Auditor-general Terence Nombembe gave roads agency Sanral’s books the thumbs-up recently, although it is struggling against losses of more than R2bn because of financing costs on its tolling operations, thanks largely to the delay in e-tolling to pay for the Gauteng freeway improvement project.

Nombembe drew attention to one matter: the question of whether the agency will remain a going concern while tolling remains suspended.

“The toll income from the [Gauteng freeway improvement project] is significant to the ability of Sanral to service its current and future obligations,” Nombembe said. “This may cast significant doubt on the entity’s ability to fund its obligations until such time that the tolling … commences.”

The agency’s annual report noted that the toll operating loss after finance charges for the year ended 31 March was R2,67bn, up from the roughly R1,3bn loss reported in 2011.

The agency’s future financial health is intimately linked to the talks taking place between the inter-ministerial committee on the Gauteng freeway improvement project, led by deputy president Kgalema Motlanthe, and stakeholders, particularly trade union federation Cosatu.

Impasse
The government is offering a mixture of tolling alongside a contribution from the fiscus to reduce costs for road users and ease the impasse on the controversial move to charge drivers using Gauteng’s freeways.

What form such a state contribution would take and the extent of any possible reduction in toll fees was still subject to negotiations between the inter-ministerial committee and stakeholders, said government spokesman Thabo Masebe.

“The government remains convinced that e-tolling should be part of the mix of mechanisms to address congestion and to raise funds for the construction and maintenance of roads,” said Masebe.

The state did not want to overburden consumers and would do everything possible to ensure that the costs of e-toll administration would remain as low as possible, he said.

The losses came as a result of the increase in finance costs to the tune of R805,5m, a rise of 30,8% from the previous year.

It was caused by the “continuous borrowing to fund the loss in revenue as a result of the delay in e-toll commencement of the Gauteng freeway improvement project”, according to the report.

Sanral, which manages SA’s national roads network, has two sources of income. Non-toll roads are funded by budgetary allocations and toll roads are funded through borrowing and tolling concessions.

Obligations
Sanral said that even though tolling was delayed, the R5,75bn received from the treasury in February ensured that it was able to meet its obligations and could do this for the foreseeable future.

A proposal has also been submitted to cabinet for a special appropriation of a further R1,9bn in the form of a subordinated loan, according to the report.

This would ensure that Sanral had cash reserves to meet all its obligations for at least 18 months.

Government will gazette the tolls only once talks are complete, despite a constitutional court ruling that set aside an interim interdict to halt e-tolls. A court review of e-tolling is due to be heard in November. The state must also finalise amendments to legislation to cater for and enforce electronic toll collection on SA’s roads.

The constitutional court decision handed down last month eased the concerns of ratings agencies after Moody’s downgraded Sanral’s debt in May to Baa2 on the global scale and A2 on the local scale.

Despite the recent downgrade of the SA government’s bond rating and the sweep of downgrades on sub-sovereigns as result, Sanral’s current rating, although on a negative outlook, was affirmed.

Opposed
But Wayne Duvenage of the Opposition to Urban Tolling Alliance said a compromise of a lower rate was unacceptable and it remained opposed to tolling for a host of reasons, including continued misgivings about the lack of transparency over tolling contracts and the risk of non-compliance by road users.

He said a ring-fenced addition to the fuel levy was a solution that would address these concerns, despite the treasury’s longstanding unwillingness to ring-fence government revenue.

Cosatu spokesman Patrick Craven said the trade union federation was committed to scrapping e-tolling, but could not comment further until negotiations were completed.

Meanwhile, SA’s provincial and local road networks are experiencing major backlogs. The estimated backlog on the provincial road network is for 10 980km of paved road and 69 216km of gravel road, according to a reply in parliament by transport minister Ben Martins.

The estimated backlog for the local government road network is for 3 490km of paved road and for 90 962km of gravel.

Although no backlogs in repair and maintenance of national road networks were reported by Sanral, the incorporation of additional roads from the Eastern Cape into the national network in April could change the status quo, said Martins.