SANRAL: Creating value for the nation’s long-term transport prospects

Across the nation, the need for reliable, safe, well-maintained roads is well known, as the country looks to further develop infrastructure to stimulate social and economic growth.

SanralSince 1998, the state of South Africa’s roads has fallen under the remit of the South African National Roads Agency SOC Limited, known as SANRAL.

The organisation is an independent, statutory company registered in terms of the Companies Act. The South African government, represented by the Minister of Transport, is the sole shareholder and regulator of SANRAL.

SANRAL operates in terms of its founding legislation, The South African National Roads Agency Limited and National Roads Act (Act No. 7,1998). It is governed by a Board of eight people, six of whom are appointed by the Minister of Transport; the Chief Executive Officer, who is appointed by the Board; and a representative of the Minister of Finance.

SANRAL has three divisions: corporate services, financial services and engineering services, and 4 regional offices as its implementation arm covering North, South, East and West.”

SANRAL’s mandate is to finance, improve, manage and maintain the national road network and the engineering aspects of this mandate fall under the leadership of Koos Smit, Engineering Executive in SANRAL’s Pretoria head office:

The South African national road network consists of 19 704 kilometres of roads. This network seamlessly connects major cities, towns and rural areas, supporting economic growth and social development and contributing to job creation in the country.

SANRAL has two primary sources of income. Non-toll roads (84.2 percent of the total national road network) are funded from allocations made by the National Treasury. Toll roads (15.8 percent of the total national road network) are funded from borrowings on capital markets.

We are a management company and procure road infrastructural services for the development and maintenance of the national road network. We operate with a relatively small staff compliment (250 people) considering an annual budget of 14 billion Rand.

Procurement is done on a competitive basis and documentation is strictly aligned with the prescribed legislation and regulation in the built environment. Engineering requirements and specifications for road construction and maintenance are on par with international standards and the designs are optimised for the environment and type of construction materials in South Africa.”

Smit has been with the agency since it was first established in 1998. “Before SANRAL was formed, the roads fell under the mandate of the National Department of Transport, but there was a big drive amongst infrastructural departments around the world to separate the operator from the regulator,  and consequently in South Africa, many departments created state owned agencies like SANRAL,” he recalls.

Over the years SANRAL has grown appreciably and its team has almost doubled to the present day 250 employees, half of whom are engineers and technical staff. The Road network increased from 7000 km to almost 20 000 km during the same time.

Whilst those figures are impressive, perhaps a clearer scale of the size of SANRAL’s work can be discerned from the projects themselves and the level of training that the agency delivers for South Africans.

Our scholarship programme has grown in leaps and bounds since 2008 when it was first launched. We now have 179 learners in South Africa, of which 136 learners are black, benefiting from this great opportunity.”

With regard to its projects, SANRAL makes every effort to promote transformation by ensuring that small, medium and micro-enterprises (SMMEs) are exposed to work experiences that would otherwise not have been possible,” states Smit.

In the last year, we awarded 255 contracts worth R11.6 billion for new works, rehabilitation and improvement, periodic and special maintenance, routine road maintenance (RRM), community development, professional consulting engineering and other activities.

SANRAL also spent R2 billion on contracts with SMMEs, of which more than R1.2 billion went to 821 black-owned firms. In addition, through SANRAL’s projects, 18,161 people were trained in elements of road-building, of which 7,252 were women,” he continues.

SANRAL’s latest Annual Report (for the 2012/13 fiscal year) indicates that some 110,401 job opportunities of varying durations were created through SANRAL’s projects and these figures are a combination of toll and non-toll roads.

Toll roads are of course a controversial topic for some people, however Smit explains that they are an absolute necessity:

Toll roads account for only 15.8 percent of the national road network and we support the user-charge principle and the Gauteng Freeway Improvement Project because of the user benefits (savings in time and vehicle operating cost) that will be generated over the life time of the project. Also, 20 000 jobs were created at the peak of construction on the project and currently almost 1 300 staff members are employed at the Electronic Tolling operations in Midrand.

Our challenge is to satisfy demand with scarce resources.“ The toll funding option allows us to bring projects to fruition that would otherwise not have been possible had we solely relied on money from the fiscus.

Funding remains a challenge and as stated in the SANRAL Act (1998), the Agency is responsible for two separate funding portfolios: toll and non-toll roads. Each of these operations is funded separately, as there is no cross-subsidisation of funds between the two portfolios.

Non-toll roads are funded by the national fiscus through Government allocations. Toll operations can be divided into two types: those funded by SANRAL and operated by service providers on its behalf, and roads concessioned to private parties (under public-private partnerships (PPPs)) who then design, construct, finance, operate and maintain the road on behalf of SANRAL over the concession period (30 years in South Africa).

Indeed, since SANRAL was first formed, the agency has been renowned as a pioneer in pursuing and sustaining successful public-private partnerships (PPPs), which has rendered substantial benefits  over the years.

At present there are 3 PPPs with concessionaires in practice: the N3 Toll Concession (Pty) Ltd (N3TC), the N1/N4 Bakwena Platinum Concession Consortium (BAKWENA) and the N4 Trans African Concession (TRAC) – which enables SANRAL to reduce the cost of transport, provide safer and more reliable road infrastructure, and build the economy of South Africa and its neighbours.

The need for PPPs in the prevailing economic climate is a necessity and SANRAL and Smit remain positive for the long-term future:

SANRAL continued to deliver during 2012/2013, notwithstanding a highly challenging environment. The projects that we are completing today and those in the pipeline will contribute to sustainable and shared economic growth over a long time. A well maintained road infrastructure contributes to employment, with its concomitant impact on reducing inequality and pushing back the frontiers of poverty, and responds to the challenges of a transforming society.

Through our active procurement policies, SANRAL will continue to promote broad-based black economic empowerment. We will also maintain our strong commitment to developing SMMEs, which are essential to grow capacity in the construction industry.”