To and fro over e-tolls not doing much to lure investors

If the government wants to attract private-sector investment in infrastructure, it had better think very carefully about undermining the principle of user charges. That in effect is what it is doing with the endless to and fro over e-tolls. And election season populism is not helping to resolve an issue which has long been a political football instead of the subject of a rational debate about how best to fund the infrastructure that SA needs.

Transport minister Fikile Mbalula has over the past couple of weeks stoked the long-standing uncertainty about the fate of Gauteng’s e-tolls by first, reportedly, saying the system could not be scrapped and then fiercely denying he had said any such thing. The cabinet was seized with trying to find a solution. Careful consideration was being given to various options and their financial implications. The minister of finance would pronounce on e-tolls when he delivered his medium-term budget policy statement, Mbalula said in a statement.

Also this week, the auditor-general has flagged the e-toll nonpayment debacle as a risk to the “going concern” status of the SA National Roads Agency (Sanral). In its annual report, tabled in parliament this week, Sanral again reported a loss, of R14bn, saying: “The inability to resolve the Gauteng Freeway Improvement Project (GFIP) continues to place significant pressure on Sanral’s balance sheet, compromising the ability to source funding and exacerbating uncertainty regarding the future of road funding.”

The contestation over e-tolls has so far been confined to Sanral’s Gauteng highway, which was launched in 2011 and arguably became a political issue not only because of the government’s failure to communicate it properly but also because it provided a platform for anti-statecapture protest and because it ran through urban areas. The earlier, successful toll-road concessions have not been embroiled in the controversy. But it has broader ramifications, especially at a time when the government is looking to infrastructure investment to lead SA’s economic recovery and lift its growth rate, and is looking to the private sector to fund much of that investment.

Abolishing e-tolls would cost taxpayers; it could also come at huge cost in terms of the negative signal to potential private funders of infrastructure.

One issue is simply the uncertainty over policy. Private investors are not going to come in on infrastructure projects, however attractive, if they cannot be certain of the revenue model that underpins these. As long as there is even the threat that the government will move the goalposts at some point in the future, public-private partnerships, including concessions such as toll roads or ports, are not going to take off.

Another is the principle. There are various of ways of ensuring the kind of revenue streams that make private investment in infrastructure projects viable and bankable. But “user pays” has to be part of any such scheme, especially when it comes to roads. And while user charges are widely considered to be the optimal way of structuring toll-road projects, there are also “hybrid” approaches that have worked in other countries, where government tops up private tariffs. Policy imperatives rather than populism should drive the conversation of what’s best for SA.

Who benefits should be central to that conversation. Contrary to what the critics say, toll roads may ultimately benefit the poor more than the rich, because of their positive economic effects. There can be no question that well-built, well-maintained intercity roads are crucial for productivity and economic activity.

The July unrest provided a stark illustration of this, with the weeklong closure of the N3 toll road between Gauteng and KwaZulu-Natal reminding us just how dependent the supply chains that sustain SA’s economy are on a single key road.

SA needs more toll roads, not fewer. The country would be the poorer if the outcome of the e-toll issue prevented any further toll roads being built.

CONTRARY TO WHAT THE CRITICS SAY, TOLL ROADS MAY BENEFIT THE POOR MORE THAN THE RICH