SAVRALA Release date: 12-01-12
NO TO OPEN ROAD TOLLING GAUTENG PAYS MORE THAN ITS FAIR SHARE
The Medium–Term Budget Policy Statement in October 2011 expressed Governments clear intention to now focus on national infrastructural spend over the next three years by allocating just over R800bn. Areas highlighted include a key focus on the desperate need to tackle the aging rail network and plans to support both national and provincial road network upgrade programs. The details of the road network investments will help give clarity to the division of roles and responsibilities between central Government, Province and its citizens.
In this context, on 18 April 2011, the Minister of Transport Mr. Sbu Ndebele launched the S’hamba Sonke – ‘Moving Together’ Programme in Durban, KwaZulu-Natal. R22bn was allocated to this programme in last year’s Medium Term Expenditure Framework (MTEF) cycle and was described by the Minister in his 1 June 2011 Budget vote speech (in the National Assembly) as ‘the Department of Transport launching a new roads upgrade and maintenance initiative to fix and upgrade the entire secondary roads network of South Africa’.
The earlier call, in the same speech, for ‘a collective engagement of thoughts, ideas and alternatives in construction and funding methodologies’ was followed, by an announcement less than a month later, on 30 June 2011 by the Transport Director-General and Chairperson of the Gauteng Freeway Improvement Project (GFIP) Steering Committee, George Mahlalela, ahead of the final stakeholder consultation meeting, that toll tariff recommendations would now be presented to both the Minister of Transport and Finance.
Unlike the S’hamba Sonke Programme, the GFIP program, said DG Mahlalela, will follow the ‘user-pay principle (tolling) to repay the loans, as well as for future operation and maintenance of these roads’.
This highlights the inconsistency and almost subjective nature of the ‘user-pay’ principle which was undermined further by the exemption of certain minibus taxis and commuter buses by the Minister of Transport late last year.
Gauteng roads users were advised that they will now have to finance the costs for both the estimated R23bn construction costs for the Gauteng Freeway Improvement Project (GFIP) Phase 1a and a further R6bn (over five years) for the administration of the Open Road Tolling system (ORT) which is currently viewed by many as a very conservative figure.
Under the veil of Public Private Partnerships (PPP), the plans to implement a national ORT structure seem like another finance scheme to help Government source much needed funds. The more cynical view is that it can be seen as additional extortion of road users who already pay for vehicle license fees, drivers license fees, multiple fuel levies (incl the RAF and Transnet fuel pipeline) and carbon taxes excluding the personal income tax contributions which go to the central fiscus, to fund the operation of Government which, many would argue includes all roads.
The majority of the opposition to ORT, which includes a cross section of society including business (e.g.: Business Unity South Africa, Road Freight Association and Automobile Association) unions (more notably COSATU), civil society groups (e.g.: South African National Consumer Union), opposition politicians and indeed some within Government (e.g.: Deputy Minister for Transport, Jeremy Cronin), have called for the total suspension of the ORT project.
All acknowledge the need for significant road improvements, as one tool to deal with modern day city traffic congestion in the current absence of an integrated public transport infrastructure; however, the funding of such projects remains the key missing piece to the national transport puzzle.
The parties opposing ORT (excluding most of Government) are unanimous about the need to consider more seriously the national fuel levy as an exponentially more administratively efficient method of both collection and funding. SANRAL’s own research conducted by the Graduate School of Business in Cape Town concedes that ‘paying for roads through taxes or a dedicated fuel levy is simply cheaper than imposing tolls on a road even if this is through an ORT system. The cost of collection is far lower because it does not incur the cost of the toll collection system ’. In terms of efficiency, as a benchmark, SARS’s cost of revenue collection is just over 1% unlike the proposed ORT collection process which is expected to be around 35%.
Accepting the fuel levy funding option, some suggest that only Gauteng road users should pay an additional fuel levy to fund GFIP. In the context of the fuel levy being an equitable way of raising funds for major national transport infrastructure projects, as such projects will have a national economic multiplier effect, it can be very strongly argued that Gauteng road users already contribute significantly more to the national funding of the operation of Government and by implication all other provinces than what it receives back to fund Gauteng’s own needs.
The Fuel Levy for the 2010 tax year ending February 2011, amounted to R34,4bn of which typically Petrol accounts for almost 58%. At a regional volume analysis of both petrol and diesel purchases, Gauteng is the single biggest proportionate consumer at 36.5% and 23.4% respectively and consequently contributed R15,3bn (44%) to the total figure.
Despite the many statements late last year, the Department of Transport has still not indicated when it will convene a Roads Fund Summit with stakeholders to discuss road funding options. This must take place before any ORT implementation takes place.
Interestingly enough, Gauteng as the smallest province at 1.4% of the national land area, with the largest population at over 11 million, contributes over 35% to the national Gross Domestic Product (GDP).
Using the 2009 statistics as a proxy, over 40% of taxpayers are registered in Gauteng and contribute in excess of 51%
towards the R228bn in Personal Income Tax collected in the 2010/11 tax year.
Using various reasonable assumptions, Table 1 below highlights that Gauteng contributes approximately R260bn (39%), via SARS, to the central fiscus at Government.
Table 1: Tax revenue performance for 2010/11 by product
|Tax Revenue Collection||R millions||Gauteng contribution factor and source||Gauteng contribution to SARS R millions|
|Pers Income Tax||228,096||40% of national assessed tax payers are registered in Gauteng and contribute 51%||116,329|
|Company Income Tax||134,635||Gauteng contributes 35% to national GDP||47,122|
|Secondary Tax on Companies||17,178||Gauteng contributes 35% to national GDP||6,012|
|Other||32||Gauteng contributes 35% to national GDP||11,2|
|VAT||183,571||Gauteng contributes 35% to national GDP||64,250|
|Fuel levy||34,418||Gauteng contributes 44% of Fuel Levy receipts||15,3|
|Excise duties||22,968||Gauteng contributes 35% to national GDP||8,038|
|Custom duties||26,637||Gauteng contributes 35% to national GDP||9,323|
|Skills Development Levy||8,652||40% of national assessed tax payers are registered in Gauteng||3,461|
|Other taxes and duties||17,996||Gauteng contributes 35% to national GDP|
Once collected, using several factors and weights, the Division of Revenue Act determines the division of nationally raised revenue between the three spheres of government, namely National, Provincial and Local Government and in 2010/11 the allocations were revised to 48.3%, 43.5% and 8.2% respectively.
If one assumes that each region gets a proportionate benefit from the National Departments, then the next big consideration is the Provincial allocations. Including conditional grants of R14,5bn, Gauteng will receive a total of approximately R65bn (18%) during 2010/11 in stark contrast to the estimated R260,834bn, contributed by the province to SARS.
Gauteng Province itself plans to raise R3bn of its own revenue in the 2011/12 budget. Vehicle license fees alone are expected to contribute, R1,8bn (59%) in addition to the expected R0,6 bn (19%) from gambling and betting taxes.
Consolidating all revenues, Gauteng Provincial Government is budgeting to spend only R6,2bn (9.2%) on Roads and Transport in 2011/12, a far cry from the R9,4 bn (18%) spent in 2008/09. A reduction of R3,2bn for roads and transport in three years despite the growing needs.
In the smallest Province with the largest population and the greatest proportion at 39% (3,9m) of nationally registered vehicles, the allocation of just over R6bn seems out of line. Indeed, a further revenue opportunity of multiple billions exists if some of the 132,416 unlicensed Gauteng registered vehicles could be renewed.
At the end of the day, the national interest is not served by revenue raised in a province being ring-fenced and kept within that province for their own hospitals, schools, transport (incl roads) etc. Rather National Projects like GFIP and other national projects under SANRAL could be and should be paid nationally via an additional cost allocation from the fuel levy by all road users.
In summary, Gauteng residents and road users already contribute both 44% of the total national fuel levy generated and significantly more, at an estimated R261bn (39%), to the central fiscus via SARS compared to the approximate R65bn it receives back from central Government. Gauteng pays more than its fair share.
South African Revenue Service (SARS) Annual Report 2010/11,Graph 2 (p18) https://www.info.gov.za/view/DownloadFileAction?id=152203
South African Petroleum Industry Association (SAPIA), Annual Report 2009, Figure 5 and 6 (p 16) https://www.sapia.co.za/publications/annual-reports.html (note: this regional volume breakdown was discontinued in subsequent Annual Reports)
Gauteng Estimates of Provincial Revenue and Expenditure: 2011/12 Budget Statement (p8): 3.4 Gauteng economic review and outlook. https://www.treasury.gov.za/documents/provincial%20budget/2011/Budget%20Statements/GT/GT%20-%20Budget%20Overview%20of%20Prov%20Expenditure.pdf