ANNUAL REPORT. introducing

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1 ANNUAL REPORT 2010 introducing

2 Reg no: 1998/009584/06 Contents CHAIRMAN S REPORT 4 CHIEF EXECUTIVE OFFICER S REPORT 6 THE BOARD OF DIRECTORS 10 EXECUTIVE MANAGEMENT 11 REGIONAL MANAGEMENT 11 STRATEGIC TASKS AND OBJECTIVES 13 SECTION 1: THE NATIONAL ROAD NETWORK 13 REPORTING PERIOD HIGHLIGHTS SUSTAINABILITY REPORTING FUNDING TECHNOLOGICAL INNOVATION 17 Traveller information ENGINEERING OVERVIEW 19 Toll road network 19 Major toll road projects underway during 2009/10 20 N1: Glen Lyon to Zandkraal 20 N1: Construction of an ultra-thin continuously reinforced concrete truck crawler lane 20 N1: Polokwane Ring Road 21 N1/N2: Winelands Toll Highway 21 N2: King Shaka International Airport Interchange 21 N2: Knysna Toll Highway 21 N2: Tsitsikamma Upgrade Project 21 N2: Wild Coast Toll Highway 21 N17: Springs to Ermelo 21 R300: Cape Town Ring Road 22 R30/R34: Glen to Virginia 22 Gauteng Freeway Improvement Project 22 Concessionaires 23 Empowerment, training and job creation 26 Socioeconomic development 27 Non-toll network 30 Major non-toll road projects under way during 2009/10 31 N2: Rehabilitation from Blue Water/Kei Mouth intersection and Komga t-junction 31 N2: Rehabilitation between Mthatha and the Nqadu Forest 31 N8: Bloemfontein Airport Interchange and access roads 31 R300: Upgrades 31

3 Creating wealth through infrastructure 1.5 ROAD NETWORK MANAGEMENT 32 Routine road maintenance 32 Bridge management 32 Pavement management /10 outcomes 34 Pavement condition 36 Road transport management system 38 Overload control 39 Traffic monitoring ROAD SAFETY MANAGEMENT 40 Key road safety challenges 40 Road safety education 41 Road safety infrastructure projects 42 Incident management system 43 Concessionaire road safety initiatives LAND PORTFOLIO MANAGEMENT 45 SECTION 2: DEVELOPING COMMUNITIES AND SUSTAINING THE ENVIRONMENT 47 REPORTING PERIOD HIGHLIGHTS COMMUNITY DEVELOPMENT 48 Project highlights 48 Concessionaires ENVIRONMENTAL MANAGEMENT 51 Designing roads to co-exist with the environment 51 Business integration for sustainability 51 Environmental management system 51 Functional integration of legislation 52 Management of the national road reserves 52 Environmental project highlights 52 Concessionaires 55 SECTION 3: CORPORATE OVERVIEW, PERFORMANCE AND FINANCIAL INFORMATION 57 REPORTING PERIOD HIGHLIGHTS CORPORATE OVERVIEW 59 Organisational structure and the cluster system 59 Human capital infrastructural overview 60 Employment equity and transformation 60 Employer of choice 2009/10 61 Talent management 61 Internal bursaries 61 External bursaries 62 Scholarships 62 Internships 62 Higher education 62 Employee wellness programme 63 Occupational health and safety 63 Diversity management 63 Marketing and communication 63 Information technology CORPORATE PERFORMANCE INFORMATION FINANCIAL OVERVIEW 72 Corporate governance 72 Risk management 72 Prevention and response to fraud and corruption 72 Report of the Audit and Risk Committee 73 Other Committees of the Board 75 SECTION 4: FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH Report of the Auditor-General 80 Statement of Responsibility by the Board of Directors 82 Certificate by Company Secretary 83 Directors Report 84 Statement of Financial Position 92 Statement of Comprehensive Income 93 Statement of Cash Flows 94 Statement of Changes in Equity 95 Notes to the Financial Statements 96 1

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5 Creating wealth through infrastructure Vision To be recognised as a world leader in the provision of a superior primary road network in southern Africa. Mission As the custodian of a public good, we are committed to the advancement of the southern African community through: A highly motivated and professional team State-of-the-art technology Proficient service providers Promoting the user-pay principle. Core values EP 2 IC E-xcellence P-roactiveness P-articipativeness I-ntegrity C-are 3

6 CHAIRMAN S REPORT During the 2009/10 financial year, the South African National Roads Agency Limited (SANRAL) continued to make progress in expanding, maintaining and securing sustainable funding for the national road network. As a testament to the strength of our capital investment programme and our commitment to the principles of good corporate governance, we have retained our Moody s Investor Service ratings: a local issuer rating of with stable outlook and a global scale rating of A3 (long term) and Prime-2 (short term). For the second consecutive year, we were also the proud recipients of the Spire Award for Best Borrower, and we received the Best Issue award for our HWAY20 bond. These awards and ratings demonstrate SANRAL s sound and sustainable approach to building, servicing and financing our country s national roads. During 2009/10 we raised R6.837 billion under our domestic medium-term note programme, initially through the issue of our non-guaranteed NRA bonds, and thereafter by tapping the capital market with our government-guaranteed HWAY bonds. SANRAL has raised a total of R23.7 billion in funding for the expansion and upgrade of toll roads, particularly the Gauteng Freeway Improvement Project (GFIP). We will continue to source finance in 2010/11 and 2011/12 to fund several projects, including the N1/N2 Winelands in Cape Town. By 2016, SANRAL aims to raise about R55 billion to provide road infrastructure for South Africa, and to underpin our country s economic growth and social development. The GFIP is our largest upgrade project to date. At its peak during the reporting period, the project employed a total of people. While this was not, strictly speaking, a 2010 World Cup project, SANRAL devoted a great deal of time and effort to ensure that we brought forward some of our construction milestones to complete stages of the project in time for the event. During the year, we completed the William Nicol Interchange, the N4 Nelspruit Bypass and the Leandra to Leven section of the N17. We constructed and placed the Lynnwood Pedestrian Bridge, built the first of the two new Allandale bridges and demolished the old Allandale Bridge. Toll and non-toll projects in progress during 2009/10 included the Chota Motala and the Umgeni/Inanda Interchange upgrades in KwaZulu-Natal, the R300 upgrades in the Western Cape, and N6 upgrades between Ezibeleni and JJ Serfontein in the Eastern Cape. SANRAL recognises that it is not enough to provide new infrastructure to alleviate congestion and improve capacity. To meet these objectives, we also need to provide technologically advanced solutions and work smarter. As a result, we have implemented a freeway management system (FMS), supported by intelligent transport system (ITS) technology along freeways in Gauteng, Cape Town and KwaZulu-Natal. This has resulted in immediate benefits to road users. A key element of the FMS project is the interaction with and enhancement of existing incident management systems to facilitate improved emergency and incident response. Real-time traffic monitoring and the efficiency of notification of an accident or incident will reduce their impact, improve the response of emergency services and bolster safety for road users. SANRAL continues to make transformation and broad-based black economic empowerment (BBBEE) a priority. SANRAL s contribution to BBBEE is primarily evident through targeted procurement; we support approximately black-owned SMMEs. Examples of SANRAL s successful partnerships with these businesses are found throughout this report. During 4

7 Creating wealth through infrastructure the year under review, SANRAL trained more that people in road-building projects and created about job opportunities throughout the country. We will continue in this vein to simulate economic growth in pursuance of pushing back the frontiers of unemployment. We believe that for an economy to grow the country must integrate all of its people in a meaningful way. During the reporting period, SANRAL published our Declaration of Intent This three-year strategic plan responded to road infrastructure challenges by ensuring medium-term integrated planning that incorporates innovative technology to the benefit of all road users. This document reflects on our accomplishments over the past decade while looking ahead to the future. We remain committed to providing a safely engineered and reliable transport infrastructure that will aid in building a thriving economy. In the near future, SANRAL will publish our next 10-year vision, providing a longer-term strategic view. promoting road safety for vulnerable users in October 2009 in Cape Town. The seminar resulted in a broad consensus on planning, policies and management to improve the safety of pedestrians, particularly in low- and middle-income countries. I would like to express my gratitude to the Board for its continued support, to the staff of SANRAL for their unflagging efforts to strengthen our road network, and to Minister of Transport Sibusiso Ndebele for his confidence in the organisation. We look forward to working together to overcome the challenges that lie ahead. Lot Ndlovu, Chairperson SANRAL continues to be an active participant in the global network of road agencies, and was proud to host the World Road Association s (PIARC) international seminar 5

8 CHIEF EXECUTIVE OFFICER S REPORT Despite the continuing fallout from the global economic downturn, SANRAL embarked on 160 new projects during 2009/10 a testament to our commitment to delivering on our mandate and providing a world-class road network. Moreover, during 2010 South Africa invited the world to our shores to witness one of sport s largest spectacles the 2010 FIFA World Cup. By completing a number of crucial milestones ahead of this event, SANRAL ensured that the national road network was ready for the global stage. During the reporting period, prices for road construction materials rose sharply along with the cost of our borrowings. SANRAL recognised this as an opportunity to re-examine our approach to the domestic medium-term note programme, the vehicle we use to raise funds on the capital markets. We are aware of the irrevocable cost in the loss of an opportunity. As custodians of a public good the proclaimed km national road network we have a responsibility to preserve, expand and improve the country s national roads. Asset-based approach for communities Persistent levels of inequality in South Africa have forced us to rethink our role in development. SANRAL strives to create opportunities that realise the potential of communities, enabling them to become economically independent. The asset-based approach enhances the capacities, skills and assets of individuals and communities. By actively involving entrepreneurs and communities in the construction of road infrastructure, they are able to become equal partners in the project with a stake in its success. During the year under review there were 8 new community development projects under construction, based on the regional development plans, to the value of about R134.9 million and directly employing 1100 people. This approach has enabled us to support those who were denied the chance to exercise their rights and freedom to live as equals in our society. Through our targeted programme and procurement policies in support of broad-based black economic empowerment, SANRAL has provided a platform to restore some measure of economic balance. The development of human capital in South Africa is a key priority for SANRAL. We continue to support the initiatives at tertiary institutions and have expanded the initiatives at high school level by providing scholarships to qualifying grade 10, 11 and 12 learners. The Targeting Talent programme at the University of Witwatersrand is another programme designed for these learners to experience life on-campus. These initiatives focus on developing scarce skills and meeting South Africa s demanding need for human capital, addressing the legacy of underdevelopment. Construction works During the reporting period, SANRAL awarded construction works to the value of R18.6 billion, of which 36 percent went to black-owned companies. The significant value of these contracts highlights the importance of maintaining and upgrading the national road network, on which the vast majority of goods are hauled nationally. These contracts also demonstrate the pivotal role that SANRAL plays in sustaining the construction industry. This year a contract was awarded for the construction of gantries, on which the equipment for the electronic toll collection system will be mounted. Careful attention was paid to the design of the gantries to ensure that they are aesthetically 6

9 Creating wealth through infrastructure appealing to road users. This contract is part of the 185km Gauteng Freeway Improvement Project. Despite the abnormally heavy rains during the first four months of 2010, the GFIP s civil engineering works are substantially completed. At its peak, there were people employed on this project. Other major projects underway during 2009/10 included the King Shaka and Bloemfontein airport interchanges, the completion of the partial ring road in the Maputo Development Corridor around Nelspruit in Mpumalanga, and the completion of the R300 in Cape Town. We are pleased to report that tenders for the N1/ N2 Winelands Toll Highway in the Western Cape have been called for. The closing date for tenders is September Also, the environmental impact report for the N2 Wildcoast Toll Road has been submitted to the relevant authority. We look forward to a successful outcome. For the rights of the poor, through which this road traverses, must not be the sacrifice by which the wishes of the objectors are achieved. The reporting period also saw the beginning of the installation and construction of the physical infrastructure for ITSes in KwaZulu-Natal and the Western Cape. To reduce our dependence on energy from fossil fuels, the ITS incorporates the use of solar panels and windmills power field equipment. ITS will play an important role in leading the way to efficient management of engineering and environmental issues, and improving travel by reducing congestion and increasing safety on the national roads. Funding The year under review was a challenging period in which to raise finance, due to continued global financial market volatility, the international economic downturn and its impact on domestic financial markets. The year also saw an unprecedented rise in the costs of road construction materials. Our concerns about the cost of borrowing led to the review of the domestic medium-term note programme. The National Treasury reinstated the state guarantee on SANRAL s borrowings of R31.9 billion, with a limit on the amount we can borrow annually. This year also saw the successful refinancing of the N4 Platinum Toll Highway to the value of R million. This is a clear indication of the strength and quality of the project. 7

10 CHIEF EXECUTIVE OFFICER S REPORT (continued) We are also pleased to note that independent rating agency Moody s affirmed the assigned national scale issue rating for non-guaranteed funds of Aa2.Za/ and also assigned global scale ratings of A3/P-2. In addition to raising funds on the domestic capital markets monthly, SANRAL secured a loan of 120 million at favourable rates from the European Investment Bank, denominated in rands to protect SANRAL from any foreign-exchange risks. Although the domestic capital markets will remain our main source of funding for toll roads, we believe in exploring all our options, and we embarked on an international road show to introduce SANRAL to international investors. The road show took us to the United States and to Britain, where we visited 23 fund managers and 9 private equity investors, we were well received on both sides of the Atlantic. In our pursuit of reducing the cost of transport and our dependence on the fiscus, we remain mindful of the political, economic and social imperatives in South Africa. International associations SANRAL has continued to serve in various roles in both international and national organisations, including: the PIARC, Association of Southern African National Roads Agencies, International Bridge Tunnel and Turnpike Association, South African Institution of Civil Engineers, Road Pavement Forum and South African Road Federation. We have been party to technical presentations, serving on national and international technical committees that set standards for civil engineering works and policies, and we have been invited to be keynote speaker at conferences. The highlight of the year was hosting the PIARC International Seminar on Road Safety for Vulnerable Road Users, when the Safe Routes to Schools project was launched. Rooting out fraud and corruption It is with regret that we note the increased incidences of poor governance in the industry. The collusive practices in the industry and the blatant attempts by external parties to defraud SANRAL are a cause for concern. We trust that the success we had through the cooperation of the law enforcement agencies in tackling the problem will act as a deterrent. We will work diligently with industry stakeholders to stamp out these practices. Accolades It is always heartening to be acknowledged by our peers. During the reporting period, SANRAL s outstanding work was recognised in various forms by the Corporate Research Foundation, the Mail & Guardian, the Bond Exchange of South Africa, Euromoney Project Finance and the African Bankers Award. We at SANRAL have derived much pleasure from these accolades and are humbled by this recognition. The future Our challenge is to remain a focused, learning organisation that retains its talent and delivers on its mandate to the best of its collective ability. We are confident that our colleagues will, through applying their knowledge with integrity and passion, continue to strive towards innovation and be of service to the citizens of South Africa. 8

11 Creating wealth through infrastructure We will endeavour to improve the condition of the national road network despite the financial constraints facing us. We will also continue to use technology to improve our efficiency, within our organisation as well as in our approach to the management of the road network. The nature of our business has changed with the introduction of ITS and electronic toll collection, which compels us to complement our skills set. We will endeavour to use new communication technologies to create real cooperation among drivers, their vehicles and the road. We will continue to strive to building the engineering profession by working to strengthen scientific capacity in South Africa, promoting education and training in science and technology and by sponsoring research and development. its shores. We also recognise and appreciate the role of the investor community and the Auditor-General s office. Finally, to our road users and other role players, my thanks for your support and feedback. We reaffirm our commitment to serving you with excellence and integrity. Nazir Alli, Chief Executive Officer A new business plan, the Declaration of Intent was published this year. The currency of the existing long-term vision of SANRAL is captured in the publication Horizon 2010, which expires during the year under review. This will be replaced during the course of next year, taking into consideration the changing nature of SANRAL s business, the environment in which we operate and the need to stay true to our mandate. Acknowledgements My sincere appreciation goes to our Minister, Mr Ndebele, and deputy Minister, Mr Cronin, for their collective leadership and guidance during the year. A special thanks to our Minister who is always willing to offer support and counsel. It is with humble gratitude that I extend my thanks to the Board for its support and inspiration, and to my colleagues for their passion for and commitment to serving others. It is our contributions, no matter how small, that strengthen us in our philosophy of equal worth. Our sincerest thanks and appreciation to our industry partners for your efforts in showcasing South Africa to the visitors to 9

12 THE BOARD OF DIRECTORS Non-executive directors Seated left to right: Mr Lot Ndlovu, Chairperson Mr Mochele Noge Ms Duduzile Nyamane Ms Lungile Mchunu Standing left to right: Prof Frederick Otieno Ms Sindisiwe Mabaso-Koyana Mr Anthony Julies Mr Skhumbuzo Macozoma Executive Director Standing far right: Mr Nazir Alli (Chief Executive Officer) 10

13 Creating wealth through infrastructure Executive management Chief Financial Officer: Ms Inge Mulder Company Secretary and Risk Officer: Ms Alice Mathew Corporate Services Executive: Ms Heidi Harper Engineering Executive: Mr Koos Smit Regional management Eastern Region: Mr Gunyaziwe Makaula Northern Region: Mr Ismail Essa Southern Region: Mr Mbulelo Simon Peterson Western Region: Mr Kobus van der Walt 11

14 12

15 Creating wealth through infrastructure Section 1 The national road network STRATEGIC TASKS AND OBJECTIVES SANRAL s principal tasks: Strategically plan, design, construct, operate, rehabilitate and maintain South Africa s national roads to support socioeconomic development Generate revenue from the development and management of its assets Undertake research and development to enhance the quality of life of all South African citizens, with particular emphasis on their social and economic well-being Advise the Minister of Transport on matters relating to South Africa s roads Finance, plan, construct, provide, operate and maintain roads in neighbouring countries on the request of the Minister of Transport and those countries. SANRAL s objectives: Manage the national road network effectively Provide safe roads Carry out government s targeted programmes Maintain cooperative working relationships with relevant departments, provinces, local authorities and Southern African Development Community member countries Achieve and maintain good governance practice Transformation Achieve financial sustainability Pursue research, innovation and best practice. 13

16 SECTION 1 THE NATIONAL ROAD NETWORK South Africa s national road network consists of km of roads. This network seamlessly connects major cities, towns and rural areas, supporting economic growth and social development, and contributing to job creation. SANRAL works to: Expand the national road network Maintain existing roads in a safe condition Access sources other than tax-based revenues to fund road development Promote transformation Use new technology to improve the travel experience of road users and protect the environment. SANRAL made progress in all these areas during the reporting period (1 April 2009 to 31 March 2010). The nature of our work, however, nearly always involves multi-year projects. Planning, construction, finishing work, capital-raising exercises and expenditure typically extend beyond the limits of any one reporting period. Consequently, many of the SANRAL projects mentioned in this report are only due to be completed during 2010/11 or beyond. Over the past several years, SANRAL and South African road users have benefited from the introduction of several innovative technologies that are designed to maximise return on investments, minimise disruptions to road users and to improve the country s global competitiveness. As part of achieving its goals, SANRAL developed an asset preservation and expansion strategy that is now integral to the management and funding of the country s system of national roads. Reporting period highlights Highlights for the reporting period included the following: Completed the bulk of construction on the GFIP. While work for this project was not planned as a requirement for the 2010 FIFA World Cup, most of the work was finished to meet milestones set for this global event. Apart from a few delays, SANRAL s other projects stayed on schedule. Met or exceeded targets in pavement management, as measured by industry standards such as smooth travel exposure, low rut exposure and high texture exposure. Took further steps to roll out ITS in two other provinces. Raised R6.8 billion through the domestic mediumterm note programme, and maintained capital market confidence levels, as shown by confirmation of credit ratings and awards. Awarded 160 contracts worth R18.6 billion for new works, rehabilitation and improvement, maintenance, freeway management, open-road tolling (ORT) systems and routine road maintenance. Spent R3.9 billion on contracts with small, medium and micro enterprises (SMMEs), of which more than R2.9 billion went to black-owned firms. Trained more than people in road-building projects, and created some jobs. Held an international seminar on road safety and conducted a Safe Routes to School research project for secondary school learners in communities along the R300 in the Cape Town metropolitan area. 1.1 SUSTAINABILITY REPORTING SANRAL s approach to sustainability is captured in the concept of the triple bottom line, which reflects our commitment to balancing economic growth with social needs and the natural environment. The Brundtland Commission defined sustainability as meeting the needs of the current generation without compromising the ability of future generations to meet their own needs. SANRAL is mindful of this complex challenge. With local and global attention focused on sustainable business practices and outcomes, we can confidently state that SANRAL has contributed positively to improving socioeconomic conditions in South African communities, particularly in the build-up to the 2010 FIFA World Cup. This annual report, like its predecessors, extends financial reporting to include our social and environmental practices. SANRAL enjoys a combined assurance model that involves agency staff and auditors (both internal and external) to ensure comprehensive management of risk. SANRAL s Audit and Risk Committee monitors the adequacy and effectiveness of the assurance model. 14

17 Creating wealth through infrastructure 1.2 FUNDING The national road network under SANRAL s management is expected to grow to an already identified km. The financial implications of incorporating roads that were previously maintained by provincial authorities poses a challenge that SANRAL will meet through a combination of the following: Funding from the national fiscus Funding from the collection of tolls, which allows for the development and maintenance of roads on a userpay principle Engaging the private sector to finance the development of some sections of tolled road over a fixed period, with the asset reverting to SANRAL at no charge and in the specified condition. Funding the road network SANRAL s business consists of two separate operations: toll and non-toll roads. The SANRAL Act (1998) stipulates a distinct separation in the funding of these operations: Non-toll roads are funded by government allocations, and are not allowed to borrow or be cross-subsidised from toll road income, and vice versa. Toll operations can be divided into two types those funded by SANRAL itself and operated on its behalf, and roads concessioned to private parties under publicprivate partnerships (PPPs). SANRAL s funding therefore comes from two primary sources: grants from the National Treasury for all non-toll roads, and the revenue received from toll roads. The agency also raises funds from the capital and money markets. There has been a steady increase in funding allocations from the national budget to support the national road network, from R1.75 billion in 2005/06 to R5.71 billion in 2009/10. This has been accompanied by the expansion of the toll road network. This funding, however, has been offset by the increasing costs of materials, eroding some of the gains made. SANRAL s costs are affected by the prices of fuel, plant, labour and civil engineering materials, and the spiralling price of bitumen. These trends are captured in the figure below, which shows that prices for road construction, as expressed by the construction price adjustment (CPA) factor, rose more rapidly than consumer and producer prices. Figure 1: Indices comparison trend Index value (Base 100 = 2000) JAN 01 APL 01 JUL 01 OCT 01 JAN 02 APL 02 JUL 02 OCT 02 JAN 03 APL 03 JUL 03 OCT 03 JAN 04 APL 04 JUL 04 OCT 04 JAN 05 APL 05 JUL 05 OCT 05 JAN 06 APL 06 JUL 06 OCT 06 JAN 07 APL 07 JUL 07 OCT 07 JAN 08 APL 08 JUL 08 OCT 08 JAN 09 APL 09 JUL 09 OCT 09 JAN 10 Year Consumer Price Index (CPI) Index Producer Price Index (PPI) Index Construction Price Adjustment (CPA) 15

18 SECTION 1 THE NATIONAL ROAD NETWORK (continued) Non-toll roads account for about 81 percent of the national road network. These roads are financed by taxbased revenues, which are used for expansion, upgrading and maintenance. These grants are indicated in the government s three-year medium-term expenditure framework, which sets out future allocations. In keeping with SANRAL s mandate, which reflects government s efforts to realign the limited pool of public expenditure to redress the imbalances of the past, we have worked to tap alternative sources of finance for road infrastructure, reducing dependence on tax-based revenues. SANRAL s financial health and corporate governance continue to receive a vote of confidence from the capital markets. Moody s Investor Service has maintained the agency s local issuer rating of with stable outlook and global scale ratings of A3 (long term) and Prime-2 (short term). During the reporting period SANRAL raised R6.837 billion under its domestic mediumterm note programme, initially through the issue of its non-guaranteed NRA bonds, and thereafter through government-guaranteed HWAY bonds. SANRAL has raised a total of R23.7 billion in funding for its current toll road programme, particularly the GFIP. We will continue to source finance, either directly or indirectly (from PPPs), over the next five financial years to fund a range of projects, including the N1/N2 Winelands in the Western Cape. During the year SANRAL hosted two domestic road shows one in June 2009 to introduce the new guaranteed domestic medium-term note programme (HWAY bonds) and the second in November 2009 to discuss the annual report. We also conducted two international road shows one to Germany and the United Kingdom, and one to the United States. While the domestic capital market is expected to remain the principal source of funding, it is encouraging to note that international investors have also participated in the monthly auctions. To broaden its investor base, SANRAL will continue to seek investment beyond its traditional domestic base. SANRAL s financial stability and corporate governance have secured a solid reputation for the agency in financial circles. During 2009, the Bond Exchange of South Africa granted its Spire Award to SANRAL as Best Borrower for the second year in a row. This award signals that a bond issuer is committed to excellence and transparency, as demonstrated by regular and consistent sharing of information with investors and other market participants. SANRAL also received the Best Issue award for its HWAY20 bond. Effective partnerships with the private sector SANRAL s strategy of pursuing PPPs has rendered substantial dividends. This policy proceeds from the reality that there are no free roads: they are either funded through general taxes or user fees. Developing and expanding a targeted portion of the national road network through application of the userpay principle not only reduces dependence on tax-based revenues: it also ensures sustainable funding, allowing SANRAL to help develop the economic potential of poor regions of the country. SANRAL is now able to negotiate investments in the improvement and preservation of the country s road infrastructure assets for periods well beyond government s three-year budgeting horizon. PPPs with SANRAL s concessionaires the N3 Toll Concession (Pty) Ltd. (N3TC), the N1/N4 Bakwena Platinum Corridor Concessionaire (BPCC) and the N4 Trans African Concessions (TRAC) allow SANRAL to reduce the cost of transport, provide a safer and more reliable road infrastructure, and build the economy of South Africa and its neighbours. During the reporting period, SANRAL called for tenders for the N1/N2 Winelands Toll Road in the Western Cape and has also received the Record of Decision on the N2 Wild Coast Toll Road from the Department of Environmental Affairs (DEA). This project is currently awaiting authorisation from the Minister of Water and Environmental Affairs. During 2009/10, the European Investment Bank granted SANRAL a loan equivalent to 120 million, denominated in rands to avoid any exchange-rate risk to SANRAL. 16

19 Creating wealth through infrastructure 1.3 TECHNOLOGICAL INNOVATION To derive the maximum benefits available from advances in technology, SANRAL has deployed ITSes in the metropolitan areas of Johannesburg, Tshwane and Ekurhuleni in Gauteng; ethekwini and Pietermaritzburg in KwaZulu-Natal; and Cape Town in the Western Cape. An ITS allows for the collection of real-time traffic information, which is conveyed to a transport management centre (TMC). The centre processes the information and uses the data to manage the flow of traffic, and to disseminate important information to road users. ITSes reduce congestion and help to improve the overall travel experience by removing some of the uncertainty associated with travel conditions. An ITS also helps incident management systems to cope with accidents or other unexpected events, leading to faster response times, improved safety and more rapid clearance of impediments to traffic flow. During the reporting period, SANRAL took some steps forward in the rollout of ITS. The Gauteng FMS spans 230km and includes 183km of fibre optic cables, 49 variable message signs (VMSes), and 245 cameras in total, including 20 wireless cameras on the R21. Road construction works during the reporting period, however, severely disrupted the service. In response to these challenges, SANRAL took other steps to obtain realtime information. For example, the agency used probes to develop temperature maps showing the average speeds of vehicles on sections of the network. This data, along with inputs from traffic safety officers employed by GFIP contractors, was used to provide real time inputs and traffic information to the TMC. Certain portions of the Cape Town FMS were already in operation by the close of the reporting period, with full rollout expected during the current financial year. Cape Town s FMS covers 150km of major freeways, incorporating 175 cameras and 48 VMSes, with a control centre housed in a newly constructed TMC that will become fully operational during 2010/11. The TMC will accommodate both transport activities and safety and security functions, including the integrated rapid transit system, and strategic surveillance operations. The KwaZulu-Natal FMS covers about 100km of N2 and N3. The ITS deployment consists of about 110 cameras, 18 VMSes and integrated traffic counting points in its initial phase, all linked to a TMC in Pietermaritzburg. The project continued to develop during the reporting period, with full rollout expected in 2010/11. In all ITS projects, SANRAL works closely with local transport, traffic and emergency services officials, the South African Police Service and the Road Traffic Inspectorate to ensure that the benefits of such deployments are realised across a wider spectrum. SANRAL intends to procure the services of a national ITS operator to manage and run the three regional operations. The contractor will be subject to a performance-based contract. SANRAL is developing an ITS performancemonitoring programme and indicators to support this process. 17

20 SECTION 1 THE NATIONAL ROAD NETWORK (continued) Traveller information During the reporting period, SANRAL continued work toward the rollout of its traveller information system. This will serve as a pre-trip and en-route tool to assist drivers with route selection and planning. SANRAL has deployed some traveller information in Gauteng. These include VMSes for en-route information, the website for incidents, road works and camera views of the Gauteng freeway network where instrumented, and an SMS push-alert service for subscribers. As noted earlier, the rollout and operation of these services has been impaired or delayed by the extent of construction works in the province. SANRAL is looking at ways to provide traveller information at national level through an advanced traffic information system (ATIS), as envisaged in the diagram below. Figure 2: National traffic information operations Concessionaire Toll Plaza Queue Length Detectors SANRAL Toll Plaza Queue Lenth Detectors High Speed WIM OLC Alert System Field Units OL Alarm, Photo Provincial Overload control (OLC) Centres National Persistant Overload Offender Database OL Alarm, Photo FMS Plaza Queue Length Wait Times OLC VOSI ORT LE ATIS Partnerships with the private sector are envisioned to support different aspects of the traveller information programme. 18



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