Maintenance at centre of Sanral’s R40bn medium-term project pipeline

Maintenance at centre of Sanral’s R40bn medium-term project pipeline

 

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1st November 2019

By: Irma Venter
Creamer Media Senior Deputy Editor

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The South African National Roads Agency Limited (Sanral) will issue tenders for roughly R40-billion in new projects over the next three financial years.

These projects will focus on maintaining the current road network, as well as the construction of a number of new projects.

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“Sanral has a big focus on preventive maintenance, so there are a lot of maintenance projects included in that R40-billion,” says Sanral engineering executive Louw Kannemeyer.

“Our budget is allocated to around 915 projects, in total, over the next three years. Of that, roughly 300 projects are currently in the design and construction phase, with another 600 to be issued in some form or the other.”

Kannemeyer says it may take time for some projects to kick off, as they typically require a variety of regulatory approvals, with land acquisitions also potentially holding back starting dates.

N2, N3
One of the key development areas for Sanral over the next three financial years – the midterm expenditure framework – is the development of the N2/N3 in KwaZulu-Natal – more specifically, the N3 between Pietermaritzburg and Durban, and the N2 between the old Durban airport in the south and King Shaka International Airport in the north.

“Several projects are currently out on tender. Some of these projects are worth R2.5-billion, so we are talking about quite substantial capital expenditure (capex) projects,” says Kannemeyer.

The total of all the projects in the pipeline for these two highways in KwaZulu-Natal is about R15-billion.

Another focus is on the N2 Wild Coast toll road.

Seven greenfield construction packages, to the value of about R9-billion, and stretching over 100 km, will be launched in staggered fashion over the midterm, says Kannemeyer.

One of the megabridges for this project – Msikaba – is already under construction.

Construction work on the other – Mtentu – has stopped, owing to the winning bidder, the Aveng/Strabag joint venture, abandoning the project as a result of a dispute with Sanral.

Sanral has applied to National Treasury for permission to negotiate with the previously prequalified, but unsuccessful, bidders to complete the contract.

The agency has not yet received a response from the Treasury.

Negotiating with the five unsuccessful bidders will be the quickest way to get the construction process back on track, says Kannemeyer.

Should the Treasury not agree, Sanral will have to launch a new tender process.

“If this happens, Sanral would face a long tender period, because of the complexity of the project, as it would take quite some time for any new entrants to familiarise themselves with the conditions surrounding the project,” explains Kannemeyer.

“What many people don’t understand is the challenge the height of the structure presents – people will have to work on the centre piers of this bridge, which are nearly 220 m in the air.

“You cannot tender such a project in a short period of time.

“If we have to start the tender process from scratch, it could take between 12 and 15 months before we have a new contractor on site.”

Kannemeyer says the N2 Wild Coast freeway will be a toll road.

It was decided that the initial cost of construction would be paid through an allocation from the National Treasury, with the operations, maintenance and any future expansion costs to be recovered from toll.

“This means the freeway will be a traditional toll road with booms,” notes Kannemeyer.

“It is an agency toll road, and there is no concessionaire involved, as traffic volumes will not be high enough to attract the private sector.”

Sanral will soon start the intent-to-toll process.

“This is a public process, and through this process the placement of the toll plazas, as well as the tariffs, will be finalised.”

Tolling will only start once the 100 km of road from the border at the Wild Coast Sun, down to the south, where the road joins up with the R61, has been completed.

Moloto Road, N1
Other work to be tendered over the three-year midterm expenditure framework includes the Moloto Corridor project and work on the N1 in the Free State.

There are major capex projects on the N1 north of Bloemfontein, says Kannemeyer.

There are three provinces involved in the Moloto Corridor project: Limpopo, Mpumalanga and Gauteng.

The roads on the corridor in Mpumalanga and Limpopo have already been transferred to Sanral’s jurisdiction. However, the Gauteng portion, which makes up the bulk of the road, has not yet been signed over.

“We are still trying to finalise the paperwork between Sanral and the province,” says Kannemeyer.

The total accumulated contracts on this project will amount to about R2.5-billion.

Maintenance, Toll Roads
About 130 three-year routine maintenance contracts are being retendered this year, notes Kannemeyer.

“These involve fixing potholes, repairing accident damage, litter collection and grass cutting, for example.”

Sanral’s toll portfolio will also see some upgrades.

The New Development Bank has approved a R7-billion loan, guaranteed by the South African government, to Sanral for its Toll Roads Strengthening and Improvement Programme.

This funding is linked to existing toll roads, and not the building of any new toll roads, or expanding Gauteng’s e-toll road network, says Kannemeyer.

“We are talking existing, conventional boomed toll roads.

“The loan relates to capacity increases. In a number of instances, we aim to double the road capacity by building new lanes, as some of our toll roads have reached capacity.”

This will be the case with the N3 between Pietermaritzburg and Durban, as well the N2 North Coast road, where capacity increases are required, explains Kannemeyer.

“We are also adding lanes to the N1 in the vicinity of Winburg, which is currently a single carriageway.”

Kannemeyer says Sanral is awaiting approval from the Minister of Finance to take up the loan.

While the Gauteng e-toll network will not see any expansion, the network surface has, however, almost reached the end of its design life.

“We need to look after this asset, so this network will receive new asphalt overlays over a staggered period,” explains Kannemeyer.

“This will be done at night, so the impact will be minimal.”

The combined value of this work will be about R850-million.

On retaining e-tolls – or not – there is no answer yet from the newest government grouping investigating its future, says Kannemeyer.

Cape Town Congestion
While the e-toll network may have brought some relief to commuters in Gauteng, Capetonians are facing rapidly increasing congestion.

However, with South Africans shunning e-tolls as a road-building solution, Sanral is forced to approach this problem in a piecemeal fashion, as budget allows, notes Kannemeyer.

“We are busy with the final design to tackle congestion around Cape Town.

“We are looking at lane additions to the N1 and N2, as well constructing a new greenfield part of the N2 through Somerset-West.”

This may, however, take some time.
“Our budget allocation from the National Treasury is 50% less than what we require,” says Kannemeyer.

“It may take up to three years to see any activity on the ground in Cape Town.”

De Beer’s Pass and the N3
The Van Reenen’s Pass has always, to a large degree, determined the capacity of the N3 between Gauteng and Durban.

More than 30 years ago, a second pass, the De Beer’s Pass, was planned as an additional, direct link from Ladysmith to Warden. This process came to a standstill for various reasons.

The plan was, however, again presented, and accepted, as part of the current 30-year concession agreement with the N3 Toll Concession (N3TC) group.

“We are currently engaging with the Presidential Infrastructure Coordinating Commission (PICC) and the relevant stakeholders on the future of the N3,” says Kannemeyer.

“The question is whether we are staying on the existing corridor, or adding the De Beer’s corridor?”

The options are to expand Van Reenen’s Pass, although this is likely to be the more expensive option, owing to the difficult terrain the road traverses.

Building De Beer’s Pass will shave 15 km off the route between Gauteng and Durban, and it will allow trucks to continue travelling at 80 km/h. On an economic artery like the N3, it will, most likely, cut the travelling time for trucks by an hour – which is quite significant, says Kannemeyer.

“This option will have a positive impact on logistics costs.

“It is important to understand that traffic on the N3 is linked directly to what happens to the economy.

“In terms of the forecast we have, the N3 will reach poor levels of service in 2022 or 2023, so we need to start the process urgently if one considers the time it takes to complete environmental impact studies and land acquisitions.”

Kannemeyer says Sanral has been instructed to do a detailed cost assessment and comparison for the two alignments, with both documents submitted to the Department of Transport for discussion at the PICC.

It is likely that N3TC would have to carry the cost of building the selected alignment – with Sanral to supply the land – as it was incorporated under the current concession agreement.

“But construction is dependent on the decision-makers,” says Kannemeyer. “When the decision is made, it will dictate where there is sufficient time remaining on the concession to implement the expansion.”

Challenging Market
Sanral is seeing a lot more smaller construction players entering the market, says Kannemeyer.

“And, because of challenging market conditions in South Africa, there is substantial interest in Sanral projects.

“We see a significant oversupply of construction capability in the industry at the moment. We expect some fierce competition for the projects we’ll release over the next three years.”

While it does mean that Sanral can do more with the same budget, there is also some risk associated with this situation.

“Companies are really coming in at rock-bottom prices, which means that these companies face business rescue if anything happens on site. As soon as they start running late, they run into cash flow problems,” says Kannemeyer.

For contracts of R50-million and less, the criteria to win a Sanral tender are 80% related to price and 20% to a company’s empowerment score.

For contracts above R50-million, they are 90% related to price and 10% to empowerment score.

In most instances, companies tendering for work are empowered at level 1 or 2, which means it comes down mostly to price.

‘Local’ Demands
With reports of a ‘construction mafia’ – local groupings intimidating construction companies for a share of the work – doing the rounds, Kannemeyer says Sanral does not necessarily view these groupings as ‘mafia’.

“There are legitimate demands being made based on National Treasury prescripts about what is local.

“But there is a significant misinterpre- tation of what is ‘local’. “Some people interpret the Treasury prescripts [as saying] that 30% of the contract must go to the local community, and then you find people demanding 30% of the work, or 30% of the project in cash,” says Kannemeyer.

“However, ‘local’ in this context means ‘South Africa’ – not the surrounding community.”

The National Treasury’s 30% prescript is also often linked to a Construction Industry Development Board (CIDB) recommendation that 30% of work must go to local communities – which, in this case, refers to the local community or local municipality.

“When people read this, they think it is one and the same thing,” notes Kannemeyer.

“There is no uniformity in the prescripts and the way they are communicated and interpreted, which is causing a lot of the challenges we currently have.

“There is virtually no single project where we are not confronted with these 30% demands.”

Kannemeyer says Sanral is currently enaging the CIDB and the National Treasury on clarifying their positions.