Government’s plans to invest R3.2 trillion in economic infrastructure hinges on its ability to get citizens to buy into its vision, according to analysts who also highlighted the threat to government spending after e-tolling was blocked in Gauteng.

This came as SANRAL has spent the past two weeks holding investor road shows to communicate its position to its bond holders.

In August, government will face what could be the biggest test to its infrastructure investment programme, which is largely driven through state-owned enterprises such as Eskom and Transnet, when it takes its legal challenge to the Constitutional Court. The state will be seeking to overturn a North Gauteng High Court interdict and review of e-tolling on the Gauteng Freeway Improvement Project (GFIP).

Last month, ratings agency Moody’s downgraded SANRAL’s debt after the Opposition To Urban Tolling Alliance, a civil society group, won an interdict against the e-toll project, indefinitely delaying implementation.

The downgrade will make borrowing by SANRAL more expensive. The extra expense will ultimately be borne by taxpayers, and could have a negative effect on the cost at which the state is able to borrow for the projects such as power and rail.

Eskom’s capital expenditure budget is R480 billion over the next five years while Transnet plans to spend R300 billion over the next seven years to boost rail and port capacity.

In a recent research note, RMB credit analyst Elena Ilkova said while the “jury is still out as to whether the decision to stop the GFIP tolls would constitute a default on SANRAL bonds…. We are confident that the implicit government support assumptions will hold, as a failure to so do will have far-reaching consequences for state-owned enterprise funding over the long term”.

An inter-ministerial committee has been established under the chairmanship of Deputy President Kgalema Motlanthe to devise a funding solution for the R20 billion which SANRAL borrowed to expand and upgrade Gauteng’s freeways.

The threat to broader infrastructure investment should the user-pays principle be defeated in court was also acknowledged by Stanlib’s head of credit, Kate Rushton.

“In my view this is broader than the tolling, this is more than Sanral, this is about the infrastructure investment plans of SA – it needs to be able to rely on support from the man in the street,” she said.

Both Rushton and Ilkova praised SANRAL and the Treasury for the work they had done in this past week’s road shows.

Rushton said the road shows were well received and included a “good delegation” of executives from SANRAL and from the Treasury, showing willingness to engage with investors. The message to investors was to emphasise “that there is not going to be a default and there is an intent to support SANRAL. And that is comforting,” she said.

Source: Business Day

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