New debt to help finance upgrades to road networks.

Pretoria – The SA National Roads Agency (Sanral) would raise a further R25 billion in debt finance this year on local capital markets to support its continuing drive to upgrade critical road networks over the next two years.

Projects in the state toll network development capital investment programme, which will be funded through the domestic medium-term note programme, include the R18.5 billion Gauteng freeway improvement project, the N2 Tsitsikamma toll road and the Dube TradePort interchange.

Sanral is responsible for the design, funding, maintenance, operations and rehabilitation of South Africa’s roads.

Nazir Alli, Sanral’s chief executive, said yesterday that in terms of the programme, the roads agency would issue notes worth an estimated R1 billion next Wednesday, followed by notes worth about R750 million on March 11 and R750 million on April 8.

Alli said Sanral would thereafter issue further notes, generally on the second Wednesday of each month, until it had raised the required funding amount.

He said Sanral was not relying totally on raising the capital in South Africa; it would look at offshore markets but take account of all the risks if it went that way.

“Our preference is onshore. But with the [funding] challenges we face, we may have to look offshore,” he said.

Sanral’s total cumulative debt level, which was at R15 billion last year, is projected to increase to a peak of about R55 billion in 2017 before it starts declining again.

Sanral raised more than R4.6 billion last year to fund current projects.

Alli said Sanral was in discussions with the treasury about its debt levels and whether it could expect assistance from the department.

Sanral remained on track to raise the funds it needed, but admitted that economic conditions were tougher than when it began issuing debt to finance the major projects now under way.

“However, indications are that investors will continue to be assured by our good market ratings and track record of efficiently maintaining the network and settling debt.”

He questioned the value of these ratings, not only in South Africa but around the world, in a briefing to investors.

Alli mentioned the ratings downgrade of power utility Eskom and Airports Company South Africa as the “contagion effect” and stressed the need for a “conversation” around this issue.

He appealed for Sanral to be judged on merit and urged the investment community to talk to Sanral directly if there was something it did not understand. He stressed the importance of not forming a view on Sanral without getting background.

He said Sanral had received “a smart rating” and would do everything to improve it.