Sanral’s R23.7bn bailout terms include independent review of the board’s performance

Sanral’s board faces an independent review of its performance as part of the conditions attached to the state-owned road agency’s R23.7bn bailout from the government announced in finance minister Enoch Godongwana’s recent medium-term budget policy statement.

The allocation is also subject to an independent review of Sanral’s supply chain management policy and related procurement processes, according to a presentation by the National Treasury to parliament’s standing committee on appropriations on Wednesday.

The Treasury team, led by head of asset and liability management Duncan Pieterse, outlined the conditions attached to R30bn in financial assistance to Sanral, Denel and Transnet, which Pieterse said were intended to ensure the entities achieved the required operational and financial improvements to reduce their burden on the fiscus. The aim was to support their balance sheets so they become sustainable, he added.

A Treasury official said the funds for Sanral will be transferred in two tranches, with R14.76bn being released only once the conditions are met. The first payment of R8.98bn will be made within 10 days of the Special Appropriation Bill, which covers the bailouts to Sanral, Denel and Transnet, being signed into law.

The conditions for the release of the R14.76bn also include the Department of Transport submitting a draft road funding policy to Treasury by the end of January 2023 for comments before the submission of policy to cabinet by April 1 2023.

The national and the Gauteng governments must also sign an agreement on a solution for the Gauteng Freeway Improvement Project, which until now has been funded by e-tolls. Godongwana effectively scrapped the tolls by announcing in his medium-term budget that Treasury would assume 70% of Sanral’s debt of about R47bn with the remaining 30% now the responsibility of the Gauteng government, which will be responsible for maintaining the road network.

“If the conditions are not met by March 31 2023 outstanding allocations will be returned to the National Revenue Fund,” the Treasury official said, adding that Treasury may request updates on the progress in meeting the conditions.

The R23.7bn is intended for the payment of maturing Sanral debt and interest payments for the 2022/2023 and 2023/2024 financial years. Government guarantees for Sanral debt will be reduced in line with the allocated funds, and Sanral won’t be able to raise or refinance debt without the agreement of Godongwana.

The conditions for the R3.38bn allocation to state-owned arms manufacturer Denel as well as the funds derived from the disposal of its noncore assets will be used to settle current and legacy obligations to avoid liquidation as to restructure operations.

Preconditions for the disbursement of the funds are that government approves Denel’s turnaround plan; the disposal of noncore assets; submission of a strategic equity partnership strategy; reducing government-guaranteed debt; and re-establishing the Denel monitoring group.

Other stipulations include the department of public enterprises finalising a memorandum of co-operation with the department of defence within six months; the withdrawal of specified government guarantees by the department of public enterprises; and no awarding of bonuses while the turnaround plan is implemented.

The conditions for the payment of the R2.9bn bailout for Transnet to repair and maintain freight rail locomotives include an independent review of all freight rail corridors and associated port operations; monthly reports on various issues; and consultations between the department of public enterprises and Treasury on various matters.

ensorl@businesslive.co.za