SAVRALA presentation to Gauteng eToll 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 presentits 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

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OVERVIEW

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;


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WE SUPPORT THE PANEL, AND THE GAUTENG PROVINCE, EFFORTS TO FIND AN EFFICIENT, EFFECTIVE, EQUITABLE AND BROAD BASED

ACCEPTABLE GFIP FUNDING SOLUTION

OVERVIEW: PANELS GFIP AND ETOLLS SCOPE

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

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


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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

http://www.savrala.co.za/

General car rental forecasted statistics - 2014;o Annual revenue to exceed R5bno Average fleet 65,000 (utilisation 72%)o Annual number of rentals 2,7m

Some key car rental concerns:o Increasing cost of new vehicle priceso Poor driver/renter behavioro Impact of new Tourism B-BBEE scorecardo E-toll administrationo Traffic fine/infringement redirection (ie: AARTO)

Positively engages with stakeholders to find mutually beneficial solutions


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1. SAVRALA – INTRODUCTION (Cont’d)


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2. “USER PAY” POLICY OBSERVATION

Policy suggests a change in behaviour through pricing

Does not respond to

‘usage’

A usage charge for

Tourism activity?


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Policy suggests the ‘user’ should pay for a service. Implies no cross subsidisation for an identified service.

Source: Tax Statistics 2013


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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



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Source: www.beta2.statsa.gov.za

Gauteng remains dominant GDP contributor


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Source: www. Treasury.gov.za

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.


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Motor Vehicle Licence does not recognise actual

local or national road (ie: GFIP) usage

Source: www. treasury.gov.za


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Source: www. Treasury.gov.za

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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


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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.


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3. OVERVIEW OF SANRAL ENGAGEMENT

SAVRALA members agreed to adopted parallel actions prior to launch:o Support the legal opposition process against e-tollso 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

Car Rental e-Tag

Lifecycle

Order tags and brackets

for fleet

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

Vehicle returns from rent. Check

e-tag present

Billing Cycle

Vehicle defleetedand tag

recycled to a new vehicle

4. THE SYSTEM

Billing Cycle

Toll files received daily from Sanral.

Owner responsible for

payment not user

Queries Raised

Daily Financial file paid by Car

Rental Company

When vehicle returns,

cumulative toll fees for period

linked to vehicle registration

Toll fees added to rental within +/-

24 hours of vehicle return

Renter invoiced

4. THE SYSTEM


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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.


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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


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5. COST BENEFIT GFIP AND ETOLL ANALYSIS

DIRECT INDIRECT

CO

STS

• 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

BEN

EFIT

S

• 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 thatvehicle wear and tear has improved on GFIP (note: impact of alternate routes on vehicle)

b) Impact on the Environment


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DIRECT INDIRECT

COSTS

• While key accounts benefit from online integration, individual e-tolltransaction 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 constantlyimproving their CO2 emissions. Cleaner fuel would improve this further

• No empirical evidence to suggest that road safety has improved or decreased

a) How and where are the costs and benefits distributed across society and the economy


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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


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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 LicFuel Levy

National or Inland

DECONGESTION

Public TransportAlternate

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


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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?


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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 eNatisaccuracy 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


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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 complyo 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

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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

Government & Nonprofit

SAVRALA presentation to Gauteng eToll panel -- 8 September 2014