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E-tolls face billions in debt

Recently-released figures reveal how unsustainable Gauteng's electronic tolling system is, but Sanral denies there are any problems.

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 04 Apr 2014
A close look at recently-released figures shows Sanral's collection rate is, at best, 31.5%.
A close look at recently-released figures shows Sanral's collection rate is, at best, 31.5%.

Less than a third of all motorists who are being invoiced for driving on Gauteng's electronically-tolled freeways are actually paying for the privilege, which has resulted in the roads agency being owed more than half a billion rand to date.

Digging into the numbers provided by South African National Roads Agency (Sanral), and the latest figures released by transport minister Dipou Peters, ITWeb has calculated that, in a worst case scenario, only a quarter of all motorists are paying their debt, which will leave the agency several billion in the red by the end of its financial year.

Sanral argues it does not have a problem with cash flow, and says 35% of non-registered road users pay up within seven days. The agency has, in fact, described this as a "high level of compliance".

However, once accounts are handed over to the agency's Violation Processing Centre (VPC) - which happens after the seven-day grace period has lapsed - only 9.21% settle accounts.

As a result, the agency has handed over R543.5 million for collection, of which only R50 million has been recovered by the VPC.

Its low collection rate leaves e-tolls in an untenable position, and shows the system is not sustainable and will fail, says the Opposition to Urban Tolling Alliance (Outa).

Behind the numbers

Sanral was owed a total of R702.2 million at the end of February, as only R250.8 million was paid against issued invoices of R953 million. Of the amount due, R543.5 million was handed over to the VPC for collection.

Some R543.5 million worth of invoices were transferred to the Violations Processing Centre on 1 March, says transport minister Dipuo Peters.
Some R543.5 million worth of invoices were transferred to the Violations Processing Centre on 1 March, says transport minister Dipuo Peters.

This means Sanral was still carrying R158.7 million on its books, which would be the amount that falls into the seven-day grace period. Extrapolating this over 52 weeks in a year, ITWeb projects Sanral is likely to issue invoices worth around R8 billion by year-end.

Answering a recent parliamentary question, Peters noted Sanral spent R54 million to collect the R50 million debt, which included R32.7 million for post and printing of invoices. Peters said the cost of the debt collection amounts to 4% of revenue.

Not paying

With the figures provided by Sanral and Peters, it is possible to calculate a payment compliance rate, although there is no clarity as to whether the R50 million pulled in by the VPC falls into Sanral's collection of R250.8 million.

If the R50 million is an additional amount, 31.5% of motorists are settling their bills. If, however, this is already taken into account, only 26% of Gauteng freeway users are stumping up. Extrapolated against the projected revenue, e-tolls will be anywhere between R6 billion and R5.5 billion in the red at the end of the year.

Justice Project SA chairman Howard Dembovsky says at the very least - based on the R500 million outstanding during a lower revenue period - users of the electronic highways will owe R2 billion by the end of the year. "Can we really afford to have R2 billion owing on this thing and it's going to survive?"

This, say commentators, is an unsustainable situation.

Dire straits

Outa chairman Wayne Duvenage - who concurs with ITWeb's calculations - says "any business whose administration costs amount to more than their income is in big trouble. They are not even covering the costs of collection, which ought to be 10% or so of the revenue needed to pay for the bonds. Nothing is going into the tarmac."

At a 31% collection rate, any other business would be bankrupt overnight, says Justice Project SA chairman Howard Dembovsky.
At a 31% collection rate, any other business would be bankrupt overnight, says Justice Project SA chairman Howard Dembovsky.

Duvenage notes Sanral needs to collect around R260 million a month to service its debt, and recently lowered its aim to R200 million a month. "They're not achieving R100 million a month. A failure to be sure."

In addition, Duvenage speculates Sanral's postponement of its bond issues was a way to avoid been downgraded by ratings agencies after the bad publicity surrounding its collection rates.

Dembovsky adds that even at a 31% collection rate, any other company would be bankrupt overnight, as this is not viable for business. Absa Investments analyst Chris Gilmour adds the figures paint a "stark reality" of Sanral's e-toll situation and that the collection rate is not tenable.

Gilmour adds the payment rate gets worse once accounts are handed over to the VPC for collection. He says the cost to collect against someone who has been through a handful of gantries is too high, and just by not paying, the system will be crippled.

Ian Ollis, the Democratic Alliance's shadow minister of transport, says Sanral initially claimed in court papers in the Outa case, which the alliance eventually lost, that it needs 93% compliance for the system to succeed.

"They have recently abandoned that claim and now claim that their budgeted income is R200 million per month. This, the minister claims, they are exceeding," says Ollis.

Sanral's collection costs are too high and will cripple the system, says Absa Investments analyst Chris Gilmour.
Sanral's collection costs are too high and will cripple the system, says Absa Investments analyst Chris Gilmour.

However, it concerns him that there is such a large number and amount of unpaid debts. "This culture of non-payment would sink any system."

Ollis says the recent strongly-worded threats in the media of jail time for those who do not pay may be an attempt to get the e-toll system to work. "However, not a single person has been prosecuted thus far."

Sanral FD Inge Mulder says in a statement: "There is no cash flow problem, but possibly a misunderstanding. In fact, we are satisfied with both registrations and payments made by non-registered users. We have always trusted that the public will do the right thing and pay.

"This high level of compliance [35% by of non-registered road users within seven days] has also meant that we are on track to meet our debt obligations."

Sanral was provided with ITWeb's calculations and the commentators' conclusions, but did not respond.

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