Too soon to scrap or expand eTolls without an economic regulator

Last night on Kaya FM, callers, Wayne Duvenhage and myself had a brief discussion about the Gauteng Freeway Infrastructure Project (GFIP). The hardest thing about the interview was behind the scenes on a personal level, and the manner in which we could narrate some of the arguments. However, this note aims to provide some clarity and at least expand a bit on my thoughts on the notion that scrapping eTolling infrastructure, technology and systems as an option. When asked on air, my view was that if scrapping becomes an option then raising the funds through the difference between the current Basic Fuel Price and the combined Carbon Tax and the revised Basic Fuel Price could work well if the difference is positive (i.e. the BFP is reduced significantly to off-set carbon tax pricing). If it is negative then another avenue needs to be considered— this does not require taxation, but focuses more on user-investment principle instead of user-pay principle. These are exactly the same, but the only difference is in the transparency of underlying the revenues accrued and attached to the investment. 

There is a problem however in the current narrative surrounding Gauteng’s eTolling scheme from SANRAL. Primarily, the criticism from the Organisation Undoing Tax Abuse (OUTA) has focused on the politics underlying the procurement process; public participation; administrative costs with respect to international benchmarks; enforcement and collection; and roads as a public good. Each of these arguments are attractive in the popular sphere because they lean on short-term axioms, but come at a long-term costs of delaying implementation and discouraging compliance to new systems or services. At the same time, a focus on what the appropriate pricing could be and how such technologies can be used in the long-term seems unaccommodated by the current debate.  Most motorists reject eTolling, at least because it inflates black middle-class household expenditures as they dominate the roadways, and the narrative around eTolls since 2010-2011. There was a strong labour in the form of COSATU and organisational advocacy against it, which focused on encouraging non-compliance— which is now listed as one of the problems of the system. It is also a politically charged debate as in many ways, the voting public may deem it as a deal breaker for provincial elections among a list of more issues in Gauteng as it grows. The GFIP and the Spatial Development Initiative (SDI) which underpinned the 500km of the GFIP and the 80km of the Gautrain, respectively, were part of a transport revolution which also ushered in the Bus Rapid Transit schemes in South Africa against the backdrop of the Public Transport Strategy of 2007. All of these were not only about the FIFA World Cup of 2010, but they were about managing the future growth of Gauteng as it develops on a foundation of segregative land-use policies. 

At first public transport strategically focused on rapid networks for scheduled services only, this changed on a policy level to reflect various options to integrating public transport— and it will expand even further soon. Today however, there is a strong focus on Integrated Public Transport Networks (IPTN) and finding ways to bring the minibus, midi-bus and digital economies on board, in addition to creating inclusive networks and services which accommodate non-motorised transport, ride-hailing and future mobility and access solutions. In the discussion, I argued largely that there were three important trade-offs: (1) investing in public transport; (2) investing in roadways and pricing users for the benefit of priced roads; and (3) raising revenues to fund attractive Integrated Public Transport Networks and managing the spatial changes through pricing roads. Underlying these issues are the sunk costs of capital investments, and the systems costs which depend on high usage, compliance and quality in order to attract and retain users who are willing to pay a specific price. This price, for public transport or roadways, might not reflect the true price which would cover sunk-cost related debt in all cases, but given the outcry after tariffs were announced there is an argument that the tolls were rejected because of poor pricing. There is very little decision making, without the single economic regulator: 

“Economic regulation is an important lever through which we can achieve this objective, while simultaneously enabling equitable access to infrastructure and pricing that encourages healthy competition.  Over the next year, we intend to introduce before this house a Bill to establish a single transport economic regulator. The regulator will level the playing fields in the rail, maritime and roads sectors.”- Minister Fikile Mbalula, 2019

With integrated ticketing solutions in integrated public transport network systems on their way, South Africans will for the second time learn how much it costs to run and administer digital, contactless and cashless payment systems at scale. This might correct the perception in the political economy that technology and administrating enforcement is cheap, quick and painless. These costs depend on scale— the sheer volumes of people using the systems need to be much higher in order to reduce the unit costs of complex and scarce systems. SANRAL’s eTolling administrative contract reveals this as unchartered territory in South Africa, but compliance lags behind because public consultation needed to continue at a similar scale as the roadways, systems and technology were being developed, innovated and deployed. A user-investment principle converts users into investors into a transparent financing scheme that is used to on one-hand reignite confidence for large projects through domestic and international funding; but also to push National Treasury and SANRAL in a direction that highlights ring-fencing revenues and spending them transparently. As road users invest, they know exactly where the money is going and can visibly take note of the public transportation networks, services and systems they are funding— not only the balance sheet reflecting bills paid to foreign capital. Under the current political economic climate, it is becoming more important to take a reasonable position: do not scrap yet; do some more research on what road users want; and invest in long-term solutions. 

The role of the single transport economic regulator in this instance will be to focus on developing the terms of reference related to investigating the transport economic principles and practices associated with evaluating, developing and implementing new and reforming existing large scale capital projects of this nature. As we await the draft Bill, there is an important 

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