Embattled South African Road, Rail Firms Bailed Out by Taxpayers

Mike Cohen
·3 min read

(Bloomberg) -- The South African National Roads Agency SOC Ltd., which maintains the national road network and has been crippled by motorists’ refusal to pay freeway tolls in the economic hub of Gauteng, will be bailed out by taxpayers.

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Finance Minister Enoch Godongwana allocated 23.7 billion rand ($1.3 billion) to the state agency, according to the medium-term budget policy statement presented to lawmakers in Cape Town on Wednesday. The handout accounts for the bulk of the 30 billion rand of additional support he said is being provided to state companies.

The Sanral funding will enable the agency to pay off its government-guaranteed debt and is contingent on the company resolving a standoff over the tolls, which has persisted since their inception in 2013.

While Sanral has suspended the collection of its outstanding debt and Gauteng authorities want the tolls scrapped, the national government has yet to pronounce on the matter. In its annual report published earlier this month, the roads agency warned that funding challenges threatened its ability to continue as a going concern and called for the state to step in.

Sanral’s responsibility for collecting the Gauteng tolls “contaminates” its ability to raise funding in the market, Mampho Modise, the treasury’s deputy director-general of public finance, said in an interview.

“Sanral cannot collect sufficient cash from its toll portfolio to settle maturing government-guaranteed debt,” the Treasury said. The company’s balance sheet weakness is affecting its ability to maintain the broader road network “and as such also presents a medium-term risk to economic growth,” it said.

Rail Damage

The Treasury also allocated 5.8 billion rand to state logistics company Transnet SOC Ltd., half of which will be used to repair infrastructure damaged by flooding in the eastern KwaZulu-Natal province in April, and the balance to increase its locomotive capacity. Debt-stricken state arms company Denel SOC Ltd. will get 204.7 million rand to reduce its contingent liabilities, and a further 3.4 billion rand if it implements a turnaround plan.

There was no additional money for national power utility Eskom Holdings SOC Ltd., which has accumulated more than 400 billion rand of debt, isn’t earning enough revenue to cover its interest bill and operating costs, and has subjected the nation to intermittent blackouts. Godongwana did, however, say the government plans to take over between one-third and two-thirds of the debt, with details to be announced in the February budget.

“The selection of relevant debt instruments and the method of effecting the relief is still to be determined,” he said. “The program will allow Eskom to focus on plant performance and capital investment, and ensure the company no longer relies on government bailouts.

The Land Bank, which provides loans to farmers, remains in financial distress and the process of resolving that issue continues, the Treasury said.

“An amount of 5 billion rand remains in the contingency reserve in 2022-23 as part of the funding provided for the Land Bank in the previous budget,” it said. “Conditions for the release of these funds have not yet been met.”

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