No ballooning of e-toll costs

Costs of the e-tolling contract have not inflated, says the South African National Roads Agency (Sanral).

It states that there has been no “ballooning of costs” in terms of the original contract awarded for the operations of the Gauteng Open Road Tolling (ORT) project.

Media reports last week, based on a leaked document, said the cost of operating Gauteng's toll roads may be as high as R14 billion, when Sanral said the cost would be R6.22 billion over eight years.

Sanral denied these claims; however, it says the amount of R14 billion will be reached.

“The supposed increased amount of R14 billion reflected in the media is an incorrect interpretation that the original cost for this project has escalated. This amount is an escalation of the original project cost over the 10-year duration for this project.”

The agency adds that the media reports, therefore, wrongly included future estimates related to contract price inflation, as well as added VAT, comparing it to the original contract amount, which excludes VAT, inflation and provisions.

“The original scope of works has never changed. It is unfortunate that the figures in the leaked document were misinterpreted, to reflect an increased amount, different to the original contract amount.”

The application of contract price inflation is in accordance with international best practice as compiled by the International Federation of Consulting Engineers, says Sanral.

The agency explains that the reason for allowing contract inflation to be calculated during the contract period is to ensure the risk associated with inflation is not a risk consideration to tenderers at the time of tendering.

“For the ORT operations contract, the contract period extends to almost 10 years. If contractors were expected to include the estimated future effect of inflation, it is anticipated that such an immeasurable risk that is dependent on a multitude of external factors would be reflected in the tender prices submitted, ie, it would increase the tender amounts. There is nothing sinister or underhanded about the manner in which Sanral managed this contract.”

It also confirms that the effect of inflation and VAT is accounted for in the financial model which is applied to determine toll tariffs. This financial model was recently independently audited by two international auditing companies which concluded that the model is correct.

Therefore, the alleged “ballooning of costs” does not affect the toll tariffs initially announced, or those that may be announced following the conclusion of the public participation process currently under way by the steering committee appointed by minister of transport Sibusiso Ndebele for the review of the proposed toll fees.

Sanral says the contract also makes provisions for related services, costs and equipment that are procured separately in accordance with requirements by the Public Finance Management Act.

Some of these provisions have been procured already through separate tender processes, such as the banking services and costs, as well as electronic tags (e-tags), and the distribution of these e-tags, by retailers.

Also in response to media reports, Sanral states that no private sector company, despite providing valuable technical and financial input to the e-tolling project, has any influence to significantly affect key strategic decisions taken by the Sanral executive and their board.

“The statement, therefore, that Tolplan is 'judge, jury and executioner' in the Gauteng Toll Road Project is simply flawed in the extreme.”

The agency says different consulting teams were involved in the different phases and aspects of the multi-disciplinary e-toll project.

Transportation Innovations developed the policy framework for interoperable e-tolling. The feasibility phase was addressed by toll specialist Tolplan, traffic modelling specialist Goba, Strategic Economic Solutions, Graduate School of Business of the University of Cape Town and Arup.

Design and procurement of the toll system and operations was done by Tolplan, Toll Infrastructure Services, Techso, legal advisor Werksmans, and various international toll specialists, advisors and reviewers.

Democratic Alliance spokesperson for roads and transport in Gauteng Neil Campbell says the R14 billion figure is ridiculous.

"It's quite crazy that we are spending almost as much on the tolling system than the R17.5 billion spent on upgrading the freeways."

He suggests this is why there is a limited opportunity to drastically reduce the proposed toll fees.

"It's a colossal blunder that is going to hurt the economy of Gauteng."

Campbell says all the relevant contracts must be made public and legal advice must be sought to determine if the contracts can be cancelled or renegotiated.

"Sanral must stop pulling the wool over our eyes in this matter."

The e-tolling project is an open road, multilane toll infrastructure that allows tolls to be charged without drivers having to stop. There are no physical booths.

The toll tariffs were initially gazetted at 66c/km for standard light motor vehicles, and R3.96/km for heavy vehicles. However, large-scale public outrage resulted in the fees being suspended and consultation processes were started by the Department of Transport.

The estimated monthly revenue from e-tolling, based on current traffic flow and the proposed fee of 66c/km, is R300 million per month.