SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

Southern African Vehicle Rental
and Leasing Association
presentation to
Gauteng e-Toll Panel
Midrand, September 8 2014

 SAVRALA welcomes the opportunity to again present
its e-Toll concerns.
 SAVRALA supports the delivery of the Gauteng highway
upgrades, the current ongoing alternate road upgrades and
the progress towards a reliable, safe, efficient and
economical integrated public transport system.
 Despite its opposition to the GFIP funding method,
SAVRALA members have implemented e-Tolls.
SAVRALA presentation to Gauteng e-Toll
Panel 8 September 2014
2
OVERVIEW

OVERVIEW: PANELS GFIP AND ETOLLS SCOPE
 SAVRALA would like to offer its input to assist the panel assess the
socio economic impact of GFIP e-Tolls as outlined by the invitation;
DIRECT INDIRECT
COSTS a) Economical and Social Impacts
b) Impact on the Environment
c) How and where are the costs and benefits
distributed across society and the economy
BENEFITS
WE SUPPORT THE PANEL, AND THE GAUTENG PROVINCE, EFFORTS TO
FIND AN EFFICIENT, EFFECTIVE, EQUITABLE AND BROAD BASED
3
ACCEPTABLE GFIP FUNDING SOLUTION

1. SAVRALA - introduction
2. “User pay’’ policy observations
3. Overview of SANRAL engagement
4. The system
5. Cost benefit GFIP analysis
6. Proposals to consider
7. Conclusion
4
CONTENT

 Established to ensure that members maintain highest
standards of service, ethical and trading practices.
 Industry is self-regulated and members commit to
SAVRALA’s Constitution and Code of Conduct
(www.savrala.co.za).
 SAVRALA represents members interests and seeks to
constructively engage with its stakeholders.
 National Executive Council (NEC) is drawn from the industry
but retains a General Manager.
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1. SAVRALA - INTRODUCTION

 General car rental forecasted statistics - 2014;
o Annual revenue to exceed R5bn
o Average fleet 65,000 (utilisation 72%)
o Annual number of rentals 2,7m
 Some key car rental concerns:
o Increasing cost of new vehicle prices
o Poor driver/renter behavior
o Impact of new Tourism B-BBEE scorecard
o E-toll administration
o Traffic fine/infringement redirection (ie: AARTO)
 Positively engages with stakeholders to find mutually
beneficial solutions
6
1. SAVRALA – INTRODUCTION (Cont’d)

7
2. “USER PAY” POLICY OBSERVATION
 Policy suggests a change in behaviour through pricing
Does not
respond to
‘usage’
A usage
charge for
Tourism
activity?

8
 Policy suggests the ‘user’ should pay for a service.
Implies no cross subsidisation for an identified service.
Source: Tax Statistics 2013

9

10
 Gauteng tax assessed rands has declined from 51.9% (R99bn) to 50.4% (R104bn)
of growing total, while maintaining a similar 40% proportion of tax payers during
period of GFIP

11
Source: www.beta2.statsa.gov.za
Gauteng remains dominant
GDP contributor

Total Vat collections R215bn. At 35% GDP, as a proxy, Gauteng receives
back just a little more than its Vat contribution of R75bn. Gauteng’s PIT ,
Corp tax, fuel levy etc effectively all gets redistributed to other Provinces.
12
Source: www. Treasury.gov.za

13
Motor Vehicle
Licence does not
recognise actual
local or national road
(ie: GFIP) usage
Source: www. treasury.gov.za

14
Source: www. Treasury.gov.za

15
2. “USER PAY” POLICY OBSERVATION - SUMMARY
 ‘User pay’ theory offers an approach to change behaviour and manage
resources when reasonable alternatives are available. A narrow view in the
context of building a democratic development state is questionable.
o Presidential Review Committee on SOE’s: Recommendation 21
“Funding of social infrastructure, including roads, should have less reliance on the
‘user pay’ principle and more on taxes”
o NDP -2030: Transport (p184)
“Decisions should take South Africa’s developmental goals into consideration and
guard against adopting transport approaches not aligned with South Africa’s
priorities or resources”
“Instead of focusing on a particular transport mode, emphasis should be placed
on a total transport network”
 Gauteng tax payers contribute for delivery of services in other Provinces
 Gautrain and other modes of public transport (excluding mini bus taxis) are
subsidized by non-users nationally
 Goal must be to develop equitable integrated public transport solutions

16
3. OVERVIEW OF SANRAL ENGAGEMENT
 Adequately traversed in the various legal records but SAVRALA was
not pro-actively engaged to review the details of the proposed GFIP
e-Toll plan.
 SAVRALA introduced RMI and NAAMSA to e-Toll project team.
 SAVRALA members engaged with SANRAL for almost 18 months
prior to legal action.
 Where the system permitted, some changes were made but industry
wanted a simple solution. A proposed daily fee for vehicles, which
could be reviewed monthly, was not accepted.
 In other countries, car rental toll fees processed via an intermediary.
 Industry argued need for efficiency and cost effectiveness of funding
solution.

17
3. OVERVIEW OF SANRAL ENGAGEMENT
 SAVRALA members agreed to adopted parallel actions prior to
launch:
o Support the legal opposition process against e-tolls
o Members to commence tagging of fleet and get e-toll ready
 Since implementation, the e-toll system has generally stabilized
but, as expected, the maintenance of the system remains a
challenge
 Once vehicles e-tagged, registered and IT systems integrated, the
system processes transactions, however, the challenge becomes
much greater when validation checks etc are applied
 Delivery of late transaction files remains a challenge

Order tags
and brackets
for fleet
Car Rental
e-Tag
Lifecycle
Register
e-tags on
TCH
Distribute
e-tags to
various
depots
Link e-tag
and vehicle
with TCH
Vehicle goes
on rent and
accumulates
toll fees
4. THE SYSTEM
Vehicle
defleeted
and tag
recycled to a
new vehicle
Vehicle
Billing Cycle
returns from
rent. Check
e-tag present

Toll files received
daily from Sanral.
Owner
responsible for
payment not user
Billing
Cycle
Queries Raised
Daily Financial file
paid by Car
Rental Company
When vehicle
returns,
cumulative toll
fees for period
linked to vehicle
registration
4. THE SYSTEM
Renter invoiced
Toll fees added to
rental within +/-
24 hours of
vehicle return

20
4. THE SYSTEM
 Given the movements, car rental fleets have to be e-tagged
nationally. Some have e-tagged regional fleets.
 E-tag brackets not universal but industry advised one type will be
used. Remember, industry constantly upfleeting and defleeting,
within 12 months both their own and lease vehicles from OEM’s.
 While smaller members manage manually, larger members
developed new systems to track boxes and individual e-tags
between centres.
 Industry had to implement new procedures, policies and training.
 Industry must pay within 7 days while customers pay afterwards.
Accounts/corporate might only pay after 30-60 days after
transaction.

21
4. THE SYSTEM
 Systems then had to cater for exemption categories on a pay now
and claim back later process which is proving to be very
cumbersome.
 System requires an e-tag and matching registered vehicle to
transact. Providing VLN alone will not trigger transactions which will
proceed to VPC.
 SANRAL allocates payment by oldest invoice and not invoice number
which is problematic for account reconciliations.
 Credit request system for cloned plates, old/incorrect eNatis details
and redirecting (individually) charges is very cumbersome.
 Billing of e-tolls does cause customer dissatisfaction with so many
tariffs (eg: standard v’s e-tag rate, time of day etc) applicable.

a) Economical and Social Impacts
22
5. COST BENEFIT GFIP AND ETOLL ANALYSIS
DIRECT INDIRECT
COSTS
• Conservatively, members spent R18m
on preparation costs
• Majority are not covering monthly e-
Toll costs. No reports of revenue
surplus
• An additional wage/salary factor
• e-Toll admin costs remain unacceptable
in the face of alternative collection
method
• Addressing customer billing
queries. Fleet card only payment
conduit
• Dispute resolution takes long
• Clients purchasing tracking
systems to validate e-toll charges
• Invoicing is delayed
• Employee fringe benefit tax
unclear
BENEFITS
• Members unable to substantiate
• No evidence presented by
Government/Gauteng/SANRAL to
demonstrate claimed 8,4 : 1 economic
benefits which motivated the project
• People consider travelling more
on GFIP
• No evidence to suggest that
vehicle wear and tear has
improved on GFIP (note: impact
of alternate routes on vehicle)

b) Impact on the Environment
23
DIRECT INDIRECT
COSTS
• While key accounts benefit from
online integration, individual e-toll
transaction and dispute system is
predominantly paper based
• In the absence of alternate incentives,
new roads just create induced
demand
• Emissions on alternate routes due
to congestion will exceed previous
levels
• System does not distinguish
between low and high CO2 emitting
vehicles
BENEFITS
• Unaware of any substantiation of
claimed emission/ environmental
improvements due to GFIP as per
project motivation
• No evaluation to identify if road users
spend more quality time at home
• Note: Vehicles are constantly
improving their CO2 emissions.
Cleaner fuel would improve this
further
• No empirical evidence to suggest
that road safety has improved or
decreased

a) Howand where are the costs and benefits distributed
across society and the economy
24
DIRECT INDIRECT
COSTS
• E-tolls, as a separate charge, has
increased the overall cost of car
rental.
• Leasing members, are often
intermediaries, and are absorbing
costs while trying to resolve queries
and streamline processes.
• Addressing customer billing
queries
• Suppliers will start to pass their
costs on to members
• Creates further cost
/maintenance burdens on
alternate routes
• Employment for staff at SANRAL
BENEFITS
• Members unable to substantiate
claimed benefits
• Revenue from SANRAL e-Toll
expenditure
• Opportunity to use the
technology for law enforcement

25
6. PROPOSALS TO CONSIDER
6.1 Identify the objective to be achieved:
URBAN
GFIP
UPGRADE
FUNDING
Fiscal transfer
Shadow
Tolling
National road
(?) funded
locally
Motor
Veh Lic
Fuel Levy
National or
Inland
DECONGESTION
Public Transport
Alternate
Routes
Urban
Planning Incentives
 The primary objective to achieve has very separate dependencies
 Funding solution should be driven by efficiency and a clear strategy to achieve
an integrated and funded public transport system

26
6.2 Pro-actively engage key stakeholders in advance
Learnings from current e-toll implementation:
 Publication of a Government Gazette and a few small ads cannot be
regarded as reasonable notice and consultation for major projects.
(The law is sometimes blind when looking for a reasonable man!)
o Ref N1/N2 Winelands study in 2001
 Pro-actively engage appropriate representatives from business,
community and labour on plans with significant impact, not just
inter-government
 Public representatives must represent the interests of their
constituents eg: could Gauteng Provincial government also have
done more to highlight e-Toll concerns much sooner?

27
6.3 Regulatory Impact Assessment’s (RIA) should be the norm not the
exception
Learnings from current e-toll implementation:
 The risk of AARTO non-compliance/non-implementation was
identified as a GFIP project risk but overlooked
 A RIA would have highlighted the non e-toll payment prosecutorial
risk (eg: AARTO v’s CPA) and the need to focus on building eNatis
accuracy with the help of vehicle owners
6. 4 Investigate appointment of an Independent Regulator to assess
appropriateness and fairness of general toll rates and policy
 Current SANRAL regulator is Dept of Transport - its shareholder
 Toll revenues on some concessions may need to support local
authorities due to toll avoidance and impact on alternate routes

28
6.4 GFIP technology can be used for non Gauteng e-toll purposes
If urban e-Tolls in Gauteng are discontinued
 Both private and commercial (eg: truck and car fleets) road users
may still choose to use an e-tag when using long haul routes
 E-tag could become a method of payment for a road user
eg: use of e-tags to replace cash in parking centres, lic renewal
 Gantries can be used for average speed over distance enforcement
while creating incentives for people who comply
o We now need the same (and more) focus for Road Safety
 Explore commercial opportunities for e-Toll call centre and
Customer Service Centres
 Challenge will be to restore trust in any alternate potential use,
particularly, if technology remains within SANRAL
 Refunds unlikely

29
6.5 Allow SANRAL to be the competent road building
focussed agency
 As we continue to build a democratic development state, SANRAL
should build and maintain key arteries as directed by Government
 National routes must be viewed as benefitting the country,
otherwise, their status should be changed. A good national
network has national economic multiplier effects.
 Re-align ‘user pay’ policy conversation in terms of roads:
o National routes should be financially supported by the national
fiscus from a national fuel levy funds etc. SANRAL’s own studies
acknowledged the superiority of fiscal transfers. Current e-toll
funding model has unacceptable collection costs.
o Provincial routes should look to their Motor Veh Lic fees and, if
required, a temporary additional fuel levy to assist fund public
transport development. Transfers must be viewed strategically.
 The focus on road building must match integrated public transport

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7. CONCLUSION
 Gauteng, as an expanding economic hub has now made, what
were national routes decades ago, local commuting highways.
 Our conversation must move from ‘Gauteng’s roads, Gauteng’s
debt’ to ‘Gauteng’s national roads are South Africa’s roads’.
 SAVRALA members have e-tagged their fleet and are processing
e-toll charges but would prefer an alternative funding method
given the current administrative challenges.
 SAVRALA believes that the current e-toll impasse is an
opportunity to make tomorrow so much better than today
WE THANK YOU
QUESTIONS

SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

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