Government's review committee, set up by president Jacob Zuma to examine state-owned entities, has proposed a road infrastructure model that is at odds with government's own stated policy, just as Gauteng residents are set to fork out to drive on freeways.
The controversial e-tolling of freeways around the province, SA's economic hub, is nearing implementation as the final pieces of paperwork are making their way through the regulatory process. The entire process has been dogged by controversy and legal wrangles, while the state has been accused of not being transparent enough.
Yet, just as government gets ready to start charging users electronically in Gauteng, the Presidential Review Committee on state-owned entities has thrown the principle of user pays - the state's argument for electronic tolling - into confusion. The report's recommendations will be further investigated before the state implements all or any of them.
The report, released yesterday by minister in the presidency, Collins Chabane, recommends that "funding of social infrastructure, including roads, should have less reliance on the 'user pays' principle, and more on taxes".
It says there should be different funding models for economic and social infrastructure, and while economic infrastructure should be funded by users, where relevant, it defines roads as social infrastructure.
In addition, the emphasis on taxes and "user pays" funding models should be reviewed, moderated and blended with other options, says the report. It adds the state must "signal unambiguously to financial markets its implicit backing of this form of SOE [state-owned entity] debt because SOEs are strategic".
The report's recommendations are at odds with the South African National Roads Agency's (Sanral's) stated position that the user pays principle is the only way to go.
Business as usual
Coincidentally, transport minister Ben Martins yesterday presented his department's budget vote and said it would continue implementing the user pays principle, although in a way that "does not have a crushing effect on the working class and the poor".
Martins said the department is wrapping up the National Transport Master Plan before it is submitted to Cabinet. The plan aims to further position transport as an enabler for social and economic development, by rolling out infrastructure and services that respond to the needs of all South Africans and ensures SA meets the Millennium Development Goals, he said.
The alignment between the plan and the National Development Plan (NDP), which sets out critical national policy goals to be achieved by 2030, includes implementing the user pay principle without having an overwhelming effect, said Martins.
Transport has been allocated R42.3 billion for the 2013/14 financial year, of which R3.5 billion will go to Sanral for current operations, and R7 billion for capital infrastructure. "Within the prevailing economic climate, the fiscus alone is not able to finance the current infrastructure backlog in SA."
SA has a total road network of 750 000km, of which 17 000km is managed by Sanral, which will continue to roll out non-toll roads over the next three years, said Martins. He noted that the non-toll road network accounts for 83.1% of SA's national roads, which is funded by the fiscus.
Sowing confusion
Ian Ollis, the Democratic Alliance's shadow transport minister, says the committee's recommendations are a "complete about-turn" on government's stated position that road upgrades should be funded through the user pays principle.
Sanral has also proposed e-tolling of the N1/N2 route in the Winelands, which has been halted by a court interdict pending the city's review of Sanral's e-tolling plans in the province. Ollis says tolls should rather be funded through the fuel levy, which is more transparent than through general taxes.
Ollis notes there should also be a roads fund to ring-fence the fuel levy, which he argues gets spent on other items during the "good years". The party has argued that a Sabita study reveals government only spent an average of R7.4 billion per year on road construction and maintenance between 2003 and 2008, while income from the fuel levy over the same time averaged more than R21 billion.
However, Sanral has argued that the fuel levy is not sufficient to cover SA's road infrastructure needs, pointing out that the GFIP alone cost R20 billion, and the N1-N2 Winelands Project requires an estimated R10 billion or even more.
"Add to that the N2 Wild Coast Highway Project and you have pretty much depleted the fuel levy. And that is just on three projects in a four provinces. We welcome the fuel levy but it is simply insufficient as the only source of funding," said spokesman Vusi Mona.
Rethinking
However, another solution is on the cards, as the committee has called for "other diverse policy options" to generate funds to moderate the use of taxes and tolls to fund infrastructure. It adds that government needs to show unambiguously to financial markets that it backs the debt raised.
Ollis says the reason for this policy statement is that Sanral is looking financially bad as it accumulated debt building the project, but is not getting any money from tolling, which makes it look risky and affects its ability to get funds.
Sanral relies on e-toll revenues to service the debt that it incurred to finance the Gauteng Freeway Improvement Project. Last year, rating service Moody's said the postponement of tolling was credit negative for the agency, and the government may have to step in and service the debt.
Ollis says the recommendation shows government is moving in the opposite direction and there is now a disconnect between the policy shift and what is happening on the ground. He says this creates confusion, and government will have to step in and resolve the issue as the confusion is not helpful.
Wayne Duvenage, chairperson of the Opposition to Urban Tolling Alliance (Outa), which took government to court in a bid to stop e-tolls, arguing the process was not transparent, says the recommendation talks right to what the association has been saying.
Duvenage says the entire country benefits from economic activity in Gauteng and roads should not be tolled as they are necessary for society. "It supports our case. It's not too late to stop the bus."
Outa lost its court bid, but has been granted leave to appeal to take the High Court ruling to the Supreme Court of Appeals, although the matter has yet to be heard.
Mona did not return calls requesting comment, and transport spokesperson Tiyani Rikhotso said he could not speak on the review findings.
Harold Maloka, spokesperson for minister in the Presidency, says while the report has been accepted by Cabinet, an inter-ministerial committee still has to probe the recommendations and recommend to Cabinet which ones to implement.
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