Sanral’s road network and the non-toll portfolio accounts for the remaining 87%.

The bulk of the agency’s funding to build and maintain the country’s road network comes directly from the transport department through the state budget.

During the October adjustments budget under the department’s vote, the treasury allowed R5.75-billion of funds from Sanral’s non-toll portfolio to be shifted to the GFIP.

According to Sanral’s latest financials, this movement of money into e-tolls would allow the agency to remain a going concern and cover its financial obligations until July.

To partly mitigate this reallocation, R3-billion was shifted from the budget for the Passenger Rail Agency of South Africa (Prasa) — in other words, money intended to maintain and upgrade the country’s railways.

In this year’s main budget in February a further R2-billion originally earmarked for Prasa was shuffled over to Sanral. Another R1.5-billion will be given to Sanral in 2020-2021.

Prasa’s bad corporate governance — it has been riddled with corruption scandals and financial mismanagement — and ailing internal capacity, has meant that it has been unable to spend the R18-billion in capital that has amassed on its balance sheet.

As a result, treasury officials have justified the reallocations — saying that “the opportunity costs of allowing funds to sit idle in Prasa while Sanral was facing significant financial constraints were high”.

The payment of e-tolls “fluctuates”, but sits at about 30%. Outstanding money from its toll portfolio stood at R10.8-billion in 2018.

But Sanral had to impair about R6.4-billion — suggesting it believes this money is unlikely to be fully repaid — with about R6-billion being owed to e-toll debtors.

The outstanding debt on Sanral’s toll portfolio is R47-billion. Sanral calculates that about R39-billion is attributable to the GFIP. Some R26-billion in Sanral bonds is held by the Government Employees Pension Fund (GEPF) through the Public Investment Corporation (PIC), according to the GEPF’s latest annual report.

It is not clear how close Sanral is to hitting the wall, but it is unlikely that the government will let it. About R40-billion of Sanral’s bonds are government guaranteed — meaning if it defaults, the treasury will be forced to pick up the tab.

If the e-toll system is scrapped or reduced, the cost of paying the debt raised to build the highways will fall to the fiscus, said chief investment officer of Futuregrowth Asset Management Andrew Canter.

Given the government’s fiscal position, and the demands for support from other state-owned entities, Canter said it is highly unlikely that the Sanral debt will simply be repaid from the current tax base.

Instead, this will most likely come in the form of an increase in the fuel levy, he argued.

“This is a modified user-pays model — whereby the drivers across South Africa pay for Gauteng’s lovely new roads, while possibly denuding other provinces of road upgrades,” Canter said.

But the use of the fuel levy is exactly what e-toll critics, such as the Organisation Undoing Tax Abuse (Outa), have been arguing for since their inception in 2013.

According to Outa’s Wayne Duvenage, had e-tolls been paid for through a 10c allocation from the fuel levy, the project would already have been paid for.

Last week Outa proposed a number of solutions to deal with the e-toll debt — including renegotiating the debt with the PIC; ending the collections contract with Electronic Toll Collections (ETC), which it calls a “massive and unnecessary cost”; and a possible allocation from the fuel levy to pay for e-tolls.

Duvenage argued that government’s persistence that the user pays principle be met fails when users are simply refusing to pay.

“We are not oblivious to the fact that the bonds have to be paid. We know that society has to pay … because of a government-inflicted bad decision,” he said.

But he dismissed the argument that payments from the fiscus — such as a ring-fenced portion of the fuel levy — are unfair. Gauteng residents already pay 34% of the fuel levy, according to Duvenage, and the province “pumps money” into provinces that are “cash negative”.

“We are paying far more for our 180km of highway than we should and that money is going to other provinces,” he said. “This is your economic hub; this is the province that the more productive it is, the more your country earns. We are going to have suck up higher taxes somewhere.”

Duvenage also has little patience for the treasury’s position — that it does not typically ring-fence taxes for specific purposes — as it already ring-fences allocations for the Road Accident Fund.

But Macozoma argued that indiscriminate nature of the fuel levy can burden the poor.

“The bias will always be not to toll, but because of the indiscriminate nature of the fuel levy, it can be an anti-poor form of tax,” he said. “In a country like ours where the majority live far from their places of work, this would definitely affect the working class more as it would be impossible to exclude public transport — their preferred mode of transport.

“Currently, registered public transport [buses, minibus taxis] is exempted [from paying e-tolls], thus cushioning the poor and working class,” Macozoma noted.

Outa is also deeply critical of the administration costs that come with the contract to ETC. Payments of R1.8-billion to ETC over five years amounted to a 61% addition to the financing costs for the GFIP. This is aggravated, says Outa, by the fact that ETC is a foreign-owned firm — meaning profits leave the country.

But Macozoma said that the toll operation costs are still aligned with the 17% anticipated cost of collection.

The toll operations company, ETC, “does not get a percentage of the toll revenue collected” but is compensated in terms of a tendered schedule of rates for services delivered, he said. “The exact amount paid by Sanral per month differs depending on the services provided.”

Macozoma said that there is a “vast difference between revenue (turnover) and profit”.

All operational costs — such as employee costs, administration costs, communication costs, banking fees, facilities (including maintenance and asset refresh), rates and taxes — are paid within South Africa.

“All these are paid in the country to local service providers. Only if a profit is made, is there a possibility that it may leave the country, subject to Reserve Bank requirements and tax regulations.”

Subscribe to the M&G for R2 a month

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

And for this weekend only, you can become a subscriber by paying just R2 a month for your first three months.

Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

Related stories

The Zondo commission of evasion

Obfuscation, non sequiturs, outright lies, senseless babble, curry breaks — and we’re paying for it all

President Cyril Ramaphosa to address the nation next week

The national coronavirus command council will meet next week to discuss ways it can clamp down on the increasing Covid-19 infections. This is after the cabinet met this week to express its concerns

Mbalula’s war with military vets belies the Prasa disaster

The transport minister uses humour, which his targets don’t find funny, to survive in tough times or to divert attention from a problem.

Citizens tired of being played for a fool

The use of a South African Air Force jet by ANC officials without the minister following the required procedures is one such case — and more questions arise on examination of that case

Fikile has a daring plan for taxis

The transport minister presented to the ANC’s top body a proposal to establish a bank for taxi operators and to subsidise the industry

Special Investigating Unit probes Covid-19 tenderpreneurs

The SIU is investigating 102 companies doing business with the provincial government in Gauteng alone
Advertising

Subscribers only

Q&A Sessions: Frank Chikane on the rainbow where colours never...

Reverend Frank Chikane has just completed six years as the chairperson of the Kagiso Trust. He speaks about corruption, his children’s views and how churches can be mobilised

ANC: ‘We’re operating under conditions of anarchy’

In its latest policy documents, the ANC is self-critical and wants ‘consequence management’, yet it’s letting its members off the hook again

More top stories

‘Where the governments see statistics, I see the faces of...

Yvette Raphael describes herself as a ‘professional protester, sjambok feminist and hater of trash’. Government officials would likely refer to her as ‘a rebel’. She’s fought for equality her entire life, she says. And she’s scared of no one

Covid-19 stems ‘white’ gold rush

The pandemic hit abalone farmers fast and hard. Prices have dropped and backers appear to be losing their appetite for investing in the delicacy

Al-Shabab’s terror in Mozambique

Amid reports of brutal, indiscriminate slaughter, civilians bear the brunt as villages are abandoned and the number of refugees nears half a million

South Africa’s cities opt for clean energy

Efforts to reduce carbon emissions will hinge on the transport sector
Advertising

press releases

Loading latest Press Releases…