Thursday, 21 July 2011

Tolls not yet finalised for South Africa's Gauteng network project

South Africa has one of the best managed highway networks in the developing world, and indeed can teach more than few developed country jurisdictions how to manage networks (yes that means cities and states in the USA, and local authorities in the UK among others). SANRAL (South African National Roads Agency Limited) is considered by the World Bank to be an example of international best practice in developing country highways management. As a limited liability company, it shows that a national highway network can be managed on a commercial basis, which would be considered almost revolutionary in the USA, if not in France, Italy and Japan where this is quite the norm.

One of South Africa's biggest highway improvement projects since the end of Apartheid has been the Gauteng Freeway Improvement Project. The project involves 185km of new and upgraded roads, including a ring bypass of Johannesburg, and tollways between Pretoria and Johannesburg and Pretoria and Johanneburg’s Oliver Tambo International Airport.  It is being funded through borrowing, with tolls to pay off the debt.  It is NOT a PPP, as the borrowing is being undertaken by SANRAL, as a state owned company, but is all being handled commercially.  In essence, many of the advantages of a PPP are being realised, because the government operates roads in a commercial manner.

The tolling system that is being introduced will use electronic tolling gantries (using DSRC/tag and beacon technology to the 5.8GHz EU standard). Customer service options will include being able to establish and pay accounts online, by phone, at roadside kiosk or at retail customer service centres. Tags are acquired for a deposit of 50 Rand (US$7.30), which is credited into the prepaid account.

The proposal has been controversial, because it is charging existing as well as new roads.  It is across a network, as can be seen on the map on this pageI wrote previously about the controversy around the scheme, as some motorists are upset that they must have a tag to get a discount, and some see barrier-free tolling as being easy to evade (probably around concerns that South Africa's vehicle licence plate database may have a significant number of inaccuracies regarding ownership details and addresses).

Today the big issue is the level of charges. It will be a form of distance charging, but by using DSRC and ANPR cameras, the distance is measured by passing various points on the network, not the constant measurement of distance as seen in GPS based systems.  This is akin to the heavy vehicle tolling system operated on Austrian motorways by ASFINAG (the Austrian government state owned enterprise responsible for the motorways).

The Wheels 24 website reported in February that the prices without tags were expected to be:
- Cars R0.66/km (about US$0.10)
- Heavy trucks R3.96/km (about US$0.58)

With tags the prices would be:
- Cars R0.495/km (about US$0.07)
- Heavy trucks R2.97/km (about US$0.43)

The price schedule includes a range of vehicle types. However, tags generally offer a 25% discount. There will be differential pricing by time of day, with discounts at night times. Buses may get a 50% discount (presuming they are registered legal scheduled services), and there are frequent user discounts (something unknown in the tolling world).  South Africa's Independent Online reported claims from SANRAL Chief Executive Nazir Alli that "if your travel costs are between R380 and R550, you would get a 15% discount and, if the value of your travel is greater than R900 at any given point in time, you qualify for 50% discount."  Such a discount may well be crucial in gaining grudging support.

A full map showing the detailed prices according to segment is located here, although it indicates that the Minister suspended the prices and has yet to announce new ones.

Revenues have been forecast at R300 million per month (US$44 million) intended to pay back loans of R20 billion (US$2.9 billion) to finance the upgrades.

Business Day reported that a dedicated police enforcement unit is being established to enforce the tolls, by identifying vehicles that are repeat offenders and having the power to stop vehicles and arrest the driver. Clearly the need to use force is seen to be necessary!  Given concerns about the risks of evasion, this is not surprising, if enforcing fines by post and court order is problematic.

However, the big question remains the toll rates. According to the South Africa National Roads Authority (SANRAL), the Minister of Transport created a Steering Committee to decide on the toll rates. The toll system was meant to commence operation in June, but it has been decided tolls will not be collected until all of the road upgrades are complete. Clearly the South African government thinks that the revenue from tolls is not as precious as ensuring political acceptability of toll levels.

It also appears that a significant body of opposition has appeared, last minute, to oppose it, with motorist lobbyists and trade unions opposing the tolls.  The Mail and Guardian Online quotes COSATU (Congress of South African Trade Unions) spokesman Patrick Craven claiming the tolls will generate "grotesque profits".   This claim seems utterly absurd, when the tolls will be dedicated to repaying debt incurred to upgrade the highway network.  SANRAL as a company is state owned, and wont be profiting anyone personally from the tolls.  FEDUSA (Federation of Unions of South Africa) agrees with COSATU and sees it as "privatisation" according to the Times in South Africa, both supporting a general strike in protest.

The South African AA, and "economist Mike Schussler" claim fuel taxes are better, presumably because it means everyone driving pays for the cost of upgrading a small part of the network.  None answer why this is so, or what happens as vehicles get increasingly fuel efficient (and the poorer tend to not be able to afford the newest most fuel efficient cars).   Eyewitness News reports how more members of the public are outraged at the tolls.  Fin 24 also reported how the AA believes it will result in alternative routes being gridlocked.

capita GDP (PPP basis) of just over US$10,000 a year, it means an average 17% cut in income.   The alternative is to go by the about to be opened, Gautrain, rapid commuter rail service (which is brand new and will operate at speeds of at least 160km/h (100mph)) between the cities, or competing bus and conventional rail services.

Surely what this all demonstrates is the need to lead with communications on the tolling right from the start.  It is always very difficult to toll existing roads, rather than simply new roads.  What South Africans face is new tolls on existing roads to pay for improvements to these roads, improvements that many clearly don't think are worth paying for.   It is fundamentally the risk of having fuel taxes and tolls on the same stretch of road, with no untolled alternative.

Ultimately, the South African government will almost certainly have to implement the tolls, probably at a greater discount initially, to get the necessary revenue, but what this should provoke in the country is a more fundamental debate about the future of road funding.   It means that the role of fuel tax vs. tolls be investigated, which should also include considering whether fuel tax may be better replaced with some form of wider network tolling system.   It is exactly the debate going on in the US, and in a different form in the Netherlands and Australia.  

Given how committed South Africa is to the Gauteng project, I suspect it will be implemented largely as planned (possibly with some short term compromise on price), but a new wider strategy is needed.  That strategy should be developed bottom up, be objectives led, take into account technological options, but more importantly the economics of road funding and financing over the longer term.  South Africa already has a world class model for road management, it now needs to develop a similar approach to road charging and more importantly, get motorists on board with a new deal - one that ensures they do not feel ripped off or cheated, where they see they get value for what they pay.  I don't think the country is far away from being able to do that, but right now the Minister of Transport must be wondering quite what to do - none of the options are going to be cheap, but all will be better than raising fuel tax.

UPDATE One writer to News 24 argues that the tolls are good value, and opponents are wrong to think someone is profiting heavily from money collected to pay off a substantial debt over more than ten years.

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