Southern African Vehicle Rental and Leasing Association p resentation to Gauteng e-Toll Panel

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

2. OVERVIEW • 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

3. 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; WE SUPPORT THE PANEL, AND THE GAUTENG PROVINCE, EFFORTS TO FIND AN EFFICIENT, EFFECTIVE, EQUITABLE AND BROAD BASED ACCEPTABLE GFIP FUNDING SOLUTION SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

4. CONTENT SAVRALA - introduction “User pay’’ policy observations Overview of SANRAL engagement The system Cost benefit GFIP analysis Proposals to consider Conclusion SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

5. 1. SAVRALA - INTRODUCTION • 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. SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

6. 1. SAVRALA – INTRODUCTION (Cont’d) • General car rental forecasted statistics - 2014; • Annual revenue to exceed R5bn • Average fleet 65,000 (utilisation 72%) • Annual number of rentals 2,7m • Some key car rental concerns: • Increasing cost of new vehicle prices • Poor driver/renter behavior • Impact of new Tourism B-BBEE scorecard • E-toll administration • Traffic fine/infringement redirection (ie: AARTO) • Positively engages with stakeholders to find mutually beneficial solutions SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

7. 2. “USER PAY” POLICY OBSERVATION • Policy suggests a change in behaviour through pricing A usage charge for Tourism activity? Does not respond to ‘usage’ SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

8. 2. “USER PAY” POLICY OBSERVATION • Policy suggests the ‘user’ should pay for a service. Implies no cross subsidisation for an identified service. SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 Source: Tax Statistics 2013

9. 2. “USER PAY” POLICY OBSERVATION SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 Source: Tax Statistics 2013

10. 2. “USER PAY” POLICY OBSERVATION • 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 SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 Source: Tax Statistics 2013

11. 2. “USER PAY” POLICY OBSERVATION Gauteng remains dominant GDP contributor SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 Source: www.beta2.statsa.gov.za

12. 2. “USER PAY” POLICY OBSERVATION 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. SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 Source: www. Treasury.gov.za

13. 2. “USER PAY” POLICY OBSERVATION Motor Vehicle Licence does not recognise actual local or national road (ie: GFIP) usage SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 Source: www. treasury.gov.za

14. 2. “USER PAY” POLICY OBSERVATION SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014 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. • 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” • 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. SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

17. 3. OVERVIEW OF SANRAL ENGAGEMENT • SAVRALA members agreed to adopted parallel actions prior to launch: • Support the legal opposition process against e-tolls • 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 SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

18. 4. THE SYSTEM

19. 4. THE SYSTEM

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. SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

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. SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

22. 5.COST BENEFIT GFIP AND ETOLL ANALYSIS Economical and Social Impacts SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

23. 5.COST BENEFIT GFIP AND ETOLL ANALYSIS b) Impact on the Environment SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

24. 5.COST BENEFIT GFIP AND ETOLL ANALYSIS Howand where are the costs and benefits distributed across society and the economy SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

25. 6. PROPOSALS TO CONSIDER 6.1 Identify the objective to be achieved: • 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 SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

26. 6. PROPOSALS TO CONSIDER • 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!) • 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? SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

27. 6. PROPOSALS TO CONSIDER • 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 SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

28. 6. PROPOSALS TO CONSIDER • 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 • 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 SAVRALA presentation to Gauteng e-Toll Panel 8 September 2014

29. 6. PROPOSALS TO CONSIDER • 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: • 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. • Provincial routes should look to their Motor VehLic 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

30. 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