Borrowing less, delivering more

Borrowing less, delivering more

The National Budget Speech presented by Minister of Finance Pravin Gordhan on February 22 contained both good and bad news – but what effect will it have on the transport industry? JACO DE KLERK reports.

Change is the only constant in life – economies rise and fall, new technologies emerge while others become obsolete, government structures are revolutionised, and people become ever more aware. Change affects immediate decisions and long-term strategies. One has to anticipate the worst and hope for the best.

The economy and the transport sector walk hand in hand. An efficient transport system provides economic and social opportunities, with benefits such as greater accessibility to markets, delivery of goods and employment. However, the economy is complex. The same can be said about the Budget Speech. Fortunately, the Annual Budget Conference hosted by Econometrix, Business Report and Macquarie Securities does some of the interpretation and analysis for us.

Dr Azar Jammine, director and chief economist of Econometrix, said he was gratified when he initially heard Gordhan’s low budget deficit projection of 4,6 percent for 2012/13 – but later said his initial impression of the budget had perhaps been a little too positive.

People had been expecting government to increase the deficit between what it spends and what it earns, says Jammine, so the low budget deficit projection was encouraging. The fact that Gordhan was able to report a reduction in the government’s intention to borrow money over the next three years, thereby avoiding the trap that Greece and other European countries have fallen into, was the most positive thing to come out of the budget The government’s intended borrowings for the next three years is set to be R80 billion less than originally budgeted in October last year, which means the country will pay less interest on borrowed money – boding well for consumers and providers alike.

Another positive aspect of the Budget was the Minister’s statement that
R9,5 billion worth of tax relief would be granted to individuals. “I initially wondered how the hell he managed to get out such a wonderful budget,” says Jammine. “However, when I started to analyse the budget I found some issues to criticise.”

One of the big areas Gordhan focused on was the massive infrastructural investment programme. “Mister President, you have given effect to the wisdom of Walter Sisulu; through the work of the Planning Commission, this country now has a 20-year vision, through your initiative we now have a massive infrastructure programme also extending over 20 years, which will increase the growth and job creating potential of our economy,” said Gordhan during his speech. “An expansion in infrastructure investment is one of the central priorities of the 2012 Budget.”

The Budget Review listed 43 major infrastructure projects that will amount to R3,2 trillion, of which R845 billion is for approved and budgeted infrastructure plans. According to Gordhan, R262 billion will be allocated to various transport and logistic projects.

“This massive infrastructural investment programme, which was supposedly announced by President Zuma in his State of the Nation address, is actually no big deal and not so different from many things that have been reported in the past three to four years,” says Jammine. “The real issue is whether or not we will see this infrastructural investment programme implemented in practice. I think we will continue to see scepticism among analysts as to whether or not the huge infrastructural programmes will come into practice in the time allocated, creating the number of jobs that one would like to see being created.”

Jammine points out that the funding requirements of these infrastructural programmes barely differs from the figures presented a year ago.

Gordhan said the total debt associated with the Gauteng Freeway Improvement Programme amounts to R20 billion, and that it was proposed that a special appropriation of R5,8 billion be included in 2011/2012 expenditure to contribute to a further reduction in the toll burden. “This will reduce the debt to be repaid through the toll system,” he said, “and will make a steeper discount for regular road users.”

Gordhan said toll fees will be reduced from 66 to 30 cents per kilometre. “That’s not quite true,” says Jammine. “It’s 30 cents for those with an e-tag, which was previously going to be 40 cents. The 66 cents is what was going to be charged for people without an e-tag – and he actually didn’t tell us what the new charge for this is going to be.”

Jammine points out that government refuses to explain why there is a need for dedicated toll roads as opposed to just increasing the fuel levy. We will now have lower toll fees, he says, but the administration of those fees will still cost the same – and will use well over 30 percent of the revenue collected.

The fuel levy is set to rise by 28 cents per litre from April 1. This will include 8 cents a litre that will be contributed to the Road Accident Fund. As mentioned, an additional R5,8 billion that has been made available to the South African National Roads Agency Limited (SANRAL) to cover a part of its debt regarding the Gauteng toll roads, relieving the tariffs road users will have to pay. Toll fees have also been capped at R550,00 per month for individuals, meaning that no-one may pay more than this amount regardless of the distance travelled on these roads.

There is still great unrest about the toll fees, despite this compromise from the government. The Automobile Association of South Africa (AA) is still of the view that the toll issue should be funded from the fuel levy – despite government’s latest compromises. ”We are convinced that despite the latest offering from government, the cost to the consumer, as far as the Gauteng tolls are concerned, is going to hit home hard when commodity prices increase as well as transport costs,” says Gary Ronald, head of public affairs at the AA. He adds that the AA believes a dedicated road fund should be established or that – at the very least – money should be collected through the fuel levy, which could also be used for road safety and other transport infrastructure projects in the future.

Despite these negative points about the Budget Speech, change remains the only constant in life. Time will tell if everything will be delivered as promised or if the sceptics are right in their scepticism. Perhaps in a year’s time South Africa’s economy and transport industry will be thriving thanks to improved infrastructure, the toll fee issue having been resolved and the country keeping to its plan of borrowing less and investing more.

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