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Prasanth MohanChief Director: Road Infrastructure & Industry Development

CAPSA ’19Sun City 13-16 October 2019

Road Funding in South Africa Prasanth Mohan

Department of Transport

CONTENT

• Overview of the Department of Transport

• Summary of SA Road Network & Funding Data

• Key Strategic Road Projects

• Summary of Past and Future Budget Data

• Recommendations

MANDATE - DEPARTMENT OF TRANSPORT

• Policy, advice, programs and regulation across a wide range of areasincluding infrastructure planning and coordination, transport safety, landtransport, civil aviation and air transport, transport security, maritimetransport including shipping and major projects facilitationo Implementation through SOCs and through supplementary grant funding to provinces &

municipalitieso Country-wide monitoring, evaluation and reportingo Research, norms, guidelines, standards, reports and publicationso Information systems

• Linkage to key government priorities and focus areas

SOCs - Policy and Legislative Mandate

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SANRAL ACT No 7 of 1998

RTMC Act No 20 of 1999

CBRT Act No 4 of 1998

RTIA Act No ??1998

RAF Act No 56 of 1996

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TOP FIVE CHALLENGES IN AFRICA

According to the Africa Transport Policy Programme:

1. Increasingly congested cities with poor urban planning.

2. High rate of road fatalities.

3. Poor connectivity hampering regional trade.

4. Weak capacity and poor governance.

5. Climate change.

SUMMARY OF SA ROAD NETWORK & FUNDING DATA

SUMMARY OF SA ROAD NETWORK & FUNDING DATA

Strengthening/ re-gravel backlog: Roads in Poor to Very Poor condition (2013)Authority Paved Gravel Total

% Length Cost (R ‘000) % Length Cost (R ‘000) Length Cost (R ‘000)

SANRAL 11.86 2354 R 18 832 000 0 0 2 354 R 18 832.00

Provinces -9 35.21 15 947 R 127 574 080 65.67 9 4131 R 18 826 140 110 078 R 146 400.22

Metros- 8 4.12 2 127 R 10 635 000 8.48 1 227 R 245 315 3 354 R 10 880.32

Municipalities 3.62 1 363 R 4 089 000 28.54 86 245 R 17 249 009 87 608 R 21 338.01

TOTAL BACKLOG 21 791 R 161 130 080 181 603 R 36 320 464 203 394 R 197 450 544

KEY STRATEGIC ROAD PROJECTSProject Capital Costs (R’000 2014R) Current StatusGFIP Phase 2 (New Routes) R 25 768 840 Nothing, pending Phase One funding resolutions

GFIP Phase 3 (Upgrades) R 17 655 160 Nothing, pending Phase One funding resolutions

R300 Cape Town Ring Road R 4 861 600 In collaboration with WC Province

N1/N2 Winelands R 9 316 100 Toll Declaration set aside, cannot proceed until funding is resolved

N2 Botrivier to Port Elizabeth R 11 272 540 Basic Planning (Non Toll)N2 Wild Coast (Ndwalane to Mtamvuna River) (SIP 3) R 7 578 656 2 Bridges + Haul Road Construction Started

Planning and Detail design of road worksN2 Durban South (Prospecton) to North (Umdloti) R 7 847 000 Detail design

N2 Richards Bay to Ermelo R 7 284 140 Detail Design,

N3 Pietermaritzburg (Twickenham) to Durban (EB Cloete) (SIP 2) R 15 777 205 Detail design,

N3 De Beers (SIP 2) R 5 500 000 N3 De Beers replaced with New Van Reenen Development. Complex Concession Amendments Required to implement. Refrerred to PICC

N4/PWV3 extension Pampoen nek R 1 716 900 Pampoen Nek Construction Started (Non Toll) due to ROD Expiring

N12 Johannesburg to Klerksdorp R 2 731 700 Basic Planning

N12 Benoni to Witbank R 811 840 Basic PlanningR72/N2 Port Elizabeth to East London R 6 301 200 Detail Design, Phased Construction Started (Non Toll)

R573 Moloto Road (SIP 1) R 3 902 176 Detail Design, Phased Construction Started in Limpopo and Mpumalanga (Non Toll), Gauteng Part not declared national road

PAST AND PRESENT BUDGET DATA: ROADS

State Funding for the the National Road Network (non toll)

Medium-Term Expenditure2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

9 728 055 10 497 184 11 916 947 12 843 488 13 915 586 15 944 823 18 624 158 21 177 224 21 751 034 21 599 001

Provincial Road Maintenance Grant (PRMG) – Supplementary Funding to Provinces (Maintenance, Rehabilitation, Reseals, Re-graveling, Blading)

Medium-Term Expenditure2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

7 981 845 8 737 775 9 361 498 9 531 744 10 478 194 10 753 663 11 035 668 11 381 665 12 093 174 13 021 106 Table 1: Extracts from 2019 Estimates of National Expenditure, Vote 35

Challenges facing Government• Planning and approvals• Procurement processes and requirements• Lack of budgets vs poor progress & expenditure • Community access roads and bridges • Lack of information

o Road conditiono Traffic datao Non financial data (following the money spent)o Other

Roads Policy for South Africa

The Department of Transport in partnership and with support from the Road and Traffic Authorities has developed the Road Policy for South Africa that seeks to identify suitable solutions to address the following key questions or challenges that confront the roads sector:

• Understanding the roles and responsibilities of all role-players, institutional arrangements and coordination structures. How should institutional arrangements and coordination be improved?

• Pedestrians, cyclists, other NMT road users, motorists want access to the roads for personal and business use and heavy vehicle operators need access and usage of the roads for their customers and suppliers. What is the most appropriate and affordable way to address the equity problem?

• How should the road network re-classification process be completed and managed?

Roads Policy for South Africa

• What kind of interventions are required within the existing business processes and environment to improve Governance, administration and efficiency in order to achieve compliance to legal requirements, technical specifications, safety, and to meet the customer needs;

• What are the data formats and information systems requirements for road and traffic authorities for effective and informed decision-making?

• What sustainable funding mechanisms should be considered to ensure system sustainability?

• Understanding the scope of work, the legal and technical considerations and/or requirements applicable to the road sector and associated risks. How should the human capital be developed to capacitate the State Road and Traffic Authorities?

• In order to improve governance and administration to optimise efficiency in road infrastructure provision, including road traffic and safety management.

Road FundingRoad funding challenges are facing all road authorities throughout the world.

Who pays the bills? – the citizens (tax payer – directly or indirectly) irrespective of model adopted !!!

In response to this challenge, the introduction of the “User Pay Principle” through tolling (direct user charges) isnow a common approach adopted in various countries. The implementation approach differs.

Examples of international funding models may include the following:o Government takes full responsibility for funding road construction, maintenance & operations. Funding

sources may include the Fiscus, fuel levy, licences fees, loans, etc.o Funding of an entire project through loans or through bonds and then introducing a “levy” or a toll to

service loan repayment, maintenance & operations by the Roads Authority;o Government funds capital costs and introduces a toll for maintenance & operations by the Roads

Authority;o “Road concessions” i.e. transferring the responsibilities, through a concession contract to the private

sector, who takes responsibility for construction, maintenance & operations. The concessionaire is allowedto recover costs through toll fees.

o Shadow tolling - No tolls are levied from road users under this approach. Instead the shadow tolls arepaid by Government to the operator, based on traffic counts on the road, an agreed rate per vehicle/vehicletype and an agreed set of performance criteria.

Hybrid model – structured funding model to include a combination of the above

Proposals in the Roads Policy for South Africa [Funding {8}]

NO SUMMARY OF POLICY STATEMENTS FOCUSAREA

8.1 • Government will put mechanisms in place for Road Authorities to prioritise road transport infrastructure development and maintenance (including public transport facilities) within their equitable share.

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8.2 • Government to revisit criteria for grant allocations to provincial road authorities to be in proportion to their own budget allocations for road infrastructure.

8.3 • Government supports the implementation of the user-pay principle, where required, in a sustainable manner.

8.4 • Government has re-affirmed its position that tolling is a sustainable means to raise funds for road construction, maintenance and operations, where required in a sustainable manner.

8.5 • Government supports the role of the private sector within the roads sector to fast-track roads delivery.

8.6 • Government affirms its position on the need to prioritise and increase funding opportunities and availability for the non-motorised transport sector.

8.7 • Government affirms its position on the need for sufficient funding for improving road safety, regulation and law enforcement across the three spheres of government.

8.8 • Government to enhance coordination to support integrated planning between the three spheres of government in the implementation of respective programmes, including infrastructure funding.

CONCLUSIONS

• Roads sector does have a steady source of funding.

• Road Infrastructure Development Agenda especially Key Strategic Projects will be influenced / dependant on GFIP resolutions;

• Government confidence in road authorities needed in order to increase funding levels;

• Critical dependencieso Efficient delivery models (Internal / Agency Model / PPPs);o Appropriately skilled structure;o Planning processes and approvals;o Supply chain processes; o Information to government (non financial data)

How can service providers assist !!!