1. SELECT COMMITTEE ON PUBLIC SERVICES 14 JUNE 2011 435423

2. MANDATE  Responsible for proclaimed national roads  Toll and Non-Toll network  Maintain, upgrade, operate, rehabilitate and fund national roads  Levy tolls to service toll roads  Manage concessionaires  Advise the Minister on road related matters  Create public value

3. Minister of Transport (Regulator Owner) Governance and Control Planning, Design, Construction, Operation, Management, Control, Maintenance & Rehabilitation of National Roads Chief Executive Officer Board Of Directors MOT Day to Day Business and Operations Management SANRAL Staff SANRAL RELATIONSHIP TO MINISTER/NDOT

4. SANRAL has eight Strategic Objectives 1. Manage the national road network effectively Non-toll roads Toll Roads – ITIS, ITS Concessions Overload Control 1. 2. Provide safe roads Maintenance Road Safety Management System Engineering Education Enforcement STRATEGIC OBJECTIVES

5. 3. Carry out Government’s targeted programmes Community Development Social and Entrepreneurial Development Development of Human Capital Internal External Education 4. Co-operative working relationships with relevant Departments, Provinces, Local Authorities and SADC member countries Environmental relationships Reputation Management Other local efforts Co-operation between neighbouring countries STRATEGIC OBJECTIVES CONT’D

6. 5. Achieve and maintain good governance practice Corporate Governance Risk Management Prevention of Fraud and Corruption Internal Audit Credit Ratings Performance Agreement with the Executive Authority STRATEGIC OBJECTIVES CONT’D

7. 6. Transformation External Environment Procurement Policy Developing Human Capital Community Development Programme Higher education – support tertiary institutions Technology transfer Internal Environment Employment Equity Bursaries Scholarships Internships Young Professionals Cluster STRATEGIC OBJECTIVES CONT’D

8. 7. Achieve financial sustainability Non-toll: Treasury allocations Optimum cash flow and liquidity management Toll: Borrowings : Currently close to R29 billion DMTN Programme Export Credit Agencies Direct Foreign Investments Bank Loans 8. Pursue research, innovation and best practice Road Infrastructure Research Performance Certification of Materials Social Sciences Research Psychology behind pedestrian behaviour STRATEGIC OBJECTIVES CONT’D

9.  Asset Management Systems for the timely maintenance of national roads  Planned increase of national road network by incorporation of roads as requested by Provinces  Good co-operative relationships with relevant government departments, provincial and municipal authorities  Toll Road development: Gauteng Freeways, N1/N2 Winelands  Community Development Projects (rural areas)  Using appropriate technology  Incident Management Systems  Research and Development – pavement standards KEY PRIORITIES FOR 2011/12

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14. Description Non TollAgency Toll BOTTotal Dual Carriageway 6105204431 573 4-Lane Undivided 11299240550 2-Lane Single 12 429101360514 047 Total 13 0501 8321 28816 170 % of SANRAL Network 81%11%8% NATIONAL ROAD NETWORK (km) Total RSA Road Network Estimated at 606,000 km

15. Ø Please Note: 72% of Network Older than Original 20 Year Design Life

20. COST OF MAINTENANCE DELAY – AGENCY Repair Cost = X / km Good Fair Poor Very Poor 3-5 Years Repair Cost = 6X / km 5-8 Years Repair Cost = 18X / km (Ratio 1:6) (Ratio 1:18) Please Note: Typical Costs for 11.4m Wide Road in Flat Terrain

21. Very Poor ConditionPoor Condition Good Condition COST OF MAINTENANCE DELAY - ROAD USER (2009R) GoodPoor Based on HDM-4 Modeling

23. Strengthening/Regravel Backlog: Roads in Poor to Very Poor Condition

24. Actual numbers – Roads Infrastructure and Fuel Levy 2009/102010/112011/122012/13 RRevised estimate (R) Medium-term estimates (R) Provincial13,527,087,00014,841,633,00015,905,302,00017,199,542,000 National5,608,086,0006,844,501,0008,651,596,0009,728,055,000 Local10,050,262,2386,955,989,6018,380,816,6341,713,432,045 Total29,185435,23828,642,123,60132,937,714,63428,641,029,045 Fuel Levy28,832,536,00034,300,000,00035,000,000,00038,110,000,000 General fuel levy sharing 6,800,000,0007,542,000,0008,573,000,0009,040,000,000 Fuel pipeline1,500,000,000 Net fuel levy22,032,536,00025,258,000,00024,927,000,00027,570,000,000 RAF Component 2009/10 – R12,556 billion 2010/11 – R14,386 billion (est.)

25. MAINTENANCE Routine Road Maintenance: all the time  Repairing potholes within 48 hours  Replace guardrails, sign posts etc.  Grass cutting  Patching  Clearing up after accidents  Fencing etc. Periodic Maintenance ( every 7 – 8 years) Special Maintenance

26. Community Development Programme u Focus on the provision of much needed transport infrastructure within poor communities u Focus on method of infrastructure delivery u Method of construction (labour enhanced construction, maximize job creation) u Transfer of skills u Small contractor development u Maximise retention of wealth in communities

27. N17 East Toll Road Extension N1 South and R30 Bloemfontein – Kroonstad N1 Polokwane Bypass N3 Mariannhill Extension Gauteng Freeway Improvement Project: Tolling planned to commence – subject to outcome of further consultations led by the Ministerial Steering Committee State Toll Network Development CAPITAL INVESTMENT

28. Business area R million 2010/11 No. of Projects 2010/11 R million 2011/12 R million Non-toll Network 2597 7809 911 Toll Network (Excl Finance charges) 1489 5826 388 TOTAL VALUE 17 36216 299 BUDGET Total expenditure

29. FUNDING  Government Grant for the non-toll network  Cannot budget for a deficit  Toll Revenue – to be used only on toll roads  Borrowings from capital markets and financial institutions  Other income (minimal) – rental income etc  Alternate Funding Sources finalised/under discussion  EIB  ECA  Foreign investors - roadshows

30. Ratings Moody’s Global Scale Issuer Ratings: (Non-guaranteed notes) Long-Term: A3 Short-Term: P-2 National Scale Issuer Ratings: (Non-guaranteed notes) Long-Term: Aa2.za Short-Term: P-1.za

31. 31 Gauteng Freeway Improvement Project and Open Road Tolling

32. Gauteng u Most freeways in Gauteng reached their capacity u Peak hours are extending by 10 to 15 minutes each year u Results in congestion and uneconomical use of time with increased vehicle operating costs and carbon emissions 32

33. Economic Impact of Congestion & Insufficient Maintenance u SACCI comments (Jan 2010) : u Expressed concern about impact on business due to congestion and insufficient maintenance u Based on conservative assumptions, cost of congestion on Ben Schoeman amounts to R15m/hour u Excludes costs associated with: u Fuel and maintenance u Late freight deliveries u Lost business opportunities u Accident costs 33

34. Economic Impact of Congestion & Insufficient Maintenance u AA conducted tests (August 2007) : u 1600cc vehicle travelling between Pretoria and Johannesburg u 122 Minutes additional driving per day (40 additional hours per month) u Engines operating for longer times – 1,5l/hr when idling u Additional 705 litres wasted (469 hrs idling) per annum – Extra R4 935 (R7 per litre) u 80 000 people – R395 m per year wasted u Excludes working time, frustration, accidents 34

35. Maintenance and Repair Cost Increases due to Worsening Road Conditions “The results obtained from the comparison indicate that the maintenance and repair costs of a truck increase as the condition of the road on which the truck is travelling deteriorates. When moving from a good condition road to a bad condition one, increases in vehicle maintenance and repair costs of approximately 121% can potentially be experienced. In addition, the increase in truck repair and maintenance costs due to deteriorating road conditions can potentially lead to an estimated increase of around 10% in the total logistics costs of a company. Other costs that can potentially be attributed to deteriorating road quality are increased vehicle operating costs, increased fuel consumption, increased cargo damages and ultimately increased vehicle design and manufacturing costs.” * 35

36. Maintenance and Repair Cost Increases due to Worsening Road Conditions. *When comparing the average repair and maintenance costs of vehicles of two companies travelling on specific routes, associated to the condition... the results potentially indicate that a truck (truck 1) from Company B travelling from Newcastle to Gauteng (300 km) has on average maintenance and repair costs of R627 per trip. A similar truck (truck 2) from the same company travelling on the N3 between Gauteng and Durban for 300 km will have on average maintenance and repair costs of only R270 per trip. If we assume that both trucks make 100 round-trips a year (200 trips in total), the total maintenance and repair costs of truck 1 could potentially amount to R125 400 per year and for truck 2 it would be R54 000. This indicates a potential percentage increase in maintenance and repair costs of 132% per year when comparing a truck travelling on a bad road with one travelling on a good road for company B. 36

37. Background: Economic Impact Analysis u SANRAL conducted an economic impact study by the Graduate School of Business of the UCT u Economic impact analysis provided robust indication of project value to economy u Indicators show that project is economically viable and provides very high benefits to the Gauteng Province and South Africa 37

38. Background: Approval Processes u Approached Minister of Transport 2005 – project proposal u Inter governmental (all spheres) workgroup agreed project principles u DOT, SANRAL and Gauteng Government played leading role in compiling a document: “Gauteng Network Integration Process: Proposal for a Gauteng Freeway Improvement Scheme” u This report was concluded in May 2006. u Participants presented the report to political decision makers for acceptance 38

39. Background: Approval Processes u Several other interactive sessions followed with metropolitan authorities and The Gauteng Province. The project was presented to the Gauteng Province at: u The Gauteng Indaba (initiative of then MEC Jacobs) May 2006 u Workshop with Gauteng Province in April 2007 u Gauteng Legislature: Transport Portfolio Committee in August 2007 39

40. Background: Approval Processes u Cabinet approval – mid 2007 u Intent to toll process – October 2007, indicated a tariff of 50c/km u Advertised in local and national papers u Directly informed other authorities u Presentations made u Declared as a toll road – March 2008 u Procurement of contracts commenced thereafter 40

41. Road Works u Road construction : u Civil Works u 17 Projects u Value: R16.9 billion, including CPA, excl VAT 41

42. GFIP – Improvements Made u Widening of the freeways u 34 interchanges are significantly upgraded which will result in less congestion u Median lighting has been provided on the route to allow for a safer journey.

43. GFIP – Improvements Made u Result of Improvements: u Less congestion u Time savings u Greater production u Safer journey u Reduced carbon emissions u Created 20 000 jobs during construction

44. Toll Operations Components: u Design and Build (project implementation) u Operations (toll collection) u ORT roadside, back office, points of presence, systems maintenance and facilities – 8 Years u Transaction clearing house (TCH) – 5 Years u Violation processing centre (VPC) – 5 Years u Asset Replacement 44

45. Toll System u Scope of Works – Design & Build: u Installation of roadside and other system hardware (tag readers, electronic vehicle classification, CCTV, servers, work stations, communications, etc); u Development and integration of software; u Provision and fitment of equipment and furniture for points of presence such as permanent kiosks, temporary kiosks, roadside customer service centres, mobile pay stations, etc; u Tag packaging, logistics 45

46. Toll System u Scope of Works – Operations: u ORT Back Office operations - road side transactions validated u Customer services at ”Point of Presence” u 14 Customer Service Centres u 16 Kiosks at Shopping Centres u 25 Mobile Service Centres u 20 Mobile Pay Stations 46

47. Toll System (cont.) u Call centre u Account management u Financial transaction settlement u E-Tag logistics and testing u System/equipment maintenance u Facilities maintenance, rentals and rates u Violation processing u The toll operations of the project will provide at least 900 permanent quality jobs (Technicians, IT, Points of Presence, Admin, Call Centre, etc) 47

48. Imports u Specialist equipment u Software development u Salaries ZAR 500 million 48

49. Other Investments u ITS and Incident Management: u Network Monitoring u Provides information to road users, radio stations u Incident management (towing vehicles, medics on bikes, incident vehicles, etc) u Objective to clear road as soon as possible in the event of incident, and assist road users u R50 m per year u Routine road maintenance: u Fixing guardrails, potholes, do crack sealing, pick up litter, grass cutting, lighting maintenance and electricity, etc) u R120m per year 49

50. Other Investments u Periodic Maintenance u Comprise periodic maintenance actions such as rehabilitation and overlays. u Scheduled to take place as follow : u Overlays (2020/21 – 2022/23): R2 895 million u Rehabilitation (2030/31 –2032/33):R8 683 million 50

51. Funding u GFIP is not funded through the central fiscus u Funds are raised on the Capital Markets through SANRAL’s Domestic Medium Term Note Programme u The user-pay principle (tolling) is used to re-pay the loans, as well as for future operation and maintenance of these roads 51

52. Basis for Determination of Tariffs u Service and repay loans to fund initial capital cost u Interest payments during term of loans u Asset preservation u Routine road maintenance u Operational costs

53. Considerations– Setting Tariffs u Affordability – Since 2007, indicated tariff of 50c/km (2007 Rand) u Benefit to user should be greater than overall cost u Project should be financially viable – must be able to repay debt incurred, as well as cover operational maintenance costs

54. Considerations – Heavy Vehicles u Heavy Vehicles: u Have highest impact on road pavement u Use of the road – requirement to conduct business, also high value of time u Mostly commercial vehicles – deductions for VAT and toll as normal business expense

55. Considerations – Discounts Considerations – Discounts u Public concern about affordability for frequent and longer travel distance users – Frequent User Discounts (FUD) to address issue u Project principle – promotion of public transport – Public Transport Discounts to assist u Motorcycles – requests for reduced tariff – toll system designed to classify motorcycles

56. Discounts Discounts u E-Toll Tag users: u Class A1, A2, B and C – 25% u Discounted Tariff (per km), VAT Incl. u Class A1 – 30c/km u Class A2 – 49,5 c/km (42,5 /km, VAT excl) u Class B – R1,49 /km (R1,28 /km, VAT excl) u Class C – R2,97 /km (R2,55 /km, VAT excl) u Ratio between tariffs for class A2: B: C is: u 1: 3: 6 NB: No tag, no discount!

57. Other Additional Discounts Other Additional Discounts u Public Transport Operator discounts for qualifying vehicles: 50% u SAPS & SANDF exempt u Time of Day Discounts

58. Time of Day Discounts

59. Other Additional Discounts (cont.) Other Additional Discounts (cont.) u Frequent User Discounts only for Class A1 and A2 e-toll tag account users:

60. Payment terms u SANRAL is not a financial institution and would therefore not be able to extend credit without being exposed to the National Credit Act, hence no payment terms u 7 day grace period from date of transaction

61. Impact of Toll Tariffs upon Financial Feasibility VLN TariffTag Tariff (-25%) 80c per km60c per km 66c per km*49,5c per km* 40c per km30c per km To illustrate the impact of different toll tariffs upon financial viability, three sets of light vehicle tariffs were considered: All discounts remain the same percentages * Gazetted Tariffs

63. Monthly Tolls Monthly Tolls u 51% of all light vehicle users would pay less than R200 toll per month u 69% of all light vehicle users would pay less than R400 toll per month u 77% of all light vehicle users would pay less than R500 per month. u A maximum of 2% of all light vehicle users is expected to pay more than R1000 per month toll. *Based on 27 000 interviews

64. Examples of the Monthly Toll Cost of a Passenger in a Taxi u For 22 return trips, as described, between Golden Highway (south of Jhb) and Centurion via the N1: R472,18 per month divided amongst 16 passengers R29,51 per passenger per month R1,34 per passenger return per day 64

65. Examples of the Monthly Toll Cost of a Passenger in a Taxi u For 22 return trips, as described, between south of Johannesburg and Centurion via the N1, M1 and N1 again R228,94 per month divided amongst 16 passengers R14,31 per passenger per month 65c per passenger return per day 65

66. Examples of the Monthly Toll Cost of a Passenger in a Taxi u For 22 return trips, as described, between Golden Highway (south of Jhb) and Jhb CBD via the N1 and M1 R45,71 per month divided amongst 16 passengers R2,86 per passenger per month 13c per passenger return per day 66

67. Economic Study: Inflationary Effect u Economic study - impact on the cost of consumer goods determined. u Only considered the cost of tolling - ignoring all the benefits of the freeway upgrades. u Conclusions w.r.t. “Cost of Living” increases: u Household incomes less than R24 365 - 0.31% increase. (31c for each R100 spent) u Household incomes between R24 365 and R55 159 - 0.29% increase (29c for each R100 spent). u The scheme will have little impact on the cost of consumer goods and will not be inflationary 67

68. Traffic Diversion u Issue of traffic diversion to supporting road network raised by local authorities during toll declaration process u Extensive traffic modelling conducted to demonstrate impact during different peak and off peak periods: u Additional GFIP capacity attracts traffic to network during peak periods u At night and during weekends – slight increase in traffic on alternative “free” network – however, highway bonus not considered u In terms of the overall alternative Provincial and Metropolitan road network, there should be a reduction of ±10% in travelled distance and in excess of 20% reduction in travel time on a daily basis as a result of the GFIP project. 68

69. How does it work? u Overhead gantries are fitted with electronic equipment u When entering the toll area the electronic equipment will: – photograph your front and rear number plate; – read the E-tag on your vehicle; – verify that the specific tag is linked to the specific vehicle [number plate and class] and have an account linked to it; – Generate a transaction; – transactions are rolled up at night; – toll fees are deducted from your e-toll account; – transactions can be viewed on-line the next day 69

70. SANRAL Principles for ORT u One tag standard u One account – may include various vehicles u Central clearing Full interoperability 70

71. Toll Point Positions (with distances) 71

72. ORT – Central Operations Centre ORT – Central Operations Centre  ORT Back Office  Transaction Clearing House (TCH)  Violations Processing Centre (VPC)  New ITS ops centre

73. Assumptions 12 mins at ave of 80km/h = 16km Turnaround only possible at next interchange Satellite Centre Coverage @ 12 min reach

74. Electronic Toll Collection  Tag linked to vehicle and number plate  Agreements with rental companies  Day passes will be available  CBRTA to facilitate registration/toll collection at border posts  Automatic Number Plate Recognition – Cameras  Grace period of 7 days for payment, thereafter lose discounts  Violations  Fines will be stiff  Applicable legislation under discussion – AARTO Act, SANRAL Act etc  Will be linked to E-Natis  Dedicated enforcement personnel – through RTMC  Gradual country-wide roll-out  N4 Platinum Highway e-tags to align first  One card, one account country-wide

75. Account Registration/Obtaining an e- Tag Obtaining an e-tag and registering an e-Toll account will take place as follows; u at the e-toll Customer Service website, ww.sanral.co.za; u at an e-toll Customer Service kiosk located at a mall; u at an e-toll Customer Services centre situated along the freeway network; u contacting the e-toll Call Centre; or u buying an e-tag at conveniently located retail outlets – set up account through website or contacting the Call Centre Interoperable with all other toll plazas in RSA

76. Account Registration Account Registration u Locations of the registration points will be available on www.sanral.co.za once registration commences. www.sanral.co.za u The full amount of the purchase price of an e-tag is credited to the road user’s e-toll account upon registration - means the e-tag is effectively free to road users. u Same account and e-tag can be used at any other plaza where e-toll is/will become available

77. Account Payment/Top-Up Account Payment/Top-Up u Road users will have the option to link their e-toll account directly to their credit card u If user elects to have a pre-paid account: u Electronic fee transfer (EFT), u Debit orders, u At selected retailers (similar to the purchase of air-time). u At dedicated e-toll customer service centres/kiosks.

78. Monthly Tolls – Toll Calculator u Toll calculator available to determine estimated monthly toll costs u Calculator can be accessed on www.sanral.co.za/tollcalc www.sanral.co.za 78

79. Monthly Tolls – Toll Calculator u Input: u Entry/exit points u Number of journeys u Time of day when journeys are undertaken u Vehicle class u Output: u Distance travelled u Estimated toll cost before discounts u Estimated toll costs after discounts 79

80. Non Payment of Toll Tariff u The non-payment of Toll Tariff will result in : u levying of administrative fees, u levying of fines and/or u prosecution in terms of applicable legislation. u Frequent User Discount, e-Toll Tag Discounts and Public Transport Discounts will not be applicable in the case of the non-payment of Toll Tariffs within the prescribed time period 80

81. Non Payment of Toll Tariff (cont.) u Non-payers – 7 day grace period u Be invoiced for outstanding toll, if no registration takes place within grace period u Debt collection processes will be implemented u On road enforcement unit: physical enforcement of amongst others, law enforcement functions and the collection of outstanding tolls 81

82. GFIP: STATUS  Roadworks near completion  Bitumen shortage: surfacing slower than planned  ETC Infrastructure will be ready in time  Tariffs announced in early February 2011  Public/political outcry against tariffs  Ministerial Steering Committee and Work Groups reviewing tariffs  Minister’s statement assures investors  Public participation with stakeholder groups current  Final report expected soon  Tolling expected to start in Q3 2011

83. CONCLUSION u Investing in roads  For sustainable economic growth  Leverage procurement to transform industry  Make communities economically independent  Create public value  Core components of South Africa’s growth strategy u Knowledge based organisation  Right professional skills  Support tertiary educational institutions u Effective delivery of road infrastructure for public transport and movement of freight

84. SANRAL: Touching Peoples Lives “Where a road passes, development follows right on its heels” Fraud Hotline: 0800 204 558 Website: www.nra.co.za