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Sanral faces financial dilemma

Jan 15 2012 11:43 Antoinette Slabbert

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Pretoria – The future of Gauteng’s controversial e-toll system is partly in the hands of a new directorate, which itself first needs to learn how the South African National Roads Agency (Sanral) operates. 

On Thursday Transport Minister Sibusiso Ndebele informed the new Sanral board at its first meeting of the task on hand.

Half of the eight directors of the board chaired by Tembakazi Mnyaka are newcomers, while three members are serving a second term. Chief executive Nazir Alli is the eighth member.

These eight must make a recommendation to Ndebele about the future of the e-toll system. This will take time, since they need to learn how Sanral operates on Thursday and Friday.

Over the coming week details regarding the Gauteng Freeway Improvement Project (GFIP) and its funding model, which is based on toll fees and the implications if the toll system is abandoned, will be explained to them.

The board’s first step was its announcement on Friday that the toll system would not come into operation in February. Although it’s clear that the board needs time to apprise itself of all issues, this step puts Sanral under enormous pressure.

The agency is continually borrowing money on the open market, and repaying it on a monthly basis. In September Sanral’s total indebtedness was R31.5bn, R20bn of which had been spent on the improvement of the envisaged Gauteng toll roads.

Every month Sanral holds bond auctions which raise an average R300m. These auctions are generally twice oversubscribed, but in September the auction was cancelled because investors got cold feet owing to the uncertainty about the future of the toll system.

Sanral then cancelled further auctions until the implementation of the tolling system. It had hoped that this would be in February and that auctions could resume in March.

The absence of auctions in September, October and February would mean a loss of R900m. Sanral does not normally hold auctions in November, December and January.

By implication the March auction is off the table and there is no indication when auctions will resume.

In terms of the initial planning, the e-toll system was to have begun in April last year. Financial planning was aligned to this date. Sanral is thus saddled with massive debt that has to be paid, but without a meaningful income.

Financial director Inge Mulder previously reported that Sanral had sufficient money, if necessary, to pay off its debt up to the end of May. But by June the money will be exhausted and Sanral will no longer be able to make payments.

The government will then have to intervene. This has huge implications for market confidence in Sanral and South Africa, which could be reflected in credit ratings.

The board has declared itself committed to meeting its obligations to stakeholders – an apparent reference to the repayment of its debt.

But it is not clear what value can be attached to this assurance from a board that still does not understand the problems involved, and which also gives no indication of how long it will take it to reach a decision.

Matters on the board’s agenda indicate a possible fundamental rethinking regarding Sanral. According to a statement by the board, points of discussion include Sanral’s mandate, the Gauteng e-toll system and future roadbuilding programmes.

Sanral currently has no answers for its investors. All that remains is uncertainty – the one thing that markets detest.

Although the scrapping of the toll system will make road users sigh with relief, it could sound the death knell for Sanral.

In the construction industry the agency is regarded as an exceptionally effective project manager – and it is one of the few successful government agencies.

 - Sake24

For more business news in Afrikaans, go to Sake24.com.

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