N4 Toll Route
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Source: TRAC N4 N4 Toll Route Procuring authorities Government of the Republic of South Africa, Government of Mozambique Project company Trans African Concessions Pty Ltd (TRAC) Project company obligations Design, build/rehabilitate, finance, maintain, operate and transfer Financial closure year 1997 Capital value ZAR3 billion (USD660 million – 1997 value) Start of operations Location August 2000 Pretoria, South Africa–Maputo, Mozambique Contract period (years) Sector 30 Transportation & logistics Key facts No governmental subsidies, 100% Project Finance 116 | GLOBAL INFRASTRUCTURE HUB CASE STUDY: N4 TOLL ROUTE Project highlights The N4 Toll Route is a brownfield toll road The MDC was also incorporated under a broader concession of 630 km running from Pretoria, Spatial Development Initiative (SDI) between the South Africa’s administrative capital, to Maputo, Governments of South Africa and Mozambique the capital of Mozambique and a deep-sea port implemented in 1995. The SDI was a short-term on the Indian Ocean. The project was structured investment strategy aiming to unlock inherent as a public-private partnership (PPP) between the economic potential in specific spatial locations governments of South Africa and Mozambique in Southern Africa. The SDI policy used public and a private consortium for a 30-year period. resources to leverage private investments in It was the first cross-border transport PPP project regions with a high potential for economic growth. in Sub-Saharan Africa and the first brownfield PPP The N4 Toll Route contract with the private of this scale in South Africa. consortium Trans African Concessions (TRAC) was The N4 is one of the most important trade routes based on a build, operate, transfer (BOT) model in the region, running across South Africa from with a capital value of ZAR3 billion (USD660 million, Botswana to Mozambique. It runs through some 1997 value). The project was financed through of the most industrialised areas in South Africa, 20% equity and 80% debt finance negotiated by including processing, mining and smelting the concessionaire. TRAC assumed full traffic industries located in the cities of Johannesburg and demand risk. Revenue generated through and Pretoria. Moreover, the western section of the the collection of tolls must fully cover operational N4 forms part of the Trans-Kalahari Corridor, a road expenditure and debt obligations, but both network spanning approximately 1900 km across governments jointly agreed to guarantee South Africa, Botswana and Namibia. The corridor the debt finance. starts in Pretoria and goes to the Port of Walvis Bay The rehabilitation and tolling of the N4 is on the Atlantic Ocean in Namibia. considered a major success and demonstrates The rehabilitation of the N4 was the key project of both the power of political cooperation between the Maputo Development Corridor (MDC) program. neighbouring countries and the benefits of The purpose of the program was to stimulate a PPP in the right context. The N4 is still the only and facilitate trade and investment in three key cross-border toll concession ever completed economic regions – Gauteng and Mpumalanga in Sub-Saharan Africa. (South Africa) and Maputo (Mozambique) – and connect them to the Port of Maputo. CONNECTIVITY ACROSS BORDERS | 117 Project timeline1 Development April 1994 THE POLICY AND PLANNING SETTING First democratic elections in South Africa The political situation in both South Africa and October 1994 Mozambique in the mid-1990s (post-apartheid) First democratic elections in Mozambique was characterised by years of unfavourable political conditions leading to the decay of the Maputo August 1995 Corridor. This key transport route connected South South Africa-Mozambique Agreement to revive Africa’s industrial heartland to the deep-sea Port trade relations of Maputo. The corridor was an integral part of the Southern African transport network, and a prime route Autumn 1995 for landlocked South African provinces to access Launch of the SDI by the Department of Trade the ocean. and Industry (DTI) South Africa faced significant challenges to reducing May 1996 road infrastructure backlogs, and Mozambique faced Launch of the MDC severe infrastructure problems as a result of the July 1996 Civil War that had raged from 1977 to 1992. Neither Southern African Development Community country was able to provide the immense financial (SADC) Protocol on Transport Communication and resources to invest in the failing infrastructure, Meteorology but each wanted to foster more vital transport and trade links. May 1997 30-year-concession agreement for the N4 Toll The value of political stability in the region was first Road signed noted after both post-apartheid South Africa and post-civil war Mozambique held their first democratic March 1998 elections in 1994 (the Heads of State at the time were Start of construction works on the N4 Presidents Nelson Mandela and Joaquim Alberto 2 December 1998 Chissano). The stability allowed the SADC and the Opening of the first toll plaza, Middelburg Government of South Africa to promote new initiatives (South Africa) focusing on economic development, trade and regionalisation and with the specific objective of (re-) August 2000 establishing the development axis between Tshwane Completion of the rehabilitation of the N4 from (then Pretoria) in Gauteng and the Port of Maputo. two to four lanes and start of operation In 1995, the Governments of Mozambique and South April 2003 Africa established a new cooperation framework Port of Maputo started operation with a 15-year- agreement and the Spatial Development Initiativeand concession the SDI strategy. South Africa was the key driver for the SDI and had a strong economic interest in March 2004 the development of its neighbour, Mozambique. Establishment of Maputo Corridor Logistics The economic strength of the two countries was Initiative (MCLI), first private sector corridor unbalanced. In 1997, Mozambique’s GDP was USD2 management institution in Africa billion, compared with USD130 billion in South Africa. August 2004 The official purpose of the SDI was to promote Completion of the rehabilitation of an extension of regional development and macro-regional economic the N4 road section between Witbank and Pretoria integration (due to an unequal pattern of spatial (contract amendment) development during apartheid) and to re-establish September 2007 trade and investment ties to rebuild the two Memorandum of Understanding (MoU) between South Africa and Mozambique on one-stop border post at Lebombo/Ressano Garcia to create a seamless border post and expediting crossing 1 SSATP (2014). Available at http://documents.worldbank.org/ curated/en/419461468202146203/Reviving-trade-routes-evidence- August 2013 from-the-Maputo-corridor Adoption of Mozambique Customs Law, 2 SADC has 16 Member States, namely; Angola, Botswana, Comoros, Revision of the Mozambique transit law Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe. 1 118 | GLOBAL INFRASTRUCTURE HUB CASE STUDY: N4 TOLL ROUTE economies by creating globally competitive CHALLENGES AND OPPORTUNITIES ADDRESSED spatial entities, new investment, infrastructural BY THE PROJECT 3 development and job creation. For this purpose, an There were several objectives associated with the SDI Unit was created within the Development Bank project, including to: of South Africa (DBSA). • foster trade between South Africa and One crucial component of the SDI was to involve Mozambique to broaden economic activity, the private sector in the process because both empowerment and development of communities governments faced financial constraints and were within both countries not able to finance this critical infrastructure without • facilitate regional and global trade through direct private sector participation. According to the SDI access to the Port of Maputo, paradigm, “the SDI aim to facilitate the creation of viable new jobs, as potential investment opportunities, • foster regional integration identified through the process, are taken up by the • balance regional disparities private sector.” Therefore, PPPs became an integral • reduce transport cost by improving the part of the SDI policy. efficiency of roads Thus, DBSA provided funds to support rebuilding • further develop exporting industries in the region. transport infrastructure that had been destroyed or neglected during the apartheid era. As part of this, The N4 Toll Route has facilitated the development of approximately USD8 billion was allocated to the MDC other infrastructure projects in the MDC, such as the under the first SDI between the Governments of South Port of Maputo and the establishment of the Mozal Africa and Mozambique, which was launched officially aluminium smelter. 4 in May 1996. PERCEIVED LONG-TERM BENEFITS 5 The MDC comprises five integral components: Delivery of the N4 Toll Route under the SDI has • rehabilitation of the N4 through a toll road developed the N4 into a major component of South concession Africa’s connection with the global marketplace due to it being the shortest link to an export port for its • rehabilitation and dredging of the Port of industrial land-locked region of Gauteng. The N4 also Maputo (15 years BOT concession since 2003, allows hundreds of thousands of Mozambicans extended to 2033) the possibility to access work and opportunities • establishment of an autonomous company in South