South African Government

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Four major South Africa roads projects presented to potential investors

17 Jun 2011

Four major road projects were presented to potential investors by South African National Roads Agency Limited (Sanral) CEO Nazir Alli on Tuesday, who said the involvement of the private sector could take various forms, from debt funding to concession contracts.

The most advanced project presented at the Department of Transport’s International Investor’s Conference in Cape Town was the N1/N2 Winelands concession, which had an estimated initial construction cost of R8 to 10 billion and a favourable benefit to cost ratio of 7.7.

Construction tenders closed in November 2010, but Alli said there were still debt funding opportunities for investors. Sanral would be running a debt funding competition from October to December and preferred bidders would be selected by August 2011. Construction, meanwhile, was due to start in February 2012.

The N1/N2 Winelands project was expected to contribute R14 billion to South Africa’s gross domestic product and create almost 2 500 direct and indirect jobs during construction and over 1 200 jobs post construction.

The 560 kilometres Wild Coast toll road, from East London to Durban and including nine new major bridges, was also presented. Construction could take over three years with estimated direct employment during construction being 6 800 and indirect employment during construction being 28 100.

The project was seen as much needed development in an economically poor area with low employment rates and an initial estimated construction cost of R9 billion was given.

Sanral intended to run this project as a public private partnership, but Alli indicated that environmental concerns had delayed implementation. While two environmental impact assessments have been carried out and both have been approved, the Minister of Environmental Affairs was still considering appeals against the proposed construction of the toll road.

Alli presented the R300 ring road as a third project for investor’s consideration. The ring road would complete the connection of the major routes in the Cape Town area with the intention of relieving traffic congestion. Of all Sanral’s projects the R300 ring road was considered to have highest economic viability with the benefit to cost ratio estimated at 13.5 and an internal rate of return of 70.4%.

Initial construction cost were calculated at R4.1 billion and 3 500 direct and indirect jobs were expected to be created during the construction period.

The final project presented, was the R72/N2 toll road from East London to Port Elizabeth, which had an initial construction cost of R5.35 billion. While the project had the lowest benefit to cost ratio of the four major projects presented, at 1.67, the social development value of the project was viewed as significant. Over 37 500 jobs would be created during the project’s life cycle, most of these in the poverty-afflicted Eastern Cape.

All the Sanral projects' and assets would remain the property of the South African government. “In South Africa we do not privatise any of our roads,” he said.

Alli did not give any indication of how much private sector investment Sanral requires at this stage. Officials at the conference exhibition were also not able to provide further details.

Source: Eastern Cape Transport