SANRAL’S strategy, transformation policy ready for Cabinet approval

Sanral’s strategy, transformation policy ready for Cabinet approval

RULES OF THE RING Heavyweight contractors are not to box in the lightweight category, warns Sanral

22nd October 2018

By: Irma Venter
Creamer Media Senior Deputy Editor


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The South African National Roads Agency Limited’s (Sanral’s) Horizon 2030 strategy is “ready to go to Cabinet”, in a process that will be managed by the Department of Transport (DoT), says Sanral transformation manager Ismail Essa.

He says the Minister of Transport, Dr Blade Nzimande, as well as Sanral’s new board, have been taken through the document, which identifies the key pillars that support the organisation, as well as the enablers to assist it with the delivery of its mandate for the future. The document also refines Sanral’s vision, mission, core values and strategic objectives.

Horizon 2030 has four pillars, namely Roads, Road Safety, Stakeholder Engagement and Mobility.

Sanral launched the Horizon 2030 document and its draft Transformation Policy in September last year. (Horizon 2030 contains a transformation framework which calls for the development of a Transformation Policy.)

Following their launch, the documents were tabled at consultative, round-table stakeholder engagement sessions held throughout the country, notes Sanral strategy head Thabiso Malahleha.

Both Horizon 2030 and the Transformation Policy were developed in tandem and released for public consultation at the same time.

The final Transformation Policy document presented to the Minister of Transport requires contractors wishing to secure tenders from Sanral to be 51% black-owned.

“We’ll give them four years to reach that 51% ownership level, following Cabinet’s sign-off,” explains Essa.

“They basically have to become level two compliant in term of the broad-based black economic empowerment codes, which includes paying attention to black representation in management and focusing on skills development.”

Another area that has seen a lot of discussion since the Transformation Policy was released last year, is the concept of obliging larger contractors to compete with their peers, rather than scooping up a number of smaller projects.

“We don’t want the heavyweights boxing in the lightweight category,” notes Essa. “We believe that contractors should not compete for contracts with contractors more than two levels down from their own Construction Industry Development Board (CIDB) rating.”

Grade nine refers to the country’s largest contractors and grade 1 to the small companies that are newcomers to the construction sector.

The South African construction industry, for the large part, reacted positively to the finalisation of the Transformation Policy, says Essa.

“Companies such as Grinaker-LTA, Concor and Group 5 are already 51% black-owned. Two companies pushed back on the matter and one assured us that they will reach the stated targets.

“The smaller contractors are very happy. They believe they have never been able to secure their fair share of business as subcontractors to the big guys.”

Sanral views CIDB grade 1 to 5 as subcontractors to the larger CIDB grade 5 to 9 contractors.

“We aim to develop grade 5 and 6 contractors into larger companies, capable of handling their own contracts,” says Essa.

He adds that consultants and suppliers all have to adhere to Sanral’s new transformation strategy, with the same rules applying to all parties.

“They all need to be 51% black-owned to secure business with Sanral. The biggest problem is the consultants, as they are largely privately owned.”

Sanral issues about R14-billion worth of contracts a year in the local roads space, excluding activities in its toll portfolio, valued at roughly R3-billion.

Toll Roads
Horizon 2030 calls for Sanral to pursue an integrated funding strategy that includes fiscal allocations from National Treasury, own revenue generation and capital raised through private finance in the form of state tolls and public-private partnerships.

The strategy demonstrates the benefits of private finance in terms of increasing the funding envelope and enabling greater road infrastructure delivery for the public, says Malahleha.

“We can do more with private finance, but understand the need for a fresh toll roads policy context in which we can have a robust and honest debate with South Africans as to how we fund road infrastructure.

“Having demonstrated the value of private finance the logical next step is the articulation of a fresh toll road policy that is clear about how, when, where tolling becomes an acceptable option.”

Malahleha says Horizon 2030 contains a graphic that shows the Sanral expenditure trend since its inception (1998/99) that includes the toll, non-toll and total funding envelope.

“From this one can see the dual trajectories of road development with private finance and without, implying a reliance wholly on the fiscus.

“The DoT and National Treasury have to have a conversation with South Africans on how roads should be funded.”

National Treasury is the custodian of funding policy, with the Department of Transport the custodian of transport policy.

“The Gauteng Freeway Improvement Project (GFIP) has been severely compromised by the non-payment of tolls,” notes Malahleha.

“The reality is that, as things stand, given current levels of congestion and traffic growth rates, it can be expected that congestion on the GFIP network will be similar to what was experienced prior to the upgrades of the freeways within the next five years.

“Sanral traffic modelling projections indicate that, for example, the expected travel time in the morning peak on the Pretoria Eastern Ring Road between N1 the N4 and N14 is expected to increase from an average of 18 minutes, to a projected estimated travel time of 35 minutes by 2026.

“Irrespective of the implementing authority or financing mechanism, Gauteng’s economic growth and living conditions will be severely compromised without the implementation of further phases of the GFIP,” notes Malahleha.

Sanral continues to face public revolt on the payment of electronic tolls (e-tolls) on the Gauteng open-road toll network, partially due to government’s vacillating support for the principle for urban tolling.

Capped Network
Malahleha says Horizon 2030 also takes “the prudent decision” to cap the national road network size to about 25 000 km to ensure sustainability for the agency.

Sanral’s current portfolio is roughly 22 000 km, with provincial and local government often opting to transfer roads to Sanral’s care when their budgets or expertise falter.

Horizon 2030 also sees Sanral expanding its activities outside South Africa, into the rest of Africa, with the aim to generate 10% of non-toll revenue from various operations both within and outside the country.

Projects that Horizon 2030 targets for implementation in the next seven to eight years are the upgrade to the N3 between Durban and Cedara and the R573 Moloto Road upgrade (Mpumalanga and Limpopo sections), as well as the construction of the N2 Wild Coast highway.

Funding limitations will potentially result in a phased, long-term implementation of the N3 upgrade.

The N2 will be a toll road, while the parts of the N3 from Durban to Cedara that are not currently tolled, are expected to remain free use.

In summarising the changes Horizon 2030 spells from the previous strategy document, Horizon 2010, Malahleha notes that the document is cognisant of the fact that the current economic environment is much more fragile that the boom times of 2010.

“2010 was driven by growth and expansion; now we look at operating under tough economic conditions. We are, among other factors, also more focused on scaling up the number of community development projects, training and transformation, as well as taking our expertise into the rest of Africa.

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