Sanral is unable to meet its financing obligations

The SA National Roads Agency (Sanral) is unable to meet its financing obligations and will not generate sufficient cash from its toll portfolio to settle operational costs and debt redemptions falling due in March and September 2021.

This was confirmed in the Medium-Term Budget Policy Statement (MTBPS) released on Wednesday, which reported that Sanral has incurred annual average losses of R2.5 billion since 2014/15.

Read: Sanral says e-tolls remain in place

It said Sanral had used R39 billion of its total government guarantee of R37.9 billion as at March 31, 2020 and over the medium term is expected to repay R10.7 billion of maturing debt obligations and R10.8 billion of interest payments.

“Consequently, the first phase of the Gauteng Freeway Improvement Project (GFIP) has not received periodic maintenance, and the second and third phases have been delayed.

“The result is increased congestion and deterioration in the quality of Gauteng’s highway network.

“Other national toll roads are also experiencing financial difficulty, because toll tariff increases granted by the minister of transport have been below what was agreed to in the toll concession contracts. This shortfall will cost the fiscus an additional R300 million in 2020/21,” it said.

Low payment compliance

The MTBPS did not mention e-tolls or the impact the low payment compliance rate is having on Sanral’s finances.

The compliance rate is now below 19%.

A decision on the future of e-tolls was scheduled to be taken by the government at the end of 2019 but was postponed until the first cabinet meeting of 2020.

However, government has not yet announced any decision on the controversial scheme, although Ayanda Allie Paine, spokesperson for Transport Minister Fikile Mbalula, confirmed that the government is deliberating about the future of e-tolls on the GFIP “as we speak”.

Paine stressed there is no indication yet when cabinet will make an announcement on e-tolls.

In a presentation to the Parliamentary Select Committee on Transport this month, Sanral revealed that the Auditor-General had drawn attention in an emphasis of matter to “material impairments – trade and other receivables” at the agency, related to the recognition of expected credit losses (impairment) of R10.177 billion.

Of this impairment, R9.831 billion relates to the impairment of e-toll receivables.

Sanral said its funding was negatively impacted by the fact that the future of e-tolls is still not confirmed, resulting in low payment compliance that negatively impacts on Sanral’s ability to finance its toll portfolio in the short term.

Budget for new projects impacted

It said this short-term funding shortfall in the toll portfolio was addressed by transfers from the non-toll portfolio, which reduced its budget for new projects.

The agency said this reduction in its budget for new projects amounted to R5.75 billion in 2018/19 and R2.5 billion in 2019/20, while R2.53 billion had been transferred so far in 2020/21.

Sanral’s non-toll allocation has also been reduced by R1.1 billion because of the impact of Covid-19 and lockdown regulations on the availability of future funding.

The MTBPS highlighted that the Road Accident Fund (RAF) is government’s largest contingent liability, with its accumulated deficit projected to grow to R593 billion by 2022/23.

“The Road Accident Benefit Scheme, which government developed to reduce this liability, was rejected by Parliament in August 2020 and the liability will continue to grow,” it said.

Read: Move to shut down Road Accident Fund