Gauteng freeways inflated by R9,6bn: Ministers urged to investigate

The exercise revealed that the rest of the world was able to build between two and three roads for every one road that SANRAL built.

At the time, the  Organisation Undoing Tax Abuse (OUTA) also conducted a high level costing exercise of the Gauteng Freeway Improvement Project (GFIP) and claimed that SANRAL had grossly overpaid by approximately R10,8bn when it paid R17,9bn for the Gauteng freeway network upgrade between 2008 and 2012.

SANRAL chose to denounce OUTA’s paper by seeking to punch holes into some of its findings and questioned its methodology of benchmarking as a futile exercise. In so doing, SANRAL attempted to dismiss OUTA’s entire report. However, OUTA responded that SANRAL made serious mistakes in trying to denounce the overarching claim that the R17,9bn price-tag of the GFIP was not fair value.

“SANRAL lost a great opportunity a year ago to deal with this issue in a constructive manner,” says Ben Theron, OUTA’s Transport Portfolio Director. “Instead of working with OUTA to explain or unpack OUTA’s concerns, they chose to be adversarial and to thwart OUTA’s attempts to obtain all the tender documents and details pertaining to the project.”

Subsequently, OUTA conducted wider and deeper research into this matter over the past year and today, we release an updated position paper titled: “The Road to Excess: A Paper on High Pricing, Collusion and Capture of National Road Construction.”

In this paper, OUTA goes broader than a benchmarking exercise to expose the extent of the exorbitant inflation of the GFIP cost to society. This time around, OUTA engaged with experienced industry experts (road construction engineers and quantity surveyors) and conducted a range of price estimation methodologies to arrive at its “fair value” price-tag for GFIP. This was made possible by using tender documents of one of the work packages it obtained, as well as other key quantity details and significant input obtained from a number of GFIP presentations given by SANRAL and the construction companies between 2008 and 2013.

In addition, OUTA gathered more information on other road construction projects (internationally and closer to home), which offered further benchmarking evidence pointing to an excessively inflated price of R17,9bn paid by SANRAL for the GFIP.

Today, OUTA reiterates its opinion that the GFIP has been overpriced. Using more accurate information, OUTA calculates the price of the project to be between R8bn and R8,7bn , resulting in an estimated overpayment to the tune of between R9bn and R10bn for this project.

“OUTA would still like to obtain the full tender documents and conduct a detailed and accurate costing exercise of the GFIP, however, until that takes place, we believe in our analysis and conclusions,” says Theron. “The mere fact that information pertaining to the tenders of the GFIP are not easily accessible to the public – when compared to the availability of other road construction projects undertaken by SANRAL – suggests that SANRAL is trying to hide something here.”

Following the release of this position paper, this week OUTA will be writing to the Ministers of Transport and Public Enterprise to seek their intervention and commitment to introduce a commission of enquiry into:

• The excessive costs pertaining to the GFIP.

• The general high cost of road construction in South Africa over the past decade.

• The R15bn costs indicated in the forthcoming 80 km N3 Cedara to Durban freeway project.

• The lack of meaningful action taken against collusive construction industry players.

• The appointment of the previously promised Transport Regulator.

Additionally, OUTA will be requesting to engage with various construction industry oversight bodies and associations such as the Construction Industry

Development Board (CIDB), the SA Institution of Civil Engineering (SAICE) and the SA Forum of Civil Engineering Contractors (SAFCEC), to establish their roles and responsibilities, along with their intended actions relating to not only the claims made by OUTA in this paper, but also to the apparent lack of detailed investigation and action undertaken in relation to the known construction industry collusion.

OUTA will also lodge complaints with the Public Protector, Treasury and others, with a view to seeking their intervention to this apparently unacceptable situation.

OUTA wishes to reiterate that it has no desire to see the demise of SANRAL, which is filled with good people, qualified engineers and immense road building expertise. It is however, unfortunate that our relationship with this SOE has been adversarial over the past five years, specifically in relation to the failed e-toll scheme. However, over these past few years, OUTA has uncovered more anomalies and concerns relating to SANRAL’s activities on numerous other fronts, the GFIP construction costs being just one of them.

In closing, we remind our State Owned Entities that OUTA’s quest is to ensure they are transparent and inclusive and that their work is continuously geared towards producing the best outcomes for the people whom they ultimately serve. We are furthermore encouraged by the open and engaging attitude of the new SANRAL CEO, Mr. Skhumbuzo Macozoma and look forward to further engagements with him and his team to assist where we can in overcoming some of the hurdles and difficulties they face, whilst seeking a suitable alternative to the e-toll scheme.