With its 15th unqualified audit, Sanral is ready to 'break the asphalt ceiling'

The South African National Roads Agency (Sanral) is a great example of what can be achieved in the transformation of state-owned entities and the creation of a capable state.

The country's focus will increasingly be on massive investment in infrastructure and the national road network will be the catalyst for growth and socio-economic transformation, says the board's chairperson, Themba Mhambi.

The 2018/19 Integrated Report of the South African National Roads Agency highlights the achievements and challenges of the agency in a financial year "in which funding constraints for road construction worsened".

Sanral received a record 15th consecutive unqualified audit report and it is on track to achieve a clean audit opinion by 2020/21, says Mhambi.

Irregular expenditure was higher because of two contracts amounting to R282 million.

The first was for additional expenditure of R103 million on a construction contract that required the pre-approval of National Treasury, which was only given seven months after the application was submitted. The second was for a property, acquired with the approval of the Assets and Liabilities Committee, a sub-committee of the board, and subsequently confirmed by the board, for R179 million. Even though Sanral had the first right of refusal to buy the property, the Auditor-General South Africa ruled that this was a deviation from normal procurement processes and should have been approved, rather than merely confirmed by the full board.

The decision by National Treasury to reallocate R5.75 billion from the non-toll portfolio to the toll portfolio resulted in a 27% reduction in expenditure in the construction of road infrastructure.

After some delay in incorporating the new regulations for the 30% subcontracting and Sanral transformation policy, Sanral started with the advertising of tenders from April 2019.

Mhambi says the resolution of the e-toll impasse "is absolutely critical and crucial for the future of our roads and the country's economy". He welcomes the current initiative announced by President Cyril Ramaphosa, saying it recognises the centrality of adequately funded roads for sustainable growth.

Sanral CEO Skhumbuzo Macozoma says the prevailing economic climate is compelling Sanral to utilise existing resources during a lean period. "Our decisions during this time will determine how well we will be positioned to take advantage of opportunities when the financial situation recovers."

The first priority has been to keep the programme of construction on toll and non-toll roads moving forward, with few delays, and to protect road assets through essential road maintenance work.

Spending on routine road maintenance has remained consistent over the past three financial years and is critical to prevent the premature deterioration of the country's 22 214km primary road network managed by Sanral.

The agency's objective is "to achieve a balance between contributing to rural development and greasing the wheels of the urban economy", says Macozoma. Through its urban freeway management systems, it kept traffic flowing and saved lives by attending to more than 77 000 incidents and 10 600 collisions.

In addition, more than 75% of spending on capital projects and road maintenance was devoted to non-toll roads which reach into more remote rural areas. An example of this is the greenfields section of the N2 Wild Coast Route, which will draw isolated and impoverished parts of the Eastern Cape into the economic mainstream.

Macozoma says Sanral is using its contracting power to enable black contractors to participate in the construction industry. A lack of access to capital and difficulties in purchasing equipment have, in the past, been solid barriers which prevented emerging contractors to secure major contracts.

Sanral decided to "break the asphalt ceiling" by facilitating partnerships between major industry players and black contractors. Four such partnerships were concluded in the past year.

Through its tendering system, more than 70% of contracts, representing 61% of contract value, were awarded to black-owned companies. Some 25% of total contract value were secured by companies owned by black women.

However, the financial difficulties experienced by some large construction companies raised the possibility of their demise and an associated loss of high-level expertise to the sector.

"Without sufficient and sustainable funding, it is inevitable that the quality of the national road network will suffer and, given the dominance of road transportation in this country, this would have an adverse economic effect," says Macozoma.

About 75% of SA's total freight is transported on roads and 70% of this volume moves along the national road network.

The Integrated Report notes that Sanral recorded a profit of R2.4 billion in 2018/19. Overall spending on capital projects and road maintenance decreased by 19% in 2018/19, and by a total of 22% over a two-year period. Because of the transfer of R5.75 billion, the non-toll operating division shows a loss of R96 million and toll portfolio shows a profit of R2.52 billion.

Among the major projects initiated by Sanral in the past financial year are:

* The strengthening of the R511 between Brits and Beestekraal in North West; * The construction of the cable-stayed bridge across the Msikaba River on the green fields section of the N2 Wild Coast Road; * The upgrading of the N11 from Newcastle to Madadeni, east of Ladysmith in KwaZulu-Natal; and * The construction of pedestrian facilities on the N2 between Umlaas Canal and Wandsbeck Road in eThekwini.