Sanral’s total liabilities top R140bn

The South African National Roads Agency (Sanral) has published its latest integrated annual report (totalling 368 pages) for the year ended March 31, 2021, which shows that its total liabilities are a gargantuan R140.4 billion (2020: R130.6 billion).

Sanral is not only facing mounting objections to the paying of tolls, but is also facing mounting liabilities. Cabinet has been tasked with making a decision on the future of the e-tolls scheme in Gauteng.

While cabinet dithers, the liability to be met steadily grows.

Read: Government must ‘bite the bullet’ and make a decision on e-tolls, says Sanral CEO

One would think that the major liability would be debt, sitting at R45.9 billion (2020: R47.8 billion). But no, there is a liability referred to as ‘deferred income’, which at the end of the financial year is R79 billion (2020: R68 billion), representing 56.3% of total liabilities (2020: 52.1%).

Deferred income is explained in Note 19 to the annual financial statements as consisting of “deferred government grants and advances from concession contracts”.

The prepayments on concession contracts “are deferred over the life of the concession”.

Sanral contract partners (concession contracts) act as an alternative means for long-term financing to operate and improve the national road network infrastructure. Costs are recovered through toll charges (though considering the e-toll impasse, it is more likely they are ‘anticipated to be’ recovered in this manner).

Read: Sanral delays e-toll collections tender

There are three concessions: the N3 Toll Concession, the N1/N4 Bakwena Platinum Corridor Concessionaire, and the N4 Trans African Concession.

Total debt

Sanral’s total debt at the end of the financial year is R45.9 billion (2020: R47.8 billion).

	2021	2020
Financial liabilities at fair value	R4.7bn	R4.8bn
Financial liabilities at amortised cost	R41.2bn	R43bn
	R45.9bn	R47.8bn

IFRS 9 requires financial liabilities to be reflected at fair value through profit and loss, or at amortised cost.

The financial liabilities at fair value include a long-term capital loan and a short-term capital loan.

The financial liabilities at amortised cost comprise mainly long-term capital loans, including issued bonds, and a domestic medium-term note programme. Sanral has also entered into a loan facility agreement with the European Investment Bank, currently at R40.2 million (2020: R36.9 million).

The government has guaranteed the borrowings of Sanral to the tune of R31.9 billion.

Financial performance

Sanral made a profit of R380.3 million for the year to end-March (2020: R1.3 billion).

Other comprehensive income included an adjustment on a retirement benefit of R4.1 million (2020: R9 million), and a revaluation of land and property amounting to R8.3 billion (2020: R36.4 billion), bringing the total comprehensive income for the year to R8.7 billion (2020: R37.7 billion).

However, the accumulated loss as at the end of the year is R14.5 billion (2020: R14.9 billion).

Sanral’s revenue earned of R3.7 billion (2020: R4.4 billion) includes the government grant detailed below:

	2021	2020
Toll revenue	R3.7bn	R4.4bn
Non-toll government grant	R6.2bn	R6.5bn
GFIP government grant	R2.7bn	R2.7bn
	R12.6bn	R13.6bn

The value for expected credit losses on toll debtors for days exceeding 365 was R9.6 billion on March 31, 2021 (2020: R9.6 billion).

Cash flow

The cash receipts from customers of R23.1 billion (2020: R23.4 billion) includes the unrealised portion of deferred income of R9.6 billion (2020: R8.5 billion).

The total cash at the end of the year of R29.3 billion (2020: R16.5 billion) has been tucked away in short-term deposits and repurchase agreements (repos).

Unqualified AG report, but …

The Auditor-General (AG) has given Sanral an unqualified audit report, but with findings.

The findings were however material.

According to the AG, Sanral’s accumulated loss of R14.5 billion plus the outcome of the e-toll impasse to be resolved by cabinet “indicate that a material uncertainty exists that may cast significant doubt on Sanral’s ability to continue as a going concern”.

Other material findings include:

• Material impairments of R9.6 billion were recognised as a result of expected credit losses.
• Irregular expenditure of R175.3 million was incurred in the year, due to non-compliance with procurement regulations; most of the irregular expenditure was caused by expenditure not approved by a duly delegated authority.
• Investigations into fruitless and wasteful expenditure were not performed.
• Sanral’s internal processes and systems did not prevent non-compliance with supply chain management legislation from occurring.

The Directorate for Priority Crime Investigation has been investigating offences perpetrated by various construction companies against Sanral since 2013.

Irregular, fruitless and wasteful expenditure

The opening balance of irregular expenditure as at April 1, 2020, was R11.9 billion.

During the year, the amount of R10 billion was condoned by National Treasury.

The current year’s irregular expenditure amounted to R175.3 million.

The major irregular expenditure in the year was R76.3 million (2020: R80.5 million) not approved by the delegated authority or National Treasury, and deviations not approved by the delegated authority or National Treasury.

Read: Sanral ‘unable’ to comment on dodgy R40m payments by e-tolls collection company

The truncated amount of cumulative irregular expenditure at the end of the year – quaintly referred to as irregular expenditure not yet condoned – is R1.4 billion (2020: R11.2 billion).

Fruitless and wasteful expenditure is R18.4 million (2020: R18.3 million).