Toll Roads and SANRAL 2011 Strategic Plan

NCOP Public Services

13 June 2011
Chairperson: Mr M Sibande (ANC, Mpumalanga)
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Meeting Summary

The presentation by SANRAL covered the topics surrounding the toll and non toll national roads all across South Africa. The presenters outlined the ongoing projects and estimated budgets and forecast the projects that would emerge in the future. They sketched the key priorities, mandate and expenditure of SANRAL. They also provided a breakdown of the electronic toll collection system including the toll charges. They responded to and debunked the criticism that had been made in the media about high cost of tolls for the commercial vehicle.  

The Committee raised concerns about corruption and risk management and wanted the Agency to provide it with a breakdown of all projects being undertaken in each province. As well they wanted to know the transformative impact of the projects in the rural areas. They were also concerned about the number of jobs being created particularly for disadvantaged groups such as women and persons with disability.

Meeting report

South African National Roads Agency Limited (SANRAL) briefing on their Strategic Plan
Ms Alice Mathew (Company Secretary and Risk Officer, SANRAL) stated that SANRAL was mandated to be responsible for proclaimed national roads including toll and non-toll roads. There were 219 persons working at the organisation and she described these employees as project managers. Their tasks included identifying projects, allocating budgets, appointing contractors and consultants and managing the projects. They also were responsible for managing toll roads that accounted for 19 percent of all the national roads. The tolls were levied to finance the maintenance of those toll roads. Certain parts of the toll roads were managed by concessions of private-public partnerships, where the roads would be handed to a private consortium of companies for a period of 30 years. These companies would manage the roads and collect the tolls and at the end of 30 years, they would return the road back to the state in a pre-determined good condition.

She emphasised that SANRAL created public value and its primary shareholder would remain the State represented by the Minister of Transport. She outlined its eight strategic objectives: 

1. Manage the national road network effectively
2. Provide safe roads
3. Carry out government’s targeted programmes
4. Co-operative working relationships
5. Achieve and maintain good governance
6. Transformation (both the external and internal environment)
7. Achieve financial sustainability
8. Pursue research, innovation and best practice.

She claimed that the transport infrastructure industry was highly corrupted, as such risk management and internal audits were extremely important for SANRAL to maintain its high credit ratings. A good credit rating would be highly desirable to promote the strong relationship with the private sector.

SANRAL also had invested in smaller projects, such as a small bridge in a community so that children would be able to go to school. The main purpose of the small community roads was to connect people with the main national roads. These would eventually assist in developing the smaller and rural communities. They also provide scholarships and bursaries for student in order to support their higher education aspirations.

National Treasury provided a specific fund each year and SANRAL had to work within the allocated amount as there would be no room for overspending. Furthermore, once the road was designated as toll then the Treasury would no longer fund the maintenance of that particular road. The tolls collected and loans from the private sector then paid for the toll roads.

She outlined SANRAL’s Key Priorities for the 2011/12 year and through graphic illustrations mapped the South African road network. [See presentation for more details].

SANRAL worked with the rail network in order to move the transportation of the hazardous materials from the roads to the rail network.

Through the use of graphs she outlined the condition of the toll and non-toll roads and the forecast the condition of the roads over the next few decades. The graphs also suggested the projected income from tolls at various rates.

She explained that roads had been built with approximately 25 years of life expectancy and currently more than 70 percent of the roads were approximately 20 years. Therefore, there would be a need for a significant increase in funds to improve the road network.

Changes to the toll charges were announced in February 2011, however they are under ministerial committee review.

The budget for 2011/12 was R16.2 billion while the year before had been R17.3 billion. The expenditure for the toll road network was R6.3 billion; however, most of the money raised was through private loans. SANRAL could not charge tolls until the road was completed and became operational. As such for the construction of the road SANRAL had to take out loans. All the loans taken out had been through the domestic market. She added that the loans were dependent upon the Moody’s rating system and SANRAL had received high ratings.

Financial Presentation by the CFO
Ms Inge Mulder (CFO, SANRAL) stated that it cost the South African economy R50 million per hour because of the delays on the road network. She further detailed the high costs caused by travel delays between Pretoria and Johannesburg. Her presentation quoted studies that suggested that maintenance and repair costs increased due to the worsening road conditions.

She provided a brief explanation of the Gauteng Freeway Improvement Project (GFIP). She said most of the freeways in Gauteng had reached their capacity. As such there were 17 projects underway valued at R16.9 billion. This included the improvement of 34 interchanges in order to reduce congestion. The programme had thus far been deemed successful. During the life of this project, SANRAL would create 20,000 jobs mainly in the area of construction. It was believed that the indirect creation of jobs was even larger.

She then outlined the procedure of toll collection and the technologies associated with the process. Her presentation explained the Toll system (Design and build) and Toll operation. She also briefed the Committee on tariffs and the various schemes associated with traveling on the toll road. In 2011 the average cost of a trip was 49.5 cents/ Km, however there were many schemes put in place that could make the tariffs even cheaper.

Ms L Mabija (ANC, Limpopo) asked the Agency to explain the purpose of the picture published on the last slide of the presentation.

Ms Mathews stated that the picture represented how SANRAL had contributed to knowledge transfer. The picture showed women from rural areas working on a road construction site. One of the major objectives for SANRAL had been skill transfer and the picture depicted women who had gained knowledge and skills in construction. They would be able to transfer these skills to gain future employment or participate in community development.

Ms M Themba (ANC, Mpumalanga) wanted to know why SANRAL decided to sign 30 year leases with the private sector. She felt that 30 years was too long. She also wanted a breakdown of SANRAL staff according to gender. How many jobs had SANRAL created and of those, how many women had  benefited. She wanted to know what was being done on the empowerment front.

Mr M Jacobs (ANC, Free State) critiqued the presentation citing that information provided in the presentation did not correlate with what was happening on the ground. While SANRAL had the responsibility to maintain the national roads, the conditions of several national roads were very poor and he demanded an explanation about what SANRAL would do to rectify the problem. He also wanted a breakdown of roads that were national and provincial. He asked for a province by province breakdown of projects undertaken by SANRAL. He was concerned about whether small companies had benefited from the tenders handed out by SANRAL. Finally he wanted more details on the role of private companies in maintaining the toll roads.

Ms Mathews replied that the SMMEs were always given priority in the awarding of contracts so that the local communities would be able to benefit from the skills transfer. She said the detailed province by province information would be provided to he Committee within a week.

She stated that there was a road coordinating body that brought the three levels of roads together and SANRAL often engaged with them to discuss knowledge transfer. Similar activities would be undertaken with rail and air authorities.

Mr Groenewald (DA, North West) reiterated the question asked by the other members. He wanted to know that when the private companies returned the roads to the state after 30 years, what would be the guarantee that the roads were in a good condition? He wanted to know why most of the weigh-bridges were no longer in working condition and said they should be replaced by mobile bridges. He asked what was being done to the un-proclaimed roads. What was SANRAL going to do to tackle the high rate of corruption within the transport industry? Finally he wanted to know how SANRAL was going to assist in moving the trucks off the road and onto rail.

Ms Mulder replied that she was not aware of what was being done with the unproclaimed roads but suggested that she would get the relevant information from the Ministry of Transport and pass it along to the members. She acknowledged that there were talks underway with the Railway Authority and once the rail infrastructure was established more extensively, then the Department of Transport would look into methods to convince trucks to move their shipment onto the rail system.

Ms Mathews stated that SANRAL was aware of most of the corrupt activities engaged by the construction companies. The Agency continues to crack down on corruption by making the rules stricter. Activities such as collusion would not happen because the rules continued to change in order to stay ahead of the corrupt companies. The fraud hotline had been very successful as people would call in and lodge complaints.

The Chairperson asked why there were discrepancies in the number of toll roads amongst the provinces. He wanted to know why there were so many toll roads in Mpumalanga. He asked why SANRAL was not repairing the growing number of pot holes. He requested more information on the R29 billion loan taken by SANRAL

Ms Mulder pointed out that the R29 billion borrowed was to pay for the construction of all the toll roads right up to GFIP. Some of the roads were still being constructed and SANRAL would have the borrowing capacity of R47.9 billion. Furthermore, it would take approximately 20 to 25 years before the toll road would become profitable.

She also added that the due to weather condition in Mpumalanga the roads deteriorate faster and would be in need for more repairs when compared to other provinces. The have constant knowledge of the condition of all their roads at any given time.

The Chairperson requested the Agency to submit all written answers to the Committee by 17 June, 2011 and then adjourned the meeting.


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