Sanral loses R2.7bn

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Delaying the implementation of e-tolling is credit negative for the SA National Roads Agency (Sanral), according to Moody's Investors Service.

Government last week decided to postpone the system for a month to explore alternative funding options.

Sanral relies on e-toll revenues to service its debt of R20 billion, which it incurred to finance the Gauteng Freeway Improvement Project (GFIP). “The postponement adds uncertainty and establishes a precedent for a final court decision on GFIP e-tolls, which we expect by the end of May or June,” says the service.

“Any final pronouncement against GFIP e-tolls will have severe credit negative repercussions for the road agency and will exert further negative pressure on the finances of the South Africa national government (A3 negative), Sanral's unique shareholder and guarantor of a large proportion of the agency's debt. Indeed, the national government will be required to step in and service or redeem debt incurred by Sanral to finance the GFIP project.”

Largest borrower

The service adds that, so far, delayed implementation and lower-than-anticipated toll tariffs have resulted in a revenue loss of about R2.7 billion for Sanral (40% of its estimated 2012 annual budget), which will grow to R3 billion by the end of May as a result of the recent postponement.

“Although partially compensated for by an extraordinary budget allocation of R5.8 billion from the National Treasury, lower toll revenue negatively pressures Sanral finances and raises concerns about the government's policy strategy. These concerns were factored into our February downgrade of Sanral's rating to Baa1 from A3.

Moody's also says a court decision to halt e-tolling would be an event of default for the R10 billion in government-guaranteed notes and could trigger immediate debt acceleration by bondholders.

“Moreover, the national government would be required to bail out Sanral and pay the remaining R10 billion in unsecured GFIP debt. Sanral relied extensively on borrowed funds to finance its operations and capex, benefiting from the implicit guarantee of the government of SA. In the past five years, the agency raised over R33.5 billion from local investors and is currently one of the largest borrowers in the country.”

Pension risk

Democratic Alliance (DA) shadow minister of finance, Tim Harris, says finance minister Pravin Gordhan mustbrief the Parliamentary committee on the status of Sanral's debt, following the recent delay in e-tolling.

He added that a recent committee meeting revealed that 5% of the Government Employees Pension Fund's (GEPF's) bond holdings are made up of Sanral bonds, but Arthur Moloto, chairperson of the fund's board of trustees, confirmed that only half of the R15.7 billion worth of bonds have a government guarantee.

“This raises the question of government pensioners' exposure to default risk associated with almost R8 billion worth of their pensions. Moloto maintains that the unguaranteed amount is subject to an implicit government guarantee given that the state is the sole shareholder of Sanral, but whether National Treasury agrees is unclear.”

Media liaison at the GEPF, Khaya Buthelezi, says as an investor and bondholder in Sanral, the GEPF is waiting for guidance on the matter from the agency. “We are still observers at this point in time. We don't want to comment right now on the figures being thrown around. These facts and figures will be discussed at the quarterly meeting this month.”

Corruption link

The DA has also referred the e-tolling system to the public protector's office in light of a possible link with suspected arms deal corruption.

DA Gauteng caucus leader, Jack Bloom, says there are allegations of links between Swedish companies involved in the arms deal, and the Vienna-based Austrian company Kapsch TrafficCom, which is the largest shareholder in the Electronic Toll Collection (ETC) consortium.

“Swedish Kapsch TrafficCom holds 40% of ETC, while Austrian principal Kapsch has the remaining 25%. The Swedish arm was previously part of Swedish manufacturing company SAAB Aerospace and later became part of Kapsch AG.

“SAAB, which sold 28 Gripen jet fighters to SA in the arms deal, sold a subsidiary called Combitech Traffic Systems to Kapsch. Together with arms deal company BAE Systems, it formed a company called SANIP, which was the joint venture between Saab Aerospace and BAE Systems to fulfil their obligations under the Arms Deal Offset Programme, which has been revealed to be largely empty.”

Secrecy criticised

Bloom adds that, in giving the background to his interdict against the e-tolls, judge Bill Prinsloo criticised Sanral for its secrecy on the contract with ETC.

“There are also 35 sub-contracts with ETC, all with confidentiality clauses. The DA submitted an application last year under the Promotion of Access to Information Act to get the contracts, but Sanral has so far not complied.

“Suspicion is high that politically connected people may have benefited from the toll companies contracted to Sanral.”

The Congress of SA Trade Unions has called for an investigation into the matter as well, according to national spokesperson Patrick Craven.

Sanral did not respond to requests for comment by the time of publication.

On Saturday, the North Gauteng High Court interdicted the agency from implementing electronic tolls on the province's freeways pending a full court review of the issue. As a result, it will be about two months before the matter is heard in court, but either party can appeal as high as the Constitutional Court, delaying implementation indefinitely.

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