Avis supports e-toll, sees positive impact

[JStrike]

except that the really useful routes are already national roads and getting pass down to provinces is unlikely but yes it would be perfectly sensible for provinces to establish their own Surface Transport Utilities companies and use either fuel levies or empower collection. The Western Cape and Gauteng are well served by fuel levy on fuel sold in the province the Free State would do better on tolls. Of course if the WC does impose a fuel levy people will buy fuel in a neighboring province if convenient and you might run into the economic detriment argument.

I really don't believe people in Cape Town will drive all the way to the eastern cape to save a couple of rands (Some trucking companies might, but I doubt most people would).
And it would be *very* difficult to prove economic detriment to other provinces.

So there is hope that the WC Gov builds the own big highways and doesn't rely on SANRAL

 

[DJ...]

Provincial Government has authority on Provincial Roads, and they may raise Provincial Levys. SANRAL is for National Roads

EDIT : Just realised that was a lot of capitalisation. I do apologise

Even if that is the case, they'd simply be tolling existing roads then. We end up with the same problems, unless I'm missing something here. Are you referring to them actually investing in new infrastructure?

 

[OrbitalDawn]

It is the convention here to call anybody out of sync with popular consensus a troll, whether they have a point or not

I don't think most of us in Gauteng would oppose a GP fuel levy, as long as that money is used for the purpose it was collected for. People are not generally opposed to the requirement of additional revenues being collected, but the nature and opaqueness with which it is being done.

Almost half the petrol price is already taxes, including a hefty fuel levy. They don't use that money for road infrastructure. It's BS that we have to settle for the lesser evil of an ADDITIONAL fuel levy to pay for this crap when they already rake in tons of cash with a fuel levy and refuse to disclose what they spend it on.

I am for etolls. I think they work fantastically in other places, and I think it would work well here.
The implementation in GP might be bad, but the concept is good (In my opinion). Provincial Fuel Levies would be alright too, but only if done by the Provincial Gov not National Gov.

I think I can legitimately call you a troll. This is now the 3rd time that I'm pointing out the dismal failure of eTolls in Portugal to you. Let's see if you ignore it for a 3rd time.

 

[DJ...]

So there is hope that the WC Gov builds the own big highways and doesn't rely on SANRAL

Oh, you're referring to WC opting to build their own roads. I don't know who has jurisdiction in that case and how national government will react to it. They could, for all we know, simply reclassify the roads...

 

[DJ...]

I think I can legitimately call you a troll. This is now the 3rd time that I'm pointing out the dismal failure of eTolls in Portugal to you. Let's see if you ignore it for a 3rd time.

Chill. JStrike has agreed that we're right with respect to the fuel levy in the context we now find ourselves in...

You have raised good arguments. I must agree with you in the end

 

[JStrike]

Even if that is the case, they'd simply be tolling existing roads then. We end up with the same problems, unless I'm missing something here. Are you referring to them actually investing in new infrastructure?

Building new infrastructure in the future.
Let the GP Gov (Or the WC Gov) do it rather than SANRAL

 

[DJ...]

Building new infrastructure in the future.
Let the GP Gov (Or the WC Gov) do it rather than SANRAL

Many a palm was greased in this last fiasco. Don't expect the government to go down without a fight. Especially in light of their unspoken policy of shifting wealth from the white middle class to poorer blacks, because it's easier to do that, than to actually invest in, support, and grow the economy...

 

[Paul Hjul]

Where do we find R17bn in the budget to pay? All debt and coupons become due upon default, and it would destroy their ability to raise finance at a reasonable cost moving forward, so we'd pay an exorbitant cot of capital again. If you think this cost of capital was high (83% of revenue goes to servicing the debt according to Vusi Moaner), imagine what it will be after a default. Not a pretty picture, and they manage national infrastructure, so this isn't a viable option.

I don't think the government guarantees hit R17bn (I seem to have an recollection of about R8bn exposure - which is still a ****load) The reason the cost of capital is high is because it is being funded on debt rather than equity and it was a risky and bad idea to begin with.

It doesn't have sufficient short-term assets to liquidate to even make a dent, so they would have to auction off land and existing tolls. To who? They can't hand it over to another private company, and if the government purchase it then we're left with the same problem...

Subject only to concepts relating to existing rights of way why not. Concessions work that way.

So my exact point - and I am being a little facetious - is let SANRAL fail, let treasury pay their surety and let the roads fall to whom they may.

My argument would be that other than the massive ballache of the debt itself and its contaminant effect on sentiment towards South Africa as a whole (lets not overstate the GEPF issue but ...) this disaster presents a certain opportunity to move towards decentralizing ownership of roads and there are certain roads that make commercial sense to operate as steady investments - the road between Jbay and Humansdorp for example considering the presence of a highway. Surface transport legislation will need to be rewritten.

 

[OrbitalDawn]

Chill. JStrike has agreed that we're right with respect to the fuel levy in the context we now find ourselves in...

But he still wants the levy to be only in Gauteng, instead of a national one. I think the importance of Gauteng's economy is sufficient reason that everyone can help pay. The middle class in Gauteng aren't as wealthy as the middle class in Europe, so everyone here can't just swallow massive increases in costs willy nilly.

Building new infrastructure in the future.
Let the GP Gov (Or the WC Gov) do it rather than SANRAL

That's why SANRAL exists in the first place...

And you can't just build new roads, where the hell would you put them?

 

[DJ...]

I don't think the government guarantees hit R17bn (I seem to have an recollection of about R8bn exposure - which is still a ****load)

Nope. 56% of Sanral's bonds held at amortised cost are guaranteed. You're forgetting to factor in the coupon payments here...

The reason the cost of capital is high is because it is being funded on debt rather than equity and it was a risky and bad idea to begin with.

That's not a rule of thumb at all in the financial industry. Debt is not more costly necessarily than equity. It is based on risk and economic factors. They couldn't raise using equity in any case as their only shareholder doesn't exactly have the liquidity to move that into one project of a provincial nature. But on the debt side of things, check out the bond yields on their issuances when you have a chance and see how they trade - there is no sentiment in there - a ton of risk. That risk profile warranted a high coupon, paid biannually. The cost of capital, in a nutshell, was so high because the market would not accept the risk (even with a government guarantee) without the higher coupon rate. They've issued double-digit coupons consistently - as high as 13% and probably higher in some riskier tranches of the debt.

This is simply how the DCM market works - risk appetite and whether said risk matches the portfolio's risk profile. Their lead arranger would have sourced this number from risk appetite to begin with, and the market dictated a high coupon rate on the basis of risk. When CoC is that high, one doesn't simply say "fsck it, let's do it anyway". I understand that this was necessary to support growth, so one cannot simply use an ROI or ROE calculation to justify turning it down, but one has to then engage with the DCM market to identify the specific risks that need to be addressed in order to reduce CoC, or to match their portfolio risk profile. All they did was willy-nilly attach guarantees, and coerce GEPF to simulate sentiment through block buys of the bonds over quite a few periods...

So my exact point - and I am being a little facetious - is let SANRAL fail, let treasury pay their surety and let the roads fall to whom they may.

Not an option. CoC will go through the roof, and I for one don't feel like paying a few billion extra for every project undertaken for the foreseeable future...

My argument would be that other than the massive ballache of the debt itself and its contaminant effect on sentiment towards South Africa as a whole (lets not overstate the GEPF issue but ...) this disaster presents a certain opportunity to move towards decentralizing ownership of roads and there are certain roads that make commercial sense to operate as steady investments - the road between Jbay and Humansdorp for example considering the presence of a highway. Surface transport legislation will need to be rewritten.

This much I'm okay with on condition that said revenue is derived from investment into making the road economically beneficial, as opposed to opportunistically taxing it for the sake of cross subsidising other debts, like GFIP...

 

[Paul Hjul]

But he still wants the levy to be only in Gauteng, instead of a national one. I think the importance of Gauteng's economy is sufficient reason that everyone can help pay. The middle class in Gauteng aren't as wealthy as the middle class in Europe, so everyone here can't just swallow massive increases in costs willy nilly.

nah you bastards must pay
just drive the wage pressure based on the growing disparity in cost of living in the province and watch as inflation comes back to bite the whole country in the ass because of the extent of production in the province

 

[Paul Hjul]

Nope. 56% of Sanral's bonds held at amortised cost are guaranteed. You're forgetting to factor in the coupon payments here...

Amortised cost
WHAT THE ****
did they get some serious hard core drugs in Austria with this whole thing

 

[DJ...]

But he still wants the levy to be only in Gauteng, instead of a national one.

Nope, he conceded that point if you read back. That was the gist of the discussion. JStrike is referring now to WC provincial investment in roads as opposed to Sanral investment...

 

[DJ...]

Amortised cost
WHAT THE ****
did they get some serious hard core drugs in Austria with this whole thing

Their guarantee extends to the bond term, not just the principal capital portion, so the government are exposed to around R17bn...

 

[DJ...]

nah you bastards must pay
just drive the wage pressure based on the growing disparity in cost of living in the province and watch as inflation comes back to bite the whole country in the ass because of the extent of production in the province

That is a very important point, and one I was referencing when I referred to demographics (loosely) earlier on. PPI increases in production-centric areas will result in far greater inflationary pressures than a national levy across all sectors of the market...

 

[Paul Hjul]

That's not a rule of thumb at all in the financial industry. Debt is not more costly necessarily than equity. It is based on risk and economic factors. They couldn't raise using equity in any case as their only shareholder doesn't exactly have the liquidity to move that into one project of a provincial nature. But on the debt side of things, check out the bond yields on their issuances when you have a chance and see how they trade - there is no sentiment in there - a ton of risk. That risk profile warranted a high coupon, paid biannually. The cost of capital, in a nutshell, was so high because the market would not accept the risk (even with a government guarantee) without the higher coupon rate. They've issued double-digit coupons consistently - as high as 13% and probably higher in some riskier tranches of the debt.

This is simply how the DCM market works - risk appetite and whether said risk matches the portfolio's risk profile. Their lead arranger would have sourced this number from risk appetite to begin with, and the market dictated a high coupon rate on the basis of risk. When CoC is that high, one doesn't simply say "fsck it, let's do it anyway". I understand that this was necessary to support growth, so one cannot simply use an ROI or ROE calculation to justify turning it down, but one has to then engage with the DCM market to identify the specific risks that need to be addressed in order to reduce CoC, or to match their portfolio risk profile. All they did was willy-nilly attach guarantees, and coerce GEPF to simulate sentiment through block buys of the bonds over quite a few periods...

Sorry I stated what I meant a little badly - I know debt is not necessarily more expensive than equity but the lack of options and choices my argument being that SANRAL is a closed equity player whose owner is not showing an interest in coming to the party. A company going cap in hand to the market is going to get expensive debt. It is the "fsck it, let's do it anyway" in the name of growth that underlies the problem.

Not an option. CoC will go through the roof, and I for one don't feel like paying a few billion extra for every project undertaken for the foreseeable future...

hence facetious ...

This much I'm okay with on condition that said revenue is derived from investment into making the road economically beneficial, as opposed to opportunistically taxing it for the sake of cross subsidising other debts, like GFIP...

well completely - although a little cross subsidization doesn't both me if it is what the market is happy with (so an expressway subsidizing public roads)

 

[OrbitalDawn]

Nope, he conceded that point if you read back. That was the gist of the discussion. JStrike is referring now to WC provincial investment in roads as opposed to Sanral investment...

Ah okay, then I apologise. I still disagree with you in that I think this should be funded out of the fiscus. They fleece us for enough taxes as is. This whole thing is basically just them trying to squeeze extra milk out of the stuttering cow. I remain thoroughly unconvinced that they managed their finances in such a way that this was the only (or most reasonable) option left.

 

[Paul Hjul]

Ah okay, then I apologise. I still disagree with you in that I think this should be funded out of the fiscus. They fleece us for enough taxes as is. This whole thing is basically just them trying to squeeze extra milk out of the stuttering cow. I remain thoroughly unconvinced that they managed their finances in such a way that this was the only (or most reasonable) option left.

I think they quite intentionally managed their finances to make it impossible not to go with an approach of squeezing out

 

[DJ...]

Sorry I stated what I meant a little badly - I know debt is not necessarily more expensive than equity but the lack of options and choices my argument being that SANRAL is a closed equity player whose owner is not showing an interest in coming to the party. A company going cap in hand to the market is going to get expensive debt. It is the "fsck it, let's do it anyway" in the name of growth that underlies the problem.


hence facetious ...


well completely - although a little cross subsidization doesn't both me if it is what the market is happy with (so an expressway subsidizing public roads)

Sanral had decent ratings though. Their CoC did not need to be as high as it was. All they needed to do was engage the market properly. Quite clearly the market identified the risk immediately, but Sanral ignored it and forged ahead, on the basis of bullying people into compliance. The other issue now is that based on this, they've priced their bonds incorrectly, and this creates arbitrage opportunities in their closed market, so their bonds have this constant downward price pressure because of this.

It is a total dog's breakfast on the funding side, and it is quite clearly the biggest problem. Had the costs not been so overly-inflated, had the implementation not been so inefficient, and had this been done locally, then I'd be more open to the idea. But it wasn't. The other issue that motivates my disdain for this project is that they didn't really build anything. They conducted maintenance (which we already pay for) and added one additional lane to some areas. For 185km of road. One lane cost us R30bn. That's R162 million per kilometre.

That's a proposal that should have been booted upon first sight. Instead, this pathetic government have placed us in a position where we simply have to pay, for their corruption, incompetence, and ineptitude. It grates me...

 

[Paul Hjul]

had a proper read over the statement of intent

**** it is a lot worse than I thought - I thought we had a R20bn problem ....