E-tolling: A feasibility study please 

                                                                                    by Clem Sunter

One of the reasons I made it up the hierarchy at Anglo was an ability I acquired from the head of the mining economics department to evaluate projects. In fact, the first one which I became involved in using this skill was the Ergo project to treat all the old slimes dams on the East Rand. It turned out to be a spectacular success from a financial point of view because of a factor entirely beyond the control of any supporter of the feasibility study team - the gold price which more than doubled by the time the plant was commissioned in 1978 and then went on to average over $600 an ounce in 1980. Naturally, despite this good fortune, we happily accepted the full credit for the project's success!

We are now halfway through the period of consultation on the latest gazetted rates for e-tolling, and I have not seen any detailed financial projections for the first 20 years around which a public debate can take place. I am particularly sensitive to this issue having been firmly admonished on this very website for initially being in favour of e-tolling. The criticism which swung me to the other side was the sheer cost of raising money this way to pay off the R20bn loan Sanral had taken on to effect the improvements to the Gauteng road network. Why not redeem the loan by an increase in fuel levies which would not attract a huge administration cost, the detractors persuasively argued.

Annual running costs for e-tolling are estimated at anything between R1.1bn and R1.7bn. Now that the tariffs have been reduced, a perfectly reasonable question to ask is what is the level of income forecast over the first few years. If it is less than the costs, it will only add to the problem of repaying the loan as additional credit will have to be procured to cover the losses. It also raises the suspicion that the initial tariffs are just to get the show on the road and will be hiked astronomically once the system is bedded down.

The other issue is delinquency rate, namely the percentage of drivers who do not register as e-tag users and do not settle the much higher bills that are sent to them. I have heard that a delinquency rate of 7% has been assumed at the beginning; but judging from the outrage expressed on this website that percentage could be way too low. Have sensitivity studies been done to show the impact on the bottom line of differing delinquency rates? Furthermore, there must be a delinquency rate above which the whole project becomes unviable as a result of the number of photographs, statements and summonses being sent out. It could even cause the postal system to collapse.

Thus, I have one earnest request. In the remaining days during which the public are allowed to comment on the e-tolling exercise, please put the feasibility study covering the next 20 years on the table for analysis and discussion. Otherwise, the accusation will be levelled that the call for external input was a complete charade: a matter of going through the motions before the inevitable.

Written by Clem Sunter on News24
(7 November 2012)