The town of Harrismith gets a reprieve for now

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Noseweek.

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SA National Roads Agency’s (Sanral) determination to push through proposals to build the controversial De Beers Pass Route, which will shave just 14kms of the existing route at a cost of close to R10bn, was slapped down by the Department of Environmental Affairs in June this year. The route preferred by Sanral would by-pass the Free State town of Harrismith and put thousands of people out of work as dozens of businesses currently dependent on traffic passing between Gauteng and Kwazulu-Natal would close down.

Those who have been following Sanral’s apparent obsession with building the De Beers Pass Route (DBPR) have long suspected a deeper agenda. The concession to operate the current route between Cedara, near Durban, and Heidelberg in Gauteng, expires in 13 years. No business generating R400bn over the 30 year life of the project is going to just turn off the lights in 2029 and hand back the road to Sanral, as required in terms of the original concession contract signed in 1999.

To keep the party going, the concessionaires need the new by-pass route. That will allow the N3 Toll Concession (N3TC), which manages the route and collects tolls between Cedara and Heidelberg, to get a 30 year extension on the business and no doubt create a revolving door for Sanral suits once they exit the public sector. Sanral CEO Nazir Alli, who was supposed to have retired months ago, seems unable to vacate his seat until the e-tolls mess he helped create is brought to some kind of resolution.

Nothing seems to be going right for Alli, whose plans to build toll roads from the Cape to Kwazulu-Natal and beyond face opposition at every turn. Last year the Cape High Court threw out Sanral’s plan to introduce urban tolling on the N1 and N2 Cape Winelands route, citing the lack of a document trail within the organisation’s decision to build the proposed route. Equally mired in controversy is the proposed Wild Coast toll road, which local community members argue will ruin a fragile eco-system, and allow Australian mining group MRC to extract titanium sands in the area, further despoiling the area. The recent murder of Sikhosiphi ‘Bazooka’ Rhadebe, chairman of the Amadiba Crisis Committee, which had been fighting to keep mining out of the area, inflamed an already incendiary community.

Now it is the turn of Harrismith to feel Nazir Alli’s love. Contrary to the cheerleaders for the proposed new route who implausibly suggested the loss of just a handful of jobs, an economic impact assessment by Mike Schussler of Economics.co.za reckons Harrismith stands to lose R890m and more than 1,600 jobs, both direct and indirect, if the DBPR goes ahead.

But with just 13 years to go on the existing N3 concession, there is little time to waste for the N3TC. Especially now that the initial capital cost of building the N3 route has likely been fully amortised, so revenues (after deducting a small percentage for road maintenance, operational costs and payments to Sanral) go pretty much to the bottom line. By some estimates, revenue from the N3 route is R2bn to R4bn a year, though N3TC is understandably reticent about disclosing this information. Allowing for inflation and increased traffic volumes, this concession is valued at R400bn over the next 30 years.

The Department of Environmental Affairs’ rejection of the Environmental Impact Assessment (EIA) for the proposed route puts a crowbar in the works. The most cost-effective and logical solution is a simple upgrade of the existing route, which would likely cost around half the R11bn for the solution proposed by Sanral.

Those who have watched Sanral squirm over its e-tolls boondoggle in Gauteng, which the Organisation Undoing Tax Abuse (Outa) reckons cost an average 321% more than similar roads elsewhere in the world, are now starting to discern a pattern in the way Sanral conducts business. Why, for example, did the 1999 N3 Toll Road Concession contract include a requirement for the De Beers Pass Route, if not to bequeath new life to a 30 year concession whose end is nigh? And why should the concessionaires get the benefit of a route that is now fully paid up once the contract expires in 2029. The route should be returned to Sanral and tolls scaled down to cover maintenance only, or at a modest level to fund other essential routes, such as the Gauteng Freeway Improvement Project.

In any event, it’s back to the drawing board for Cave Klapwijk and Associates (CVA), the firm contracted to prepare the scoping report for the DBPR, which has now been kiboshed by the Department of Environmental Affairs.

The Department’s rejection of the proposal steers clear of the economic consequences of amputating Harrismith from the N3, and focuses exclusively on environmental issues, such as why a third alternative route (known as A/C) was not considered in detail, and why no assessments were done on ecological, wetland, air quality, avifauna, visual, noise and the economic impacts of the third route. CVA recommended approval for the DBPR even though the “ecological, wetland, avifauna, heritage, visual, noise and the environmental economics resource specialists are not in support of the above alternative route…” says the Department in a letter to CVA. Among numerous technical points raised by the Department for its rejection of the EIA is the claim that the Platberg Private Nature Reserve is not a declared nature reserve – which it is.

As reported in Noseweek (August 2015), Mary-Jane Morris of Morris Environmental & Groundwater Alliances, responded to the environmental study on the proposed route as follows: “In environmental terms we talk about irreversible impacts. From an ecological point of view, this bypass has several negative irreversible impacts”.

Once a wetland is damaged or affected in a way that alters its natural functioning, it cannot be restored to its pre-existing state. The DBPR runs right through a crucial wetland area, and the only way to prevent ecological damage is not to build the route. “The ecological changes that will result from building the road are forever,” said Morris.

Cave Klapwijk and Associates (CVA) drafted the scoping report for the N3TC and came up with three potential routes:

  • De Beers Pass Route (DBPR), which would branch off from the existing N3 north of the Tugela Toll Plaza, pass through a 500m tunnel before crossing the Wilge, Meul and Cornelius Rivers to rejoin the existing N3 just north of Warden – a distance of 97,7kms.
  • Alternative A, running parallel to the existing N3 Van Reenen’s pass for a short distance, passing the escarpment just south of the Van Reenen’s village, through the Swinburne area, but by-passing Harrismith to then follow the existing N3 to Warden, a distance of 107kms.
  • Alternative B runs from Tugela Toll Plaza to Van Reenen Village interchange, before crossing a wetland in a north-westerly direction to join the DBPR at the Lincoln interchange, a distance of 98,3kms.

harrismith-routes

The Department of Environmental Affairs asks CVA to rectify the shortcomings in its rejection letter and resubmit its report. This leaves the door open for N3TC to make a second lunge at the DBPR, but opposition is likely to grow rather than diminish.

In a report for the Harrismith Chamber of Commerce, Mike Schussler of Economics.co.za points out that the new route is only needed once traffic volumes at Van Reenen’s Pass reach an average of 13,900 vehicles a day, against 2103 volumes of 11,884. The N3 is still several years away from reaching the point where the DBPR or an alternative route with more capacity would be   required, according to Bernal Floor, the veteran transport economist commissioned by the Harrismith Business Forum to side-check the Techworld Consulting Engineers report which recommended proceeding with the DBPR.

“The expected traffic growth at a rate of 5% a year from 2016 to 2043 for heavy vehicles travelling on the route between Warden and Keeversfontein is contrary to experience, as cycles in the national economy will surely result in periods of lower growth,” says Floor. In fact, traffic is presently  declining..

Floor adds that the Department of Environmental Affairs is doing its job in rejecting the N3TC’s proposed new route. “It rejected the proposal on procedural grounds, and haven’t yet taken all the factors into account, but it’s clear they are listening to the objectors.

“There is a  motive in  this rush to get the DBPR approved: why are SANRAL and the N3TC so against upgrading the existing route, and  pursuing the  DBPR when they were told by their own consultants that it will  create excessive  capacity  and waste resources?.”

Floor’s report  criticises Techworld on multiple counts: its claim that the various proposed routes were identified in response to pressure groups “such as the residents of Harrismith” (when Alli and his team were booed out of the town on a visit last year to drum up support); the lack of a sensitivity analysis to assess the costs and benefits of implementing the various route suggestions; and the fact that costs were left out of the analysis, which, if included, could render the project non-viable.

It’s clear from the wording of the rejection letter that the Department is leaning towards to a compromise in the form of an alternative route that would replace Van Reenen’s Pass, but in a way that does not kill the town of Harrismith, and allows the road to be upgraded in stages. This would be less costly from an environmental and economic standpoint than the alternatives currently being proposed.

Also unclear is how the proposed route is to be funded. N3TC are reported to have said they would fund it with a mix of equity and loan funding, which will likely be borrowed overseas. If SA’s credit rating is downgraded, increased interest rate costs may render the project non-viable.

A congenial arrangement

The congeniality between Sanral, the tolling companies and the big construction firms who fixed prices and charged more than three times the going rate for the Gauteng Freeway Improvement Project, is now the stuff of legend. In May, Sanral announced it was claiming R760m from seven construction firms which had admitted colluding on tenders relating to various road projects, but this is a pittance when compared with the R10,8bn over-payment for the Gauteng Freeway project that the Organisation Undoing Tax Abuse (Outa) reckons

Old Mutual and Australian investment bank Macquarie own two investment funds with shares in all three concession operators: Bakwena (operating the N1 Tshwane to Bela-Bela, N1 Tshwane to Rustenburg, and N4 Rustenburg to Botswana), Trac (which operates the N4 from Pretoria to Mozambique) and the N3TC (Gauteng to Durban). Several construction firms are also shareholders in the tolling companies. This poses obvious conflicts of public interest where construction firms are awarded contracts for maintenance on roads where they are also receiving tolling income.

Under pressure from bond investors, Sanral has started issuing summons to non-compliant e-tolls users to recover debts. Sanral’s nemesis, the Organisation Undoing Tax Abuse (Outa), has promised to defend its members against any legal threat and has briefed Gilbert Marcus SC to argue its case in court – which will likely drag out for years. So long as the cases are snaking their way through the courts, Sanral’s revenue remains under pressure and Gauteng motorists who decided long ago to give e-tolls a miss are unlikely to change their minds now.

There is no easy way out of this mess for Sanral, or Alli, who despite plans to retire, is hostage to the crisis he authored. Toll roads have become the touchstone for popular protest across the country.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.