Downgrade negative but SANRAL solvent

The South African National Roads Agency SOC (SANRAL) is solvent, although non-payment of tolls has had a negative impact on the debt levels of the toll portfolio. The non-toll portfolio, which covers 85% of the national road network, is healthy, says Inge Mulder, Chief Financial Officer of the national roads agency.

She adds SANRAL was not surprised by Moody's downgrade of its rating from stable to negative.

"The ratings agency had warned at the time of the previous two ratings (July and November 2014) that any failure by SANRAL to generate e-toll revenue leading to deteriorating cash flows and growing borrowing needs would lead to a downgrade. We were ahead of forecast income at the time when the E-Toll Advisory Panel was announced by the Gauteng province. Since then, income has dipped appreciably and Moody's itself makes a correlation between the increase in the non-payment of e-tolls and the decision by the Gauteng province to establish a panel to assess the socio-economic impact of e-tolls - something that could have sparked speculation among the general public that the e-toll project may be abandoned.

"We now await the outcome of the process led by Deputy President Cyril Ramaphosa on e-tolling to provide policy clarity as well as the funding model for the Gauteng Freeway Improvement Project (GFIP). With policy certainty, we can devise a plan to repay our debt, which should improve our rating," Mulder said.

SANRAL operates two portfolios - toll roads and non-toll roads.

"The non-toll portfolio consists of funds from the national fiscus, an amount of approximately R10 billion per annum. These funds are used by Sanral to manage its non-toll network, which accounts for 85% of the total national road network of 21 403km. There are no funding challenges with the non-toll portfolio. It's business as usual.

"The second portfolio accounts for 15% of the total road network, and constitutes of agency tolls (1 832km) and those run by concessionaires (1 288km). The agency tolls are financed through the capital markets by issuing bonds, and the ones operated by the concessionaires are financed through private sector capital on a build, operate and transfer basis.

"Importantly, there is no cross-subsidisation of funds between the toll portfolio and the non-toll portfolio," Mulder emphasises.