E-toll debacle – what does it say about governance?

A truce has been called, but not before troubling questions were raised about the ANC’s ability to lead a democratic South Africa through difficult economic times.

May 5, 2012
E-toll costs

South African unions took to the streets. Big business added its opposition to proposed tolls to pay for road upgrades for the nation’s commercial hub, saying an irrational plan was being imposed on citizens by the governing African National Congress.

A truce has been called, but not before troubling questions were raised about the ANC’s ability to lead a democratic South Africa through difficult economic times.

Four days before a sophisticated electronic tolling system was to have started working on April 30, the ANC announced the project, already repeatedly delayed, would be postponed another month. The ANC will use the time to talk with unions and others about finding alternatives for paying back the 20 billion rand (about $2.5 billion) borrowed on international markets to build the tolling system and upgrade 185 kilometers (115 miles) of highway in and around Johannesburg.

In March, tens of thousands of demonstrators had responded to a call by the main union federation, an ANC ally that has increasingly challenged the party on economic issues, to march to pressure the government to scrap the tolls.

The Congress of South African Trade Unions says tolls will make life more expensive for the working class, even though the government exempted minibuses that form the main mass transportation system for the poor. Middle-class drivers also have complained, and business says its transport costs will rise. Some on the left have said the 20 billion rand should have been spent on roads in townships, the urban areas set aside for blacks and neglected by the apartheid government, and in impoverished rural areas.

Timing may account for some of the rage. South Africans have been hit by the global recession. Economic prospects were more hopeful when the tolling plan was first proposed in the 1990s.

The main problem may have been the ANC’s failure to prepare the public for the road project’s costs, which have emerged only recently. That has implications for the future. The ANC is intent on building not only roads, but ports, rail, utility plants and other infrastructure needed to expand the economy and create jobs in a country of 50 million where a quarter of the work force is unemployed.

Goolam Ballim, an economist at South Africa’s Standard Bank, worries that if a precedent is set that users should not pay for new or improved roads, or that the government will always step in to ease the pain, it could mean South Africa will have fewer options for raising money for future projects.

“Society needs to be alert and see through those who seek to perhaps muster political capital out of society’s financial distress,” he said.

“There are times when a nation needs to realize that popular opinion may not be correct,” Ballim said, calling on political leaders to show courage.

ANC spokesman Jackson Mthembu indicated the party was considering a concession: scrapping plans to one day expand electronic tolling beyond the Johannesburg area.

“Maybe it wasn’t such a good idea for a developing country,” Mthembu said of the electronic tolling system, which critics say will cost too much to run.

But Mthembu said so much has already been invested that the system would likely go ahead in the Johannesburg area, if only there. Gantries with sensors to monitor cars’ trips already hover over some roads, and computer systems are in place.

The national government in February announced a nearly 6 billion rand (just under $1 billion) subsidy for the Johannesburg highway project. Officials also have pledged that no toll road user in a light vehicle will pay more than 550 rand (about $60) a month.

Whatever further concessions emerge may end up being scrutinized by judges. Wayne Duvenage, chief executive in South Africa for the international rental car agency Avis, was a key organizer of a court challenge, which could take months to settle.

Duvenage said businesses that are sensitive to transportation costs might not have gone to court if the government had responded earlier to their concerns about the costs of the tolling system. He calls the electronic tolling plan an “irrational, unjustifiable process being thrust upon the people in a very harsh and unjustifiable manner.”

Such language illustrates a rift that appears to be growing, even as the ANC calls on business and labor to work with it to get South Africa’s economy moving. Critics of the tolling project also have speculated that it will be open to abuse by corrupt officials, reflecting mistrust fanned by a series of recent government corruption scandals.

Neren Rau, chief executive officer of the South African Chamber of Commerce and Industry, said his members concede tolls are an important way to raise funds for much-needed roads and road improvements, even though it has raised several concerns about the way the Johannesburg electronic tolling project would work. Rau does not expect the ANC to completely retreat.

“They can’t really cave in,” he said, “because that would send a poor message with regard to leadership in this country.”

Already, international credit rating agencies have questioned the ANC’s ability to resist popular pressure when making tough economic decisions. Standard & Poor’s said in March it was revising its outlook for South Africa from stable to negative, saying that as the ANC prepares for 2014 elections, its “centrist wing may make gradual concessions to the more populist expectations from within and without the party.”

Moody’s expressed similar concerns and took a similar step late last year.

The changes could be a move toward downgrading debt ratings, which would make it more expensive for South Africa to borrow.

Tags: Active, ANC, e-tolling, govenment

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