SANRAL had Moody's rating downgrade review coming
"It comes as no surprise to the Organisation Undoing Tax Abuse (OUTA) that SANRAL's credit rating by Moody's is under threat of a downgrade. Moody's cited SANRAL's inability to garner any improvement from public compliance on the e-toll matter - despite offers of massive discounts and threats of persecution - as a significant element in their decision for the review," says Wayne Duvenage, OUTA's Chairperson.
OUTA pointed out numerous flaws in the e-tolls scheme long before it was launched, warning that it had all the hallmarks for failure. The organisation also cited many of these flaws in its court challenge between 2012 and 2013, as well as in its position paper released in early 2014.
As a “user pays” scheme it was doomed from the beginning, due not only to the shockingly poor public engagement processes which have given rise to the outrage since its exposure in 2010, but also due to its administrative cumbersomeness, it's reliance on the inaccurate eNaTIS system and the inability to enforce non-payment both efficiently and effectively.
In addition to Moody's real concerns about SANRAL's cash flow and ability to manage the scheme, OUTA has raised concerns about the high cost of road construction, claiming that the price paid for the Gauteng freeway upgrade by SANRAL was grossly overpriced to the tune of approximately R10bn for the total project. This in itself has unnecessarily inflated SANRAL's borrowings and costs, which is a self inflicted pain that the public will now have to pick up if government is called on to honour their debt.
Sadly for the people of this country, had Treasury and SANRAL chosen the existing fuel levy policy option in 2008 - when the upgrade began - to fund the upgrade, the capital debt of this project would have already been serviced. This would have been the case if they allocated R0.09c of the fuel levy per liter – currently sitting on R2,85c per liter – to finance the project, instead of the costly, inefficient and cumbersome e-toll scheme. If indeed the project cost came in at R8bn, where OUTA's research shows it ought to have, the interest on those bonds would have also been settled, in which case Moody's might have been complimenting SANRAL today on their efficient road infrastructure project funding and management processes, instead of threatening them with a downgrade.
"We feel it’s about time the Minister of Transport took some hard advice from SANRAL's critics and seriously considers taking disciplinary action against SANRAL's leadership for allowing this SOE to slide into the mess it has become", says Duvenage.