BUSINESS INTELLIGENCE
certain assumptions in place and the environment changes, for example a power station or mine opens along the road, the dynamics will change as traffic increases, reducing the life of the road. So too, the reverse will happen: if an existing facility or mine closes along the hypothetical road, the life of the road will be extended as the traffic lessens.“ If the assumptions were correct, certain roads are designed to carry the heavy traffic,” he says and adds,“ If the original design did not account for the increased traffic, then yes, they can be totally under-designed” and may result in extensive damage. Given the info above and the fact that without finances SANRAL is unable to conduct repairs, the obvious question arises: where has the money come from in the past and where will it come from in the future?
SANRAL’ s budget
The engineer explains that SANRAL’ s budget has two main parts to it.“ There is an allocation that comes from National Treasury, via the Department of Transport, and there is toll funding that is generated by the toll financing mechanism where we sell bonds and so on. All taxes collected by the fiscus, whether it be the fuel tax, VAT or PAYE, all goes into the Department of Finance’ s vault. From there, allocations are made across the board, from health and education, to roads. So, it’ s important to understand that the fuel levy is not specifically allocated to use on roads,” he stresses.“ If you look at the current mediumterm expenditure budget, you’ ll notice that what has been allocated to roads and road-related functions— including bus subsidies, traffic officers, and more— exceeds the generated revenue from the fuel tax.“ People are inclined to simply see what Treasury allocates, without understanding where the money comes from and where it goes,” he adds with a degree of exasperation and stresses,“ There is no spare cash lying around for Treasury to use on roads! We have an ongoing challenge that we cannot repair each and every road as
38- CEC June 2018
SANRAL
While Louw Kannemeyer, SANRAL’ s recently appointed engineering executive, makes a strong case for the adoption of the e-Tag, there is still strong public distrust for SANRAL.
“ If you base your future income purely on fuel sold, you run the risk of major miscalculations when determining revenue generation.”
and when required— we do not have the available budget.” He emphasises that preventative maintenance is a priority, with any budget that remains thereafter going into capex expenditure, whether to strengthen or reconstruct existing roads, with the last on the list being the building of new roads. So back to e-tolls and why we possibly need to reconsider them as a funding model if we are to get our road infrastructure back on track and if we are serious about improving our economy. Building new roads can only occur from private sector financing, namely toll roads. These comprise SANRAL toll roads where it sells or issues the bonds:“ We get the money, we appoint the private sector contractors to build the roads, and we collect the toll revenue; we are the direct owner of the toll road. The other toll roads come under concessions, such as Bakwena or Trans Africa Concessions,” Kannemeyer explains.( The latter is a partnership between the governments of Mozambique and South Africa, and a private company, Trans African Concessions.)
How concessions work
SANRAL puts out a tender for a section of the national road network to the private sector. The private sector then obtains the financing to fulfil its obligation to maintain and undertake improvements to the road, to the standard determined by SANRAL, for a 30-year period. In return, the tolls collected over that period are theirs to keep. None of this money goes back into the state coffers. In terms of the concession agreement, the toll tariffs are set at the outset and form the bases of how the companies tender against each other; determining how the facility is managed, how the requirements are met, and at what price for the entire concession period— at the lowest cost.“ The one with the lowest toll tariffs is awarded the concession,” Kannemeyer adds. From the day the company is awarded the tender and appointed the concessionary holder, the toll tariffs can only increase in alignment with the consumer price index( CPI), yearto-year. By making it a concession, the cost comes off SANRAL’ s balance sheet, as does the responsibility for that section of road.“ For a road to be selected as a concession, you need to have roads with relatively high traffic volumes to ensure an acceptable toll, while still being financially viable,” he adds.
Understanding the fuel levy
Kannemeyer explains that even if the fuel levy was ring-fenced specifically for road infrastructure, modern vehicles are becoming increasingly fuel efficient, down from an average fuel consumption of > 10l per 100km travelled about 15 years ago, to the
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