HAVE BITUMEN, WILL HELP

The City of Joburg has partnered with Discovery Insure and Dialdirect in launching the Pothole Patrol project. It’s a much-needed intervention. But is this tantamount to the authorities simply abdicating responsibility?

If the sight of Joburg’s weed-infested pavements has you choking back tears of rage on your morning commute, you may want to return to remote working.

So great is the shortfall between what the city says it needs (R700m a year to resurface and maintain roads) and what it actually has (R100m as of this year’s budget) that overgrown pavements and road islands are last on the extensive to-do list of the Joburg Roads

Agency (JRA).

But mounting outrage over proliferating potholes — many of which now have their own Twitter accounts — appears to have goaded the city into accepting help from insurers Dialdirect and Discovery Insure.

The Pothole Patrol project, which kicked off two weeks ago, will run for at least the next five years, subject to an annual review.

Discovery Insure CEO Anton Ossip denies that Joburg’s crumbling roads had got to a point where claims were beginning to spike, but he says the company has had an increase in claims across the country.

“There are more people driving, the roads are more congested,” he says.

Dialdirect head Anneli Retief, however, says her company has “definitely seen an increase in tyre and rim claims and claims caused by people swerving to avoid potholes.

“It’s a big risk and our strategy is to help customers prevent loss.”

A decade ago, Dialdirect was well known for its Joburg pothole patrols, so what happened?

The initiative was “massively successful in the sense of the amount of potholes we were able to repair”, says Retief — more than 65,000.

But he says there were “challenges” in Dialdirect’s partnership with the city, which meant the campaign ended after just two years.

That said, Dialdirect was always keen to continue the programme with the city, according to Retief, “so we always had our hand up”.

Asked whether either firm is frustrated that it has come to this — the city essentially outsourcing its core functions to the private sector — Retief says not.

“I think we see it perhaps a little bit differently. There are definite challenges that the city is experiencing and it causes huge frustration for society.

“But from our perspective, a public-private participation is common.

“Companies often step in when there’s a societal challenge and if we are able to make a difference, we want to.”

Ossip similarly cites Discovery’s partnership with the government in its Covid response plan. For the company, he says, “it wasn’t a case of being so frustrated that we needed to do something. That wasn’t what drove this initiative.

We’re insurance companies, we have economic reasons to make a difference — we can monetise the value of fixing potholes, so why wouldn’t we?”

Arguably, it means taxpayers are not seeing their rates and taxes well spent, with the city effectively having thrown in the towel on its own critical functions. But that’s not how Joburg sees the matter.

“I don’t think it’s outsourcing,” says JRA head of infrastructure Siya Genu. “The reality that we are faced with in SA is that we do not have enough capacity to deal with all our infrastructure problems.”

Connected to that is the city’s constant balancing act between building infrastructure in sprawling informal settlements and long-neglected townships, and servicing extensive existing infrastructure in Joburg’s wealthier areas.

“So with limited resources, government is bound to fail or lag to deal with these issues.”

But, says Genu, “the failure of the city in addressing road infrastructure has a direct impact on the city’s economy, on business so, for me, business cannot allow that to happen — without proper road infrastructure there will be no economy”.

It raises the question of why Joburg’s roads budget is so small, given the fact that most of the city’s roads are older than 30 years, so are due for some form of rehabilitation or reconstruction. In fact, only about 30% of the city’s roads are in good condition.

The most pressing issue is resurfacing, to prevent water ingress. If you don’t resurface roads, they deteriorate faster, says the JRA — which is why the city’s potholes, of late, have spread like the plague.

“For us to get the tar network to an acceptable condition would require more than R10bn that we’d need to spend today. That’s not going to happen,” says Genu.

Ideally, 6%-8% of a road’s value should be spent on maintenance to ensure its “performance life span”. But while Genu blames bad decisions taken over a decade ago for today’s shortfall, he admits that the city “[hasn’t] been good at proactive maintenance and we wait for things to fall apart”.

The problem, of course, is that once that’s happened, “they become more expensive to fix”.

Asked whether this budget gap doesn’t require some innovative infrastructure finance thinking, bringing in private sector expertise and money,

Genu says that traditional project financing “probably won’t work” because the city’s balance sheet has taken strain “because it’s not collecting enough from residents”.

“The city’s capital budget is decreasing every year and what that means is the city has no confidence that it will be collecting rates and taxes. If the city were to borrow money today, it has to borrow against future cash flows. If those cash flows are already negative, its ability to borrow money is limited,” he says.

“If the city had positive future cash flows, we would have gone to private-public partnerships to borrow capital to fund infra

structure. But the reality is that capacity is nonexistent.”

Implementing a tolling system is tricky too, as municipal roads don’t bring in revenue.

“The only source of revenue is collecting tax and getting loans from the National Treasury, and if we’re not collecting enough in rates and taxes, as well as Treasury loans, then our ability to fund service delivery becomes limited,” says Genu.

Economist Mike Schüssler believes the city could bring in more capital if it were prepared to cede control. In other words, lenders to the city need some say over how the city’s assets are run, or there will be little incentive to pony up any money.

“No banker will finance your spending if it’s crazy,” says Schüssler, who describes Joburg as one of the highest-taxed cities in the world.

It is also, curiously, a city with one of the highest profit margins, based on what it pays for its bulk water and power, and the price at which it sells both utilities on to its residents.

According to the City’s 2019/2020 financial report, the city had an effective operating markup of 72%. On billing, its mark-up was a colossal 101% for bulk water, power and sanitation, as well as refuse removal.

In the first six months of this financial year, the city’s bulk purchases totalled R10bn, while billing was set at R15.9bn.

It all points to a bigger, systemic issue.

Says Schüssler: “I would be very glad if anybody can fix potholes, but I think it’s a more long-term solution when they fix their processes and financing, otherwise it’s not a long-term sustainable solution.”

Companies often step in when there’s a societal challenge and if we are able to make a difference we want to

Asked whether the PR might backfire, in that would-be customers would see Discovery Insure and Dialdirect as one and the same,

Ossip says the two firms will continue to compete in normal business circumstances. He, however, believes that “society gains” from the two working together.

Says Retief: “I think there are other ways to get our phones to ring, so this is not intended for us to get direct marketing contact. Partnering just doubles our impact and we have very similar objectives. So, why not?”

As for whether more collaboration with private partners may be on the cards, Genu says the city is “open to any assistance”.

Anneli Retief