Cabinet decided to scrap e-tolls but Treasury has questions about funding

The Cabinet has decided to scrap the controversial e-tolls scheme on the Gauteng Freeway Improvement Project (GFIP).

Transport Minister Fikile Mbalula confirmed this on Friday but said National Treasury had stopped the implementation of the decision.

“When we went to Cabinet, a decision was taken. When it was supposed to be implemented to scrap the e-tolls, Treasury said ‘no wait’,” Mbalula said during a briefing on the state of transport entities in Johannesburg.

“So that is where we are. We have done a lot of work between then and today so we will be ready by February to make an announcement on this matter and how we are going to handle the e-toll thing in South Africa.

“The Minister of Finance will be in a position to make the announcement in the Budget Speech in February.

“If not, we may make that announcement even before the Budget Speech if Cabinet and us are in agreement on the way forward. The deadline now is February [2022],” he said.

ALSO READ: Scrapped or not, South Africans will pay for e-tolls, says Fikile Mbalula

Mbalula stressed that an announcement on the future of e-tolls cannot be delayed beyond February 2022 because it will create “a crisis for Sanral [SA National Roads Agency] forever and forever” and continuously affect Sanral’s balance sheet.

Scrapping e-tolls

Mbalula confirmed to Moneyweb on the sidelines of the briefing that the government has moved beyond the nine options he previously presented to Cabinet to consider when taking a decision on the future of e-tolls.

Mbalula has previously confirmed that nine options were being considered to resolve the e-toll impasse. This followed President Cyril Ramaphosa in 2019 appointing Mbalula to head a task team to report on the options available for the future of e-tolls by August 2019.

“We reduced all those options and we are looking at the scrapping and the implications. That is the option we are looking at.

“If we scrap e-tolls in the current form, how do we then address the financial models, including financing of the upgrading of roads in the country?

“Remember the user-pay principle is… [what] was assisting us in terms of intervening and generating revenue to upgrade our roads,” he said.

Financing road upgrades

Mbalula said the user-pay principle gave Sanral its solid balance sheet and borrowing capacity to enable it to borrow money and to be able to pay it back.

“So when you see the beautiful freeways in Gauteng, it’s because of the e-tolls intervention. Once that is taken away, it means we have to redirect the money that is meant for road upgrades from the department to pay for e-tolls,” he said.

Mbalula indicated the government is currently considering how the scrapping of e-tolls will affect the future financing of road infrastructure and at different models to finance road infrastructure in the future.

He admitted the fuel levy has been on the agenda, adding that both the Organisation Undoing Tax Abuse (Outa) and trade union federation Cosatu have been in favour of using the fuel levy to fund the repayment of GFIP bonds.

“We are looking at that but Treasury said that is not possible. It’s not sustainable.

“We know that the user-pay principle in relation to the e-tolls has been boycotted. People are not paying and there is a huge debt that is there so those are the challenges we need to address,” he said.

The 2021 Medium-Term Budget Policy Statement (MTBPS) referred to policy uncertainty about government’s position on the user-pay principle.

Sanral losses

It said Sanral had incurred annual average losses of R2.5 billion since 2014/15 and had been unable to successfully issue a bond since 2017, largely due to uncertainty about government’s position on the issue.

ALSO READ: Government must ‘bite the bullet’ and make a decision on e-tolls, says Sanral CEO

The MTBPS said government has extended a total guarantee facility of R37.9 billion to Sanral, of which R28.4 billion had been used by March 31, 2021.

“While policy uncertainty remains, Sanral is still responsible for maintaining its toll portfolio and continues to service the debt used to fund construction.

“To date, R5.5 billion has been collected in toll revenue against an initial projection of R20.2 billion.

“Without a policy decision that reinstates government support for the user-pays principle, Sanral will remain a significant burden on the public finances,” it said.

Dr Mampho Modise, the deputy director-general responsible for public finance at National Treasury, told Moneyweb last month they were still calculating the risks to the possible options for the future of e-tolls.

Mbalula said earlier this year a pronouncement on e-tolls on the GFIP would be made by Finance Minister Enoch Godongwana in his MTBPS but confirmed on Friday this was not done because the consultation process with National Treasury had not been finalised.

“There have been delays with regard to this and the delays are informed partly because the decision we have got to make, either way, has got financial implications and we need to respond to those financial implications.

“While we address another problem, we can’t open a hole on the other side,” he said.

Outa CEO Wayne Duvenage said on Friday the decision by the government to scrap e-tolls is “excellent” news but stressed Outa did not believe the government had any other choice.

However, Duvenage questioned why it was taking government so long to make a decision on the alternative to e-tolls.

“They’ve already been practicing the alternative. They have already been allocating funds through Treasury to offset those bonds.

“Social infrastructure cannot be subjected to a user-pay scheme, especially if they can’t administer it and if they can’t enforce it.

“They had to go this route. They should have made this decision years ago. It’s long overdue,” he said.

NOW READ: Outa asks Godongwana to waive billions in e-toll debt

By Roy Cokayne

This article first appeared on Moneyweb and was republished with permission. Read the original article here.