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Jun 15, 2012

The intriguing silence of business on user-pay principle

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Africa|Defence|Environment|Projects|System|Waste|Africa|China|India|South Africa|United States|E-toll|Media Briefings|Infrastructure|Pravin Gordhan|Waste
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It is interesting that business, which has expressed genuine concern about the dominant role being played by government and State-owned companies in the R845-billion infrastructure roll-out, has not joined government in vociferously defending the user-pay principle.

Finance Minister Pravin Gordhan has been left to lead the defence through court papers, as well as during media briefings relating to the proposed implementation of an electronic toll collection system to secure fees from users to pay for Gauteng’s upgraded motorways.

For him, it is about ensuring that the country does not foreclose on any of the possible options available to fund an investment programme that is arguably emerging as South Africa’s main growth engine in a context of serious global economic uncertainty.

Without doubt, the outlook in many European economies, which remain key trading partners, appears to have worsened materially over the past few months and many believe any economic recovery could involve five to ten years of painful convalescence. Growth rates in countries such as China and India are also slowing and there is also rising concern that the so-called 2013 ‘fiscal cliff’ in the US could put that vital economy, and by extension the rest of us, even further on to the back foot.

Gordhan has, thus, called for the e-toll emotion to be set aside and for South Africans to grasp that there are only “limited sources of funding from which we can pay for the things we desire”. User charges, he asserts, are a crucial element and have to be included in a mix that also comprises direct fiscal allocations, debt raising and public–private partnerships (PPPs).

“It is very important that the principle of user-pay and of user chargers is not undermined through this process and through the emotion, and that we are able to sustain our ambition to provide the kind of infrastructure that will impact positively not only on our economic potential, but also on the environment in which our people live,” Gordhan has argued.

One would have thought that organised business would have jumped to support Gordhan in this, particularly given that business is the champion of the PPP concept and PPPs can generally only take place in an environment where a user-pay ethos prevails.

Instead, business has been all but silent, having been seemingly swayed by those elements within its structures that prefer a payment method premised on adding to the overall tax burden.

Such a reaction is arguably only natural, given the vitriol surrounding e-tolling. But business organisations should not be surprised by future backlashes against PPP projects that will, no doubt, be premised on the user-pay principle.

Possibly, business has reached this seemingly contradictory position owing to the breakdown of the trust relationship between it and govern- ment.

Business has lost faith in government’s ability to deliver on its policy, is frustrated by the lack of PPP progress and is angry at the high level of waste and corruption surrounding the public sector and its projects.

In other words, a mist of mistrust has descended and instead of seeking to see through it, business has opted to settle into an oppositional stance that may well undermine its long-term interests.

Edited by: Terence Creamer
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