Outa asks for clarity on Sanral debt before bailouts finalised

The Organisation Undoing Tax Abuse (Outa) has called for an explanation and improved transparency and clarity on the debt of the South African National Roads Agency (Sanral), as well as the Gauteng Freeway Improvement Project (GFIP) portion of this debt, before bailouts to Sanral are finalised.

However, Sanral has highlighted that Outa’s calculations on its debt and the GFIP portion of this debt failed to include other GFIP costs incurred by Sanral.

Outa made the call for greater transparency in its submission last week to the standing and select committees on appropriations on the 2022 Adjustments Appropriation Bill and the 2022 Special Appropriation Bill.

It said these bills include:

• A transfer of R3.7 billion for Sanral for the GFIP, which was transferred to Sanral in July 2022 and is now being regularised; and
• A proposed transfer of R23.7 billion through the Special Appropriation Bill.

Outa said national government has indicated that it will pay off 70% of Sanral’s debt, with Gauteng paying 30%; Gauteng will also cover ongoing maintenance of the GFIP roads, effectively ending the current e-tolls collection mechanism in the province.

Gauteng has since said it is paying off 30% of the GFIP debt – not the full Sanral debt – and calculates its share as R12.9 billion.

GFIP debt remains ‘inexplicably high’ at R43bn

Outa CEO Wayne Duvenage said that in its submission, the organisation noted:

• The cost of the GFIP upgrade was R20 billion and Sanral borrowed R20 billion to fund this;
• Since 2011/12, national government has authorised government grants totalling R30.053 billion to Sanral, explicitly for the GFIP, including the R3.7 billion transferred in July 2022 but excluding the proposed R23.7 billion transfer; and
• The GFIP debt however remains inexplicably high, as National Treasury said it was R43.031 billion in March 2022.

“While we would have preferred that government had not embarked on the costly exercise of implementing e-toll infrastructure in the first place, which would have negated the exorbitant amounts paid to the collection agency, we welcome the resolution of this matter and the acknowledgement that Gauteng commuter roads [social infrastructure] should be funded by the fiscus,” said Duvenage.

“However, we would like improved transparency and clarity on these finances before the Sanral bailouts are finalised.”

What Outa neglected to factor in, according to Sanral

Sanral communications and marketing GM Vusi Mona said on Friday that Outa has failed to include in its calculations the ongoing maintenance and operational expenditure by Sanral on the 201km of GFIP Phase 1.

Mona said Outa also ignores the accumulated interest on debt, where revenue collection was significantly below the expected amount.

“This means that to service the debt and this shortfall in operating expenses, Sanral had to continue borrowing funds to finance the deficit.”

Mona said it should also be noted that construction began in 2007, meaning that funds were borrowed and capitalised throughout the construction period, which concluded mainly in 2010.

“Due to the legal challenges by Outa and others, tolling only commenced in December 2013 – more than six years after construction started and three years after the upgraded roads were in use.

“Surely it is common cause that the accumulated interest in this period should also have been included in Outa’s simplistic calculations,” said Mona.

“This is called the J-curve effect, which is a widely recognised depiction of large infrastructure funding.”

Sanral provided Moneyweb with a breakdown of the cumulative total income and expenses since the roads were declared toll roads in 2007.

DA Gauteng Shadow MEC for Roads and Transport and member of the Gauteng Provincial Legislature Fred Nel said last week that Gauteng Premier Panyaza Lesufi has confirmed that the current liability towards e-tolls for Gauteng is R12.9 billion – but has no answer on how the province will fund it.

Nel said the Gauteng government committed to paying the e-toll debt and a further R2 billion for the maintenance of the highways over the next three years without knowing where the money will come from.

He said Lesufi also committed that the current budget allocations in Gauteng will not be affected and that additional funds will be raised to fund these additional commitments.

Nel said Lusufi’s only proposal thus far is that a “hybrid model” will be developed to which residents will have to contribute.

Outa previously said the e-toll system will not be used for e-tolls but the infrastructure used to raise other revenue for the Gauteng provincial government.

Another tax for Gauteng?

Nel said the plan clearly is to replace e-tolls with another form of tax on Gauteng residents so that the Gauteng government can cover its newly acquired liability towards the scrapping of the system.

“It is the only way additional revenue can be generated.”

He said it is likely that the R12.9 billion liability will end up being much more than the current amount as the Gauteng government wants to pay off the liability over the long term, with this repayment plan attracting further interest and causing the liability to balloon.

Nel said the DA believes an alternative solution should be sought to reduce the liability on both the provincial government and the residents of Gauteng.

The DA is proposing that the underexpenditure by government departments be used to pay towards the e-toll loans “as a starting point”, said Nel.

“The very high taxes on fuel can also be used to contribute towards the repayment of loans.

“These are just two proposals that do not require any additional taxes.”

By Roy Cokayne 

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