Johannesburg — IF EVER there was a reminder that when state-owned enterprises build infrastructure it's we citizens who take the risk, it's the story of the new fuel pipeline Transnet is building between Durban and Johannesburg.

Four years ago, before Transnet won the licence to build the pipeline - beating rival private sector consortium Ipayipi - the cost was put at R9,5bn. Then it was R11bn. Then it climbed to over R12bn a year ago. Now it is R15,4bn.

At least Transnet provided a detailed breakdown of the cost increases this week, which is more than Eskom did to explain the cost of its new coal-fired power stations as it ballooned from R80bn to R120bn plus.

But the approach that Transnet (and even more so Eskom) use to design and cost infrastructure projects can only be adopted by a parastatal, with the government and taxpayers standing firmly behind it, and not a private company that has to take the loss if it gets its cost estimates wrong.

Transnet got the go-ahead to build the pipeline, and indeed started to build it, with only a small percentage of the engineering for the project completed and based on very high "contingency" ratios - in other words that costs would be much higher than the company had factored in at the time. And so they have proved to be.

Transnet argues too that it was the government that wanted it to build a 24-inch pipeline, when its own business case indicated there was need only for a 16-inch pipeline. That too has inflated the costs, especially now that demand is turning out to be more muted than the government expected when it forecast economic growth would reach 6%.

Transnet did not complain too loudly about having its arm twisted at the time that it bid successfully for the licence in 2007. But now it has managed to get the government, or more accurately motorists, to fund the difference through a 7,5c/l addition to the fuel levy that Finance Minister Pravin Gordhan announced last month. The levy will provide about R4,5bn for the new pipeline over the next three years.

Then there's the steep 51% tariff increase on its pipelines that Transnet has applied to Nersa for 2010 -11. About a third of that increase relates to the new pipeline and Transnet has long warned that tariffs would spike once the pipeline was built, at which point it is entitled to tariffs that give it a return on its investment.

Now that sections of the pipeline are being completed, that is starting to kick in. But after Nersa actually cut pipeline tariffs by 10% last year, the basis on which it sets tariffs remains entirely unclear. The incoherent regulatory framework is as much to blame for the tariff craziness as is Transnet.

One small consolation is that the pipeline tariff makes up only 2% of the pump price in Gauteng, so it's not going to keep drivers off the roads one way or the other.