Government’s abrupt U-turn last week, ahead of a high
court judgment on the proposed electronic tolling of
Gauteng’s freeways, has earned the SA National Roads
Agency Limited (Sanral) a black mark from Moody’s
The policy reversal also has implications for the
government. In a note released earlier this week, Moody’s
senior analyst Francesco Soldi and analyst Kenneth Morare
said: “Sanral relied extensively on borrowed funds to finance
its operations and capex, benefiting from the implicit
guarantee of the government of South Africa. In the past
five years, the agency raised more than R33.5 billion from
local investors and is currently one of the largest borrowers
in the country.”
Two months ago, the rating agency cut Sanral from A3 to
Baa1 with a negative outlook – in other words the next
move would probably be down.
On Monday, the Moody’s analysts issued another warning.
They said “any final pronouncement against” Gauteng
Freeway Improvement Project (GFIP) e-tolls would have
“severe credit-negative repercussions for the road agency
and… exert further negative pressure on the finances” of
the government, which is Sanral’s only shareholder and
guarantor of a large chunk of its debt.
“A decision to halt GFIP tolls would be an event of default
for the R10bn in government-guaranteed notes, (equal to
half of the GFIP debt) and could trigger immediate debt
acceleration by bondholders.”
Goolam Ballim, Standard Bank’s chief economist, said “debt
acceleration” meant Sanral could be required to pay the
entire loan ahead of the dates originally scheduled.
The decision, by the ANC and trade union federation
Cosatu, to delay tolling for a month, came last Thursday,
while the National Treasury was in the Gauteng North High
Court arguing against a postponement. On Saturday, the
court granted the interdict requested by the Opposition to
Urban Tolling Alliance and halted the process for a full
The Moody’s analysts pointed out that Sanral relied on e-
toll revenues to service its debt of R20bn, incurred to
finance the GFIP’s construction and absorb operating costs.
The postponement added uncertainty and “establishes a
precedent for a final court decision on GFIP e-tolls, which
we expect by the end of May or June”.
Whatever the merits of e-tolling itself, the last-minute
decision to postpone the start of the controversial system
has “serious implications for the image of National
Treasury”, according to Econometrix chief economist Azar
Moody’s, along with rivals Standard & Poor’s and Fitch
Ratings, have already downgraded the country’s sovereign
outlook from stable to negative.
Jammine, who believes that e-tolling is an ineffective and
costly way of raising the revenue needed for the country’s
road network, is nevertheless concerned about the impact
of the public relations fiasco on investor perceptions.
Rating agencies were sceptical in February, when Gordhan
said the government’s budget deficit – the gap between
revenue and spending – could be cut from 4.8 percent of
gross domestic product this year to 3 percent within two
The medium-term budget projections now appear to be
compromised. The postponement of e-tolling will require
the government to further subsidise Sanral, after R5.75bn
was allocated in the Budget in February. And, if the delay in
e-tolling results in a further downgrade for Sanral, the event
will boost the agency’s interest bill.
The government, whose inept handling of e-tolling is
drawing adverse comment, will suffer more collateral
However, Ballim noted there were two elements to default:
the ability and the willingness of the debtor to repay. If
Sanral was unable but willing to pay, the default would not
be “an indelible blot” on South Africa’s credit standing.