Debt looms large for Sanral

2011-11-14 08:49

By May next year, the SA National Roads Agency (Sanral) may no longer be able to pay its debts.

This could occur if plans to introduce toll fees on Gauteng freeways from February go awry and if the tolling policy uncertainty persists.

Government will then be responsible for the debt, on the one hand because it directly guarantees the bonds through which Sanral borrows money in the capital market for its project, and on the other because it is the only shareholder in Sanral.

Sanral financial director Inge Mulder said the agency had suspended its monthly bond auction because there had been little appetite for it in September and investors had indicated that they regarded clarity on toll policies as critical.

Transport Minister Sibusiso Ndebele previously put all new toll projects on a back burner to enable a rethink in terms of funding road building.

A funding conference is being planned. A fuel levy is widely proposed as an alternative, especially because the cost collecting it would be much lower than the cost of an electronic tolling system.

Sanral’s total debt at the end of September was R31.5 billion. This money is applied exclusively to toll projects, but specific bonds are not attached to particular projects.

About R20 billion of this money is used to fund road improvements for the first phase of the Gauteng Freeway Improvement Project.

This was to have come into operation about a year ago to meet this expense, but it was initially delayed as the road works were not ready owing to a bitumen shortage and serious public opposition.

Cabinet lowered the tariffs originally proposed by Sanral. This step in itself raised the cost of funding over the period by some R6 billion, and extended the repayment period by 30 months, Mulder told Sake24 some time ago.

Sanral normally holds monthly auctions involving some R300 million worth of bonds on offer – except in November, December and January. Before September these auctions were always at least doubly subscribed, said Mulder.

If the tolls are levied from February, the next auction might be in March, which means the loss of three auction opportunities – worth about R900 million – in September, October and February.

Sanral can handle this because, according to Treasury policy, it has built in a three-month buffer and there is sufficient money in the kitty for a further two months or so because of lower payouts.

The transport department, from which Sanral receives its mandate, and National Treasury have been informed of the situation, said Mulder.

She believes Sanral’s credibility among investors has not been permanently damaged. They realise that the current uncertainty is of a political nature in that Sanral is simply executing policy.

Sanral, she believes, maintains its investors’ confidence by keeping them abreast of the situation.

She said investors have expressly stated that they consider insecurity untenable. They can discount bad news in the price, but uncertainty is crippling.

– Sake24

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