South Africa’s secret toll profits

While toll fees on major South African highways have increased substantially over the past few years, the profits of the private companies maintaining these routes are a closely guarded secret.

Although highways like the N1, N3, and N4 are owned by the taxpayer-funded South African National Roads Agency (Sanral), large sections are maintained, upgraded, and operated by private concessionaires.

The Organisation Undoing Tax Abuse (Outa) is concerned that concessionaires have started making substantially more money due to the huge amount of freight transportation moving from rail to road.

While there is an argument to be made that the additional volumes could increase strain on the roads and therefore expenses to conduct the required maintenance, the extra revenue was likely more than offsetting that impact.

“Outa believes it is imperative that the State ensures transparency of the revenues and costs incurred by these concessions, on behalf of the public,” the organisation said.

“In the case of these public-private concessionaire partnerships, where there is a lack of transparency, these are opportunities for significant unnecessary enrichment.”

Outa is currently involved in three court actions against Sanral relating to information about the revenues of the Bakwena, N3TC, and TRAC concessionaires.

The most recent development involves the N3TC, which operates the N3 toll road between Heidelberg in Gauteng and Cedara in KwaZulu-Natal.

The toll fees on this section amounted to roughly R300 for light passenger vehicles in 2023.

Outa executive director, advocate Stefanie Fick, said these fees had increased by about 25–28% between 2018 and 2023.

She explained that the transport minister determines toll fees and that these should be calculated using a formula in the contracts.

“However, the toll fees increased significantly (more than CPI in some instances) over the years, and Sanral’s financials show that they do not get a significant amount of money from the concessionaires,” Fick said.

“We have commissioned an actuary to look at the increases and to determine whether the increases were in line with the formula.”

Fick said although Outa took no issue with the companies making profits, excessive profits to the detriment of the motorist are irrational.

“Although the 30-year contracts are nearly completed, it may become very important if the contracts are to be renewed,” Fick said.

“If the financial burden of ordinary road users can be alleviated by exposing excessive profits, we have a duty to expose this,” Fick stated.

Outa launched a Promotion of Access to Information Act (PAIA) application to have Sanral share information on toll revenues from the N3TC in 2019.

In November 2023, the Pretoria High Court dismissed Outa’s application.

Sanral opposed the case while N3TC joined the case to oppose the handover of the information.

The court found that the case was not premised on any irregularity in the contract between Sanral and N3TC but rather on the perception that the N3TC, in performing its duties under the contract, “may well have made a profit”.

“There is no provision in our law that any private third party which contracts with the State is prohibited, within the confines of a lawfully made and awarded tender, to make a profit,” the judgment stated.

“In its terms, section 46 of PAIA applies only to contraventions or failure to comply with the law or public safety or environmental risk. None of these apply in the present case.”

“It was neither argued nor was any case made out that N3TC had failed to comply with its obligations in terms of the main agreement and to deliver that for which it had been contracted.”

“The making of profit, in a private company, is an everyday commercial consequence and is not in and of itself a matter which requires disclosure in the public interest,” said the court.

Public interest above private interest

Outa was not granted leave to appeal the ruling by the High Court but has petitioned the Supreme Court of Appeal to hear its case. It is currently drafting its papers for this filing.

Fick said the organisation believed the public interest did not receive the attention it ought to in PAIA processes, especially in the light of contracts between the private sector and the state.

“We believe that the public interest should always enjoy preferential and elevated status above that of private interest — irrespective of who the parties are,” Fick said.

“The judgment as it stands upholds the veil of secrecy when it comes to private companies contracting with the state.”

Fick said democratic societies required transparency and accountability to build a responsible state.

“Unfortunately, there is no political will to foster transparency in South Africa,” she said.

While she acknowledged that the concessionaires actually looked after their roads pretty well, refusing to share their profit data was concerning.

“This secrecy doesn’t help one’s ‘spidey senses’ that ‘something’ is off,”

Fick further argued that N3TC might not truly be a private company in its own right, at least not in how it operates the N3.

“In terms of the N3TC contract it is clear that N3TC is not a contractor doing business with Sanral, N3TC is Sanral — just with skills,” she said.

“The contract SANRAL drafted for the N3TC deal, was very specific in its requirements.

“N3TC’s sole purpose is to maintain the N3 to Sanral’s specifications, it doesn’t do business anywhere else unless authorised by Sanral.”

Fick also pointed out that some of the directors serve or have served on boards of more than one of the concessionaires.

In Outa’s opinion, this undermined the view by Sanral and N3TC that the concessionaires’ intellectual property and trade secrets must be protected.