The anti-eToll Alliance OUTA made it clear today that if it can get the funding, it will take its battle against the planned tolls to the Constitutional Court. OUTA boss Wayne Duvenage told a media briefing that the pressure group will decide the way forward at a meeting on Monday. This follows a major legal setback, with the Supreme Court rejecting the latest legal challenge to the new tolls. Duvenage warned that whatever happens on the legal front, the enforcing of eTolling will be impossible, with the authorities being forced to deal with numerous defaulters per month. He suggested that the Supreme Court had rejected OUTA’s latest appeal largely on the technical basis that there had been too long a delay in challenging eTolls – so the decision was not on the merits of the case. “OUTA and road users still have no clarity on the lawfulness of eTolling. It remains open to any citizen to lawfully decide not to pay eTolls,” he said. “We are bitterly disappointed the Supreme Court took the decision it did. This will be felt most acutely by persons with low income.” He said OUTA has a couple of avenues open to it – it could take this matter to the Constitutional Court, and has been advised there are solid grounds for an appeal. But there is a shortage of funds. “We are 1.5m rand short, and another appeal will be around 1.5m rand,” he explained. “Maybe there is an organisation or an individual who will fund us? It is not impossible that one, two or three individuals will help us see the light of day in the Constitutional Court.” He said that if this is decided against, OUTA would still be able to support one or more individuals who go to court once tolls are implemented – something that is expect before the end of this year. Duvenage pointed to the backing the anti-eToll movement has received from political parties, business, the unions and religious organisations. He emphasised that the cost of eToll collection and administration is over 30% of the fee, and he charged that roads agency Sanral made just a cursory glance in consideration of a fuel levy, which is the chosen alternative way of funding the Gauteng highways of most protestors. “Sanral’s Achilles heel might be their blind obsession to enforce eTolls against the opposition of the people,” he warned. “It is not a legal requirement to get an eTag. The chances of this working and being enforced, and being practically applicable, are slim. It doesn’t work in other parts of the world. Passive resistance in the form of exercising your legal rights – if enough people do that, this system will collapse. Don’t rush out (and buy an eTag); you don’t need to rush out. You can wait and see what happens. We are convinced that sufficient numbers of citizens will be defiant. There are so many avenues for non-compliance that I believe we are seeing the birth of a full-scale tax revolt by society. They are going to arrest people, use force. There will be patrols. This is aggression expressed towards society, the same aggression that was used in the apartheid era. Sanral needs to spell out clearly the full enforcement process. Are they seriously going to arrest people who don’t pay?”

Tweet of the Day:
Political Humor (@PoliticalLaughs): Q. What’s an example of irony? A. Bruce Springsteen singing "Born in the USA" at Barack Obama’s inauguration.
Puns (@omgthatspunny): Just went to an emotional wedding. Even the cake was in tiers.

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Trade and Industry Minister Rob Davies has told the media he is seeing BMW today to discuss their recent decision to walk away from an expansion in ZA, by not building a new model at their Rosslyn plant near Pretoria. He was briefing journalists on next week’s visit to ZA by the French President, with his spokesman keen to dispel myths that this country is no longer a good place to invest. We were repeatedly told that things are better now than they were under apartheid. Davies said that he was seeing BMW after they had sent him a letter “clarifying” what they had recently said about the new investment.
He insisted: “They are continuing with operations in ZA. They had a possibility for competing for an additional model, and that was jeopardised by the recent strikes.” BMW had said the decision not to expand their operations had been taken because of the protracted strike in the automotive sector.
Davies said: “The strikes concluded with a three year agreement. We want to work with BMW to improve the investment climate from their point of view.”
He said he had met a delegation from the auto sector during the strike “and basically they are here for the long haul. Yes, we are having to work, and to compete for investments, and that is what this government is committed to doing.”
When asked about ZA unilaterally scrapping bilateral investment treaties with a number of EU countries, Davies said that these would be replaced by national legislation, but that the protection of investment is enshrined in the constitution. The EU Trade Commissioner had recently warned that ZA was at risk of losing investment through the scrapping of the treaties. The Minister tried to play down the impact of the automotive strikes on investment attractiveness, saying:
“It is not every part of manufacturing or every part of the South African economy with strikes – it was the automotive sector. The strikes are over, and over with a three year wage agreement. There won’t be a strike next year or the year after. On BMW, we thought it was important to engage the company as soon as possible. We need to put this in some perspective. A number of investment projects are on the cards, and there is not a trend where everyone is saying: we are getting out of here.”
When asked why government had not done more to end the auto sector strikes, he said that they had ended earlier than they might have done because of discussions with government. But he insisted that in a democracy, government cannot tell people not to strike, even though that might have happened under apartheid.

Tweet of the day: Puns (@omgthatspunny): I only listen to waltzes 3/4 of the time.

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Technology group Altron has produced its first interim results, for the six months to August, since two major developments. The first was the full incorporation of listed subsidiary Altech, and the second was the disposal of Altech’s loss-making African operations. CEO Robbie Venter told analysts that today’s were the first results to exclude underperforming and disposed-of East and West African Altech operations, plus the Altech integration (for one month of the reporting period.) He said it was the end of a long journey in consolidating the group, and accessing synergies. Already some benefits are being realised, including R10 million a year in terms of saved listing costs, the expense of a separate board, and so on. But the Powertech division of Altron is still underperforming. On a more positive note, Venter said he detects tangible signs of recovery in the building and construction industry. Revenue was up 6%, normalised heps up 15%. What did our experts make of it?

Lavan Gopaul of 28E:
The income stream is a combination of residual income and contracts they are able to secure in both the public and private sectors. The requirement to consolidate their two listed entities into one doesn’t have apparent benefits. It might have been more transparent if they had continued as separate entities, written off the losses in East and West Africa completely, and then consolidated. I would like to see them prove the savings they are claiming from the consolidation, when we get results for the full year.

Independent Analyst Ian Cruickshanks:
Certainly they are serious about cost-cutting. It is necessary. But one is left with the question of why the consolidation has taken so long. There was some shareholder disapproval earlier, but that was because of the way the consolidation had been structured. Many of the areas in which they operate are unlikely to grow much faster than GDP growth. It will be difficult to see them growing above that – which does not make a convincing argument for new shareholdings.

Craig Pheiffer from Absa Investments:
The first-half numbers from Altron were a first glance at the group in its newly constituted form, and reflected the benefits of having exited the loss-making East and West African operations that had dogged Altech’s numbers for some time. Following the buy-out of Altech minorities (effective 1 Aug 2013), Altech was included as a 100% subsidiary in the financials at the end of the half-year, but the benefits were limited to just the last month of the reporting period. While the operating environment remained tough there were numerous positives in the results, which lead one to believe that a turning point has been reached. The UEC set-top box business within Altech is producing at record levels with a good order book and the annuity business of Altech Autopage had a good earnings showing, despite lower revenues. Good top line growth in the Bytes business more than compensated for the slightly lower margins to produce a respectable 14% growth in headline earnings. The Powertech business struggled over the year but there are very positive signs of recovery in the order books for cables, transformers and system integrators. Much store is being placed on the benefits to be derived from amalgamating the Altech and Bytes businesses into a TMT cluster. Management points to potential cross-sell opportunities, better capital allocation and efficiencies through shared services that could boost revenues and profits (rather than only cost-savings from property consolidation and the audit fee and listings fee savings from one less company listing). Much store is also being placed on growing future revenue from Africa and the public sector. The market will like the turnaround and the outlook – but management ultimately has to deliver on the promises.

Conclusion:
After a long struggle, there is now just one entry point for investors into the Venter family empire that is Altron. It is now up to management to convince the investment community of the soundness of their strategy – by producing some worthwhile results. We shall watch this space.

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ZA Confidential is not going to become repetitive, but for the first time, we are going to feature the same topic for a second day. It is the BMW decision to pull a big investment from ZA because of the impact of the trigger-happy strikers in the local automotive sector. There are two reasons for returning to the topic. The first is the feedback we received that this was a BIG investment, which is now lost to ZA. And secondly, we received some useful comment from two of our esteemed economists that came too late for yesterday’s newsletter. So here goes – more comment on the BMW decision……..

Peter Attard Montalto from Nomura:
We hear of these things all the time from companies, but they normally are not in the public eye and in the media because they are decisions made in quiet back rooms by management and not trumpeted. However BWM has clearly had enough of the labour situation and the risk/reward of further investment simply doesn’t make sense for them. There are many other companies thinking the same thing because of labour issues. Plus remember that in the car sector electricity supply quality and the stalling by government of allowing major co-generation by manufactures is a big issue. The car manufacturing strike has gone on for four weeks and the media has, till the BMW headline, given up noticing – the market too gets bored on the story dragging on – until it appears in current account and trade figures. Remember the key issue of the last trade print was that it was too EARLY for this car strike and other strikes to fully appear. It’s the next trade number that is going to be the bumper, scary one. We must not forget that strikes are ongoing in a whole host of different sectors around the economy. It appears in nominal level data but not growth data because this is a yearly phenomenon to some extent on a macro level, though the car sector is certainly much worse than last year. The key areas to watch are this car sector strike given even the upside of investment being effected now, Eskom related construction given delays in power stations coming on stream, the Platinum wage round which hasn’t even started yet (we are seeing restructuring strikes ‘only’ at this stage), and gold to see if AMCU tries and obtains a larger increase than the NUM.

Mike Schussler from economists.co.za:
The fact is companies need to make profits to stay in SA and they need to deliver on the contracts. No one in the world has six to seven weeks of disruptions to an industry. That was last the case in the Britain of the late seventies and early eighties. We lose more man days per 1000 workers than the UK did in the winter of discontent in 78/79! We will not create the jobs or the wealth we need – that is fast becoming a future fact. We are now in danger of losing the jobs we already have! The madness of strike after strike in a particular industry must stop. If the leaders of our country do nothing then we will be talking extreme poverty in 2050. The ultra left wing NUMSA who get Ultra Left wing monies via the Rosa Luxembourg foundation do not even know that they are being used to get jobs going in Germany again!

BMW ZA has revealed what many of us had feared for a long time. That industrial action is a deterrent to investment. Specifically, the current strike has scared off the German parent from investing in a new production line at the Rosslyn plant, near Pretoria, which would have meant more exports, more jobs, more taxes paid and more wealth for the country. What do our experts make of it?

Mario Pretorius from Telemasters:
The time has come for implementing economic sabotage legislation, and for enforcing it without mercy. The entire concept of ganging up, via labour OR management, against shareholders reeks of an ancient age and a primitive economic world. Labour unions may look after their workers, but merit alone should determine the remuneration of each. Any attempt to go slow, go rogue, or go against the economic interests of the country should be treated as treason to our common economic interests, as sabotage, and with the harshest penalties possible. Ditto for management when doing the Nokia-Microsoft type of deals, where workers and shareholders get shafted.

Frans Cronje from the SAIRR:
Sentiment in that industry is changing. It’s a competitive global market, and plants in other regions compete with South Africa for production quotas. On a few occasions those plants have had to bail out South African plants laid low by union action. The risk is that that South Africa loses its quotas or that the manufacturers walk out. If one goes, we should expect some others to follow. It is already the case that new investment now seems to be off-limits, and will go to other global plants. Our trade unions can be directly blamed for this and it is a good example of what reckless union leaders are costing both SA and their own members. My sense is that such negative consequences are driving the ANC’s apparent increasing hostility to some of its union allies.

Jeff Osborne from Gumtree Auto ZA:
As a source of automotive manufacture, SA is far from the global markets. We therefore must be reliable and competitive if we are to retain our status as a source of automotive supply. There is no shortage of manufacturing capacity around the world for vehicles; in fact there is an over-capacity. These strikes, which seem to have become an automatic part of negotiations, are crippling for the SA auto industry. Exports for September this year plummeted by 75% compared to September last year. Vehicle manufacturers will simply not continue to expose themselves to this type of practice, which devastates their companies. This also profoundly affects levels of investor confidence and will almost certainly compromise not only future investment, but also existing operations. From an SA economic perspective, the automotive sector is a major exporter, and is very important in reducing our balance of payment deficit. We need to move away from rhetoric such as "strike season" every time negotiations take place, and can’t afford to make strike action an automatic part of the process. If not, we can expect more of this type of reaction from multinational vehicle manufacturers.

Craig Pheiffer from Absa Investments:
There is no doubt that protracted strike action – with lost production that can’t be made up – tarnishes perceptions of an affected industry. Where foreign investment has set up that original factory/industry it is susceptible to being repatriated when output is compromised and orders can’t be filled. Where foreigners have been eyeing potential industries for investment, then news headlines of irrecoverably lost production or unfilled export orders simply divert that investment to alternative, less hostile, destinations. Strike action may have short-term benefits for the work incumbents if wages are raised but it may prevent additional job creation through higher operational costs – and it may well prevent additional job creation through potential foreign investment that is lost. Additionally, lost production and activity hampers economic growth and it is no secret that global capital follows growth opportunities, not contracting industries and economies. The rand is really the barometer of the situation and at R10/$ it doesn’t paint a rosy picture.

Mike Schussler from economists.co.za
The fact is Companies need to make profits to stay in SA and they need to deliver on the contracts. No-one in the world has six to seven weeks disruptions to an industry. That was last the case in the Brittian of the late seventies and early eighties. We lose more man days per 1000 workers than the UK did in the winter of discontent in 78/79! We will not create the jobs or the wealth we need – that is fast becoming a future fact. We are now in danger of losing the jobs we already have! The Madness of strike after strike in a particular industry must stop. If the leaders of our country do nothing then we will be talking extreme poverty in 2050. The ultra leftwing NUMSA who get Ultra Leftwing monies via the Rosa Luxembourg foundation do not even know that they are being used to get jobs going in Germany again!

Duane Newman from Cova Advisory:
I suppose the day had to come. It is a pity, but up to now there had been no real visible consequences to strike action. I believe Unions got away with lots of unnecessary strikes, as it seemed as if business was "crying wolf". The loss of automotive investment is very significant as it is seen as a special case investor, due to the overall confidence it gives to all other investors. This is why the automotive sector receives such generous ongoing incentives. I hope this is a signal for government to start taking a firm stand on strikes, especially illegal strikes, and we start arresting the union leaders for breaking the law. As Trevor Noah joked in his show last night, we have so many strikes in SA that next we will be having babies striking for a 12% increase in breast time.

Conclusion: BMW has spoken clearly and forcefully. Government cannot ignore this. But we need more courage and more comment from our business community. NB: ZA Confidential did seek comment from the dti and from Cosatu. If it is forthcoming,or other commentators come back to us, this newsletter will be updated on the www.zaconfidential.com website.

Tweet of the Day:

Lord Skip Licker VC: Why can’t NASA source their own funding? It’s not rocket scie….. Oh.

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One of our leading economists Dawie Roodt has just published an excellent book entitled: Tax, Lies and Red Tape (Zebra Press). It provides an accessible, sometimes controversial, and entertaining look at a range of economic issues. Why weren’t there books like this when I was studying economics? ZA Confidential had a short chat with Dawie to learn more about this venture….

ZAC: A central theme of this book seems to be your mistrust of government, and firm belief in the private sector. How badly do you think the imbalance is in ZA?

DR: It’s quite bad and getting worse. In fact, in recent years politicians have been putting all sorts of pressure on private rights: nationalisation, the ‘secrecy law’, a clamp-down on the press, and so on.

ZAC: Is there any realistic hope that the tax burden on businesses or individuals could be eased?

DR: Not really. The reality is that pressure will increase on the state to provide more – inevitably meaning more taxes. But the good news is that eventually the tax burden gets so heavy that community simply revolts – France is a nice example of that happening now, and the opposition against the e-Tolls is an example in SA.

ZAC: You try in your book to explain complex issues and to make it possible for the man and woman in the street to understand. How worried are you that all too often economists don’t communicate their views effectively?

DR: I think it used to be a much bigger problem in the country. In the past, economists spoke a language nobody could understand – but today economics is much more of a braaivleis subject, thanks to guys like Mike Schussler, and hopefully myself.

ZAC: The plight of the rhino is a big concern currently. You suggest that rhino horns should be freely traded. How would that help ensure the survival of the animals?

DR: It will lead to the official price of a rhino – R250 000 to R300 000 – and the market price of over R10m getting closer to each other. The results will be better prices for farmers, and therefore a stronger incentive to protect rhinos, and a lower price for consumers – and most probably lower consumption because lower prices reduce the so-called Rolex effect, where expensive stuff is more attractive. Of course I am not advocating a free-for-all overnight, as some controls may be needed, and also education. But the reality is that nobody can fight the market indefinitely – and currently the market is trying to close the gap between the official and market prices. The pressure will remain until the gap is closed.

ZAC: DA leader Helen Zille wrote a foreword to your book. Does that mean the DA has the best economic policies?

DR: Most definitely not! I like Helen because I think she is a good leader and also an honest leader. But there are many instances where I have criticised the DA’s policies. I also think that they are moving away from their intellectual roots in their attempt to get more votes.

ZAC: This week we saw new tariffs on imported chicken. Is this an example of an over-active state, or the right response to predatory dumping in our market?

DR: It’s an excellent example of how a pressure group can establish themselves as rent seekers. The priority of the chicken producers will now shift to making sure this protection is maintained, by keeping up the pressure on the politicians. Under proper competition, their emphasis would have been on how to make their industry more competitive. Also, keep in mind, somebody dumping produce in SA means that somebody else is subsidising my consumption – what a bargain!

Tweet of the Day:

J Montana (@JMontanaPOTL): People try to live within their income so they can afford to pay taxes to a government that can’t live within its income.

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The seasonally adjusted Kagiso Purchasing Managers’ Index (PMI) for September fell sharply by 7.4 points to 49.1 in September. The index is now below the key 50-point mark for the first time since March this year. What do our experts make of it? We give some extracts from their recent statements.

Abdul Davids, Head of Research at Kagiso Asset Management:
Intermittent mining sector disruptions and fears about future industrial action may be weighing on manufacturers. If this is the case, an end to the vehicle component strike and a quick resolution to AMCU’s strike in the platinum mining sector should see an imminent rebound in activity and orders.

Coenraad Bezuidenhout from the Manufacturing Circle:
The manufacturing recovery shock signalled by the Kagiso PMI for September must be laid squarely at the feet of the protracted industrial action we have seen in vehicle manufacturing, automotive components and the platinum sectors. It is a wake-up call that a myopic and reckless approach to industrial relations will lead to reversals in manufacturing recovery, and ultimately to job losses. If industrial peace does not prevail to support other positive developments in the manufacturing space (weaker rand, local procurement traction) this could impact the growth of the economy markedly, and lead to employment losses as manufacturers contract or mechanise to stay afloat. The way our dismal labour market outcomes undermine the ability of our economy to recover should be viewed as a national emergency that requires resolute political action. The fact that we have recently again seen 11th hour concessions to labour demands in Parliament for an even more punitive employment dispensation (in relation to labour relations and employment equity amendments, as well as the Employment Services Bill) means the ranks of the unemployed will grow and the sustainability of our economy will deteriorate. This environment will also limit any positive impact that the Employment Incentives Bill may have on growing youth employment, as it will undermine overall employment growth. Growing the economy and jobs require tough trade-offs. President Zuma will have to decide how long his government will shore-up organised labour at the cost of economic growth and jobs, and the growing exclusion of the unemployed and the poor. As the PMI illustrates, the negative impact for manufacturing is very real.

Conclusion:
A worrying indicator. However, things should pick up if there can be a speedy resolution to the latest wave of strikes. Trade data out yesterday show that ZA can ill afford a sick manufacturing sector.

Tweets of the Day:
Funny Tweets ™ (@Lmao): Someone: so what are you getting for Christmas? Me: fatter.

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This morning, Minister Rob Davies of Trade and Industry announced new chicken tariff rises on all imports, apart from those from the EU – with levels climbing to as much as 82%. Local producers claim they are struggling to compete against dumped chicken, and government has investigated their application for protection, and gone through an elaborate procedure – required under WTO rules. Davies said the new tariff regime has already entered into force. He claimed action was needed following a drop in the local production of poultry products, with imports rising. He said action was needed to support an industry which supports 48 000 people, with 100 000 jobs at stake if you include indirect jobs. Said Davies: “The industry is bleeding.”
There are different rates applied to 5 categories of poultry products, with the highest jump imposed on whole birds from 27% to 82%. Offal, which Davies said is an important source of protein to low-income households, saw a tariff rise from 27% to 30 %, and similarly bone-in portions saw a relatively modest rise. Aside from the whole chickens, Davies said the average tariff increase was 8.75%, and he did not appear too worried about big price rises for poorer consumers – while acknowledging there would be a noticeable impact on the cost of a Sunday roast chicken. He warned local producers not to be greedy, and said he would not tolerate uncompetitive behaviour to thrive behind a tariff wall. There would be an early review of the new tariffs – which would look at production trends, employment trends and import trends. The new tariffs don’t apply to the EU, which has its own trade agreement with ZA, but Davies said he would like to negotiate the right to more easily apply safeguard measures to imports from the EU as well. In answer to questions, he said tariff duties are imposed as tools of industrial development, and denied he is being protectionist as ZA does have the right to boost tariffs within certain limits. “This is a potential employment generating sector. If we can’t produce chickens in SA, what can we produce?”

Conclusion:
The government is clearly concerned about hitting then poorer consumer as we head to an election, but inevitably chicken prices will rise as a result of these new tariffs. The message to wealthier consumers might be: “Let Them Eat Offal”

Tweets of the Day:
Jana Marais (@janamarais): "If you like what we’re doing, buy our shares. If you don’t, buy our shares so you can fire us."- Jabu Mabuza in high spirits at #Telkom AGM
Puns (@omgthatspunny): When the TV repairman got married the reception was excellent.
SpikeWilton (@spikeWilton67): I’m a dyslexic agnostic insomniac; I’m awake all night wondering if there really is a dog.

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It has finally happened. Having flown to New York at taxpayers’ expense for a UN junket, our beloved President has signed into law the new e-Tolling regulations, which will mean those of us without blue lights atop our luxury limos will have to pay extra to use many stretches of Gauteng highway. The legal challenges will continue, but this is certainly a big step in the wrong direction. Roads must be paid for, but surely not through these bureaucratic, kleptocratic and wasteful tolls. What do our experts think?

Jeff Osborne, Independent Motor Industry Analyst:
The timing of the signing of the Bill is astounding. One would have imagined that the outcome of the Supreme Court action would have been awaited. Although this now grants sweeping powers where e-tolling is concerned, one has to question, if they go ahead, whether it will work – given the myriad of unaddressed issues, and the financial woes of SANRAL?

George Glynos from ETM:
Last week we had the TransUnion Consumer Credit Index which fell to lows last seen in 2009; yesterday we had the release of the BER’s Consumer Confidence Index which fell to the lowest levels in 10 years. This frames beautifully the financial difficulties that households are faced with. The effects of a weaker ZAR which effectively reflect weakening purchasing power of every rand, and inflation – which is above 6% and eats into the disposable income of households – paint a gloomy picture for the second half of the 2013 and early 2014. The implementation of e-Tolls simply adds to that pressure and would not need to impact as heavily if the government utilised the more efficient method of tax collection through the fuel levy – rather than active tolling, which is significantly more expensive. Given that many do not have the luxury of alternative methods of transport and need to use the highway, the impact will be significant for many and we fear that there will be both economic and political ramifications to the move which we feel highlights how out of touch the government is with the will of the people.

Dawie Roodt from the Efficient Group:
My view is that the huge public protests against the tolls should rather be seen as a kind of “tax revolt” and not necessarily as anti-toll as such. Most people I have spoken to are happy to pay for the tolls as long as “my money is well spent”. People are getting tired of an ever-increasing tax burden combined with deteriorating service delivery. Once the tolls are implemented this revolt is likely to morph into another similar public protest.

Writer and motoring enthusiast David Bullard:
A bizarre move, bearing in mind that the matter is still in play, from a legal perspective. Either he (Zuma) was badly advised or the need to screw more money out of the working minority is getting rather more pressing by the day.

Leon Louw from the Free Market Foundation:
President Zuma should not sign Gauteng’s proposed gantry e-Toll system into law for reasons that are unrelated to e-Tolling. He should refer it to the Constitutional Court because the policy seems to have been adopted in violation of section 195 of our Constitution according to which policies must be preceded by effective public participation. His problem is that section 195 is routinely disregarded, especially regarding roads. A constitutional ruling in this case will have far-reaching implications for all government policies. That aside, few issues entail more muddled thinking than the e-Toll saga. What, precisely, do opponents oppose? It ranges from procedural constitutionality to whether any roads should be tolled in any way. Are objectors specifically against Gauteng gantry technology, tolling in Gauteng per se, or proposed pricing? Confusion is compounded by the fact that tolling is already commonplace and tollerated (misspelling intended) throughout the country. So why not Gauteng highways? The most distressingly idiotic objection, repeated, for instance, by leading radio talk show hosts, asserts that roads should be a free public service. Roads must be paid for, the questions are: by who; users or non-users; efficiently or inefficiently; fairly or unfairly?
Regardless of where one stands on Gauteng e-Toll technology, pricing or constitutionality, roads must be paid for. Fairness and economic efficiency suggest that people who use specific roads rather than people who don’t, should pay for them. One of the biggest problems here is that the illusion of free roads over the years has resulted in massive spacial distortions, such as people living far from where they work by virtue of the illusion that commuting is cheap. The fact that the real costs are concealed means that billions of Rands are diverted to excessive infrastructure. There should be two and only two debates, one of which is not whether there should be tolling — there should on all roads as cheap modern technology allows. Legitimate debates are (1) constitutionality and (2) best road-pricing methodology. Road tolls are, in most contexts, the best way to price and fund roads. That, emphatically, does not mean the Gauteng system, which entails real or suspected corruption on a massive scale, and, it seems, extremely cost-inefficient technology. It should be common cause that what we have now, inherited from the dreaded apartheid regime, is the worst of all worlds, whereby revenue collected from road users goes into the amorphous pot of general misallocated revenue. Until the 1980s South Africa had a sensible alternative to road tolling, a dedicated road fund, into which revenue from fuel, tyres, batteries, vehicle licences and the like was spent on roads. It was a user-pays system, albeit less precise than individual road tolls. At the very least, a dedicated road fund should be demanded by toll objectors. The debate should not be between opponents and supporters of the user pays principle, but about how best to have users fund what they use.

OUTA Chairman Wayne Duvenage:
OUTA is surprised at the President’s signing of the eToll bill into law, especially in light of very recent mention that he was considering the technicalities related to the tagging of the bill as proposed by the Freedom Front. In addition, the recent Presidential Commission on the review of State Owned Entities recommended that ‘social infrastructure, including roads, should rely less on user pays funding and more on general taxation’. Then we still have the Supreme Court’s ruling to be heard but even if this gives eTolls the green light, the real test has yet to come, that of practical implementation and enforcement. We have said in the past, laws are only as good as they are governable and eTolls will be under huge pressure in this space. It has been rejected by society at large due to its high costs, cumbersome process and anger at funds going to enrich European based Kapsch TrafficCom. The public, in my opinion, will make it unworkable, in which case, it will fail and this is the sad reality we face with a Government that refuses to listen to its people.

Conclusion::
These tolls are an inefficient way of paying for better roads. But there appear to be vested interests in the e-toll system. I worry about the impact on restaurants, gyms and other small businesses as the shrinking wallets of Gauteng motorists takes their toll, so to speak.

Tweets of the Day:
Political Humor (@PoliticalLaughs): Q: What are the three most common words in the English language? A: Made in China.
Puns (@omgthatspunny): A cardboard belt would be a waist of paper.

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Capitec Bank has continued to impress with good results today for the six months to August, with headline earnings a share up 20%, and a similar hike in the interim dividend. Meanwhile, CEO Riaan Stassen has announced his intention to stand down at the end of the year. What do our experts think?

Independent Analyst Ian Cruickshanks:
Capitec continued its steady growth, but it was not as explosive as it has been in the past. Maybe it is proving difficult to continue expanding the customer base, and loan growth, in an environment where consumers remain under considerable pressure on the income and employment sides. Shareholders will welcome the 20 percent increase in dividends and I am really impressed by the cost to income ratio of 33% – way beyond the 50% where the major banks operate.

Ron Klipin from Cratos Wealth:
This was a very sound set of operational results. The diversification of the deposit base resulted in better-quality funding and liquidity. The strong growth in transactional fee income is impressive, as well as the tightening of credit criteria. Many of the above factors are absent in the business models of its peers. The next six months will remain challenging, but management has had a good track record in the past in dealing with a difficult operating environment.

Simon Brown from justonelap.com
These were solid results, showing they tightened earlier in the cycle and hence are not getting hit as hard. They also generating significant revenue from the traditional banking model and they have a cost to income at an astounding 33%. Riaan Stassen retiring as CEO won’t hurt them, but it remains a complete mystery why at a certain age companies insist on showing people the door.

Conclusion:
Capitec is no longer a young pretender, but is an established predator and must be rattling the established big banks. It may be seeing a slowdown in growth but is still performing impressively. We will wait to see the transition to the new CEO and whether this causes any fallback – not that it needs to.

Tweets of the day:

superman (@MrSandeepP): Beginning of the day: I have so much work to do. *logs onto Twitter* 8 hours later: *Goes home*

Puns (@omgthatspunny): Alcohol and calculus don’t mix so don’t drink and derive.

Funny Tweets ( Funny Tweets (@iQuoteComedy): Life is short. Smile while you still have teeth.

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