Spending over R5 billion to collect R10 billion in E-tolls

The South African National Roads Agency Limited (Sanral) has spent an estimated R5.3 billion on trying to recover e-tolls from motorists who are unwilling and unlikely to pay, an analysis from the Organisation Undoing Tax Abuse has showed.

Based on its annual report for the 2020/21 financial year, the amount Sanral spent on trying to collect outstanding e-tolls was almost equal to the amount of revenue the unpopular system generated.

Sanral spent an estimated R508 million on collecting e-tolls, which brought in over R660 million in revenue.

Estimates from the Organisation Undoing Tax Abuse (Outa) show that, in total, it has cost the roads agency around R5.3 billion to operate the E-tolls system.

Meanwhile, Sanral’s financial statements show that it only hoped to collect around R10.5 billion from e-tolls since 2014.

However, Outa CEO Wayne Duvenage told MyBroadband that Sanral collected much less than its annual reports might suggest.

“For example, their actual e-toll income was R875 million for 2017, despite the fact that they showed a billable income of R1.86 billion,” Duvenage said.

“By the following year, e-toll income was down to R725m, and they were still delusional in reflecting this as R1.897 billion.”

Duvenage said that sanity appears to have prevailed in the 2019 and 2020 financial years, with Sanral reporting e-toll revenues of R687 million and R660 million respectively.

It is worth noting that Sanral switched to the International Financial Reporting Standard version 15 (IFRS 15) from its 2019 financial year.

IFRS 15 provides a standard for how companies that have contracts with customers should report revenue.

Prior to 2019, Sanral used IAS 18 (International Accounting Standard). It outlines the accounting requirements for when to recognise revenue from the sale of goods, rendering of services, and for interest, royalties and dividends.

During a recent presentation in Parliament, Sanral CFO Inge Mulder stated that the Auditor-General of South Africa was satisfied with the road agency’s implementation of IFRS 15.

The following table summarises the e-toll revenues that Sanral reported over the years.

It shows the revenue Sanral reflected in its financial statements, and the e-toll revenues it didn’t recognise to account for the high levels of non-compliance.

The table illustrates how Sanral didn’t recognise 50% or more of the e-toll bills it sent out every year as potential revenue.

Duvenage said that even though Sanral effectively wrote off over R17 billion in e-toll revenue, these amounts were not removed from motorists’ bills — Sanral still pursued collection of this income.

Of the amounts owing to Sanral for e-tolls, the roads agency only recognised around R9.8 billion in its most recent financial results as debt owed by motorists.

MyBroadband asked Sanral for feedback on its revenues and the costs it incurs to collect e-tolls, but the roads agency declined to comment.

“The South African National Roads Agency SOC Limited is unfortunately not able to respond to your questions on e-toll related matters until Transport Minister Fikile Mbalula makes a public pronouncement,” a spokesperson told MyBroadband.

“As an implementing agent of government, Sanral continues to be guided by the Minister and Cabinet’s pronouncement on this matter.”

Duvenage said that unfortunately Sanral has not explicitly reported the costs of running the e-toll system.

It is not known exactly how much Sanral pays for its contract with the Electronic Toll Collections (ETC) company, nor what its other administration costs for the e-toll system is.

However, Duvenage said it is possible to get an estimate by looking at how Sanral’s operational administration costs have increased since 2006.

“If we take 2006 as a relatively e-toll free billing year, one can put down their general admin — including the toll operator contracts they have for their conventional toll management — at around R88m per annum,” Duvenage told MyBroadband.

Adjusting for inflation using an average rate of 4% per year, that would bring Sanral’s administrative costs unrelated to e-tolls to around R153 million in 2020.

Deducting this estimate from the expenditure reported by Sanral yields an estimated cost of R508 million to operate the e-toll system during the 2020/21 financial year.

Duvenage said this method could also be used to try and estimate how much Sanral’s contract with ETC was at its height.

“As 2015 was the height of their e-toll administration costs, one can assume this was the most they paid ETC for e-toll administration, before they realised they had to either renegotiate these fees or take a bath on the charges coming in from ETC,” Duvenage said.

“From this deduction, we place the e-toll related administration fees (to ETC) at around R700 million per annum in 2015,” stated Duvenage.

“Remember, 2015 was the first full year of e-toll operations and was the year they were billing motorists like crazy with significant postal and registered mail costs.”

Duvenage said that after 2015, you can see the total operational administrative costs fluctuated. This suggests that reductions must have taken place such as a decrease in postal charges, and other unnecessary costs.

When the ETC contract formally ended in 2018, Duvenage believes they must have renegotiated the extension with ETC to be substantially less.

He also emphasised that although it looks like Sanral made a gross profit of over R150 million on e-tolls in 2020, this is insignificant when you consider Sanral’s loan repayments on the Gauteng Freeway Improvement Project (GFIP).

Just the interest portion on their R21 billion GFIP bond would be substantial, Duvenage said.

The table below summarises Duvenage’s approach to estimate how much Sanral spent on collecting e-tolls since its inception.

Gauteng MEC for Transport says E-tolls will be scrapped, then backpedals

Jacob Mamabolo, MEC for Gauteng Public Transport and Roads Infrastructure, said during an SAFM interview that the decision to scrap e-tolls has already been made.

“We are already in the post e-toll period. An announcement is imminent,” Mamabolo stated.

“We are looking to a completely new e-toll dispensation – we are just waiting for that to be formalised.”

Mamabolo quickly backtracked when news articles about his interview started appearing, stating that his remarks were made from the perspective of the provincial government and not national government.

“The provincial government has been working with national government to ensure the implementation of the e-toll system in Gauteng is halted,” Mamabolo said in a statement.

Shortly after Mamabolo’s comments, Transport Minister Fikile Mbalula released a statement saying that no decision has been made on the future of the e-tolls.

“We are of the view that the MEC has made it quite clear that what he articulated during the interview, is a provincial position of Gauteng, which is not a new matter at all,” Mbalula said.

Now read: Exposed – Astounding corruption allegations inside e-tolls