Sanral's bumpy road with e-tolls leads to R6bn funding gap

Auditor General Kimi Makwetu has pointed out that the South African National Roads Agency’s bumpy road with e-tolls in Gauteng continues to bode ill for the entity's financial stability due to resistance by motorists.

After scrambling to find funding to make up for a gap of R6bn, Sanral has reportedly started issuing summonses to motorists in the province who have defaulted on their toll debt.

The funds are aimed at funding the Gauteng Freeway Improvement Project (GFIP), but motorists have refused to pay.

According to the entity's financial statements contained in its annual report, the impairment losses for the current financial year amount to R6.4bn. Of this, R6bn relates to the e-toll debtors.

Transport Minister Blade Nzimande and Finance Minister Nhlanhla Nene must seek a lasting solution to a challenge that has, for six years, dogged an otherwise healthy and well-run state-owned entity.

“The entity’s funding strategy for the next 12 months relating to toll operations is dependent on a Cabinet decision regarding GFIP e-tolls. These events or conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern,” said Makwetu.

The financial statements in the annual report showed that National Treasury committed to a shift of funds from the non-toll transfer in the transport department’s budget vote towards allocations for the improvement project.

“Until a final decision is taken by the state president on this matter, the e-toll scheme continues to operate and no provision for the discontinuation of e-tolls was made in the financial statements,” said Makwetu.

Makwetu also noted irregular expenditure of R347m in the financial year due to non-compliance with prescribed procurement guidelines, mostly spanning from contracts of the previous year which were deemed irregular.

Some goods with a transaction value below R500 000 were procured without obtaining price quotations as required by National Treasury regulations. Other contracts were awarded without approval from the appropriate delegated official.

“There has been a slow response by senior management to address previously reported deficiencies to oversight regarding the financial reporting process, including detailed reviews of the financial reports by delegated officials, compliance and related internal controls,” Makwetu said.

In his report, Sanral chairperson Roshan Morar said Treasury’s R406m special grant and Sanral’s willingness to transfer R1.6bn from non-toll business to its toll road portfolio was necessary to reduce losses incurred as a result of non-payment for toll roads.

“Sanral is alert to the fact that we operate in a climate where there is widespread resistance to payment by users of public services such as water and electricity and this is exacerbated by the adverse economic climate. In this context, the finance of new roads through private financing and toll collections becomes increasingly challenging,” said Morar.

Makwetu highlighted investigations into contracts Sanral entered into with service providers, including investigations into the freeway improvement project itself.

Investigations include one initiated by former Public Protector Thuli Madonsela which concluded in January and another by the Directorate for Priority Crime Investigations into allegations against construction companies.

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