The government’s chaotic efforts to introduce e-tolling, and the high court’s order at the weekend to halt the project, have cast a shadow over the state’s multibillion-rand infrastructure plans, with questions raised about its ability or willingness to guarantee debt.
SA’s leadership also appeared to be weak and confused, which could damage the country’s image as an investment destination, Efficient Group economist Dawie Roodt said yesterday.
He was referring to an agreement on Thursday between the African National Congress (ANC) and the Congress of South African Trade Unions (Cosatu) that the implementation of the system be delayed by a month.
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While the North Gauteng High Court’s order on Saturday granting an urgent interdict to the Opposition to Urban Tolling Alliance (Outa) has been hailed as a landmark victory for public opinion, it has narrowed parastatal policy options.
SA in March launched an R845-billion infrastructure drive involving 17 projects. The projects included a plan to modernise and expand rail, port and road infrastructure. The drive has been promoted by President Jacob Zuma at meetings with other developing economies of the Brics group - Brazil, Russia, China and India.
Treasury lawyer Jeremy Gauntlett told the court that if Sanral defaulted on one month of its payment, the state would have to pay its entire debt. "It does not mean that government would not be able to meet it (the debt), it has to, but at what cost? For this country to sustain R20-billion in unbudgeted capital is a serious matter."
Peter Attard Montalto, an emerging market economist at financial services group Nomura, said yesterday the struggle to implement the e-tolling system would create a precedent which undermined parastatal policy, and measures to manage the problems would add costs to the fiscus.
Mr Montalto said the state would have to bail out Sanral using funds meant for other parastatals. He said this would be a real test of the government’s ability to act as guarantor for a parastatal.
Sanral was structured like two separate companies with two balance sheets - one half for non-toll roads and the other for toll roads, according to Mr Montalto.
Commercial law allowed no cross-funding between the two halves, but there was a broad guarantee and a single rating over the whole structure, he said.
"The rather tricky issue here, now, is that about R20-billion of debt has been issued on the toll side of the balance sheet to fund the Gauteng roads - if tolls are not collected it risks being unable to service its debt because Sanral can’t cross-fund the two sides of the balance sheet.
"Consequently, if a payment is missed - the toll-side debt accelerates. The government would have to then pay around R19-billion (the guarantee was for 95%) to finance that side of Sanral’s balance sheet," he said.
"There may well be consequences beyond Sanral. There is no doubt that the Treasury can manage the debt repayment schedule and even pay up if all the debt was accelerated. If the government had to step up and meet its guarantee, budget reserves would be fully consumed at the start of the fiscal year and add yet another risk to the deficit."
Spokesman Jabulani Sikhakane said yesterday the Treasury was looking at the court judgment before commenting further.
But solving the funding issues could be delayed by legal process. Pieter Conradie, a lawyer representing Outa, said yesterday the review process ordered by the court was likely to take from two or three months to a year, depending on whether the government provided all the documents on time. "We are waiting for all the documents put before the minister when he came to this decision," he said. "If they don’t play ball it will take time."
Meanwhile, the government would be viewed by investors to have buckled under pressure from Cosatu and others who had set up a "tax revolt", Mr Roodt said.
"People are prepared to pay for tolls but with conditions. The real issue is we are losing face because clearly the politicians are not in charge here. It’s very bad for SA’s image," he said.
Mr Roodt said the R20-billion needed to fund highway rejuvenation was a small sum compared to what the state spent annually, but the process of funding the project was making the state look indecisive.
"State expenditure is around a trillion rand. This excess 2% of state expenditure is then small." But the government looked confused in dealing with an infrastructure need which investors would see as easy to fund.
This could also worry ratings agencies. "Ratings agencies ask only two questions: can these guys repay their debt, to which they will answer yes, and does the government want to, to which they will answer, not really," he said. Although e-tolling was probably the most efficient way to recover the debt, there were other options. " They could get the money from the Reserve Bank or commercial banks. They could change the VAT rates," Mr Roodt said.
The e-toll issue also helped to redefine power politics within the ruling tripartite alliance.
Cosatu is widely credited with having pushed the ANC into agreeing to the month-long delay, and said yesterday it would continue looking for an alternative funding model.
"We are participating in that process with the ANC and we are confident that it will yield positive results," Cosatu general secretary Zwelinzima Vavi said.
He described the court action and the agreement with the ANC as "extraordinary events". "We are at a point where we had a big cloud removed, it gives us a clear way moving forward to work out a better funding model."
Had the system not been halted by both the political intervention and the courts, Mr Vavi said, it would have remained difficult to enforce since no regulations were in place to do so.
The e-toll issue was a key point of contention in the ruling alliance, with the ANC-led government and the South African Communist Party (SACP) behind the project and Cosatu bent on seeing it scrapped. The SACP position was that it was already a done deal and that the government had committed itself.
Director of the Centre for the Study of Democracy, Professor Steven Friedman said the e-toll saga helped Cosatu to demonstrate the influence it wielded in society and its ability to muster public support.
Political analyst from the Wits Centre for Ethics, Eusebius McKaiser, said it showed that Cosatu presenting a united front, despite internal divisions, was key in influencing policy.
Sanral could not be reached for comment yesterday while the Department of Transport said it was studying the court ruling.