Sanral yet to receive any ‘firm instruction’ on e-toll refunds
Motorists who have for years made e-toll payments related to the Gauteng Freeway Improvement Project (GFIP) will have to wait to hear if they are in line for a refund.
Hopes were raised last week when Gauteng Premier Panyaza Lesufi stated during a radio interview that motorists who had paid their e-tolls would be repaid.
The South African National Roads Agency (Sanral) has however not yet received any firm instruction on the way forward in this regard.
Sanral communications and marketing general manager Vusi Mona confirmed on Friday that the issue of e-toll payment refunds has served as an item under discussion by the official task team working on the practical implementation of the decision to scrap e-tolls.
The task team comprises representatives from the Department of Transport, National Treasury, Gauteng Provincial Government and Sanral.
Mona said the task team reports to the relevant political principals – Minister of Transport Fikile Mbalula, Minister of Finance Enoch Godongwana and Gauteng Premier Panyaza Lesufi.
“As part of the task team, Sanral has yet to receive an instruction from the joint committee of the political principals, firmly indicating the way forward,” he said.
Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage described the e-toll repayment comments by Lesufi as “confusing” because Sanral billed motorists and collected the fees.
“This matter requires a comprehensive explanation from Sanral on what refunds will be made and how,” said Duvenage.
Sanral baulked at providing a specific explanation as to why Gauteng motorists will be expected to pay 30% of its total GFIP debt of R43 billion instead of the R21 billion borrowed for the project.
The roads agency issued a general statement on Friday rather than responding to a number of questions posed by Moneyweb about the status of discussions on the scrapping of e-tolls on the GFIP and about Sanral’s debt.
This followed Outa stating that the GFIP took place on national roads managed by Sanral, reporting to the national Department of Transport, and it was the national Ministry of Finance that approved the government guarantees to back the bonds taken up by Sanral.
Outa claims that only R21 billion of the bonds taken up by Sanral pertain to the GFIP, which means the 30% of the GFIP debt the Gauteng government has agreed to pay is R6.3 billion.
The GFIP road network of 201km comprises only 1% of the 22 653km of the national road network managed by Sanral (1 681km of which comprises toll roads).
Clarification yet to be provided
Mona said Sanral previously explained how the R43 billion GFIP debt was calculated “but it would appear that this explanation may need further clarification”.
The statement did however not provide any clarification on the specific e-toll related issues raised by Moneyweb.
Read: Confusion over how much Gauteng must pay Sanral to settle e-toll debt
Comment requested by Moneyweb from Sanral on a number of other issues raised by Outa included:
What are the issues that are holding up the finalisation of an agreement on the scrapping of e-tolls?
Can you provide a Sanral perspective on why the Gauteng Provincial Government is being asked to settle any debt that the national authorities (National Treasury, the Department of Transport and Sanral) entered into in 2008 when the e-toll scheme was approved?
The Gauteng freeway infrastructure upgrade took place on national roads managed by Sanral. Why is the Gauteng Provincial Government – and its residents – now being held responsible for maintaining some national roads in Gauteng that were previously the responsibility of Sanral and national government?
Mona’s full response can be seen below.
The Gauteng Provincial Government did not respond to a request for comment on a number of e-toll related issues.
Sanral in November provided Moneyweb with a breakdown of its GFIP debt, stating the cumulative total of income and expenses since the roads were declared toll roads in 2007 as follows:
Cumulative total (2007 to September 2022)
Grant allocated (excl Vat)
Calculated outstanding debt
* Finance charges calculated on annual outstanding balance at the weighted average cost of borrowing (WACB) as published in the audited annual financial statements.
However, Duvenage told Moneyweb that Sanral is simplifying the issue and not being transparent about its expenditure.
Duvenage said the R13.09 billion in operational expenses pertaining to e-tolls did not appear in any line item in Sanral’s financial results since 2013.
He added that Sanral was not ready to start e-tolls in 2012 after the Constitutional Court gave it the go-ahead to start at the end of that year, with Sanral – despite stating that it would start within two weeks – only launching the scheme in December 2013
“So their e-toll operational expenses up until 2012 are questionable,” he said.
Duvenage said Sanral’s GFIP operational expenditure was about R6.5 billion and is offset by its e-toll income, which means the issue is then essentially about the debt of R21.43 billion.
However, he said that while some of the GFIP road construction may have begun in 2007, the roads were not declared as e-tolls roads until the beginning of 2008.
Sanral therefore cannot legally accrue this to the e-toll section and can only allocate interest to the bonds which were taken out from 2008, he said.
Duvenage said Outa does not get to interest due of more than R28 billion on GFIP bonds of R21.4 billion from 2008 to 2022 if interest is amortised over this period.
Read: Sanral’s FY revenue from GFIP e-tolls scheme improved 25.6%
He said Sanral’s financial statements reflect interest payments of R49 billion for the same period, which is attributed to interest on finance liabilities (amortised cost) and interest on finance liabilities (at fair value) combined.
“However, not all this interest is attributed to the GFIP bond of R21.4 billion, which we calculate at a maximum of R28 billion.
“They [Sanral] have been settling this annually, so there is no accumulated interest on outstanding interest.
“If they had allocated all the additional Treasury GFIP allocations to the GFIP bonds over the period, then the GFIP bond interest would have reduced.
“We place the revised interest over this period at R19.2 billion and the bonds would have also been settled by 2022.
“In short, it now comes down to an interpretation of how they [Sanral] have allocated their GFIP funds received from Treasury and what they have attributed to GFIP bonds,” he said.
“Prudent costing of interest and allocation of Treasury GFIP funds to off-set GFIP bonds, in our opinion, places the interest portion at R19.2 billion, which is well below the R36 billion in finance charges they are allocating to GFIP.”
Sanral executive Vusi Mona’s full response to Moneyweb’s queries
The issue of refunds has served as an item under discussion in the official task team working on the practical implementation of the decision to scrap e-tolls. The team is made up of the Department of Transport, National Treasury, Gauteng Provincial Government and SANRAL. The task team reports to the relevant political principals (Minister of Transport, Minister of Finance and Premier of Gauteng). As part of the task team, SANRAL has yet to receive an instruction from the joint committee of the political principals, firmly indicating the way forward.
SANRAL had previously explained how the R43 billion GFIP debt was calculated, but it would appear that this explanation may need further clarification.
SANRAL’s Toll Portfolio is registered as a VAT Vendor, therefore all revenue, including grant allocations are subjected to Output VAT. As previously indicated, the net amount received as a Government Grant for GFIP, is R22.003 billion and not R30.053 billion. The R23.7 billion, as announced in the MTBPS [Medium-Term Budget Policy Statement], is allocated to reduce SANRAL’s debt, and, as indicated by the Minister of Finance, will be a portion of National Government’s 70% contribution to GFIP debt.
The assumption made on deferred income is incorrect. Only a portion of the deferred income is due to the unspent portion of the non-toll grant. The principle of the deferred government grant, as explained in the notes to the financial statements, is to defer the amounts already spent on capital expenditure for non-toll roads. The deferred income is then released to the income statement over the life of the asset (20-30 years). Similarly, the amounts received from concessionaires are amortised over the concession period of 30 years. This accounting treatment is required in terms of the International Financial Reporting Standards (IFRS), IAS 20. The portion of the total deferred income for the non-toll grant of R89.7 billion, that has already been spent on non-toll assets, as described, is R54.0 billion. Therefore, this amount is not available in cash and cash equivalents.
Furthermore, the Appropriations Act determines that amounts earmarked for non-toll roads may not be used for toll roads. Similarly, the SANRAL Act determines that toll revenue may not be spent on anything other than a toll road. Therefore, the two portfolios are ringfenced and no cross-subsidisation is allowed, other than through an Act of Parliament. In the last few years, the Specials Appropriations Act was utilised to un-earmark non-toll grants for toll. However, this is not sustainable as SANRAL is responsible for 22 653km of national roads, of which 87% is non-toll and fully reliant on the government grant. The transfers to toll in the last few years has resulted in many non-toll road projects being postponed. It should also be noted that, at 31 March 2022, of the unspent grant of R35.3 billion (Note 19, page 156), R32.5 billion (Note 35, page 168) was already committed to contracts awarded on non-toll roads.
In the simplest terms, SANRAL receives a grant from the National Department of Transport (NDoT) and this grant is either spent or unspent. The unspent portion is represented by an amount in cash and cash equivalent. The full amount of R41,2 billion quoted by the analyst, does not relate to non-toll. A portion relates to the toll portfolio. The spent portion is represented by the net book value (NBV) of assets constructed, using government grants. Thus, the R89 billion credit is matched by cash and cash equivalent, and NBV of assets created from grant funding. Hypothetically, if NDoT requested the R89 billion, they would receive assets at NBV and cash in the bank that relates to the non-toll portfolio.
It is also important to understand why SANRAL cannot use the non-toll unspent grant to settle toll debt. The unspent conditional grant was approved for specific projects, and these projects must be implemented as they are important for infrastructure development to aid the economy, the industry and local communities. Not spending on these identified projects will result in the collapse of important roads infrastructure or continuation of inequality as most of the projects are in poor rural areas. SANRAL’s projects have an average of 24 months implementation periods, hence the entity will always carry unspent conditional grants. These should be viewed as committed funds.