E-toll delay upholds rate cut

The delay in the passage of legislation to put into effect the Gauteng e-tolling system has raised alarm bells that a rating agency could downgrade – for a third time this year – the South African National Roads Agency Limited (Sanral).

Although the ANC withdrew the enabling bill – meaning that the system will not be implemented in December as suggested by the Treasury in October – opposition to the e-tolling plan say they are sticking to their guns even though a credit downgrade will hit taxpayers’ pockets.

A toll gate on the N1 North just before the Beyers Naude offramp in Gauteng. Photo: Dumisani Sibeko. Credit: Independent Newspapers

Their argument is that there are other ways of financing the project, even though the gantries have long been placed along the controversial routes.

Cosatu’s Zwelinzima Vavi has argued that the toll roads are a form of “privatisation”, which will have a direct affect on the poor.

The union federation intends to hold a public protest on Friday.

The enabling legislation, the Transport Laws and Related Matters Amendment Bill, is now likely only to pass through Parliament in February, meaning the system is unlikely to be implemented before April or May – if at all.

Opposition parties including the DA, IFP, Freedom Front Plus and Cope lined up to oppose the enabling legislation last week. They objected to it being fast-tracked through Parliament as requested by Deputy President Kgalema Motlanthe.

Approached for comment, Moody’s Investor Service in London did not indicate that a review of Sanral was imminent, although Sanral’s revenue stream for the project will be delayed for months.

Moody’s said on Friday it still stood by the view that operational risks “associated with the e-toll collection remain”.

Noting that September’s “favourable” court ruling “does not entirely resolve” Sanral’s e-toll “matter”, the court had kept a requirement that the Gauteng Freeway Improvement Project “receive a full review by the high court”.

This ruling is expected before the end of the month.

“An unfavourable ruling in that review would [negatively] affect Sanral’s cash flows and threaten its business model.”

DA finance spokesman Tim Harris said: “This ongoing saga just represents the mounting costs of a poor policy decision.”

The government could have chosen to ring-fence a portion of the fuel levy for the upgrading of roads.

“One could even have a provincial top-up fuel levy for Gauteng roads,” he suggested.

The project was putting the credit rating of Sanral at risk. “If that risk results in an actual downgrade it has negative effects on the entire country, as the cost of borrowing (by Sanral) is passed on to taxpayers,” Harris said.

In May, Moody’s downgraded Sanral’s credit rating for the second time in just over two months.

After cutting the road agency’s status from A3 to Baa1 at the end of February, Moody’s cut it again in May to Baa2 with a negative outlook.

That was interpreted, at the time, that another downgrade was on its way.

As the rating slips, the costs of borrowing increase.

The cash-strapped Sanral would need support from the government – its sole shareholder – to pay the bigger interest bill.

Sanral owes about R37 billion in debt, with about R20bn of this relating to the Gauteng toll road system.

Its interest bill just for the toll roads is estimated to be about R100 million a month.

The government provided a R5.75bn subsidy in the February budget to Sanral to cover the mounting project costs.

Opposition to Urban Tolling Alliance leader Wayne Duvenage said he wouldn’t blame Moody’s if it did downgrade Sanral.

Pressed on whether this would ultimately hit taxpayers, he said: “This is the sad reality of life.”

Duvenage said there was universal opposition to tolling.

“The focus should be on the inefficient and costly system of (tolls) collection,” he said.