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Sanral approaches banks to plug funding holes in toll portfolio

9th August 2013

By: Terence Creamer

Creamer Media Editor

  

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The South African National Roads Agency Limited (Sanral) has approached various commercial banks to help it close near-term funding shortfalls related to the toll-road portion of its 19 700 km national roads portfolio. Sanral has not disclosed the identities of the institution it has approached, but indicates that the R1.473-billion nonguaranteed, five-year NRA 13 bond, issued in 2008, matures on October 31.

In addition, CFO Inge Mulder notes it also has to pay for the normal operations and maintenance of its toll portfolio, while servicing all the other listed bonds. The toll portfolio comprises only 16%, or 3 120 km, of the overall road network falling under the agency, with just 1 832 km under Sanral’s direct aegis and the balance operated by concessionaires. Sanral is currently unable to approach the debt capital markets directly, owing to the constraints its faces in light of the failure to implement an e-tolling system across the 185 km of roads comprising the first phase of the Gauteng Freeway Improvement Project (GFIP).

Implementation has been delayed partly as a result of legal challenges and public consultations that have arisen owing to widespread opposition to e-tolling. However, implementation is currently awaiting finalisation of the Transport Laws and Related Matters Amendment Bill, which is still awaiting the signature of President Jacob Zuma. Newly appointed Transport Minister Dipuo Peters has described the implemen- tation of e-tolling as being urgent.

The Supreme Court of Appeal will also in September hear the Opposition to Urban Tolling Alliance’s appeal against the North Gauteng High Court’s dismissal of an application for a review of the tolling system. In September last year, the Constitutional Court also ruled in Sanral’s favour with regard to a temporary interdict that had been imposed against e-tolling.

Sanral spokesperson Vusi Mona stresses that, while Sanral’s finances are healthy in the main, it is facing some funding challenges regarding parts of the toll network falling under its direct control. These roads include the motorway between Bela-Bela and Musina, in Limpopo, the toll roads connecting Johannesburg and Bloemfontein, the tolled link from Johannesburg to the Swaziland border via Ermelo, and the tolled portions of national roads in KwaZulu-Natal, the Eastern Cape and the Western Cape.

GFIP project manager Alex van Niekerk confirms that the shortfall is linked to the delay in the implementation of the e-tolling system, as GFIP is unable to pay for its own maintenance nor can it contribute to the servicing of Sanral debt because no revenue is being generated.

The organisation’s bonds are no longer trading, its credit rating has been downgraded and it is no longer in a position to issue bonds. But Sanral is in ongoing discussions with the Department of Transport and the National Treasury over its funding difficulties. “The National Treasury is very aware of the state of our finances and have formally approved that we engage local financial institutions to provide us with bridging finance for the interim,” Mulder adds.

National Treasury figures show that Sanral borrowed R20-billion to build the roads, which, together with interest payments and maintenance over the 24-year repayment period, would result in a total cost of around R58-billion. Van Niekerk insists that Sanral is ready and has the capacity to implement the e-toll system, despite serious public opposition and misgivings over its ability to deal with nonpayment.

Once the outstanding Bill is signed and the necessary regulations published, Van Niekerk sasy that e-tolling will begin. In the meantime the system, which has been delivered by Electronic Toll Collection (ETC), a joint venture led by the South African subsidiary of Kapsch TrafficCom, is operating under so-called “soft tolling” conditions, at an average monthly cost of R25-million.

hat cost is calculated based on the contract Sanral has with ETC, which stipulates that costs such as site rentals, maintenance and operations are covered. Van Niekerk says it is premature to estimate what the monthly costs will be once the system becomes fully active, explaining that the operational costs will depend on the level of e-tag uptake.

The higher the uptake, the lower the operational costs, as expenses relating to postal invoicing and legal enforcement decline. The figure will also be related to the final toll fee structure, which still has to be confirmed. Sanral modelling exercises have indicated that monthly costs of between R55-million and R60-million, based on a ‘balanced’ mix of registered and nonregistered vehicles.

“The contract has been structured [so that Sanral pays] for the actual items used every month,” Van Niekerk explains, stressing that the costs will fall as compliance rises. At present Sanral claims that some 600 000 e-tags have been purchased by private vehicle owners and what it calls key accounts, comprising government, rental and corporate fleets.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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