Private and Public Partnerships South African Experience

PRIVATE AND PUBLIC PARTNERSHIPS SOUTH AFRICAN EXPERIENCE

Tiago Massingue BSc Eng Civil & Structural Engineering, MBA, Pr Eng Robust PPP Experience Successful implementations Lessons Learnt…

2 South African Road Network 750 000km South Africa has the 10th Longest Total Network in the World

SANRAL Management Structure

Minister of Transport (Regulator Owner) MOT Minister Fikile Mbalula

Board Governance and Control Of Directors

CEO and Day to Day Business and EXECUTIVE Committee Operations Management Mr Skhumbuzo Macozoma SANRAL Staff Total Staff : 422 Western Region : 65 4 Regional Offices

SR WR South African Road Network

Authority Paved Gravel Total

SANRAL 22,214 0 22,214

Provinces - 9 46,099 136,640 182,739

Metros - 8 51,682 14,461 66,143

Municipalities 37,691 302,158 339,849

Total 153,719 453,259 606,978

Un-Proclaimed (Estimate) 140,000 140,000

Estimated Total 153,719 593,259 746,978

Un-Proclaimed Roads = Public roads not formally gazetted by any Authority National Road Network

• The +/- 22 000 km represents only 2.9 % of the 750 000 km of RSA network • but carries 33,1% of all traffic, and • Up to 80% of all long distance road freight.

Traffic Distribution Investing in National Road Network

• Continue to invest in our national asset • Since 2010: • SANRAL awarded >1000 contracts • Worth > R100 billion for new works, rehabilitation and improvement, and various maintenance cycles • Optimum investment, Capex versus Opex

Age of the SANRAL Network What Is The Price We Pay?

Repair Cost = X / km 100 Repair Cost = 6X / km (Ratio 1:6) 80 Good

60 Fair 40 Repair Cost = 18X / km Poor 3-5 Years (Ratio 1:18)

Road Condition Road 20

0 Very Poor 2008 2013 2018 2023 2028 5-8 Years Year

Please Note: Typical Costs for 11.4m Wide Road in Flat Terrain SANRAL Project Types

• Different Types of Projects • Adhoc Maintenance • Routine Road Maintenance • Periodic Maintenance • Rehabilitation • Improvements • New Facilities

SANRAL SCHOLARSHIP PROGRAMME

The Scholarship Offers : • Pay the learners School fees • Text Books & Stationary • Uniform • Sport Uniform • Invite to a gala event What do you need to apply?

• 65-75% and above in Mathematics • 65 – 75% and above in Physics • 65% English • An overall average of 75%.

The reason why we keep the standard so high is so that the learner also meet the entry requirements for most Tertiary Institutions.

EXTERNAL BURSARY

• The Bursary is aimed at students ,who at tertiary level are doing a qualification in Civil Engineering. • Because our core function and as custodians of the National Road , the current the focus is on BSc , BEng & BEng Techs in undergraduate degrees. We also sponsor postgraduate studies in Civil Engineering WHERE CAN I DO CIVIL ENGINEERING?

SOME OF THE INSTITUTIONS WHERE WE CURRENTLY HAVE STUDENTS SANRAL ASSETS

SOUTH AFRICA NETWORK: 750 000 KM PPPs, the South African Experience SA vs World, PPP’s (Concession contracts),  Why Tolling/What is PPP/Project Rationale,  The Road to PPPs,  Typical PPP Structure – Practical Examples,  Concession Contract Structure,  Success Measures in PPPs,  Addressing Poverty/ Support to GOV Policies,  Expansion Programs in Concession Contracts,  Lessons Learnt/Challenges; Public & Private Partnerships WORLD EXPERIENCE

COUNTRY Extension in Km/ Contracts USA 76,788 Germany 12,917 France 11,400 United Kingdom 3,200 [* 1996] Australia 10 Major PPPs South Africa 3,200 20 Why tolling?

• Generate funds…allowing for the implementation and proper maintenance of the large road infrastructure projects;

• User is paying for a benefit… improved infrastructure, travel time savings, or vehicle operating costs,

• Can impact on the driver behaviour traffic management tool;

• Feasibility based on B/C ratio & IRR calculations What is a PPP?

• A Public Private Partnership is a contract between a public sector institution and a private party, in which the private party assumes substantial financial, technical and operational risk in the design, financing, construction, operation and maintenance of a project.

• Private party performs an institutional function or acquires the use of State property for its own commercial business.

• Payment may involve one of three mechanisms – institution paying the private party for the delivery of the service, the private party collecting fees/charges from users of the service, or a combination of the two.

• Not a simple outsourcing of functions where substantial risk is retained by the institution.

What is a PPP?/----

• Not a donation by a private party for a public good;

• Not the privatisation or divesture of state assets and/or liabilities;

• Not the commercialisation of a public function by the creation of a state owned enterprise;

• Does not constitute borrowing by the state; PROJECT RATIONALE To concession the road, which means transferring extensive obligations to the concessionaire in exchange for the right to collect tolls CONC-OBLIGATIONS CONC-RIGHTS Design Tolls Construct Rehabilitate Finance Operate Maintain Expansion Works (Level of Service D) 30 YEARS ROAD to PPP’s

• Insufficient funding

• Toll financing 1983 – 1994 • Tariff < required • Soft loans, • Alternative route requirement

• Transitional phase 1994 – 1998 • Tariff more market related • Government guarantee limit • Alternative route requirement removed in 1996

• Fund/Design/Construct & Maintain model on N1 • Toll road operation separate – no legislation to allow toll collection by private sector

• SANRAL 1998 • Legislation for PPP • State toll expansion limited by Government guarantee

• Public Private Partnership identified as a financing option CURRENT PPP CONTRACTS

• N1 North – Lease back – Private Party do Design-Built- Maintain for 23 years. SANRAL do operations and toll collection.

• 3 Concession Contracts [between 1997 and 2003 – 1277 km]

• Design, Build, Finance, Operate, Maintain

• 30 year concession period;

PPP Structure

Roads Agency

Concession Agreement

Contractor/ Shareholders Private Party Loan Banks OM/BEE Agmt (special purpose vehicle) Agreement/s

Sub-Contracts

D & C Operations Sub-Contractor Sub-Contractor

MDC: description of Route

N4 Maputo corridor • TRAC • Between Gauteng and Maputo harbour in Mozambique • 1998 • 563 km in SA & Moz • Maputo Development Corridor Initiative • 4 x plazas in SA • 2 x plazas in Mozambique

CURRENT PPP CONTRACTS

N3 corridor • N3TC • Between Gauteng and Pietermaritzburg (connect with Durban harbour) • 1999 • 426km • Ownership shifted from contractors to institutions • Avg. 8% Truck growth

CURRENT PPP CONTRACTS

N1/N4 Platinum highway • Bakwena • Between Gauteng and Botswana • 2001 • 380km • 1st electronic toll collection • Dragados/M&R (main sponsor) • R3,7billion re-financed deal (July 2009)

SUCCESSFUL STORIES IN PPPs

Project Accumulated Cap & Project Concessionaire Operat Expenditure Year Length (R million)

N3 Cedara/ N3 Toll Concessions 1,112 429 1999 Heidelberg (Pty) Ltd 3,500 N4 Pretoria Trans African 2,003 Concessions (Pty) 563 1998 - Maputo Ltd 3,000 N1/N4 Bakwena Platinum 2,579 Concession 382 2001 Platinum Consortium (Pty) Ltd 3,200 5,694 TOTAL 1,374 9,700 Success Measures in PPPs

• Off Government balance sheet, • Extension of institutional capacity, • Optimal sharing of risk - no guarantee for minimum traffic, • Performance based requirements – final maintenance, • Competitive – value for money, • Profit / Revenue sharing, • Sustainable Operations – performance surveys, ratio tests, expansion/strengthening meetings, approval of preliminary designs. • Independent Engineer

HIGH QUALITY ROAD INFRASTRUCTURE Addressing Poverty

Support to Government Initiatives Key Milestones

SMME EMPOWERMENT PROGRAMS

TRAINING PROGRAMS IN SANRAL /2014

TRAINING Type of project Male Female Total Total Rand value SANRAL NON-TOLL ROADS Maintenance 3 500 1 260 4 858 5 664 578 Replacement & improvement 4 968 1 622 6 590 18 491 494 SUB-TOTAL 8 558 2 890 11 448 24 156 072 SANRAL TOLL-ROADS Maintenance 794 617 1 411 1 176 687 Toll operations 4 565 7 822 12 387 3 170 484 Improvements 497 41 538 2 233 129 SUB TOTAL 5 856 8 480 14 336 6 580 300 TOTAL 14 414 11 370 25 784 30 736 372

2014 Annual Report TOLL PROTFOLIO CONTRIBUTION /2014 ONLY

Type of Contract Contracts Awarded

T No

Non-Toll 116 6 990 832 285

Toll 30 1 227 785 302

Other 29 697 107 968

GRAND TOTAL 175 8 915 725 554 *All amounts exclude construction price adjustment, contingencies and VAT Implementing Authority, taking responsibility on MDC

EMPOWERMENT & HUMAN RESOURCE DEVELOPMENT HUMAN RESOURCES

DEVELOPMENT AND

TRAINING Two Events are proposed …

EMOTIONAL INTELLIGENCE WORKSHOP THREE TRAINING CENTERS WERE(September BUILT ALONG 2010) THE 525 KM HIGHWAY

TEAM BUILDING WORKSHOP (October 2010) TRAINING CATEGORIES Training Courses TRAINING OUTCOMES

• 1487, Workers were trained in Moamba; • 971, Workers were trained in Machadadorp; • 691, Workers were trained in Matsulu; • 40% of the panned employment in Mozambique was done via the SMMEs • 20% of the panned employment in South Africa was done via the SMMEs;

Expansion Programs

N1/4: Rehabilitation and upgrades N3: Reconstruction works N4: Rehabilitation and upgrades PPPs Contribution Expansion Works

SANRAL’S NETWORK: 22 129 KM Lessons Learnt • Dynamics between Mandate, Political will and Public Acceptance • Ensure that legal framework is adjusted to changing environment. • Project selection – viability thresholds for PPPs in enabling environment. • Tender process, quality documentation and clear scope are vital to extract value for money. • PPPs are complex and require mature role-players – concessionaire in employer’s role. • Ensure adequacy of checks and balances in concession contract. • Role of Independent Engineer,

Challenges • Dual legal framework, • Overloading control, • Lack of developed and skilled SMMEs, • Role of Government, • Is tolling double taxation? • Public acceptance to user pay principle, • Poverty: inability to pay, • Interface between Public Entities, • Road user benefits. Are they clearly quantified?

Questions? THANK YOU!