New e-toll dispensation highlights financial risks of SANRAL’s proposed Winelands Tolling Project
20 May 2015
Deputy President Cyril Ramaphosa’s announcement of a new dispensation for e-tolls in Gauteng confirms the City of Cape Town’s assertion that SANRAL’s proposed Winelands Tolling Project poses a huge financial risk to the National Treasury.
Due to public resistance, the National Government was forced to adopt a new hybrid model for e-tolls that effectively halves the price of travel on the Gauteng Freeway Improvement Project (GFIP) roads. The National Minister of Transport has reduced the toll fees several times before already and the National Treasury has had to foot the bill for the shortfall.
The announcement this afternoon means that Treasury will have to provide even more funding for SANRAL.
An even bigger financial crisis awaits SANRAL and the National Treasury in Cape Town, should SANRAL be allowed to continue with its proposed tolling of the N1 and N2 freeways. This is why the City applied and obtained an interdict that prevents SANRAL from signing the concession contract with the Protea Parkways Consortium (PPC) until such time as a court has reviewed the decisions authorising the Winelands Tolling Project.
SANRAL failed to disclose the grave consequences of the reimbursement clause in its Concession Contract with PPC to the SANRAL Board and the Transport Minister. The contract addresses the risk that the Minister may determine lower toll tariffs than the Concessionaire is entitled to charge under the Concession Contract, or may refuse or delay approving a change in the toll tariffs. The purpose of this clause is to protect PPC against what is now happening in Gauteng with regard to e-toll and the subsequent lowering of toll tariffs due to the public outcry.
According to this clause, should the National Minister of Transport determine lower toll tariffs than PPC is entitled to charge under the concession contract, SANRAL must reimburse the Concessionaire by an amount that will place the Concessionaire (PPC) in the same economic position that the Concessionaire would have been, had the failure, refusal or delay on the part of the Transport Minister not occurred.
In terms of this clause, SANRAL would have to divert public funds meant for the construction and maintenance of national roads to fund PPC’s profit expectation – PPC anticipates toll revenue in the region of R48 billion over the concession period (2010 values, excluding VAT). The reimbursement clause also contradicts SANRAL’s presentation to the Transport Minister that the proposed Winelands Tolling Project would require ‘no financial contribution from the State’.
Importantly, GFIP charges a toll tariff of 30 c/km for light vehicles (VAT included). PPC’s proposed base toll tariff for light vehicles is 84,59 c/km (VAT included, 2013 values). PPC’s rate, therefore, would require a 65% reduction in order to be equivalent to the GFIP rates – this was before today’s announcement.
The GFIP toll tariffs for light vehicles are now capped at R225 per month; PPC’s discount scheme does not make provision for any cap.
PPC, unlike the GFIP, does not make provision for specific time-of-day discounts.
The GFIP effectively allows for a 100% reduction for public transport while PPC only allows for a 50% reduction for public transport.
The GFIP experience has put SANRAL in a precarious financial position. Should the Winelands Tolling Project go ahead and the Minister of Transport forced to reduce the proposed toll tariffs, SANRAL would be forced to raise substantial additional funds to reimburse the Concessionaire.
This will very likely have a negative impact on SANRAL’s finances, creditworthiness and ability to maintain the country’s national roads.
Statement issued by Councillor Brett Herron, Mayoral Committee Member: Transport for Cape Town, City of Cape Town, May 20 2015
