The Gauteng E-tolling Thread

[Wyzak]

I think you're misunderstanding something here a bit. Fixed income market is the debt funding market. The fixed income descriptor has nothing to do with the cash flow side of things. It is a fixed income to the creditor. And a fuel levy is not a MBUF method. Just think about what MBUF means, and the fact that not all cars are equal.

Guys listen now, this is getting a little ridiculous. You can keep bitching about E-Tolling all you like, and I agree with you, but you're not going to win on the fixed income market bit. It's just no feasible to fund infrastructure in the debt capital markets with an unknown variable to such an extent to your cash flow. You just will not. You can disagree, but you'll be wrong. Actually let me rephrase my statement. Funding infrastructure in the debt capital markets with a massive risk factor to your primary cash flows would result in the cost of capital becoming so ludicrously expensive that it would probably make more sense to just print the damn money and accept the inflationary hit to the economy instead.

Then I guess we just won't reach an agreement on this matter. If the fixed income market somehow thinks that that the e-tolling revenue model is more stable than the fuel levy model then their argument is completely flawed and it's no wonder the world's economy is in so much crap.

I understand what you are trying to say with regards to fossil fuel's future, but that could be 50 years from now, or 20 years or 10 years. Whereas the e-tolling funding model's revenue is high-risk now, and will be tomorrow and will still be in 20 years or 50 years. If anything they should be considered equal risk, alternatively the e-tolling model should be higher-risk.

The fuel levy might not be an exact MBUF, but it is a very close derivative thereof. The more miles you travel, the more you pay on the fuel levy. I am yet to see a vehicle which stops consuming fuel after a certain amount of distance travelled.

I know you don't support e-tolls, but you might be confusing other people who arrive here and don't have time to read through everything. Just like the fuel levy, the e-tolling system is also a derivative of the MBUF because not all roads are treated equally, and not all users pay equally. I would also fully support a proper MBUF, but for that to work you would need to install GPS-trackers in every vehicle and bill them accordingly. That is a massive operation, compared to the fuel levy which has a very similar effect up to the point where people start switching over to alternative fuels en mass. And that's not happening anytime soon in SA.

EDIT: DJ: If it really is such a massive problem, why does government have to borrow based on fuel levy or e-toll income? Why doesn't it borrow against the tax base? Surely that is more sustainable and stable than both.

 

[Sinbad]

The fixed income market DON'T believe the e-tolling model is more stable. No one bought the bonds.

 

[Necropolis]

I wonder what will happen to all the etoll infrastructure should the whole endeavor fail.

Do you guys reckon it will be ripped apart and sold for scrap - or just left as reminder of a system that was doomed to fail?

 

[Sinbad]

I wonder what will happen to all the etoll infrastructure should the whole endeavor fail.

Do you guys reckon it will be ripped apart and sold for scrap - or just left as reminder of a system that was doomed to fail?

If they had any brains they'd turn them into average speed enforcement devices.

 

[Wyzak]

I wonder what will happen to all the etoll infrastructure should the whole endeavor fail.

Do you guys reckon it will be ripped apart and sold for scrap - or just left as reminder of a system that was doomed to fail?

They should convert them into average speed cameras like Sinbad suggested and then change their names to those who approved the system.

 

[Cius]

Not sure I agree with you on the fixed income funding side DJ. I work at an investment bank and our investment boys regularly help pull together FI funding on deals like this. The Bakwena toll deal was done via them I think and that was a 20 or 30 year transaction.

 

[DJ...]

Then I guess we just won't reach an agreement on this matter. If the fixed income market somehow thinks that that the e-tolling revenue model is more stable than the fuel levy model then their argument is completely flawed and it's no wonder the world's economy is in so much crap.

I understand what you are trying to say with regards to fossil fuel's future, but that could be 50 years from now, or 20 years or 10 years. Whereas the e-tolling funding model's revenue is high-risk now, and will be tomorrow and will still be in 20 years or 50 years. If anything they should be considered equal risk, alternatively the e-tolling model should be higher-risk.

The fuel levy might not be an exact MBUF, but it is a very close derivative thereof. The more miles you travel, the more you pay on the fuel levy. I am yet to see a vehicle which stops consuming fuel after a certain amount of distance travelled.

I know you don't support e-tolls, but you might be confusing other people who arrive here and don't have time to read through everything. Just like the fuel levy, the e-tolling system is also a derivative of the MBUF because not all roads are treated equally, and not all users pay equally. I would also fully support a proper MBUF, but for that to work you would need to install GPS-trackers in every vehicle and bill them accordingly. That is a massive operation, compared to the fuel levy which has a very similar effect up to the point where people start switching over to alternative fuels en mass. And that's not happening anytime soon in SA.

EDIT: DJ: If it really is such a massive problem, why does government have to borrow based on fuel levy or e-toll income? Why doesn't it borrow against the tax base? Surely that is more sustainable and stable than both.

This can be summed up quite easily. You cannot originate a bond, nor secure an underwriter without a proper cash flow model, where the cash flow's integrity is calculated.

It's as simple as that...

 

[DJ...]

Not sure I agree with you on the fixed income funding side DJ. I work at an investment bank and our investment boys regularly help pull together FI funding on deals like this. The Bakwena toll deal was done via them I think and that was a 20 or 30 year transaction.

I'm talking about 30 year notes though. I've made my case for shorter maturation dates already.

How would you show integrity in a cash flow model with a variable that simply has no precedent and cannot be calculated? The only method to perform such a calculation, and to bind it legally in a prospectus would be to ignore possible development in totality, and in turn make the deal completely unattractive to investors...

 

[Wyzak]

This can be summed up quite easily. You cannot originate a bond, nor secure an underwriter without a proper cash flow model, where the cash flow's integrity is calculated.

It's as simple as that...

Then why would they effectively ring-fence the income from the roads when applying for financing instead of using the much more stable entire tax base?

I'm talking about 30 year notes though. I've made my case for shorter maturation dates already.

How would you show integrity in a cash flow model with a variable that simply has no precedent and cannot be calculated? The only method to perform such a calculation, and to bind it legally in a prospectus would be to ignore possible development in totality, and in turn make the deal completely unattractive to investors...

Exactly, how did they proceed then with the e-tolls cash flow model?

 

[Sinbad]

Then why would they effectively ring-fence the income from the roads when applying for financing instead of using the much more stable entire tax base?



Exactly, how did they proceed then with the e-tolls cash flow model?

They assumed compliance.

 

[Wyzak]

They assumed compliance.

Even with full compliance it will never be as stable as the fuel levy is currently and has been historically because people won't have money to pay on time or will forget to pay, or refuse to pay outright, or until a dispute has been resolved etc.

 

[Sinbad]

Even with full compliance it will never be as stable as the fuel levy is currently and has been historically because people won't have money to pay on time or will forget to pay, or refuse to pay outright, or until a dispute has been resolved etc.

And that's why no-one bought the bonds.

 

[Compton_effect]

You know what?
I've followed all the arguments and counter arguments, the accusations and trolling.
And come to the stunning conclusion that I don't give a **** why, or why not.
I don't care about the motivations why this is a good idea, a bad idea, or other methods for doing this.
I won't debate this with anyone. All I know is - I'm not paying and will make it as unpleasant as possible for all involved if I am forced to. This is not business - if need be - I will make this very personal.

 

[DJ...]

Then why would they effectively ring-fence the income from the roads when applying for financing instead of using the much more stable entire tax base?

Not sure I'm following your argument. MBUF doesn't apply to the entire tax base...

Exactly, how did they proceed then with the e-tolls cash flow model?

By showing various models based on varying degrees of compliance. They were simply more honest with their investors about the payment split...

 

[DJ...]

Even with full compliance it will never be as stable as the fuel levy is currently and has been historically because people won't have money to pay on time or will forget to pay, or refuse to pay outright, or until a dispute has been resolved etc.

Assuming 100% compliance makes it very stable. You're arguing their debtor's book collection rates now. You really are nitpicking, Wyzak.

MBUF cannot apply to the entire tax-base. Their cash flow models with honest payment splits probably do show a tidy, sustainable profit. The Sanral act provides stability in the debtor's book collection.

They just simply didn't take into account the massive backlash from taxpayers. But then government guaranteed most of the debt to coerce funding.

What you're proposing is that they levied a new tax on all taxpayers. Which would have to come in the form of a VAT increase to hit all taxpayers...

 

[Wyzak]

Not sure I'm following your argument. MBUF doesn't apply to the entire tax base...

By showing various models based on varying degrees of compliance. They were simply more honest with their investors about the payment split...

Sorry I misspoke, I meant equally to all road-users. No-exemptions.

And the investors saw right through them...

Assuming 100% compliance makes it very stable. You're arguing their debtor's book collection rates now. You really are nitpicking, Wyzak.

MBUF cannot apply to the entire tax-base. Their cash flow models with honest payment splits probably do show a tidy, sustainable profit. The Sanral act provides stability in the debtor's book collection.

They just simply didn't take into account the massive backlash from taxpayers. But then government guaranteed most of the debt to coerce funding.

What you're proposing is that they levied a new tax on all taxpayers. Which would have to come in the form of a VAT increase to hit all taxpayers...

Even with 100% compliance it will never be as stable as the fuel levy due to human nature. People forget to pay, or don't have money to pay at the time etc. You can't avoid the fuel levy when re-fueling your car. Full stop.

It makes no sense to me for them to borrow against only the income they earn on roads, this is obviously considerably more risky than the entire tax base. Hence they were probably penalized in the form of the interest rate.

No, it doesn't have to come from VAT at all. It can come from anywhere else, it can come from PAYE, it can come from new taxpayers, it can come from money saved by cutting down on corruption etc.

 

[DJ...]

I for one will not support a precedent that creates additional PAYE burden every time the government want to invest in infrastructure.

I'm also really not following your argument any longer.

I don't see the massive risk discrepancy you see.

But this has gone down an incredibly detailed nit-picking process with a lot of confusion and misunderstandings along the way. Raising money in the capital markets is a suitable form of funding infrastructure. Doing so with revenue from the source of investment makes sense. I don't see the problems you're seeing...

 

[creeper]

http://www.bdlive.co.za/business/transport/2014/02/06/gauteng-firms-battling-to-register-for-e-tolls

GAUTENG companies have had difficulty registering for e-tolls, according to a survey by management consultancy P E Corporate Services, whose findings add to billing and registration grievances against the South African National Roads Agency’s (Sanral’s) e-toll system

The more interesting tidbit was this:

Sanral on Wednesday postponed a press conference at which toll collection statistics for last month were to be released. It was unclear when it would become available.

:erm: Assumptions and wild deductions can be made.

 

[DJ...]

Yup, as was expected.

It's time to up the ante with these guys. So I've created a thread with what I believe to be the important information about E-Tolling that everyone needs to absorb

http://mybroadband.co.za/vb/showthr...-know-about-E-Tolls-The-important-information

 

[creeper]

My bet. They will be creative. Revenue instead of collections will be reported. Compare volumes to complaints, even though a complaint may have many transactions involved. Use the 1m registered users and divide it by total revenue during Dec.

Other issues will be isolated problems.