by Terence Creamer
Creamer Media
27 January 2012

As with every other Gauteng motorist, I am certainly not enamoured with the idea of having to pay toll fees. But as a citizen of South Africa, I am even more troubled by the lack of leadership being shown on the e-tolling issue.

True, Transport Minister Sibusiso Ndebele and his deputy, Jeremy Cronin, were handed a poisoned chalice. True, Cronin, in particular, has been consistently critical of the tolling concept, as with the Gautrain idea. Even before taking up his current position, Cronin expressed serious misgivings about Gauteng’s transport trajectory, which he felt was skewed in favour of private motorists and lacked a comprehensive mass-transit dimension.

That said, both individuals have not covered themselves in glory over the past few years in their handling of the e-tolling issue, while their treatment of the South African National Roads Agency Limited (Sanral) and its executives has been inappropriate in the extreme. Surely, if they were that unhappy with the way the project was unfolding, it was within their power to intervene decisively. Instead, they have simply kicked the can down the road and created more anxiety and uncertainty than was ever necessary. Worse yet, they have undermined one of the few agencies developed during the democratic era that has a record of delivery.

It may not be popular to say so, but an unemotional analysis of Sanral’s performance throws up the reality of a technically competent entity that not only talks about service delivery, but also actually implements. Under CEO Nazir Alli, Sanral has even found ways around its serious funding shortfalls – a far cry from the situation in several other agencies, State-owned companies and national delivery departments that tend to hold up their hands and surrender when taxpayer funds are not forthcoming.

In fact, the entire e-tolling project has its genesis not in the minds of a few ‘rogue’ engineers. Instead, it is a direct response to the fact that the National Treasury indicated, quite soon after 1994, that there would be no additional resources for national roads. In other words, Sanral had the choice to either pursue a ‘user pays’ model and build the infrastructure it felt was required, or simply maintain what it had – which, by now, would have been the continent’s biggest parking lot. It also only moved ahead once it had gained all the necessary policy, legal and political mandates required to enable it to start raising money on the bond markets.

Perhaps there was a lack of political and economic foresight. Without doubt, the public relations could have been better handled. But it is simply unfair to present Sanral as some out-of-control technocratic fiefdom. Undermining the entity, as government has, is a disservice to the country, particularly when we sorely need implementation bodies that are actually capable of delivering. The political solution is also not that hard to achieve. First, agree on the principles: we need the infrastructure and we need to pay for it. Then, interrogate the payment methods through the prism of South Africa’s most pressing challenge: the need to stimulate job-rich economic growth.

The outcome of that analysis could show that the objective is best achieved by leaning on the general tax base. It could show, however, that the user should bear most of the burden. Either way, it will be unpopular. But once the decision is made, Ndebele and Cronin need to have the political courage to communicate the decision, and communicate it unequivocally. In my own view, the funding could be met through a hybrid model, whereby e-tolling is implemented, but at far more affordable rates, while the balance is secured through the fuel levy. Indeed, why not make the temporary increase instituted to pay for Transnet’s fuel pipeline permanent, and divert the proceeds to Sanral become due, is it not reasonable for a rating agency to begin adding this to the country’s debt ratios?

Lastly, Gauteng has guaranteed ridership levels on the Gautrain. Its models assumed toll fees would encourage more motorists to switch to the train. Without the tolls, the subsidy could last many years beyond the projected three years. So Gauteng would likely need some financial help as well. Finance minister Pravin Gordhan has said government has taken over the financial running of Limpopo to ensure that SA’s hard- won credibility in the international financial markets is not compromised. Unfortunately, if cabinet does not find a sustainable plan to finance infrastructure projects , Limpopo will be the least of his problems.

The Mercury reports that the shutdown of Durban's Sapref refinery for unexpected maintenance is set to exacerbate SA's shortage of bitumen, which is used to produce asphalt for road surfacing.

Bitumen shortage has affected about 35 SA National Roads Agency Ltd (Sanral) projects, in addition to other major road construction projects, including the John Ross Parkway upgrade in Richards Bay and highway construction in Durban.

Transport Minister S'bu Ndebele said recently that more than R1 billion worth of work would not be able to be completed Sanral contractors in the 2011/12 financial year because the agency "is severely affected by the shortage of bitumen." "Sapref's shutdown is certainly going to have an impact and will make the current bitumen supply situation worse," said Saied Solomons, chief executive of the SA Bitumen Association (Sabita).

A by-product of oil refineries, bitumen is used to produce asphalt for road surfacing. There have been bitumen shortages since the World Cup construction boom. With high demand and both planned and unplanned shutdowns of oil refineries the situation worsened.

"The Enref (Engen) refinery in Durban also only recently came back on line after the fire and maintenance shutdown late last year. However, there is very little new bitumen coming onto the market at the moment," Solomons said. "The situation is dire and is significantly impacting on the industry. It is not just big construction and asphalt companies that are being affected but small companies too, which is having a ripple effect on other business sectors."

A costlier alternative was to import bitumen, and some construction and asphalt companies had banded together to import about 4 500 tons recently. In comparison, "South Africa uses roughly 420 000 tons of bitumen annually," Solomons said.

NICKY SMITH
Business Day
11/1/2012

The South African National Roads Agency (Sanral) has reached 20% of its targeted number of road users registered for electronic tolling on the unpopular Gauteng Freeway Improvement Project.

To date about 200 000 vehicles have been registered for e-toll accounts, Sanral’s manager for the project, Alex van Niekerk, said yesterday. "We still have a long way to go but it is picking up, our first goal is to get about 1-million users registered which if you look at the number of daily users on the network is about 900000," Mr van Niekerk said.

A 200-vehicle pilot project to test software was being run by e-toll, the concession company that won the bid to manage toll collection on the 205km of Gauteng freeways that form part of phase one of the programme. Transport Minister Sbu Ndebele has halted the second and the third phases of the programme in the face of fierce public resistance to the introduction of tolling. Sanral is planning to have all the systems in place for the commencement of tolling in "mid-February", said Mr van Niekerk, declining to say whether he believed the commencement date would be delayed a third time.

Tolling was meant to have started in April last year but was postponed until June and then to next month. Opponents to the plan such as Business Unity SA and the Southern African Vehicle Rental and Leasing Association are calling on the state to abandon its plans to toll Gauteng’s freeways. The state says it needs to generate the cash needed to repay the R20bn Sanral has borrowed on the bond market to finance the scheme.

Business Unity SA and the rental association argue it is cheaper and administratively less complex to collect the money the state needs to pay for the improvement project by increasing taxes that are levied on fuel. The association has called on its members, who represent a collective fleet of about 450000 vehicles, not to register e-toll accounts until the body has clarified issues of concern, including enforcement and the exemption of public transport operators from the system.

Mr van Niekerk said traffic volumes on the Gauteng freeway network had grown on average by 27% a year from 2006 to last year, which was "substantial" and higher than Sanral had expected. He said discussions between Sanral, the National Prosecuting Authority and the Department of Justice were at a "sensitive stage" and a decision on how and where to prosecute offenders must still be made.

Irma Venter
Creamer Media
6 December 2011

Current indications are that, for the 2011/12 financial year, more than R1-billion of work will not be completed by contractors working on South African National Roads Agency Limited (Sanral) projects, owing to the bitumen shortage in the country, says Minister of Transport Sibusiso Ndebele in a written response to a question posed by the Democratic Alliance in Parliament.

“The implication of the shortage of bitumen is that projects are delayed and not completed as per the original project plan.” Ndebele says Sanral, which accounted for 70% of 2010 road bitumen used in South Africa, is “severely affected” by the shortage of bitumen. “Sanral has a growing list of construction projects – currently 35 – countrywide that are affected to various degrees by the shortage of bitumen.

On some projects contractors could only work for three days a week during October, and on other projects no bitumen-related work was at all possible.” Ndebele says various steps have been taken to resolve the problem, including talks between the Department of Transport, Sanral and the Department of Energy – which oversees refineries’ activities in South Africa – to find solutions for the medium to long term.

“Sanral has also been actively engaging with the road construction industry to directly import bitumen from overseas to overcome the local short-term supply constraints.” The shortage of bitumen in South Africa is the result of a series of technical complications at local refineries, especially relating to shutdown periods. Bitumen is used to produce asphalt, which is used in road construction – which means the continuation of many road construction projects is heavily dependent on the supply of bitumen.

The local bitumen and asphalt industry expects bitumen shortages to again rear its head next year.

SETUMO STONE
Business Day
2011/11/22

The appointment of a new national roads agency board later this month should be an opportunity for Transport Minister Sbu Ndebele to review its mandate and scrap the open road tolling system, Gauteng Congress of the People provincial MP Ndzipho Kalipa said yesterday.

The term of office of the current South African National Roads Agency (Sanral) board ends at the end of the month, while the agency is battling opposition from business, trade unions, opposition parties and civil society over the inflationary effect of tolls. Mr Kalipa said the new mandate needed to provide for alternate ways of funding and maintenance for provincial roads. "The new board must offer advice on the objections of our people to the toll," said Mr Kalipa.

Mr Ndebele has ordered Sanral to halt any future tolling projects ahead of a road-funding summit to be convened this month. This followed criticism by Deputy Transport Minister Jeremy Cronin that the department had ceded major decisions to Sanral, which is a nonpolitical entity. Gauteng transport MEC Ismail Vadi said there were lessons to be learned from the toll roads saga, but the reality was that the upgraded highways had to be paid for.

The first phase of the Gauteng Freeway Improvement Project is almost complete and tolling is scheduled to begin in February after being delayed twice. The project covers about 560km of the freeway network. "When we look back … we might have many views about what had happened, but the fact of the matter is that these roads have already been upgraded and the project is almost complete," Mr Vadi said.

The government had bonds to repay on the first phase of the project and those funds had to be generated. "We have got to repay R17,5bn, so the ‘user pays’ principle will apply. And the minister has been sensible in exempting public transport so that it doesn’t pinch the poor. "He has brought down the tariffs in instances and from a financial point of view, I don’t think he can move any further ." Any review of Sanral’s mandate was Mr Ndebele’s prerogative, Mr Vadi said.

Transport spokesman Logan Maistry said while various options for funding would be discussed at the upcoming roads summit, the new board would be given time to look at all issues pertaining to Sanral in order to take its mandate forward. "The board will be given time to look at what works and what doesn't work," he said . During a public participation process in July, business associations and road hauliers argued that toll roads were an expensive way to pay for new roads and suggested a ring- fenced fuel levy would be a cheaper way to fund roads.

Sanral has been forced to halt its monthly bond auctions as the government’s flip-flopping on toll-road policy has scared off potential investors. The agency had raised about R300m a month to fund its road- building programmes through the bond auctions, which were usually "oversubscribed — more than double", chief financial officer Inge Mulder said last month. Sanral had a cash buffer to help it ride out the period of uncertainty while the state engaged the public to find alternatives to tolling.

It has urged Gauteng’s citizens to register for e-tolling, but the Southern African Vehicle Rental and Leasing Association, whose members run fleets totalling about 450000 vehicles, has decided to boycott registration. SA has a backlog of R149bn in road infrastructure and the current projections for the fuel levy’s contribution to road-building budgets forecasts shortfalls in excess of R1bn in each of the next two fiscal years.

Irma Venter
16th November 2011
Engineering News

 The local bitumen and asphalt industry was “eagerly awaiting” what was probably the first bulk shipment of bitumen to be imported into the country, said Much Asphalt CEO Phillip Hechter on Wednesday.

Colas, a binder supplier, was importing around 4 000 t of 60/70 penetration grade bitumen, with the ship due to arrive in the Durban harbour this weekend. “Much Asphalt has been able to secure a third of the contents of the shipment, which is in the region of 1 200 t. Even though this only represents a few days supply for us, it will boost our supplies and help us meet the demand from our clients leading up to the contractors’ shutdown in December,” Hechter told Engineering News Online. “This is significant as most contractors have programme deadlines to meet before the shutdown and without bitumen they will not be in a position to do so.”

The importation of bitumen was the result of an acute shortage of bitumen in South Africa, owing to complications at local refineries, especially relating to shutdown periods. Bitumen is used to produce asphalt, which is used in road construction – which meant the continuation of many road construction projects was heavily dependent on the supply of bitumen.

Importing bitumen was not as easy at it might sound, however, warned Hechter. The logistics were challenging, especially finding adequate storage to enable offloading the ship before incurring punitive demurrage charges, he explained. Bitumen had to be stored in a heated, liquid form. “If it can be offloaded successfully without any serious logistical problems, I foresee this becoming the norm for the industry going forward, as I have absolutely no doubt that come September, October next year, we will be facing the same circumstances we did this year,” noted Hechter.

The current situation was that the supply shortage seen earlier this year had eased somewhat as the Sapref refinery in Durban came back on stream. However, this refinery was unable to meet the current “huge demand”, said Hechter. Sapref was currently allocating customers a certain volume each day and “nothing more”. “Much Asphalt is still experiencing a 30% to 40% shortfall in supply,” added Hechter. “The Enref refinery has indicated that they do not expect to be back on stream before mid-December, which coincides with the contractors shutdown, so we do not expect them to supplement supply before January 2012.”

Irma Venter
Engineering News
28th October 2011

A disaster is looming in the local asphalt industry as the supply of bitumen from South African refineries has all but dried up, says Much Asphalt CEO and Southern Africa Bitumen Association chairperson Phillip Hechter.

Bitumen is used to produce asphalt, which is used in road construction. Not only will the shortage hamper road construction, warns Hechter, it may also lead to job losses within the industry and the closure of a number of small contractors. He says the current shortage has cost the asphalt industry and its customers R2.3-billion to date, not to mention the unquantified costs of roads falling even deeper into disrepair, and the closure of smaller companies.

“I have had a number of smaller contractors phone and say that if the situation does not improve soon, they will have to close their doors. I know companies are asking employees to take leave – we are – and putting employees on short time. Much Asphalt has 17 asphalt plants around the country. Fourteen of them have been standing idle for the last few days. The other three have very limited supplies of bitumen and will also stop operations [soon]. I have absolutely no doubt other manufacturers are in the same predicament.

“In 31 years in this industry, I have never experienced a situation like this. Natref is the only refinery that has any bitumen and they are only feeding one or two loads per day into the system and that is for the whole country. I can foresee this situation continuing for the next four to six months.”

The current shortage of supply started with a fire at the Engen refinery, in Durban, on October 10, with the operation now shut down until November 23, and bitumen only expected to flow at the beginning of December. Following a lengthy shutdown period, the Sapref refinery was supposed to be on line with bitumen supply on October 15, but it now appears that this may only happen towards the end of October. Bitumen stock at Chevron, in Cape Town, was depleted by October 4, as demand outstripped supply, and the bitumen plant has been experiencing problems. The only remaining refinery, Natref, is now left to cope with excessive demand on its systems, with the situation expected to improve somewhat from late November. Hechter says the only solution to the problem is to import bitumen.

“This is not as simple as it sounds, but circumstances may force our hand.” A list of bitumen customers hinted to Engineering News that a number of road construction projects had been placed in jeopardy by the bitumen shortage. They include work on the Gauteng Freeway Improvement Project, such as work on the N12, Johannesburg’s bus rapid transit project, the R23 in Standerton, the John Ross highway, in KwaZulu-Natal, and the N7, at Piketberg, to name but a few.

The Cape Chamber of Commerce has also noted its concern over the continuing bitumen shortage in South Africa. The current situation is not a new one, and is similar to a shortage experienced in the first half of 2010. The chamber notes that there “may not be enough bitumen available for the construction of the N1 and N2 Winelands toll roads, as well as to maintain existing roads” in the Western Cape. “There has been a shortage of bitumen for several years and this has led to costly delays in construction projects and even the repair of potholes,” says chamber president Michael Bagraim. He points out that the Gauteng toll road project has been held up “several times” because of the shortage of bitumen, which is one of the factors which has increased costs on the project. “The toll road delays were just the most visible part of the problem.

Other projects had to compete for bitumen supplies and, because they were smaller, they frequently came off second best to the toll-road contractors.” Bagraim says a similar situation is likely in the Western Cape. He says it is questionable whether there will be enough bitumen available in the Cape for the municipalities to maintain their roads while the big N1/N2 project gobbled up most of the local supplies. He adds that evidence of the already exist- ing supply shortage can be seen on Boyes drive, where construction equipment has been standing idle for days because there is no bitumen available. “The situation will become much worse when work starts on the toll roads. It will force up the cost of every other road construction project and there will be even more days when plant stands idle and workers twiddle their thumbs because the South African National Roads Agency Limited (Sanral) has grabbed all the available bitumen,” says Bagraim.

According to his sources, there has been a shortage of bitumen for several years, with deficits of 20% to 35% in some months over the last five years. “Under the circumstances, it may be advisable to delay the Cape toll road projects until there is sufficient bitumen available to do the job without damaging other sectors of the economy,” notes Bagraim. Sanral says it accounted for about 70% of the bitumen used in South Africa in 2010. As a result, any bitumen shortage that exists within the industry “severely” affects the completion of the agency’s projects, as the product is used in the final road surface layer, notes Sanral.