Not too long ago, the South African National Roads Agency Limited (Sanral) was a firm darling among its peers. It was a well-funded State-owned enterprise (SOE) almost never under fire, seldom in retreat, grinding ever onward in its task to manage and expand the country’s road network.
Then came 2013 and the roll-out of electronic tolling (e-tolling) in Gauteng. Scattered murmurings of dissatisfaction melded into organised public resistance, ensuring that Sanral’s collection target became a pipe dream – a problem that persists until today. The public rebellion against urban tolling also meant that the N1/N2 Winelands tolling project, in Cape Town, had to be put on ice.
Sanral CEO Nazir Alli managed the implementation of e-tolling in Gauteng, following a R21-billion upgrade to the freeways in the province. Subsequent to his retirement last year, after 18 years at the helm of the agency, Skhumbuzo Macozoma took over the reins at 48 Tambotie Avenue, Pretoria.
But why say yes to a job that has become a bit like tap dancing on the sharp edge of a sword?
“It was the next natural step for me,” explains Macozoma, who holds an MSc in civil engineering.
“I have invested a lot of time in the transport sector, having spent eight years at the Department of Transport (DoT). My relationship with Sanral began in 2003 when I had the oversight function at the DoT for the agency. I understand the environment within which it operates. Running the Johannesburg Roads Agency has also given me an understanding and appreciation of managing an outfit like this.”
Among Macozoma’s list of achievements there is also a six-month stint as the head of the Electronic Tolling Company (ETC).
ETC is responsible for toll collection in Gauteng on behalf of Sanral.
Macozoma has set three immediate goals for his tenure at Sanral.
“The first is the reputational issue we have to deal with. We need to try to win back the trust of the people of our country. We need to hear some of the criticism we have received and, if we have missed opportunities in our consultation processes, we need to put in extra effort to make sure we engage openly on the plans we have going forward, so that people can understand Sanral’s vision.
“Sanral has entered a new era. We are willing to listen more, we want to engage and consult more, and people must know this.”
Macozoma’s second goal is to mend some government fences, with a number of local and provincial authorities “unhappy with Sanral for one reason or the other”.
“These authorities enable the work we do,” he notes.
“My objective is to entrench our regional offices in their localities – be it a municipality or a provincial government – in order to facilitate joint planning. We need to make sure our plans contribute to local economic development.”
The last of Macozoma’s trio of challenges is to stabilise Sanral’s finances, with the agency firmly in the red owing to the large-scale failure of Gautengers to pay their e-toll bills, which, in turn, has meant that Sanral cannot service its multibillion-rand debt.
“We need to make sure that we continue to be a going concern. We need to look at our financial sustainability and see to it that our debt book is capitalised so that we can continue our business operations.”
The National Treasury noted last year that it would provide Sanral with R1.4-billion over the medium term to plug the gap of lowered and unpaid e-toll fees in Gauteng, and to ensure the parastatal serviced its debt.
LIMPING, BUT NOT DEAD
Sanral is a Schedule 3 SOE, which means the umbilical cord with government is much stronger than it would be for a Schedule 2 SOE, such as Eskom or South African Airways (SAA), explains Macozoma.
SAA, among other SOEs, has received a number of government bail-outs in recent years.
“Sanral is not a profit-making organisation and the bulk of our funding is from the fiscus. It would not make sense for government to allow us to fail and, as a result, we always seek guarantees from the National Treasury. But, yes, we are limping because of the Gauteng Freeway Improvement Project (GFIP),” acknowledges Macozoma.
“When we do our toll budget, we have a deficit. Collections from the Gauteng toll scheme are low, but the other toll schemes are doing well. We have tapered down quite a lot on the capital expenditure (capex) we had planned on the toll side over the next three years. We needed to be more pragmatic about our budget.”
Macozoma is grateful for the budget increase Sanral will receive from the Treasury, growing from the current R13-billion a year to R15-billion in 2017/18, stepping up to R18-billion over the medium term.
However, he would appreciate that number increasing even further.
“The agency’s mandate is to develop and manage the national road infrastructure. We understand there are a lot of competing demands on the Budget, such as education and housing, but we want a bigger slice from Treasury. You cannot build a school or a clinic and then people cannot get there. Roads are a basic service, just like water and electricity – they provide access to other services.”
“We must allow South Africans to engage and contribute to this process, so that, when Parliament eventually passes that policy, all South Africans will agree on when we toll, where we toll [and] how we toll, and then we shall be able to run this part of the business properly.”
The previous Sanral CEO did not believe this to be the case. Alli argued that instituting a fuel levy instead of the e-toll ‘user pays’ system would mean that commuters outside Gauteng would be forced to pay for roads they did not use, even if Gauteng generated around a third of the country’s gross domestic product.
Macozoma’s thinking is somewhat different.
“In our fist fight with the Western Cape and Cape Town on the proposed N1/N2 Winelands toll scheme, there has been a call to investigate some provincial fuel tax to fund the road infrastructure there.
“Our board has agreed that we may engage with the city and the province on this issue. We have initiated the process, and it looks promising. We want to pursue a joint process now to see how we can solve this funding problem together.
“It is important to explore all funding strategies that are available to us, and select whatever funding model works best.
It is important to move forward, adds Macozoma, otherwise Cape Town traffic will grind to a halt.
“We have started engaging the KwaZulu-Natal government with regard to the N3 from Pietermaritzburg to Durban along the same principles. We are willing to consider any possibility to unlock funding for Sanral’s road projects.”
“In five years, we will be back where we were before 2010 in terms of congestion. We need to figure out how we are going to implement and fund the GFIP Phase 2 and 3,” says Macozoma.
“The interesting thing about the new phases is that the road reserves are not in our hands. They sit with the province. Whether we implement phases two or three, or whether the province implements them, is not the issue. The roads must be delivered if mobility in the province is to be seamless over the medium term.”
“In the foreseeable future? The answer is no for e-toll. We cannot afford to do that and we don’t want to upset South Africans any further. Toll roads will, however, continue in the traditional format, where applicable. Outlawing tolling as a viable road financing mechanism is not the answer.”
Sanral will also continue rolling out the e-tag technology used in GFIP Phase 1 to the rest of its toll network. This will facilitate e-tag use at all its boomed toll schemes, such as the N4, N3 and N1.
“The GFIP scheme delivered a national clearing house, which is quite a strategic resource. Using an e-tag is simply a method of payment. It does not mean we are exporting e-tolling as it exists in Gauteng to other parts of the country,” explains Macozoma.
Despite Macozoma’s more flexible approach towards tolling – compared with Alli’s – it does not mean that Sanral will stop its pursuit of recovering outstanding debt on the Gauteng toll scheme.
“We are a government entity and government has borrowed a lot of capital to implement GFIP 1. That money has to be recovered.
“We are legally obligated to collect the outstanding debt – we don’t have a choice. We are not allowed to write it off.”
A legal standoff between Outa and Sanral has, however, put a rather effective halt on debt collection.
Outa is challenging the issuance of summonses to e-toll defaulters, with the court case currently scheduled for September.
“We have met with Outa,” says Macozoma. “They indicated to us that they will continue to encourage people not to pay their e-toll bills until the court case is settled. We, on the other hand, will continue to pursue monies owed to Sanral. It is imperative that the courts bring certainty on this matter sooner rather than later.”
Macozoma says Outa and Sanral have both agreed to push for the court case to be brought forward.
“Before this case happens, we will all be in limbo. I’d rather get a court ruling – whatever the court ruling. We need to move so that we can talk about the GFIP Phase 2 and 3.”
“What I hope for is that we will realise that this problem will only be solved if we leave our corners. We cannot all continue shouting from our corners. We can find a solution in the interest of the citizens of Gauteng, if we are willing to engage and find consensus.
“I think government has demonstrated good faith by making a number of concessions in this regard, such as cutting toll fees dramatically, but there has been little movement on the public’s side. We need the public to realise that the GFIP was rolled out to benefit them. Yes, there may have been procedural mistakes along the way, but the infrastructure delivered was absolutely critical.
“The only call you ever hear is for the scheme to be scrapped. This would mean that Sanral would not be able to meet its financial obligations and that it may be liquidated. This could affect government’s funding policy and all other infrastructure entities within government.”
Macozoma acknowledges that pressure in preparing a new road network in Gauteng in time for the 2010 FIFA Soccer World Cup “may have led to missed opportunities with regard to consultation”.
“We knew from the start that we would never put toll booms on these freeways and that we would have to make use of new technology. This, however, delivered its own complications,” says Macozoma.
“Everybody complains that we are paying too much for the operation of the toll scheme. My argument is that the potential the system carries is mind boggling and still relatively untapped, such as the transaction clearing house and interoperability between different toll schemes across the country.”
Macozoma believes it is possible for Sanral to generate more of its own revenue – and not through its road network.
As a Schedule 3 SOE, the entity has never been profit driven. However, there are opportunities to generate income through various strategies, including advisory services to other roads authori- ties and exploiting Sanral’s land portfolio.
“What we are doing now is to intervene broadly, through our Technical Centre of Excellence, in Port Elizabeth, to train engineers for professional registration in order to generate capacity in the industry. We hope to expand this training to include engineers from the rest of Africa.”
“Fifteen years later, we still face the same capacity challenge in some roads authorities. We need a different kind of support from Sanral now. We need interventions that will assist roads authorities with their road condition surveys, road asset management systems, roads planning and project delivery capacity, for example.”
Macozoma says Sanral wants “a more cautionary approach” to road transfers.
“Transferred roads generally need investment, which adds to the funding challenges we face.”
The Sanral board is yet to give its stamp of approval for the strategy.
“We are still engaging all parties on the model we will follow for this project. We already know, at least, that the national government has agreed to fully fund the big bridges,” says Macozoma.
“Whether the rest of the scheme will be fully or partially funded by government is still to be determined. The National Treasury, the DoT and the Presidential Infrastructure Coordinating Commission are currently discussing this matter.”
The plan for an alternative pass – the De Beer’s Pass – has been scrapped, which means Sanral is looking at “a part new, part upgrade” approach to the existing Van Reenen’s Pass.
“We will be working with the toll concessionaire to finalise the detailed design and costing of this option,” says Macozoma.
Sanral’s Strategy 2030 will also focus on the GFIP Phase 2 and Phase 3, which include the PWV 15, a new freeway between Pretoria, Ekurhuleni and Johannesburg; the PWV 9, a north–south link on the western side of Gauteng, linking the north of Pretoria with Centurion and the north of Johannesburg; the PWV 5, which will run from Tembisa, through Midrand to Krugersdorp; the PWV 17, which will link Wemmer Pan with Nasrec; and the PWV 13, which will run from the R21 south to link to the N3, allowing trucks to skip the congested Gillooly’s interchange and move directly on to the N3 corridor.
Sanral will no longer pursue any civil claims against construction companies that were found to have colluded on a number of projects and tenders related to the 2010 FIFA World Cup – the GFIP included.
“We are done from the perspective of pursuing claims,” says Macozoma.
“The agreement reached by government and the construction companies involved covers all affected government entities.”
The agreement reached last year between government and Aveng, Raubex, Steffanutti Stocks, WBHO Construction, Basil Read, Group Five and Murray & Roberts will see these construction companies collectively make a contribution of R1.5-billion to the Tirisano Construction Fund to be established for social and economic development within the construction industry.
The companies have also committed to undertaking extensive transformation and mentoring initiatives.
Macozoma says Sanral will look to tap into the Tirisano Trust for a number of projects the agency has already identified, such as expanding the activities at its Port Elizabeth Technical Centre of Excellence.
“We also want to tap into that fund to increase our efforts in terms of industry transformation and contractor development.”
One of the biggest criticisms Sanral has received from within the contracting environment is that it does not play a strong enough role in holding the main contractor responsible for “supporting and developing emerging contractors”, says Macozoma.
“We will try to remedy this.”
Sanral is also in the process of developing a new transformation policy for the company.
“We will appoint a transformation manager to drive the new policy,” says Macozoma.
Edited by: Creamer Media Reporter