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SANRAL recently took a bold initiative to make its draft transformation policy public. During
October to December 2017, it discussed this policy in great detail with internal and external
stakeholders, including the construction and engineering sectors and other related industries. The
final version will be published in 2018 to complement its long-term strategic vision, Horizon 2030.

What sets SANRAL’s new policy apart from other transformation initiatives is that it is proactive,
implementable and sets realistic and achievable goals. It covers all aspects of its business, from
major projects to professional services.

As a first step to speed up transformation, SANRAL has committed itself to breaking down
monopolies in the supply chains of materials, equipment, technologies and procurement and to open
the sector to broad-based participation by black South Africans.

It commits itself to exceed the minimum levels set by the prevailing legislative and regulatory
frameworks. It identifies 10 subsectors of business that cover all of SANRAL’s activities and set clear
and reachable goals for each sector.

On capital projects, for example, it states that it will only do business with contractors that are a
minimum 51% black-owned with at least 30% management control by black people and Level 2 B-
BBEE rating. This policy will also apply to consultants and established suppliers whose annual
turnovers exceed R50m.

No company will receive more than 15 tenders in a year, with a further limitation of three per province.

To ensure a level playing field in the industry, SANRAL will enter into empowerment agreements with
entities at the top of the supply chains for construction material, equipment and supplies. Such
agreements will be broad-based in nature and designed to benefit local communities within the areas
where construction activities will take place.

Ismail Essa is SANRAL’s Head of Transformation

A reduction of R2.6bn in SANRAL’s allocation and greater clarity on the government’s position on
road tolling were some of the key features of the 2018/19 budget statement delivered by former
Finance Minister Malusi Gigaba.

The speech and the Budget Review tabled recently contained important references to SANRAL that
will have an impact on its short- and long-term future plans. Among these are:

A reduction of R2.6bn in its budget, compared with the allocations in the 2017 Medium Term
Budget. Similar cuts were also announced for the SA Revenue Service, Prasa and four water
boards.
A commitment that SANRAL will continue to deliver on plans to resurface 3 200km and
strengthen 1 475km of national roads over the medium term.
An allocation of R29.1bn for capital investment in non-toll roads, with an additional R4.3bn for
the Moloto Road and R2.1bn – from 2019 to 2021 – for the N2 Wild Coast Highway.
In the Budget statement it is noted that “the finances of SANRAL remain weak” due to
opposition to the GFIP project. “The Agency may require recapitalisation in 2018/19,” it
states.

Gigaba did not refer to tolling or e-tolls in either his speech or the media conference that preceded its
delivery in Parliament. However, the extended budget statement makes it clear that the government is
committed to the principle of road tolling.

A Cabinet committee has been set up to develop a tariff determination framework that will oversee the
setting of road tolls.

Gigaba said that the government might be required to provide financial support to several SOCs in the
coming year through the disposing of non-core assets, strategic equity partners or direct capital
investments.

SANRAL budget – all the numbers:

• Over the medium term, SANRAL intends to focus on undertaking preventative maintenance
  to improve and preserve the national road network.
• It plans to resurface, strengthen or improve some 4 700km of roads and build new
  interchanges and bridges.
• Total expenditure is expected to increase at an average annual rate over the medium term –
  from R34.7bn in 2017/18 to R37.2bn in 2020/21.
• The bulk of SANRAL’s expenditure is going towards payment of service providers for road
  maintenance or construction. This is projected to increase at an average annual rate of 30%
  over the medium term – mostly due to upgrades to the N3 Mariannhill and the N2 North and
  South Coast roads.
• Toll revenue is expected to increase at an average rate of 5%.
• The staff complement is expected to remain constant at 390. Spending on compensation will
  grow at an average of 10.5% – from R312m in 2017/18 to R421.5m in 2020/21.

The role of state enterprises to grow the economy and transform society remains a vital priority for
South Africa, said President Cyril Ramaphosa in his first State of the Nation address.

He also addressed problem areas:

• Governance – Government will change the way in which boards are appointed so that only
  people with expertise, experience and integrity serve in these vital positions. Board members
  will play no role in procurement and the Auditor General will strengthen external audit
  processes.
• Coordination – work will continue on the broad architecture of the state-owned sector to
  achieve better coordination, oversight and accountability.
• Financial constraints – many SOEs experience severe challenges which has impacted on the
  performance of the economy and placed pressure on the fiscus. Government will “intervene
  decisively” to stabilise and revitalise SOEs.
• Funding models – some SOEs don’t have a sufficient revenue stream to fund their
  operational costs. Government will review the funding models in consultation with
  stakeholders to address structural issues.
• Size and composition – the structure and size of the state must be “optimally suited” to meet
  the needs of the people and ensure the most efficient allocation of public resources. He will
  initiate a process to review the configuration, number and size of government departments.
• Corruption – the President promised that 2018 will be the year “in which we will turn the tide
  of corruption in our public institutions” and pointed to recent action taken at a prominent SOE
  as “just the beginning.”

The state has learnt “some valuable lessons” from its experience in building infrastructure, which will
inform the way ahead.

Thus, it will focus strongly on:

• improvements in budget and monitoring systems;
• improving the integration of projects; and
• building a broad compact on infrastructure with business and organised labour

Tough decisions will be taken to restore confidence in the South African economy and put the country
on a path of growth, employment and transformation.

At the core is a commitment to form partnerships with business, labour and civil society and to draw
deeply from experience through the appointment of advisory bodies and the convening of high level
summits.

Radical economic transformation remains the objective especially through initiatives that are
underway to empower the youth, create more black industrialists and improve the position of black
women in the country’s economy.

What will be done:

• Ramp up the role of small business.
• Revive the manufacturing base.
• Convene a jobs summit.
• Establish an advisory Youth Working Group.
• Youth Employment Service to get interns into private sector.
• Boost tourism.
• Intensify focus on infrastructure.
• Embrace advances in science, technology, innovation.
• Attract investment – international investment conference to be held soon.
• Bring policy certainty.
• Stabilise vital state institutions, like SARS and the National Prosecuting Authority.