Extended guarantee for SANRAL

Investment in infrastructure and the good governance of state-owned entities were recurring themes
in the Medium Term Budget delivered in Parliament at the end of October by the Minister of Finance,
Malusi Gigaba.

The extended policy statement released with the speech emphasises that “difficult trade-offs will need
to be made” to avoid a deterioration in the national road network should government decide not to use
tolling as a funding mechanism for major freeways.

Mr Gigaba focused on the important role played by state-owned companies, which he described as
“powerful levers for the state to directly drive economic transformation.” They have played a leading
role in the development of world-class infrastructure which sustains the South African economy.

However, government as the shareholder is also “tired of being dragged into crises” at entities and will
no longer provide bailouts to finance operational expenditure, inefficiency and waste, he said.

The Budget Statement notes that SANRAL has been provided with an extended guarantee of
R38.9bn to expand its toll roads portfolio. In response to public concerns about electronic tolling in
Gauteng, SANRAL introduced a lower-cost dispensation. However, collections remain lower than
projected, making it difficult for the agency to service its debt.

Government has clarified the conditions of the SANRAL guarantee. This gives SANRAL more room to
borrow under the guarantee and allows the agency to service all its commitments over the medium

Over the longer term, an improvement in toll revenue collection is needed to ensure SANRAL’s
sustainability. If government does not proceed with tolling to fund major freeways, difficult trade-offs
will have to be made to avoid a deterioration in the national road network.

Issues to note:

1. Transport and logistics are at the core of the implementation of the National Development
Plan. Reforms will be introduced to drive down port and rail prices, improve global
competitiveness and boost the tourism sector, which is a critical source of revenue.
2. Changes to government’s procurement policies are already yielding results. This includes
targeted procurement from SMMEs and designated groups such as black youth, women,
township and rural enterprises.
3. Supply chain reform is working. The introduction of expenditure ceilings and cost containment
measures in the public sector has already led to savings of more than R2bn. The fight against
abuse of the supply chain management system is being extended to cover both public and private
sector corruption.
4. Spending on infrastructure will grow rapidly. The lion’s share of infrastructure is provided by
state-owned entities – R403bn over the next three years. A new approach will focus on the
maintenance of existing infrastructure, improved procurement and better conditional grants to
eliminate inefficiencies and underspending.