MEDIA STATEMENT
SANRAL refutes claims of ‘creative accounting’ and ‘hoarding’ cash
Pretoria, 18 October 2024 – The South African National Roads Agency SOC Limited (SANRAL) has dismissed as “mischievous and misleading” various claims that its financial records are incorrect.
SANRAL spokesman Vusi Mona says the national roads agency’s financial statements were diligently prepared in line with the best accounting practices and stressed that the Auditor-General of South Africa (AGSA) had signed off on SANRAL’s 2023/24 financial statements with an unqualified audit report.
Responding to a statement and media interviews by the Organisation Undoing Tax Abuse (OUTA), as well as an article in the Daily Maverick, Mona said various claims by OUTA and the media house were not based on facts and could have been clarified if either of the two parties was genuinely interested in understanding SANRAL’s position.
Mona said it was incorrect for OUTA to make the claims that it did without at least seeking clarification from the national roads agency. “SANRAL is a public entity which is proud to be delivering world-class road infrastructure in support of our country’s economy and ultimately its people. It is unhelpful for civil society organisations and/or media outlets to cast aspersions on our accounting practices without so much as providing us the opportunity to clarify any issues they may have. That leads us to conclude that these comments circulating in the media are mischievous and intentionally aimed at misleading the public.”
“SANRAL wants to place on record for the South African public some important facts that easily clarify questions raised in the media, without the relevant organisations seeking SANRAL’s comment,” said Mona.
“Regarding our reporting framework SANRAL wants to clarify that until the year ended 31 March 2023, SANRAL reported its revenue according to International Financial Reporting Standards (IFRS). The IFRS reporting framework was used by SANRAL from 2007/08 and that decision was backed by permissions from the National Treasury. This was done because SANRAL had
bonds which were listed on the Johannesburg Stock Exchange (JSE), for reporting comparability purposes with other State Owned Entities (SOEs) that were also listed on the JSE, and also had loans which had IFRS as part of the requirements.”
“In South Africa, the Accounting Standards Board (ASB) is mandated by the National Treasury (NT) to release reporting standards in South Africa for the public sector. The reporting standards are known as Generally Recognised Accounting Practice (GRAP) and Interpretation of GRAP (IGRAP), which is where a standard is clarified by the ASB so that users and preparers of AFS do not use their own interpretation of a particular standard which is being interpreted. In 2018, the ASB issued Directive 12 titled ‘The selection of appropriate reporting framework’. The aim of the directive was to direct SOEs, government departments and other State-like institutions to report on IFRS if they are commercial entities (meaning their purpose is largely profit driven) and on GRAP where they are largely grant funded from the fiscus. SANRAL is largely grant funded and therefore the reporting framework per Directive 12 should have been GRAP. However, SANRAL was given permission to continue with IFRS until 31 March 2023. This permission was granted to allow ASB to issue financial instruments related standards, for which there were no equivalent GRAP standards. Once these were developed by ASB, NT withdrew the permission to use IFRS as a reporting framework and SANRAL was instructed to apply GRAP from 1 April 2023. The move from IFRS to GRAP had an impact on the reported figures for the current year and prior years, which meant that certain line items on the statement of Financial Performance and Position had to be restated,” said Mona.
Furthermore, regarding e-toll revenue treatment, it is important to note that SANRAL applied the following GRAP and IGRAP standards to recognise its revenue;
GRAP 9 titled “Revenue from exchange transactions”,
IGRAP 1 titled “Applying the Probability Test on initial Recognition of Revenue”, and
IGRAP 20 titled “Accounting for Adjustments to Revenue.”
“The requirements of GRAP standards differ from IFRS in that they require statutory revenue to be recognised as revenue with a corresponding statutory receivable as the entity has an obligation to collect all the statutory revenue. This has resulted in the recognition in revenue of amounts that were previously not recognised under IFRS as the transactions did not meet the requirements of the related standards. The receivables are accounted for in accordance with GRAP 104.
GRAP requires SANRAL to recognise all e-toll fees billed regardless of collectability, resulting in higher e-toll revenue being reported in the 2023/24 financial year and 2022/23 revenue being restated. See Note 2 of the Annual Report for more details on the policies and treatment related to adoption of GRAP. However, the e-toll revenue was also impaired, as a result of collectability issues as explained in expenses under the statement of Financial Performance. Thus, the e-toll revenue is fully recognised as revenue and then impaired in expenses, leaving a small net amount of collectable or realisable revenue.
Hoarding of unspent cash (non-toll)
Mona said the R42 billion underspending on SANRAL’s non-toll portfolio was primarily due to project commitments. “SANRAL’s operational and capital expenditure projects span multiple years, with operational expenses largely involving Routine Road Maintenance (RRM) covered by 134 contracts across the entire SANRAL network. These contracts are valid for five years. Similarly, capital expenditure projects are executed over a period of three to five years.
“As indicated above, the non-toll segment has project commitments amounting to approximately R67.94 billion by the end of the 2023/24 fiscal year. This includes R14.24 billion for the 2024/25 financial year and R53.7 billion projected for 2025/26 and beyond. This implies that the R42 billion is not sitting unused but is allocated to paying for contracts and suppliers related to road maintenance and construction projects,” said Mona.
Ends//
____________________________________________________________________________
Issued by FTI Consulting on behalf of SANRAL. For editorial content or additional information contact: Lwando Mahlasela on 082 440 5305 or pressoffice@nra.co.za