City discloses how SANRAL’s tolling project will not benefit road users
The City of Cape Town today, 28 April 2015, served our replying affidavit in the Western Cape High Court, revealing how little of every Rand collected in toll fees on the N1 and N2 freeways will benefit the road user should the South African National Roads Agency (SANRAL) go ahead with their Winelands Tolling Project. Read more below:
It has always been the City’s position that SANRAL should use their own funds to maintain the N1 and N2 freeways. We have also stated publicly that tolling is an overly expensive method for funding the construction of road infrastructure and that the user-benefits are usually miniscule in comparison with the concessionaires’ profits.
The reports from independent experts about the Winelands Tolling Project that are included in the City’s replying affidavit, confirm these views.
These reports also refute SANRAL’s claims about the so called ‘benefits’ of the tolling project, listed in full page advertisements in today’s newspapers.
Contrary to what SANRAL is saying in these expensive advertisements:
It is the preferred bidder – the Protea Parkways Consortium (PPC) – that proposed the tolling strategy for the Winelands Tolling Project. This project was never approved by anyone in Government other than SANRAL;
PPC’s own tender documents reveal that the revenue (not the profit) that PPC stands to earn from the project will be R48 billion;
toll paying road users would pay about R2 in tolls for every R1 of benefit to them (i.e. toll payers would be the losers if the project is to be implemented);
it is essential that the toll tariffs are discussed now before SANRAL is allowed to sign a concession agreement, as we have seen in Gauteng, once the money is spent, and legal commitments made, the options are limited.
It will be much cheaper and cost effective for SANRAL to fund the upgrades and maintenance of the N1 and N2 freeways themselves instead of implementing a private tolling scheme, as we explain in detail in our replying affidavit.
We have said before that SANRAL’s proposed tolling of the N1 and N2 freeways will be detrimental to the residents of the Western Cape and the province’s economy, in particular to those sectors that rely on freight services such as the agricultural sector.
In preparing our review application of the Winelands Tolling Project, the City commissioned ten experts to analyse and report on specific issues arising from the information and bidding documents made available by SANRAL to the City during the proceedings relating to the project.
The City’s experts conducted various tests to assess whether the project would be of benefit to road users with regard to the expected toll revenue that the project will generate:
The City has ascertained that if SANRAL financed the Winelands Tolling Project as a non-toll operation there would have been a saving of approximately R32,25 billion (2010 value in real terms). This huge saving is because if the project was to be funded as a non-tolling operation, it would cost R22,5 billion instead of the R54,76 billion under the private toll concession as proposed by the Protea Parkways Consortium (PPC) which SANRAL has selected as the preferred bidder or concessionaire. In real terms, financing by private/toll involves expenditure amounts to 243% of the public/non-toll scheme.
Of each Rand paid in toll fees, only 29c will be spent on construction, maintenance and operational works which will benefit road users. If other non-toll items and the cost of public finance are added, then the construction, maintenance and operational works which will benefit road users would be equivalent to 41c of each Rand of toll revenue in real terms.
In real terms, PPC’s pre-tax profits which include a combination of shareholder returns and corporate tax amount to 39c of each Rand paid to toll.
PPC’s total projected revenue from the Winelands Tolling Project is R44,9 billion in 2010 real terms.
Furthermore, should the National Minister of Transport determine lower toll tariffs than PPC is entitled to charge under the concession contract and approve a toll tariff which is the same as the Gauteng Freeway Improvement Project (GFIP), SANRAL would have to reimburse the concessionaire an amount of R43 billion (inclusive of VAT in 2015 real terms).
Meanwhile it would cost SANRAL R33,28 billion (inclusive of VAT in 2015 real terms) to construct the upgrades and maintain and operate the highways, including the financing costs, over a period of 30 years as a non-toll operation. This means that if the Minister of Transport reduces the toll tariffs proposed by PPC to the same levels as those in Gauteng, Cape Town road users will have to pay the toll fees and SANRAL will have pay PPC more than it would have cost SANRAL to do the upgrades without any tolling. That doesn’t make any sense.
The City’s experts have also ascertained that on SANRAL’s experts’ own version that toll paying road users would pay about R2 in tolls for every R1 of benefit to them. This clearly demonstrates that the toll payers would be the losers if the project is to be implemented.
Following on from the Supreme Court of Appeal’s ruling on 30 March 2015, the City has already revealed that should the tolling of the N1 and N2 freeways go ahead, residents from the Western Cape and visitors to this region will pay toll tariffs that are nearly three times that of the e-toll tariffs that are being charged by the GFIP in Gauteng.
We have seen the public’s opposition to e-toll and the huge costs that is being incurred by trying to wring the toll tariffs from the road users in Gauteng.
The City is convinced that we have a very strong case and we are looking forward to meeting SANRAL in the Western Cape High Court on 11 August 2015 when our review application will be heard. In the meantime we would urge SANRAL to stop wasting taxpayers’ money on expensive advertisements to mislead the public.
Statement issued by Councillor Brett Herron, Mayoral Committee Member: Transport for Cape Town, City of Cape Town, April 28 2015
