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South Africa Looks For E-Tolls Solution

by Lorys Charalambous, Tax-News.com, Cyprus

17 August 2012


South Africa’s Constitutional Court has reserved judgement on whether to accede to the request of the South African National Roads Agency Limited (SANRAL) and the National Treasury, and overturn the injunction preventing the implementation of road e-tolls for the Gauteng Freeway Improvement Project (GFIP).

The GFIP, one of SANRAL’s largest projects to date, was, from April 30 this year, to have been the country's first multi-lane free-flow toll system using e-tolls, but a successful application for an injunction against their levying and collection was brought before the North Gauteng High Court by an alliance of transport and consumer groups led by the Opposition to Urban Tolling Alliance (OUTA).

OUTA said that the tolls would be “an inefficient, costly and unnecessary additional burden on road users, who already pay through a number of taxes for the benefit of road use.”

In reply, the National Treasury has indicated that there would be serious negative implications for the future financing of roads and investment in public transport were SANRAL to be prevented from implementing the e-tolls collection system, with the latter adding that, as insufficient financial resources are available to implement capital intensive projects (such as the GFIP), the most equitable way to pay for the road improvements would be through a ‘user-pay’ principle.

Following the High Court decision, the government appealed the ruling and appointed a review committee to look at all aspects of financing the project, including SANRAL’s ability to pay back the debt already incurred in financing construction of the new road, and looking for a quick decision in the matter.

Finance Minister Pravin Gordhan reiterated, at the time, that “it is clearly unhelpful, if we are to make progress in these challenges, that an important source of revenue for the road system has been delayed”. He also stressed that both the government’s and SANRAL’s GFIP investment “has been made not out of general revenue, but through debt which has to be repaid. Cabinet has reiterated its commitment to the e-toll system as an efficient and appropriate mechanism of partial cost recovery from road-users.”

In court papers, Gordhan has disclosed that SANRAL's cash reserves, which include a ZAR5.75bn (USD697.5m) government contribution to the project, will be depleted by the first quarter of 2013 should e-tolling not go ahead, unless additional transfers are made from the Treasury through higher taxes for road infrastructure.

In addition, failure to collect tolls raises the risk of SANRAL defaulting on its loans, which would trigger an immediate repayment of its entire loan book of ZAR37.1bn, and the government would also be obliged to support SANRAL by repaying the rest of its unguaranteed debt totalling another ZAR14.1bn.

At a business briefing, Transport Minister Ben Martins acknowledged that the government had previously not consulted sufficiently on the implementation of e-tolling, but that the inter-ministerial review committee had met with representatives of labour, business and OUTA, amongst others.

Nevertheless, he said, a way has to be found to fund the GFIP, and that "there's a need for all stakeholders to come to an agreement. At the end of the day we can't just print money, a budget has to be found somewhere." However, he did not rule out other methods of funding the GFIP, such as using the fuel levy.

TAGS: court | South Africa | tax | economics | business | fiscal policy | law | budget | fees | travel and tourism | ministry of finance | Africa

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