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South Africa’s unloved road toll agency fights for $477m loan

By Xolisa Phillip, in Johannesburg
Posted on Friday, 20 September 2019 11:55

The opposition DA has erected huge banners on the road from Johannesburg to Pretoria with the slogan: "E-tolls. Proudly brought to you by the ANC". REUTERS/Siphiwe Sibeko

South Africa's road infrastructure agency Sanral is struggling to unlock a substantial loan from the new 'BRICS bank'.

The New Development Bank (NDB), announced this week it has granted the agency a R7bn ($477m) loan.

  • The NDB is a multilateral development-finance institution formed of lenders from the ‘BRICS’ grouping of countries (Brazil, Russia, India, China and South Africa)

But what should have been a moment of celebration has turned into panic for the South African National Roads Agency Limited (Sanral)

It turns out there are two caveats:

  1. Technically, Sanral cannot access the much-needed funds from the NDB yet because the roads agency is awaiting the green light from finance minister Tito Mboweni and transport minister Fikile Mbalula. This because the loan is guaranteed by the South African government.
  2. There is a pending decision from the South African government about whether electronic tolling, popularly known as e-tolls, will remain or be scrapped.

Tolling dispute

The decision on whether South Africa will stick or scrap the ‘user-pay’ principle on toll roads and the NDB loan announcement are expected some time next week, confirmed Ayanda Allie Paine, Mbalula’s spokesperson.

  • Mboweni is a proponent of the user-pay principle. The finance minister has said as much publicly and during his medium-term budget policy statement in October 2018 and his main budget speech in February 2019.
  • But Mboweni’s colleague at provincial government level, Gauteng premier David Makhura, is a vocal opponent of e-tolls. Makhura is chair of the African National Congress in Gauteng, where the party experienced significant electoral losses during the 2016 local government elections. Many blamed e-tolls for the party’s electoral slide in the province.

Funding dilemma

Sanral is the custodian of the country’s vast road network. The roads agency has experienced a prolonged run of bad luck since 2008, when it embarked on what is known as the Gauteng Freeway Improvement Project.

  • During that time, the South African government backed a decision to upgrade Gauteng’s intricate road network to ease rising traffic congestion.
  • The province is one of the country’s major economic hubs and accounts for almost 40% of economic activity.

Sanral undertook the project and raised funding through government-guaranteed bonds.

Residents’ resistance

Once the road upgrades were completed, the agency installed gantries fitted with overhead cameras that capture vehicle details electronically to generate invoices for motorists.

The system went live in December 2013 and funds generated from e-tolls were meant to go towards the repayment of the bonds.

But the system encountered resistance that resulted in a prolonged and successful civil disobedience campaign led by the Organisation Undoing Tax Abuse (OUTA).

The e-tolls are currently confined to Gauteng and their critics consider the province a pilot site before the government rolls out similar initiatives nationally.

Sanral strikes back

Almost immediately after the National Treasury announced the NDB loan approval on Monday, OUTA released a statement asking for further details about the funding facility.

Sanral CEO Skhumbuzo Macozoma said yesterday that OUTA was being “outrageous”.

  • “OUTA’s malicious actions are designed to destroy Sanral and deprive South African citizens of world-class national road infrastructure,” said Macozoma.

Loanly road

The NDB loan facility was a rare bit of good news for Sanral.

The roads agency also received a boost from Moody’s Investors Service in August, when the sovereign credit ratings agency changed Sanral’s outlook from negative to stable.

The civil disobedience campaign has had many adverse consequences for Sanral, including the roads agency taking a decision to halt bond auctions.

  • Sanral’s board has suspended pursuing e-toll debt until there is clarity about the system.

Macozoma  contends: “Sanral is doing its best in tough economic conditions and unfavourable bond markets to secure funding for road development.

  • “The loan from the BRICS bank shows international confidence in our capabilities despite the destructive comments from OUTA.”

Bottom line: The tough choices arising from South Africa’s fast-paced urbanisation will require political manoeuvres as well as financial muscle.

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