Electronic Toll Collection: The green light for e-tolling

Hot off the press is the timely news that the South African National Assembly has passed the bill that would provide the legal framework to e tolling. However, this bill has not yet reached the end of its journey, as it still needs to go via the National Council of Provinces after which it is referred back to the National Assembly and will only become law after being signed by the President of South Africa. By then, the resulting legislation will give the green light for putting the much-discussed e-tolling on the Gauteng Freeway Improvement Project into practice. For Electronic Toll Collection Company (ETC), the company that was awarded contract from the South African National Roads Agency SOC Limited (Sanral) to implement e-tolling contract, it promises to be a hectic few weeks.

Introducing debate on the Transport Laws and Related Matters Amendment Bill, Transport Minister Ben Martins said that the Bill was essential to enable “the appropriate implementation of the e-tolling system”.

These measures were required to implement the Gauteng Freeway Improvement Project and to facilitate provision of public transport and other projects in Gauteng, he said, adding that the inability to collect revenue would also damage the credit reputation of the South African National Roads Agency SOC Limited (Sanral) with investors, and could negatively affect both Sanral’s and the Government’s international ratings.

E-tolling arrives in Gauteng off the back of a controversial three years, with much opposition and heated debate. However it appears now that e-tolling is to happen, with the last major hurdle for its go-ahead now successfully being negotiated.

For ETC, located between Johannesburg and Pretoria, the road has been much longer and started in Austria, as Salahdin Yacoubi, CEO, explains:

“We are an independent, privately-owned company and we are under contract with Sanral, to deliver the e-tolling collection technology and service. A few years ago the South African Government made the decision to implement the Gauteng Freeway Improvement Project, to widen roads and provide a number of security features.

“Of course this needed funding and the concept of Open Road Tolling was introduced. The aim of Sanral is to develop the programme (initially 201 kilometres of road) and to then introduce two other phases that also includes the construction of new freeways at later dates. It is a very ambitious programme for Gauteng, a very high populated province, which accounts for roughly 40 per cent of the country’s GDP.

“So several years ago the Government went to the international market and requested statements of interest in the project and announced pre-qualification criteria. Our parent company Kapsch TrafficComis the leading international supplier of electronic tolling technology and solutions and is a major force in toll systems in Europe, Australia, Asia, and South America.

“Kapsch led a consortium that pre-qualified in 2008 along with two other high profile international companies and were then able to meet the clear criteria set out to win the contract for the Gauteng development. They were awarded the contract (in a partnership with South African company TMT) with Sanral in 2009 and it was decided to create a local operation which is ETC Pty Ltd today.”

Kapsch has for many years built an excellent reputation for its specialist technology which is tailored for transportation projects. Having won the contract with Sanral, ETC Pty Ltd had to develop suitable technology which could capture and process traffic data and convert financial figures into Rand. The second requirement was to build IT systems which could process vast amounts of data on road users across Gauteng, including the introduction of a call centre, staff training, IT equipment and a fully functional website.

“At this time the primary support we needed from Austria was based around the supply of technology. But we were also starting ETC Pty Ltd from zero and of course it takes time to find premises and recruit and train staff on Day One,” says Yacoubi. “Head office were very helpful providing support in the early days and today we have around 10 people from the overseas group, working on technology and the business side,” he adds.

The project covers the design and build of an Open Road Tolling System for the Gauteng Province, and a National Transaction Clearing House and Violations Processing Centre, valued at R1.16 billion. It also includes turnkey operations of the project for five to eight years thereafter. The ETC contract lasts for eight years and Yacoubi’s team has already developed a large call centre functionality and customer outlets (where road users will be able to interact face to face with ETC staff) to handle the volume of enquiries and transactions.

With the announcement in early March that the legislative process is now in it’s final stages, Yacoubi and his team are braced for a huge influx of enquiries from Gauteng’s drivers:

“We will be marketing this project in collaboration with Sanral although some of the work will just be from ETC,” he says. “There are between 2.5 and 3 million road users in Gauteng, so we are bracing ourselves for a tidal wave of communication from the end of March, when people will be able to set up accounts, pay to get an e-tag and provide vehicle details.
Open Road Tolling, or Multi-Lane Free Flow Tolling, involves tolling on large motorways at high speeds. Vehicles do not stop at plazas, but rather get identified by gantries erected over the road and the toll transaction is processed against an account held in a back-office. The toll charges will be applied to all vehicles.

There are no toll gates to stop drivers using the roads, putting an emphasis effective collection and enforcement operations and as Yacoubi explains, toll gates were not really a viable option:

“If we had to slow down or stop traffic we would have created huge congestion. Therefore there are no toll plazas and there is zero interference with the traffic – similar to other big cities like London. The decision on this design ultimately came from Sanral and of course the big challenge will be compliance from the road user.

“In our case, enforcement is an important component to obtain compliance and we now have the legal framework almost finalised to achieve this.”

For the past three years, Yacoubi says that there has been opposition and debate to the proposals, which has delayed take-up from road users. As a consequence, the next few weeks are likely to prove exceptionally busy for ETC.

Another by-product of the debate has been the challenge of recruiting – and retaining trained staff. With approximately 500 employees still to recruited 1 for the ramp-up period before slightly scaling down, a few month after start of operations..

“We operate two shifts in our call centre and also at the customer service outlets and we provide lots of training before staff can deal with the public. Our screening is very strict but we have found that a lot of people, once trained, become potentially very valuable to larger companies, so staff retention has been a problem. This has been exacerbated by the perception that the project may not go ahead, and there has been lots of negative publicity from the opposition and the media. Now however everyone can see that this is going to happen and the situation with employees is changing and we can be confident for the future.”

The future success of collection operations will be crucial to ensuring that ETC realises a return on its investments. Yacoubi says that the toll tariffs were set by Sanral who issued bonds on the  capital markets for the financing of the project and aim to repay their borrowing through the revenues collected. However, during the heated discussions, the tariffs were lowered, by means of a contribution from Government.

Yacoubi says that in full operation, the tariff collection process should realise R2200 million per year and it is vital for ETC that this happens correctly:

“We initially invested around 100 million euros to supply the technology and we are compensated in terms of our tendered rates and standard of service delivery. We had to invest a lot of money up front for the first few months but it is typical that you have to initiate activities before you can realise the financial benefits.”

Gauteng has proved a challenging project and is entering the next phase, giving ETC time to reflect upon its processes and look for future opportunities elsewhere, mainly further into Africa:

“Looking at Africa, there is lots of opportunity with the development of the middle classes and a growth in urbanisation. Those are the elements needed to develop this kind of business as they rely on infrastructure and transportation. We have successfully worked in Algeria and we see the successful implementation here in South Africa and believe that this will create other opportunities for the future,” Yacoubi concludes.