Questions arise from SANRAL’s annual report, ahead of bond auction
The Opposition to Urban Tolling Alliance (OUTA) believes these pertinent matters need to be to disclosed to potential bond investors, who would otherwise be unfairly prejudiced by the information that appears to be craftily left out or framed in the report.
When one reads both the SANRAL Chairman and CEO reports in the 2015 Annual Report, it is clear to OUTA that these paint an unrealistic picture of the real situation that the State Owned Entity finds itself in.
Mr Alli speaks of the decline in e-toll compliance since July 2014, as being directly attributed to Premier Makhura’s e-toll advisory panel discussions. While this may have been partially to blame for some of the drop off, it is clear from SANRAL's own revenue trend graphs supplied to the media earlier this year, that their e-toll income had plateaued at R120m per month by June 2014, despite ongoing threats of criminal prosecution of motorists who defied the scheme. In other words, OUTA believes that SANRAL's e-toll compliance levels were never going achieve significantly more than that reached by June 2014, seven months after the scheme was launched.
Furthermore, OUTA believes that it was the Minister of Transport, Ms Dipuo Peters' statement in Parliament on 18th July 2014, that the Government and SANRAL would not be pursuing the criminal prosecution of e-toll defaulters, which was a bigger catalyst to the decline in e-toll compliance levels, than Premier Makhura's e-toll impact announcement in the same month.
It is also strange to read Mr Alli statement in the report, that the same number of 1,3 million e-tag holders are paying for Gauteng’s e-tolls, which was also the figure used at the height of their compliance levels in mid-2014, despite the clear indication that e-toll revenues reduced by almost half - to an average of around R70m per month in the first half of 2015. The picture of 1,3 million e-tagged and paying motorists still driving on Gauteng's freeways by the end of March 2015 or even mid 2015 (when the report was finalised) is extremely misleading.
The 2015 SANRAL Annual Report also indicated a healthy regulatory and operating environment for the management of Gauteng's e-tolls, yet some five months after their announcement of the new dispensation in May 2015, which also mentioned (threatened) the withholding of vehicle license renewals in order to stimulate enforcement, none of these new dispensation mechanisms were in place by October 2015, and neither does it appear (from the recent Gazette 39130) that vehicle re-licensing will be impacted by the non-payment of e-tolls.
OUTA furthermore highlights other serious discrepancies or questionable accounting practices reflected in SANRAL’s 2015 report, in that:
On page 114, they reflect e-toll revenues to the value of R3,8 billion for the financial year, excluding discounts.
Yet recent media releases by SANRAL have indicated e-toll revenues actually generated (collected) equate to R1,04 billion from 1 April 2014 to 31 March 2015, i.e. only 27% of the value claimed in their report.
This implies that SANRAL believes the difference of R2,8 billion is collectable from the public, which is highly unlikely, even at the implied 60% discounts indicated.
Furthermore, we see no reference for a bad debt provision to cover the vast majority of this debt or the discounts on offer, either for this financial year or the debts incurred from the start of the e-toll scheme in December 2013, which must surely be indicated in SANRAL's financial statements and Annual Report for fiscal prudence to prevail.
This concern is again highlighted on page 108 of the report, wherein the Auditor General states, (in reference to disclosure note 45 to the annual financial statements on page 190) ‘that the announcement of the new dispensation on the Gauteng Freeway Improvement Project (GFIP) has ensured that the project can continue and the uncertainty whether the tolling of GFIP will continue as a result of the announcement of the Provincial Panel on e-toll in July 2014, has been removed. The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern’.
OUTA finds this statement extremely risky and disturbing from an investor's point of view, in that all indications are that the vast majority of this growing societal debt will never be collected. It is one thing to indicate that the Gauteng Review Panel has given the scheme the green light, however, it is another to say that the 'uncertainty' of the scheme 'has been removed,' since this implies that the scheme is now practical and able to collect the revenue required. If history is anything to go by (and it should be in this matter), compliance will probably never exceed 50% of the road users and there is no certainty of the scheme's success in this regard. It has certainly failed as a user-pay’ mechanism and on an international basis, similar tolling schemes generally fail at compliance levels below 80%.
SANRAL remains silent on GFIP civil suit against collusive companies
Another serious concern for OUTA, is the absence of reporting on SANRAL’s previously noted intention of legal action against collusive construction companies, for overcharges on the GFIP. For whatever reasons, the risk committee also omitted to note this issue, which OUTA raises as a serious risk, as a potential class action is looming for SANRAL, should they fail to introduce decisive and strong actions to collect the estimated R7 billion overcharge on the GFIP, which they wish to pass on as an odious debt to the public. This lack of transparent action will provide the public with increased rights to defend their non-e-toll payment actions and is a serious financial risk for SANRAL.
OUTA will assess the SANRAL 2015 Annual Report in greater detail, for more discrepancies and questions which the SOE should provide answers to.