New plan for paying R13-billion e-toll debt

The Gauteng provincial government (GPG) wants to use revenue from Gautrain — a partially tax-funded service that is not yet self-sustaining — to pay off a R12.9-billion loan it needs to foot the bill for its part in the e-toll shutdown.

The plan was recently confirmed to be part of a “revenue enhancement strategy” announced by Gauteng Finance and Economic Development MEC Lebogang Maile in his 2024/2025 budget speech.

The shutdown of e-tolls in early April 2024 came after an agreement was struck between the GPG, the national government, and the South African National Roads Agency (Sanral).

That deal entailed that the GPG take on 30% of Sanral’s R43 billion outstanding debt on the project, while National Treasury carried the remaining 70%.

Those commitments facilitated the shutdown of the e-tolls and the discontinuation of billing for future use of the e-tolled roads but have not eliminated the outstanding customer bills owed up to the shutdown date.

While it is unclear how the government plans to collect the billions of rand in e-toll debts, the GPG previously said it would fund its R12.9-billion contribution to the e-toll shutdown with a loan or loans from financial institutions.

Until Maile’s budget, there was little clarity on how the loan itself would be paid off.

Maile has told Moneyweb the GPG had revised its strategy to rather obtain a loan to invest in new infrastructure — including the Gautrain Phase 2 expansion.

That investment is then supposed to produce revenue to pay off the loan.

“We will rather borrow money from the bank to finance Gautrain because Gautrain will be able to pay that debt and Gautrain will also impact the economy,” Maile said.

The Gautrain has never been profitable and relies partially on subsidies from the government to remain viable.

That being said, the service’s functioning has often been dubbed “world-class” and at least has some practical benefit — alleviating vehicle congestion between Pretoria and Johannesburg.

The same returns were not achieved for many other institutions and state-owned companies into which billions of rand in bailouts were poured over many years.

Gautrain Management Agency (GMA) chief operator officer Victor Shange recently told MyBroadband that the GMA’s number one focus is currently on generating alternative revenue to reduce its reliance on the subsidy.

Shange also defended the expansion and said the Gautrain would generate more revenue as it will be a fully paid-for asset once it is handed over to the GPG by the Bombela Concession Company in 2026.

“Going forward, we know the commercial revenue and have the commercial rights to the system,” Shange said.

“At the moment, where there’s a billboard on the system, for example, we share the concession in terms of revenue. Going forward, that becomes ours.”

However, Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage told MyBroadband he did not believe the expansion plan would lead to the Gautrain becoming profitable.

“Its most lucrative opportunities lie in its links between Joburg to Tshwane and the OR Tambo airport, which have not generated profits to the province,” said Duvenage.

“We certainly can’t see how an expanded network will solve their cashflow crisis.”

“If the cost of undertaking such projects is anything to go by, this expansion will be overpriced, take longer to build than it should, and will introduce more debt around the neck of future provincial leaders.”

The Automobile Association of South Africa also regards the expansion plan as “disastrous” because it would fund a “failing” system.

It calculated that Gauteng taxpayers had already contributed close to R13 billion in subsidies to the system several years ago.

Questions over other revenue enhancements

In addition to the revenue from Gautrain and other infrastructure projects, the GPG’s revenue enhancement strategy includes new gambling taxes, such as a switch from a 9% flat tax rate on casinos to a sliding scale tax ranging from 8% to 15%.

The GPG also aims to improve motor vehicle licence revenue collections and driving licence testing centre services.

Duvenage is also sceptical about some of these enhancements, arguing that improved service delivery would not bring in more money unless paired with increased fees.

“With under 5% of the Gauteng province’s revenue being self-generated — around R8 billion of its total R190 billion — one cannot imagine what it is that the province will do to significantly increase its revenue,” Duvenage said.

“If it could, we imagine it would have done so years ago.”

“Even if the province could increase its own revenue by 25%, that would still be less than R2 billion per annum.”

“This is hardly enough to settle their commitments to Sanral’s e-toll debacle, let alone the interest and capital portion of a loan to cover this inconvenient debt.”

Duvenage said the province should never have allowed itself to be “sucked into” settling an unnecessarily inflated debt that Sanral got the country into.

“The debt on the construction of the 186km freeway network upgrade is on Sanral’s asset register, not the Gauteng province’s, so one wonders what accounting principles are being applied to this transaction,” said Duvenage.

“The province and its residents will now be subjected to higher tariffs or costs in order to settle this debt.”

“What the province should be doing is not only seeking reasonable avenues to raise more revenue, which it should use to manage its support for NGO-based social services but also to reduce its waste, maladministration and corruption in other areas of its day-to-day business.”