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Overview of the Gauteng Freeway Improvement Project

This chapter provides a brief overview of the GFIP project, specifically describing the extent of the infrastructure plans, the Electronic Open Road Tolling system to be used for toll collections, and the GFIP financial model, which is currently under intense public scrutiny.

The GFIP Infrastructure Plans

The Gauteng Freeway Improvement Project (GFIP) was launched by the South African National Roads Agency Limited (SANRAL) in 2007, at an overall approximate cost of R20 billion, to improve the road infrastructure network in Gauteng and to alleviate traffic congestion. The GFIP involves the identification and removal of bottlenecks at interchanges by widening freeways to four lanes and the construction of new freeways. The project also includes the construction of new bridges and rebuilding several existing bridges (SANRAL, 2011a).The first phase of the project involves upgrading 185 kilometres of the existing freeway network, initially scheduled for completion by 2010 and upgrading a further 65 kilometres of freeway, initially scheduled for completion by 2012. Further, new freeway sections will be developed, 34 interchanges will be upgraded and a few old bridges will be demolished and rebuilt (SANRAL, 2011a). The second phase of the project involves the construction of 63 kilometres of freeway sections and the development of new freeway sections, expected to be completed by 2020. The final phase of the project will involve constructing 85 kilometres of new freeway routes and is scheduled for completion after 2020. The financial feasibility of the phase three developments is still to be decided (SANRAL, 2011a).

The GFIP Open Road Tolling Electronic System

SANRAL has decided to implement a user pay system to generate the revenues needed to service the debt it will be incurring on the GFIP roads development. To collect the tolls, SANRAL has decided to use Open Road Tolling (ORT), which is a form of electronic toll collection, except that in ORT systems the driver does not have to stop at a toll booth to pay the toll fees (SANRAL, 2011c). A contract worth US$ 155 million for the installation and operation of the tolling system was awarded to the Electronic Toll Collection joint venture (JV) in September 2009. The JV, highlighted in Figure 5 below, includes Kapsch Sweden, Kapsch Austria and South Africa’s Traffic Management Technology (ETC, 2010). The Kapsch Group is one of Austria’s leading technology corporations, with a presence in 38 countries. Kapsch has its head office in Vienna, Austria, was established in 1892 and employs over 3,000 employees globally. The Kapsch contract with SANRAL is to develop and manage the electronic toll collection systems for five years (ETC, 2010).The most important benefit of the ORT system is that it does not involve physical tolling booth, thus eradicating delays and increased vehicle emissions associated with stop-start driving (SANRAL, 2011c).

The GFIP Financial Model

SANRAL, in accordance with South African National Roads Agency Limited and National Roads Act, Act 7 of 1998, has two separate business areas, namely toll and non-toll operations. SANRAL reports and budgets separately for the two business areas and is not allowed to cross-subsidise. The non-toll roads, which are 81% of the national road network, are funded through government grants. The toll road network,making up 19% of the road network, is funded mainly through the capital market and receives income through toll fees (SANRAL, 2011a).The GFIP was funded through bonds raised on the capital markets through SANRAL’s Domestic Medium Term Note Programme. SANRAL issues bonds to investors at monthly bond auctions and the interest rate paid is determined in the capital market. Bonds trade in the market similarly to shares on the stock exchange, and prices and interest rates fluctuate all the time.At the bond auctions, investors bid in relation to interest rates of Government bonds and their sentiment towards risks in the market. SANRAL has a guarantee from the national treasury for a total debt of R37.91 billion. The increased government guarantee provided for the GFIP led to a reduction in the cost of the debt. In addition, SANRAL may issue a total of R15 billion unguaranteed bonds, of which R10.5 billion have already been issued. As at June 2011, the total bonds issued by SANRAL amounted to R25.70 billion, details of which are available from the Johannesburg Stock Exchange (JSE) (DoT, 2011b).

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Abstract
Acknowledgements
Table of Contents
I Definitions, Acronyms and Abbreviations
II List of Figures
III List of Maps
IV List of Tables
1. Nature and Scope of Research Study
1.1 Introduction
1.2 Background and Importance of the Study
1.3 Statement of Problem and Sub-problems
1.4 Research Objectives
1.5 Scope of the Study
1.6 Assumptions of the Study
1.7 Potential Benefits of the Study
1.8 Possible Constraints to the Research
1.9 Outline of the Research Report
2. Overview of the Gauteng Freeway Improvement Project
2.1 The GFIP Infrastructure Plans
2.2 The GFIP Open Road Tolling Electronic System
2.3 The GFIP Financial Model
3. Conceptual and Theoretical Framework
3.1 The Economic Importance of Roads
3.2 The North-South Corridor (Durban Corridor)
3.3 Gauteng Roads in the National Freight System
3.4 The Social Cost of Transport
3.5 National Road Infrastructure Requirements
4 Literature Review
4.1 Introduction
4.2 The Agenda for Commercialising the Roads
4.3 Second-Generation Road Funds
4.4 Governance and Institutional Reform
4.5 Roads Funding Strategies
4.5.1 Fuel Levies
4.5.2 Road User Charging or Tolling
4.5.3 Privatisation of the Highways
4.6 Risk Sharing and Financing
4.7 Accountability, Transparency and Public Control
4.8 The User Pay Principle
4.9 Road and Rail: Balancing the Playing Field
4.10 Climate Change and Implications for Roads Planning
4.11 Conclusion of Literature Review
5 Research Methodology
5.1 Research Design
5.2 Research Sample and Data Sources
5.2.1 Primary Sources of Data
5.2.2 Secondary Sources of Data
5.3 Method of Data Collection
5.4 Research Areas and Interview Questions
5.5 Data Analysis Method
5.6 Ethical Considerations
6 Research Findings
6.1 Transport Experts and Academics Views
6.2 Government Stakeholder Views
6.3 Private Sector Stakeholder Views
6.4 Public Views on Social Networking Sites
6.5 Public Transport Operator Views
6.6 Political Parties and Trade Union Views
6.7 Summary of Research Findings
7. Analysis of Research Findings
7.1 Economic Impact of the GFIP Toll Road
7.2 Social Impact of the GFIP Toll Road
7.3 Environmental Impact of the GFIP Toll Road
7.4 Road Infrastructure Funding Strategies
7.5 The User Pay Principle
7.6 Public Policy Issues
7.7 Issues of Governance
8. Conclusions and Recommendations
8.1 Economic Impact of the GFIP Toll Road
8.2 Social Impact of the GFIP Toll Road
8.3 Environmental Impact of the GFIP Toll Road
8.4 Road Infrastructure Funding Strategies
8.5 The User Pay Principle
8.6 Public Policy Issues
8.7 Issues of Governance
8.8 Areas for Future Research
References