SANRAL’s bond woes and excuses don’t reflect financial reality
However, SANRAL’s financial plight, while separate to the national situation, suffers from the same overspending and questionable accounting decisions which we find in other state owned entities in South Africa.
Over the past few years, SANRAL have had a series of cancelled bond auctions, with their difficulty to raise bond capital largely put down to the uncertainty of the e-toll scheme’s success or poor market trading conditions. However, the Organisation Undoing Tax Abuse (OUTA) believes there are additional and significant factors beyond the e-toll debacle which plagues SANRAL’s ability to raise funds.
The picture any potential financier needs to look at, is not just the ratio of assets to liabilities, but why the value of SANRAL's assets have "artificially" skyrocketed (see graph), as well as SANRAL’s debt to short-term asset ratio and cash flow. For instance, SANRAL’s indebtedness on its toll portfolio has grown from a debt of R6.2 Billion for 1500km of SANRAL administered toll roads in 2007, to over R47.1 Billion in 2015 for 1832 km. This increase of over 522% in debt, coupled with an increase of only 332 km on their toll road portfolio, does not appear to have a corresponding increase in revenue generated, even in light of what they had hoped to achieve with the Gauteng e-tolls.
SANRAL’s ongoing accumulated losses continue to grow each year, while SANRAL continues to run up escalating debt to finance its operations. Even 2015’s recognised e-toll revenue of R3.8 Billion is now cast in doubt following the dismal failure of the e-toll discount dispensation, with SANRAL’s agents collecting less than R150 Million of the R5.9 Billion discounted e-toll debt. This is despite the ongoing threats of legal action and spending over R177 Million in the last financial year in a wasteful marketing campaign.
In light of the above, SANRAL’s extraordinary increased revaluation of their road asset base is exceptionally questionable. By valuing the existing road network to that of current day (inflated) replacement values, they have sought to make their debt vs liability ratio look healthier than it really is. Rather than using external valuers, SANRAL perform this valuation internally as quoted from its 2015 Annual Report: “SANRAL performed the revaluation internally on road assets utilising information supplied by industry experts.”
Scrutinising SANRAL’s actual revenues has cast doubt on the true picture of SANRAL’s financial situation.
“We find it rather imprudent that Minister Peters blames media coverage of the much resisted e-toll system for the road agency’s poor fortunes at the bond markets,” says Wayne Duvenage, the Chairman of OUTA. “What the media have merely done is exposed the public’s anger and resistance to an irrational government scheme which the authorities refuse to realise has dismally failed.”
We believe an in depth analysis and investigation into SANRAL’s financial affairs is long overdue, especially in light of recent evidence of endemic over expenditure of road construction and the expectation of the taxpayers to bail them out if things go wrong.