19/06/2012 Transnet CEO Brian Molefe during a breakfast briefing hosted by Business Report in JHB. (002) Photo: Leon Nicholas

If the SA National Roads Agency Limited (Sanral) could not pay its debt due to opposition to e-tolls for the Gauteng Freeway Improvement Project, borrowing by other parastatals could be jeopardised, Transnet chief executive Brian Molefe cautioned yesterday.

Speaking at a breakfast with the editors of Independent Newspapers, the parent of Business Report, Molefe said since the highways had already been built, the debt had to be repaid somehow because if Sanral did not live up to its commitments, Transnet might find it difficult to borrow money.

“If we don’t pay, we get downgraded. The Treasury can’t borrow, Transnet can’t borrow,” he said.

Even so, Molefe did not foresee the Sanral challenges and opposition to e-tolling leading to South Africa’s credit rating being downgraded.

“It is unlikely that Sanral will default because of the state guarantees. We are not concerned about that, but we will have to take the money from somewhere else,” Molefe said.

He said South Africa’s rule of law was encouraging, and because everybody respected it, investors had confidence in it, and that it would handle the tolling debate well.

The challenges surrounding Sanral’s debt were unlikely to cause a downgrade of South Africa’s credit ratings because the issues were not systemic and did not go to the heart of the economy.

Goolam Ballim, the chief economist at Standard Bank, said there might be “greater vigilance by lenders when lending money to the parastatals due to fears that there could be another incident of an inability by a parastatal to collect its funding”.

However, he said parastatals in general had established sound funding models that eliminated most of the risk associated with fee collections.

“It is unfortunate that Sanral has been compromised. While that does impair the company’s credit reputation, it does not do the same to the government,” he said.

Ballim said while Sanral had been compromised, South Africa’s credit record had not been tainted by the e-tolling saga or the downgrading of Sanral’s credit rating.

“The guarantees that the government has written for the parastatals have proven to be worth more than the paper they were written on.”

Moody’s Investors Service has downgraded the credit rating of Sanral twice this year. It cut them from A3 to Baa2 with a negative outlook in May after the North Gauteng High Court decided to halt e-tolling.

However, South Africa’s credit rating has remained unchanged from the BBB+ with a negative outlook that Standard & Poor’s and Fitch Ratings last changed it to. Moody’s changed its outlook to negative on South Africa’s A3 sovereign rating in November last year. This resulted in Moody’s also downgrading the outlooks of the two major parastatals, Eskom and Transnet, to negative.

Azar Jammine, the chief economist at Econometrix, said although the tolling debate was affecting the credit rating of Sanral now, the extent to which the government was prepared to rescue the company would shield Sanral from further negative market reaction.

Jammine said the market was clever enough to realise the difference between the work and state of the different parastatals and thus he did not see the Sanral issue jeopardising other parastatals’ ratings.

“The magnitude of the Sanral debt is relatively small compared to the debt that the government and the National Treasury hold. So I don’t think it’s a horrific issue,” he said.

He added that Molefe’s comments provided some insights into the interconnected nature of sovereign and corporate borrowing.