By Andy Maano Thovhakale
22 October 2022, minister of finance announced that the Gauteng provincial goverment has agreed to contribute 30% to settling SANRAL’s debt and interest obligations, while national government covers 70%. National Treasury allocated R23.7bn to settle maturing debt and debt-related obligations.
South African National Roads Agency Limited (SANRAL) is a 100% state-owned. It is tasked with the development, maintenance, and management of all South African national roads.
A national road is any road that has been declared as such by the Minister of Transport, including any toll road and inter-provincial bridge.
Where does SANRAL receive funding from?
- capital investments or loans made by govt,
- external loans;
- interest from cash balances or investments,
- revenue generated from tolls
- annual grant from the fiscus mainly to fund non-toll roads.
In came the Gauteng Freeway Improvement Project (GFIP).
Freeways in Gauteng were set to be upgraded over a period of a few years starting in June 2008. This is after approvals were received to upgrade the roads as economic activities increased.
Gauteng Freeway Improvement Project is managed by the SANRAL.
The Gauteng freeway improvement scheme was intended to cover about 561km of new and existing freeways. The proposed works included lane additions and interchange upgrades, improvements at on and off ramps, and new and widened bridges.
In anticipation of the funding that would be required to pay for the upgrades the Department of Transport and SANRAL reclassified the relevant sections of the seven roads as toll roads.
The idea was to use the toll revenue to pay off the debt raised for upgrading the roads.
By 2010, about 185km of freeway upgrading was completed had been completed on sections of the N1, N3 and N12.
The government stressed that this project was not a 2010 FIFA World Cup project since it was already planned before the 2010 event was awarded to South Africa. However, the 2010 FIFA World Cup, and the need for additional road capacity was taken into consideration during the design and documentation stage of the project, resulting in construction milestones to be achieved for the event.
Cost of upgrades
The estimated cost of the first phase of the project which was to be completed by 2012 was R14.3 billion.
SANRAL then received approval from government to raise funds for the Gauteng Freeway Improvement Project in the capital markets.
The upgrades costs have since exceeded R22 billion.
Where did the money come from?
The upgrades were funded by means of bonds issued on the Bond Exchange of South Africa (BESA).
The total toll portfolio debt was R27.7bn as at 31 Dec 2010, of which the majority was borrowed for the Gauteng Freeway Improvement Project.
Bonds are repayable loans.
In SANRAL’s case, the repayment was guaranteed by the South African government through National Treasury.
Around 2018/2019, R19bn of this was guaranteed by the government and government was willing to support SANRAL with the balance if needed.
In 2019, Treasury said that SANRAL’s total outstanding debt was R47 billion and that the GFIP debt was R39 billion (83%) of SANRAL’s outstanding debt.
Government issued two guarantees for SANRAL. The first was for R31.9bn and the second was R6bn.
SANRAL’s total debt as at 31 March 2022 was R45.936 billion.
Gauteng Freeway Improvement Project phase 1 was funded as part of the Toll Portfolio and not as a ringfenced project, the value of debt attributed to Gauteng Freeway Improvement Project Phase 1 is R43.031 billion.
How was government intending on funding the loans?
By making motorists pay for using the roads via e-tolls.
Proposed toll collection system would operate through overhead gantries, fitted with toll collection equipment that would identify vehicles passing under the gantry.
Goverment concluded e-toll tenders in 2009.
Who won the tender?
Electronic Toll Collection (ETC) which was a consortium comprised of South African company TMT Services and Supplies and Austrian traffic company, Kapsch TrafficCom won.
Reports say tender was worth R6bn for 5 years.
Fun fact: For the GFIP e-toll route, a service provider is appointed to manage the operations and collection. The operator is paid for services rendered to operate the tolling system and collect the toll on behalf of SANRAL. The risk of non-payment remains with SANRAL.
Here’s the shareholding of ETC (which won the first contract) at the time;
- TMT Services and Supplies * (co-founded by Douglas Davey, Johan du Toit and Neil Louwrens) 35%.
- Kapsch TrafficCom AG: 25%,
- Kapsch TrafficCom AB of Sweden: 40%.
*was majority owned by Kapsch owning around 56.81% in 2010.
In 2010, Kapsch TrafficCom acquired a 56.81% stake in TMT R75 million.
TMT was shortly was awarded a contract worth R175 million to implement and operate an automatic fare collection system on the bus fleet (Rea Vaya) of the City of Johannesburg for 12 years.
Kapsch TrafficCom also received orders of 1.5 million on-board units for the electronic toll collection system which is in implementation in the Gauteng province.
It is important to note that Kapsch now owns 100% of TMT.
On Nov 15 2019, Kapsch TrafficCom was informed to be best bidder for a tolling project in in South Africa. The total project volume over its six year lifetime should have exceeded €400 million.
9 Mar 2020, Kapsch TrafficCom was informed that the tender was terminated.
The South African government had estimated income from eTolls to be R300 million per month.
The revenue was based on toll revenue, revenue recovered through debt collection processes, and revenue received through traffic fines and administration fees payable as a result of infringements.
Government was expecting that in terms of the above processes, it was estimated that for steady state operations, the unrecoverable or bad debt would amount to 5% of total possible revenue.
Well we all know that the opposite actually happened.
SANRAL is unable collect sufficient cash from its toll portfolio to settle maturing government-guaranteed debt.
The only solution is to completely eradicate this system.
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