N2 WILD COAST TOLL ROAD PROJECT

Transcription

1 N2 WILD COAST TOLL ROAD PROJECT PROCEEDINGS OF A MEETING WITH KEY INDUSTRIES IN PROSPECTON HELD ON 13 NOVEMBER 2002 AT 14H00 IN THE SOUTH AFRICAN BREWERIES BOARDROOM

2 N2 WILD COAST TOLL ROAD PROJECT MINUTES OF MEETING HELD WITH KEY INDUSTRIES IN PROSPECTON AT 14H00 ON 13 NOVEMBER 2002 IN THE SOUTH AFRICAN BREWERIES BOARDROOM Agenda: The proposed agenda for the meeting as outlined by Mr. Foreman was as follows: 1. Welcome and Introductions 2. Detailed Map of the upper South Coast Toll Plaza's and alternate routes 3. Expected Costings and Concessions 4. Concerns by relevant business parties (SAB, Toyota, SAPPI, Unilever, Robertsons) 5. Response by Developers and Consultants 6. The Way Forward 7. Close and Drinks The above agenda was adopted without any amendments. 1. Introductions and Apologies Mr. Foreman, the Chairperson of the meeting, welcomed all present and called on members to introduce themselves. 1. (a) Present: Mr. Greg Foreman Mr. R. Wingfield Mr. M. Hart Mr. W. Wallace Mr. B. Felgate Mr. P.Marhwa Mr. G. Mackenzie Mr. Neil Tolmie Mr. Stewart Wilson Name Organisation South African Breweries Toyota (South Africa) SAPPI SAICCOR UBR Foods Macsteel South African Breweries GUD National Roads Agency (SANRAL) SANRAL 1

3 Mr. Graham Moon Mr. R.Singh Name Organisation N2 Wild Coast Consortium Pravin Amar Development Planners 1. (b) Apologies No apologies were forwarded. 2. Detailed Map of the South Coast Toll Plaza and Alternate Routes Mr. Foreman, displayed a computerized version of the map depicting the layout of the toll plazas for the South Coast. The plaza positions were incorrect and were corrected. Mr. Graham Moon made the following comments: The N2 Wild Coast Consortium comprises of Group 5, Grinaker (Pty) Ltd, Hawkins, Hawkins and Osborn, WBHO and Stewart Scott and Intertoll. The above companies have responded to Government s Unsolicited Bid Policy and have developed a proposal for a road between Durban and East London. SANRAL reviewed the proposal submitted and showed interest in pursuing a partnership for the development of the project. At this point, Mr. Foreman interjected and enquired on the status of the project. Mr. Moon informed the meeting that the 15 November 2002 deadline is for comments on the Environmental Impact Assessment (EIA) Report. The 'Intent to Toll' process is still to be undertaken by SANRAL, where information will be gathered from interested and affected parties (I&APs) and submitted to the Minister of Transport for decision. Mr. Moon pointed out that the Minister will have to look at whether the principle of tolling is the correct way of financing the project, and the views of I&APs will be considered when he takes the decision. Mr. Tolmie added that through the Intent to Toll process, the Minister and SANRAL Board would have to be explained as to how the concerns of I&APs would have to be addressed and what are the proposed solution to their problems. 2

4 In responding to the strength of Mr. Foreman's enquiry on the strength of their objection and how will it affect the decision; Mr. Moon commented that the Minister would look at the validity of the arguments presented by I&APs, whether they are receiving value for their money and what would the benefit be for users. If there were no economic benefit for the private sector, then the proposal would not be financed. Mr. Mackenzie indicated that in reading the N2 toll road website, he concluded that the reason for the Tollgate at Isipingo was to subsidize the development of the road in the former Transkei. Mr. Foreman pointed out that the Report stated that concessions would be given, and enquired on the value and beneficiaries thereof. Mr. Moon explained that it is difficult to comment on concessions on behalf of the Consortium, as it was still early stages in the project development. He informed the meeting that the present consortium may not necessarily win the tender and is thus not in a position to negotiate or comment on concessions. However, he suggested that the concerns of industry in relation to concessions which could be factored into the tender documents that are to be prepared. Mr. Tolmie informed the meeting that the Minister of Transport will approve headline tariffs. He went on to add that the successful concessionaire would have to sell a product and SANRAL does not get involved in that process. Mr. Foreman indicated at this stage, that most businesses in Prospecton were against the toll as they saw no economic benefit therein. 3. Presentations by Business on their Positions Relating to the Proposed Toll Road The presentations of SAB, Toyota (SA), Unilever /Robertsons is attached as Annexure 1. Mr. Tolmie sought clarity on how the amount of R was derived by the SAB and also enquired on the number of staff that would be affected by the toll plaza. Mr. Foreman responded that the amount of R was based on an assumption that the toll fees would be R10 and stated that some 200 staff would be affected. Mr. Wingfield enquired whether the R102 would be used as the alternate route. Mr. Moon informed the meeting that in terms of legislation, there was no requirement on the developer to 3

5 build alternate routes. Mr. Tomie added that if motorists chose to 'dodge' the tolls, then they would use the R102 as their alternate choice. Mr. Mackenzie pointed out that the R102 at present was congested and with the increase in traffic, they would not be able to enter and exit from the sites. He also stressed the need for central government to fund the development of the former Transkei. Mr. Hart in concurring with the position of the other businesses, made the following points of behalf of SAPPI / SAICCOR: SAPPI exports tons per year. They are not in a position to rely on rail transport as SPOORNET is in a state of disaster. The road network is used extensively for their chemical and forestry products. 60 loads of coal per week is transported. Concern that they would be using 50 km of the road network, but are required to fund 500km. Concern that the tolling of the road would have an impact on their staff. Why is the toll plaza located at Isipingo and what would be the concessions given to his company? Mr. Mackenzie indicated that the Port of Durban was a problem for all whose businesses involved in the export market, in view of the congestion. He stated that the Container Depot in Amanzimtoti was a solution thereto, and the construction of the toll plaza would thus not alleviate the problem. Mr. Foreman summarised the concerns of industry into the following categories:- Costs (business and staff) Efficiencies (production and distribution) Moral Issues Devaluation of their assets Mr. Moon made the following points: 4

6 Prospecton had a major problem in that it had a poor road network with a national highway running through it. The N2 was built because of the congestion of the R102. Within 5 years, the N2 would suffer have a 'stop-start' situation, as it has a traffic growth of 5%. At present it has a LOS of "D" with free flowing traffic at 100km per hour, and will deteriorate within the next five years to LOS "F" (stop-start conditions). Kingsway has not been designed to accommodate heavy traffic. The 2 lanes from Isipingo to Adams Road on the N2 does not have adequate capacity to handle the increase in traffic growth. The N2 therefore requires a third lane; and within the next years, a fourth lane would be required. Between 7h00 to 7h30, the traffic flow was satisfactory and thus it was difficult to market the toll road. However, the congestion difficulties would arise in next five years. (using a graph, he explained the service levels and its deterioration from LOS "D to "F ) People will need to get onto the road by 6am to avoid congestion. If they are to wake up at 5h30, then they will need to decide on either a change of employment or place of residence to avoid waking up so early and being caught in traffic for over a hour) Businesses would be affected by traffic congestion if they are unable to move their products out of their area (the graph was used to explain this point). Need for industry to agree that there is a need for an additional lane to improve the road network. The municipalities nor provincial government is going to choose to improve the road. The concessionaire has a contractual obligation to SANRAL to provide certain level of service. They would have to deal with bottlenecks by adding lanes within the 30-year concession period. The container terminal would be a failure in the absence of a proper road network. Mr. Foreman enquired on what the growth patterns were based on, as business was declining. Mr. Moon responded that the figures were based on traffic counts undertaken on the route. Generally, it is found that traffic growth is one percentage point above the GDP. Mr. Tolmie added that it was difficult to quantify growth in traffic. He stressed the need for added road capacity within the next five years and assured members that SANRAL would not be marketing the project if it were not warranted. 5

7 Mr. Wilson pointed out that the third lane was created as temporary measure when the upgrade was undertaken five years ago. Whilst the third lane has given some relief, it has reduced the emergency lane. He stressed that a fourth lane was required and there is no funding priority for it, as SANRAL is presently under-funded by at least 40% and there is no additional funding from the national fiscus. Mr. Foreman reiterated that Amanzimtoti was not growing and the toll plaza would affect local residents and business. He suggested that its location be Park Rynie instead. Mr. Moon responded that tolling works on the basis of the 'user pays principle', and the need to toll Amanzimtoti is based on the fact that improvements are to be effected to that part of the road section and will thus be beneficial to both residents and business. He outlined that it costs approximately between R2 -R4 million per lane to construct. If the toll is not located in the Prospecton area, then there would be no improvements effected to the road. In responding to Mr. Hart's enquiry on the costs of construction per lane, Mr. Moon responded that the improvements would cost at an estimate at R4 million per km per lane, and it costs approximately R per kilometre for maintenance and rehabilitation works. He went on to alert members to the example of the Platinum Highway where users avoided the toll in first two weeks of its opening, and subsequently returned to use it as they were not prepared to sit in traffic congestion for 45 minutes when they could pay R3.70 and avoid the hassles (getting late to work; loss of earning per hour etc) thereof. He was of the view that a similar situation would arise in the first 3 months of the Prospecton Toll Plaza. In responding to the question on the rationale of government to toll an existing road, Mr. Tolmie explained that SANRAL is looking after the economic links of the country since During its inception, he explained that SANRAL asked government to have a dedicated fuel levy which did not happen, instead their budget was slashed by R300 million two years ago. He argued that the only way to sustain the economic links of the country was through tolling. He went on to add that the present infrastructure is being utilised, as it was too expensive to construct new road, which is estimated at R30 million per kilometre. Mr. Wilson pointed out that the R30 million is without the costs of land acquisition. 6

8 Mr. Mackenzie was concerned about the enormous costs of cross-subsidisation, and the 2months cited by Mr. Moon for the diversion of traffic from the R102 back to the N2 toll road. Mr. Moon responded that the loss of production within the two months would be significant. He added that it was difficult to convince persons to use the toll road and there was a need for creative solutions with the municipalities. There is a five year lead time from the point when the project goes to tender and its awarding to the successful bidder. In responding to Mr. Mackenzie s question on whether the tollgate would be installed prior to the constructing of the extra lane, Mr. Tolmie explained that there would be a condition in the tender documents for certain work to be undertaken prior to the tollgate construction. He cited the case of the Wilge Plaza on the N3, where the tollgate had only become functional upon completion of the two additional lanes. Mr. Moon added that a user would not want to pay R4 for a road which under construction. He also informed the meeting that cross-subsidisation happens on all toll roads, and in the case of Amanzimtoti there was a need for interchanges and bridges being rebuilt. He was of the view that in the first 10 years, there would be a cross-subsidisation of the North, and thereafter it would be reversed as Transkei only needs 1 lane per direction. In responding to Mr. Mackenzie s request for the central government to fund development south of Port Edward, Mr. Moon explained that financial institutions would not invest money into a toll road that is not bankable He went on to add that if government felt strongly about the project, then it would have to find funds from the national fiscus. The proposal on the table is from the private sector in response to the Unsolicited Bid Policy of SANRAL. He alerted the meeting that if the project does not go to tender stage, then the Consortium would have to be reimbursed from the national fiscus. The consortium has to prove to SANRAL that the route is viable and outlined the costs of the tender stage being R40 million and R140 million upon financial closure. Mr. Mackenzie suggested that the Consortium sits with industry and develop a cash flow model for Umgababa to Isipingo, and was of the view that if business support for the project was required then the Consortium had to be more forthcoming. Mr. Moon responded that they are unable to work with business on the financial model as they were entering the tender stage of the 7

9 project. He added that toll roads gave a solid investment over 30 years with low returns. He suggested that business sit with SANRAL to work on a financial model. Mr. Hart indicated that business and residents were not happy with cross subsidization, as they would be receiving very little benefits of a 'nice' road for the Transkei. Mr. Moon indicated that a report had been prepared for the Durban Chamber of Commerce and Industry as well as for the South Operational Entity that examines the economic impact. He informed the meeting that he would make the document available to members present. Mr. Moon cited from the report that congestion would cost industry in the next five years an amount of R187 million. The amount was calculated on the value of time, which was set at R65 per hour; as well as economic factors (access and mobility). Mr. Moon added that the user must pay for the length of road he uses and the Minister and SANRAL would have to determine whether the user is getting the maximum benefit for what he is paying for. He suggested that business negotiates with the successful tenders on costs later in the project cycle. Mr. Moon informed members that their objections and concerns would have to be addressed by SANRAL during the Intent to Toll Process. Mr. Wallace pointed out that whilst the congestion would be removed from the freeway, it (congestion) would move to the industrial areas instead. Mr. Moon responded that according to the findings of the traffic modelling, Kingsway is in 'trouble' as it cannot accommodate traffic growth. The toll road would have improved capacity that the user would have to pay for. He reiterated that it was impossible for him to negotiate discounts with business at this meeting, and this would need to occur with the successful tenderer instead. Mr. Wingfield enquired as to the time when this could happen. Mr. Wilson explained that financial closure of the project is approximately 18 months away. Mr. Tolmie indicated that it was the first time that the toll fee was declared in public so soon, as the legislation states that it must be done 14 days prior to the opening of the toll road. In responding to Mr. Foreman's request for consultation during the Intent to Toll process, Mr.Tolmie outlined the legislative requirements where an advert will be put into the newspaper 8

10 giving the public thirty days to raise their concerns and objections; whilst the Premier and Municipalities are given 60 days to do the same. He assured the meeting that I&APs on the database would be informed of these deadlines accordingly. He highlighted that the declaration process was not related to the tariffs payable. Mr. Wilson in responding to Mr. Hart s comment that it is the decision of the African National Congress (ANC) to build the road and a select group would fund it; stated that this was not the case as the State nor the ANC had identified the route as being viable and feasible. He highlighted that the route is part of a public-private partnership (PPP). Mr. Tolmie indicated that SANRAL is reviewing the initial scheme. He informed the meeting that the Intent to Toll process would highlight the location of the tolls, and should there be variations; the process would have to be re-started. The bidders would tender on agreed scheme or else there could be delays. 4. Way Forward Mr. Moon outlined the process: Activity Timeframe EIA Report Comments 15 th November 2002 Intent to Toll Process February 2003 Tender stage June 2003 Preferred Bidder Stage December 2003 to June 2004 Construction (upgrades and improvements) January 2005 Mr. Moon suggested that companies send in their letters to Mr. Pravin Singh by 15 November 2002, so that it could be recorded as part of the EIA process Information Mr. Moon is to provide the Economic Impact Study to Mr. Grant for circulation to members as well as an article on Tolling of Roads by the private sector. 9

11 5. Closure Mr. Moon thanked members of industry for allowing him the opportunity to share the views of the Consortium with them. Mr. Foreman thanked all for attending and declared the meeting closed at 16h35. 10