We’ve been hearing a lot from the anti e-Toll grouping. Today at CNBC Africa we hosted a vigorous pro-toller in Rudolf Fourie, CEO of road builder Raubex. He believes if citizens want new freeways, there’s no alternative to tolling. That the user-pay system is sound. Then again, he would say that. But what about all the tax money generated at the petrol pump? Surely there’s a case for that money being used to build and maintain roads rather than, as now happens, taking the road user’s contribution to fund a plethora of other State projects? That was part of an interesting discussion today. By the way, I haven’t bought an eTag. Have you? – AH
To watch this CNBC Power Lunch video click here
ALEC HOGG: Raubex saw its interim earnings per share inch up to 96 cents. The group has declared an interim dividend of 30 cents. Chief Executive Rudolf Fourie is with us in the studio. The share price is down four percent today, Rudolf. Obviously, somebody thought you were going to do a bit better.
RUDOLF FOURIE: Yes, the construction industry space is still under pressure. We certainly thought the margins were in line with our expectations and satisfactory at the moment. But everywhere the construction space is still under pressure and it’s quite tough there.
ALEC HOGG: Well, you mentioned the profit margins. When revenue’s up by 15 percent and your operating profit is down five percent, the crocodiles’ jaws are going the wrong way…
RUDOLF FOURIE: Yes, one must actually compare apples with apples. The operating cost last year: we took R40m in from the Free State, so if you take the Free State money out, which was once off, then the profit is more or less the same.
ALEC HOGG: Just explain that. What happened in the Free State?
RUDOLF FOURIE: We didn’t take the revenue (from building roads for the provincial Government) before the settlement was reached. It came in the first six months of the previous year’s results, so if when comparing the results are very much the same – in line with the previous year’s six months.
ALEC HOGG: All right, so strip out the external part. What was interesting in these numbers now is Raumix. It’s pumping now – the materials handling side. If you compare what so many of the construction companies’ disasters in the material side, you’ve managed to do something against the stream here.
RUDOLF FOURIE: Yes, we’re very excited about the Raumix results and its mining and commercial quarry business. They’re performing well. We believe they’re going to perform well in the next six months too.
It’s certainly a good sign for our country because it shows that there are signs of economic uptick, because that’s really where the crisis is for the building and residential markets.
ALEC HOGG: It’s interesting to see that you’re making more from roads in Zambia than you are in South Africa.
RUDOLF FOURIE: It’s not only in Zambia. It’s in Namibia as well. But certainly, the space in the South African market, especially in road construction, is very heavily unappreciated at the moment with small margins.
ALEC HOGG: Why?
RUDOLF FOURIE: I think it’s over-traded. The World Cup, as you know, provided capacity that was not sustainable and we’ve seen it’s very over-traded. There’s still much tender activity. The volume is still out there. We’re happy that the volume is still there. The volume didn’t go away, but activity is certainly very over-traded at the moment.
GUGULETHU MFUPHI: Is the recent volume growth not good for you?
RUDOLF FOURIE: The volume is there. We’re just not getting the margin we’d like. There are a few things that need to come into play before it will improve, and the big one is toll roads. We need to see the tolling roads rolled out. We need to see GFIP (Gauteng Freeway Improvement Plan) being tolled. Once they’ve been tolled, hopefully we’ll get some more margins.
ALEC HOGG: You shouldn’t say that, because that puts you firmly in the wrong camp I think, as far as the public is concerned.
RUDOLF FOURIE: The reality of this country is that SANRAL or the State: that’s the only financial model that is able to give us this type of road network or highways. To make it public funding – to toll it. The fiscus simply doesn’t have this type of money to pay for the toll projects. That’s the real problem. The only way is to get the user principal paying.
ALEC HOGG: There is an alternative view, but perhaps we’ll put that to the one side. E-tolls at the moment have evoked a very emotional response. Do you have your e-tag, Gugu? (shakes head) I don’t have one, either.
RUDOLF FOURIE: I certainly have mine.
ALEC HOGG: You’re in construction. If you didn’t have one Rudolf, who would?
RUDOLF FOURIE: I can tell you where to get some as well.
ALEC HOGG: Not yet. Don’t you think though, the way the public has reacted to this – clearly, the whole process has not been ideally handled?
RUDOLF FOURIE: It could have been managed better. I agree with that. In essence, I don’t see an alternative to toll. It has unfortunately taken a long time to get here. There’s a huge public outcry. I also believe there’s a lot of misinformation out there. I think if there were more information available to the public, they would have been more tolerant of it.
GUGULETHU MFUPHI: Labour unrest is a huge issue, and doubtless, that also affected your numbers. Do you have any concerns regarding that?
RUDOLF FOURIE: Well, it’s actually going to impact on the second half’s results because it happened in September. We had a three-week strike in the industry, the extent of which I was quite surprised by. There were demands on the table. We signed the settlements for nine percent for the lower grades and ten percent for the upper task grades. It’s a two-year agreement, so we will have some stability for at least two years.
ALEC HOGG: Just to come back to e-tolling: the Western Cape has doubtless been affected by what’s happening in Gauteng?
RUDOLF FOURIE: Yes, very much so. You see, the way I heard it, is we won’t see a toll road before we start tolling at GFIP1, because at this stage SANRAL needs the funding to pay off their bonds and as soon as GFIP1 rolls out… Hopefully, the Western Cape or the Winelands Toll will go ahead. There are quite a few other toll projects in the design phase already which need to be rolled out. But they cannot roll that out before tolling begins on the Gauteng Freeway.
ALEC HOGG: So does that say until we go and buy our e-tags and until there is settlement reached in Gauteng, we’re not going to get any new major roads?
RUDOLF FOURIE: That’s unfortunately the economic reality. The type of roads we’re planning is the N3 between Durban and Pietermaritzburg. As you know, that road is heavily trafficked. We want to improve that to a four-lane, both sides and they cannot fund that until they get the toll process going.
ALEC HOGG: The N3 is already a toll road.
RUDOLF FOURIE: Yes, but the N3 section between Durban and Pietermaritzburg: they obviously want…
ALEC HOGG: I pay a toll every time, just outside of Durban.
RUDOLF FOURIE: They want to add a tollgate to that.
ALEC HOGG: Oh, they want to add another one.
RUDOLF FOURIE: They want to add another one to fund that project, because it’s quite a big project.
ALEC HOGG: We’re paying a lot of money in taxes through the petrol price at the moment. Unfortunately, that money is not going into roads. So surely that’s where your argument should be, rather than saying ‘let’s toll everything’.
RUDOLF FOURIE: No, let’s take for example GFIP1. Previously from Johannesburg to Pretoria we took an hour and a half to commute on the R21. Now it takes 30 minutes. Surely, there’s a saving for somebody in that hour downtime you cut off during the day. That’s unfortunately forgotten, because that tollgate never happened, so there are those types of benefits as well to the toll.
