Sanral: toll roads ‘an attractive investment’
● Discussions between the National Treasury and Gauteng to scrap e-tolls and for the province to absorb some of the debt owed for freeway improvements will give the National Roads Agency (Sanral) room to plan and build more national road projects.
Sanral CEO Reginald Damana said the agency was also waiting for the Treasury to approve the upper limits of its borrowing threshold so that it can return to the bond markets to raise capital for projects.
“We haven’t been very active in the bond market, primarily because the Treasury has not given us borrowing limits to go out and raise funding. We are waiting for the resolution of our application, which is imminent.”
Speaking on the sidelines of the Sustainable Infrastructure Development Symposium in Cape Town, Damana said that while Sanral waited for word from the Treasury, its interest in continuing to leverage the bond markets for capital remained high as investors still considered its bonds to be attractive.
“Our understanding is that the resolution of that is tied to the finalisation of the e-toll project. However, our engagement with potential investors and existing bondholders is that they remain very attracted to our bonds. There is a lot of appetite for infrastructure and I think toll roads in South Africa, excluding e-tolls, have proven to be a very attractive investment.”
Sanral applied for R16.5bn borrowing and guarantee limits, which it plans to use to cover priority projects.
Gauteng premier Panyaza Lesufi announced in his state of the province address in February that e-tolls would be scrapped by the end of March. The Gauteng government has agreed to pay R4.1bn of Sanral’s R12.9bn debt and interest obligation towards the finalisation of the debt.
The tolling programme was introduced a decade ago to cover the cost of the Gauteng Freeway Improvement Project. But e-tolls were vehemently resisted by motorists and collections underperformed consistently.
Damana said Sanral continued to receive the bulk of its funding from the Treasury through grants, while it also raises money from the private sector by way of bonds. He said the private sector still had the appetite to invest in roads despite the e-tolls storm.
“Our collection rate in the conventional boom-down toll gate is about 99.99%. So it’s very good and predictable. It’s a proven infrastructure asset by way of traffic. Very good traffic growth, very good collection rates. So bond investors and asset managers, pension funds, they love it, and they are keen to come back to it as soon as the Treasury approves our borrowing limits to go back to the market,” he said.
Business Times sent queries to the Treasury on the approvals. However, the 2023 medium-term budget policy statement said the government intervened in the long-term dispute over phase 1 of the programme, which limited Sanral’s investment capacity.
“As a result of revisions to Sanral’s borrowing limits and guarantees associated with the R23bn injection made in the 2022 adjustments budget, Sanral will now seek approval to revise its funding plan to ensure continued investment in the national road network,” the document said.
Earlier in March, public enterprises minister Pravin Gordhan told a parliamentary briefing the government was mulling a framework for public-private partnerships (PPPs) that considered leveraging state assets and private-sector funds as well as technical expertise.
“We’ve gone beyond the stage of just the word disposal because there are other types of PPPs. For example, some of the government buildings have entered into PPPs to construct those offices.
“Sanral uses yet another variety which you might see a lot more frequently now, which is the build-operate-and-transfer variety. Here, a concession is given for the toll road for 20 or 30 years, tolls are charged, profits are accrued and after that the government or Sanral needs to decide what they do with the partner that they’ve worked with,” Gordhan said.
Deputy public works & infrastructure minister Bernice Swarts told Business Times that a prime example of a PPP in road infrastructure was the N3, built through a build-operate-transfer agreement with the private sector.
“We know that the N3 was built like that. So, 20 years ago, the investors in the project built it, collected their money through the toll roads, maintained the road [and] we have now reached 20 years. They are giving back a solid road to Sanral. So now ... we just maintain that road,” Swarts said.