A massive loss for transparency: Court rules OUTA not entitled to financial information on N3TC toll concession
OUTA has lost a court bid to get financial information from Sanral which would expose the scale of profits which N3TC makes on its 30-year toll concession contract.
On 14 November 2023, the Pretoria High Court dismissed OUTA’s application, which had challenged Sanral’s refusal to provide key documents requested in a Promotion of Access to Information Act (PAIA) request more than four years ago, particularly N3TC financial statements relating to the toll concession. Sanral opposed the application and N3TC also joined the case to oppose the handover of the information.
“OUTA is disappointed that the court dismissed our application for access to the financial information on the N3TC toll concession contract. This is a massive loss for transparency,” says Advocate Stefanie Fick, OUTA Executive Director.
“We believe that the public interest does 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. Unfortunately, the judgment as it stands upholds the veil of secrecy when it comes to private companies contracting with the state.”
“Although we accept the judgment handed down by the Pretoria High Court, we are still at liberty to exercise our right of appeal. We are currently considering our options.”
N3TC is the company contracted by Sanral to build and operate the N3 toll road between Heidelberg in Gauteng and Cedara in KwaZulu-Natal. The contract was signed in 1999. This is a key route between KZN and Gauteng – even more so since the collapse of the rail infrastructure – and the tolls affect the price of consumer goods moved on this route.
“It is a big concern that there is a possibility that N3TC earns excessive profit to the detriment of road users who fork out the toll fees. These toll fees have increased about 25-28% since 2018 and if the financial burden of ordinary road users can be alleviated by exposing excessive profits, we have a duty to expose this. If you, as an ordinary motorist, take the trip down to Pietermaritzburg and you travel on the N3 road from Heidelberg, you have the benefit of a well-maintained road but it will cost you nearly R300 in toll fees. We believe this cost could be substantially less,” says Fick.
Considering that a vast amount of freight has moved from rail to road over the past two decades, and the toll tariffs have increased every year, we believe the revenues generated by the toll concessions have increased significantly. OUTA believes it is imperative that the State ensures transparency of the revenues and costs incurred by these concessions, on behalf of the public. In the case of these public-private concessionaire partnerships, where there is a lack of transparency, these are opportunities for significant unnecessary enrichment.
These toll escalations not only directly burden transporters with elevated operating costs but also amplify supply chain expenses, impacting businesses engaged in the transportation of goods. This, in turn, makes it increasingly challenging for businesses to remain competitive. As the heightened toll fees translate into higher prices for everyday goods, consumers bear the brunt of this impact in their daily lives. The pass-on of these increased costs squeezes the already stretched household budgets of all South Africans, making the affordability of everyday items a genuine concern.
Tolls are effectively a tax on the public and OUTA is concerned that, as such, they should be linked to the costs of the roads.
“OUTA is not opposed to such public-private partnerships as a method of financing and managing infrastructure development, nor to businesses making a reasonable profit off these. However, that does not mean that such agreements are free of concern. We believe that any excess profit should go to Sanral, as these roads are South Africa’s roads, or that the road users should get the benefit of more affordable toll fees. All we seek are assurances that the public benefits to the maximum extent possible from these public-private partnerships.”
Fick says that the private sector should understand that when they enter into agreements with government, they become subject to public scrutiny. In this specific matter, Sanral has admitted it is not in possession of crucial documents, which its contract with ETC says it ought to have, which in turn raises concerns over Sanral’s oversight abilities.
“The corporate world has been tainted by what has emerged from the Zondo Commission and the Eskom exposures. While big corporates battle it out for government contracts, we will continue to seek to hold both government and private entities to account where public funds and public interest are concerned. This can only be achieved when all parties are genuinely committed to transparency,” says Fick.
OUTA is involved in two other court actions against Sanral over its refusal to provide similar information relating to the two other toll concessions, the Trans African Concessions (TRAC) and Bakwena Platinum Corridor Concessionaire. Some of the directors serve or have served on boards of more than one of these concessionaires, which undermines the view by Sanral and N3TC that the concessionaires IP and trade secrets must be protected.
This case has implications for transparency around public-private partnerships.
N3TC indicated during the court proceedings that it intends to bid for the concession again when it comes up for renewal in a few years. OUTA would like much greater transparency on such arrangements and is concerned that similar secrecy will be applied to the next contract.
What the case was about
In July 2019, OUTA asked Sanral for information relating to the concession, including the concession contract, sub-contractor contracts, N3TC’s annual financial statements on the concession submitted to Sanral, confirmations that the highway usage fees were correctly calculated, and lists of lenders to which N3TC owed more than R10 million.
Sanral failed to respond timeously, which is legally deemed a refusal.
In July 2020, OUTA filed the court application. Sanral, after initially failing to respond to the action, finally in May 2021, the day before the case was due to be heard, gave notice of intention to oppose the action and subsequently filed its answering affidavit. In February 2022, N3TC successfully applied to join the case to oppose certain information being provided.
On Monday 9 October 2023, the morning before the court hearing, Sanral finally provided OUTA with a copy of the concession contract, the operation and maintenance manual, and the engineering contracts (a set of the documents was provided on the Friday but could not be opened). However, Sanral refused to provide the performance certificates for the construction contracts, the N3TC annual financial statements and profit and loss statements relating to the concession which were submitted to Sanral, auditors’ documents confirming the highway usage fee was correctly calculated, or lenders and creditors to whom N3TC owed more than R10 million.
The court application revolved around the refusals.
The court dismissed OUTA’s application.
“OUTA’s claim that the disclosure of the disputed documents is in the public interest is, properly construed on the case before me, predicated entirely, not upon any irregularity with the contract that was concluded in 1999 between Sanral and N3TC but rather upon the perception, after an investigation conducted some 20 years after the fact, that N3TC in the performance of its obligations in terms of the contract may well have made a profit,” said the court.
“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. In its terms, s46 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.”
The court said the case had nothing to do with the original contract – which was in OUTA’s possession – but with the implementation of that contract.
“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.
PAIA says that access to a record must be refused if it contains information on a third party which would likely cause harm to the commercial or financial interests of that party or put it at a disadvantage in contractual negotiations or prejudice it in commercial competition. N3TC had argued that, with the main concession contract up for renewal in a few years, providing the refused information would cause it commercial and financial harm.
On other documents requested which Sanral said it did not have – such as N3TC sub-contractor contracts – the court said that PAIA did not require it to embark on a process to obtain those documents.
The Pretoria High Court judgment is here.
A chronological breakdown of the court process and court papers, plus information on the legal actions in connection with accessing information on the other toll concessions, can be found here.