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Trump’s toll plan a fit for South Africa

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N_ROUTE_1st QUATER_LEAD 3

US President Donald Trump made a point in his inauguration speech to emphasise his election pledge to spend $1 trillion on infrastructure investment over ten years. He has repeatedly promised to “rebuild highways, bridges, tunnels, airports, schools and hospitals”.

 

In his inauguration address, the Republican president said the nation’s infrastructure “has fallen into disrepair and decay”.

 

Those words could just as easily have been applied to South Africa’s infrastructure – and that of many other countries. South Africa is not alone in facing an infrastructure backlog. Rapid wealth accumulation and assets such as cars, as well as a far more mobile population in   many countries, means their infrastructure is as inadequate as ours.

 

Corporate South Africa is flush at the moment, sitting on more than R725bn balance-sheet cash. It is obvious that South Africa Inc is on a long-term investment strike – at home, at least.   

 

It is evident that business will be prepared to invest in the local economy where incentives are in place to overcome other concerns. We already have templates of successful Public-Private-Partnerships (PPPs) in several sectors of the economy. In the renewable energy and toll road sectors, regulations exist.

 

Car manufacturing companies also invest due to well thought-out policy and predictable incentive packages. These examples create many jobs and stimulate the economy at negligible cost to the government. It needs to be rolled out to many more sectors, starting with accelerated toll road building.

 

The American president has agreed to a policy that provides tax credits or tolls on new roads. The US plan in its current rough form would seek to incentivise the private sector to increase investment in infrastructure projects on the basis of tax credits and future usage fees, such as road tolls. As a result, US governors have already flagged 300 high-priority projects that are ready to proceed “today”.

 

To kickstart South Africa’s own infrastructure roll-out would simply require a change of heart by government as to the level of private participation. For instance, Trump’s policy aims to essentially sidestep political squabbles by focusing mostly on private investment. Here is a policy choice that South Africa could immediately follow for quick results.

 

Trump is not the only leader looking to stimulate infrastructure development through the private sector: Germany, India and Chile are also looking at private sector participation in their road systems. Tolls generate sufficient cash flow to develop the infrastructure more efficiently.

Graeme Blewitt is the CEO of Bakwena Platinum Corridor Concessionaire

Premier welcomes Wild Coast Road

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(in the pic - Eastern Cape Premier Phumulo Masualle delivering his address). President Jacob Zuma's State of the Nation Address speech debate in the National assembly in Parliament, Cape Town. 16/02/2016, Elmond Jiyane, GCIS
(in the pic – Eastern Cape Premier Phumulo Masualle delivering his address). President Jacob Zuma’s State of the Nation Address speech debate in the National assembly in Parliament, Cape Town. 16/02/2016, Elmond Jiyane, GCIS

The Eastern Cape provincial government is fully behind the N2 Wild Coast highway project. This was confirmed in Premier Phumulo Masualle’s State of the Province address in February. He said plans would move ahead for the development of the road from East London to the KwaZulu-Natal border.

Contractors will be on site in the first quarter of the 2017/18 financial year, following the allocation of tenders by SANRAL.

The project forms part of the Strategic Integrated Projects in the Eastern Cape. It will include the construction of two mega-bridges over the Msikaba and Mtentu rivers, seven additional bridges and three interchanges.

Contracts for the haul roads for the mega-bridges have been awarded – some R63m for the Msikaba bridge and the same amount for the Mtentu bridge.

Premier Masualle also referred to other national road projects that involve SANRAL:

  1. The resurfacing of the Nkantolo Road, which leads to the birthplace of struggle leader OR Tambo
  2. The construction of the R61 from the Mthamvuna River to Mbizana
  3. The R72 from East London to Port Alfred
  4. Sections of the N2 between East London, Peddie, Grahamstown and Port Elizabeth

As is the case with all SANRAL projects, SMMEs, particularly black-owned businesses, and local labour will be used as far as is possible, resulting in a significant injection into the local economy.

To make the process inclusive and transparent, a steering committee is established for each contract, comprising representatives of the local community and leaders, to identify labour to be interviewed for potential employment.

On the greenfields section of the Wild Coast Road, it is expected that R450m will be paid over four years to locally employed labour. This excludes indirect employment generated by suppliers.

Major South African and international construction firms are among the bidders for the mega-bridges. Because of the nature of these bridges, it is possible that a limited number of international experts will be employed on these two projects.
[Fact box] This will in no way affect the employment of local labour and South African construction professionals, but it will inject vital expertise, necessary for the completion of these two unusual and massive projects.

Treasury increases SANRAL’s budget allocation

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N7/Clanwilliam road upgrade project; Western Cape, near Clanwilliam, South Africa. 09/06/2015 - Photo by Brett Eloff. Construction of the new 380m bridge.
N7/Clanwilliam road upgrade project; Western Cape, near Clanwilliam, South Africa. 09/06/2015 – Photo by Brett Eloff.
Construction of the new 380m bridge.

There was a significant increase in SANRAL’s allocation from the national budget, which was presented to Parliament by Finance Minister Pravin Gordhan in February – up from just over R13bn to R15.4bn.

SANRAL CEO Skhumbuzo Macozoma said this would greatly increase the agency’s capacity to improve the existing non-toll network. The majority of these roads are beyond their design-life of 25 years.

It will also enable much-needed improvements on the roads that were recently incorporated into the national network from provinces. The budget will further increase by another R2bn, to R18bn, by 2019/20.

Toll roads will continue to be financed through borrowings in the capital market and recoveries through toll fees. The latter is expected to grow moderately, from R5.3bn to R6.1bn, over the medium term.

Two successful bond auctions in the second half of 2016/17 demonstrated that investor confidence in SANRAL had returned.

Minister Gordhan stressed that state-owned enterprises should not depend only directly on the budget for revenue. Hence, SANRAL is formulating an integrated funding model to enhance its financial position.

While the agency is mandated to deliver a world-class national road network, it also has to support the government’s economic transformation priorities.

SANRAL is already active in this regard. It engages small contractors, particularly black-owned SMMEs, on business opportunities when roads are constructed, repaired or maintained. It achieves this through its procurement policies and its ability to direct its spending toward emerging enterprises.

This will be significantly boosted by the application of the new Preferential Procurement Policy (PPFA) Act, from 1 April, which will enable more targeted procurement. SANRAL will take this further over the medium term through the implementation of a new transformation policy that is being developed.

The agency supports the drive by the Gauteng provincial government to extend the Gautrain. The future of mobility in the province lies in intermodal transport infrastructure that underpins integrated public transport services which is prioritised over private car use.

SANRAL will engage with the province to assist in its aim to improve commuting for current public transport users, while over time, encouraging a shift from private cars to public transport.

SANRAL wins award for its Freeway Management System

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FMS-1
Technology is used to manage traffic, and to provide road users with traffic conditions on a real time basis.

In its quest to make roads safer and more efficient, the roads agency’s efforts were recognised at a ceremony of the Intelligent Transport Society of South Africa Awards (ITSSA), held at the Sandton Convention Centre recently.

The South African National Roads Agency (SOC) Limited (SANRAL) won the ITSSA Award for Excellence for its Intelligent Transport System (ITS) project.

While SANRAL received the ITSSA Award for Excellence for the Freeway Management System (FMS) in the Western Cape, the submission was also judged for the larger FMS project, which extends to Gauteng and KwaZulu-Natal, and its significant positive impact on the motoring public by relaying real-time information on the flow of traffic.

Receiving the award, SANRAL’s Eastern Region ITS Project Manager, Kersen Naidoo, said: “It is a great honour to receive this award on behalf of SANRAL.

“Our team of engineers can be proud of the world-class system they have developed and continue to maintain. This is a great example of how infrastructure improves the quality of life of commuters and sustains the economy of the country.”

The conference and exhibition

The awards took place during the i-Transport and UATP Conference and Exhibition.  It has become a well-established event on the transport calendar, a platform for knowledge sharing in the quest to promote the sustainable deployment of ITS projects.

This year’s theme: “Future of Public Transport: Go Green – Go Smart” reflected the need to improve transport efficiencies, to reduce the carbon footprint of the transport sector and to encourage modal shifts. The theme specifically reflects the strong synergy between public transport operations and Intelligent Transport Systems.

Musina Ring Road on track for completion

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Musina-ring

One year after construction started on the Musina Ring, north of Limpopo, it is on schedule to be completed on time, unless weather conditions prevent the completion.

Climate conditions is the only factor standing in the way of the road’s completion within the next 18 months

The R625-million project by the South African National Roads Agency (SOC) Limited (SANRAL) will divert traffic from the Beit Bridge Border away from Musina CBD and result in major improvements in road safety and less damage to vital infrastructure within the town.

Ben Botes, resident engineer on the project, said trucks travelling to and from Beit Bridge are causing major damage to the road infrastructure in town.

Traffic is heavily congested as heavy-duty vehicles share the narrow roads with other road users and pedestrians. Heavy traffic passing through the Musina CBD poses a danger to pedestrians and the local business community have raised concerns about access to their premises.

Botes said: “The Ring Road will ease congestion and reduce the dust blown up by traffic which creates health problems among residents, it will also save travel time to the road users and reduce vehicle operating costs.”

Job creation and business opportunities

Local residents will benefit through the project in the form of job and business opportunities.

The project includes the building of nine big structures, five bridges and four in-situ culverts. Local sub-contractors are involved in the construction of these structures.

Owen Simba, site manager at Makali Construction said: “We are busy constructing the nine structures required for the road construction, the bridges and the culverts at an investment of R114-million.

“We have employed 12 skilled labourers as well as 23 local general workers and as the project progresses we will start hiring more people.”

SANRAL is committed to creating equitable access for small contractors, particularly black-owned enterprises through its procurement processes.

Baldwin Luvhengo, a previously unemployed general worker who is now benefitting from the project, said: “It feels great to work again and now I am able to look after my family and put food on the table. I am saving some money to get a certificate in the construction field when the project is complete.”

Community liaised with properly

The 8km project runs through the Nancefield community which necessitated the relocation of 30 households. SANRAL sent a consultant to each household to negotiate the relocations.

“It was agreed that they will receive the same size structure they had in Nancefield. The community is happy with this arrangement and are looking forward to the move,” said Petrus Mbedzi, the project liaison officer.

Botes said the project also consists of a barrier wall that will minimise noise levels for the households living next to the road.

He said: “I am confident that road users and the residents will soon start to enjoy the benefits of a newly constructed Musina Ring Road.”

R107-million for maintaining Eastern Cape roads

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Eastern-Cape-Road-Trip-1
The Eastern Cape has invested up to R107-million in plant machinery for the maintenance of provincial roads located in municipalities.

The Premier of the Eastern Cape, Phumulo Masualle, has highlighted the building of two bridges by the South African National Roads Agency (SOC) Limited (SANRAL) during his State of the Province speech.

He also spoke about how the Eastern Cape has invested up to R107-million in plant machinery for the maintenance of provincial roads located in municipalities and how it will continue with the maintenance of surfaced roads through a programme of resealing.

Masualle said the province is continuing with the construction work on strategic roads and related infrastructure throughout the province.

“As we implement the Presidential Strategic Integrated Projects in the province, we are moving ahead with plans for the development of the N2 Wild Coast route from East London to the Mthamvuna River.

“This project includes the construction of two mega-bridge structures on the Msikaba and Mthentu rivers, as well as seven additional major river bridges and three interchanges.”

Masualle added SANRAL anticipates the tender for both bridges will be awarded and contractors be on site by the first quarter of 2017/18 financial year.

Other roads under construction include the R61 from the Mthamvuna River to Mbizana, the R72 from East London to Port Alfred, and sections of the N2 between East London and Port Elizabeth.

The bridges

The bridges and the overall highway project will be a catalyst for local development, bringing direct and indirect business opportunities for small and medium enterprises while connecting bigger towns and local communities with each other. It will also make the Wild Coast tourist attractions more accessible.

The Msikaba River Bridge will be a 580m single span cable-stayed bridge – the largest of its kind in South Africa. The bridge is a unique spectacular structure that crosses a deep forested gorge which is flanked on each side with high sandstone cliffs. At no stage will work be done in the gorge. The deck will be cantilevered out from the banks using conventional construction techniques.

With the bridge 190m above the river, the bridge erection team will undoubtedly be presented with some challenging weather conditions. The deck is a composite steel and concrete deck with an overall width of 22.8m. It will have four traffic lanes with narrow shoulders and two 1.4m wide pedestrian footpaths.

Some 18km north of the Msikaba River is the proposed Mtentu River Bridge. The deck of this bridge is some 220m above the river and it will be a 1 132m-long concrete structure with a balanced cantilever main span of 260m with depth of deck varying from 15m at the piers to 5m at the centre. The approach spans of the bridge will be incrementally launched and consist of 66m-long spans with a constant depth of 5m.

This bridge will be one of only a few cantilever bridges in the world with spans of 260m or more.

Joburg honoured for effective traffic management

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By combining new toll roads, freeway improvements and a new traffic management system with the new Gautrain and integrated bus system, Johannesburg has seen a decrease in congestion, despite an increase in population.

In a study of 390 cities around the world, Johannesburg – South Africa’s most densely populated city – has earned special recognition from an international panel of traffic experts for its effective traffic management systems.

TomTom, the Dutch navigation telematics company, has selected Johannesburg as the city with the best traffic management in the world in its 2017 Traffic Index (TTI).

The annual report details cities from around the world with the most traffic congestion.

For the first time this year, TomTom is celebrating those cities that deserve special recognition for their efforts to beat traffic congestion with the introduction of the TomTom Traffic Index awards.

Using data from 2016, the TTI looks at the traffic congestion situation in 390 cities in 48 countries on six continents – including Rome, Rio de Janeiro, Singapore and San Francisco. TomTom works with nearly 19 trillion data points that have been accumulated over nine years. This is the sixth year of the TomTom Traffic Index.

Six cities have been chosen for special recognition by an international panel of traffic experts. Each expert nominated three cities, and subsequently, all experts voted to determine the award-winning cities from the nominated cities. Along with Johannesburg, winners include Moscow, Stockholm and Rio de Janeiro. The full list of winners can be found here: www.tomtom.com/trafficindex/awards

Traffic management award

By combining new toll roads, freeway improvements and a new traffic management system with the new Gautrain and integrated bus system, Johannesburg has seen a decrease in congestion, despite an increase in population.

The decrease can, in part, be attributed to the Gauteng Freeway Improvement Project (GFIP). It consisted of improvements to freeways in Gauteng, as well as Open Road Tolling and incident detection and response systems, which are managed from the centralised integrated Transport Management Centre (TMC).

Megan Bruwer, project coordinator for the Stellenbosch Smart Mobility Laboratory, said that the Gautrain has been successful in reducing traffic congestion in Johannesburg. “The system opened to the public on one route in 2010, in time for the 2010 FIFA World Cup. Additional routes were opened in 2011 and 2012.

“Park and ride facilities have been provided at stations and bus feeder routes are operated by the Gautrain. The Gautrain has been very successful, with ridership rising to 63 000 passengers every weekday in 2015, reducing reliance on the freeways and private car use between Pretoria and Johannesburg.”

SANRAL’s new appointments

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Ismael-Essa-inside
Essa, a qualified civil engineer, is an industry heavyweight with 36 years’ experience within the roads and civil engineering sector.

 

The South African National Roads Agency (SOC) Limited has made two new appointments that will look to ensure emerging black-owned enterprises are given more opportunity to do business with the agency.

Ismail Essa is the new Transformation Manager – who will report directly to the roads agency’s CEO, Skhumbuzo Macozoma – while Asithandile Ben-Mazwi is the new Southern Region Supply Chain Officer.

Announcing the appointment, Macozoma said: “The time to bolster government’s economic transformation priorities is now.

“One of Mr Essa’s immediate priorities will be to ensure sub-sector transformation across the supply value chain we deal with. This will include, among others, construction work, maintenance, property and operations, professional services and non-core services.

“Secondly, he has been tasked with ensuring that SANRAL creates an enabling environment for small contractors, particularly black-owned ones, to access opportunities through procurement.”

Working close to the CEO

Essa, a qualified civil engineer, is an industry heavyweight with 36 years’ experience within the roads and civil engineering sector.

Backed by 21 years’ experience as a contractor with a major listed company in South Africa, Essa first joined SANRAL in 2001 as a Senior Project Manager. Within two years, he was promoted to Regional Manager for the Northern Region (Gauteng, Mpumalanga, Limpopo and North West provinces), a position he has held for the past 14 years.

He is a long-standing member of the South African Institution of Civil Engineering. He also holds a professional registration with the South African Council for Project and Construction Management Professions.

Essa believes his past experience will be instrumental in this new role as he understands private sector operations and the need to create inclusive opportunities towards the transformation of the economy.

“The industry has been transforming slowly, our intent now is to give renewed impetus to the progress thus far made,” said Essa.

“SANRAL service providers need to reflect the demographics of the country. It is now my job to reduce dominance by big contractors as this is a major barrier for small and new contractors and consultants in accessing opportunities offered by SANRAL.”

Macozoma explained that this is a new position which has been set up to fundamentally direct spending towards emerging black-owned enterprises.

Adding value to supply chain

With extensive experience in supply chain, Ben-Mazwi will be an asset to SANRAL.

Ben-Mazwi
Ben-Mazwi is looking forward to using her experience to provide strategic guidance to the region.

She will be responsible for managing all departmental supply chain management (SCM) processes and reviewing and monitoring compliance on SCM matters in the region.

Ben-Mazwi will also develop and engineer standard operating procedures with regards to SCM as well as develop and implement controls for contract management, among other things.

She said: “My position at the Department of Roads and Public Works made me realise my passion for roads and transport. The position I filled, and all those I have filled before, gave me enough grounds to be able to be positive [that] I can fulfil my role at SANRAL.

“I am excited to be working on tenders so I can have that interface with people as I also have a passion for people. I look forward to using my experience to provide strategic guidance to the region.”

SANRAL Southern Region’s Regional Manager, Mbulelo Peterson said, “SANRAL Southern Region is fortunate to have Ms Ben-Mazwi join our team as she has extensive knowledge in supply chain management.

“Before joining the Southern Region she was an Assistant Manager (demand) and later acting Supply Chain Manager in the Department of Roads and Public Works Chris Hani Region, which is experience that would add value to SANRAL.”

Ben-Mazwi’s career kick-started in 2005 shortly after completion of her cost and management accounting diploma at Nelson Mandela Metropolitan University (NMMU). She then started her in-service training at a catering company in East London.

She later worked for companies including: Clicks head office, Total SA, and Vodacom, where she filled the roles of an accounts and creditors reconciliation clerk. In 2007 she joined the Passenger Rail Agency of South Africa (PRASA) as a Senior Administration Officer, and in 2008 was promoted to Assistant Manager, a role she filled until 2011.

SANRAL in the 2017 Budget

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Despite ongoing uncertainty surrounding fee collection for the much-contested e-tolling of certain Gauteng freeways, National Treasury believes investor confidence in the agency has returned following the conclusion of two successful bond auctions last year.

Finance Minister Pravin Gordhan presented the 2017 Budget and highlighted how state-owned companies (SOCs) were an important part of the restructuring and strengthening of the economy.

The South African National Roads Agency (SOC) Limited (SANRAL) being one of them plays a major role in providing arteries for the flow to the economic heart of major cities.

Gordhan said that SANRAL will receive R15.4-billion for the strengthening and maintenance of the national road network, which now stands at 21 946 km.

He added: “State-owned companies are governed by a strong legal framework, and Cabinet has endorsed a series of measures to reinforce governance and accountability and clarify their development mandates. This imposes substantial obligations and responsibilities on boards and senior managers. We expect the highest standards of ethical leadership and understanding.

“With a combined asset base of R1.2-trillion, the SOCs are well-placed to partner with private sector investors in growing the productive capacity and infrastructure of our economy. But they must be financially strong, governance must be sound, and boards and executives must have the necessary competencies to run complex business enterprises.”

Investor confidence in SANRAL

Despite ongoing uncertainty surrounding fee collection for the much-contested e-tolling of certain Gauteng freeways, National Treasury believes investor confidence in the agency has returned following the conclusion of two successful bond auctions last year.

Gordhan said: “Some degree of uncertainty around Gauteng toll fees persists. However, investor confidence has returned, as demonstrated by SANRAL’s two successful bond auctions during the second half of 2016.”

The budget continues to prioritise both national and provincial economic infrastructure requirements.

Road upgrades on the cards

SANRAL also plans to borrow R35.5-billion in the domestic market over the medium term in addition to its total borrowings of R48.8-billion as at March 31, 2016.

A further R1-billion has been provisionally set aside for the N2 Wild Coast road on the 2018 budget, depending on how discussions on the funding model for the project concludes.

SANRAL’s expenditure

SANRAL plans to resurface 3 200 km and strengthen 1 475 km of national roads.

The agency’s expenditure is expected to increase at an average annual rate of 17.1% – from R26.3-billion in 2016/2017 to R42.2-billion in 2019/2020.

Spending on improvements will grow by 65.2% per year over the medium term as SANRAL focuses on its ever-changing road network.

The staff component of the agency is expected to increase from 330 to 390 due to the absorption of interns into the organisational structure.

This will result in an increase in compensation at an annual rate of 12.7% – from R275-million to R394-million.

 

Why KING IV matters

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King-inside

One of the hallmarks of our relatively young democracy has been its contribution to the discourse on corporate governance now enshrined in what is commonly referred to as the King Report.

In July 1993, the Institute of Directors in South Africa asked retired judge Mervin King to chair a committee on corporate governance whose report (King I) led to the first corporate governance code for South Africa.  Since then three more reports have been issued, King II (2002), King III (2009) and King IV (2016).

While the first three reports generally applied to listed companies, King IV succeeds in extending the reach of good practices and principles that are used to benchmark corporate South Africa into the public sector.

Indeed, one of the key strengths of King IV – compared to its earlier editions – is the inclusion of sector supplements that provide much clearer guidelines to public sector entities on how to apply good governance guidelines to their particular circumstances.

The objectives of state-owned entities obviously differ markedly from private sector companies. There generally is no profit motive and in many of our business activities we have to abide by the developmental mandate given to us by our shareholder (Minister) who represents the South African government.

This is reflected in our emphasis on the empowerment of small- and medium-sized enterprises and our commitment to allocate a growing share of work packages in the road construction and maintenance sectors to black-owned and women-owned companies.

The successes we have achieved in community development, in skills transfers, in bursaries and internships, in research into road safety and transport engineering are well-documented. SANRAL is proud of the contribution it has made to economic transformation and empowerment – without neglecting its primary mandate to manage the national road infrastructure.

As a public sector company, our activities are defined by the SANRAL Act and the Public Finance Management Act. Within this framework SANRAL has, however, in the past observed most of the principles of governance contained in the King Codes and will, most definitely, continue to do so once King IV becomes effective in April.

The value of King IV lies in the manner in which it has distilled the previous 75 principles for good corporate governance into 17 – each linked to very distinct outcomes. The sector supplements make the report more accessible than the 2009 version and will enable entities such as SANRAL to better measure our performance against broader standards.

King IV recognises the need for state-owned entities to address the serious challenges facing South Africa in respect of service delivery and the provision of strategic national infrastructure. But it also emphasises the importance of such entities to be viable, efficient and competitive to ensure the country’s citizens receive value for their tax money.

Within SANRAL we are conscious of the fact that the state company operates within the public contracting arena where transparency and accountability are of the utmost importance.

We took clear note of the public concerns that have been expressed about historical collusion in the construction and engineering sectors and are adapting our own processes and procedures in line with the recommendations of the Competitions Commission.

We also recognise the fact that SANRAL raises significant amounts of its capital from the bond and capital markets and that the choices we make on governance and ethical business conduct have discernible impacts on the decisions taken by the investment communities.

King IV emphasises the role of the board in risk and opportunity oversight and it is important to note that SANRAL is already one step ahead of the recommendation to combine the functions of audit and risk management in a single board committee comprised of non-executive members.

Moreover, we welcome the emphasis King IV places on the management and protection of technology and information and the need for companies to develop a ‘cyber-security’ plan. Recent events in the global environment have proven that cyber-hacking is a growing threat and that companies can forfeit their long-standing reputations in a day if they are not adequately protected against malware and industrial espionage.

Thus, the SANRAL board and management have decided to elevate the importance of cyber-security and to ensure our own information technology systems are constantly evolving to keep pace with ever-evolving threats.

In the final analysis, King IV is a welcome step forward to guide the activities of both private sector companies and state-owned entities such as SANRAL. The latter are increasingly operating in a global environment and it is imperative that we bring their governance in line with global best practices.

The SANRAL board is committed to the principles and spirit of King IV in as much as they apply to state-owned entities. It will become an invaluable tool for the agency to review our own governance principles and measure ourselves against the high standards set out in the Report.

This article is written by: Roshan Morar, the Chair of SANRAL’s Board of Directors.