National Treasury clarifies why Gauteng residents foot bill for GFIP

National Treasury has clarified why Gauteng residents – and not just motorists in the province – will be required to pay for the cost of the controversial Gauteng Freeway Improvement Project (GFIP) despite these roads being assets in the books of the South African National Roads Agency (Sanral).

Sanral spokesperson Vusi Mona baulked at responding to this question, indicating that it should be directed to Finance Minister Enoch Godongwana.

ALSO READ: Call for ‘proper audit’ as Outa suspects Gauteng govt ‘overpaying Sanral for GFIP bond debt’

National Treasury said this week that Gauteng will only be paying for the GFIP backlog maintenance, with the maintenance costs going forward paid by the national government.

“The reason is that the province does not want to use the tools (e-tolls) put in place by national government.

“Therefore, if the province does not want e-tolls, then they should pay for it. The national policy has not changed,” it said.

GFIP payment obligations

Gauteng Premier Panyaza Lesufi announced in January that the GFIP e-toll gantries will be switched off by 31 March.

ALSO READ: Gauteng to contribute R12.9 billion towards the decommissioning of e-tolls

Gauteng Finance MEC Jacob Mamabolo confirmed to Moneyweb this month that the provincial government had reached an agreement with Sanral on the payment of R4.1 billion towards the GFIP maintenance backlog over four years.

However, Mamabolo indicated when tabling the Gauteng budget that the payment by the province of its 30% portion of Sanral’s GFIP debt and interest obligations, which amounts to R12.9 billion, would be left for the new Gauteng administration to finalise after the 29 May general election.

Mamabolo said Gauteng has approached financial institutions to raise the money required to honour its contractual obligations.

This follows Godongwana’s announcement in his Medium Term Budget Policy Statement speech in October 2022 that to resolve the GFIP funding impasse, the Gauteng provincial government had agreed to contribute 30% to settling Sanral’s debt and interest obligations while the national government covers 70% of this debt and interest obligation.

ALSO READ: Sanral to issue a new tender for GFIP e-toll system

Godonwana said Sanral’s GFIP debt was R47 billion.

He said Gauteng will also cover the cost of maintaining the 201km and associated interchanges of the roads.

Mamabolo said the R4.1 billion in GFIP maintenance costs was payable over four years, and these funds would only be used for rehabilitation and refurbishment of the GFIP roads, with Sanral still responsible for the operational maintenance of the GFIP, such as the lights and grass cutting.

“In four years, we are done. Then Sanral takes over the next phase,” he said.

Differences of opinion

However, there are some significant differences of opinion between Gauteng, Sanral and National Treasury about some key aspects of the agreement reached between these entities.

Mamabolo told Moneyweb in an exclusive interview that Gauteng was initially required to pay Sanral R5.6 billion in GFIP maintenance backlog costs, but after engaging with Sanral, this amount was reduced to R4.1 billion.

ALSO READ: E-toll debt collection from motorists still on the agenda

He further confirmed the GFIP road maintenance costs were “added” to the offer made by Lesufi to National Treasury to resolve the GFIP e-toll funding impasse.

However, Mona said Sanral is unaware of “any other amount except the amount of R4.1 billion provided by Sanral to the Gauteng government”, while National Treasury claimed the GFIP maintenance backlog costs were “always part of the arrangement”.

Mamabolo said it “is right” to question why the Gauteng province is required to pay for roads that are assets in the books of Sanral and also has to raise funds to pay for GFIP construction costs.

“But let’s look at the quality of the roads and the purpose they serve nationally.

“These are the ‘shoulders’ on which stands the South African economy,” he said.

Mamabolo added that as the country’s economic hub, Gauteng has responsibilities and obligations and is “willing to share”.

‘Economy is suffering’

He said the GFIP project was “not well thought out” and that proper risk analysis was not done on what would happen if the e-toll payment system did not go well.

“Fine, that has happened, but the roads are here. These are national assets. We can’t be going back and forth. The economy is suffering because of that and it’s only people who suffer,” he said.

Mamabolo was critical that a GFIP policy announcement was made, and that in the next two years the policy was not implemented.

“Sanral can’t move. It wants money. It wants security. It is held back by the challenge of this,” he said.

‘Lack of understanding’ of Sanral debt

National Treasury said a Moneyweb question about why there has not been any reduction over the years in Sanral’s GFIP debt of R47 billion despite National Treasury making significant additional allocations to it to service its GFIP bonds “shows a lack of understanding of how Sanral’s debt is structured”.

“One cannot separate the different types of debt in Sanral. Sanral has other debt apart from GFIP. The GFIP issue impacted on the rest of Sanral’s balance sheet and their borrowing abilities.”

National Treasury also confirmed these additional allocations to Sanral were used only to service the interest on the road agency’s GFIP bonds.

On Tuesday, Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage took issue with National Treasury’s comment on this issue.

Duvenage said National Treasury has since 2024 allocated an additional R26.5 billion to Sanral when it “started to realise it was not going to be able to settle these bonds” from e-toll revenue.

He said if these additional allocations just go into the big pot, why then does Sanral have a separate line item in the income statements in its annual reports stating “Government Grants GFIP”?

Will Sanral require provincial governments to maintain other national roads?

Duvenage said he was also trying to work out how a provincial government justifies spending money on a Sanral road.

He referred to the massive upgrade taking place to the freeway between Pietermaritzburg and eThekwini that is not tolled and questioned whether Sanral will require provincial governments to maintain other national roads that run through the economic heartland of their province.

“It creates a very messy accounting process. It creates opportunities for obfuscation,” he said

Duvenage stressed the GFIP was never imposed on Sanral but was a project that was hatched by the road agency, which drove it, sold it to government and tried to sell it to the public and yet Sanral now “just steps back and says somebody else is going to make this decision”.

He said former Sanral CEO Nazir Alli was driving the project at the time, and Sanral had obviously done its poor research and “thought this is a lovely way to make a lot of money”.

Duvenage said Sanral realised that if they only tolled the N1 between Johannesburg and Pretoria, motorists would use the R21 airport road, which would then get congested because it was not tolled.

ALSO READ: E-tolls going, going… not gone

“A deal was struck, and Sanral had dollar signs in their eyes,” he said.

“When we did our sums, if Sanral had got 95% e-toll compliance, they would have earned over 30% of their revenue from this 1% of their road network.

“So it was a very abusive tolling scheme on a concentrated part of the economy, which backfired on them.”

Still no news on motorist debt

Mona said Sanral awaits a decision from the policymakers at national government “to provide a way forward” regarding what will happen to the e-toll debt of motorists.

He also confirmed that the contract awarded to Electronic Toll Collections for the Open Road Tolling system on the GFIP and Transaction Clearing House, which has already been extended several times, “remains in place until the effective date of the termination of e-tolls is formally communicated to Sanral”.

“Shortly thereafter, a decision on the way forward will be made,” he said.

This article was republished from Moneyweb. Read the original here