The road network that Sanral is responsible for has increased from 19 704km in 2013 to 23 569km at the end of March 2023. Picture: Michel Bega
The South African National Roads Agency (Sanral) is considering to develop further toll roads to fund an identified R15 billion per annum shortfall to fulfil its mandate over the next decade.
Sanral revealed the R150 billion funding shortfall when it tabled its annual performance plan in parliament last month.
Sanral general manager for communications and marketing Vusi Mona told Moneyweb the roads agency previously identified a portfolio of non-toll roads that require major improvements, such as reconstruction with additional lanes, to address current service level constraints on the routes.
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Mona said these improvements, at an estimated value of R150 billion, were identified as being “viable to implement through the toll financing mechanism”.
He said this would enable Sanral to accelerate implementation within a four-year period and unlock major economic benefits, such as job creation, while reducing road user costs associated with the improvements much sooner.
“Should the implementation of these improvement projects not be possible through the toll financing mechanism, we will require an additional R15 billion per annum non-toll allocation for the next decade to implement these improvement projects, as the current non-toll allocation is not sufficient to both sustain and improve the non-toll network,” he said.
Mona said the road network Sanral is responsible for has increased by 19.6% in the past 10 years – from 19 704km in 2013 to 23 569km at the end of March 2023.
He added that Sanral will “for now” be responsible for 23 569km of the country’s roads in its 2023/24 financial year “unless further strategic and primary road transfers from provinces occur”.
“Currently, still about 11 000km of strategic and primary roads are to be transferred to Sanral.”
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Mona said no budget transfer from the province to Sanral occurs in the year the road is transferred to the roads agency but the allocation to the relevant province through the Provincial Road Maintenance Grant will reduce in subsequent financial years in relation to the reduction in network length.
“Sanral’s budget allocation will normally be increased over the future three-year MTEF [Medium Term Expenditure Framework] budget cycle in a phased manner, as funding allows.
“In the year of takeover, Sanral will reprioritise existing non-toll funding to address the immediate backlog maintenance needed to make the roads safe,” he said.
“Then, as part of the annual MTEF budget submission in June of each year, Sanral will submit a request for additional funding allocation going forward based on network length incorporated.”
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More than 400 tenders with an estimated value of about R87 billion are included in Sanral’s 2024 procurement plan that was recently submitted to National Treasury.
Mona said not all tenders will be awarded in the 2023/24 financial year but they will probably all be advertised and in some stage of procurement by the end of March 2024.
However, he said the impact of the latest regulatory change to the Preferential Procurement Regulations on the delay in closing tenders, effective from 16 January 2023, must still be measured.
The planned further steep increase in tender awards in Sanral’s 2023/24 financial year follows the roads agency recently reporting that it awarded “a whopping 377 tenders to the value of R51 billion” in its financial year to end-March 2023 compared, to the 377 tender awards valued at R21.8 billion in its 2021/22 financial year.
Mona explained that the increased value of tender awards in Sanral’s 2022/23 financial year was as a result of the types of projects put out to tender.
“In 2022, the focus was on operational contracts for maintenance of roads, whereas the focus in 2023 was on large capital projects which expand and upgrade the network,” he said.
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Mona added that Sanral’s board approved a turnaround strategy in December 2022, which allowed specific interventions to capacitate the supply chain management processes.
He said some of the previous financial year’s procurement process constraints were also ironed out, which led to efficiency in the evaluations of tenders.
“However, it should also be noted that Sanral would have awarded many more projects in the 2022/23 financial year if it was not for the ConCourt [Constitutional Court] judgment in February 2022, which led to the suspension of all tender advertisements.
“Sanral only resumed tender advertisements in August 2022 after approval of a Preferential Procurement Policy by the board and the amendment of tender documents to comply, which had resulted in 174 tenders being delayed,” he said.
Sanral was able to award tenders valued at R51 billion in its 2022/23 financial year despite the roads agency only recognising total income of R18.578 billion in its 2021/22 financial year, which includes the government grant for the non-toll portion of Sanral’s portfolio.
Mona explained this saying it was a known fact there had been a significant backlog in Sanral’s procurement process as it relates to the awarding of construction tenders.
He said Sanral and National Treasury did not have the same understanding on the 30% subcontracting clause and this process took 18 months to resolve – and during that time, no construction tenders went out.
“Furthermore, there were also at least 60 projects that had stalled because of disruptions by communities. Once all these issues were resolved, it resulted in a natural ramp-up, in order to clear the backlog.”
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Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage said on Wednesday that if provincial government does not or cannot do its work because of political interference, ineptitude, a lack of meaningful oversight and politics, it is better that some of these roads are handed over to a state entity “that is worth its salt in this space”.
Duvenage said Sanral “lost its way” but its credibility is being improved through its new CEO, although it is having to live with “a trust deficit” because of damage to its brand that will take a while to fix.
“There is nothing wrong with them inheriting more kilometres and then getting the funds and doing it properly,” Duvenage said.
“What we need from Sanral is greater transparency in all of this space so that when a new road is built we can see very clearly what is the cost per kilometre, what is the average cost out there, why are they spending X?
“That is the type of stuff we asked around GFIP [Gauteng Freeway Improvement Project] when we did those reports to show that we have been ripped off,” he said.
Duvenage said Sanral had to show that proper tender processes are being followed and tenders are not being handed out “to a crony of somebody in the Department of Transport who has quickly set up a road building company” and kickbacks are given on the contracts awarded.
He stressed that Outa is not against boom tolling that has followed due process and makes sense, with the money collected used to fix and build the roads – but it is opposed to e-tolling because it has failed and will never have a 10% collection rate.
Duvenage added that if toll roads are to be outsourced to concessionaires, there must be a lot more transparency about how much revenue is collected and how much is being spent on the toll road because “when it’s outsourced, that is when corruption happens”.
“Let’s hear their [Sanral’s] plans and if they can’t do that and then need another R15 billion, they must explore that because the whole topic of road financing in this country now needs a serious discussion.”
This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.
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