Downgrade pains us, says Sanral

Johannesburg - The SA National Roads Agency (Sanral) was disappointed by Moody's Investors Service's decision to downgrade its credit rating, it said on Sunday.

"Though it was not unexpected, it still does pain us, spokesperson Vusi Mona said.

Moody's downgraded Sanral's long-term issuer ratings to Baa3 (global scale, local and foreign currency) from Baa2, and to A3.za (South African national scale) from A2.za.

"Sanral's debt stock has substantially increased to an estimated R36.2bn as at 31 March 2013, up from R6.2bn in 2007, mainly due to GFIP," Moody's said, referring to the controversial Gauteng Freeway Improvement Project, otherwise known as e-tolling, which has stalled because of court challenges.

Moody's said its decision was driven by the deterioration in the company's cash flow.

"This cash-flow strain has arisen from the prolonged delay in the realisation of e-toll revenue earmarked to repay [GFIP] related debt, and casts doubt on the company's financial health in the medium term," it said.

The downgrade means the cost of borrowing money for Sanral will likely increase, said Mona.

Implications for the people of SA

"Let's not forget that Sanral is a state owned entity. In essence, it is an asset owned by the people of South Africa and government is simply the custodian. Therefore, the downgrade of Sanral ultimately has implications for the people of SA."

It would affect Sanral's risk profile.

Sanral raises money from commercial markets to supplement its allocation from the national fiscus to enable it to deliver good quality national roads.

"The national road that gave rise to this downgrade is one of the best in our toll portfolio and was financed through debt which must be repaid," said Mona.

Sanral is in discussions about it and hopes it can go back to planning, building, operating and maintaining South Africa's national road network.

"It's a mandate we have succeeded in carrying out, even if we have to say so ourselves," he said.

Mona said the downgrade would not hamper Sanral's continued operations, especially its non-toll portfolio which constitutes 84% of its road network and is financed through an allocation from the fiscus and therefore not affected by tolling.