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The South African National Roads Agency SOC Limited (SANRAL), an independent statutory company whose sole shareholder and owner is the South African government, is in charge of all matters affecting the country’s national road network.  These include the financing, management, control, planning, development, maintenance, and rehabilitation of national roads. 

Over 80% of South Africa’s national roads are nontoll roads funded largely through government appropriations.  The rest are toll roads, over 10% of which are under the direct management of SANRAL, and funded in large part through a mix of toll revenues and capital market borrowings.  The latter are generated by auctioning government guaranteed and nonguaranteed bonds.  SANRAL has also made limited use of funding for its toll-road projects from additional sources, including direct foreign investment and loans backed by export credit agencies.  The remaining toll roads are funded through thirty-year concessions to private investors, who build, manage, and maintain the toll roads for the term of their contract.

I. Introduction

The current South African Constitution established a three-tiered system of government: national, provincial, and local.[1]  The national and provincial governments enjoy concurrent legislative jurisdiction over matters relating to public transport and the regulation of road traffic.[2]  Provincial governments enjoy exclusive legislative jurisdiction over matters affecting provincial roads and traffic.[3]  However, in special circumstances, the national government may legislate on matters exclusively reserved for provincial governments, including those affecting provincial roads and traffic.[4]  As a result, there are a number of national and provincial laws regulating roads and road transport in South Africa.[5]

This report briefly describes the legal framework for funding national roads in South Africa.  Specifically, it discusses the functions and activities of the South African National Roads Agency Limited (SANRAL), an independent, wholly state-owned statutory company responsible for developing, maintaining, and managing South Africa’s national road network, in accordance with its governing legislation, the South African National Roads Agency Limited and National Roads Act.[6]

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II. National Roads and SANRAL

A national road is any road or route declared as such; it includes any toll road, interprovincial bridge, and interstate bridge used in conjunction with a national road.[7]  The process of having a particular road declared a national road may involve the Minister of Transportation, SANRAL, provincial premiers, and the Constitutional Court.  The Minister of Transportation may declare as a national road “any existing road, or any route of which the boundaries have been fixed by survey,” and may amend or reverse such declaration.[8]  However, the Minister can only do so on the recommendation of SANRAL.[9]  In addition, if the road in question is an existing road, the Minister needs to reach into an agreement with the premier of each province in which the road is situated; however, if it is a new road the Minister can declare it a national road upon consultation with the premiers of the provinces that will be affected.[10]  If, in the process of having an existing road declared a national road, the Minister and a premier of an affected province cannot reach an agreement, the matter is referred to the Constitutional Court.[11]

SANRAL is in charge of matters affecting every aspect of South Africa’s national road system.[12]  Incorporated in 1998, SANRAL is an independent statutory company registered in accordance with South Africa’s Companies Act, with the South African government as its sole shareholder and owner.[13]  It is governed by a board of eight members, most of whom are appointed by the Minister of Transportation.[14]  Its main functions include all strategic planning concerning South Africa’s national roads; planning, designing, constructing, operating, managing, controlling, maintaining, and rehabilitating all national roads; and financing all these activities.[15] 

In addition to its main functions, SANRAL is afforded various additional powers by law.  For instance, in addition to its duties regarding national roads, at the request of a municipality or a provincial government and with the approval of the Minister of Transportation, it may perform any of its main functions on roads under the jurisdiction of a municipality or a province on behalf of any such authority.[16]  It may charge a fee for any service it provides.[17]  It also has the authority to contract out any of its functions to a private person or institution.[18]  In addition, with the Minister’s approval, it may take part “in ventures, involving national or other roads, jointly with the road authorities, or (as the case may be) any private persons or bodies, who have or will have ownership or control of the other roads.”[19]  Furthermore, it has the authority to operate any national road as a toll road.[20] 

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III. Funding of National Roads

 

The South African National Roads Agency and National Roads Act envisages various sources of funding for SANRAL, including

  • capital investments or loans made by the state;
  • revenue generated from fuel taxes in accordance with any applicable law;[21]
  • loans;
  • interest from cash balances or investments;
  • revenue generated from participation in joint ventures;
  • revenue generated from the sale of assets;
  • revenue generated from tolls;
  • revenue generated from collecting fines;
  • revenue generated from developing, leasing, or managing assets;
  • revenue generated from any fees collected;
  • parliamentary appropriations; and
  • revenue generated from grants, donations, or inheritances.[22]

Currently, SANRAL operates two separate business areas (toll and nontoll operations).  The reports on and budgets for each are kept strictly separate for purposes of management and cash flow obligations; “no cross-subsidization between the two are permitted.”[23]

A. Nontoll Roads

Most of South Africa’s national road network falls into the category of nontoll roads and is largely funded through appropriations.  At present, SANRAL manages a road network of 19,705 kilometers (about 12,244 miles), including both toll and nontoll roads throughout South Africa.[24]  Most of these (81%) consist of nontoll roads.[25]  The vast majority of the funding for nontoll roads comes from tax-based revenues generated by the national government and disbursed through appropriations; in 2012/2013, this amounted to ZAR9.7 billion (about US$875 million).[26]  A small portion of the funding is generated from other income; in the same year this amounted to ZAR355 million (about US$32 million).[27]  Of the total nontoll budget for the year, ZAR466 million (about US$42 million) was allocated for routine road maintenance contracts.[28]

B.  Toll Roads

Toll roads are a relatively recent phenomenon in South Africa.  Government appropriations were the only source of funding for roads in the country until 1995, when toll roads were introduced to compensate for inadequate government funding for the development, management, and maintenance of national roads.[29]  Currently, 19% of South Africa’s national road network consists of toll roads.[30]  The total budget for toll-road development and management for 2012/2013 was ZAR4.7 billion (about US$424 million), including ZAR293 million (about US$26 million) allocated for full-time routine road maintenance.[31]

SANRAL is authorized by law to determine which national roads should be turned into toll roads.  SANRAL may, with the approval of the Minister of Finance, declare “any specified national road or any specified portion thereof, including any bridge or tunnel on a national road, to be a toll road.”[32]  However, the Minister determines the amount of the toll that may be imposed as well as any increase or decrease in such fees.[33]

Toll roads in South Africa are developed in one of two ways: SANRAL may fund the development of a toll road and directly collect tolls, or contract the management aspect to a private company.[34]  It may also enter into a contract with any person to finance, plan, design, construct, maintain, or rehabilitate a national road and operate it as a toll road.[35]   

1.  SANRAL-Funded Toll Roads

SANRAL has directly developed and manages about 11% of the over 19,000 kilometers of national roads, which it funds largely through a mix of toll revenues and capital market borrowing.[36]  In raising funds for toll roads, SANRAL seeks to follow two key principles: reducing the cost of borrowing and tying the maturity of the funding to the life of the roads.[37]

One of the principal ways SANRAL raises funds to finance toll roads is by issuing government-backed bonds.[38]  It has a government guarantee on borrowing of ZAR6 billion (about US$547 million) with no expiration date.[39]  This helps SANRAL keep the cost of borrowing low.[40]  The country’s National Treasury has approved for SANRAL a borrowing ceiling of ZAR47.91 billion (about US$4.3 billion); ZAR37.9 billion (about US$3.4 billion) of this amount will be underwritten by the national government through a guarantee.[41] 

SANRAL may also issue nonguaranteed bonds for the purpose of accessing additional sources of funding.[42]  It is authorized to raise funds through the issuance of nonguaranteed bonds of up to ZAR15 billion (about US$1.35 billion).[43]

SANRAL bond auctions have been temporarily suspended since September 2011.[44]

In addition to bonds, SANRAL has also explored and made limited use of additional sources to fund its toll-road program.  One such source is direct foreign investment.  In 2010/2011, SANRAL obtained a government-guaranteed, twenty-year loan from the European Investment Bank in the amount of ZAR1.1 billion (about US$99 million).[45]  SANRAL has also explored Export Credit Agency (ECA) supported loans.  Recently, SANRAL was able to obtain an Austrian ECA guaranteed line of credit from a local South African bank for ZAR550 billion (about US$49 million) at a favorable rate for the purchase of goods and services to finance a particular toll road.[46]  

2.  Privately Funded Toll Roads

In addition to the 81% of nontoll roads and about 11% toll roads under SANRAL’s direct management, 8% of South Africa’s national roads, which are also toll roads, are developed and managed by private parties through concession contracts under public-private partnerships.[47]  The concessionaires get a thirty-year term to build the roads, collect tolls, and manage them in accordance with the terms of their contracts; at the conclusion of the concession, they turn the roads over to SANRAL.[48]  The roads under concession remain the property of SANRAL, and all improvements made by the private investors are reflected on SANRAL’s balance sheet as assets.[49] 

SANRAL has awarded concessions to three private companies to build, operate, and maintain three sections of the national road network.[50] 

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Hanibal Goitom
Foreign Law Specialist
March 2014

 


[2] Id. sched. 4.

[3] Id. sched. 5.

[4] Id. § 44(1).  Pursuant to Section 44 (2), the national government legislates on such matters when it is necessary

  • to maintain national security;
  • to maintain economic unity;
  • to maintain essential national standards;
  • to establish minimum standards required for the rendering of services; or
  • to prevent unreasonable action taken by a province which is prejudicial to the interests of another province or to the country as a whole. 

[5] Marvyn Dendy, Roads and Road Transport, in 23 The Laws of South Africa (W.A. Joubert et al. eds., 2d ed. 2009).

[6] South African National Roads Agency Limited and National Roads Act No. 7 of 1998, 31(1) Butterworths Statutes of the Republic of South Africa  (rev’d. through 2012). 

[7] Id. § 1.

[8] Id. § 40.

[9] Id.

[10] Id.

[11] Id.

[12] Id. § 2.

[13] Id. § 3.

[14] Id. § 12; Overview, SANRAL, http://www.nra.co.za/live/content.php?Item_ID=151 (last visited Jan. 22, 2014).

[15] South African National Roads Agency Limited and National Roads Act § 25.

[16] Id. § 26.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] A fuel levy is imposed under the Customs and Excise Act No. 91 of 1964, § 47, 10 Butterworths Statutes of the Republic of South AFRICA (rev’d. through 2012).  The levy goes into the country’s National Revenue Fund (NRF) and it does not appear to be earmarked specifically for infrastructure spending.  The NRF is a fund “into which all money received by the national government must be paid, except money reasonably excluded by an act of Parliament.”  (S. Afr. Const. § 213. ) There are two ways of withdrawing money from the NRF: through parliamentary appropriations; or as a direct charge against the [NRF] if mandated by the Constitution or an Act of Parliament.  (Id.

[22] South African National Roads Agency Limited and National Roads Act § 34. 

[23] Id. § 26; Finance, SANRAL, http://www.nra.co.za/live/content.php? Category_ID=29

(last visited Jan. 22, 2014). 

[24] SANRAL, Annual Report 2013, at 26 (undated), http://sanral.ensight-cdn.com/content/Sanral_Annual_Report_13_LRES.pdf

[26] South African National Roads Agency SOC Ltd. Operating Summary (Non Toll) Budget (undated), http://sanral.ensight-cdn.com/content/Non_Toll_Budget_Summary_Page_2012_2013~1.pdf.

[27] Id. 

[28] SANRAL, Strategic Plan, supra note 25, at 7.

[29] Strategic Vision of the South African National Roads Agency for the Year 2010, at 25 (2004), http://www.nra.co.za/content/horizon2010.pdf

[30]  SANRAL, Strategic Plan, supra note 25, at 14.

[31] Id.

[32] South African National Roads Agency Limited and National Roads Act § 27.

[33] Id.

[34] Id. §§ 27 & 28.

[35] Id. § 28.

[36] SANRAL, Strategic Plan, supra note 25, at 7.

[37] Id. at 53.

[38] Id.

[39] Finance, SANRAL, supra note 23; South African National Roads Agency Limited and National Roads Act § 33.

[40] SANRAL, Strategic Plan, supra note 25, at 53.

[41] SANRAL, Annual Report, supra note 24, at 121.

[42] SANRAL, Strategic Plan, supra note 25, at 53.

[43] SANRAL, Annual Report, supra note 24, at 121.

[44] Id.

[45] Id. at 121 & 147; SANRAL, Strategic Plan, supra note 25, at 54.

[46] SANRAL, Annual Report, supra note 24, at 121 & 147.

[47] SANRAL, Strategic Plan, supra note 25, at 14.

[48] Id.

[49] Id. at 52.

[50] SANRAL, Annual Report, supra note 24, at 35.