Sanral fails to meet funder’s governance demands
The South African National Roads Agency (Sanral), which faces the prospect of its electronic tolling project being scrapped, has failed to meet many of a key funder’s governance demands after the funder cut off lending to it in 2016.
In July 2017, asset manager Futuregrowth said it would resume funding to the roads agency after freezing loans the previous year, citing the agency’s eagerness to address the governance and supply chain concerns, which it believed could be detrimental to investors’ interests.
Gauteng Premier David Makhura has mooted plans to scrap e-tolls, which he said were a failure, in favour of a new funding model, a move that has worried funders.
But in a report on governance at state-owned companies, drafted three years after Futuregrowth first withdrew funding from the agency, the asset manager noted that Sanral only agreed to meet seven of its 16 governance demands.
Two other demands — an appropriate quorum and voting thresholds for boards and subcommittees; and public reporting of key performance indicators, the shareholder compact and targets — were in place.
This made Sanral the worst performer of four state-owned companies surveyed. The Industrial Development Corporation met 12 of 14 objectives.
Tarryn Sankar, an investment analyst at Futuregrowth, said that while the asset manager indicated in 2017 it would lift its embargo on trading Sanral bonds, this did not necessarily mean Futuregrowth would extend additional funds.
“Failing meaningful improvements, notably in the Sanral Act, we would likely limit any new funding to short- to mediumterm debt,” Sankar said.
Sankar said that Sanral had not reneged on its undertakings to Futuregrowth, as some of them were out of its control and had to be considered by the minister of transport. These undertakings include changing the Sanral Act to increase the number of board members and improve the process of appointing these members, and to change loan documentation.
Sanral had not offered timelines for the minister to consider or implement these issues.
“Legislative change is required to effect certain governance improvements,” Sankar said. “This requires an extensive consultation process and, given the recent change in the minister of transport, our understanding is that this process has yet to commence. Any amendment of the Sanral act is a parliamentary process, in which we cannot participate or affect directly,” Sankar said.
President Cyril Ramaphosa recently fired transport minister Joe Maswanganyi, replacing him with Blade Nzimande.
On Makhura’s plan to approach Ramaphosa for discussions about an alternative to e-tolls, Futuregrowth said it would like “meaningful clarity” on Sanral’s funding model and its sustainability in order to continue supporting the agency in the long term.
The Organisation Undoing Tax Abuse (Outa) agreed with Makhura’s proposals, saying only 29% of e-toll road users complied with the system. “Outa is preparing a submission for the minister of transport and the president and will engage with the executive to show the negative impact e-tolls have had on the public and on the Sanral budget and to propose alternative funding models,” Rudie Heyneke, Outa’s spokesman on transport, said.
Sankar said that Futuregrowth would continue to monitor Sanral.
“Futuregrowth’s funding decisions will continue to be guided by the ongoing monitoring of Sanral’s governance structures and practices, the satisfactory implementation of governance recommendations, and the ongoing assessment of Sanral’s financial position and performance,” she said.
WE WOULD LIKELY LIMIT ANY NEW FUNDING TO SHORT- TO MEDIUM-TERM DEBT OUTA WILL ENGAGE WITH THE EXECUTIVE TO SHOW THE NEGATIVE IMPACT E-TOLLS HAVE HAD