e-Tolling: Some guiding principles from Tunisia’s rural electrification programme

As a daily commuter between Johannesburg and Pretoria, Gauteng’s e-toll bell tolls loud for me.  Let me say at the outset that I’m not against e-tolling in principle – on the contrary, I believe that road user charges are a sustainable way of financing roads if implemented properly over time.  e-tolling is a modern way of implementing road user charges, and should be painless, for the individual in terms of the time saved by individual drivers not having to stop at toll booths and for society in terms of the productivity gains that smoother flowing highways will engender.

However, in Gauteng, the perceived future pain of paying e-tolls has now reached the point of agony – and we haven’t even started paying yet.  The current focus of the anger is on whether some groups in society should pay at all; others are concerned about the extent to which our public purse is committed to repaying the debt for the procurement and installation of the toll collection technology.  As of last Friday, the agency responsible for South Africa’s national roads was interdicted and restrained from levying and collecting tolls by the High Court, so instead of starting yesterday, e-tolls are delayed for at least a month.  I hope this month allows for a public reset of the debate to allow for a principled discussion of infrastructure development in this country.

As a future road user charge payer, I want to know the basis of the costs of the improvements to our highway (including the cost of servicing the debt for toll collection), how these map to the charges we’ll be paying, the extent to which any surplus is going to be managed to pay for highway maintenance, renewal and extension in future, and whether revenues gathered from the fuel levy are going to contribute to any reduction in the tolls.  It’s also fair to ask how the economic benefit of improved productivity which can be attributed to not having to stop or slow down at toll booths (a benefit of the high tech gantry system which has been installed) corresponds, if at all, to the reported 70% of operating cost that these gantries will represent – and whether that reporting accurately represents the breakdown of operating costs.

The public debate is now frenzied, politicised and, I’m afraid, glossing alarmingly over the need to fund routine and periodic maintenance.  The debate is focusing on the payment mechanism rather than the outcomes we’d like for our roads: societies need to pay for their public infrastructure, and this includes paying for maintenance to keep them driveable and safe.  We want our roads to be in good condition, free of potholes and safe to drive on – and that means that our roads will need to be maintained for the rest of their lives.

Maintenance will cost money, and we know that, but where the debate gets skewed is on the build-up of the costs and how the tolls are “mapped” to these costs¹.   In public infrastructure development, the need for “cost-reflective tariffs” has long been recognised and implemented in roads development and management as “road user charges”. The term cost-reflective tariffs means there are two sets of information in play: the build-up of the costs, and the build-up of the tariffs.  In the Gauteng e-toll debate, it isn’t clear either how the costs are made up or how the tariffs have been assessed per customer class…or what the cross-subsidisation model is.

We also seem to think that infrastructure development is far too complicated for infrastructure users to understand. I contend that it’s not, given the right information clearly expressed, in a framework and language which people can understand. However, getting it right involves leadership of what can be a complex interplay of factors.

This takes me back to an analysis I did for the African Development Bank (AfDB) a few years ago on best practice in infrastructure development.  The AfDB was especially interested in those practices which could be adapted by other African countries to unblock and accelerate their own sustainable infrastructure development and asked us to analyse how various countries had achieved undeniable results in energy, water, transport and information and communications technology (ICT).  Our energy success story focused on how Tunisia, over a 30 year period, managed to achieve close to 100% access to reliable electricity throughout the country by applying a few basic principles which could inform South Africa’s own debate on sustainable infrastructure development.

Bear with me as I use an example of rural electrification in a small Maghreb country to spur thinking on how we might be able to turn the public debate over a small number of toll roads in an economic powerhouse at the other end of the continent into a lasting conversation on how we can develop and maintain our infrastructure sustainably to the benefit of all in South Africa.  This post doesn’t have all the answers, but it does deal with some fundamental principles of sustainable infrastructure development which are currently being drowned out in the noisy debate.

First, the results: the process of achieving 100% access to electricity was driven by the original vision of Tunisia as a country whose peoples’ economic and social conditions were improved through a quantum leap in education, healthcare and integrated rural development. In 1972, less than 5% of rural households and 40% of households overall had access to electricity. By 2006, these numbers had dramatically shifted to over 98% for rural and urban beneficiaries alike by 2006 – a staggering achievement.

So how did they do it?

Development of Sustainable Infrastructure – some guiding principles

Tunisia’s rural electrification programme ticked the boxes of a sustainable infrastructure programme:

• programme conception rooted in a shared national vision which strongly informed national, provincial and local goals and action plans
• enabling environment which enrolled development and financial partners, the relevant national, provincial and local agencies and institutions, and Tunisia’s citizens; the programme was based on excellent quality of information on electricity provision costs as well as socioeconomic factors which contributed to establishment of tariffs which are affordable to both the supplier and the customer
• savvy management of the infrastructure life cycle, involving what for the technocrats at the time was a gutsy technology selection which significantly reduced costs, informed management of tariff evolution and payment mechanisms, strong quality management and concern for the environment, as well as a dynamic and innovative attitude towards the rollout of the programme.

Project conception – Integrated development vision and participatory planning

The government translated a clear vision for Tunisia’s development into accessible and measurable plans for which progress and results could be demonstrated, building the credibility of the process as successive stages were reached.  These were 5 year plans which involved electricity, water and roads.  Under the rural electrification programme, rural electrification planning was based on good information of where the demand was at the time and how likely it was to grow by how much over the period covered by the planning cycle.  Critically, this information was validated at the local level, allowing for adjustments in the planning process at national level.  The 5 year plans were characterised by the mobilisation of all levels of political structures to communicate the vision and have provided mechanisms for consolidating understanding of the needs.  Under these programmes, beneficiaries were empowered to participate in project selection and prioritisation.

Enabling environment – Credibility of the process, the utility’s systems and the tariffs

The electricity utility was responsible for designing the national electrification programme and for rolling it out, in collaboration with the rural electrification agency.  The utility used what we would now consider a pretty simple (but effective) computer model for planning which matched the status quo of connections and projected demand growth – information validated at the local level – with various scenarios of electricity network growth, technologies to be used, and prioritisation of projects.  Proposed project costs were documented and communicated at local level in such a way that communities understood their choices: they could choose whether to have a grid connection at a given basic tariff and available at a given point in time, or whether to have a solar panel connection at a different rate and available at another point in time.

Customers knew what they were getting, when they would get it, how much they would pay for it and why, and their trust in the process was supported by the reality of the rollout over the 30 years.  The beneficiaries understood the costs involved and made informed decisions on whether to become grid consumers, and if so, what level of service to subscribe to and how long they would have to wait for their connection.  I’m oversimplifying somewhat, but basically the tariff structure worked on the basis that everybody paid something, starting with the consumer:

• the beneficiary paid the first tranche according to their means (based on socioeconomic information and validation through local government structures).  Beneficiaries’ contributions were capped at different levels in different regions of the country, reflecting the socioeconomic status of each region
• the utility covered the next tranche
• the State, through various programmes (including a discretionary Presidential Programme and a National Citizens’ Fund for rural development to which all citizens could contribute) and its engagements with development partners, covered any remaining tranches

This worked, and the utility remained viable, because customers paid for their electricity on time and what they paid was enough to cover the utility’s costs on an ongoing basis.  I should emphasise here that Tunisia’s rural poor were really poor, and that the poorest of those poor paid little more than a token amount, with the rest picked up by cross-subsidisation – but the point is that in the tariff build-up, their contribution was first.

Overall, the utility’s cost calculations were supported by the real costs and delivery timeframes of the network rollout, lending credibility to the utility’s systems and the process of providing access to electricity for Tunisians.

Infrastructure life cycle – making it work for the long term

The utility’s selection of a specific technology for the medium voltage network – that’s the part which has the smaller lines that transmit electricity to communities and villages from the longer high voltage lines you see on big pylons – was courageous for the utility’s team at the time.  Electrical engineers are a conservative bunch and many considered this technology to be substandard, mostly because it wasn’t widely used at the time.  A main argument for using the technology was that it was cheaper because it used less cable; later in the programme they managed to introduce an even cheaper technology which used even less cable, without compromising on quality of service.  It did, however, have an influence on the level of service; those who wanted a higher level of service corresponding to the more traditional electricity network technology were given the choice to pay for that higher level of service if they wished, and some did.

Another point which particularly struck me during my research, as several grizzled veterans of the utility told me variations of the same story with a great deal of pride:

Sometimes during construction, materials such as cables and pylons were delivered to rural depots before the rural roads programme was completed. The rough and rocky terrain, coupled with the unwieldiness of the bulky, heavy materials, made it impassable to vehicles. Rather than leave the materials to rust or get stolen, delaying the programme
and increasing costs, the utility and the local people made a plan: they co-opted the local donkeys to carry materials the last few kilometres.  How’s that for pulling together to make it work?

How does this apply to Gauteng’s toll roads?

While the development contexts for Tunisia and South Africa are vastly different, some common threads can be drawn by looking through the simple filter of the guiding principles for sustainable infrastructure development:

Programme conception: Tunisia had a clearly articulated vision of a better society for its citizens and the goals and objectives of its national plans spoke clearly to that vision.  What is our national plan for transforming our current transport system to one which includes fair and equitable public transport?

Enabling environment: Tunisia’s rural electrification funding plan was transparent, with top-down planning informed by bottom-up validation of the basis for planning, and all parties along the line paid according to their means – starting with the consumer.  Regardless of how poor they were, people paid a fair, agreed amount for their electricity and knew that they were contributing to longer term maintenance of the network through their tariff.   To be sustainable, South Africa’s infrastructure development programme will benefit from an open and transparent public discussion of costs, sources of revenue and how these revenues will be collected.  In the case of Gauteng’s tolling system and freeway improvement programme (let’s not forget that we need to pay for the road improvements and future maintenance as well), this means an open discussion of what revenues are needed to cover each of the cost components and how these revenues relate to the proposed tolls – and what the fuel levy will contribute to the programme.

Infrastructure life cycle:  Tunisia’s utility had a mandate to deliver a programme for full access to electricity which would be affordable over the long term – for both the utility and the consumer.   They were able to provide choice regarding type of service and level of service and have maintained the network affordably over the last 30 years.  Tunisians also bought into the idea of universal electricity access and helped to make it happen during construction and by paying their electricity bills in a timely manner since the programme’s inception.  What road quality level do we want?  How much will maintenance cost?  What will the maintenance programme entail?  How much are we willing to pay for maintenance? How much are we willing to pay for the convenience of not having to stop to pay tolls?

Sometimes society has to pull together to make it work.  This public discourse needs to be about more than not paying e-tolls – it needs to be about what we want for our society, how we want infrastructure to play a role in delivering on that vision, and how we agree to fund and pay for that infrastructure.

1. In the electricity world, utilities which charge cost-reflective tariffs work on the basis of a revenue requirement, which is the amount of money that a utility must collect from its customers to pay all its costs (including operating expenses, taxes, interest paid on debts owed to investors and, if applicable, a reasonable return on investment (profit)).  In other words, a utility aims to collect the reasonable level of revenue required to operate properly, maintain its system and meet its financial obligations. The revenue requirement provides a basis for determining how much revenue needs to be collected through tariffs; road user charges are calculated in a similar way.