SANRAL – Keeping SA’s Wheels Turning

The South African National Roads Agency SOC Limited (SANRAL) is an independent, statutory company of which the South African government, represented by the Minister of Transport, is the sole shareholder and owner. SANRAL’s mandate is clear and distinct: to finance, improve, manage and maintain the national road network.

In line with government’s objective of transforming the public sector, SANRAL was established in April 1998 to maintain and develop South Africa’s expanding national road network, which currently stands at in excess of 700,000 kilometres (21,000 under SANRAL stewardship). “SANRAL harnesses more than 600 person years of core skills and experience in road development and management,” the agency elaborates, “within a highly motivated, professional and passionate team operating out of its Tshwane (Pretoria) head office.”

This is joined and bolstered by four regional offices in Tshwane, Cape Town, Pietermaritzburg and Port Elizabeth. “SANRAL has two primary sources of income,” it outlines. “Non-toll roads are funded from allocations made by the National Treasury. Toll roads are funded from borrowings on the capital and money markets – bonds issued on the Bond Exchange of South Africa (BESA) in the name of the South African National Roads Agency Limited.”

SANRAL manages assets worth in excess of R30 billion, without land values. “Our vision is to be a world leader in the provision of a superior national road network,” it lays out. “As the custodian of the national road network, we are committed to the creation of economic value for the nation, through the provision of road infrastructure with a motivated and professional team, consideration for community needs and state-of-the-art technology.”

BUSY ROADS BOOST ECONOMY

The number of cars on SA roads often takes people by surprise, and makes SANRAL’s task all the more challenging and crucial. South Africa has the highest cars per capita in Africa, with one in every five people in South Africa owning a vehicle. Wheels24 reported that the most recent data showed a total of 12,027,860 registered vehicles in South Africa, recorded by the electronic National Administration Traffic Information System (eNatis) at the end February 2017.

South Africa realised yet more year-on-year growth in new vehicle production in 2018, with a total of 610,854 new vehicles made across all sectors of the market. By way of comparison, in 2017, Naamsa reported 601,338 units and 599,812 vehicles in 2016.

South Africa’s infrastructure is such that it can produce thousands of new vehicle exports, and has drawn manufacturers such as BMW, Ford, Toyota, and Volkswagen to all have factories across the territory where they produce vehicles for local and international markets.

These numbers meant that the annual heavy traffic flows which characterise the post-holiday were more pronounced than ever in January this year, as thousands of holidaymakers made their way back to their homes after the Christmas holidays. Limpopo traffic authorities recounted more than a thousand vehicles passing through the toll gates on the N1 towards Gauteng, with traffic congestion on sections of the highway.

“The number of cars stretches probably almost a distance of five or six kilometres,” declared Transport MEC Dickson Masemola. Traffic volumes increased on average by 1.8% when compared to the same period in the previous year, but, refusing to dwell on the potential downsides of this rise, SANRAL focuses purely on the economic boost it entails.

SANRAL general manager for communications Vusi Mona, SANRAL’s spoke of the relationship between traffic volumes on the national road corridors and the status of the South African economy. Based on historic trends, the average increase in traffic volumes year-on-year on the national road corridors was at 1% above the GDP growth rate of the country.

POSITIVE RATING CHANGE

In further good economic news, in August Moody’s changed the SANRAL outlook from negative to stable, saying that the change reflects the SA government’s plan to provide additional financial support to its Gauteng Freeway Improvement Projects (GFIP) for the next three years.

“The rating is constrained by very high debt levels, high capital expenditure requirements as well as well as ongoing liquidity pressure related to low cash collections on the Gauteng Freeway Improvement Projects,” Moody’s commented.

According to Moody’s, this rating could be upgraded if the government introduces an alternative funding model which will include collection and enforcement strategies for the GFIP that will result in a structural improvement in SANRAL’s cash flows.

Just days later, in September SANRAL received from the BRICS National Development Bank (NDB) a R7 billion loan, payable in 15 years. The loan will help to improve key national roads to construct additional lanes and rehabilitate related infrastructure, such as bridges and intersections.

“The loan is for both maintenance of roads and construction of new ones, bridges, etc. It will not be to refinance existing debt,” clarified NDB director-general at the African Regional Centre Monale Ratsoma. “As a sovereign guarantee loan, it enjoys the best rates possible by the NDB in rand.” 

PROJECTS IN THE PIPELINE

SANRAL announced in August that it will issue major road construction tenders to the value of more than R40 billion to the construction sector over the next two to three years. National Treasury has allocated about R21.5 billion per year for the maintenance and improvement of SANRAL’s 19,262km non-toll network and Louw Kannemeyer, SANRAL’s engineering executive, described that this will go towards a total of 940 projects, of which 325 are already under construction.

“We expect a surge in road construction projects over the medium-term framework as part of the broader national efforts to invest in economic infrastructure,” Kannemeyer said. 

“We are confident that this investment will help to boost the construction sector which has been under severe pressure in recent years, and also cascade down to black-owned and emerging enterprises who will receive much larger shares of tenders in future.”

Kannemeyer added that SANRAL will issue smaller tenders related to routine road maintenance and periodic maintenance across the entire SANRAL network and in all nine provinces. 

“The projects will provide economic and social infrastructure that has the potential to unlock economic growth, stimulate local economies and create jobs within the communities that are located close to the construction activities.”