South African National Road Agency Limited briefing on current and future projects

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19 August 2014
Chairperson: Ms Dikeledi Magadzi (ANC)
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Meeting Summary

The South African National Road Agency Limited (SANRAL) briefed the Committee on its current and future projects. SANRAL was responsible for the proclaimed road network, covering both the tolled and non-toll road network. SANRAL also maintained, upgraded, operated, rehabilitated and funded national roads, and levied tolls so as to service tolled roads. South Africa has the tenth largest total road network in the world, and the eighteenth longest paved road network. Roads represented one of the largest public infrastructure investments in most countries. The road replacement cost was predicted to be around R2 trillion. The total South African road network was estimated to be 750 000 km, although SANRAL was concerned about the unproclaimed roads that were close to 131 919 km. The priorities of SANRAL included increasing public infrastructure investment from 10% of Gross Domestic Product (GDP) to a total of 30% in 2030. this would be financed in various ways, including  tariffs, Public-Private Partnership (PPPs), taxes, loans and focused on transport, energy and water and toll roads.

The proposed projects by SANRAL were outlined, which included transport upgrades on the Durban-Gauteng freight corridor, the N2 through Eastern Cape, expansion of capacity of coal, iron, ore and manganese lines, injection of more capital on public transport infrastructure and systems, including the renewal of commuter rail fleet, supported by enhanced links with road-based services. SANRAL was presently focusing on six outcomes identified by the Department of Transport. These concentrated on an effective and integrated infrastructure network that served as a catalyst for social and economic development, prioritising the safety of road users, improving rural access, infrastructure and mobility, upgrading public transport systems, increasing contribution of transport to job creation and the protection of the environment. SANRAL also focused on community outreach programmes and supported a number of tertiary institutions and education programmes, including those in schools and on road safety. It was proud of its record in contributing to transformation. More than 80% of road work was done by black Small Medium Micro Enterprises, with emphasis also on the women and youth.

The non-toll budget for SANRAL was R10 billion for 2013/14, with the toll budget being R3 billion in this year. By 2016/17 these figures would increase, respectively, to R12 billion and R5 billion in Private sector funding was a possibility. In the non-toll areas, 85% of funding came from the National Treasury and only 15% from e-tolling. SANRAL emphasised that, contrary to popular belief, there was no borrowing allowed to fund non-tolled roads, and set out the various financing options, that made up its total borrowing capacity of R48.64 billion. The benefits and disadvantages of toll financing were described, as well as of the fuel levy. It was indicated that tolling could be pro-poor if there were exemptions given to public transport.

SANRAL described priorities for the coming year, which included increased attention to road safety education and awareness programmes. There were 42 future projects, with a budget of R1.03 billion and 5 641 jobs to be created. Finally, the challenges facing the entity were summarised, ranging from resistance to e-tolls, reputational damage, delays in project approvals and inadequate law enforcement, poor driver behaviour, and insufficient coordination across the spheres of government and between the modes of transport.

Members commended SANRAL on its work, but raised a number of shared concerns, including the lack of focus on the rural areas, the Lwandle eviction, the current status and how to avoid similar situations in future. Concern was expressed about the price collusion in the construction industry, what would be done, and stressed that urgent action was needed. They questioned its stance on the fuel levy, commented that insufficient attention was being paid to the effects of rising transport costs on the very poor, said that Gautrain use needed to be tracked and that more support was needed for taxis upon whom so many of the public depended. One Member questioned whether dedicated motorcycle lanes would be effective, and SANRAL was also asked to provide information on social responsibility programmes, details of tenders, the impact of road fatalities on the economy, and to quantify the work provided to contractors. They stressed that SANRAL needed to work closely with other road agencies, and local and provincial municipalities. Detailed responses were to be submitted in writing.

Meeting report

Chairperson’s opening remarks
The Chairperson indicated that the meeting would receive a briefing from the South African National Road Agency Limited (SANRAL) about its current and future projects. She stressed that transport formed a backbone of the South African economy and it was important to deal comprehensively with the issues affecting road users.

South African National Road Agency Limited (SANRAL) briefing on current and future projects
Mr Nazir Alli, Chief Executive Officer, SANRAL, indicated that indeed SANRAL had an important role to play in the provision of a superior primary road network in Southern Africa. He mentioned that Act No 7 of 1998 specified that SANRAL was to be responsible for the proclaimed road network, and this related to both the tolled and non-toll road network. SANRAL also maintained, upgraded, operated, rehabilitated and funded national roads, and levied tolls so as to service toll roads. SANRAL also played a role in advising the Minister on road-related matters and identified the issues to be given priority, and also those that would create public value.

Mr Alli noted that South Africa has the tenth largest total network, and eighteenth longest paved road network in the world. Roads represented one of the largest public infrastructure investments in most countries. The total South African road network was estimated to be 750 000 km. SANRAL was concerned about the estimated number of unproclaimed roads as these were approaching 131 919 kms. The road replacement cost was predicted to be around R2 trillion.

Mr Alli said the vision of SANRAL was to be recognised as a world leader in the provision of a superior road network in Southern Africa. The mission was to act a custodian of a public good, and to be more committed to the advancement of the Southern African community through a highly motivated and professional team that used state-of-the-art technology, proficient service providers and promoted the “user pays” principles. In order for SANRAL to be able to accomplish both its vision and mission, it needed to use its core values, which were based on excellence, proactiveness, a spirit of participation, integrity and care. SANRAL was fully cognisant of the goals of the National Development Plan (NDP)

SANRAL managed, through its work and methodology, to contribute to the elimination of income poverty, and to community development programmes and also to bolster Small Medium and Micro Enterprises (SMMEs). It was aiming to reduce inequality by developing human capital in universities and high schools. SANRAL also planned to contribute to the country reaching its milestones to increase South African employment from 13 million in 2010, to 25 million in 2050. SANRAL also planned to establish a competitive base infrastructure, human resource and regulatory framework

Mr Allie noted that public infrastructure investment was currently at 10% of Gross Domestic Product (GDP) and this was planned to increase to a total of 30% of GDP in 2030, financed thorough various forms, such as tariffs, Public-Private Partnerships (PPPs), taxes and loans. These plans focused on transport, energy and water and toll roads

Particular initiatives that he cited included:
- Transport upgrade on the Durban-Gauteng freight corridor
- Building the N2 through Eastern Cape
- Expanding capacity of coal, iron, ore and manganese lines
- Expanding the public transport infrastructure and systems, including the renewal of the commuter rail fleet, supported by enhanced links with road-based services

Mr Alli stressed that SANRAL was focused on six outcomes identified by the Department of Transport (DoT). These included:
- An effective and integrated infrastructure network that would serve as a catalyst for social and economic development
- A transport sector that is safe and secure
- Improved rural access, infrastructure and mobility
- Improved public transport systems
- Increased contribution of transport to job creation
- Increased contribution of transport to environmental protection

Mr Alli then took the Committee through the SANRAL Strategic Outcomes Oriented Goals (see attached presentation for full details). The goals that were set, to provide an impact, were to:
- Provide effective strategic road infrastructure that would facilitate development, commerce, international trade, facilitate mobility of people and freight and access to community and tourism
- Job creation by the implementation of projects that would provide sustainable jobs
- Transformation and empowerment, using the broad based black economic empowerment (BBEEE) principles, community upliftment, skills development and educational support to universities, research, internships, bursaries and scholarships

The Strategic Objectives of SANRAL, which were supported by the Annual Performance Plan (APP) stated, amongst others, that SANRAL would be managing the national road network effectively, and providing safe roads. It would carry out government’s targeted programmes, specifically transformation. It would aim to establish co-operative working relationships with relevant departments, provinces, local authorities and South African Development Community (SADC) member countries.

Internally, SANRAL would strive to achieve and maintain good governance practice, achieve financial sustainability, pursue research, innovation and best practice, and safeguard SANRAL’s reputation, specifically through stakeholder communication  

Mr Alli said that the non-toll budget for SANRAL was R10 billion for 2013/14, and this would increase to R11 billion in 2014/15 and again to R12 billion in 2015/16 financial year. He emphasised that only 15% of the roads in South Africa were funded through e-tolling, with the remaining 85% being funded by allocations from National Treasury (NT).

The total toll budget was R3 billion for 2013/14 and this was expected to increase to R4 billion in 2014/15 and R5 billion in 2016/17.

SANRAL was proud to have awarded 116 contacts to non-toll roads, 30 to tolled roads, and 29 to the other roads, making a total of 175 contracts awarded for 2013/14. Mr Alli stated that the repair cost of road conditions was multiplied by a factor of 18 per km after three to four years.

Mr Alli the specified the key priorities for 2014/15, which comprised:
- Asset Management Systems for the timely maintenance of national roads
- Planned increase of national road network by incorporation of roads as requested by provinces
- Good co-operative relationships with relevant government departments, provincial and municipal authorities, which would include sharing of asset management systems across jurisdictions
- Smooth implementation of e-tolling in Gauteng
- Roll out of electronic toll collection lanes at current plazas for quicker flow of vehicles
- The N1 and N2 Wineland Toll Road (Western Cape)  
- The N2 Wild Coast Toll Road (Eastern Cape)

Mr Alli indicated to the Members that SANRAL also had major non-toll projects that included the routine road maintenance, which were the N1 Trompsburg-Sydenham, the N2 Mt Edgecombe Interchange, the N2 Umgeni/ Inanda Interchange, the N5 Vaalpenspruit-Winburg, the N8 Alexanderfontein-Petrusburg, the N9 Wolwefontein-Colesberg, the N10 Baavians River-Riet River, the N11 Ermelo-Hendrina. There was also the R23 Standerton-Greylingstad and the R27 Niewoudtvie-Calvinia.

Future projects included work on the N3 Durban to Pietermaritzburg, N12 Kimberley to Johannesburg, the N1 Ring road at Musina, the N1 Kroonstad to Winburg and the N1 Polokwane Eastern Ring Road

Mr Alli stated that SANRAL was focused on road maintenance, and priority was given to trying to repair potholes within 72 hours of the case being reported. The replacement of guardrails, sign posts, grass cutting, patching, fencing and clearing up after accidents were important for the convenience of the road users. Periodic maintenance was done every seven to eight years and then followed by special maintenance.

SANRAL was proud of the role it has played in transformation, and this was evidenced by the Overall Empowering Rating of Level 2 in 2009/10. The Board had approved an Employment Equity Plan to October 2014, and the new three-year Economic Empowerment (EE) plan was to be developed in 2014/15. SANRAL also paid special attention to skills development, in the form of scholarships, bursaries, internships, and funding to universities to produce local engineers who could improve the economy of South Africa.   

SANRAL also played a major role in community outreach programmes, mainly focusing on education, as evidenced by SANRAL’s presence at national career expos and exhibitions. There was also a huge focus on roadshows at secondary schools, including presentations by community development specialists to schools, and use of the database of the Department of Basic Education. He stated that it was also important to target universities in order to spread awareness about drunk driving, speeding and how to be a responsible road user. SANRAL also supported numerous universities that focused on engineering and transport or town planning, including the Universities of Cape Town, Stellenbosch, Witwatersrand and Free State. SANRAL offered scholarships to 177 scholars from grades 10 to 12 across 40 schools and 106 bursaries for those studying to engineering degrees, including post graduate degrees in seven universities. There were also 196 interns training with 57 contractors across the country.

Mr Alli reiterated that SANRAL managed to prioritise transformation. He said that this was shown by:
- SMME development in routine maintenance contracts
- 72% of work was assigned to black SMMEs, and 8% to other SMMEs
- 20% of work went to managing contractors responsible for empowerment, training and support
- SANRAL supported community development programmes focused on projects (generally safety related), pedestrians, walkways and roads
- It ensured economic opportunities in rural areas
- Targeting of employment of women and youth

He noted that roads were catalysts for opportunities such as tourism, hospitality industry and other related industries

There were 42 future projects, with a budget of  R1.03 billion and 5 641 jobs to be created

Mr Alli indicated that, owing to an increase in road fatalities, SANRAL was now paying more attention to road safety education and awareness programmes. Its education programmes focused on how to practically advance principles of road safety in schools. In 2013/14, 1 410 educators attended workshops on how to make road safety accessible to students, and 5 911 educators implemented road safety education in class, with 416 739 learners receiving learning material. A road safety art competition had been introduced, to test the knowledge of learners on road safety, and 1 281 schools were invited to participate, with more than 5 000 entries being received. SANRAL had created an Awareness page on Facebook, which had about 10 000 followers. It had run a T-shirt competition for students, inscribed with road safety messages. Finally, the CheckiCoast –Save life campaign was launched in radios, television adverts, SABC, E-TV and selected DSTV channels

Mr All reiterated that it was important for Members to understand that non-toll roads were funded by National Treasury. He made the point that the Medium Term Expenditure Framework (MTEF) submission was made in July of every year and he wanted to emphasise that, contrary to popular belief, there was no borrowing allowed to fund non-tolled roads. The tolled roads were financed through toll income, the capital market, government guarantees and non-guaranteed funding. Tolled roads were also funded through PPP, mainly concessions, unsolicited proposals and miscellaneous. SANRAL’s total borrowing capacity was R48.64 billion. It had capacity to borrow R6 billion guaranteed funding (SZ bonds), and R0.73 billion for the N1 loan, by way of a separate guarantee. R26.91 billion was guaranteed funding (through HWAY bonds and others) and R15 billion was non-guaranteed funding (NRA bonds).

Mr Alli added that the toll network benefits of toll financing included early project implementation, economic spin-offs and that this would release other funding from the fiscus to be applied to non-toll roads. The concessions allowed for the sharing of risk with private sector. For investors the focus was on long-term investment, and this was low risk as there were government guarantees (to date). Other benefits included improved road user benefits, time savings, safety and comfort and also the reduction in vehicle operating costs.

The limitations of both tolling and the fuel levy were described. Firstly, the money was not ring-fenced and went to a general fund. Fuel efficiency was an objective that, when reached, led to a decline in the fuel levy. Everyone would end up paying for the levies, regardless of use, including the poor. Tolling also demanded management of tolling incentives and different choices, such as public transport usage, ride sharing and the time of day travel. Urban sprawl was limited. Tolling could be pro-poor if there were exemptions given to public transport. Users would only have to pay a fraction of benefit received. At the moment, government spent more than the net receipts of fuel levy on road infrastructure.

Mr Alli identified numerous challenges that were facing SANRAL. These included:
- Resistance to e-tolling on Gauteng Freeway Improvement Project (GFIP) by interest groups
- Slow e-tag registration
- Resistance to the user charge for the N1/N2 Winelands, and N2 Wild Coast legal action
- The need to have firmly communicated messages on toll road funding
- Delays in project related approval from the Department of Water Affairs and provinces
- Inadequate law enforcement on traffic rules, overloading by hauliers and enforcement in relation to electronic or open road tolling
- Driver behaviour was identified as the greatest cause of road fatalities
- Reputation risk for SANRAL and DoT
- Insufficient funding for timely upgrades and maintenance of the non-toll network
- Poor progress on the SIP-1 and SIP-4 Strategic Integrated Projects
- Insufficient high-level of planning and co-ordination between inter-modal transport and the three spheres of government
- Future of private sector investment in funding road infrastructure-toll road projects was still to be fully envisioned
- The need to improve inter-governmental departmental co-operation

Ms D Carter (COPE) commended SANRAL for its excellent work and said that this was a detailed presentation that covered comprehensive issues. She said it was, however, of concern that the presentation did not touch much on the issue of infrastructural development in rural areas, as this was identified as a priority by the Department of Transport (DoT). She also said that it was worrying that some of the roads were still not maintained over a period of eight to ten years, and commented that surely this was costing SANRAL and taxpayers a lot of money. She asked whether SANRAL was considering the use of motorcycle lanes as a way to curb traffic volumes, especially in congested cities like Johannesburg, Durban and Cape Town. She commented that the cost of Gautrain was exclusionary to the poor, who were unlikely to cope with inflated prices of public transport. She also said SANRAL needed to consider the utilisation of the fuel levy as a funding source for the maintenance of roads.  

Mr M Freitas (DA) stated that SANRAL was one of the most efficient entities in South Africa and commended Mr Alli for leading on the transparency issues. However, he would have liked to receive the presentation in advance of the meeting, to allow Members to prepare themselves fully. He wanted to know whether there any actions were taken against construction companies that were involved in price collusion. He asked whether it was possible for SANRAL to provide Members with the research findings on the three-year longitudinal study of road safety, knowledge, attitude and behaviour (as set out in slide 43). He wanted to know whether SANRAL supported the use of the fuel levy, as its standpoint was not very clear from the presentation.

Ms S Xego-Sovita (ANC) wanted to know the current status in relation to the Lwandle evictions, the relationship between SANRAL and the City of Cape Town, and the next step to be taken on the matter. She asked whether SANRAL had detailed information on social responsibility in each province. She asked for more detail on the universities, the designated groups and gender representation. She stated that it was important for the Committee Members to support e-tolling as it was unsustainable to fund road maintenance solely by way of taxpayers’ money. She appealed to the NT to increase the budget allocation for SANRAL. She asked SANRAL to provide detailed information on loss of opportunity, especially on N2 Wild Coast Project.

Mr T Mulaudzi (EFF) also questioned the timing of the Lwandle eviction and indicated that this portrayed both the City of Cape Town and SANRAL as uncaring, especially towards the poor. He was concerned about unproclaimed roads totalling 131 919 km, and asked whether SANRAL had taken any action on these roads that had no ownership. He wanted to know SANRAL’s relationship with other provincial road agencies. He expressed concern about the proposal to use the fuel levy to fund the maintenance of roads, as this would affect the taxi industry. He asked whether SANRAL was planning to rotate the 800 SMMEs so as to give opportunities to new and upcoming small businesses. He asked what SANRAL was doing about the fact that 60% of the South African roads were conceded to be in a “very bad” state. He urged SANRAL to also support rural universities as the well-established universities already had enough funding. He suggested that SANRAL needed to have a better communication strategy with provincial and municipal road agencies. He believed that consideration should be given to using concrete fence, instead of barbed wire that was likely to get stolen or destroyed. He asked whether there was any available data on the cost of road fatalities to the South African economy.

Ms S Boshielo (ANC) also commended SANRAL on its skills development programmes and joined her colleagues in their hope that SANRAL could focus more on rural areas. She also was interested to hear more on the current status on the Lwandle eviction and the way to prevent such incidents from recurring in the future. She asked SANRAL to further explain the benefit of 48% discount for those who obtained an e-tag. She urged SANRAL to ensure that all roads in South Africa were proclaimed.  

Ms E Masehela (ANC) urged SANRAL to deal decisively with the issue of price collusion in the construction sector, as this was robbing the poor. She wondered what other funding mechanisms were available as alternatives to the fuel levy. She agreed that SANRAL needed to improve its relationship with local municipalities.

Mr C Hunsinger (DA) asked SANRAL to provide an updated slide of the figures in the presentation, especially on tariffs. He suggested that SANRAL needed to focus on issues at local government level especially on the maintenance of roads. He also asked SANRAL to focus on the main road between Ntabazimbi and Rustenburg, as there were reports on potholes that were causing fatal accidents.

Mr M Sibande (ANC) emphasised that the priority of SANRAL should be to develop areas that were previously disadvantaged. He joined his colleagues in expressing concern over price collusion in the construction sector and said this was corruption. He wanted to know whether it was possible to disclose details of the R9 billion worth of toll contracts awarded by SANRAL in slide 20. He questioned the possibility of funding roads through the fuel levy, as this was likely to impact on the extremely poor sectors that were hugely dependent on the taxi industry for commuting. 

Mr L Ramatlakane (ANC) suggested, as a matter needing future discussion, that SANRAL needed to use the Gautrain commuter pattern in order to determine the utilisation and usefulness of Gautrain as a form of public transport. He commended the 80% target of support to the SMMEs but wondered whether the benefits were commensurate, and suggested that this needed to be quantified. He was concerned that the issue of road fatalities had still not been addressed and urged SANRAL to deal with behaviour patterns of road users.

Mr Alli responded to questions in general. He said that SANRAL was not in any way supporting the fuel levy as it believed that it distorted prices and affected the poor. He also responded that SANRAL prioritised the utilisation of public transport, as this was a way to tackle the issue of congestion and the carbon footprint. He emphasised that the DoT was aware that almost 64% of commuters in Gauteng used minibus taxis and it was important to continue subsidising the industry in order to survive. He emphasised that SANRAL made a decision to expose the price collusion in the construction industry but there were no official charges yet. There was a possibility of bringing claims for civil damages. He also agreed that SANRAL needed to work closely with local municipalities in order to avoid situations similar to the Lwandle evictions and other cases. He admitted that there was a lot that still needed to be done to improve the situation in rural areas, and stressed that job creation should be primarily aimed at fighting poverty and marginalisation, as emphasised in the NDP and State of the Nation Address (SONA).   

The Chairperson interjected to note that there was no time left, and thus suggested that SANRAL needed to respond to the remaining questions by email, with these responses to be discussed in the next Committee meeting. She said that the detailed presentation by SANRAL had covered a lot of controversial issues, like e-tolling, the poor quality of our roads and other issues affecting road users. She commended Members on their challenging questions, which indicated that indeed the Committee was passionate about transport issues.

Adoption of Committee Minutes
The Chairperson tabled the minutes dated 29 July 2014 for consideration.
The Committee went through the document and adopted it with no changes.

The meeting was adjourned.   

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