Roads agency Sanral has thrown in the towel over e-toll debts older than three years and written off R3.6bn in the 2017 financial year relating to this debt. However, it will continue in its attempts to recover unpaid e-tolls by pursuing defaulters in the courts.
It also says the Sanral Act allows it to institute criminal prosecutions against defaulters, though attorneys contacted by Moneyweb believe a criminal conviction will be a hard sell in any court, not to mention a PR nightmare for Sanral.
It was exactly a year ago that Moneyweb first raised questions over the recoverability of these old debts in terms of the Prescription Act, which makes it difficult for creditors to recover certain debts older than three years. Last year, Sanral counted unpaid e-tolls as revenue even though there was little chance of ever seeing this money due to the social protest movement led by Organisation Undoing Tax Abuse (Outa). The write-off of this older debt was signed off by the auditor-general.
So long as Sanral recognises that any debt over three years’ old should not be counted, it will be under pressure to find some resolution through the courts on the recoverability of unpaid e-tolls. If this drags on another year, which seems likely, it will have to write off another chunk of unpaid e-tolls next year.
Outa says the most telling sign of Sanral’s financial woes is the increased loss posted, at just under R5bn, which was substantively up from the loss of R1.2bn posted last year, the bulk of which (R4.6bn) arising from its toll operations.
“However, it was the change of heart in Sanral’s treatment of its outstanding e-toll debt when compared to last year that one notices the processing of impairment losses of R3.6bn, which relates to e-toll debts that were written off,” says Wayne Duvenage, Outa’s chairman.
“Last year, virtually no outstanding debt was written off, as Sanral had pinned its hopes on the 60% discount dispensation gaining traction during the following financial period. This year, the massive R3.6bn is a significant acknowledgement that e-toll debt is largely unable to be collected, as this equated to 50% of the trade receivables for the first 15 months of operations and is well above the prescribed debt.”
Another feature of the results is the meteoric rise in debt to R48bn from R6bn a decade ago. Borrowings increased R10bn in the last two years, in part to cover an increase of about 1 400km in new roads under management over the period. The total road network covers 24 637km, of which 87% is non-tolled. The rest are tolled roads.
Rand Merchant Bank credit analyst Elena Ilkova says the main reason for the rise in debt was that the Gauteng Freeway Improvement Project (GFIP) was accelerated so that Gauteng’s improved roads were ready for the 2010 Fifa Word Cup. “If it was not for that rush, upgrades would have been done more slowly as cash became available. Had e-tolling started immediately after the World Cup, most of the debt would have been repaid by now, but the start of tolling was delayed by almost three years.”
The cash position deteriorated by nearly R3bn over the year, with a total cash haul of R6.6bn at the end of the year. Total expenses for the year jumped from R10.9bn in 2016 to R17.3bn, after writing off R3.7bn for bad debts. Based on this level of expenses, Sanral has sufficient cash to carry it for a few months before it needs to raise additional borrowings. Last week, the auditor-general took aim at entities falling under the department of transport, saying they were likely to miss targets established in terms of their strategic plans.
Finance minister Malusi Gigaba last week announced that Sanral’s guarantee has been expanded to nearly R39bn from R31bn, which will allow it to continue with its borrowing programme in order to meet its commitments.
The company collected nearly R1.9bn from e-tolls over the year, which is a fraction of what was anticipated when the project was launched in 2013. Outa estimates that close to 80% of Gauteng freeway users are refusing to pay e-tolls. The toll operating loss for the year to March 2017 was R4.6bn.
Sanral’s recently released 2017 annual report shows toll revenue up 6% to R4.9bn. Government chipped in with a grant of R8.6bn (up from R6.5bn for the previous year) to give total revenue for the year of R13.9bn.
Roshan Morar, Sanral’s chairman, says the clean audit report from the auditor-general confirms the quality of corporate governance and financial management at the company. “Fruitless, wasteful and irregular expenditure has gone down in the past year to R424.9m from R1.1bn the previous year,” says Morar.
“Where required, and as part of consequence management, disciplinary action was taken against responsible employees, and in two instances against service providers, and it was made clear that any deviations from good corporate governance will not be tolerated. Understanding that some of the fruitless, wasteful and irregular expenditure emanates from events that precede the financial year under review, we have given management the instruction to eliminate these by the next financial year.”
On targets relating to corporate performance, the agency achieved 32 out of its 37 targets, which translates into 86% achievement.
In June, transport minister Joe Maswanganyi said government would explore alternatives to e-tolls, and Sanral — while reaffirming its commitment to e-tolls — has indicated that a fuel levy is under consideration, though it has problems of its own. It is seen as a regressive tax that impacts the poor most.
Another concern raised by Outa is the R430m of irregular expenditure, which Sanral claims an achievement as it is less than half the previous year’s figure. “While the trend of curbing irregular expenditure may be moving in the right direction, the value is still unacceptably high,” says Duvenage.
Outa says the current legal actions taken against e-toll defaulters is a further waste of taxpayer money. Outa and Sanral’s legal teams have been working to bring the first case to court for well over a year now.
Duvenage says he is pleased that Maswanganyi acknowledged the challenges Sanral has had with tolling, especially the GFIP. He plans to hold discussions with all provinces to find solutions and to take the proposals to government. Outa will seek to engage with the authorities on making a decision to eventually can the failed scheme, once and for all.
- This article was originally published on Moneyweb and is used here with permission