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ETC and OUTA debate road funding solutions

ETC and OUTA debate road funding solutions

The fourth and final Transport Forum Working Group on road funding in South Africa thrashed out the way forward in Pretoria last week.

The session included a fervid debate between the CEO of OUTA, Wayne Duvenage, and the CEO of Electronic Toll Collection (ETC), Coenie Vermaak.

Duvenage said OUTA did not oppose new or upgraded road infrastructure or even e-tolling technology. “E-tolling works, in environments that are fitting: Singapore, Hong Kong, Mexico. But it also fails in many parts of the world, as it has here,” he said.

“Society ultimately picks up the cost of road funding, so the funding mechanism selected must be in their best interest, at the lowest cost, and with efficient processes. It also needs to be introduced lawfully,” he argued.

Duvenage stated that the Gauteng Freeway Improvement Project’s (GFIP) e-toll funding model relied upon public buy-in and acceptance, accurate information and efficient systems as well as an effective regulatory and enforcement environment.

He said the e-tolling system in Gauteng was already failing before OUTA launched it’s e-toll defence umbrella in October 2015.

“Road funding is impacted by administration costs. Had the public rolled over and complied, ETC could have received R8.2 billion for the five-year e-toll collection contract period.”

He said the country could not ignore the effect of Zumanomics (the inflated costs of construction in South Africa after 2007), when discussing road financing. “SANRAL’s original GFIP construction cost of R17.9 billion was grossly excessive, lacked transparency and should have cost no more than R10-billion,” he said.

According to OUTA, finding solutions for road funding in South Africa requires that road construction costs are free from collusion and corruption. “Absolute transparency is necessary and the country must exercise caution when it borrows against inflated and meaningless asset valuations,” Duvenage added.

He believes all existing and possible new road funding mechanisms need to be explored. These include taxes, levies and other user-pay methods.

“The e-toll scheme is dead and barely covers the toll collection costs. To try and revive a defunct scheme is senseless and to keep suggesting that e-tolls is the only user pays scheme is incorrect,” he continued.

To move forward, OUTA suggests that the country acknowledge that the current e-tolling scheme cannot address the GFIP debt. It says the bonds with the PIC also have to be renegotiated.

“In the worst case scenario, the R47 billion debt must be funded with a hybrid of national taxes and a 15c increase in the fuel levy. Government should also establish a Road Funding Committee and introduce a Transport Regulator,” Duvenage suggested.

He said the user-pays principle in South Africa is inconsistently applied.

“If you want a drive-now-pay-later system to work in South Africa, you have to have the systems and the processes in place to get the compliance levels to where they need to be.

“Solutions need to be found; this won’t be done by beating a dead horse,” he concluded.

Vermaak hit back by saying it was clear that a fuel levy alone would not be enough to support and build new roads. He said that the government needed the private sector to assist with building the required infrastructure.

He took considerable exception to what he described as the promotion of lawlessness in the country. “There is an additional R16-billion interest bill that has to be paid, which government considers unnecessary and wasteful expenditure.

“The reason phase two and three of GFIP are on hold and the fact we have a R16-billion interest bill is because we have people promoting lawlessness. South Africa has very clear case law. The High Court ruled that the GFIP is legal and that a proper process of public consultation was followed.” He added that the Auditor General and Public Protector had also greenlighted the system.

Vermaak bemoaned OUTA for saying it wanted to hold ministers and the government to account in terms of how it managed taxes and dealt with corruption and collusion, but at the same time, wanted to decide which laws were and were not applicable to it.

“Citizens need to take responsibility and be aware of the harm they are causing by stopping the building of road infrastructure which would create jobs and grow the economy,” he stated.

Vermaak argued that for Gauteng to be a sustainable city it needed to reduce traffic congestion, improve the quality of life, support economic growth and protect the environment. In his opinion, keeping Gauteng - the economic powerhouse in Africa - moving forward required that the multi-phase GFIP continue.

“If we want to find solutions and move the country forward, we have to engage in a constructive way. This explains our decision to sponsor the Transport Forum Working Group sessions on road funding,” he said.

“Government cannot afford to pay for roads on its own. It is unable to meet the funding requirements of basic services through general taxation. We have to create alternatives and partnerships with private businesses.”

He all but dismissed the fuel levy as a road funding solution, describing it as a diminishing tax that favours the rich. “The user-pays method we use has to be fair and equitable and cognisant of the socio-economic realities we are faced with in South Africa today.”

Vermaak argued that ETC favoured the user-pays principle. “Those who receive a direct benefit for services should pay for them. Roads are not for free. If we want world-class services, we must pay for world-class services. We should be proud of the e-tolling system we have.”

Vermaak believes that non-compliant road users have taken the view that their historic debt is stopping them from becoming compliant.

“We have made proposals to government. We’ve said to them we need to find a way for people to settle their historic debt, without burdening them financially. If we can write off a percentage of their historic debt, together with a strict enforcement plan, the system will immediately start working. Compliance levels will go up and then we’ll be able to fund phase two and three of the GFIP, create jobs, build new infrastructure and facilitate much-needed investments,” he said.

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