R70 billion of taxpayer money down the drain-Hanno Labuschagne

A small 4-cent levy on a litre of fuel in South Africa over ten years would have funded the entire Gauteng Freeway Improvement Project (GFIP). Instead, the government and Sanral wasted R70 billion of taxpayer money on the project.

That is according to Wayne Duvenage of the Organisation Undoing Tax Abuse (Outa). His organisation was founded as the Opposition to Urban Tolling Alliance and has played an instrumental role in ending e-tolls in Gauteng.

He explained how the GFIP’s costs quickly spiralled out of the South African National Road Agency’s (Sanral’s) control.

The pricing of the GFIP in Sanral’s 2005 Declaration of Intent showed that the project should have cost between R6 billion and R7 billion.

When construction works began in 2008, Sanral estimated the cost would be R11 billion. By completion, that figure had increased to R17.8 billion.

“In total, the construction costs of R17.8 billion was around R11 billion overpriced, and this is where the waste essentially came in,” Duvenage said.

However, Duvenage said that adding just 10 cents to every litre of fuel sold in South Africa from 2008 would have seen the entire cost of GFIP paid off by 2018.

“Had Sanral simply asked the government to fund the overpriced 186km road construction cost of R17.8 billion through a slight increase in the fuel levy of 10 cents per litre in 2008, they would have raised R2.2 billion per year and paid off the GFIP within a decade, including interest,” Duvenage said.

If the GFIP had come in at the original R7 billion from Sanral’s Declaration of Intent, less than 4 cents per litre would have been needed to pay off the project.

“Incidentally, they added well over 25 cents per litre per year annum to the price of petrol between 2008 and 2020, so they certainly did get the money from the public,” Duvenage said.

At least R70 billion to fund e-tolls

Duvenage said a fuel levy was the most logical option then, but Sanral instead opted to fund the project with e-tolls.

Despite many critics pointing out that Gauteng’s contribution to the country’s GDP justified a general fuel tax, Sanral was fixated on the “user pays” principle.

The agency borrowed an additional R3 billion to cover the cost of e-toll infrastructure, including the construction of the gantries, toll collection centres, and other facilities, so that it could toll motorists who actually used the roads.

That took the total cost of the GFIP to around R21 billion up to 2011. Duvenage said the e-tolls would add a further R1 billion in administration costs every year before any money went into covering the cost of the road upgrade.

At this point, corruption happened when “lots of money was siphoned off through off-shore companies”.

Most e-toll users refused to pay for the system, with insufficient public consultation processes being among the major justifications for their resistance.

That forced the National Treasury to pay Sanral an additional R26.6 billion in GFIP bailouts, in addition to the agency’s regular allocations for other roads and responsibilities.

However, Outa has maintained that Sanral has not divulged how it used this funding to pay off its e-toll-related debts. Instead, the government has told the media that the total debt on the project has climbed to R43 billion.

As part of an agreement to shut down the system, the National Treasury will pay 70% of this amount, roughly R30.1 billion, while the Gauteng Provincial Government (GPG) will cover the remaining 30%, working out to about R12.9 billion.

The former’s funding will come from taxpayers across the country, bringing the total bailout amount to around R56.7 billion.

The GPG will initially use bank loans to fund its portion. These will be paid off through its regular revenue channels, including motor licence disc fees and an allocation of National Treasury taxes.

All these costs add up to around R70 billion, ten times the original budget of GFIP. That excludes any e-toll amounts paid by the minority of obliging motorists.

source:R70 billion of taxpayer money down the drain (mybroadband.co.za)