Sunday, January 16

The National Treasury stopped the ‘Brics Bank’ loan of 7,000 million rand from Sanral


Concerns about low electronic toll collection rates in the Gauteng Highway Improvement Project (GFIP) were one of the main reasons why the National Treasury rejected a request for a R7 billion government guarantee to cover a loan to the National Highway Agency of South Africa (Sanral) by the New economic bloc of the Development Bank (NDB) of the Brics (Brazil, Russia, India, China, SA).

The request to the National Treasury was made by the Minister of Transport, Fikile Mbalula, in October 2019.

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This has emerged after Sanral CFO Inge Mulder challenged accusations made by the Organization to undo tax abuse (Outa) in an article published by Moneyweb last Tuesday (November 16).

The article referred to a judgment handed down by Judge J van der Schyff in the North Gauteng High Court last week overturning the refusal of Sanral and former CEO Skhumbuzo Macozoma to Outa’s request for information on the trans-African concessions ( TRAC), one of Sanral’s long-distance tolls. concessionaires, through the application of the Law for the Promotion of Access to Information.

Judge van der Schyff ordered Sanral to provide Outa with the requested records within 15 days of serving the order to the agency.

Outa’s request, which is an attempt to obtain more transparency from Sanral about possible “excessive profits” that the agency’s long-distance toll concessionaires are making, was not opposed.

Read:

Outa takes Sanral to court
A court order could expose ‘excessive profits’ by Sanral’s long-distance toll concessionaire

The Executive Director of the Outa Division of Liability, Advocate Stefanie Fick, confirmed on Wednesday (November 24) that the order has been served on Sanral.

Disputed statements

Mulder disputed Fick’s statements in a founding affidavit of the application, and Moneyweb reported that Sanral received a loan of R7 billion from the NDB (popularly known as Brics Bank) that will be repaid over a period of 15 years, but with the purpose of the loan is unknown.

“The aforementioned allegation, contained in a Moneyweb article dated November 16, 2021 and entitled ‘Court order could expose’ excessive profits ‘by Sanral’s long distance toll concessionaire’, is incorrect,” he stated.

“Sanral wishes to record that it did not receive any loan, of any amount, from the Brics’ New Development Bank.

“The New Development Bank approved a loan from him, but the loan was never approved by the Government of South Africa, through the National Treasury, and therefore has not been accepted,” Mulder said.

“Nor has any loan agreement been signed between Sanral and the NDB, which would constitute a facility that could be used.”

The NDB’s approval of the loan to Sanral, based on a statement issued by NDB, was widely publicized in the media in September 2019.

The directors report in Sanral’s 2020 Integrated Report for the year ended March 31, 2020, mentioned the NDB loan.

It read: “During the year, the New Development Bank (NDB) approved a loan of R7 billion for the Sanral toll program, which will be used to finance several recently completed toll projects and toll projects currently under construction.”

However, Sanral’s 2021 Integrated Report did not mention that the National Treasury had rejected the request for a guarantee of R7 billion to cover the NDB loan.

Clarity

Mulder said that Mbalula’s letter informing Sanral of the rejection of the guarantee request by the National Treasury is dated February 12, 2020.

The National Treasury confirmed that it made this decision in December 2019.

Mulder said that for Sanral to use the NDB loan, National Treasury approval was required for the loan and guarantee agreements “although Sanral would use the existing government guarantee of R31.91 billion for this loan.”

“The National Treasury, through the Department of Transportation, indicated that the GFIP / electronic toll problem must be resolved before the National Treasury accepts this or any other loan,” he said.

The National Treasury was more forthright in explaining why it rejected the request for a guarantee to cover the R7 billion NDB loan.

He said that the Minister of Finance (National Treasury) does not approve lines of credit to state-owned companies, adding that the specific terms and conditions of the loan agreement are determined by the lender in question and the state-owned company, in this case NDB and Sanral respectively.

Risk to the fiscus

One of the conditions for the issuance of the NDB loan to Sanral was that the R7 billion loan would be guaranteed by the government, according to the National Treasury.

“A government guarantee results in the government guaranteeing payment to the NDB from the fiscus, if Sanral defaults on any of the principal or interest payments under the NDB loan of R7 billion.

“Therefore, the issuance of a guarantee to Sanral for the purpose of obtaining a loan with the NDB has the potential to link the National Revenue Fund (NRF) for any defaults by Sanral under the loan payment terms.

“Then Sanral would use the guarantee granted by the state to collect the loan of R7 billion from the NDB and thus fulfill the condition agreed between Sanral and NDB for the issuance of the loan.

“Having considered the relevant information provided by Sanral and the Department of Transportation, the then Minister of Finance did not attend the issuance of a guarantee for Sanral,” he said.

‘Issues’

The Treasury said several problems were identified in the decision not to agree to Mbalula’s request.

He said the most salient of these was that “given the low toll collection rates in the GFIP, there was uncertainty regarding Sanral’s ability to generate sufficient operating income that would allow the entity to repay the amounts of principal and interest owed in under the NDB loan so as not to trigger a default, which would then require the government to liquidate the guaranteed obligation on behalf of Sanral. ”

Mulder said the purpose of the NDB loan was to finance large capital projects on the existing toll roads, which were urgently required, such as the N3 and N2 in KwaZulu-Natal.

He added that Sanral has enough available capacity under its R31.91 billion guarantee to finance these projects, but that the NDB loan would have been more profitable and more accessible than the capital markets at the time.

Moneyweb asked Sanral why it applied for a toll road loan service when these roads are supposed to be financed and maintained by the proceeds of the toll fees received.

Mulder said that all large infrastructure projects are financed through loans because public entities do not have access to large sums of cash to apply for capital projects upfront.

“This is called a J-curve, where initial capital costs are borrowed and repaid over time,” he said.

“Sanral (formerly Roads Board) has been issuing bonds in the capital markets to finance its toll road program since the 1990s. Sanral has also provided loans with the European Investment Bank, as well as a loan from the European Investment Bank. Export Credit with a local bank.

“To expand (capital works) the existing infrastructure, the initial construction cost is borrowed and reimbursed from existing toll revenues. This is called an income-backed loan (LSR) model.

“Before starting the capital works, it must be demonstrated that the costs can be amortized with the existing income, since the maintenance must also continue,” he said.

Mulder added that Sanral has drawn on its existing bonds to ensure that the cash is available once construction begins on the projects that were earmarked for financing through the NDB line of credit.

“The R7 billion loan would have been released during construction and not as a single lump sum,” he said. “Indeed, the bond issue is doing the same, the rate is more expensive.”

Why not upgrade?

Outa CEO Wayne Duvenage said Sanral should have provided an update and disclosed that it had not accepted the loan from NDB.

“It is frustrating that [Sanral] they are not transparent. But they are not. They keep you in the dark, ”he said.

Fick said the fact that Sanral has not accepted the NDB loan does not change the reasons Outa wants specific information about the concessionaire’s contracts.

“These roads are supposed to be self-financing, but toll rates keep going up. Them [the concessionaires] they are in the business of making money but not to the detriment of taxpayers.

“At some point they are reaching the point of equilibrium and everything they earn they put in their pocket.

“So shouldn’t the toll rates be lower, not higher?” she asked.


www.moneyweb.co.za

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