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
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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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