It is not normal for a society to be this unequal, hence we cannot adopt a classical approach to our challenges, writes Ralph Mathekga.
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When government decided to go with Sanral's e-toll scheme, the biggest sin by those in authority was their disregard for the grossly inflated costs of road construction and the scheme's exorbitant contracted fees. The public, who were expected to pick up the tab, were left out of the equation and high revenue motives appear to have blinded the scheme's architects from an unexpected public backlash, writes Wayne Duvenage.
The massive increase in road construction costs
for the Gauteng Freeway Improvement Project (GFIP – Phase 1) can never be
ignored when it comes to road funding. The payment of R17,9bn for a 186km
upgrade to an existing freeway was outrageously excessive, even to the layman.
Aside from the acknowledged construction
industry collusion, the clear giveaway of Sanral's blatant or ignorant conduct
to allow the GFIP to be unacceptably overpriced, is evident when reading Sanral's
own "Declaration of Intent – 2005 to 2008" (DOI).
On page 27 of the document, they listed their
intention to expand and upgrade the Gauteng freeway network by 340km, at an estimated
cost of R4,56bn. One thing we can safely presume when Sanral put this document
together, is that they knew the cost of road construction better than any other
When OUTA cross checked Sanral's estimates of
their intended 340km freeway development project with engineering firms that built
such roads for Sanral, along with other road construction data available, the
going rate of a new 4-lane highway (two new lanes in each direction), was
around R14m per km (or R3,5m per lane km). Meaning: Sanral's estimate of
R4,56bn for their planned 340km Gauteng freeway network expansion made
READ: E-tolls – A 5-year debacle without purpose
How then was it possible that three years
later when construction on the 186km GFIP – Phase 1 began in 2008, the project
came with a price-tag of R17,9bn, which was almost four times Sanral's estimate
of a 340km project. Let that sink in for a minute; they paid four times the
estimated cost of a 340km project, for almost half (54%) of that freeway length.
Some of the discrepancy is obviously
attributed to inflation (around R2bn as the DOI estimate was done at 2004
prices) as well as some unexplained extras and higher pricing pressures due to
higher construction demand possibly not contemplated for at the time. But even if
one heaps generous assumptions in Sanral's favour when calculating what the GFIP
project ought to have been (as OUTA has done with qualified people), a price
tag of R9,5bn for GFIP is considered as being generously high.
In short, there is no reasonable explanation
for Sanral's R17,9bn GFIP project to have come in at over R9,5bn. Sadly, we the
public must now pay for this overpriced infrastructure, just as we are having
to pay for overpriced power stations, stadiums and other infrastructure.
flippantly batted away
The second and even more mindless decision
on the GFIP, was government's choice of the e-toll scheme to finance the freeway
upgrade. Sold as being efficient because there was no need for cars to stop to
pay (as one does at conventional toll plazas), this "drive-now-pay-later"
scheme was promoted by consultants and economists who positioned it as a
glorious and internationally sound scheme that would enjoy high levels of
compliance – or so they thought.
Hiding behind a mantra of a "user-pays
principle" to sweep aside criticism, little regard was given to the scheme's
operational challenges and exorbitant costs. Questions about these high costs and challenges
were flippantly batted away by Sanral's belief that the scheme was based on
international best practice. Somehow they overlooked the fact that South Africa's
administrative, regulatory and enforcement environment was very different to
that of London and Singapore.
In presentation after presentation, Sanral's
leadership reflected that the Electronic Tolling Collection-JV (ETC) had won
the 5-year tender at a cost of R6,22bn (the lowest of four tenders), and this
amount was even presented to Premier David Makhura's e-toll Advisory Panel in
November 2014, when assessing the socio-economic impact of e-tolls on the
Little did Makhura's panel or others know
that three years earlier in September 2011, Sanral had already signed the contract
with the ETC-JV at a value of R9,19bn. The "Operation Services"
element formed the bulk of this contracted cost at R8,2bn for five years.
That, folks, is a massive average of
R1,64bn per annum just to administer and manage the eToll collection process,
before R1 goes into the tarmac.
The absurdity of the eToll Operations
Services costs at R1,64bn per annum is realised when one understands that the
GFIP bonds over 20 years only required an allocation of R2,68bn per annum from
Treasury. How was is it possible that the authorities who planned and approved
this decision, found it acceptable for an eToll scheme to be priced at 61% of
funds required for the upgrade?
Existing Treasury allocation mechanisms or
an addition of 10 to 11 cents to the fuel levy were by far the most efficient
mechanisms to finance the GFIP Bonds, of that there is no question.
Fortunately, the public's successful
resistance has forced ETC to do the job at around R640m per annum. That is R1bn
less than what they would have received, had the public rolled over and
submitted to the scheme. And guess what, ETC have managed to do the work at
R1bn less than what they were contracted to receive, without substantively reducing
their staff size or number of customer contact centres.
The obvious question is what would ETC have
done with the additional R1bn per annum, had their desired levels of public compliance
been achieved? Could this be the reason behind government's reluctance to pull
the plug on e-tolls? Could this be why ETC, the Austrian based Kapsch
TrafficCom company, is working hard behind the scenes to convince government to
implement a new carrot and stick approach to revive the dysfunctional scheme?
It's time to move on, ETC, your contract
has expired and your time here is done. Please Mr Nzimande, Mr Mboweni and Mr
President, stop listening to the drivel these people are feeding you. The
public will never succumb to this devious scheme, which has not come close to
achieving its objectives.
The time to pull the e-toll plug was
- Duvenage is chief executive officer of the Organisation Undoing Tax Abuse (OUTA).
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