BEYOND THE HORIZON AWAIT POSSIBILITIES

INTEGRATED REPORT: Volume 1 2017 Building South Africa through better roads.

Integrated Report 2016/17 The South African National Roads Agency SOC Limited Reg no: 1998/009584/30 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

TABLE OF CONTENTS

Chairperson’s Report...... 6 CEO’s Report...... 10

SECTION 1: COMPANY OVERVIEW...... 15 Our Vision, Mission and Core Values...... 16 Our Mandate...... 17 Our Board of Directors...... 18 Our Executive Team...... 19 Our Principal Tasks and Objectives...... 20

SECTION 2: CAPITALS & PERFORMANCE ...... 23

Manufacturing Capital...... 25 1. Non-toll road projects 2. Toll road projects 3. Road network management 3.1 Bridge management 3.2 Slope management 3.3 Sinkhole management 3.4 Pavement management 3.5 Routine road maintenance 3.6 Overload control 3.7 Traffic monitoring

Funding Capital...... 39 1. Public-private partnerships 1.1 Bakwena 1.2 N3TC 1.3 TRAC 2. Non-toll road operational and capital expenditure 3. Toll road operational and capital expenditure 4. Land management

Intellectual Capital...... 45 1. Automated electronic toll payment 2. Road management systems and technological innovation 3. Innovations in geology, geophysics and applied geotechnical engineering 4. Sharing innovation 5. The SANRAL Technical Innovation Hub

Social & Relationship Capital...... 49 1. Empowerment, job creation and skills development 1.1 Value and number of contracts 1.2 SMMEs and black-owned entities 1.3 Job opportunities 1.4 Training provided on projects 2. Road safety 2.1 Approach 2.2 Road safety education 2.3 Behavioural research 2.4 Concessionaires’ road safety activities 2.5 Safe systems 2.6 Road safety incident management systems

4 3. Road safety infrastructure projects 4. Community development 4.1 Community development infrastructure projects 4.2 Community development geological projects 4.3 Empowerment, job creation and training 4.4 Concessionaires’ social projects 5. University partnerships

Promoting Social & Relationship Capital: Marketing and Communications...... 67

Natural Capital...... 75 1. Environmental management 2. Liaison with regulatory authorities 3. Monitoring and evaluating environmental performance 4. Vegetation management on road verges 5. Major projects 6. Environmental impact assessments 7. Research and development 8. Impact of drought on road construction 9. Concessionaires and the environment

Human Capital...... 81 1. Certification 2. Workforce 2.1 Employment equity and transformation 2.2 Workforce profile 2.3 Talent management 3. Organisational philosophy 4. Employee learning and development 5. External scholarships and bursaries 5.1 External bursary programme 5.2 Scholarships programme 5.3 Internships 6. SANRAL Technical Excellence Academy 7. Employee wellness programme 8. Wellness programme for road maintenance workers

Promoting Human Capital: Information Technology...... 91

SECTION 3: CORPORATE GOVERNANCE...... 95 1. King IV Declaration 2. Corporate Performance Information 3. Report of the Audit and Risk Committee

5 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

CHAIRPERSON’S REPORT

someone of his calibre and experience and we are encouraged by the positive reaction to his appointment by SANRAL’s stakeholders, from the broader engineering sector to investors.

Road management, planning and engineering are fields that are continually evolving and SANRAL needs organisational renewal to meet its mandate to manage the growing primary road network and create economic value for the nation. Through the years SANRAL has built an enviable reputation as a global leader in road management, planning and engineering and will be applying this experience and knowledge in new ways to serve South African society and support development.

Our track record as an organisation also speaks to the quality of our corporate governance and financial management. The Board embraces the principles contained in the King IV report on corporate governance and we pro-actively implement its recommendations. I want to express my appreciation to the members of the SANRAL Board who are contributing to high standards of corporate governance within the organisation. A word of thanks goes to each and every staff member – both at head office and in the regions – who assists in the building of a strong organisation with a reputation for quality and professionalism.

The Board and management have commenced with a process of reviewing SANRAL’s long-term strategy to ensure the organisation responds to changes in its environment. In the coming year, we will consult widely with stakeholders as we develop SANRAL’s new Horizon 2030 strategy. The publication of SANRAL’s Annual Report for 2016/17 comes at a time of major changes both At SANRAL, we are mindful of the impact our within the organisation and in the broader governance procurement policies and practices have on the environment within which we operate. lives of South Africans and the transformation of the construction industry. These policies, which were Within SANRAL we said goodbye to our founding CEO, originally tailored with the aim of promoting small, Nazir Alli, who retired after a lifetime of service to our emerging, black construction companies, are being country. Our organisation and the broader transport reviewed alongside changes to public procurement sector were greatly enriched by Nazir Alli’s insights and regulations, with the aim of better supporting experience. The modernised state of our national road the transformation of the industry to reflect the infrastructure can, to a large degree, be attributed to his demographics of the country. In addition, SANRAL is drive and decisive leadership. conscious of the fact that the company operates within the public contracting arena where accountability and As a Board and an organisation we were fortunate to transparency are of the utmost importance. welcome a new Chief Executive Officer, Skhumbuzo Macozoma, who is well-equipped to lead SANRAL into Since year-end the possibility of a sovereign a new era of growth. SANRAL is proud to have found downgrade by Moody’s Investment Services has

6 become a reality, and so have the expected negative This investment in future generations will prove valuable consequences. This risk relates particularly to the toll as SANRAL’s responsibilities continue to grow. The road portfolio and results from the low collection rate on network managed by SANRAL expanded during the the Gauteng Freeway Improvement Project (GFIP). past year and we are now responsible for over The agency has implemented a number of strategies 22 197km of national and provincial roads. The to improve toll collection and ameliorate this risk. It is confidence in our ability to oversee this extensive important to note that SANRAL’s going concern status network that stretches across our country is reflected in remains intact. decisions taken by provincial governments to entrust the management of additional roads to SANRAL. During 2016/17 SANRAL awarded 172 contracts worth almost R16bn for new works, rehabilitation The vast majority of these roads are not tolled, with and road maintenance projects. SMMEs earned a road maintenance and improvement being funded total of R4bn through contracts with SANRAL, more through allocations from government. SANRAL also than R2.1bn of which went to 1 045 black-owned manages a portfolio of toll roads, which augment enterprises. Our commitment to promote the growth the resources available to refurbish and expand the of small and medium-sized businesses, which reduces road network to enable economic growth and avoid unemployment and helps build a skilled workforce, is congestion, which can be a major inhibitor of business reflected in the growing value of contracts allocated efficiency and productivity and the quality of life of to black-owned companies, and enterprises owned citizens. We are making measurable progress in the by women and the youth. Through this approach we roll out of interoperability across the tolling network are making a contribution to the transformation of to ensure seamless travel on our road network and the the South African economy and the empowerment of introduction of a central transaction clearing house will emerging contractors – many of whom receive their first bring major benefits to all road users. experience in the construction and engineering sectors by working on SANRAL projects. SANRAL works closely with concessionaires on many of the major freeways and the past year has seen SANRAL is equally committed to identifying, the completion of extensive work to rehabilitate and developing and nurturing the talents of the next upgrade the roads for which they are responsible. One generation of engineers and artisans through our example is Bakwena’s R260m rehabilitation of the N4 investments in education and training. We support from Zeerust to Swartruggens in the North West. students at tertiary institutions across the country and award scholarships to high school learners who Similarly, major projects on SANRAL’s non-toll portfolio use the opportunities provided by SANRAL to access are nearing completion. The government allocated further educational opportunities. Our Technical funds for the Moloto Road upgrade and, during 2016, Excellence Academy in Port Elizabeth has grown into the project was launched with a sod-turning event. This a valuable institution where newly qualified engineers project demonstrates SANRAL’s ability to work with receive practical experience prior to entering the communities and alongside the national and provincial professional arena. governments to upgrade an important road artery that is vital to regional economic growth and to improve We value our productive partnerships with top road safety, as well as promoting job creation. institutions of higher learning to promote interest in STEM-subjects – science, technology, engineering Large sections of the national road network are and maths. We work closely with universities involved being rehabilitated in the Free State and Northern in advanced research on aspects of transportation, Cape. Through SANRAL’s pavement management engineering, construction and road safety. Through system, sections of the roads that are in poor our sponsorship of chairs in Pavement Engineering at condition are identified and rehabilitated while the University of Stellenbosch, and Transport Planning additional work is done to reduce flood risk and at the University of Cape Town, SANRAL contributes damage to the carriageways. Upgrading of vital greatly to knowledge generation and the training of sections of the N7 and N12 are nearing completion, people who go on to serve the broader transportation and the rehabilitation of structures on the N14 and engineering sectors. between Upington and Kuruman will benefit the

7 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

regional economy and improve the quality of life of Cape Town and KwaZulu-Natal and coordinate communities who depend on this important road. emergency responses is making a major contribution The ring roads at Polokwane and Musina will to road safety. These systems recently received an benefit the entire regional economy and facilitate award for outstanding achievement from the Intelligent management of the growth in traffic volumes Transport Society of South Africa. between South Africa and its neighbouring states. Improvements to the Mount Edgecombe Interchange We are justifiably proud of the contribution that on the N2, including the addition of five major bridge SANRAL has made to the development of the new structures, will bring much needed relief to local road National Road Safety Strategy 2016 - 2030, which was users and visitors to KwaZulu-Natal. approved by Cabinet during the course of the year. Road safety is something that SANRAL integrates into The N2 is the primary road link between the the design and engineering of the national roads. Eastern Cape and its neighbouring provinces. Major Our innovative interventions and our commitment to improvements to the road between Grahamstown create safer roads, together with improved post-crash and the Fish River Pass are currently underway. In responses, have placed SANRAL at the core of the addition, the implementation of the N2 Wild Coast national efforts to improve road safety and reduce the improvement is an important project that will facilitate number of fatalities on the country’s roads. economic growth and upliftment in the region. These improvements will be funded through a hybrid model, In addition, SANRAL seeks to create safer road with the first allocations coming from government to users. We recognise the fact that about one-third of enable the construction of bridges in 2017. all schools in the country are located within 5km of the SANRAL road network. Our aim is to empower SANRAL’s introduction of freeway management systems communities – especially pedestrians and school to monitor transport networks in the metros of Gauteng, children – with sufficient knowledge about road safety. We are working closely with universities, and I would like to thank our outgoing Minister, Ms Dipuo national and provincial departments to conduct Peters, and Deputy Minister Sindisiwe Chikunga for research on road safety and develop material that can their support and guidance. At the end of March 2017, be integrated into the curriculum of schools. In the we welcomed Mr Joe Maswanganyi as the new past year SANRAL has expanded its Safe Routes to Minister of Transport and SANRAL is looking forward School project which combines road safety education to working with him to continue the delivery of the for learners and teacher training packages with the road infrastructure necessary to enabling the introduction of safe road infrastructure. country’s development.

Our success can, in no small measure, be attributed to the commitment of our employees and we are fortunate to be able to attract and retain some of the most talented people in the industry. SANRAL strives to create a diverse workforce and the organisation is committed to employment equity at every level of our business. Our commitment to gender equity and the fast-tracking of female talent in key sectors is borne out Roshan Morar by appointments and promotions made in the past year CHAIRPERSON as well as in the allocation of bursaries and scholarships. Our investment in human resources and skills development through the years will become increasingly important in the near future as a new generation of professionals moves into important leadership positions within SANRAL.

9 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

CHIEF EXECUTIVE OFFICER’S REPORT

with our shareholder over many years. It is a great challenge to lead the incredibly talented and dedicated people who work for SANRAL.

It is well known that the physical development of a country starts with the development of the road network. During the financial year under review, SANRAL has pursued its mission to be a world leader in the provision of a superior national road network, in order to move people and goods and build our national economy. It is in this context that SANRAL has undertaken its programme to construct new links and preserve the nation’s assets by maintaining the existing roads.

Major projects The country’s R3.6tn investment in Strategic Integrated Projects (SIP) is dependent on the quality of the road network available to support economic activity. SANRAL is a key agency in the delivery of the state’s massive investment in economic infrastructure

In order to ensure the viability of the existing road network, in line with a long term national strategy, SANRAL has implemented several new projects in the road sector. The objective is to build up a road network that will address future development needs as well as alleviate the acute problem of traffic congestion, either by increasing the capacity of the road network or reducing traffic in congested areas by constructing ring roads and roundabouts.

SANRAL’s mandate is to finance, improve, manage and maintain the national road network, the “economic arteries” of South Africa. In fulfilling this mandate, The year under review has been one of change and has we strive to protect and preserve the environment seen the start of a number of key projects. Leading an through context-sensitive solutions, and to support the entity such as SANRAL, even if only for four months of this development of our country’s human capital through period, has already proved challenging and rewarding. contributions to tertiary institutions and cooperative governance. I am honoured to be just the second CEO in our long history. The first, Mr Nazir Alli, stepped down after a During the year under review, we have executed this lifetime dedicated to public service. During his 18 years mandate by breaking ground on a number of flagship at the helm of the agency, he kept the importance projects: the Moloto Road upgrade project, the N2 of quality road infrastructure firmly in the public Wild Coast road project, Polokwane ring road project conversation. Our world-class national road network is a and the Musina ring road project. tribute to his drive, commitment, vision and energy. We believe that implementation of these projects This legacy of leadership is a major factor in the success will boost economic growth, improve road safety and and stability of SANRAL, and is rooted in our belief in create opportunities for communities which these roads the importance of our purpose, a belief held in common will connect.

10 Transforming the way we do business finance. Good road-riding quality and improved safety In the course of fulfilling our mandate, we awarded 172 are testimony to this concern with standards. contracts worth approximately R15.9bn for new works, rehabilitation and improvement, routine and special During 2016/17, R11 807.4m was spent directly on maintenance, and community development. non-toll roads, and this was split between capital works (R5 860.8m) and maintenance (R5 946.6m). At Small, medium and micro enterprises (SMMEs) earned the same time, R4 073.4m was spent directly on toll R4bn on contracts, meaning that we directed almost 25% roads, comprising R2 016.7m for capital projects and of our contract expenditure to economic empowerment. R2 056.7m for maintenance work. More than half of these SMMEs were black-owned. We remain committed to ensuring parity in allocating In addition, we trained 4 257 people (including 1 690 funds to maintain the toll network despite the financial women) in road-building and other skills through 8 604 challenges of GFIP and Moody’s downgrading of courses at a cost of R16.9m. We created the equivalent the sovereign credit rating along with the ratings of of 19 047 full-time jobs, 11 242 of which were taken up state-owned entities. We will continue to work with by youth. Additional opportunities for sub-contracting, government to mitigate this risk. employment and training were generated by the SANRAL community development programme. Government, as SANRAL’s shareholder remains committed to the agency’s future and this is reflected As we strive to keep pace with our country’s in the steady growth in the annual budget allocation aspirations, more than 20 years after democracy, we for the non-toll network. The role of private finance look to strengthening the role the agency can play in in infrastructure development is amplified in the transforming the economy. Our strategy will encompass national development plan, and we will continue to actions that we need to start right now to address engage South Africans in this regard in the interests of future challenges. This includes transforming the entity economic and social development from within, amending our supply chain management policies to ensure inclusive investment in the SANRAL employs the procedures and practices of construction industry and economy, and working with sustainable development to ensure that it manages our stakeholders to deliver on government’s promise to the impact of road construction, maintenance and move South Africa forward. operation on the physical, social and economic environment as responsibly as possible. Our commitment to innovation is in order to create value, and we seek innovation not just in project roll-out Developing communities and services, but in everything we do and everywhere During the past financial year, we continued to we operate. We need a constant flow of new ideas support learning and development in partnership and different approaches to meet the challenges and with universities with a strong focus on science, opportunities of the future. The work we do cuts across all technology, engineering and mathematics (STEM). provinces, therefore it must be brought to life with a local A highlight in this regard was the University of the focus. That implies locating critical decision-making where Free State’s Family Math & Family Science initiative the needs are and where our resources live. which continues to expand into new communities. A total of 176 primary schools from predominately Funding rural communities in the Free State, Northern SANRAL has to remain at the top of its game to ensure Cape, Eastern Cape and Gauteng provinces were that the road network remains in excellent condition. actively involved in 2016. A total of 327 teachers, This is done through technical expertise and careful use 13 787 learners and 8 161 parents benefited from of funds. In delivering its core mandate of managing the project’s activities. A total of 32 subject advisors 22 197km of roads, SANRAL applies engineering were trained to act as coordinators in their respective standards that will ensure good quality roads with education regions, assuming the responsibility of adequate capacity and thereby maximise its limited supporting educators in the implementation of annual budget and funds contributed by private the programme.

11 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

In addition, a total of 133 students, including timeframe. The academy, which was established in 32 women, were awarded SANRAL bursaries and 2014 with three graduate engineers, will be expanded 194 learners with a high aptitude for mathematics, over the medium term to yield larger numbers of physical science and English were recipients of SANRAL registered engineers, supply the market and strengthen scholarships. professional capacity within roads authorities.

Through the SANRAL Technical Excellence Academy, Good roads do not necessarily mean that road crashes 27 candidate engineers – 10 of whom are women – are averted and, therefore, SANRAL is committed to underwent training in 2016/17. The academy provides promoting road safety not only through engineering dedicated training and work exposure to civil engineering safer roads, but also by educating road users. With graduates, the majority of whom have been beneficiaries a third of all schools in the country located within of SANRAL bursaries. 5km of the national road network, SANRAL aims to empower the 6.3 million learners in these areas with This pioneering, structured training programme appropriate and relevant road safety information. equips graduate engineers with the necessary skills, SANRAL’s educational materials are developed on the competencies and knowledge required for road basis of sound social science to influence attitudes in a design. It enables trainees to complete the required manner that will contribute to safer road user behaviour. experiential training for registration in one of the SANRAL’s initiative has already reached 1 940 schools professional categories governed by the Engineering and more than 14 000 teachers have received training Council for South Africa (ECSA) within an accelerated and learning materials.

12 A glimpse into the future Nearly two decades after SANRAL’s establishment, we have decided to check our delivery against our mandate, vision and mission. This strategic process started in December 2016 and is taking place within a rapidly changing global and regional economic environment, and at a time of national reassessment of South Africa’s socio-economic priorities. As a state-owned entity, we must deliver within this reality.

This strategy that is in development will replace the previous strategy – Horizon 2010 – which was developed with due consideration of the constraints within which government had to achieve its objectives, including the challenges of meeting basic socio-economic needs. The initial strategy was aimed at the containment and elimination of the funding backlog – which had resulted in roads in poor and very poor condition – on the non-toll national road network. Acknowledgements The new strategy, aptly titled Horizon I am committed to continuing the proud tradition 2030, aims to reposition the roads agency of SANRAL as a purpose-led organisation, calling for the challenges of the future. It is a pro- on the great range and diversity of our talent and active response to deliver on SANRAL’s capabilities. We will dedicate ourselves every day to vision of a national transport system that the responsibilities defined in our mission, vision and delivers a better South Africa for all. values. We will also sustain our commitment to our employees and to the communities in which we operate It sets new goals and priorities for SANRAL with the aim of better serving and the country we proudly call home. And to you, our the needs of all South African citizens, our valued shareholder, who have placed your confidence customers and all road users by moving and trust in us. towards a business model that adopts an integrated funding approach comprising I would like to thank the Chairman and members of public, private and own funds. It intends the Board for their support. The fruitful discussions and to intensify the community development advice given have been valuable. The trust of the Board focus and will vigorously pursue a safely and excellent relationship with management have also engineered road network. contributed to a conducive atmosphere for efficient work.

SANRAL will focus on improving Our achievements would not have been possible consultation with citizens, road users and without the support and commitment of the former other stakeholders. We want to engage with South Africans and develop solutions Minister of Transport, Ms Dipuo Peters, and Deputy that will address their challenges and Minister Sindisiwe Chikunga. We look forward to improve their lives. Communication working with the newly appointed Minister, Mr Joe and stakeholder engagement will be Maswanganyi, and supporting him in creating a intensified at strategic and project sustainable entity that continues to add value for all level, both to impart and seek ideas on South Africans. addressing the challenges of developing and expanding road network infrastructure in a context where public and private funding is limited.

Skhumbuzo Macozoma We intend to consult and finalise this CHIEF EXECUTIVE OFFICER strategy during the 2017/18 financial year.

13 14 SECTION 1

COMPANY OVERVIEW

Our Vision, Mission and Core Values______16 Our Mandate______17 Our Board of Directors______18 Our Executive Team______19 Our Principal Tasks and Objectives______20

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Our Vision, Mission and Core Values

As the custodian of the national road network, we are committed to the creation of economic value for the nation through the provision of road infrastructure with: Mission • A motivated and professional team • Consideration for community needs • State-of-the-art technology • Proficient service providers • The user-pays principle.

COMPANY OVERVIEW

Vision To be a world leader Core Values in the provision of a superior national road network. EP2IC Excellence Proactiveness Participativeness Integrity Care

16 1

Our Mandate OVERVIEW COMPANY

The South African National Roads SANRAL has two primary sources of income. Non-toll Agency SOC Limited roads, comprising 87% of the national road network, are funded from allocations made by the National Treasury. Toll roads, constituting13% of the national The South African National Roads Agency SOC road network, are funded either through public-private Limited (SANRAL) was established in 1998 as an partnerships or from capital market borrowings. independent, statutory company registered in terms of the Companies Act. The South African government, SANRAL adds value to developmental initiatives in the represented by the Minister of Transport, is the sole fields of transport, education, health and development shareholder and owner of SANRAL. of communities. We revel in our role as a development partner and see this as closely related to our core function. SANRAL has a distinct mandate – to finance, improve, manage, maintain and upgrade the national road SANRAL makes a significant contribution towards road network – and we are committed to carrying out our safety by maintaining and improving the road environment mandate in a manner that protects and preserves the and by identifying and addressing road safety concerns. environment through context-sensitive solutions. We also align with local and international road safety authorities to learn more and improve the safety of the The South African national road network consists of national road network for road users. 22 197km of roads. This network seamlessly connects major cities, towns and rural areas, supporting The organisation actively supports development of economic growth and social development, and the country’s human capital through its support for contributing to job creation in the country. education at both high school and tertiary levels.

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Our Board of Directors & Executive Team

Non-executive directors

Roshan Morar Allyson Lawless Christopher Hlabisa Daphne Mashile-Nkosi CHAIRPERSON Pr Eng C Eng BSc Eng (Natal) BTech (Civil) MDP Small Business Management Pr Tech Eng MSAICE Diploma CA (SA) CFE MSc (Lond) DIC (Imp Lond) DEng hc (Stellenbosch) FREng FSAICE FIStructE

Avril Halstead Matete Matete Zibusiso Kganyago BCom (Hons) (Mathematics) BSc (Hons) Transportation BCom Diploma in Advanced MBA MA (Advanced Planning MBA Property Practice Organisational Consulting) MSc (Economic Policy)

Executive director

Skhumbuzo Macozoma Alice Mathew CHIEF EXECUTIVE OFFICER COMPANY SECRETARY BSc (Civ Eng) MSc (Civ Eng) BSc MBA FCIS

18 1 COMPANY OVERVIEW COMPANY

Executive Management

Inge Mulder Heidi A Harper Koos Smit CHIEF FINANCIAL CORPORATE SERVICES ENGINEERING OFFICER EXECUTIVE EXECUTIVE: BCompt (Hons) CTA CA (SA) BSoc Sci MBA Pr CHRP BSc Eng (Civ) Pr Eng (SABPP) IPMSP (IPM)

Regional Management

Logashri Sewnarain Ismail Essa Mbulelo Simon Peterson Kobus van der Walt EASTERN REGION NORTHERN REGION SOUTHERN REGION WESTERN REGION BSc (Civ Eng) Pr Eng Pr CPM NHD (Civ Eng) ND (Civ Eng) BSc (Maths and Applied BEng (Civ) Pr Eng MSAICE FAArb BTech (Civ Eng) MBA Maths) BSc (Civ Eng) Pr CPM AMSAICE MSc (Strategic Planning) MBA Pr Eng MSAICE

19 Our Vision, Mission and Core Values

Our principal tasks • Plan, design, construct, operate, rehabilitate and maintain South Africa’s national roads to support socio-economic development • Generate revenue from the development and management of assets • Undertake research and development to advance knowledge in the design and construction of roads and related fields, including the use of smart technologies to promote safer roads • Advise the Minister of Transport on matters relating to South Africa’s roads.

Our objectives • Manage the national road network effectively and efficiently • Provide safe roads • Carry out government’s targeted programmes • Sustain co-operative working relationships with all spheres of government and the SADC member countries • Maintain good governance practice • Maintain financial sustainability • Pursue research, innovation and best practice • Safeguard SANRAL’s reputation • Pursue environmental sustainability and maintain sound environmental practices.

Funding the road network SANRAL is responsible for two funding portfolios related to non-toll roads and toll roads respectively. These are managed separately and there is no cross- subsidisation between them. Non-toll roads are funded from an annual allocation from the national fiscus, while toll roads are either funded by SANRAL through borrowings from capital markets and operated on its behalf, or they are financed through public-private partnerships for a fixed period in terms of concessions that are granted to private parties.

20 COMPANY OVERVIEW 1 22 SECTION 2

CAPITALS & PERFORMANCE

Manufacturing Capital______25 Funding Capital______39 Intellectual Capital______45 Social & Relationship Capital______49 Promoting Social & Relationship Capital: Marketing and Communications ______67 Natural Capital______75 Human Capital______81 Promoting Human Capital: Information Technology______91

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24 2

Manufacturing Capital CAPITALS & PERFORMANCE CAPITALS

Length of the Toll road roads maintained Percent management of roads tolled 22 197km 57% SANRAL 13% 43% Concessions

Roads with Roads offering 9 513 bridges smooth travel texture safe in wet conditions 97% 94% in good 99% condition

SANRAL continued to fulfil its critically important of major projects is spread over consecutive annual mandate of managing and maintaining 22 197km of the reports. Many of the projects in this report are due for national road network while supporting small, medium completion after March 2017. and micro enterprises (SMMEs) and black-owned businesses, and developing construction and other skills Given its unique mandate, the creation of value in among workers drawn from communities adjacent to the form of manufacturing capital is in the very DNA construction works. of SANRAL and by far its greatest contribution to the national economy. However, significant investment in The national road network, which is expected to terms of human capital and intellectual capital flows grow to 35 000km in the medium to long term, plays naturally from the fulfilment of the agency’s core a vital role in enabling economic development. As infrastructural mandate. the population and the economy grow, there are increasing demands on road infrastructure. Roads 1. Projects on non-toll roads deteriorate over time due to the wear and tear of constant use and environmental influences such as Northern Region weather. These factors create a constant need to In 2016/17 SANRAL’s Northern Region managed four maintain the national road network and increase its major construction and rehabilitation projects on non-toll carrying capacity. roads within its area of operation, as well as 30 smaller resealing projects. One large new project got underway, SANRAL has a dedicated asset management system two continued as planned, and one reached completion. which generates data on the state of all roads within the network and enables the agency to decide which A short summary on each project appears in Table 1. roads to prioritise for major upgrades and rehabilitation. The total value of the listed projects, from start to Routine maintenance is undertaken across the network finish, is about R2.18bn. Variations to the contracted on a continual basis. amount can arise during the course of the project and adjustments are made accordingly. SANRAL takes pride in helping set and achieve international benchmarks for road infrastructure Musina Ring Road and related technology. The agency’s work involves An important new project is the construction of the multi-year projects and as a result reporting on the Musina Ring Road in Limpopo. Currently, the N1 route planning, financing and construction of a number that links South Africa to the rest of Africa passes right

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through Musina, which lies 15km south of the border northern interchange bridge will be a feature bridge, with Zimbabwe. A ring road to divert long-distance with a central supporting column shaped like a hand traffic around the town was proposed by SANRAL as far rising out of the ground. back at 2006 and approved by the municipal council in 2007. The processes of land acquisition, environmental Special circumstances arising in this project were the impact assessment and planning commenced soon need to ensure replacement housing for occupants of after and construction got underway in April 2016. 30 houses affected by the construction of an interchange and the relocation of several ancient baobab trees. The new road will be a single carriageway to the west The latter process is described in more detail the of the Musina CBD. It will function as a highway with environmental report in the section on natural capital. controlled access to the N1 via two interchanges. The

Table 1: Northern Region: major construction and rehabilitation projects on non-toll roads 2016/17

Project Major elements Start date Completion Total cost R570 from N4 to Jeppes Rehabilitation of existing pavement. New February December 2017 R640m Reef border post, MP climbing lanes. Widening of five river bridges. 2015 Establishment of quarry for supply of crushed stone R23 from Platrand to Rehabilitation and strengthening to withstand coal July 2013 May 2016 R450m Standerton, MP haulage loads. Widening of several bridges R23 from Standerton to Rehabilitation and strengthening to withstand coal March 2013 May 2017 R689m Greylingstad, MP haulage loads. Widening of several bridges 29 projects (10 in NW Resealing October 2016 June 2017 R1.4bn and 19 in LP)

All the above projects provided sub-contracting opportunities for SMMEs, created job opportunities for local residents and contributed to the building of skills. A summary of these aspects of SANRAL roads projects appears on pages 49 – 50.

Eastern Region and similar developments are likely. The Eastern Region had ten major engineering projects in progress on non-toll roads during the 2016/17 The new interchange, to be completed before the end of reporting period. The total value of the projects 2018, will not only have the capacity for increased volumes amounted to approximately R2.63bn. of traffic but will also meet the clearance requirements for the N3 which is to be widened in the future. Three projects reached completion during the year, three new projects commenced and three were Eteza Traffic Control Centre ongoing, at various stages of completion. A summary of The completion of this centre during 2016/17 was an all projects is provided in Table 2 and additional details important contribution to management of loads passing on selected projects appear below. through Richards Bay harbour. These loads are typically destined for SASOL plants in Secunda and Sasolburg and Hammarsdale Interchange various ESKOM power stations. A number are headed as The upgrade of this interchange, which falls within far afield as Botswana, Zimbabwe and Zambia. the eThekwini metropolitan area along the N3 route between Durban and Pietermaritzburg, was accelerated KZN Road Traffic Inspectorate issues between 260 and due to co-funding provided by eThekwini Municipality. 350 abnormal load permits a year. About 35% of these require mass exemptions while the remainder must It forms part of government’s Strategic Integrated comply with axle-load limits. It has been found that Project (SIP2) and responds not only to the recent about one-third of all heavy vehicles are overloaded, increase in traffic volumes but to the council’s which not only causes serious damage to roads but also earmarking of Hammarsdale as a node for freight constitutes a road hazard, especially in terms of braking logistics companies. A major homeware retail chain has on the steep downhill slopes and sharp curves that are recently developed a distribution warehouse in the area common in KwaZulu-Natal.

26 2 CAPITALS & PERFORMANCE CAPITALS

The new traffic control centre was completed at the very KwaBhoboza Interchange end of the financial year. It will operate around the clock Construction of this interchange on the N2 near and a contract for its management was awarded ahead of Mtubatuba was undertaken in advance of the completion. About 30 permanent jobs will be created for projected date for the upgrade due to rapid local residents. development in the area which placed great pressure on the old intersection and led to A large training programme for traffic officers of the frequent collisions. Its completion early in 2017 KZN Road Traffic Inspectorate and uMfolozi Municipality will be of great benefit to regular users of was undertaken in preparation for opening. the route.

Table 2: Eastern Region: major construction and rehabilitation projects on non-toll roads 2016/17

Project Major elements Start date Completion Total cost N1 from Trompsburg Construction of new single carriageway with drainage September 2014 June 2017 R324m to Fonteintjie, FS designed to reduce flood risk N5 from Harrismith Reconstruction of N5/Murray Street Interchange, October 2015 October 2017 R292m to Industriqwa, FS widening of road to four lanes and widening of bridges. Construction of a new bridge over the Wilge River N8 from Widening and realignment of existing road. October 2014 March 2017 R418m Bloemfontein to Construction of new dual carriageway, seven bridges Sannaspos, FS and three major culverts N2 Mt Edgecombe Upgrading to a four-level free-flow interchange. April 2013 December 2017 R816m Interchange, KZN Includes building of longest incrementally launched bridge in South Africa N2 Eteza Traffic New 24-hour traffic control centre. Widening of N2 October 2014 March 2017 R283m Control Centre, KZN to four lanes, new interchanges and new road-over bridge N2 KwaBhoboza Construction of new diamond interchange. Upgrading June 2014 January 2017 R156m Interchange, KZN of N2 to accommodate future six-lane carriageway. Realignment of provincial road

N3 Hammarsdale Upgrade of interchange including six new on- and May 2016 November 2018 R234m Interchange, KZN off-ramps, a new five-lane overpass bridge and demolition of old bridge N6 from Resurfacing by means of double seal and within September 2016 August 2017 R66m Reddersburg to Reddersburg by means of asphalt overlay Rustfontein, FS N11 from Resurfacing with double seal treatment September 2016 April 2017 R33m Kwaggasnek to Volksrust, KZN R22 Manguzi Town to Construction of concrete pedestrian walkway and November 2015 November 2016 R15m Mozambican border, access road to local school KZN

All the above projects provided sub-contracting opportunities for SMMEs, created job opportunities for local residents and contributed to the building of skills. A summary of these aspects of SANRAL roads projects appears on pages 49 – 50.

27 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Western Region years to complete. This is the latest in a series of The Western Region saw the completion of two projects to upgrade the N7 to accommodate increased projects in 2016/17: the realignment of the road traffic and safely allow travel at 120km/h. The section at the Clanwilliam Dam in the Western Cape and between Abbotsdale and Malmesbury was still under widening of bridges and major culverts along the construction during the year. This is a large project, N10 between Groblershoop and Upington in the valued at R505m and scheduled to take more than Northern Cape. three years. It involves 17 new bridge structures as well as development of a double carriageway. The major new project initiated during the year was the widening of the N7 from Leliefontein to Hopefield Information on all major projects in the region, collectively in the Western Cape, which is projected to take two worth R1.36bn, is presented briefly in Table 3.

Table 3: Western Region: major construction and rehabilitation projects on non-toll roads 2016/17

Project Major elements Start date Completion Total cost N7 from Abbotsdale to Upgrading road to four-lane dual carriageway. March 2015 July 2018 R505m Malmesbury, WC Realignment of a section of road and 17 new bridge structures N7 from Kransvleikloof Realigning road to avoid flood risk resulting from October April 2016 R339m to Clanwilliam, WC raising of Clanwilliam Dam wall. Involves major rock 2013 cutting and a new 380m-long bridge N7 from Leliefontein to Upgrading road to dual carriageway designed for January July 2019 R335m Hopefield, WC 120km/h travel. Construction of grade-separated 2017 interchange. Rerouting existing access roads N12 near Hope Town, Widening of bridge over the Orange River and July 2016 February 2018 R87m NC another over a tributary N10 from Widening of five concrete bridges and five major February March 2017 R57m Groblershoop to concrete culverts and surfacing of affected road 2016 Upington, NC N14 from Upington to Rehabilitation of three bridges using reinforced October June 2017 R39.1m Kuruman, NC concrete overlays to strengthen bridge decks. 2015 Reconstruction of parapets. Stabilisation of dolomite soil below bridges

All the above projects provided sub-contracting opportunities for SMMEs, created job opportunities for local residents and contributed to the building of skills. A summary of these aspects of SANRAL roads projects appears on pages 49 – 50.

Southern Region Grahamstown and the Fish River Pass was on course In the Southern Region in 2016/17 one major construction for completion in May 2017. This section of road links project was completed and three others were approaching the Eastern Cape’s largest city, Nelson Mandela Bay, completion at the end of the year. The total value of the with the provincial capital, Bhisho. Much of the traffic four projects under management was about R1.4bn. is local but there is also some tourism-related traffic as well as through-traffic from the Western Cape and The completed project was the upgrade of the KwaZulu-Natal. The road section is generally of lower R61 between the Libode Interchange and the standard than adjacent sections and improvement will Ngqeleni Interchange. reduce travel time and improve road user safety. Phase 1 focused on a portion of the road in the Makana Local Phase 1 of the upgrading of the N2 between Municipality and two more phases are planned.

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Table 4: Southern Region: major construction and rehabilitation projects on non-toll roads 2016/17

Project Major elements Start date Completion Total cost N2 from Grahamstown Widening of road involving reconstruction April 2015 May 2017 R345m to Fish River Pass, EC of sub-base and base courses plus sealing. (revised) CAPITALS & PERFORMANCE CAPITALS Phase 1 Provision of climbing lanes. Construction of by- pass to support Phase 3 of project. Addition of separate roadway for non-motorised traffic N2 from Komgha River Resurfacing of road March 2016 May 2017 R96m (revised) to Grahamstown and (revised) from Keiskamma Pass to Keiskamma River, EC R61 from Mthatha to Widening of road to create dual carriageway. September June 2017 R618m (revised) Ngqeleni River, EC Construction of new eastbound carriageway. 2013 (revised) Construction of three river bridges, an overpass and an interchange bridge R61 between Libode Construction of bridges and widening of March 2014 September 2016 R358m (revised) and Ngqeleni intersections. Includes an interchange bridge (revised) interchanges and overpass at Libode, pedestrian bridge and underpass at Ngxangxa

All the above projects provided sub-contracting opportunities for SMMEs, created job opportunities for local residents and contributed to the building of skills. A summary of these aspects of SANRAL roads projects appears on pages 49 – 50.

2. Projects on the toll route network adjusted to allow for higher speeds, and two bridges will be reconstructed for improved, safer access. Toll roads are an essential element of the national response to the challenges of expanding and • The upgrade of the N2 from Mtunzini Toll Plaza to maintaining road infrastructure. SANRAL will continue Empangeni junction in KwaZulu-Natal is the largest to develop toll roads selectively to enable the road project (by value) in SANRAL’s Eastern Region. network to grow sustainably. The current toll road Growth in traffic has led to long delays on this network accounts for 13% of the national road network route and the upgrade will relieve this pressure. and comprises 2 952km of roads. SANRAL manages Construction began just weeks before the start 1 681km of toll roads and three concessionaires of the current reporting period and will result in manage and fund the remaining 1 271km. the single carriageway being expanded to form a dual carriageway. It involves several new bridges, Major toll road construction projects including two major structures over the uMlalazi and Major upgrading, rehabilitation and maintenance of toll uMhlatuze rivers. roads is shared by SANRAL and the three companies that have been awarded 30-year concessions on major national toll routes.

All projects provide sub-contracting opportunities for SMMEs, create job opportunities for local residents and contribute to the building of skills. More detail on these aspects of SANRAL roads projects appears on pages 49 – 50.

SANRAL was engaged in nine major toll road construction projects during 2016/17. • The upgrade of the Polokwane Ring Road to facilitate the flow of through-traffic around the Limpopo capital. The capacity of the road is being doubled from two to four lanes, the alignment

29 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Table 5: SANRAL toll route projects undertaken in 2016/17

Project Description Start date Completion Total cost

Polokwane Ring Road Upgrade of bypass to December 2015 November 2018 R645m Phase 2, LP provide a four-lane divided dual carriageway. Includes upgrade of existing road, new dual carriageway and construction of two bridges

N2 from Mtunzini Toll Upgrading to create a March 2016 April 2019 R946m Plaza to Empangeni four-lane dual carriageway. T-junction, KZN Construction of new carriageway, two major bridges across rivers and several additional bridges

N1 from Sydenham to Rehabilitation and February 2015 May 2017 R538m Glen Lyon, FS strengthening of carriageway with realignment of several interchange bridges and ramps

N1 from Winburg Widening to form four- January 2016 March 2018 R407m Interchange to Winburg lane dual carriageway. Station, FS Rehabilitation of existing road. Construction of new two-lane carriageway and new bridge over railway tracks

N1 from Ventersburg to Widening to form four- August 2015 October 2018 R652m Holfontein, FS lane dual carriageway. Rehabilitation of existing road. Construction of new two-lane carriageway

N1 from Holfontein to Widening to form four- February 2015 February 2018 R559m Kroonstad, FS lane dual carriageway. Rehabilitation of existing road. Construction of new two-lane carriageway

N1 from Koppies to Asphalt resurfacing of road, May 2016 May 2017 R102m Vaal toll Plaza, FS ramps and cross roads at two interchanges

N2 from Oribi Toll Plaza Construction of pedestrian August 2016 April 2017 R9m to Albertsville Bridge, facilities including reinforced KZN concrete stairways and taxi/ bus bays

Musina Ring Road, LP Construction of new single April 2016 September 2018 R506m carriageway bypassing town with two controlled access interchanges at the N1 north and south of Musina

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3. Road network management

SANRAL utilises a dedicated asset management system to monitor and predict future road performance and plan for road maintenance and rehabilitation. The system uses data on pavement and bridge conditions as well as traffic flows and future road usage. & PERFORMANCE CAPITALS

Figure 1: Pavement condition on national roads 2016/17

Pavement Condition Z II M B A B W E Musina Very Poor !

Poor Makhado ! Ë Fair B O T S W A N A Mogalakwenastroom M O Z A M B II Q U E Good ! Polokwane (! Very Good

Bela-Bela N A M II B II A ! Lydenburg !

Nelspruit (! Belfast Pretoria ! !. ! Mafikeng Witbank (! ! Ogies Carolina Johannesburg ! ! (!

Heidelberg Ermelo ! ! Potchefstroom S W A Z I L A N D ! S W A Z I L A N D Klerksdorp Vryburg ! !

Kroonstad !

Welkom Hluhluwe ! !

Harrismith ! Upington ! Winburg ! Kimberley Vioolsdrif Richards Bay ! (! ! Bloemfontein (!

Pietermaritzburg Springbok (! ! L E S O T H O !. Durban

Garies ! De Aar ! Colesberg Aliwal North ! ! Margate !

Middelburg ! Umtata (!

Queenstown !

Cradock ! Beaufort West !

Bisho ! !. East London

Grahamstown !

Oudtshoorn Worcester ! ! Cape Town George Port Elizabeth (! Swellendam !. Knysna !. Strand ! Heidelberg ! ! ! !.Mossel Bay

Kilometers 0 50 100 200 300 400 500

3.1 Bridge management to establish which needed repair. All bridges and major The bridge management system aims to ensure public culverts have been inspected in the last five years, safety on bridges with a span that exceeds 2.1m and including those on newly incorporated routes in the culverts with openings greater than 5m². SANRAL- Eastern Cape. In 2015, inspections were carried out accredited inspectors inspect all bridges and major on bridges and culverts on the routes operated by the culverts every five to six years and prioritise repair work three concessionaires. based on the condition of the structure. All bridges and major culverts are also inspected to ensure they Exposure measurements have not changed significantly meet national standards on capacity to cope with flood from those contained in the 2015/16 Annual Report. conditions. This aspect of SANRAL’s work is particularly Inspections in the Eastern Cape, which included the important given the potential effects of climate change. latest traffic flow figures, impacted on the calculation of the overall condition index (OCI). There are currently 9 513 bridges and major culverts on the national road network, including 903 on routes The method of calculating the OCI was changed and operated by the three concessionaires. This figure will now follows the Committee of Transport Officials (COTO) increase as the national network expands and SANRAL deduct method for calculating the condition of bridges incorporates routes from provinces. and culverts. This generally results in a lower OCI value for defective structures. Those structures scoring above Most bridges and culverts were inspected in 2016/17 70% are deemed to be in a good condition.

31 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

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Table 6: Percentage of bridges in good condition The first such tender has been awarded in the Western Region to Aurecon South Africa (Pty) Ltd. 2014/15 2015/16 2016/17 2016/17 Description Actual Actual Target Actual

Percentage of & PERFORMANCE CAPITALS travel over or under bridges on 92 93 90 94 national roads with OCI higher than 70%* *The OCI threshold for structures in good condition used to be 80%

3.2 Slope management SANRAL has undertaken proactive management of unstable slopes since 2003 and in 2016 introduced new approaches to address material and geotechnical hazards and risks. The Western Region has initiated slope monitoring contracts so that geo-hazards are 3.3 Sinkhole management managed and mitigated. SANRAL has introduced a system to manage the risks associated with dolomitic areas. This management SANRAL’s concessionaires continued their proactive system complies with the SANS 1936-2012 – Code 4 management of the geohazards along the routes for (Dolomite Risk Management) and is still in its infancy. which they are responsible. Areas of dolomitic geology have been identified and are being rated in accordance with the risk of sink hole Slope stability is primarily monitored by routine development. This data will enable SANRAL to manage road maintenance personnel with the assistance of the risk proactively and have emergency specialists on specialist service providers. Several unstable slopes standby in case an event occurs. were identified and addressed in all regions during the course of the year. Some were monitored and Two notable sinkholes occurred in 2016: on the N14 cleared as incidents occurred but where life-threatening between Kathu and Olifantsfontein in the Northern conditions existed risk mitigation works were Cape and on the N12 near Orkney in the North West. immediately carried out. Both were repaired and the risk of recurrence mitigated. Monitoring of these sites continues. In the Southern Region, where SANRAL has recently assumed responsibility for several roads, efforts were 3.4 Pavement management and outcomes concentrated on reducing slope-related risks. Several The pavement management system uses life-cycle sites were identified for risk mitigation and appropriate cost analysis to drive its maintenance and funding action was taken. In the other regions, slope-related strategy. The goal is to preserve the national road risks were mostly minor in nature. network – including those roads under concession – at an adequate level given available funding. SANRAL’s An example of the kinds of risk situations dealt with was automated road-survey vehicles, equipped with laser, the erosion of the road fill by tidal waters along the R72 video and computer-based technologies, gather between Port Elizabeth and East London. A labour-intensive detailed road condition data. Visual inspections verify solution, involving the construction of gabions and the the automated assessments and enable SANRAL to use of local materials and local labour, proved effective in review suggested solutions. providing the desired protection to the road fill. SANRAL allocates the funding available to maintain In future SANRAL aims to award long-term tenders for the national road network according to the following slope management in all regions. The responsibility of hierarchy of priorities: specialised geotechnical service providers will be: • Routine maintenance: preventive asset-preservation • Monitoring of unstable slopes actions, such as cleaning drains, cutting grass, • Designing mitigation measures for seriously sealing cracks, patching potholes unstable slopes • Periodic maintenance: preventive asset-preservation • Providing specialist emergency personnel. actions such as resealing and overlays

33 • Strengthening/improvement: extensive causing vehicles to aquaplane. Measurements for reconstruction and improvement actions that extend 2016/17 showed an improvement on the previous pavement life and/or add additional lanes to year, reflecting the positive impact of SANRAL’s relieve congestion maintenance strategies. • New construction: construction of new roads and ancillary services. Table 8: Low rut exposure 2016/17

Description 2014/15 2015/16 2016/17 2016/17 The state of the road network in 2016/17, as established Actual Actual Target Actual by the road survey system, is described below. Percentage of travel undertaken each year on Smooth travel exposure 99 99 95 100 Smooth travel exposure is a measurement of the national roads with rut depth less than roughness of the road. In 2016/17, the condition of the 20mm roads was similar to that measured in previous years. Note: Rut depth refers to surface depressions that can hold This indicates that the maintenance programme has water and cause a vehicle to aquaplane. been effective, especially on the roads incorporated from the Eastern Cape, North West and Limpopo High texture exposure between 2012 and 2016. High texture exposure is a measurement of the surface macro-texture, which affects surface friction at speeds Table 7: Smooth travel exposure 2016/17 higher 60km/h under wet conditions. Measurements for Description 2014/15 2015/16 2016/17 2016/17 2016/17 were similar to those for the previous year and Actual Actual Target Actual this reflects the positive impact of SANRAL’s maintenance Percentage of strategies, especially on the roads incorporated from the travel undertaken Eastern Cape, North West and Limpopo where surface each year on national roads with seals with high macro-texture were typically used. roughness less 96 96 95 97 than 4.2m/km Table 9: High texture exposure 2016/17 according to international Description 2014/15 2015/16 2016/17 2016/17 roughness index Actual Actual Target Actual

Note: Roughness refers to longitudinal road surface Percentage of undulations affecting the wear and operating costs of vehicles, travel undertaken road safety and the impact of the vehicle on the road through each year on excitation of vehicle mass. national roads 99 99 95 99 with macro-texture higher than 0.4mm Low rut exposure Note: Macro-texture refers to visual coarseness of the road Low rut exposure is a measurement of surface surface that affects surface friction at high speeds (>60 km/h) in depressions that are capable of holding water and wet conditions.

34 2 CAPITALS & PERFORMANCE CAPITALS

3.5 Routine road maintenance A total of 103 black-owned SMMEs were contracted SANRAL has contracts in place to cover routine to provide road maintenance and training provided in maintenance on every bit of the national road relation to these contracts amounted to R853 000. network. These provide for: pothole-patching, sealing of open cracks, repairing and cleaning Eastern Region drainage systems, repairing and renewing fences, The Eastern Region manages nine routine road road signs, road studs and guardrails, burning maintenance contracts covering 2 542km of roads, firebreaks, maintaining trees and shrubs to protect or 16% of the SANRAL road network. Spending on the environment, controlling weeds and litter, and this work amounted to approximately R448m in the assistance during emergencies. 2016/17 year.

The necessity of a sustainable routine road maintenance Maintenance contracts were awarded to 28 black programme becomes more evident as roads SMMEs and the investment in training related to these approach and exceed their initial design life. Having contracts was about R184 457. a maintenance team on site at all times is imperative, especially when dealing with emergency works. Southern Region This region managed 18 routine road maintenance Important objectives of SANRAL road maintenance contracts covering 49 634km of road, including 342km contracts are to provide empowerment opportunities which were added during 2016/17. This represents 20% for SMMEs, to improve their capability, and ensure of the SANRAL road network. sustainable business opportunities for emerging contractors. The routine road maintenance model During 2016/17 approximately R470m was spent on requires the main contractor to provide mentorship, routine road maintenance, providing work to 154 training and financial support to SMMEs. SMMEs and 578 people. The total amount earned by SMMEs was R195m and R290 000 was invested These contracts prioritise black-owned SMMEs, in in training. particular. In 2016/17 a total of 317 such entities performed road maintenance work to the value of R788m. Western Region The Western Region manages 19 routine road Northern Region maintenance contracts covering 4 513km of roads, or The Northern Region manages about 30 routine road 22% of the SANRAL road network. Spending on this management contracts that service about 8 508km of work amounted to approximately R310m in the 2016/17 road, amounting to 42% of the SANRAL road network. year. Maintenance contracts were awarded to 32 black In 2016/17 expenditure on these contracts amounts to SMMEs and the investment in training related to these about R1bn. contracts was about R592 000.

35 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

3.6 Overload control Overload control by concessionaires Overloading of heavy vehicles is a major problem Bakwena currently manages two weigh bridges: the on South African roads and takes a toll in terms of Bapong Traffic Control Centre on the N4 west of damage to roads and risks to road safety. SANRAL Tshwane and the Mantsole Traffic Control Centre on the has a vested interest in the control of vehicle N1 north of Tshwane. Enforcement duties are carried overloading and operates 19 traffic control centres out by North West and Limpopo traffic authorities around the country. respectively. Table 11 reflects the results of weighbridge operations in 2016. During 2016/17 nearly 23% of the vehicles weighed at these centres were overloaded. The majority were within the “grace” margin but 7% were so far over 23% overloaded the legal limit that prosecutions were instituted. Fines exceeding R21m were imposed during the year and 77% correct load fines to the value of R4.1m were paid.

Table 10: Summary of activities at SANRAL traffic control centres 2016/17 2016/17 Total Vehicles weighed 1 731 664 Overloaded vehicles 390 310 MORE THAN R21m Drivers charged 28 399 fines were imposed Drivers arrested 1 836 Value of fines issued R21 705 965 Value of fines paid R4 096 670 LESS THAN R4.1m fines were paid

SANRAL has eight vehicle inspection facilities situated at strategic positions on national routes. These facilities tested 9 460 vehicles in 2016/17 and more than one- third (34.5%) failed to meet road safety standards.

Table 11: Activity report on for 2016 Bakwena traffic control centres

Mantsole TCC Bapong TCC Total Vehicles weighed 303 647 88 996 392 643 Vehicles overloaded 71 336 21 187 92 523 Drivers charged 5 362 2 261 7 623

Overloading fines issued R4.96m R2.64m R7.6m RTQS Fines issued R0.96m R9.64m R10.6m

N3TC continued to monitor overloading on the N3 toll lay-byes along the N4 toll route which weighed more route where heavy vehicles constitute about 32% of than 796 000 heavy vehicles in 2016/17. The rate of traffic and an average of 60m tons of freight is carried overloading ranged from 9% to 13% at the various each year. Seven weigh-in-motion (WIM) stations centres. Just over 1% of vehicles (9 244) were extremely provide traffic loading information and determine overloaded and liable for prosecution. damage caused by overloaded vehicles. Data quality checks are incorporated to ensure that WIM data quality TRAC’s N4 Overload Control Project has created 92 is of a high standard. permanent jobs and has indirectly generated another 64 job opportunities through the use of SMMEs for TRAC has seven load control centres (LCCs) and 11 security and maintenance of facilities and equipment.

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3.7 Traffic monitoring services which rely on human observation. Traffic and weigh-in-motion (WIM) monitoring is undertaken with the purpose of measuring and In terms of new specifications, automatic monitoring analysing traffic and vehicle characteristics – such as services may only be provided by service numbers of vehicles, operating speeds and axle loads providers and system suppliers in possession & PERFORMANCE CAPITALS – in order to manage, plan and design road networks of valid certificates. and infrastructure. Three traffic monitoring contracts were active during A distinction is made between automatic traffic the 2016/17 financial year. There were 916 long-term and WIM monitoring services, which depend traffic-monitoring stations in operation and 755 short- mainly on the use of mechanical and electronic term traffic-monitoring counts were conducted during equipment, and manual traffic monitoring the 2016/17 financial year.

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Funding Capital CAPITALS & PERFORMANCE CAPITALS

Spending on SANRAL toll roads

R4.5bn Spending on concessioned toll roads Spending on non-toll roads BAKWENA R510m N3TC R449m R11.6bn TRAC R950m

Government has indicated that the 22 197km of roads 1. Public-private partnerships under SANRAL’s jurisdiction may increase by a further 12 803km over time. During the reporting period, SANRAL has long recognised that the importance 707km of provincial roads were declared national roads. of transport infrastructure to economic growth This expansion has financial implications which SANRAL creates opportunities for private investment in road proposes to meet by: development and management. PPPs are an alternative • Using funding from the national fiscus as efficiently means of financing and operating the national road as possible network, with the costs being recovered through • Collecting tolls in accordance with a move towards user charges or tolls. PPP enables SANRAL to secure the user-pays principle financing for the improvement and preservation of the • Engaging with the private sector to finance sections country’s road infrastructure assets for periods well of toll roads. beyond government’s three-year expenditure horizon.

In the period under review, 13% of the national road PPPs have been a cornerstone of SANRAL’s business network was funded through tolls and toll roads were model and the agency currently has three significant either managed directly by SANRAL or by the private partners: the N3 Toll Concession (RF) Proprietary sector through public-private partnerships. These Limited (N3TC), the N1-N4 Bakwena Platinum partnerships or concessions require that the private Corridor Concessionaire (Bakwena), and the N4 Trans sector collects tolls and uses these funds to design, African Concessions (TRAC). These partnerships, construct, finance, operate and maintain the roads in or road concessions, have proven their worth accordance with standards stipulated by SANRAL. The through operational efficiency, a reduction in the concessions are for a period of 30 years, after which cost of transport, and safer and more reliable road the road is to be returned to SANRAL in the specified infrastructure. condition, free of charge. On non-concessioned toll roads, comprehensive toll The 87% of the national road network that is not tolled road operation and maintenance contracts consolidate is maintained, upgraded and expanded through tax- responsibility for performance of operational activities based revenue allocated from the national fiscus. and the financial risk associated with managing toll

39 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

routes. A main contractor operates a particular route, important Trans-Kalahari Highway between Walvis Bay pays the actual gross income (tariff x number of vehicles) and Maputo and is entering its fourteenth year to SANRAL and then claims discounts, concessions and of operation. violations as costs, based on an agreed cost matrix. During 2016/17 various road improvement projects Toll road projects undertaken by were undertaken along these routes and they are concessionaires detailed in Table 12.

During the year under review, N3TC invested R449m, Several projects were concluded during the the year, TRAC R950m and Bakwena R510m in the maintenance, and several more were due to be completed within rehabilitation and upgrading of their respective sections months of the end of the financial year. of the national road network. TRAC's expenditure included works in Mozambique. During the course of the year the benefits of toll plaza upgrades in Gauteng became apparent. The demand on The rehabilitation work undertaken in 2016/17 by the these plazas in the peak commuter periods is extreme three toll route concession-holders is outlined below. and their expansion and reconfiguration has improved the flow of traffic considerably. At the time of reporting, the 1.1 Bakwena Zambesi Plaza southbound on-ramp was processing on Bakwena is responsible for the design, financing and average 3 400 vehicles an hour between 6am and 7am construction of road improvements as well as the and the Zambesi Plaza northbound off-ramp processed ongoing operation and maintenance of 385km of toll 3 050 vehicles an hour in the afternoon peak hour. The road between Pretoria and Bela-Bela on the N1 (95km) Doornpoort Plaza processed on average 3 400 eastbound and between Pretoria and the Botswana border on the vehicles an hour in the morning peak hour and 2 600 N4 (290km). The Bakwena Corridor forms part of the westbound vehicles an hour in the afternoon peak hour.

Table 12: Road rehabilitation projects undertaken in 2016/17 on routes managed by Bakwena

Project Description Start date Completion Total cost N4 Zeerust to Swartruggens, NW Phase 1 Rehabilitation March 2015 April 2017 R260m N4 Zeerust to Swartruggens, NW Phase 2 Rehabilitation June 2017 March 2019 R240m N4 Zeerust to Swartruggens, NW Phase 3 Rehabilitation July 2016 September 2017 R164m N4 Ga-Rankua Interchange to Brits Resealing March 2016 December 2016 R32m Interchange, NW N4 Marikana to Waterfall Mall in Resealing March 2016 December 2016 R34m Rustenburg, NW N4 from R24 to Bietjieberg, NW Resealing March 2016 December 2016 R23m N4 Lehurutshe to Botswana border, NW Resealing October 2016 April 2017 R33m N4 at Waterfall Mall, Rustenburg, NW Construction of new February 2016 March 2017 R25m bridge portal Zambesi Toll Plaza, Tshwane, GP Addition of two lanes January 2016 February 2017 R48m in each direction Stormvoël Toll Plaza, Tshwane, GP Addition of one lane in January 2016 February 2017 R29.4m each direction Doornpoort Toll Plaza, Tshwane, GP Addition of two lanes January 2016 February 2017 R26.4m in each direction Pumulani Toll Plaza, Tshwane, GP Addition of two lanes January 2016 February 2017 R36.5m in each direction

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1.2 N3TC The mandate of N3TC is to design, finance, construct, operate and maintain the section of the N3 extending from Cedara in KwaZulu-Natal to Heidelberg in Gauteng. During the reporting period, rehabilitation & PERFORMANCE CAPITALS contracts with a combined value of R581 million were completed, contracts to the value of R642 million were ongoing, and new contracts worth R136 million were awarded. These projects are summarised in Table 13.

Two major rehabilitation projects between Warden and Van Reenen on the N3, which commenced in 2015, were nearing completion at the end of the financial year.

Table 13: Road rehabilitation projects undertaken in 2016/17 on routes managed by N3TC

Project Major elements Start date Completion Total cost N3 Sand River to Frere Rehabilitation involving resurfacing of November 2016 March 2018 R136m Interchange, KZN some sections and resealing of others N3 Harrismith to Warden, FS Reconstruction of truck lane and January 2015 September 2017 R376m asphalt resurfacing of entire road N3 Van Reenen to Harrismith, Reconstruction of truck lane and August 2015 May 2017 R182m FS asphalt resurfacing of entire road N3 De Hoek Plaza to Repair and resurfacing of entire road February 2016 November 2016 R72m Heidelberg, GP

1.3 TRAC TRAC’s mandate is to design, finance, construct, operate and maintain the N4 from Solomon Mahlangu in Pretoria, Gauteng, to Maputo in Mozambique, making the N4 toll route the only cross-border concession.

During 2016/17 various road upgrade and rehabilitation projects were undertaken along this route. In addition to the projects concluded during or after the course of this financial year, another five projects are planned for the next financial year.

Table 14: Road rehabilitation project undertaken in 2016/17 on routes managed by N3TC

Project Major elements Start date Completion Total cost N4 Wilge River Interchange to Rehabilitation August 2015 January 2017 R205m Highveld Interchange, MP N4 Highveld Interchange to OR Rehabilitation and upgrading to March 2017 August 2018 R253m Tambo Drive Interchange, MP six lanes N4 Crossroads to Sycamore Siding, Rehabilitation September 2015 February 2017 R221m MP (Phase 1) N4 Crossroads to Sycamore Siding, Rehabilitation and additional March 2017 August 2018 R275m MP (Phase 2) climbing lanes N4 Hectorspruit to Komatipoort, MP Rehabilitation and additional January 2016 July 2017 R276m climbing lanes

41 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

2. Non-toll road revenue and expenditure

The national fiscus provides SANRAL with the financial resources to maintain and improve the non-toll road network. The allocation from National Treasury has invariably increased year-on-year since the establishment of SANRAL. Spending is prioritised according to needs identified through SANRAL's road asset management system.

In 2016/17, the total grant received from government was R13.49bn, part of which was capitalised for major rehabilitation and new construction projects. Revenue from the operation of non-toll roads amounted to R8.67bn.

SANRAL spent R5.7bn during 2016/17 (see Table 15) on maintaining non-toll roads and nearly R5.9bn on strengthening, improving and providing new facilities on these roads (Table 16).

Table 15: Non-toll roads: operational expenditure 2016/17

Description Number of projects Length (km) Cost (R’000) Routine maintenance 84 19 245 1 693 212 Periodic maintenance 80 1288 2 892 310

Special maintenance 18 447 1 115 836

Total 219 20 980 5 701 358

Note: Operational expenditure excludes any accruals made at year-end. Expenditure related to contracts awarded in previous financial years, but incurred during 2016/17, is included. Length indicates the actual length of road maintained or constructed during the financial year. Periodic and special maintenance is in addition to routine maintenance of the road network.

Table 16: Non-toll roads: capital expenditure 2016/17

Description Number of projects Length (km) Cost (R’000) Strengthening 19 127 1 749 306 Improvements 36 163 1 948 664

New facilities 49 186 2 182 999

Total 104 476 5 880 969

Note: Capital expenditure excludes any accruals made at year-end. Expenditure related to contracts awarded in previous financial years, but incurred during 2016/17, is included. Length indicates the actual length of road maintained or constructed during the financial year.

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3. Toll road revenue and expenditure a 60% discount was available to road users with toll accounts in arrears in terms of this dispensation. Revenue from SANRAL’s non-concessioned toll operations increased by 7.7% from the previous year to The debt collection process for accounts in arrears approximately R4.9bn. continued and civil litigation for outstanding toll fees & PERFORMANCE CAPITALS and associated costs commenced. Summonses were The Gauteng Open Road Tolling Project (GFIP) issued for prosecutions in magistrates’ courts and the contributed 4.2% to this increase. An amount of high court. The first default judgment in the high court R372.9m was received from the fiscus as a grant to off- was obtained in January 2017. set the loss in e-toll revenue as a result of implementing the new dispensation for GFIP that was announced by SANRAL spent over R2.5bn during 2016/17 (see Table 17) the Deputy President in May 2015. on maintaining toll roads and nearly R1.9bn on strengthening, improving and providing new facilities May 2016 marked the end of the period during which on these roads (Table 18).

Projects68

1985km Total Length

Toll roads: operational expenditure 2016/17

Table 17: Toll roads: operational expenditure 2016/17

Number of Cost Description projects Length km (R‘000) Toll operations and routine maintenance 56 1 681 1 842 661 Periodic maintenance 8 238 637 696

Special maintenance 4 66 113 897

Total 68 1 985 2 594 254

Note: Operational expenditure excludes any accruals made at year-end. Expenditure related to contracts awarded in previous financial years, but incurred during 2016/17, is included. Periodic and special maintenance is in addition to routine maintenance of the road network. Length indicates the actual length of road maintained or constructed during 2016/17.

43 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Table 18: Toll roads: capital expenditure 2016/17

Description Number of projects Length km Cost (R’000) Strengthening roads 3 22 309 370 Improving roads 14 6 287 264

New facilities 18 72 1 402 720

Totals 35 100 1 999 354

Note: Capital expenditure excludes any accruals made at year-end. Expenditure related to contracts awarded in previous financial years, but incurred during 2016/17, is included. Length indicates the actual length of road maintained or constructed during 2016/17.

4. Land portfolio management contract at least 50% of its work in order to provide opportunities to black-owned SMMEs and smaller Over the years, SANRAL has acquired a property companies in the property sector. Despite keen portfolio in order to meet its mandate of building and competition for the services of black land surveyors and improving roads. In the process of acquiring land for valuers, this target has been exceeded. road development it is inevitable that portions of some properties are left without access or rendered useless The SANRAL Act requires the agency to acquire to their owners. In such cases, SANRAL also buys these property by agreement, where possible, but in portions and therefore has both road reserves and exceptional cases the agency may request the Minister surplus land in its portfolio. to expropriate property in terms of the Expropriation Act No 63 of 1975, which determines compensation. While road reserves are maintained by means of routine road maintenance contracts, the surplus land SANRAL’s predecessors were not bound to take transfer is managed by a specialised service provider who of property that they acquired for purposes of road provides surveying, valuing and general property development and the agency has made a considerable management services and maintains all SANRAL’s effort to identify this land and transfer it to SANRAL. offices. This contract was concluded in 2015 for an This entails tracing the land owners and requesting initial period of five years and has a value of R943.4m. them to sign documents to create a legal foundation for the transfer. Where property owners have refused to The contract requires the service provider to sub- cooperate, the Minister has been asked to expropriate.

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Intellectual Capital CAPITALS & PERFORMANCE CAPITALS

Urban freeway response to Pioneering use of technology for 9 453 collisions landuse planning Most freeway incidents noted 1 within tag works on all toll routes 3 minutes nationwide

SANRAL’s strength in relation to the building of border in the west and to Komatipoort in the east. intellectual capital lies not so much in the origination of • The R30/R730/R34 between Kroonstad and new technology but in the novel application of existing Bloemfontein. technologies to provide solutions in road planning and • The N17 between Johannesburg and Ermelo. construction and the creation of safer and more user- • N2 South Coast route. friendly road systems. Marketing campaigns were conducted periodically at 1. Automated electronic toll payment major petrol stations and malls to increase usage of e-tags. Electronic tolling has been found to increase South Africa’s first multi-lane free-flow electronic toll plaza throughput considerably from about 270 – collection system, with a newly developed central 350 vehicles an hour to more than 1 000, in certain clearing house, was introduced in 2013. This application dedicated e-tag payment lanes. of automated electronic payments built on the established boom-down system was first introduced TRAC went live with the automatic electronic tag on the Bakwena Platinum Corridor in 2003. During system in March 2017. To date tag uptake has been 2016/17, SANRAL increased the electronic payment positive, especially at the Diamond Hill and Middelburg footprint to most toll plazas nationally, as an additional Toll Plazas. payment collection system. Planned roll out of the system, comprising all toll plazas in South Africa, is to 2. Road management systems and be concluded in the next financial year. technological innovation

Interoperability of electronic tolling across most existing The freeway management systems (FMSs) in Cape toll plazas is an incentive for increased e-tag uptake. Town, Gauteng and the busiest routes in KwaZulu- Road users with a registered e-tag account are able to Natal comprise integrated networks of cameras, use this account and the same e-tag at toll plazas across radar equipment and communication technology that the country, passing almost instantly through the gates. facilitate rapid responses to incidents and efficient route A central transaction clearing house administers this planning by making real-time information on traffic system. During the reporting period, toll roads with the patterns widely available. automated electronic payment option were: • The N3 between Johannesburg and Durban. In 2017 the Intelligent Transport Society of South • The N1 from Pretoria to Musina, and from Africa (ITSSA) recognised this smart roads initiative by Bloemfontein to Johannesburg and the selecting the SANRAL FMS deployment as the recipient Huguenot Plaza. of its inaugural award for outstanding achievement in • The N4 from Pretoria to Pelindaba and the Botswana the intelligent transport field.

45 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

The FMS infrastructure, coordinated through a central monitored and evaluated. This not only leads to safer control centre in each of the three urban areas, is practices at the incident scene, but also to more described in the table below. The reliability of this efficient management of resources. Senior personnel technology, in terms of virtually uninterrupted availability, are also able to assist on-scene personnel with decisions is essential to the FMS playing its intended role. on how to clear the incident as efficiently as possible.

Table 19: Freeway management system components 2016/17 The analysis of accurate and comprehensive incident data helps to understand crash trends and identify high- FMS CCTV Vehicle Electronic Twitter cameras detector message followers risk locations which in turn informs the allocation of stations boards resources for engineering and traffic law enforcement. Cape Town 236 81 50 42 000 The identification of areas with high pedestrian activity has guided law enforcement and educational activities. Gauteng 238 108 60 46 000 The erection of a pedestrian fence on the median of KwaZulu-Natal 146 59 26 124 445 the R300 freeway, near the Delft community, eliminated pedestrian crossings and crashes in this area. Information on prevailing traffic conditions is relayed via social media platforms, as indicated in the table, and The Cape Town FMS has played a key role in improving also accessed via the i-traffic website by hundreds of safety and security on portions of the N2 and R300 thousands of users and broadcast widely by radio stations. freeways. A priority task team, which includes law enforcement agencies, was formed to improve Electronic message boards along the freeways are safety and security through proactive intelligence “live” at all hours and regularly updated. gathering and a rapid law enforcement response to any stationary vehicle. This is supported by a dedicated Incident response services 24/7 operation centre coordinated by the Cape Town The ability of the FMS to initiate rapid and appropriate FMS and backed by its technology. There is also an responses to road incidents is of enormous value to emergency call centre for members of the public. the public. This helps save lives after serious collisions, SANRAL has provided a live feed from the Cape Town prevents collisions and reduces economically damaging FMS video to the call centre to facilitate an efficient traffic snarl-ups by clearing breakdowns as quickly as response. This project has led to a significant decrease possible. It also contributes to the security of motorists in incidents of crime and to multiple arrests. who experience breakdowns.

Table 20: Summary of critical activity by freeway management PEDESTRIAN DETECTION AND SOFTWARE systems 2016/17

FMS Incidents Collisions Detection responded responded time for to to incidents Average: Cape Town FMS 22 000 3 100 2:15 mins

Average: Gauteng FMS 20 200 4 787 (60-70%) < 3mins A Stellenbosch University Master’s student and SANRAL intern, Hardy van der Merwe, Average: KwaZulu-Natal FMS >10 000 1 656 2:33 mins has developed software capable of analysing pedestrian movements by the use of video footage from surveillance cameras along Cape Town Freeway Management System South Africa’s highways. He developed the The Cape Town FMS has seen a reduction in clearance programme to extract pedestrian mobility times for fatal crash scenes, primarily due to improved data from videos of foot traffic on pedestrian coordination between emergency services and the bridges. This analytical tool will enable support of the South African Police Service. transport authorities to evaluate the impact of pedestrian safety campaigns, study CCTV footage of incidents is used by managers and pedestrian flows in specific areas and – when supervisors of all the responding services for training used together with gesture recognition – alert and debriefing of on-scene personnel. On-scene authorities to suspicious behaviour. personnel are aware that their actions are being

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KwaZulu-Natal Freeway Management System responded to an average of 783 incidents a month The KwaZulu-Natal Freeway Management System covers in 2016/17. the busiest 120km of the N2 and N3 freeways. Stationary vehicles accounted for about 50% of the 10 000 incidents 3. Innovations in geology, geophysics and

responded to in 2016/17, while incidents related to applied geotechnical engineering & PERFORMANCE CAPITALS traffic congestion and crashes each accounted for 16% of incidents. About nine out of 10 crashes involved light The innovative combination of satellite imagery vehicles and the highest number of crashes was recorded and airborne geophysical testing was used for the between the Queen Nandi Drive Interchange on the N2 first time by SANRAL in 2016/17 to overcome the and the EB Cloete Interchange. Provincial road traffic difficulties experienced by designers in understanding officers are located at the traffic management centre the geological and geotechnical risks involved in and this has enhanced coordination of the response road development. Land use patterns tend to mask to incidents. During high traffic volume periods, SAPS underlying geological features and risks and this can officers also have a presence at the centre to further cause costly unforeseen work during construction and enhance the management of traffic incidents. reduce the life of road assets.

The KwaZulu-Natal FMS has noted a tremendous This ground-breaking methodology was applied very increase in the use of social media by road users, successfully in planning both the N2 Wild Coast and with growth of 50 000 Twitter followers alone in the Moloto Road projects. SANRAL utilised Landsat 2016/17. The public has responded positively to the 7 imagery in combination with airborne geophysical dissemination of travel times for key road sections. testing, which is usually used in deep mineral exploration. This shallow earth assessment allows In recognition of its significant use of technologically investigation of material types, karst features and advanced systems to manage the freeway network, the geotechnical risks – that is, fault zones and dykes. KwaZulu-Natal FMS received an award for technical excellence in 2016 from the Pietermaritzburg branch of The result was much better and more efficient land-use the South African Institute of Civil Engineering. planning and design. The technique probably saved nine to 12 months of on-the-ground investigation in the Wild Gauteng Freeway Management System Coast where no significant geological exploration had been Crashes constituted nearly 24% of incidents recorded previously undertaken by the Council for Geoscience. by the Gauteng FMS, and medical response units responded to over 3 512 incidents, with an average In addition, Landsat data was combined with a response time of 10.7 minutes. They provided first-line magnetic dataset to identify probable sources of medical assistance within the critical “golden hour” to road-building materials for the project. Several existing an average of 199 people a month. quarries and sites for the possible development of new quarries were identified close to the planned Msikaba Efforts to improve the clearance times of fatal crashes and Mtentu bridges. have intensified. By building relationships with the SAPS Accident Investigation Unit and Forensic Pathology 4. Sharing innovation Services clearance times have been reduced to under an hour, compared to two or three hours in the past. Staff from SANRAL presented papers on new These services are notified of any fatality as soon as it is geotechnical methods at important international and declared by the SANRAL medical response unit. local conferences. • Engineering Geologist Pierre Roux presented a Increased awareness of the right of traffic police to paper on investigations for the Ermelo Ring Road at instruct the immediate removal of a vehicle causing the International Society on Rock Mechanics, which undue obstruction has reduced delays resulting from took place in Turkey, and at the 30th Symposium on stranded heavy vehicles. the Application of Geophysics to Engineering and Environmental Problems, held in the United States. A critical success factor in Gauteng was the dedicated • Quality Manager and Materials and Pavements on-road service unit, comprising 10 incident response Specialist Rob Damhuis made a poster presentation units, 10 light towing units, six heavy recovery units and at the 35th International Geological Conference 12 medical response units. The incident response units (IGC) in Cape Town.

47 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

5. The SANRAL Technical Innovation Hub the next few years. Two of the current TIH engineers in training have recently completed post-graduate studies In rising to the challenge of rapidly evolving Smart Road in research topics relevant to transportation technology Technologies and Innovations, SANRAL during 2016/17 advancements, such as automated pedestrian detection established the Technical Innovation Hub (TIH) located and drone applications. in Cape Town at the Western Region Office. The TIH has commenced with various innovative and Some five years ago already, SANRAL began investing technology driven projects that will reshape how in bursaries for candidates showing interest in we think about transport and our environment. One engineering disciplines other that Civil Engineering, important project is a collaboration between the which is traditionally most commonly associated with Stellenbosch University’s Smart Mobility Laboratory roads and transportation. These other engineering and the TIH. The objective of this project is to test disciplines include Electrical and Electronic, the use of Floating Car Data, such as bluetooth and Mechatronic (combined Mechanical and Electronic), other vehicle tracking devices in decision making. The and Computer Engineering, and are now more than development of knowledge and capacity in this field ever impacting on roads, transportation and mobility will lead to improvements in traffic analyses, monitoring specifically. of traffic trends, and the identification of congestion and speed violation hotspots. This strategic investment in human capital was based on the foresight that technology and innovation will shift A very important objective of human capital our focus in reimagining and adapting existing roads development is to ensure that we create an and their immediate environments, to ensure that we environment that not only stimulates innovative thinking deliver on smart and safe mobility to all. The good thing and ideas to improve the experience of our road is that the technology is already here, and SANRAL users, but one that also lends itself to the professional is now well positioned to embrace this technological development to allow all our engineers in training to innovation explosion through its TIH. The TIH employees be registered as professionals. All TIH engineers in currently comprise four recently graduated engineers in training have therefore been registered as candidate training, namely; two Electronic and Electrical Engineers engineers with ECSA, and in collaboration with the and two Mechatronic Engineers. Additional engineers SANRAL Technical Excellence Academy, are on the path from varying disciplines will be joining the TIH over to Professional Registration.

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Social and Relationship Capital CAPITALS & PERFORMANCE CAPITALS

Value of work Work Value of work by black-owned opportunities for performed by SMMEs companies

bn 39 809 R4.6 R2.1bn individuals

Training for Road safety Community education for development 4 257 projects worth individuals 185 529 individuals R257m

As a state-owned company, SANRAL is committed to the social goals of government, including economic transformation and the building of a more equal, A total of 4 257 individuals received training on these cohesive society. The agency utilises every procurement projects. opportunity to advance these objectives. SANRAL also invests in community development and road safety 1.1 Value and number of contracts programmes, as well as educational initiatives designed to SANRAL awarded 172 contracts worth over R15.9bn for improve the teaching of maths and science at school level. new works, rehabilitation and improvement, periodic particularly in rural and disadvantaged communities. and special maintenance, routine maintenance, community development and other related services 1. Empowerment, job creation and skills during 2016/17. development SMMEs earned a total of R4bn through contracts with SANRAL makes a significant contribution to the SANRAL, more than R2.1 billion of which went to 1 045 development of human capital in the construction black-owned enterprises. SANRAL’s skills development industry through its mainstream road construction, programmes benefited 4 257 people, including rehabilitation and maintenance projects. 1 690 women. SANRAL projects created the equivalent of 19 047 full-time jobs, 11 242 of which were taken up All contracts awarded by SANRAL require principal by young people. contractors to sub-contract to SMMEs – particularly entities with black and female owners, to prioritise the Table 21: Value of SANRAL contracts awarded hiring of local workers, and to provide training to these Number of Amount workers. As a result of this approach: contracts • Work worth R4bn was contracted to and performed Non-toll roads 142 R12.9bn by SMMEs on road construction, rehabilitation and maintenance projects during 2016/17 Toll roads 30 R3.0bn • Road construction, rehabilitation and maintenance Total 172 R15.9bn

projects generated the equivalent of 19 047 Note: All amounts exclude contract price adjustment, full-time jobs. contingencies and VAT

49 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

1.2 SMMEs and black-owned entities Figure 3: Distribution of job opportunities realised through road projects in 2016/17 As indicated in Figure 2, nearly six out of 10 SMMEs performing work on SANRAL projects were black- owned and the value of work contracted to these 14% enterprises was somewhat higher than that awarded to other SMMEs. 34%

Figure 2: Share of road contracts and work by black-owned and other SMMEs 2016/17

57% 60% 53% 47% 50% 43% 40%

30%

20%

10% 7% 0% Black-owned SMMEs Non-black-owned SMMEs 45% Contracts Value of work

1.3 Job opportunities Male > 35 years Female > 35 years Job creation is possibly the greatest challenge facing Male 18-35 years Female 18-35 years South Africa and each year SANRAL plays a role in creating job opportunities. In 2016/17 the agency’s road construction, rehabilitation and maintenance projects provided job opportunities to more than 39 800 1.4 Training provided on projects individuals. Given the nature of construction work, it Table 23: Training provided on road construction, rehabilitation is unsurprising that young men, aged up to 35 years, and maintenance contracts in 2016/17 constituted the largest group of workers. Category of road Trainees Courses Value of training However, one in five individuals hired was a woman Non-toll roads 3 154 5 080 R15.6m and this ratio represents progress in terms of gender Toll roads 1 103 3 524 R1.3m representation. Total 4 257 8 604 R16.9m Almost all the job opportunities created are short-term and equated to about 19 000 full-time jobs. SANRAL strives to ensure that workers gain a range of skills Figure 4: Gender ratio of workers receiving training on road during the time they are employed on projects so that projects in 2016/17 their future job prospects are improved. A total of

4 257 workers received training during 2016/17 and, on 70% 65% average, each worker attended two courses. 60% 60% 54% 50% 46% Table 22: Job creation through road projects undertaken in 40% 2016/17 40% 35%

30% Category of road FTEs* Job opportunities 20% Non-toll roads 13 690 30 820 10% Toll roads 5 357 8 989 0% Total 19 047 39 809 Non-toll roads Toll roads All roads Male Female *Total hours worked expressed as the equivalent of full-time jobs

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footprint, changing land use patterns, and the need CONCESSIONAIRES BUILDING SOCIAL to provide a more forgiving roadway, mean there will CAPITAL always be room for innovative engineering solutions which provide a safer environment for road users.

BAKWENA created a total of 1 058 jobs for & PERFORMANCE CAPITALS managers, supervisors and construction workers SANRAL’s approach to safe roads is both proactive and during this reporting period. reactive. • Proactively, the agency continuously evaluates the N3TC spent R2.9m on training and development national road network against a set of norms and of contractors, staff, community members and the standards and applies this analysis during project provision of bursaries. Its toll operations, routine road design, construction and routine maintenance. maintenance, route services and the route control • Reactively, SANRAL identifies and addresses high- centre contributed 821 permanent employment incident areas. In many cases, solutions require positions, while about 500 individuals were employed close partnerships with education and traffic law in road design and rehabilitation projects. enforcement entities.

invested over R29.5m in SMMEs in South TRAC As part of its community development programme, Africa and R16m in Mozambique. Total expenditure SANRAL promotes pedestrian accessibility and mobility for internal training exceeded R1.2m and a by providing appropriate infrastructure. The agency’s similar amount was spent on external training for work over the next five years will focus on: enterprise development. • Constructing pedestrian and bicycle paths to accommodate non-motorised modes of transport safely 2. Road safety • Displaying traffic-calming messages at locations with SANRAL has become much more than an engineering pedestrian activity entity responsible for the design, management and • Building strategically located pedestrian bridges. maintenance of our national road network. It has also • Creating safe access for communities neighbouring pioneered many interventions that contribute to the SANRAL road network. safer roads. Safer road users 2.1 Approach Road-user behaviour plays a major role in the high The agency was part of the technical team that helped crash rates experienced in South Africa. Our ability develop the National Road Safety Strategy 2016 - 2030, to change risky road-user behaviour for the better is which was approved by Cabinet during the reporting critical to the achievement of road safety. SANRAL has period. SANRAL’s own road safety strategy, which is well made a strong commitment to road safety education aligned with the new national strategy, focuses on safer and awareness programmes with the intention of roads, safer road users and the post-crash response. influencing road-user behaviour.

The agency is committed to the “safe systems” In South Africa, pedestrians account for more than approach advocated in the United Nations’ Decade 40% of road deaths. SANRAL takes an holistic for Action on Road Safety. This takes human approach to improving pedestrian safety. This places fallibilities and vulnerabilities into account and seeks considerable emphasis on social and educational to minimise the damage of road incidents through approaches but also includes engineering and the development of safe systems. This attention enforcement elements. Interventions include to infrastructural standards is coupled with public improving pedestrian routes, speed-control information campaigns and road safety training enforcement and community mobilisation, for example designed to achieve better road-use behaviour. to provide assistance for children who walk to school. The programme also provides training for officials, Safer roads youth and community groups. As a roads authority, SANRAL automatically has a focus on enhancing road safety by providing safer roads. Post-crash response Although the national road network is recognised as The entire national road network has incident world-class, the periodic expansion of the national road management systems in place to ensure an optimal,

51 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

coordinated response to every incident. Initiatives informed material will create awareness of road safety, are underway to legislate on the availability of road influence attitudes to road use, and hopefully result in incident management systems on all major routes in safer behaviour. South Africa. SANRAL works closely with education authorities with SANRAL’s use of intelligent transport systems to the objective of informing, training and motivating manage freeway operations gives it the potential to teachers to impart the correct messages to help increase the efficiency of post-crash responses. their learners. CCTV video surveillance is already used on urban freeways to detect and notify the relevant emergency Children require different skills and education services of the occurrence of an incident and this depending on their age. SANRAL has equipped ensures a speedier response. The deployment of such teachers with appropriate teaching aids to provide systems will be expanded beyond their current footprint a practical teaching environment to learners from in Gauteng, KwaZulu-Natal and the Western Cape. grades R to 6. SANRAL is currently developing new education material addressing different age groups 2.2 Road safety education and circumstances they encounter. About a third of all schools in the country are located within 5km of the national road network managed The number of schools, educators and learners reached by SANRAL. The agency’s aim is to empower the 6.3 by the programme in 2016/17 are indicated in Table 24 million learners in these locations with appropriate while Table 25 reflects the cumulative numbers over a and relevant road safety information. This evidence- five-year period.

Table 24: Participation in road safety education programme 2016/17

Grades 1 – 9 Grades 10-12 Total

Number of schools 272 62 334 Teachers at workshops 524 90 614 Grades 0-3 Grades 4-6 Grades 7-9 Teachers receiving manuals 983 797 474 219 2 473 Number of learners 67 107 54 385 34 707 29 330 185 529

Table 25: Participation in road safety education programme over five years

Grades 1 – 9 Grades 10-12 Total

Number of schools 1 305 635 1 940 Teachers at workshops 2 419 1 014 13 931 Grades 0-3 Grades 4-6 Grades 7-9 Teachers receiving manuals 3 085 2 600 1901 2 912 10 498 Number of learners 24 148 207 744 173 342 327 212 949 446

ChekiCoast Save a Life Road safety awareness is a year-round focus for SANRAL. One of the ways this is done is through its signature social media campaign - ChekiCoast Save a Life. The focus for 2016/17 was on using social media influencers to emphasise the identified road safety messages and promote responsible behaviour amongst all road users.

Total Facebook likes at 31 March 2017 111 171.

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Safe WSchool project • Establishing baseline data for road safety behaviour The Safe Routes to School project is designed to combine among these learners a teacher training package, road safety education for • Developing interventions for safer road behaviour for learners and the introduction of safe road infrastructure, the SANRAL education programme focusing on the routes children take to and from school. • Sharing the research findings so that other & PERFORMANCE CAPITALS organisations can use the evidence to guide their The project is run in partnership with Global Road behaviour change campaigns. Safety Partnership (GRSP), following a framework that was developed by GRSP and used in China, Japan and The research showed that road behaviour of learners Zambia. The methodology was piloted in South Africa is the product of a variety of factors. It indicated that and tools were developed before moving forward when learners feel confident about their knowledge – with implementation. for example, that putting on a seatbelt has real safety benefits – then their personal attitudes will decide their Each local project consists of five components: actions. In addition, when they are confident that a • A road safety assessment which evaluates the pre- behaviour, such as looking right and left before crossing, project safety of the local road network, focusing on will be acceptable to society, this confidence will result in child pedestrians walking to school, and provides a them adopting the behaviour. But when learners are not menu of costed countermeasures quite sure about what the correct behaviour should be, • Road infrastructure safety improvements, they will emulate their peers and elders – and this may such as cost-effective road design and traffic calming not always result in safe road behaviour. improvements, which the project team seeks to implement in collaboration with local authorities The research recommended that: • Teacher/community training and child education • Road safety education should be contextually which is resourced and conducted in partnership with specific with emphasis placed on the lived lives of Sesame Workshop and education authorities learners. Association with reality assists children to • Provision of high-visibility reflective schoolbags, understand and internalise information which are locally sourced, to children at the • Road safety material should be authentic and participating schools engage the attention of learners • Monitoring and evaluation of all components of the • Since academic literacy and language proficiency project, which is coordinated by the GRSP. levels are relatively low in rural schools, learners should be provided with books and games which During 2016/17 this project involved eight schools in they can take home and explore. the Ethekwini Metro and five in the Ekurhuleni Metro. Relevant municipal and provincial officials, community The study noted that road safety is still only representatives and local stakeholders, education incorporated into the life orientation curriculum authorities, the edutainment programme, Takalani and that, overall, the school curriculum is extremely Sesame, and private sector funders are all playing a part full. This means that educators are able to convey in the initiative. road safety information to learners but there is insufficient time to ensure that knowledge 2.3 Behavioural research translates into practical application. Further As a foundation for its road safety awareness and recommendations were: education programmes, SANRAL appointed the • Schools should rotate the educators responsible for University of Pretoria to conduct a three-year teaching road safety education every few years and longitudinal study to understand the road safety treat road safety as a transversal subject that can be behaviour of learners in the intermediate phase. The incorporated into various curricula study combined qualitative and quantitative methods, • Training of educators to deliver road safety education and was conducted in five sites in various parts of should focus on how learners learn, rather than the country. sticking just to road safety messages • Strong community partnerships should be built and The aims of the study, which concluded in 2016/17, civil society mobilised to take an interest in road included: safety. Road safety becomes merely theoretical for • Understanding the components of road safety behaviour learners who do not have practical experience of it in and identifying indicators to measure such behaviour their communities

53 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

• Parents should become more involved in children’s service personnel along the route. N3TC, together road safety education. with strategic partners, continued with various training initiatives, including specialised training in monitoring SANRAL hosted a colloquium at the University of roadworthiness of vehicles and checking the condition Pretoria on road safety behaviour in June 2016 and this of tyres; impounding vehicles; policing dangerous provided a platform for the researchers to share and goods on the road; hosting specialised operations discuss the research findings with stakeholders and and road blocks; and performing alcohol and drug other experts in the field of road safety. screening tests at road blocks.

The findings have already been put to practical use N3TC has also assisted law enforcement agencies in in the development of new materials for road the implementation of average speed enforcement. safety education. Statistics show that this has played a significant role in reducing speeding and reducing crashes and fatalities. 2.4 Concessionaires’ road safety activities Bakwena undertakes various road safety initiatives Road signs and markings have enhanced the transfer along the N1-N4 corridor in partnership with provincial of important information to motorists in an attempt to road safety and education departments. During the improve reaction times to dangerous situations. period under review: • Bakwena, in partnership with Total SA and under the N3TC continues to provide post-crash support to umbrella of the Global Road Safety Partnership (GRSP), victims of vehicle crashes through its Duduza “We implemented the Total Road Safety Cube project at Care” initiative. Comfort and practical support are eight primary schools in the Bapong area and reached given to victims with the help of community members more than 1 000 grade 4 learners and 21 teachers and businesses along the route. Apart from assistance • The Bakwena Community Disaster Team in provided to family members, blankets and nearly Bapong, comprising nine young people, devoted 3 000 teddy bears were distributed to give comfort approximately 5 000 volunteer hours to patrolling and care. the N4 from the pedestrian bridge to the R556 • The animal visibility project in Dinokana fitted 70 TRAC conducts various road safety projects such as its more donkeys with reflective ear-tags and continued annual Easter and December road safety campaigns. its efforts to keep animals away from road crossings These campaigns entail TRACAssist and TRAC’s and the N4 24-hour Helpdesk together with ER services and law • The scholar patrol project at eight schools in the enforcement authorities stationed at strategic points Dinokana and Swartruggens areas continued its work along the highway on peak-traffic days. The idea is for the sixth successive year to provide the shortest reaction time to road-related • Bakwena donated scholar patrol equipment to incidents during busy periods. Such campaigns St Camillus School in Hammanskraal on the N1. create the opportunity for TRAC to boost road safety awareness. Bakwena also supports initiatives to implement the Safer Routes to School project in the Bapong and 2.5 Safe systems for road users Majakaneng areas. Initial meetings were held during SANRAL is an advocate and implementer of the “safe 2016/17 with provincial road safety and education systems” approach to road safety. A safe system takes officials, school principals and other stakeholders. account of human fallibility and accepts that even the most safety-conscious person will make a mistake at some Wheel Well, which is supported by Bakwena, won a point. Systems can be engineered to minimise the impact Prince Michael International Road Safety Award for its of human error, leading to less severe traffic incidents. 2016 Easter campaign. The organisation appeals to members of the public to deliver unused child-safety Among other considerations, SANRAL recognises the seats to major petrol stations on the N1 and N4. These need to balance freeway movement with the safety of seats are then provided to lower-income families for all road users – pedestrians, drivers and passengers a small donation, resulting in improved protection of – and is developing guidelines to accommodate a young passengers. good balance. The agency caters to pedestrians and drivers by using on-road facilities, such as intersections, N3TC has prioritised improving the knowledge and roundabouts and interchanges, appropriate to specific experience of law enforcement and emergency road use patterns.

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SANRAL has taken over high-mobility corridors from several provinces and has prioritised safety improvements on many of these roads.

2.6 Road safety incident management systems & PERFORMANCE CAPITALS Implementation of the Road Incident Management System (RIMS) has been ongoing on the national road network. SANRAL monitors progress and reports to Department of Transport and COTO.

N3TC manages all incidents along its route in terms The proposed amendment to the National Road Traffic of a comprehensive Road Incident Management Act No 93 of 1996 was published for public comment System in line with national guidelines. Central to during the reporting year. this system are a dedicated around-the-clock route patrol service and route control centre. The former Workshops on the RIMS National Framework and Policy also offers assistance to stranded road users between were held in all provinces during the year and the Heidelberg and Cedara, while the centre provides comments of participants will inform of review of the traffic and route updates through N3TC’s Twitter feed document in 2017/18. @N3Route.

The RIMS training qualification came up for review Most importantly, the control centre manages a highly in this reporting period and the Transport Education advanced incident database, currently the only one of and Training Authority (TETA) granted an extension to its kind in South Africa. This database is a powerful tool allow for the mapping of this qualification in terms of for identifying hotspots along the N3 Toll Route and the National Qualifications Framework. As at March understanding how to manage and mitigate these. 2017, five assessors and one internal moderator for the RIMS course had been registered with the TETA. They Deaths have decreased by 43% over five years, from include SANRAL officials. The first training course on 196 in 2011 to 111 in 2016. Nevertheless, the death the accredited material was conducted in December toll remains a serious concern which can only be 2016 and those who completed it successfully will effectively addressed through the commitment of all accumulate points towards the RIMS qualification. stakeholders.

Outreach to schools and the use of sign boards in public In 2016, 70% of crashes on the N3 were due to human spaces have begun to create public awareness of RIMS. behaviour and errors of judgment. Drivers are often not skilled enough for the speeds and conditions they In the main metropolitan areas of Gauteng, KwaZulu- encounter on the road. The three most common types Natal and the Western Cape, freeway management of crashes were: vehicles that rolled (24%), vehicles systems successfully integrate a range of technologies to that left the road (21%), and head-tail collisions (17%). respond swiftly and effectively to road incidents. These Pedestrian crashes accounted for 3.8% of all crashes, systems are described on pages 45 – 47, while systems in and were almost always fatal. operation on major toll routes are set out below.

TRACAssist continued to mount road safety awareness Concessionaires’ incident response facilities campaigns during peak travel days. In addition, Bakwena’s customer care centre operates 24 hours TRACAssist was stationed alongside emergency a day and plays an important role in mobilising services and law enforcement authorities at strategic emergency services along the Platinum Corridor. The points along highways to ensure the shortest reaction call centre works closely with route patrollers and the time to incidents or accidents. Road Incident Management System.

Table 24: Utilisation of Bakwena call centre in 2016/17 The campaigns were led by TRAC’s 24-hour helpdesk, established in 2009 and now a fully functional call Calls received and assistance provided Number centre. Utilisation of the helpdesk has grown steadily, Calls received by call centre 26 500 from 5 904 calls in 2010 to 13 239 in 2016. The number Accidents attended 530 of accidents called in has increased even more steeply, Motorists assisted 725 from 294 in 2010 to 2 196 in 2016.

55 A breakdown of calls received in 2016 appears in Table 25.

Table 25: Utilisation of TRAC helpdesk in 2016

Type of call Number Accident 2 196 General 7 531 Incident 3 114 Roadside assistance 398

Total 13 239

The number of crashes fluctuates annually. In 2016, 23% of crashes occurred due to negligent driving; 21% to loss of control over the vehicle; and 7% each due to speed differentials and tyre bursts.

2.7 Major conferences and meetings During the year SANRAL participated in several important international, regional and national gatherings on road safety. These included: • The World Road Association (PIARC) annual meeting held in September 2016 in Cape Town, during which a special road safety debate focused on the use of technology and research in advancing road safety • The 5th African Road Safety Conference, held in October in Durban. The conference was opened by the then Minister of Transport, Ms Dipuo Peters, and it addressed the challenge of halving road deaths and injuries on the continent by 2020 • The meeting of the Road Safety Committee of the Association of Southern African National Road Agencies (ASANRA). South Africa currently chairs this committee and hosted the meeting in October. Twelve delegates from seven SADC member states attended (South Africa, Zambia, Zimbabwe, Malawi, Namibia, Mozambique and Botswana) and committed to implementing road safety audits • The National Road Safety Summit, held in Durban in November and attended by a wide range of stakeholders, including national and provincial departments, municipalities, law enforcement agencies and non- governmental organisations that focus on community safety. SANRAL chaired the commission on safer roads and mobility, which produced resolutions that have been incorporated into the new National Road Safety Strategy.

3. Infrastructure projects for road safety

During 2016/17, SANRAL implemented a number of infrastructural changes and improvements to create a safer environment for road users and pedestrians. These projects are summarised in Table 26.

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Table 26: Summary of selected road safety infrastructure projects undertaken in 2016/17

Location of project Focus of work Value

N2 York Street Interchange to Pedestrian walkways with cameras and lighting to increase safety. Mesh R73m Garden Route Mall, George, WC fence to prevent pedestrians crossing the highway CAPITALS & PERFORMANCE CAPITALS Construction of narrow diamond interchange with pedestrian overpasses, N1 at Botlokwa, LP R156.2m good lighting and fencing to prevent illegal crossing N2 Pacaltsdorp Interchange, Road widened to dual carriageway with turning lanes. Interchange R82.5m George, WC bridge widened. New sidewalks and pedestrian bridge constructed

4. Community development 4.1 Community development infrastructure projects SANRAL's approach to community development During 2016/17 a total of 24 community development embraces local-level perspectives and enables projects were underway in various provinces. The communities to participate in empowerment initiatives combined expenditure during the reporting period was offered along the national road network. R257m and nine projects were completed.

Its community development programme focuses on Community development projects typically involve the improving access and mobility in rural communities construction of cement pedestrian walkways and/or in a participative and locally sensitive manner. These surfaced access roads to villages which have previously strengthen the social capital of these communities in a been accessible only by gravel road. number of ways: • It builds local businesses and expands the skills pool These kinds of construction projects are suited to labour- in communities intensive building methods which create relatively large • It connects communities more strongly to the social numbers of work opportunities and it is possible to train and economic mainstream inexperienced workers to do the work competently. • It often improves road safety. Important features of the programme are: SANRAL’s community development programme focuses on: • The employment of local residents and the prioritisation • Providing pedestrian facilities and safe access points of women and young people as sections of the for communities living next to the national road population most severely affected by unemployment network • Training of individuals employed on projects, both • Creating jobs and providing access to skills and formally and through on-the-job skilling training • Contracting of SMMEs and building the supervisory • Developing SMMEs and technical skills of managers of these companies. • Promoting community participation • Local sourcing of materials and services, wherever • Developing individuals through a variety of general possible, in order to inject additional cash into the education initiatives. local economy.

A summary of selected projects undertaken in 2016/17 is provided below.

Table 27: Community development projects initiated, in progress or completed in 2016/17

Location of project Focus of work Start date Completion Value N12 at Jouberton Construction of concrete walkways June 2016 December 2017 R57.6m and Alabama, City of plus safety improvements at four Matlosana, NW intersections

N2 Blue Sky to Construction of 6km of surfaced access June 2015 July 2016 R35.9m Emambabala in Mnquma roads and concrete pedestrian walkways (revised) Local Municipality, EC to Emambabala

57 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Location of project Focus of work Start date Completion Value N2 between Mount Frere Construction of surfaced community October 2016 October 2018 R46.3m and Ngcweleni River, EC access roads and 5km of concrete pedestrian walkways

N2 between Mzeke and Construction of surfaced community October 2016 October 2018 R31.1m Mount Frere, EC access road and pedestrian walkways

R75 between Graaff-Reinet Construction of community access road November 2016 June 2017 R8.1m and PE, EC using reclaimed asphalt from N2 Port Elizabeth bypass project

R58 in Walter Sisulu Local Construction of pedestrian walkways September 2016 September 2017 R13m Municipality, EC and a bus lay-by

R61 in St Barnabas and Construction of community access roads July 2013 November 2016 R34.8m Ntlaza areas, EC (revised)

N2 from Colosa village Construction of surfaced access roads October 2012 March 2017 R45.9m to Nyhwarha village in and concrete pedestrian walkways plus (revised) Mbashe Local Municipality, bridge upgrade EC R22 Manguzi Town to Construction of concrete pedestian November 2015 November 2016 R15m Mozambican border, KZN walkway and access road to local school

N2 from Oribi Toll Plaza to Construction of pedestrian facilities August 2016 April 2017 R9m Albertsville Bridge, KZN including reinforced concrete stairways and taxi/bus bays

4.2 Community development geological through the current reporting period. The company projects investigated the viability of several disused boreholes In 2016/17 SANRAL and its service providers conducted and three were brought into full service by re-equipping a number of community-based geotechnical projects, gate valves and installing new pumps and piping. In including a community water project, as part of its one case, a new borehole had to be drilled next to the efforts to improve the quality of life of communities old one in which an old pump had become jammed. living along its road network. The water quality was tested and found fit for human Swartruggens borehole project consumption and the local hospital now has a reliable Water supplies in the Swartruggens area of the source of water. Kgetlengrivier Local Municipality in the North West dried up during the severe drought of 2015/16 and Community quarries Bakwena sponsored two water tankers a day for At the request of the leader of Ntlavukazi village in residents for a 13-month period. the Eastern Cape, SANRAL explored the viability of developing a quarry in the area and concluded that two Bakwena’s longer term intervention of reinstating some new quarries, supplying different types of materials, disused boreholes in the area continued to bear fruit may be a proposition.

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The village leader brought the existence of a potential quarry to the attention of SANRAL and requested assistance in establishing whether it would be viable as a commercial quarry for construction materials.

The quarry site is just 5km away from the proposed & PERFORMANCE CAPITALS Msikaba River Bridge, part of the major N2 Wild Coast construction project.

A geotechnical investigation of this sandstone borrow pit was carried out and, in the process, the potential for a second dolerite quarry was identified at an unworked site. Testing indicated that the sandstone borrow pit would yield material suitable for subgrade improvement and fill layers, while the dolerite quarry would yield very hard rock probably suitable for concrete aggregate and road sub-base.

SANRAL is considering opening the quarries in conjunction with the community, leaving a legacy for the people of the area.

4.3 Empowerment, job creation and training SANRAL’s prioritisation of SMMEs – particularly those with black and female owners – and the hiring and training of local workers is intensified on community development projects, where labour-intensive construction methods are utilised.

In addition to improving road infrastructure and mobility in selected communities, during 2016/17 community development projects: • Generated work worth nearly R90m for SMMEs • Created temporary work opportunities for 1 063 individuals • Provided training to 517 individuals, many of them women and young people.

Approximately three-quarters of the SMMEs contracted to work on community development projects were black-owned.

Table 28: Empowerment of SMMEs through community development projects 2016/17

Category of road Number of SMMEs Value of work contracted performed Non-toll roads 57 R78.8m Toll roads 2 R11.1m

Total 59 R89.9m

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Figure 5: Share of SMME contracts and value of contracts by type of ownership 2016/17 80%

70% 75% 71% 60%

50%

40%

30% 29% 25% 20%

10%

0% Black-owned Non-black-owned

SMMEContracts Value of work

A total of 1 063 individuals found work on these projects during 2016/17 and earned R41.3m in salaries. The short duration of some of the work is suggested by the fact that the job opportunities were equivalent to 373 full-time jobs. Young people (aged 35 years or younger) constituted 56% of those who were employed on community development projects.

Table 29: Job creation through community development projects in 2016/17

Category of road Hours work FTEs* Job opportunities Value of work Non-toll roads 504 252 252 865 R29.0m Toll roads 242 838 121 198 R12.3m

Total 747 090 373 1 063 R41.3m

*Total hours worked expressed as the equivalent of full-time jobs

Figure 6: Distribution of work opportunities in 2016/17 by age More than R6m was invested in the training of workers and gender engaged through the community development projects and more than 500 individuals received training, which included: • Formal supervisory, financial and construction training for managers of SMMEs which gained them credits in terms of the national qualification framework • Training of workers in basic construction skills such as brick-laying, carpentry, plumbing and plastering • General skills such as traffic control at sites and first aid.

Table 30: Training provided through community development projects in 2016/17

Category of road Trainees Courses Value of training Non-toll roads 516 1 069 R6 045 875 Toll roads 1 2 R1 795

Male > 35 years Male 18-35 years Total 517 1 071 R6 047 670

Female > 35 years Female 18-35 years

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TRAINING THROUGH COMMUNITY DEVELOPMENT & PERFORMANCE CAPITALS

517 TRAINEES

1071 COURSES

VALUE OF TRAINING R6 049 465

4.4 Concessionaires’ social projects SANRAL’s concessionaires also support social and development initiatives that serve to strengthen links with communities located close to the national toll-routes for which they are responsible.

Bakwena conducts a range of healthcare projects in communities close to the routes which it operates, namely, the N1 toll road between Pretoria and Bela-Bela and the N4 between Pretoria and the Botswana border. In 2016 these interventions included: • A drama development project at 17 secondary schools from Dinokana, Lehurutshe, Groot Marico, Swartruggens and Bapong. The focus of this project is to provide a platform where talented learners can apply drama skills to initiate community outreach programmes. In the past year, 272 learners and 34 teachers were involved, as well as out-of-school youth who were appointed as drama pioneers. The outreach programme reached more than 2 100 people • Collaboration with Pink Drive to provide education on breast and prostate cancer to some 8 000 residents of Hammanskraal and Bapong and facilitate the screening of 1 094 individuals for breast cancer and 160 for prostate cancer • Testing of the hearing of 3 500 learners and the sight of 4 199 learners in the Bapong and Moretele areas, with follow-up care where needed. Spectacles were provided to 263 learners, making a vital difference to their ability to learn • Sponsoring sporting activities: long-distance athletes at Zeerust High School and the annual family fun run, the Bosveld Myl • Building capacity for first aid and disaster management at schools and in communities. The project has 312 first aiders at 13 schools in Dinokana and Kgetlena and 110 active community volunteers in Groot Marico, Swartruggens, Bapong, Majakaneng and Hammanskraal • Supporting an NGO that provides HIV education in Hammanskraal. This organisation reached out to 6 010 learners and 2 378 members of the public through activities at schools, clinics and churches during 2016.

61 Bakwena has also contributed to communities by: • The 32 hawker stalls at the Matsulu hawker facility in • Supporting the Chaneng Business Centre near the Lowveld were upgraded and bathroom facilities, Rustenburg water and sewerage systems, and an information centre • Raising funds for several social care organisations were added. Total investment in the project was R2m including Mohau House for children affected by HIV • A disused clinic in Machadodorp was renovated, in Kilner Park, Thusanang Early Learning Centre in staffed and re-opened in July 2016 under the name Groot Marico, CANSA and its Pink Drive campaign, KuPhila Clinic. It focuses on primary healthcare and and Laudium Cancer Care. TRAC pays the salaries of staff, including a doctor, psychologist, professional nurse and receptionist. N3TC’s Touching Lives corporate social investment Although the clinic is a private facility it offers programme funds a variety of community and pro-bono services to qualifying members of local enterprise development initiatives along the N3 communities and assists an average of 220 people a transport corridor and builds solid foundations for month. Investment in the project totalled R1.7m sustainable projects. During 2016, N3TC’s total • The Emakhazeni Fire Brigade was facing serious investment in Touching Lives was R13.1m. The challenges and, in light of the economic and social programme benefited 79 000 people directly and pressures faced by the Emakhazeni Municipality, TRAC generated 2 277 jobs, at a cost-effective spend of committed R2m to upgrade the building and provide less than R5 000 per job. It supported the following essential firefighting equipment and uniforms. enterprise development initiatives: • N3 Gateway Tourism Association 5. University partnerships • Beads of Hope • Tsa Lapeng Designs SANRAL’s partnerships with universities centre on a • Project Gateway shared interest in promoting the learning and teaching • Midlands Meander Emerging Artists of science and mathematics with the aim of ensuring • Babanentse Co-Operative a strong flow of talented young people into the • Senzakahle Primary Co-Operative engineering professions. • Van Reenen Community Based Tourism • Central Drakensberg Information Centre The value for SANRAL lies chiefly in the reputational • Mpophomeni Conservation Group value built by visible involvement in programmes • Sunfield Fortuna that benefit young people and offer them economic • Mamello Support Group. mobility. However, the agency is also committed to these partnerships in terms of helping meet Touching Lives also has a number of legacy projects, its own demand for engineering professionals namely: and contributing to a dynamic engineering sector • EWT Sungazer and Grasslands Conservation Project that offers world class expertise when major road • Bearded Vulture Project construction and rehabilitation projects are put out • Singakwenza Early Childhood Development Project to tender. • KZN Crane Foundation: Wattled Crane Chick Isolation Rearing Centre The University of Pretoria partnership with • Old Mutual joBerg2C Route Development Project. SANRAL and CSIR A Memorandum of Agreement (MOA) was signed TRAC has improved communities by upgrading a by Prof Cheryl de la Rey, Vice-Chancellor of the number of public facilities: University of Pretoria, with the then CEO of SANRAL,

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Mr Nazir Alli, and Dr Rachel Chikwamba, Executive In 2016, at the request of Free State MEC for Education Director of CSIR, on Tuesday 28 June 2016. The Tate Makgoe, the UFS developed its School Change MOA supports a collaborative effort to establish an Project (SCP) designed to introduce sustainable change Integrated Education, National Certification, National in the teaching of mathematics in primary schools. Reference and Research Laboratories Facility, an Implementation of a pilot project in a single district will & PERFORMANCE CAPITALS effort which involves SANRAL, the Department of begin in 2017. A preparatory workshop in 2016 was Civil Engineering in the Faculty of Engineering, Built attended by 84 maths teachers from 12 schools. Should Environment and Information Technology (EBIT), and the pilot succeed, the approach could be scaled-up the CSIR Built Environment research area. across the Free State.

The vision associated with the integrated facility is Science-for-the-Future at the University of the Free to provide an internationally renowned platform State for academic and vocational training support in (i) In 2015 SANRAL entered into a three-year agreement transportation infrastructure materials testing; (ii) a to support the UFS Science-for-the-Future (S4F) unit national transportation material reference testing which aims to build positive attitudes to maths and platform and (iii) high quality research facilities staffed by science and increase the number of achievers in these skilled personnel. This partnership will strive to create an subjects in the Free State, Northern Cape and Eastern environment where a stable research funding stream can Cape. It comprises two main components: be invested optimally, and it will focus on the alignment • The Family Math and Family Science programme of bursary and studentship programmes at CSIR, UP and which strives to demystify maths and science for SANRAL to ensure the required throughput from which learners in the early school years the research capability can be re-built. • An ICT Laboratory programme which focuses on improving the conceptual grasp of maths and Due to the current dearth of civil engineers and other science as well as practical skills among promising transportation engineering related skills in South learners in grades 9 -12. Africa, it is vital to ensure that critical mass in these areas is developed and maintained. The three parties ICT Laboratory for Science will not only strive to find innovative ways to solve The ICT Laboratory for Science caters to learners in these challenges, but also enhance the quality and grades 9 – 12 who have achieved a minimum of 60% in quantity of the outputs and avoid costly duplication of both maths and science. Over the course of several years laboratory facilities. it exposes them to approximately 30 sessions in special ICT facilities at the Bloemfontein and QwaQwa campuses This agreement will add to efforts to positively impact of UFS. While all activities are based on the science on the day-to-day life of South Africans through curriculum, the non-traditional learning environment improvements in design, construction, maintenance – which centres on the use of ICT – facilitates novel and the management of transportation infrastructure. approaches to explaining scientific principles.

SANRAL Chair in Mathematics, Natural Sciences and In 2016, a total of 310 learners from 31 schools Technology Education participated in regular sessions at the laboratories. A The SANRAL Chair in Mathematics, Science and total of 2 724 sessions were logged, meaning that each Technology Education was created by the University learner attended an average of nine sessions. of the Free State (UFS) in 2014 in order to strengthen research and enhance the training of teachers of science, technology, engineering and mathematics Table 31: Participation in ICT Laboratory for Science 2016/17 (STEM). By 2016, the chair was well-established and had Participants Sessions attended begun to win recognition for its work. Grade 9 69 567 In 2016, the chair attracted 50 high-quality Masters’ and Grade 10 99 870 PhD candidates from South Africa and other countries Grade 11 83 756 on the continent. This was the largest number of post- Grade 12 58 531 graduates recruited by a research chair in South Africa. The graduation of six PhD candidates in 2016 was Total 310 2 724 another major achievement for this young entity. Student teachers 26 54

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New funding partners enabled learners and teachers trained teachers integrating project activities into the from Thaba Nchu, Botshabelo, Jagersfontein and curriculum they deliver to learners and also conducting Jacobsdal – all areas in commuting distance of sessions for parents. This enables parents to become the Bloemfontein campus – to participate in the involved in their children’s maths and science learning. programme. In 2016, a total of 327 teachers from 176 primary The ICT Laboratory for Science has become widely schools in the Free State, Northern Cape, Eastern Cape known and attracts visitors from beyond the Free State. and Gauteng provinces regularly utilised Family Math In 2016, a group of 10 grade 7 maths and science and Family Science activities. These activities benefited achievers from Transkei Primary School (TPS) in Mthatha 13 787 learners and 8 161 parents, mainly from rural spent two days at the facility. communities. In addition, 32 subject advisors were trained as coordinators and assumed the responsibility An innovation in 2016 was the introduction of a training of supporting the educators who were implementing component for educators, Key concepts in Science. the programme. This focused on improving content knowledge and teaching skills and broadening educators’ experience. A key success factor for the Family Math and Family Educators and a subject adviser from the John Tao Science initiative is S4F’s production and supply of Gaetsewe District of the Northern Cape did the course adequate quantities of learning and activity materials to and implemented the approach in seven schools with support classroom teaching and parent training sessions. 639 learners. To facilitate planning and implementation of the The laboratories on both campuses have also afforded programme, S4F consults regularly with education student educators specialising in science teaching officials in the Free State, Northern Cape, Eastern Cape the opportunity to experience how ICT can be used and Gauteng. Requests for training sessions are often to enhance the teaching of this subject. Both UFS’s received from education departments. own student educators and some enrolled at technical and vocational education and training (TVET) colleges The Family Math and Family Science initiative is also utilised this opportunity in 2016. a resource to enrich the training of student teachers attending the UFS: In the period from 2009 to 2016 a total of 66 learners • In 2016, a total of 187 UFS student teachers attending the ICT Laboratory for Science have received underwent Family Math training as part of their SANRAL scholarships. In 2016 alone, nine scholarships intermediate phase maths course and 47 of them were awarded. The quality of the project’s learners is volunteered to conduct activities for learners reflected in the fact that about two out of three of its attending local schools SANRAL scholarship applications are successful. • In addition, 154 foundation phase student teachers attended Family Science training sessions to assist them A high proportion of ICT Lab participants proceeds to integrate life skills into their teaching of science. to study science and related subjects at university. In 2016 Ruan van Breda, an ICT Lab “graduate” and The 8th Annual Family Math and Family Science Summit SANRAL scholarship recipient, completed an MEng in took place at the university in September 2016 and Mechatronics and subsequently took up employment at attracted about 250 participating educators, as well as SANRAL, becoming the first ICT Lab participant to do so. programme sponsors, education officials, and staff of the UFS. Family Math and Family Science Programme Science for the Future (S4F) launched its Family Math STEM PP at NMMU and Family Science initiative in the Free State and The Science, Technology, Engineering and Northern Cape in 2009, and extended it to the Eastern Mathematics Pipeline Project (STEM PP) at Nelson Cape in 2012 and to Gauteng in 2016. Mandela Metropolitan University aims to improve the science performance of grade 10 -12 learners in the The initiative seeks to build confidence about the Port Elizabeth and Uitenhage school districts in the study of maths and science among learners and the Eastern Cape. The goal is to increase the number of general public by training teachers to use innovative learners who qualify to study for a degree in a science- teaching techniques. The “triangular” strategy entails related field.

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A total of 2 543 learners from 38 schools benefited from being postponed or cancelled. The programme also this project during 2016. This represented an overall noted a drop in the number of participating grade growth of about 16%, due mainly to an increased intake 12 learners and is examining whether it adequately of grade 10 learners. meets the needs of learners at this level. CAPITALS & PERFORMANCE CAPITALS

Table 32: Participation in the STEM PP in 2015 and 2016

Grade 2016 2015 Grade 10 learners 1 243 927 Grade 11 learners 621 647 Grade 12 learners 512 529 Educators/students 167 78

Total 2 543 2 181

STEM PP conducts physical science experiments in university laboratories to complement the classroom learning offered by schools. In many cases this hands- 2 543 on approach to science helps learners to grasp essential principles. The laboratory sessions are offered to entire 2 181 classes from selected schools and learners’ regular teachers are encouraged to participate. 2016 2015

University student protests at NMMU impacted on the Total learners participated in STEM PP in 2016 and led to some laboratory sessions STEM PP project

CONCESSIONAIRES’ SUPPORT FOR EDUCATION

Bakwena provided a R65 000-bursary for a Tshwane University of Technology Honours student to conduct research on conservation education in the Magaliesberg Biosphere and sponsored the school fees of 11 children of low-income staff members living in the Bakwena corridor.

TRAC has established a thriving e-learning project which provides lessons to 32 356 learners at 31 schools along the N4 Toll Route. Within this project, the Ligbron online system provides maths and science lessons to 890 grade 12 learners gathered in 10 classrooms at five schools in Mpumalanga.

Other TRAC education projects in 2016/17 included: The conversion of two shipping containers to create a sustainable kitchen for the delivery of the National School Nutrition Programme to 850 learners at Phumelela Secondary School in Middelburg. TRAC also built a covered dining area which can be used for extra lessons.

Construction of an eco-friendly off-grid Grade R section at Kaapmuiden Primary School. This comprises two classrooms, bathrooms, a kitchen and a play area. The school is also a centre point for the Asifunze Literacy Programme, which TRAC runs in partnership with Penreach. This programme improves literacy skills among 1 350 foundation phase learners.

N3TC awards bursaries to tertiary students in fields linked to its business. In 2016/17, it was assisting 14 university students, including a doctoral and four Masters’ students. Eleven bursary recipients are from communities alongside the N3 Corridor and three are linked to N3TC. Where possible, N3TC offers bursary students work experience and employment opportunities.

65 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

During 2016, STEM PP presented interactive • Fewer than half these students would have gained development sessions to educators in the Nelson entry to a science course on the basis of their Mandela Bay Municipality, focusing on class room grade 11 marks, but their performance improved management and teaching strategies that use practical significantly during the course the year they spent in activities to introduce and explain concepts. This the GATE programme. initiative was also somewhat curtailed by student protests on campus. A number of grade 11 and 12 learners in the STEM PP received SANRAL scholarships for 2016. The goal is The GATE (Getting Ahead in Technology and Engineering) for learners receiving SANRAL scholarships to qualify programme for especially promising science students in for SANRAL bursaries for tertiary studies and this has grade 12 delivered good results. A total of 26 learners occurred in some cases. completed the GATE intervention in 2016. The STEM PP team was able to contact some learners after they For example, Ronald Baxter, who joined STEM PP in received their final results and established that: 2011 as a Grade 11 learner, was awarded a SANRAL • At least 13 began their studies at tertiary institutions in scholarship for grade 12 and a SANRAL bursary to 2017 and one took up a learnership in marine technology study for a BSc Engineering degree at Stellenbosch • Many opted for science-related course in fields such University. He graduated in 2016 and became a as pharmacy, mechanical engineering and polymer graduate-in-training at the SANRAL Southern Region technology in February 2017.

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Promoting Social And Relationship Capital CAPITALS & PERFORMANCE CAPITALS

Advertising Media releases & spend on local & Facebook page interviews community media ‘likes’ grew by

169 32% 16 904

Marketing and communications Leadership reputation As a state-owned company SANRAL’s communication SANRAL strives continually to improve its objectives are aligned with the broader aims of communication to members of the public in order to government and there is close liaison with the inform them about the agency’s work and increase Government Communication and Information System understanding of what the SANRAL brand represents. (GCIS) and the Communication Unit of the DoT. A good reputation is invaluable to the agency’s ability to play a role in promoting national investment, The agency’s supplements, advertorials, radio spots, growing the economy and creating jobs. out of home advertising and television commercials were shared with the public through various advertising SANRAL presents a comprehensive picture of how channels. Because of the agency’s need to communicate it fulfils its mandate by featuring the full range of its specifically with communities affected by major road operations and catering to the interests of all customers construction projects, more than 32% of our advertising it serves. spending was devoted to local and community media.

An approved strategy guided SANRAL’s marketing and The agency also made use of less conventional communications activities during the year. This strategy channels, such as wall murals and stadium advertising. was informed by and is consistent with the National Figure 7: Share of advertising spend allocated to mainstream Communication Strategy Framework 2014 - 2019. and community media.

SANRAL runs extensive communication campaigns throughout the year using a range of methods and channels to reach the general public and specific 32% stakeholders. These include public relations, advertising, SANRAL’ own print, online and social media channels, community activations and promotions. Advertising channels in 2016/17 included TV, radio, 68% outdoor billboards, wall murals, stadium boards, social media, digital platforms, newspapers, magazines, and specialist and professional trade titles.

Community media 32%

Mainstream media 68%

67 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Digital communication is becoming increasingly National Budget with our staff and stakeholders. important and SANRAL utilised digital adverts as well as its social media. SANRAL used a wide range of platforms throughout the year to interact with a variety of stakeholders. These By monitoring the media and responding promptly to included: issues as they arise as well as pro-actively publishing • Participation in conferences and exhibitions. thought-leadership pieces in the print media, SANRAL • The delivery of lectures and conduct of workshops at has secured a substantial share of voice in both the universities print and broadcast media. The availability of the • Addresses to local and international business agency’s spokespeople to participate in interviews and chambers talk shows makes it possible to respond to concerns • Briefing of public sector communicators. raised by the public and explain the agency’s approach. • Participation in events organised by our stakeholders Stakeholder engagement • Special events, such as the opening of completed Stakeholder relations continued to be a priority for projects or observation of themed days and weeks. SANRAL throughout 2016/17. The agency interacted with academics, professional organisations, the Marketing and advertising campaigns engineering and construction industry, organised SANRAL strives to position itself as a leader in road labour and business chambers. During engagements infrastructure, a force for development and the with political role-players, SANRAL management was creation of a more equitable society, and a key player accompanied and supported by representatives of the in the area of road safety. Marketing and advertising Ministry of Transport, as the agency’s shareholder. campaigns during 2016/17 reflected all these aspects of the agency. Advertising is an integral part of A regular electronic publication, N-Route, served to SANRAL’s marketing and communication efforts, and keep stakeholders informed about developments at extends beyond education to reputation. To achieve SANRAL. The agency also continued the practice of this, advertising campaigns are conceptualised, many sharing analyses of the State of the Nation Address, different executions produced and repeated in bursts the provincial State of the Province Addresses and the to inculcate the message (Table 33).

Stating the SANRAL case

During the period under review, 25 opinion pieces were placed in influential news publications – a 20% increase on the number published in the previous reporting period. A few examples are presented below.

OPINION PIECE BY ROSHAN MORAR Accountability, transparency are of utmost importance One of the hallmarks of our relatively young democracy has been its contribution to the discourse on corporate governance now enshrined in what is commonly referred to as the King Report. In July 1993, the Institute of Directors in South Africa asked retired judge Mervyn King to chair a committee on corporate governance whose report (King I) led to the first corporate governance code for South Africa. Since then three more reports have been issued, King II (2002), King III (2009) and King IV (2016). Business Report http://www.ornico.co.za/editorialstream/OwnMediaAttachments/2017_01_31_3218801.pdf

OPINION PIECE BY VUSI MONA Freeloading on infrastructure is a form of corporate capture "Corporate capture" has become a buzz-phrase in SA. Opposition politicians fret, commentators froth, unionists march and the clergy lament about what they perceive to be undue influence of business over political decision-making. And well they should. It is hard to imagine any well-meaning South African would not be concerned if proof is found that decisions on public money are made to enrich certain individuals or companies. But we should be equally concerned about the widespread — often more covert — forms of corporate capture in our country. Let us put the spotlight on instances where public infrastructure and shared national resources are literally stolen, abused or swindled by private sector companies. This is not the opportunity to address tax evasion. That is a debate for another day. BD LIVE http://www.bdlive.co.za/opinion/2016/04/08/freeloading-on-infrastructure-is-a-form-of-corporate-capture

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Table 33: Executions of major SANRAL campaigns 2016/17

Print ads Wall murals Outdoor Television Radio Digital Commercials commercials

Road Safety 7 different 3 wall murals 6 different 3 different 3 different - CAPITALS & PERFORMANCE CAPITALS executions executions commercials executions

Woman’s 24 different - - - 9 different 8 different Month executions in executions banners the various in English, regions Afrikaans, Zulu, Sepedi, Tswana

Transport 1 print ad - - - - - Month 2 advertorials Brand 2 print - 1 OOH (Out 1 Commercial - - executions of Home) execution at 5 different locations

Traffic Report - - - 2 opening - - billboards 2 closing billboards

Corporate campaign campaign to remind the public. This comprised radio A new SANRAL brand campaign was conceptualised and television adverts on national and regional Gauteng and brought to life in early 2017. Its aim was to interpret stations, as well as print adverts in major weekend and SANRAL’s work in terms of the impact it makes on daily newspapers and the use of banners on key news, people’s lives and show the benefits of a quality road business and entertainment websites. The adverts ran in network in terms of personal stories. April and May. SANRAL also ran a “Was it better to have paid?” advert to acknowledge and encourage road users This campaign, referred to as the Beyond Roads who had been paying since the start of e-tolling. Campaign, was aimed at a diverse audience across South Africa. It was TV-led and utilised SABC, eTV and Promoting interoperability DSTV channels as well as four community channels. As the e-toll system was extended as an optional form The campaign also featured radio, out of home, print, of payment at toll plazas around the country, SANRAL cinema and digital platforms. About 73% of media organised a series of activations to educate road users spend was allocated to mainstream media and the on this and promote expanded use of e-tags. The balance to community media. pilot activation took place at the N1 North Panorama petroport in September 2016 and several others State of the Roads campaign followed. In 2016/17, the central idea behind the bi-annual State of the Roads campaign was that roads are a shared space Road safety initiatives and road users have a responsibility to each other. These Road safety is a key focus at SANRAL which uses campaigns take place during the periods when holiday the mass media and stakeholder engagements to traffic along the major routes reaches its peak: the Easter encourage good road-use behaviour by drivers and weekend and the end of year festive season. pedestrians. This complements its schools-based behaviour change programme. Public interest in road safety and travel convenience is high during these times and SANRAL attempted to take The overall brand for all SANRAL road safety campaigns full advantage of the receptive climate. The campaigns is ChekiCoast – Save a Life. Specific mass media were run mainly through media relations and on social and stakeholder initiatives are created under this media. encompassing brand.

Campaign on the new dispensation in Gauteng The WHOA! campaign, launched in December, was the As the end of the period for securing a 60% discount agency’s major mass media intervention in 2016/17. on Gauteng e-toll arrears approached, SANRAL ran a It tried to update road safety tips and package them

69 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

in a fresh appealing way for a diverse audience. The page newspaper supplements following community underlying messaging, however, remained consistent: outreach activities in the Southern Region and at the • Don’t drink and drive launch of the Moloto Road upgrade. The supplements • Don’t drive while fatigued were reformatted as pocket guides. • Party responsibly • Don’t drink and walk A digital publication, Hit the Road, was created to • Don’t text and walk. appeal to young people.

In mid-December, as the campaign launched in the The agency prioritises communication to toll road users mass media – on TV, radio, outdoor sites, digital to keep them informed about changes in tariffs and platforms and in newspapers – four regional activations developments on these routes. The annual toll tariff focused on popular chisa nyamas and entertainment adjustments booklet was published and appropriately venues. The mass media campaign was sustained distributed and a newsletter on international toll road throughout the festive season. Follow-up activations practice was produced. in January formed part of the WHOA Drive Back campaign and these took place at petrol stations Community outreach activities on key holiday routes. SANRAL also hosted a large SANRAL hosted 36 activations and outreach activities activation at FNB Stadium in Soweto as an extension of in 2016/17, organised or exhibited at 10 career the WHOA! campaign and this focused particularly on expos, hosted five ministerial events and participated texting and walking. in activities initiated by the DoT, other government departments and various road entities. Major activities Other road safety activities included: during 2016/17 were: • An art competition for learners which was designed • An activation at FNB Stadium in Soweto mainly to to raise awareness of the risks of texting while drive public awareness of SANRAL’s on-road services walking which enable it to respond effectively to accidents, • Exhibitions at conferences, colloquiums and breakdowns and other incidents community events. • The sod-turning and tree-planting ceremony to mark the start of the project to upgrade the deadly Moloto Own media platforms Road. This provided an opportunity for the Minister SANRAL delivers more than 30 publications a year for our of Transport to visit the Nkangala District and create own staff, external stakeholders and the general public. awareness of the role played by the DoT in relation to road safety One of the features of the period was the revamping of • Three information sessions for SMMEs in Limpopo road agency’s flagship publication, By the Way, which is and Mpumalanga to enable them to register on a produced for the broad public. It is now lifestyle-driven, database of potential sub-contractors on the Moloto less text-heavy and written less formally. It features Road project. About 400 companies participated all SANRAL’s pillars of operation, using eye-catching in the briefing and 13 000 application forms were photography and elements like book reviews, columns received and crossword puzzles to keep readers interested. It • The opening of the Swartkopfontein Bridge which is distributed nationally through post offices, police links South Africa and Botswana. This ceremony was stations, provincial legislatures, transport sister-agencies conducted jointly by the South African and Botswana and the South African Revenue Service. It is also ministers of transport distributed at events and activations, petroports and • The handover of a scale model of the new Moria filling stations, and toll plazas on the N1, N2 and N3. interchange on the R71 to Bishop Barnabas Lekganyane of the Zion Christian Church during the SANRAL continued to showcase its pillars of operation formal opening of the interchange in November through the Investing supplements. In 2016/17 three 12- • A pilot career expo in Hammanskraal, which was page supplements – focusing on investing in road safety, initiated by SANRAL and involved several other the environment and the community – were distributed exhibitors. The event was successful and the agency as inserts in mainstream and community newspapers. plans to undertake similar events in other regions in 2017/18. In addition, SANRAL participated as an SANRAL also published its People’s Guide, an exhibitor at several other career expos accessible summary of the annual report and two eight- • Community events including a mobile library

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handover at the Crossmore Primary School Our social media platforms, which include Facebook, in KwaZulu-Natal and a taxi rank activation in Twitter, Instagram, and our blog, Stop-over, showed Kimberley, which focused on pedestrian safety and tremendous growth in both followers and engagement SANRAL projects in the Northern Cape over the reporting period. It was pleasing to see a large

• The annual Women in Roads Seminar which was number of people engaging on many topics, not only on & PERFORMANCE CAPITALS held in Port St Johns and focused on informing e-tolls. These platforms were invaluable in assisting the women in SMMEs about business opportunities agency to attend to grievances promptly and directly. with SANRAL • Various Transport Month events including an event Table 34 indicates the number of posts made on various held in Mthatha with the Minister of Transport which social media sites and how frequently various pillars profiled SANRAL projects in the province. were featured.

Social media Table 34: Number of social media items written and posted 2016/17

Pillars of operation Facebook & Stop-over blog YouTube Total per Twitter pillar Community development 19 15 1 35 Engineering 27 20 1 48 Environment 22 5 0 27 Employees 5 6 0 11 Governance and finance 3 6 1 10 Road safety* 29 17 2 48 Sustainability 6 9 0 15 Technology (financial management and IT) 13 5 0 18 Blog posts 33 33 Campaigns 33 1 34 Tolls 4 3 7 General 36 13 49 Total per social media platform 197 132 6 335 * Includes iTraffic and traffic advisories on Facebook and Twitter

Social media engagements Table 36: Activities on Twitter account SANRAL_za 2016/17 The SANRAL Facebook page grew by 16 904 page Activity Number “likes” in the last year. SANRAL corporate information likes 566

Table 35: SANRAL Facebook page activity 2016/17 SANRAL corporate information retweets 669 Clicks on links shared 982 Activity Total number Unique users 402 403 Table 37: Activities on Twitter account SANRAL_etoll 2016/17 Posted likes 241 533 Activity Number Posted comments 7 109 E-toll information likes 45 Shared items 7 499 E-toll Information retweets 63 Clicked links 498 247 Liked pages 50 682 The reporting year also saw SANRAL’s first forays into promoted tweets and Facebook posts. This resulted in SANRAL had two Twitter accounts in 2016/17: 3.6m clicks, views and engagements across selected SANRAL_za which had 5 872 followers as of March channels. 2017, and SANRAL_etoll which had few followers and was closed at the end of the year. Activities on these are reflected in Table 36 and Table 37 respectively.

@sanral_za sanralza @sanral_za SANRAL SANRAL Corporate

71 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Employee communication platforms, 15 multi-media releases – in audio, video and Regular communication with staff on developments in written format – were created and distributed. This was SANRAL was maintained through the internal electronic used to excellent effect to announce an important fossil publication, InRoads. A fresh look-and-feel introduced find at a road construction site in the Eastern Cape in near the end of the reporting period has revitalised this July 2016, a story that was carried internationally by important communication tool. CNN and publications as diverse as the Business Times of India and National Geographic in Spain. Events were held in all regions towards the end of 2016 to inform staff about the WHOA! road safety campaign Management of media relations also entails identifying which took place in December. Staff mailers were also potential controversies and being prepared to make a used to keep staff abreast of marketing initiatives. public statement should these issues develop. SANRAL prepared 21 holding statements during the year under Women’s Month and Heritage Day celebrations were review. held for staff at all offices and a farewell dinner for the agency’s founding CEO, Nazir Alli, was hosted by Ms Tone of media reporting Dipuo Peters, then Minister of Transport. An independent media monitoring company analysed hundreds of media items on SANRAL over the course Media engagement of the year and classified them as positive, negative SANRAL maintained a high level of media engagement or neutral in tone. As can be seen in Figure 8, positive throughout the year, issuing a total of 90 media releases reports outnumbered negative reports for most of the (excluding hundreds of traffic advisories). In addition to year, with the exception of two negative spikes in April media releases – which are generally widely distributed and August/September. These related to reports that – SANRAL responded to 356 queries from individual the GFIP was overpriced (April) and the decision by journalists and participated in 79 media interviews. FutureGrowth to suspend investment in SANRAL bonds. There was a strong flow of neutral reporting virtually To cater to the specific needs of online media throughout the year.

Figure 8: Trends in tone of media reports on SANRAL 2016/2017 700

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400

300

200

100

0

Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Positive 276 364 636 327 262 472 306 287 203 390 307 320 Neutral 439 136 394 239 191 517 223 334 90 403 213 213 Negative 155 439 55 66 44 589 82 175 100 237 186 59

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PUBLICATIONS

MARCH 2017 WESTERN REGION & PERFORMANCE CAPITALS -SUPPLEMENT-

SANRAL’s 4 581km of well-maintained economic arteries carry and safeguard the lifeblood of Western Region commuters, commerce and communities along the national routes. The continuous improvement and maintenance of this road network means vital growth and support for the surrounding citizenry. We are proud of our work to uplift, develop and contribute to the lives of the people in the cities, towns and "dorpies" that make up the Western and Northern Cape.

PAGE 3 / FOOT TRAFFIC PAGE 5 / MORE ROOM ON THE N7 PAGE 7 / SOUTHERN CAPE FOOTPRINT

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SEPTEMBER 2016 WILD COAST PROJECT UPDATE SOUTHERN www.sanral.co.za REGION 2016 -SUPPLEMENT- BRIDGE OF BIRDS

Transport Minister Dipuo peters and SANRAL CEO Nazir Alli arrive at the N2 Wild Coast Toll Road project meeting SANRAL MOVES FORWARD ON

SANRAL knows that environmental management is a very premier birding destination. Bird numbers at any time The rehabilitated and improved section of the N14 route N2 WILD COAST TOLL ROAD important part of building and managing roads. Constructing exceed 20 000 from 350 different species. In September and between Delareyville and Sannieshof is making an important Various outreaches, stakeholder relations architectural landmarks. SANRAL will make an The month ended with a ministerial event Eastern Cape Roads and Public Works MEC and operating roads can change the lay of the land, affect October, as the summer rains reach the area, the pan is often difference to both the community and bird refuge. It was and consultation meetings for the N2 Wild award near the end of the year and construction and outreaches to traditional leadership Thandiswa Marawu. water resources and cause pollution. It can be particularly found teeming with more than 40 000 water birds, making it a officially opened by Deputy Minister of Transport Sindisiwe Coast Toll Road have taken place this year, will start in January and February 2017. in the region. Pondoland king Zanozuko challenging when construction is in an environmentally bird lover’s paradise. Chikunga in March 2014 and is a vital link between Gauteng, as SANRAL is laying a firm foundation for The area known as Pondoland incorporates sensitive area such as the Barberspan Bird Sanctuary in North North West, Northern Cape and Namibia. It brings commerce, this mega-development project that will Mbizana, Libode, Ngqeleni, Port St Johns, This road will bring more opportunities. West, one of South Africa’s most important bird havens. In addition to flamingos and pelicans, Barberspan is home growth and prosperity to the area while safeguarding its bring about prosperity for people in one Tabankulu and Msikaba, the region through “ to maccoa duck, chestnut-banded plover, black-necked valuable natural heritage, as SANRAL observed an important of the most rural and underdeveloped Pondoland will be something else after this project. which N2 Wild Coast Toll Road will run. ” grebe, Namaqua sandgrouse, grey-backed sparrow lark and environmental impact recommendation not to destroy the parts of South Africa. The N14 Bridge is of particular environmental swallow-tailed bee-eater. existing bridge with the swallow colony underneath it in the SMMEs from the surrounding communities Sigcau and king Ndamase Ndamase of Pondoland king Sigcau was enthusiastic interest, because its construction took construction of the new one. In June, a site visit took pre-qualified bidders to had the chance to engage support agencies, Western Pondoland were afforded a about what the project offered the region. into account the swallow colony living under In days gone by, Barberspan was just a large, temporary pan the locations of the two mega-bridges across with SANRAL, on the opportunities offered flight over the area, to give them an “Good infrastructure will bring us more jobs the old bridge. in the fossil bed of the Harts River, formed and enlarged by the Mtentu and Msikaba river gorges in the by the construction of the N2 Wild Coast toll aerial perspective of the road. The event and business prospects and make Pondoland northerly winds and massive herds of springbok trampling the Eastern Cape as part of their preparation to road, along with the programmes and products was hosted by Transport Minister Dipuo accessible to South Africa and the world,” Barberspan was one of the first wetlands in South Africa to edges of the waterhole. submit bids for the construction of the new available to assist them. Peters, SANRAL CEO Nazir Alli and the he said. DID YOU KNOW? be covered under the Ramsar Convention, an international The N14 Bridge is of particular environmental interest, The Barberspan Bird Sanctuary was created by herds treaty for the conservation and sustainable use of wetlands, because its construction took into account the swallow of springbok trampling the area around the waterhole and is home to thousands of birds. colony living under the old bridge. The new bridge crosses the and thus creating the sprawling pan that is one of the It’s an important site for ornithological research and a Sanctuary on the outskirts of Delareyville. largest waterfowl reserves in southern Africa. INTRODUCTION BY MBULELO PETERSON, SANRAL SOUTHERN REGION MANAGER 2 5 8 Read more on page 2... SAVING OUR LESSONS FROM SMART STREET inside ENDANGERED ALOE SIMII GRAHAMSTOWN LIGHTS SANRAL has proposed seed Learn more about the Street lights play PAGE 3 / R61 UPDATES PAGE 6 / WILD COAST SMME OUTREACH PAGE 7 / WHAT WE’VE BEEN UP TO harvesting and propagation Suurberg cushion bush a powerful role in of the Aloe Simii energy efficiency 1

NATIONAL ROADS SUEENT AUGUST 2016 People’s Guide MOLOTO CREATING WEALTH THROUGH INFRASTRUCTURE OCTOBER 2016 ROAD TOP STORIES PAGE 2 PAGE 3 PAGE 6 PAGE 8 Changing Lives Moloto Road ‘Go Well’ - Road Safety Is The Moloto Community And Skills Managing SA’s vital infrastructure Bringing Development Stretches Into Reality Road Project’s Key Driver Development

A Word From The Minister Of Transport Dipuo Peters

very day, millions of South Private cars, taxis and buses transport people accompanied by the empowerment of communities "I am glad that we have fi nally embarked on a journey that will see the Moloto Road being converted into a world- Africans take to the country’s between homes and workplaces. At weekends – through the allocation of work packages for small and holiday periods, this vast network connects and medium enterprises, job creation within local class road. For many years, this road has caused misery to so many people. For a long time, the state of this road E national roads to travel to commuters to places of leisure. communities and skills development programmes. has been a blight on the region. The Moloto Road has become synonymous with crashes, bus accidents, injuries their destinations. Continued on page 2... and death. It has robbed communities of breadwinners and beloved mothers. Parents have had to stand at the Roads are the country’s largest and most-used public infrastructure. South Africa has a total of open gravesides of their children. As Minister of Transport, I often attend the funerals of crash victims and have 750 000km – the tenth longest road network in the to respond to the unacceptable carnage on our country’s roads." world. At the core of this is the spine – a national SANRAL is committed to Inside network of almost 22 000km, which is managed by But as the government, we could no longer afford This road, which runs through three provinces – SANRAL. It stretches from Beit Bridge in the north to being a focused, evolving to witness this carnage continuing on Moloto Road. Gauteng, Mpumalanga and Limpopo, is used by Some of the benefi ts include: New bridge strengthens the southernmost parts of the continent and from organisation that delivers on Road safety has been elevated as a top priority in close to 150 000 commuters on a daily basis. Clearly • Reduced travel time between destinations, SANRAL’s reputation Oranjemund to the KwaZulu-Natal coast. South Africa, in line with the United Nations’ Decade this is an important economic corridor that requires eliminating the need to travel at unsafe hours 3 its mandate to the people of of Action, a programme aimed at reducing road signifi cant investment. On this note, I am pleased to • Contributing to healthy family and social These roads are managed by SANRAL, an South Africa. It will continue to: collisions and fatalities in member countries. The announce that this improvement project forms part of relationships by minimising time spent on the road Changing behaviour to save organisation established in 1998 by the government Department of Transport decided that something the Moloto Road Development Corridor, which will see • Improved safety through state-of-the-art traffi c 5 lives of President Nelson Mandela, with the mandate to • Work to improve the condition of the national needed to be done to improve safety on this road and signifi cant investments in infrastructure development management features finance, manage, maintain and improve the national road network, despite the current financial ultimately save the lives of the many people using it. being made in Mpumalanga and Limpopo, particularly • Linking seamlessly with broader transport plans road network. constraints with regards to road and passenger rail. and the Moloto Development Corridor Initiative All roads lead to development • Use technology to deliver more efficiently and The long-term solution identifi ed by my Department, • Becoming a transport spine, attracting new SANRAL recognised that transport is a critical manage the road network better after listening to the concerns raised by communities, investments and broadening the economic base 7 Once all the upgrades have been done, the enabler of growth and prosperity. As South Africa • Promote education and training in science was to upgrade the road to world-class standards and of the surrounding districts Moloto Road will no longer be the “road continues to pack its cities and expand the regional and technology SANRAL has been given the mandate to undertake Employment opportunities of death”, but the “road of hope”. It will and local economies, the entire country must have • Contribute to the country’s broader socio- this massive responsibility. I have every confi dence in 9 flow from SANRAL projects access to a road network that supports growth and bring many economic opportunities to these economic development through job creation, SANRAL that once it has been upgraded, this road The upgrade of this stretch of road is a colossal offers efficient mobility. provinces, as well as positively impact the lives skills development and the empowerment of will be celebrated as a masterpiece of South African engineering task, but it one that we will all celebrate of the communities who live in close proximity. emerging enterprises engineering. Targeting talent to benefit Commitment to community building at the end. society 11 Construction work undertaken by SANRAL is always

The People’s Guide is a summary of SANRAL’s annual report and is intended to CHANGING LIVES BRINGING DEVELOPMENT give all South Africans an overview of the roads agency’s performance over the Ismail Essa - SANRAL’s Northern Regional Manager past financial year Read more on page 2...

MOLOTO ROAD SUPPLEMENT 1

4585_SANRAL_Moloto Road Supplement.indd 1 2016/08/10 9:54 AM PRINT ADS

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Natural Capital CAPITALS & PERFORMANCE CAPITALS

Fossils aged 360 years uncovered & preserved

11 New SANRAL office wins GIANT BAOBABS transplated & 5 GREEN saved STARS

SANRAL has always recognised that environmental international environmental management standard. management is an integral component of road The basic tenet of SANRAL’s environmental policy is infrastructure development and road management. A continual improvement. sustainable road network that meets the requirements of people and respects the environment requires careful Stakeholders are increasingly aware of environmental planning and consultation with interested parties. It also issues and more active in conserving natural assets. demands a measure of innovation to find the necessary It is therefore important for SANRAL to engage balance between the interests of the road users, roads with them and be able to demonstrate improving authorities, business entities and conservationists. performance. The agency’s policy needs to evolve to reflect new thinking and 2017 will see a revision of its This reality is recognised in the National Environmental environmental policy. Management Act of 2002 (NEMA), which defines the environment not only in terms biophysical elements but 2. Liaison with regulatory authorities also takes account of social and economic elements. SANRAL has forged mutually beneficial relationships 1. Environmental management with relevant government departments, particularly the Department of Environmental Affairs (DEA), the The construction and upgrading of major road systems Department of Mineral Resources (DMR) and the inevitably has significant environmental impacts, Department of Water and Sanitation (DWS). which may be beneficial or adverse. SANRAL’s approach to this challenge is to go beyond negative The agency has created platforms for regular impact mitigation and develop responses that yield meetings with the DEA to discuss strategic and positive benefits in securing natural capital. The project-specific issues that affect both organisations. agency is constantly challenged to introduce more SANRAL’s larger projects, including those that fall environmentally sustainable practices as it undertakes within government’s Strategic Integrated Projects its core work of maintaining and improving the national (SIPs), benefit most from this cooperation. SANRAL road system. has gradually become a partner to the DEA, serving on reference groups for specific tasks, providing SANRAL’s approach is based on its sustainable feedback on projects, and jointly developing human development framework and the ISO 140011 capital in the environmental field.

1 The ISO 14001 standard is the most important standard within the ISO 14000 series. ISO 14001 specifies the requirements of an environmental management system (EMS) for small to large organisations. An EMS is a systemic approach to handling environmental issues within an organisation. The ISO 14001 standard is based on the Plan-Check-Do-Review-Improve cycle.

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SANRAL also interacts regularly with the DWS and in September in compliance with the regulations. contributed significantly to the formulation of the new General Authorisation (GA) issued in August 2016. The submission of this provided an excellent The GA provides greater certainty to SANRAL in its opportunity to review and possibly update the routine approach to water use as defined in the National Water road maintenance guideline of 2009 to ensure existing Act of 1998. practice was aligned with the plan submitted and applicable legislation. Engagement with the DMR and DEA also serves to ensure a common understanding of legislative requirements, SANRAL’s Environmental Focus Group undertook including those related to mining and other applicable the review, which comprised a desktop review, the activities listed in regulations under the NEMA. compilation of a checklist and site inspections of two projects in each region. It concluded that SANRAL’s 3. Monitoring and evaluating existing practices met legislative requirements in that environmental performance all road maintenance contracts require contractors to prevent the introduction of listed alien and invasive Environmental performance on a project is monitored specifies, detect and remove emerging alien and by means of regular site inspections by project teams, invasive plants, and ensure existing plants do not environmental authorities, and internal and external spread. audit teams comprising environmental management inspectors. SANRAL has noted increasing interest in its projects on the part of environmental authorities and Getting to grips with the prickly pear other interested parties.

In the last year, SANRAL conducted joint inspections The ​prickly pear, or opuntia, is of Mexican origin with the DMR in order to clarify issues of mutual and a hybrid prickly pear, selected for its lack of concern, understand norms and standards within the spines and high fruit quality, was introduced into road construction industry, and ensure coherence and South Africa hundreds of years ago. Through consistency in the issuing of water use authorisations for cross-pollination, spiny forms of this hybrid, known road construction. as opuntia ficus-indica, emerged. While various animals graze on the spineless cultivars, they avoid 4. Vegetation management on road the spiny or prickly plants. The latter have therefore verges gained a competitive advantage and are gradually displacing natural vegetation and pasture. So The management of vegetation within road reserves opuntia ficus-indica has been declared a category requires a balancing of road user safety, control of fire 1 weed, which necessitates its control, or removal risks and support for biodiversity. While SANRAL has and destruction if possible. While there are stem- developed an approach that is managed primarily injected herbicides registered for use against the under its routine road maintenance programme, once prickly pear, physical and biological controls are in a while there are challenges and changes that require cheaper and more environmentally friendly. The new approaches and new partnerships. insects that are deployed to keep South African prickly pear populations down are the cochineal NEMBA regulations species, dactylopius opuntiae, the cactus moth, Regulations under the National Environmental cactoblastis cactorum, and a stem-boring weevil, Management: Biodiversity Act of 2004 (NEMBA) require metamasius spinolae. all statutory bodies to draw up and submit to the DEA management frameworks for certain categories of alien Source: Agricultural Research Council and invasive plant species in all areas of land under their jurisdiction.

5. Major projects To prepare for this task, a SANRAL environmental coordinator attended a course on alien and invasive species offered by the South African Green Industries N2 Wild Coast road project Council (SAGIC) in April. SANRAL duly submitted its The environmental authorisation or record of decision alien and invasive species management plan to the DEA for the N2 Wild Coast road specifies a number of

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stringent conditions. These include the signing of a coordinates for individual species, scientific information biodiversity offset agreement, obtaining of permits, and photographs. and appointment of environmental personnel to ensure adherence to the conditions. CAPITALS & PERFORMANCE CAPITALS

The biodiversity offset agreement has been signed, but its implementation had not commenced by the end of 2016/17. The offset is expected to contribute significantly to biodiversity conservation in the Eastern Cape.

In preparation for the construction of haul roads to the planned bridges over the Msikaba and Mtentu rivers, SANRAL has obtained: • Water use authorisations • Permits for threatened or protected species • Permits for protected trees and natural forests.

The required personnel were mostly in place by the end of the reporting period. Each contractor is required to employ a site-based environmental control officer and in addition SANRAL has appointed two independent environmental control officers and an environmental N4 at Pampoen Nek project manager. The process of appointing an In 2010 an environmental authorisation was granted environmental auditor also commenced during the year. for a new section of the N4 near Hartebeespoort Dam in the North West. However, construction did not General oversight will be provided by an Environmental commence at the time. Monitoring Committee, comprising representatives of SANRAL, regulatory authorities and non-governmental In 2016, with construction envisaged in the near organisations, and the environmental monitoring personnel. future, a review was undertaken of the project’s environmental management programme, the conditions In preparation for the start of the formal offset process, of the environmental authorisation, and other permit a massive plant “search and rescue operation” requirements. This confirmed the need to: commenced towards the end of 2016. This involved • Update the environmental management programme identifying and removing plant species that would be and submit it to the DEA for approval affected by the construction of the haul roads to the • Appoint an environmental control officer to ensure Msikaba and Mtentu bridges. The search and removal adherence to specifications extended beyond threatened and protected species and • Survey the project area for protected plants and involved obtaining a reasonably representative selection apply for relevant permits of species that thrive in the area. The rescued plants • Apply to the South African Heritage Resources are being taken care of in temporary nurseries and the Agency (SAHRA) for permission to alter and demolish process will be repeated as the seasons change and heritage sites. there is regrowth of plants. After the first clearance was completed, traditional healers were invited to the site to SANRAL also decided to change the road design to collect medicinal plants. mitigate some environmental impacts, decreasing the depth of the cutting through Pampoen Nek to create a The project is a very ambitious one, not only in terms of flatter surface, reducing the design speed of the road the sheer length of the N2 Wild Coast road but also due (which will shrink the footprint of the cutting) and including to the variety of habitats to be conserved, from wetlands tree-planting to soften the visual impact of the cutting. and grasslands to rocky outcrops and forest areas. Some species are also extremely difficult to transplant and Protected trees on the Musina Ring Road might have to be propagated from cuttings or seeds. Construction on the Musina Ring Road project commenced in 2016 following the completion of an The search and rescue team developed an elaborate environmental impact assessment and acquisition of recording and labelling system, that includes GPS permits for the removal of protected trees.

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A major conservation challenge was the fact that a They will be re-established at the site of the interchange significant portion of the new road will pass through a after the completion of construction works. declared forest reserve that contains a large number 6. Environmental impact assessments of protected trees. These include baobabs (adansonia digitata) weighing more than 100 tons and thought to be older than 3 000 years, as well as numerous marula N3 De Beers Pass Following the public response to the environmental (sclerocarya birrea sub-species. caffra) and shepherd impact assessment report, and further engagement with trees (boscia albitrunca). key stakeholders, the Minister of Transport cancelled Although the permits allowed for the destruction of the project. SANRAL is to investigate other options for these trees, SANRAL’s intention was to minimise the addressing safety and capacity concerns on the existing negative impact as much as possible. The road design N3 Van Reenens Pass alignment. was adjusted to avoid some trees and other affected trees were moved slightly to the edge of the road Ermelo Ring Road reserve. This retained the road’s general sense of place The DEA granted environmental authorisation for the without compromising road safety. Ermelo Ring Road and the decision was communicated to interested and affected parties. No appeals were With the guidance of a specialist, 11 baobab trees, 197 made against the decision. shepherd trees and nine marula trees were relocated and carefully tended in the months after the move. P166 at Mbombela Good rains between December and March stimulated The DEA also issued an environmental authorisation for the growth of the trees and an in inspection in February the P166 at Mbombela and this was communicated to indicated they were good condition. interested and affected parties. A number of parties, including SANRAL, have lodged appeals against the The mighty baobab decision on the grounds that the authorised road alignment does not adequately accommodate long The baobab grows in South Africa only in the low- distance and localised road traffic and partly defeats the lying, warm and dry bushveld area of Limpopo. Its objectives of the proposed road. enormous trunk and short splayed branches set it apart from all other trees. When the branches The Mpumalanga Department of Public Works, Roads are bare of leaves, the baobab appears to have been turned upside-down and left with its roots and Transport, the Mbombela Local Municipality, exposed. The seeds of baobab trees are refreshing SANRAL and the transportation specialist who to suck and their whitish pulp contains tartaric acid, contributed to the P166 Economic and Transport Study bitartrate of potash and vitamin C. Infusions of the all take the view that original routing through White seeds have been used traditionally to reduce fever River offers a better solution. Furthermore, a number of and provide supplementary vitamin C. spatial, development and road plans for the area have been based on the original alignment. The Minister of Environmental Affairs will rule on the appeals.

Grahamstown archaeological find

One of South Africa’s richest fossil finds was made in 2016 during construction work on the N2 freeway between Grahamstown and Fish River in the Eastern Cape. This discovery of fossils revealed an ancient river-mouth ecosystem with many species, including invertebrates, that had never been documented by scientists. These fossils date back nearly 360 million years to a time when South Africa Hammarsdale Interchange was part of the supercontinent of Gondwanaland. Indigenous plants of conservation value were found at SANRAL’s environmental management plan makes the Hammarsdale Interchange on the N3 which was due provision for excavation and specialist examination for a major upgrade. In partnership with the eThekwini of rock debris should there be a find during Municipality, SANRAL relocated a range of plants from construction. areas that would be affected to a temporary nursery.

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7. Research and development

The Southern Region’s new office was the first Fynbos in Eastern Cape road reserves commercial building in the Eastern Cape to be The research project on fynbos species growing

awarded a coveted five Green Stars by the Green & PERFORMANCE CAPITALS along the N2 national road between Nature’s Valley Building Council of South Africa. The building is and Port Elizabeth was completed during 2016/17. heated, cooled and ventilated by energy efficient It demonstrated that road reserves in this locality are methods, uses a lower volume of potable water a viable habitat for fynbos and could play a valuable than conventional buildings, and was built with low conservation role as fynbos species are diminishing in embodied-energy materials. the wild.

Eleven plant species of conservation concern were found in the road reserves. In addition, a rare orchid, disperis woodii, never previously found in the Fynbos Biome, was identified during the study, significantly extending the range in which it grows.

A key deliverable of the multi-year study was the development of a fire management plan, which will guide SANRAL’s routine road maintenance approach to fynbos on this stretch of road. The fire management plan was completed but was not implemented because there had been a number of fires in the area and these forced the postponement of test burns to late 2017.

In addition to transplanting oldenburgia grandis plants affected by the upgrade of the N2 between Grahamstown and the Fish River, an attempt was made to improve understanding of how they survive and reproduce. For example, how well they survive fire, how readily seeds germinate under a range of conditions and what animals pollinate the species.

It was found oldenburgia grandis survives fire – even extreme fire damage – reasonably well. It was also established that seed germination was around 66% regardless of shade intensity or whether water was 8. Concessionaires and the environment treated with smoke. This germination rate was fairly high for a plant that appears to put more effort into Bakwena participated in a range of environmental survival than reproduction. The next phase of the projects in 2016: study will investigate birds and bees as agents • It partnered with the Endangered Wildlife Trust of pollination. (EWT) and the Wildlife and Environment Society of South Africa (Wessa) to take the Eco-Schools Project Environmental specialist for the Southern Region to 10 schools in the Hammanskraal area and SANRAL’s Southern Region now has an in-house 10 schools in the Kgetleng area. This project involves environmental specialist. She hit the ground running providing conservation education to educators and in the new SANRAL Baywest office, and has already learners and improving the schools’ management of undertaken borrow pit inspections with environmental environmental matters authorities and conducted monitoring of alien • It is a partner in the EWT Wildlife and Roads Project vegetation management as part of the review and records all roadkill along the N4 through its trained of SANRAL practice against the new legislative route patrollers. The EWT collates this data and the requirements. She is expected to play a significant role resulting database is a tool to identify hotspots which in relation to the N2 Wild Coast project. may require measures to protect wildlife

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• Bakwena supports the Magaliesberg Biosphere, TRAC conducted regular monitoring of the water which was declared a UNESCO World Heritage Site quality of the Goedehoopspruit and Klein Olifants in 2015, in a variety of ways. It is represented on the River to establish whether there was any adverse board and assists the secretariat. The company was impact arising from the widening of the N4 between involved in a research project on leopards in the the N11 Interchange and Wonderfontein. This showed area and this has been instrumental in sustaining a that the habitat integrity of the Klein Olifants River ban on leopard trophy hunting. Bakwena invested was unchanged after the construction work while in a liquid nitrogen biotank which has enabled the that at Goedehoopspruit had actually improved. This establishment of a library of biospecimens specific to was due to the removal of old pipe culverts that had the area restricted the flow of water and the placement of riprap • The company participates annually in Arbor Week downstream from new box culverts which facilitate the and holds tree planting ceremonies in the various upstream migration of fish. schools along the N4 route. Basic assessments were undertaken in 2016 for the N3TC has implemented an environmental management widening of the road at Elands Valley and a full system based on the ISO 14001 standard. Its environmental study was conducted for the widening environmental management programme was updated of the Belfast to Machado Toll Plaza section. TRAC in 2016 and quarterly environmental inspections were has received all required environmental and water conducted on site. license approvals for current, and intended, upgrading projects. Training is an important requirement of the environmental management system and it applies Like SANRAL’s other concession-holders, TRAC to identified personnel in the company as well as continued to participate in the EWT’s Wildlife and contractors. Roads Project by recording the wildlife killed along the section of the N4 under its management. During 2016, N3TC attended to four newly registered rehabilitation sites resulting from spills of petroleum TRAC’s corporate social investment programme distillate, petrol and cooking oil. Rehabilitation of these includes some environmental projects, including: sites and a fifth site registered in 2015 was ongoing • Sponsoring the feeding, accommodation and during 2016. medical costs of three rhino orphans undergoing rehabilitation at the Care for Wild Rehabilitation N3TC contributes to the EWT Wildlife and Roads Centre in Mbombela Project and its route patrol teams have been trained • The greening of the N4, which has involved the to identify and record all animals killed on the roads. planting of a vast number of trees and aloes along 2016 saw an increase in both domestic and wild animals the road. Many of these were Marlothi aloes found killed on the N3. The number of domestic animals on the Oorsprong Borrow Pit which was used for involved in crashes went from 58 in 2014 to 45 in 2015 the upgrading and rehabilitation of the N4 from and 63 in 2016. The number of wild animals killed, went Hectorspruit to Komatipoort from 128 in 2014 to 104 in 2015 and then to 203 in • Providing financial support to environmental 2016. The animals most at risk include servals, rabbits, organisations such as the Houtboschloop jackals, porcupines and barn owls. Environmental Action Link (HEAL) which focuses on the removal of animal snares in the Elands Valley area. TRAC ensured regular monitoring and rehabilitation of environmentally sensitive areas under construction. 2016 saw the continuation of the clean-up project in Slope-stability surveys were conducted during 2016 to Ndogwana and Vosman. This involves TRAC employing identify possible risks arising from steep cuts and fills several members of communities living adjacent to the along the N4 and institute mitigation measures. N4 to keep their area clean.

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Human Capital CAPITALS & PERFORMANCE CAPITALS

Annual staff turnover Number of employees 2.5% 349

Interns placed 304 Bursaries awarded for tertiary study 185

SANRAL’s strives to strengthen the pool of engineering 1. Certification and construction expertise in South Africa not only through the development of its own professional 1.1 Top Employer and managerial staff, but also through educational In 2016 SANRAL achieved Top Employer certification by interventions that expand the broader talent pool in the Top Employers Institute for the third consecutive year the sector. and improved on its previous ratings in all categories.

During the year under review SANRAL strove to This global evaluation process focuses on employee maintain high quality people management practices conditions. It assesses factors such as the company’s and participated in the survey of the Top Employers talent strategy, workforce planning, on-boarding Institute and the audit of the South African Board processes, approach to learning and development, of People Practices (SABPP) with the intention of performance management, and employee benchmarking its performance. compensation and benefits. The information supplied by participating companies is independently audited to SANRAL’s continued growth and success can be verify its accuracy and reliability. ascribed largely to the fact that it places its employees at the core of its endeavours and invests in them to 1.2 Third place in National Standards Audit derive full benefit from the technical and specialist skills The good governance of organisations depends only they possess. partly on appropriate systems. Finally, it is people who determine whether governance succeeds or fails, and The agency’s core values of excellence, pro- human resource management has a significant role to activeness, participativeness, integrity and care are play in enabling employees to contribute to the sound the foundation of its practices and employees at all governance and long-term sustainability of organisations. levels are encouraged to apply these values in their daily operations and interactions with colleagues, In order to provide high quality human resource stakeholders and customers. management, SANRAL’s HR team continues to assess its

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practices against the best in the country. The National • HIV/AIDS and Sexually Transmitted Diseases (STDs). Standards Audit of the South African Board of People Practices (SABPP) provides the best yardstick and the SANRAL’s statutory EE structures and reporting agency completed its audit once more in 2016. The processes are fully functional and supportive of the results were encouraging: broader transformation initiatives. • SANRAL was ranked third in the country in terms of fulfilling the criteria for National Standards 2.2 Workforce profile certification The staff complement of SANRAL grew from 314 • The agency’s wellness programme took top place on employees in 2015/16 to 349 in the current reporting the applicable criteria. period. This overall increase of approximately 11% was accompanied by a small increase in African employees 2. Workforce as a proportion of the staff complement.

2.1 Employment equity and transformation SANRAL has a low voluntary staff turnover of 2.5% SANRAL’s transformation strategy centres on a year, which attests to its superior ability to retain positioning itself for efficient, sustainable and profitable employees, including many extremely talented and service delivery and long-term value creation for the highly qualified professionals. South African economy through the development and maintenance of the strategic road network. Figure 9: SANRAL workforce profile 2015/16 and 2016/17 48% This plan sets out from the premise that transformation, 46% as it pertains to national policies such as broad- based black economic empowerment (BBBEE) and employment equity (EE), is a logical component of the sustainability agenda. Support for these policies demonstrates SANRAL’s unwavering commitment to 27% 27% good corporate citizenship, robust governance and active transformation of our society.

SANRAL’s employees are its most important and 14% 13% 13% 12% most valued resource. They are the key to the agency delivering on its mandate and serving the people of South Africa. The management of employees is informed by this consciousness. The agency recognises the rights of employees and pursues the goal of fair African Coloured Indian White labour practice, striving to apply all legislation and workplace procedures with consistency and fairness. 2015/16

2016/17 SANRAL actively pursues the attainment of employment equity at every level of business activity. The agency values diversity within the workforce and strives to 2.3 Talent management create an environment that encourages employee In order to realise its strategic objectives SANRAL development by mentorship and training. requires a talented workforce. The Human Resources Strategic Plan 2016 - 2018 is designed to harness the Key policies that guide implementation of employment existing talent pool and develop the agency’s human equity and transformation include: capital. The agency’s HR objectives include: • Employment Equity • Embracing diversity in term of age, class, race, gender, • Employment of People with Disabilities occupational group and educational background • Induction, Training and Development • Promoting the development of designated groups, • Financial Assistance for Part-time Study as defined in the Employment Equity Act • Performance Management • Establishing SANRAL as an employer of choice within • Employee Assistance Programmes the industry

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• Creating a world-class working environment with a A flat matrix structure: SANRAL has a matrix structure with strong ethos of information sharing and knowledge relatively few managerial levels. This reduces hierarchies, management promotes flexibility and lateral cooperation and problem- • Facilitating employment relationships which create solving, and increases motivation and performance.

high motivation among all employees & PERFORMANCE CAPITALS • Developing a system capable of continually building Cluster system: Employees are encouraged to work and maintaining organisational capacity. in clusters in order to share knowledge across the organisation, involve regional staff in Head Office All HR strategies need to take account of challenges functions, and promote collective decision-making. in the internal and external environment. Some of the Cluster activities often allow operational employees to factors SANRAL has considered are: become involved in research and policy development. • The changing nature of the road network as a result of incorporation provincial roads and rapid Developing talent: SANRAL promotes pioneering urbanisation which increases traffic volumes knowledge in the engineering and built environment • The growth of the agency’s workforce and its disciplines. This is a challenging work environment, increasing diversity especially for professionals in these disciplines. Training • The ageing nature of its workforce which demands and development are the ingredients that can convert succession planning to ensure retention of skills and commitment into peak performance. institutional knowledge • The diversification of SANRAL’s service offering and Sharing knowledge and building confidence: its increasing sophistication, with the advent of smart SANRAL facilitates career-long learning in various roads and other applications of advanced technology professional disciplines that contribute to the core • The increasing number of road construction, and support functions of the business. Professionals rehabilitation and maintenance projects and the are encouraged to affiliate to accredited and impact of this on administrative capacity recognised professional bodies to ensure continued • The need to maintain a healthy balance between the professional development. The agency offers skills of in-house staff and contracted consultants, employees opportunities for formal mentoring and between specialist technical skills and the skills and coaching. In 2016/17, 66 project-managers- of managers and administrators in-training underwent mentoring and coaching to • The terms of the annual performance plan agreed by expedite their professional registration. A team of SANRAL and the Minister of Transport seven mentors was created to develop and manage • The evolving legislative and policy environment the mentorship system. • The prevailing economic climate and associated employment market. Harnessing technology and innovation: SANRAL has developed an internationally recognised road 3. Organisational philosophy asset management system to monitor the state of roads, predict future road conditions and prioritise Some important elements of SANRAL’s organisational maintenance and rehabilitation intervention. philosophy are summarised below. SANRAL has also developed innovative procurement Roles not jobs: SANRAL’s occupational grading system, models which satisfy the requirements National established in 1998, is based on the concept of Treasury’s supply chain management system and can individual “roles” rather than “jobs”. It comprises broad be used for all types of road projects, from routine bands and promotes a competitive market especially maintenance to the award of toll road concessions. in relation to senior and technical roles. The aim is to attract, retain and motivate high performers. Identifying critical workforce segments: SANRAL uses the identification of critical workforce segments to inform Accountability: SANRAL seeks to inspire among all talent management, succession planning and leadership employees a deep sense of rights, obligations and development. These segments consist of employees who ownership of the organisation’s successes and failures. possess essential and scarce skills, or who are vital to the The company’s performance management system links agency’s current performance or long-term sustainability individual performance to overall company performance. in a rapidly changing environment.

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SANRAL’s leadership and management development The Learning and Development Strategy focuses programme seeks to equip professional staff primarily on: members with generic management skills that • Prioritising business needs and aligning HR and enable them to fulfil roles that extend beyond learning approaches with these priorities the construction-related functions they • Analysing learning and development needs have fulfilled. • Developing solutions to address learning and development needs 4. Employee learning and development • Evaluating learning and development programmes • Strengthening ethical practices and governance SANRAL’s Learning and Development Strategy is based • Promoting strong financial management. on the premise that all employees should master the • Developing leadership competencies among African competencies required to fulfil their roles through self- women employed by the agency. directed learning. An individual development plan is developed for each employee in order to ensure the SANRAL’s training and development is multi-faceted alignment of organisational needs and the employee’s and utilises a combination of methodologies as career growth. indicated in Table 38.

Table 38: Summary of SANRAL learning and development interventions

Learning and development intervention Approach Component Notes

Ethics, governance and prevention of Group learning Cross functional Key to success is the fraudulent activities teams management of the group and Including: the attributes of the individual Company-wide induction members ASANRA technical committee training Can be resource intensive

Communication and media training Tutor-led Training courses Must be relevant to current work Including Construction Engineering interventions Seminars situation Management Programme at Stellenbosch Development Immediate opportunity to put programmes learning into practice on the job is important

Leadership development Self-managed Reading Effective where it supports on-the-job learning e-Learning learning Further education Must be relevant

Professional presence and business On-the-job Observation, Most effective and efficient way to etiquette learning demonstration develop capability and practice Delegation Coaching Mentoring Self-managed Reading Effective where it supports on-the-job learning e-Learning learning Must be relevant

Adapted from SANRAL’s L&D Strategy 2016-2018

In addition to the above interventions, SANRAL Internal bursaries employees have opportunities to undergo formal SANRAL’s philosophy of self-directed learning has learning programmes offered by educational encouraged a culture of learning and knowledge- institutions. During the year under review total of sharing. Many of the agency’s employees study for 267 employees received training in various fields, degrees, diplomas and certificates and SANRAL including engineering, accounting and human resource provides financial support where possible. During the management. The total investment by SANRAL in this year under review 52 employees received bursaries training amounted to R3.2m. from SANRAL. The number included 20 new applicants who had not been funded in previous years.

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Table 39: Courses of study funded by internal bursaries in The numbers of male and female employees awarded 2016/17 bursaries were equal in 2016/17, while allocation by Course of study Number racial group showed a strongly affirmative trend, as Certificates 5 indicated in Table 40. CAPITALS & PERFORMANCE CAPITALS Under-graduate diplomas and degrees 15 Post-graduate diplomas and degrees 31 Other 1 Total 52

Table 40: Internal bursary recipients in 2016/17 by gender and race

African Coloured Indian White Total Female Male Female Male Female Male Female Male 16 18 4 2 6 5 0 1 52

65.4% 11.5% 21.1% 1.9% 100.0%

Higher education complements the UFS’s School Partnership Project (SPP) The need to attract and retain capacity in technical and – a flagship initiative which addresses concerns about civil engineering fields has prompted SANRAL to invest underperformance in South Africa’s school system. in skills development through scholarships, bursaries and internships, as well as through the sponsorship of 5. External scholarships and bursaries specialised chairs at leading universities. 5.1 External bursary programme SANRAL has sponsored the Chair in Pavement In addition to assisting employees with tertiary Engineering at Stellenbosch University (SU) for several studies, SANRAL awards a number of bursaries each years and made an endowment of R30m in 2016 to year to young people studying in areas related to the secure the continuity of this significant educational agency’s business – mainly civil engineering and related resource. The aim of the partnership is to ensure high- professions in the built environment and smart quality education, training and research in the area of technologies. The goal is not only to nurture talent in pavement engineering. order to cater to SANRAL’s own recruitment needs but also to contribute to closing the national skills gap and The chair has led the way at Stellenbosch University promoting equity in the construction professions in in terms of empowerment of black professionals. A terms of racial and gender representation. substantial number of its post-graduate students are drawn from other African countries and it has become A total of 133 students attending nine tertiary an asset for the entire continent. institutions received bursaries from SANRAL in the year under review. They include13 post-graduates ranging In 2011, SANRAL invested R20m in the University of from honour’s students to a PhD candidate. SANRAL’s Cape Town to support the teaching of transport planning total investment amounted to R8.5m. and engineering at under-graduate and post-graduate levels and to contribute to the creation of a SANRAL The bursary programme not only pays recipients’ Chair in Transport Planning. In 2015 work commenced at tuition fees and allowances but offers recipients access the university on the development and teaching of a new to vacation work, mentorship and the services of the fourth-year course in transport engineering. agency’s wellness programme.

SANRAL and the University of the Free State (UFS) jointly Although more than 70% of external bursaries were launched the SANRAL Chair in Science, Mathematics awarded to African, coloured and Indian students and Technology Education on the Bloemfontein in 2016/17, African students were somewhat under- campus, after a R30m endowment from the agency to represented. The engineering and built environment establish the Chair in perpetuity. This venture aims to fields are still dominated by male professionals and this improve the quality of teaching of maths and science bias filtered through into the gender profile of bursary at schools in the Free State and adjacent provinces. It recipients: more than three-quarters were men.

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Table 41: External bursaries awarded 2016/17

African Coloured Indian White Total 54 (41%) 11 (8%) 31 (23%) 37 (28%) 133 (100%)

F M F M F M F M F M 17 37 1 10 7 24 8 29 33 100

5.2 Scholarship programme SANRAL also invests in the education of high school Figure 11: 2016/17 scholarship recipients by gender learners by providing scholarships to selected learners who show an aptitude for maths, physical science and English. The primary objective of the scholarship programme is to ensure a pipeline of fresh talent for the engineering and construction professions.

In 2016/17, SANRAL invested R4.3m in this programme and provided scholarships to a total of 194 learners at schools across South Africa. The grade 12 cohort comprised 55 learners, 80% of whom qualified at the end of 2016 for degree-level studies at tertiary institutions.

More than six out of 10 scholarship recipients were African and a similar proportion comprised girls and young women.

Since this programme started in 2009, with 49 learners, it has enriched the experienced of 720 learners. SANRAL’s investment over the years has amounted to about R14m. Male 41%

Female 59% Figure 10: 2016/17 scholarship recipients by racial group

5.3 Internships SANRAL’s internship programme aligns with state initiatives to address the problem of youth unemployment by providing work-integrated learning to tertiary institution students and graduates. Access to the workplace as an active learning environment not only assists many students obtain the practical experience required to complete their qualifications but also improves the employability of young graduates.

SANRAL facilitates internship placement through contractors and consultants working on SANRAL projects. The majority of internships involve students who are studying towards a National Diploma in Civil Engineering.

In terms of the performance agreement between African 63% Indian 5% SANRAL and the Minister of Transport, the number of Coloured 5% White 27% internships created should equate to 10% of SANRAL’s

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staff complement. However, universities generate a high demand for practical experience and SANRAL’s contractors and consultants have been able to accommodate a considerable number of interns. As a result, SANRAL facilitated the placement of 304 interns in 2016/17 – a number that translates to 87% of the agency’s staff complement.

The overwhelming majority of interns placed in 2016/17 were African and four out of 10 were young women. & PERFORMANCE CAPITALS

Table 42: Distribution of 2016/17 interns by race and gender

Region African Coloured Indian White All groups

F M F M F M F M F M

Eastern Region 40 83 1 0 0 2 0 2 41 87

Western Region 12 25 0 3 0 0 1 1 13 29

Northern Region 22 36 0 0 0 0 0 0 22 36

Southern Region 46 29 0 0 0 0 0 1 46 30

All regions 120 173 1 3 0 2 1 4 122 182

293 4 2 5 304

6. SANRAL Technical Excellence The fields of training include geometric, pavement Academy and drainage design, hydrological analysis, economic evaluation, and supply chain processes for the The SANRAL Technical Excellence Academy (PE procurement of consulting and contracting engineers. Facility), situated in the agency’s Southern Region Weekly knowledge sharing sessions expose candidates offices, offers a structured training programme that to specialist presentations on various subjects. aims to equip graduate engineers with the necessary knowledge and competencies to enable them to The SANRAL regional materials-testing and training register in one of the professions governed by the laboratory, based in Port Elizabeth, offers trainees Engineering Council of South Africa (ECSA) within the the opportunity of gaining hands-on experience in contracted timeframe. materials-testing methods and the interpretation of various test results. It was established in 2014 with three graduate engineers and most graduates accepted since then In 2016, a total of 27 candidate engineers underwent have been recipients of SANRAL bursaries for under- training at the academy. Some of these will move graduate study. to construction sites in 2017 and others to regional offices of SANRAL to assume posts as assistant project The academy is funded entirely by SANRAL and managers. candidates pay nothing towards their training. SANRAL provides training courses, appropriately experienced There was an intake of a further 27 graduates in 2017. mentors and workstations equipped with the necessary This group included three civil engineering technicians hardware and software for engineering practice. from the Eastern Cape Provincial Department of Candidates have access to all the necessary standards, Transport who were seconded to the academy at the codes, guidelines, technical methods, specifications request of the department. and procedures. The total process of professional development, from Graduates are exposed to real design projects under enrolment at the academy to ECSA registration, the guidance of mentors and progressively assume extends over 48 months. The first three graduates who more responsibility until they are able to work helped found the academy in 2014 are expected to be independently. ready for registration towards the end of 2017.

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The possibility of accrediting the academy is being Figure 12: Percentage of employees utilising SANRAL wellness discussed with ECSA. programme 2016/17

Table 43: Candidate engineers at Technical Excellence 48% Academy in 2016 by gender

Females Males Total

10 17 27 25,67% Table 44: Candidate engineers at Technical Excellence 18,67% 20% Academy in 2016 by race 16%

Black Indian Coloured White Total 7,81% 9,10% 15 7 3 2 27

Mar-May Jun-Aug Sep-Nov Dec-Feb 12 Govt Careways 7. Employee wellness programme months sector bench- mark SANRAL’s Ekhaya Wellness Programme provides Note: Data on 12-month utilisation rates for the government comprehensive health and psycho-social services sector and Careways have been included for purposes of to enhance employee wellbeing and workplace comparison effectiveness. It includes access to a care centre on a 24/7 basis throughout the year, including weekends and Occupational health and safety public holidays. Mitigation of the risk of injury on duty is a key priority at every SANRAL office and trained safety officers ensure The Ekhaya programme, which is currently delivered that safety at work is respected. by the Careways corporate healthcare provider, includes assistance to employees and managers in SANRAL’s health and safety procedures and standards identifying and resolving workplace problems. It strives are continuously improved in order to remain abreast to create a supportive environment that facilitates of legislation and developments in the field. The behavioural change. Occupational Health and Safety Cluster convenes quarterly and cooperates with the Risk Cluster to During the SABP audit, SANRAL’s performance against address issues related to workplace safety. the wellness standards achieved a 91% score. Some of the strengths of the programme were: Procedures are in place to ensure the correct reporting • The integration of Discovery Health information into and record-keeping of incidents. The Federation for wellness activities, which made it possible to identify Employers Mutual Assurance Company Limited (FEMA) and mitigate health and wellness risks more easily. has been appointed as the administrator of all injury on • The inclusion of a change management workshop duty incidents. during wellness day activities • The introduction of a Smoke Enders programme, Table 45: Injuries on duty 2016/17 which achieved a reduction in the number of habitual Regions Number smokers • Clear definition of safety roles and the appointment Head Office 1 of safety champions at all offices. Northern 0

Figure 12 compares utilisation of the SANRAL wellness Eastern 0 programme with utilisation in the public sector and in other Careways employee programmes and Southern 3 confirms that use of the agency’s scheme is Western 3 higher than the norm. TOTAL 7

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8. Programme for road maintenance The programme aims to enable workers to live healthier workers lifestyles and in particular to: • Offer all road maintenance workers and their The construction industry is adversely affected by immediate families an opportunity to know their depletion of skills due to unmanaged HIV infection. HIV status & PERFORMANCE CAPITALS Workers in the industry are at high risk of HIV infection • Assist HIV-positive workers and family members to due to their work circumstances: solitary work access treatment at the nearest clinic environments, extended periods away from home, and • Ensure HIV-negative workers and family members limited ability to access health services. acquire adequate knowledge and motivation to maintain their HIV-free status SANRAL has implemented a nationwide wellness • Provide bi-annual health education and screening programme for all its routine road maintenance for TB and STIs to all workers and families as projects, focusing on the national health imperatives of well as voluntary testing of blood glucose and strengthening prevention and treatment of HIV, TB and cholesterol levels. sexually transmitted infections (STIs). The programme has created 44 new jobs for health SANRAL has appointed service providers to manage champions, performed health screening and testing for the wellness programme with the assistance of 44 2 700 individuals, and distributed about 20 000 condoms. wellness champions appointed through contractors at road maintenance sites. These champions are trained Approximately R30m has been budgeted for the peer educators in the fields of HIV, TB and STIs as well continuation of this wellness programme over the next as general wellness. three years.

89

2

Promoting Human Capital CAPITALS & PERFORMANCE CAPITALS

Information technology organisation depends. These applications have placed a significant demand on ageing IT infrastructure and Collaboration, participation and the support of relevant SANRAL has embarked on a major upgrade of its stakeholders are the key to an efficient information data centre. technology function that effectively supports the core business of SANRAL. The clarity provided by the The modern converged data centre looks nothing like revised IT charter and IT governance framework – both data centres of the past and is capable of tasks that approved by the Board during 2016 – will be invaluable were regarded as unattainable only a few years ago. as IT personnel focus on strengthening the partnerships SANRAL is tapping into the opportunities presented that are so critical to implementation. with emerging technologies. In addition to the data centre upgrade, the agency is deploying managed A new Information Technology Governance Committee security services to protect its systems against growing will be established to direct strategic planning, IT risk security threats. management, architecture transition, and investment priorities. The solution acquired by SANRAL meets the following critical requirements: Clean system audits • It is designed for speed and efficiency The IT audits undertaken in 2016 by BIG – a contracted • Has tightly integrated components that are service provider – examined three aspects of SANRAL’s optimised to support on-demand IT infrastructure corporate systems: • Meets critical business objectives, such as value for • IT general controls money • SAP basis controls • Delivers increased performance • Application systems controls. • Ensures high availability • Provides private cloud storage The 2016 audit yielded a good rating with zero findings. • Accommodates mixed workloads. This was an improvement on the 2015 audit where the rating was satisfactory and minor housekeeping findings Video conferencing were noted. The IT staff paid close attention to the SANRAL has identified the need for more agile and remedial actions required and ensured that these were effective work teams that span several offices. The need applied consistently to avoid any recurrence of the to meet quickly and economically with team members identified issues. near and far, share ideas, and collaborate on critical projects has fuelled the demand for visual collaboration. Major systems acquisitions To meet this demand, the agency has sourced a Data centre refresh turnkey video conferencing solution that can be SANRAL runs multiple mission-critical and business- easily and consistently deployed without costly room critical applications on which the productivity of the remediation. The chosen video conferencing system

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deploys anywhere in minutes. Every detail has been In light of the unprecedented increase in cyber security addressed to ensure teams can focus completely on threats, SANRAL initiated a comprehensive security effective collaboration. project to acquire world-leading technology to address the threats it could potentially encounter. Other major projects The cyber security overhaul has been designed to Cyber security managed services ensure that adequate, appropriate and effective A security breach can expose an organisation to safeguards are in place and these safeguards are considerable financial and reputational damage and, working as designed. SANRAL adopted a holistic therefore, enterprise security is something SANRAL approach and opted for a “defence in depth” multi- cannot afford to get wrong. Yet it remains one of layered security system to safeguard its confidential and the most challenging organisational disciplines to sensitive data and reduce the likelihood of breaches understand, implement and maintain.​ occurring at any security layer.

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The security solutions are being built and designed The WAN architecture and design are based on a MPLS to comply with standards that are required by the layer 3 VPN network and will cater for voice, interactive IS27001/2 (Broader Information Security Standard) and video and data. the Protection of Personal Information (POPI) Act.

Looking ahead & PERFORMANCE CAPITALS Wide area network upgrade Progress achieved in 2016/17 provide a solid SANRAL appointed a telecommunications service foundation for implementation of SANRAL’s IT strategy provider to upgrade the capacity of its wide area for the short -, medium - and long-term. Looking network (WAN) from 2mbps to a 100mbps MPLS ahead, SANRAL still has a distance to go in optimising connection. This upgraded network is provided its utilisation of IT in order to improve efficiencies at a substantially lower cost than the previous within the agency, improve integrated reporting – service and increases bandwidth available to the especially on major strategic projects, and enhance regional offices. security awareness.

93 94 SECTION 3

CORPORATE GOVERNANCE

1. King IV Declaration______97 2. Corporate Performance Information______110 3. Report of the Audit and Risk Committee______116

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Corporate Governance CORPORATE GOVERNANCE CORPORATE

1. King IV Declaration written disclosure of interests by Board and committee members and also by disclosure at every Board and SANRAL subscribes to King IV and recognises its committee meeting. importance in identifying principles and practices which guide corporate governance practice within any Board members receive training with respect to organisation and, in particular, a state-owned company governance and the core functions of SANRAL, such as SANRAL. as required. All board members have working knowledge of SANRAL. This enables the Board to SANRAL prides itself on its commitment to good set strategic direction, monitor implementation and governance practice as it delivers on its mandate of performance, oversee effective risk management providing an effective national road network using and ensure responsible disclosure of activities and state and investor funding. The tone for ethical performance. business practice is set by the accounting authority, that is, the Board, and it filters through the entire Principle 2: Organisational ethics fabric of the organisation. The governing body should govern the ethics of the organisation in a way that supports the establishment of SANRAL applies the first 16 principles of King IV which an ethical culture. are relevant to the agency and the conduct of its business. This section explains the application of each SANRAL’s HR policy, which includes a code of conduct of the principles in order to illustrate the quality of for employees, is approved by the Board. Important governance practice within SANRAL. principles of conduct include an annual declaration of interest. Such declaration of interest is required 1.1 Leadership, ethics and corporate from Board members, employees and suppliers citizenship (as part of the tender process). The maintenance of confidentiality, transparency, independence of Principle 1: Leadership decisions and clean procurement processes are part The governing body – or accounting authority – should of the code of conduct which becomes binding on lead ethically and effectively. signature of the contract of employment.

The functioning and conduct of the Board and its In addition, all SANRAL employees involved in supply committees are guided by the charters of the Board and chain management (SCM) are required to sign an SCM committees and the board code of conduct, which are Practitioners Code of Conduct on an annual basis. reviewed and approved annually. Periodic checks are done through the Companies and Intellectual Property Commission (CIPC) website The importance of acting in the best interests of to establish whether any SANRAL employees hold SANRAL is understood by all Board members. There is directorships of companies which could lead to a proactive avoidance of conflicts of interest by annual conflict of interest.

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Ethical behaviour is reinforced by presentations given • Employment equity: SANRAL has a three-year during employee induction and annual governance, risk Employment Equity Plan, the implementation and compliance roadshows. of which is monitored by the Social, Ethics and Transformation Committee (SETC). Performance The Board reviews and approves the Fraud and against targets is reported to the Board and the Corruption Policy and Risk Management Policy annually. Minister of Transport annually. SANRAL has a fraud hotline for employees and external parties, including service providers, to report suspected • Fair remuneration: Measures to ensure fair fraud. Tip-offs may be made anonymously and the remuneration include a yearly salary review by hotline is independently monitored. an external company to ensure that SANRAL’s remuneration structure is in line with the market. All supplier contracts include a requirement that any All positions in the organisation are evaluated and conflicting interests be disclosed. Employees serving on graded to ensure fair and equitable remuneration. bid evaluation committees must disclose any conflict of Moreover, the Social, Ethics and Transformation interest that arises and recuse themselves from further Committee and Board approve annual remuneration involvement in the bidding process. adjustment rates.

The recruitment and appointment of employees are • Safety, health and dignity: SANRAL provides a preceded by necessary checks on personal credentials, comprehensive employee wellness programme. criminal history, credit standing, qualifications and In terms of the safety of contractors’ employees, references. SANRAL ensures that companies responsible for all contracts valued at more than R40m are registered Principle 3: Corporate citizenship with the Department of Labour. An occupational The governing body should ensure that the health and safety practitioner is appointed to organisation is and is seen to be a responsible oversee each site and ensure compliance with safety corporate citizen. regulations.

Given SANRAL’s mandate to manage South Africa’s • Development of employees: A work skills plan, national road network, it finds opportunities to derived from each individual’s development plan, contribute to the well-being, development and determines the career development path for each empowerment of the country and its citizens in diverse employee. Internal bursaries are available to staff ways through internal and external transformation who have an interest in pursuing further education. initiatives. Internally, these include the practice of and The SANRAL Technical Excellence Academy in Port respect for equity in terms of diversity and the provision Elizabeth provides training, mentorship and work of skills development opportunities to employees. exposure to accelerate the professional registration External initiatives promote the development of SMMEs of engineering graduates. and communities through work opportunities and skills development programmes, as well as through 1.2 Strategy, performance and reporting scholarships, bursaries, internships and partnerships with universities. Community development projects Principle 4: Strategy and performance ensure the provision of access and mobility in rural The governing body should appreciate that communities, while road safety-related projects improve the organisation’s core purpose, its risks and the safety of roads through pedestrian bridges and opportunities, strategy, business model, performance other infrastructural and educational interventions. and sustainable development are all inseparable elements of the value creation process. Employees SANRAL values its employees and strives to reflect this in The Board is responsible for setting strategic direction policies and programmes applicable in the following areas: and was fully involved in the process that was

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undertaken in 2016/17 to develop SANRAL’s Strategy financial statements, is published on the SANRAL 2030. The Board will consider and approve Strategy website. The integrated report includes governance 2030 in 2017/18. The Board also reviews risks which disclosures with respect to the King IV Code. could influence the achievement of strategic objectives and is responsible for risk management. The integrated report provides information on GOVERNANCE CORPORATE SANRAL’s contribution to national road infrastructure, SANRAL’s strategic objectives are backed by key transformation and empowerment, performance with performance indicators (KPIs) which are linked to respect to targets, and financial performance. individual performance agreements and have annual targets. Performance against most targets is monitored 1.3 Governing structures and delegation quarterly, six-monthly or annually. The KPIs measure performance in important areas of business such as Principle 6: Primary role and responsibilities of the road asset performance, road safety, transformation, governing body finance, research, stakeholder management and The governing body should serve as the focal point and environmental management. custodian of corporate governance in the organisation.

The aim is for SANRAL to deliver against its mandate The Board’s role and responsibilities are detailed and make a real contribution to the lives of its in the Board charter. Functions include setting of stakeholders, including employees, contractors and strategic direction, approval of policy, oversight associated SMMEs, road users, and communities along of implementation and accountability through the national road network. appropriate disclosure in the integrated report, performance management and additional reporting. Principle 5: Reporting The Board is satisfied that it has fulfilled its The governing body should ensure that reports issued by responsibilities in line with the Board charter and code the organisation enable stakeholders to make informed of conduct. assessments of the organisation’s performance and its short, medium and long-term prospects. The Board held five meetings during the year, with attendance as in the table below. SANRAL’s integrated report, including the annual

Table 46: Attendance of Board members at meetings held in 2016/17

Director Position 30 May 12 Aug 22 Nov 11 Jan 30 Jan 2016 2016 2016 2017 2017 Mr R Morar Chairperson Non-executive √ √ √ √ √ Mr C Hlabisa Non-executive √ √ √ √ A Ms Z Kganyago Non-executive √ √ √ √ √ Ms A Lawless Non-executive √ √ √ √ √ Ms D Mashile- Nkosi Non-executive A √ A √ √ Mr M Matete Non-executive √ √ √ √ √ Ms A Halstead Non-executive A √ √ √ √ Mr N Alli CEO – Executive A √ R R R Mr S Macozoma CEO – Executive - - - √ √

√: Member present A: Member absent R: Retired -: Not appointed

99 Mr Nazir Alli was CEO until 30 September 2016 when Agency Limited and National Roads Act No 7 of 1998 he retired. Mr Koos Smit attended the meeting of 22 (the SANRAL Act), as amended. November 2016 as Acting CEO and Mr Skhumbuzo Macozoma was present at meetings after his The Board comprises eight members, as listed on appointment as CEO on 1 December 2016. page 101. Ms Avril Halstead is a non-executive member representing National Treasury and is appointed by the The 2016 shareholder meeting, or annual general Minister of Finance. Mr Chris Hlabisa represents the meeting, was held on 9 September 2016. Department of Transport. The CEO is the only executive member. The other five members are non-executive, Board strategy sessions were held on 2 February 2017 independent members who serve a maximum of two and 3 March 2017 to discuss Strategy 2030. three-year terms.

Principle 7: Composition of the governing body The Board includes four engineers, a chartered The governing body should comprise the accountant and three finance and business specialists. appropriate balance of knowledge, skills, This is considered to be a good mix of skills that are experience, diversity and independence for it to relevant to SANRAL’s business. The gender ratio discharge its governance role and responsibilities is 50:50. objectively and effectively. The chairperson is an independent, non-executive SANRAL’s sole shareholder is the state, represented member of the Board. A lead member has not been by the Minister of Transport. Most Board members are designated among the independent members. In the appointed by the Minister of Transport. Appointments absence of the chair at any meeting, the Board appoints are made in terms of the South African National Roads another member to serve as chair.

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Table 47: Biographical summaries on SANRAL board members

Director Position Age Length on Other significant board membership/professional SANRAL board positions

Mr R Morar Chairperson 50 5 years PIC, ACSA, Adcock Ingram Holdings, Pan African Group, GOVERNANCE CORPORATE Non-executive, Morar Investments, Morar Trust Services, Amakhono Capital independent As a chartered accountant and certified fraud examiner, Mr Morar has extensive experience relating to financial management, business advisory, audit and forensic assignments in both the public and the private sectors. He has served on various public and private sector boards, including as chair of audit committees and boards. Ms A Halstead Non-executive 40 1 year South African Blind Mobility Trust Ms Halstead has been a chief director at the National Treasury for more than 10 years and is responsible for overseeing approximately 40 large state-owned enterprises. Prior to joining the National Treasury, she worked for McKinsey & Company, Old Mutual and Wipcapital, a subsidiary of Wiphold. Mr C Hlabisa Non-executive 55 3.5 years Roadside Abattoir (Pty) Ltd, Umzansi Lodge B&B CC, Amangotsha Enterprises CC As Deputy Director-General for Roads Transport in the Department of Transport, Mr Hlabisa’s role encompasses responsibility for road engineering standards, road infrastructure and industry development, road regulation, driving license card entity oversight, public entity oversight and strategic integrated projects. Prior to his appointment to the DoT in 2013, he was Head of Department at the KZN Department of Transport. Ms Z Kganyago Non-executive, 50 2 years Tsogo Sun Gaming, independent Hospitality Property Fund, Arctograph Investments (Pty Ltd) Ms Kganyago’s experience is in the area of property planning, development and management. Dr A Lawless Non-executive, 64 2 years South African Institution of Civil Engineering (SAICE) board independent and council, SAICE Professional Development and Projects (SAICE-PDP), Human Resource Development Council (HRDC), Allyson Lawless (Pty) Ltd, Tortoise Investments (Pty) Ltd, advisor to Department of Higher Education and Training on skills for Strategic Integrated Projects As MD of SAICE Professional Development and Projects since 2004, Ms Lawless has launched many engineering skills development initiatives and has served on many national structures relating to engineering qualifications, skills and innovation. Her early career was in consulting. With the emergence of desktop computers, she became a pioneer in developing the local civil engineering software market. Ms D Mashile-Nkosi Non-executive, 58 2 years Kgalagadi Manganese (Pty) Ltd, First Rand Foundation, independent Metmar Ltd, Women’s Development Bank Holdings, Eyesizwe Mining (Pty) Ltd Ms Mashile-Nkosi has a strong development background as an activist on gender issues. She encourages business to improve the quality of life of poor communities and to nurture women entrepreneurs and business leaders. Ms Mashile-Nkosi is a leader in infrastructure development, having built a mine, a sinter plant and surface infrastructure, including a road, a rail line and a 132 JVA substation. She was the first black woman to own a mine in SA. Mr M Matete Non-executive, 48 2 years Southern African Transport Conference independent Mr Matete has been in business since 2001 and has more than six years’ experience as a non-executive member of boards. He has been involved in the civil and transportation engineering field for more than 20 years. He has experience in business establishment and development. Mr N Alli CEO - 66 18 years None Executive Mr Alli served as CEO of SANRAL from its establishment in 1998 until September 2016, when he retired. The entity’s road network more than tripled on his watch as did the staff complement. He was a respected champion of good governance and honest business throughout his time with SANRAL. Mr S Macozoma CEO - 41 4 months None Executive Mr Macozoma joined the DoT in 2002 following 10 years as a researcher at the CSIR. As a chief director in the DoT from 2005, he was responsible for road, rail and aviation infrastructure. He served on the 2010 FIFA World Cup Organising Committee and was responsible for transport, logistics, accommodation and hospitality. He then served as MD of the Johannesburg Roads Agency for three years and as CEO of the Electronic Toll Concession Ltd (GFIP e-toll operations) for a short period. He joined SANRAL as CEO on 1 December 2016.

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Principle 8: Committees of the governing body may also appoint external, independent members or The governing body should ensure that its advisers on committees, should their skills be required arrangements for delegation within its own structures for the effective functioning of the committees. promote independent judgment and assist with balance of power and the effective discharge of its duties. Contracts Committee The Contracts Committee is established in terms of its Section 16 (1) of the SANRAL Act states that “the Board charter, which is reviewed and approved on an annual may from time to time appoint one or more committees basis by the Board of Directors. to assist the Board in performing its functions”. The Contracts Committee is responsible for the The board has established four committees to assist adjudication and award of contracts and authorisation of it in discharging its control and oversight duties. contract expenditure. It also has oversight of SANRAL’s These are the Contracts Committee, the Audit and transformation initiatives in the construction industry and Risk Committee, the Social, Ethics and Transformation the empowerment of SMMEs and small contractors. Committee, and the Assets and Liabilities Committee. The committee comprises three non-executive SANRAL does not have a nominations committee as the members and the CEO. They are listed in Table 48 and appointment of the Board is the responsibility of the their qualifications and experience are detailed in Minister of Transport as legislated in the SANRAL Act. Table 47. The representative of National Treasury is nominated by the Minister of Finance. No external advisers or invitees attended committee meetings regularly during 2016/17. SANRAL’s Functions that might otherwise vest in a remuneration Engineering Executive, the Contracts Manager, the committee are undertaken in SANRAL by the Social, Legal Adviser, the CFO, the Company Secretary and Ethics and Transformation Committee. the Committee Secretary attended all meetings by invitation. The various committees do not assume any management or operational responsibilities but A key area of focus during the year was increasing have oversight of the implementation of their SANRAL’s transformation impact by the unbundling recommendations. All committees also have the of projects to provide opportunities for smaller responsibility of monitoring the management of risks contractors. within their respective areas of oversight. Thirteen meetings were held during the year and The Board appoints the members of committees attendance of meetings is indicated in Table 48. from among Board members on the basis of the skills required to fulfil the functions of each committee. The committee is satisfied that it fulfilled its The tenure of members of committees is concurrent responsibilities in accordance with its charter during with their period of service on the Board. The Board 2016/17.

Table 48: Attendance at meeting of the Contracts Committee in 2016/17

Director/ Position 8 Apr 9 May 7 Jun 12 Jul 11 Aug 30 Aug 06 Sep member 2016 2016 2016 2016 2016 2016 2016

Ms Z Kganyago Non-executive √ √ √ √ √ √ √ chairperson

Mr M Matete Non-executive member √ √ √ √ √ √ √ Mr C Hlabisa Non-executive member √ A A A √ A √ Mr N Alli Executive member √ √ √ √ √ √ *

* Mr JJ Smit, Acting CEO, attended as executive member

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Table 48 continued

27 Sep 11 Oct 10 Nov 13 Dec 07 Feb 07 Mar Director/member Position 2016 2016 2016 2016 2017 2017 CORPORATE GOVERNANCE CORPORATE Ms Z Kganyago Non-executive chairperson √ √ √ √ √ √

Mr M Matete Non-executive member √ √ √ √ √ √

Mr C Hlabisa Non-executive member A A √ A A A

Mr S Macozoma Executive member * * * √ √ √

* Mr J J Smit, Acting CEO, attended as executive member √: Member present A: Member absent

Audit and Risk Committee • Other functions such as oversight of the annual The Audit and Risk Committee (ARC) is established in performance plan, performance report, annual terms of its charter, which is reviewed and approved budget and public liability claims. on an annual basis by the Board of Directors. Two committee members are independent, non-executive The committee meets at least once a year with the directors and one member is a non-executive internal and external auditors respectively. Management director. Their names are listed in Table 50 and their is absent from such meetings in order to facilitate qualifications and experience are detailed on page 101. discussions that may not be appropriate in the presence.

The board has also appointed an adviser to the Both the internal and external audit teams attend all committee, in order to support and strengthen its Audit and Risk Committee meetings by invitation. In financial literacy and related skills. addition, the CEO, CFO, the Management Accountant, the Corporate Services Executive, the Risk Manager, The functions of the committee, as set out in the the Company Secretary and the Committee Secretary charter, are: attend all meetings by invitation. • Independent oversight of the integrated report and the financial statements. Key areas of focus during the year included oversight • Internal control and oversight of internal audit. of the internal audit team, audits related to GFIP • Independent oversight of combined assurance, Open Road Tolling, risk management, management including the external audit. and follow-up of audit findings by operational teams. • Oversight of compliance, risk management and anti- Moreover, SANRAL has a policy on non-audit services. fraud and corruption measures. • Information technology governance. Five committee meetings were held during the year and attendance of meetings is indicated in Table 50.

Table 49: Biographical summary on external advisor to Audit and Risk Committee

Name Position Age Length of time in Other significant board membership/ position professional positions

Mr Akhter Hoosen Moosa Advisor – Audit and 64 13 months Pitlake Investments (Pty) Ltd, South Risk Committee African Airways, Competition Tribunal, SAA Technical (Pty) Ltd, Encha (PMB) (Pty) Ltd, and Distribution and Warehousing Network (Pty) Ltd Mr Moosa was the CEO and later the chair of MSGM Masuku, a firm of auditors and accountants which subsequently merged with PwC. He served on the executive committee of PwC and later on its governing board. He also led the firm’s transport and logistics industry group.

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Table 50: Attendance at meetings of the Audit and Risk Committee in 2016/17

Director/ Position 24 May 28 July 15 Nov 24 Jan 14 Mar Member 2016 2016 2016 2017 2016 Ms A Lawless Non-executive, independent chairperson √ √ √ √ √ Ms Z Kganyago Non-executive, independent member √ A √ √ A Mr M Matete Non-executive, independent member √ √ √ √ √ Mr A Moosa Advisor √ √ √ √ √

A detailed report by the Audit and Risk Committee in Responsibility for nomination of members this annual report provides further information on the SANRAL does not have a Nominations Committee. The committee’s activities and governance responsibilities appointment of the Board is the responsibility of the during the year. The committee is satisfied that it Minister of Transport, as legislated in the SANRAL Act. fulfilled its responsibilities in accordance with its charter The National Treasury representative on the Board is during 2016/17. nominated by the Minister of Finance.

External Auditor Responsibility for risk governance In terms of the SANRAL Act and the Public Finance The Audit and Risk Committee oversees risk Management Act, the Auditor-General of South governance within SANRAL. It reviews the strategic Africa (AGSA) is the appointed external auditor. The (primary) risk register and the report of the fraud hotline committee is satisfied that the external auditor is at every meeting, that is, at least once every quarter. independent of the organisation. The committee also leads an annual risk session for the The external auditor conducted limited assurance Board during which members identify new risks and engagements during the year under review on the closely interrogate the risk register. compliance with commercial paper regulations relating to proposed issues by SANRAL of guaranteed notes Further details are provided in the Report of the Audit under its amended R31.91bn Domestic Medium Term and Risk Committee. Note Programme. Social, Ethics and Transformation Committee The external auditor did not provide any As mentioned earlier, SANRAL’s Social, Ethics and non-audit services. Transformation Committee is also responsible for remuneration. It is established in terms of its charter, The committee has considered the quality of the which is reviewed and approved on an annual basis by the external audit done by the AGSA. The AGSA is Board. Its functions are governed by Regulation 43 of the mandated by the Public Audit Act No 25 of 2004, to Companies Act No 71 of 2008 and include oversight of: conduct the audits in accordance with the International • Labour and employment management. This includes Standards on Auditing. The AGSA adopted the the review of remuneration policy and annual International Federation of Accountants’ Code of remuneration adjustments Ethics and International Organization of Supreme Audit • Social and economic development programmes, Institutions’ Code of Ethics to ensure that the audits are including transformation, skills development, conducted in an ethical manner and in accordance with employment equity, and good corporate citizenship the standards. These codes require the company to endeavours identify the threats to independence and put mitigating • Customer and stakeholder relationships measures in place. • Environmental, health and safety responsibilities.

The AGSA rotates engagement managers whenever The committee has three members, two of whom are a familiarity threat to independence is identified. non-executive. Their names appear in Table 51 and The rotation policy stipulates that an engagement their qualifications and experience are detailed on manager should be rotated on a five-year basis and page 101. this is monitored by the risk and ethics unit within the AGSA. However, if conditions exist that suggest The activities of the committee are guided by an annual a significant threat to independence, the rotation can work plan and it held three meetings during 2016/17 be done earlier. with attendance as indicated in Table 51.

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Table 51: Attendance at meetings of the Social, Ethics and Transformation Committee in 2016/17

Director/member Position 10 Jun 2016 29 Sept 2016 19 Jan 2017 Ms D Mashile-Nkosi Non-executive chairperson A √ √ Mr R Morar Non-executive member √ A A CORPORATE GOVERNANCE CORPORATE Mr C Hlabisa Non-executive member A √ √

The committee had no advisers or invitees who activities of the treasury function. The committee attended its meetings regularly. However, SANRAL’s periodically reviews the relevance and validity of these remuneration service provider provides advice each controls. Any proposed amendments are subject to year in October/November on the annual remuneration approval by the Board. adjustment for various employee grades, based on an annual remuneration survey. The committee comprises two non-executive members and the CEO. Their names are listed in Table 52 and The CEO, the Corporate Services Executive, the qualifications and experience are detailed on page 101. Company Secretary and the Committee Secretary attend all meetings by invitation. The committee is No external advisers or invitees attended committee satisfied that it fulfilled its responsibilities in accordance meetings regularly in 2016/17. SANRAL’s Treasurer, with its charter during the financial year 2016/17. Financial Risk Manager, the CFO, the Company Secretary and the Committee Secretary attended all The Assets and Liabilities Committee meetings by invitation. The Assets and Liabilities Committee is established in terms of its charter, which is reviewed and approved The main areas of focus were SANRAL’s borrowing plan on an annual basis by the Board of Directors. The and liquidity management. committee monitors the implementation of policies and controls governing SANRAL’s financial risk management The committee held five meetings during 2016/17 and activities with respect to liquidity, investments, interest attendance is listed in Table 52. rates and credit. The committee sets risk management parameters for each risk category and reviews the The committee is satisfied that it fulfilled its performance of the treasury function. Provisions in responsibilities in accordance with its charter during the the Treasury Policy and Control Manual regulate the financial year 2016/17.

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Table 52: Attendance of meetings of the Assets and Liabilities Committee in 2016/17

Director/ Position 14 June 23 Aug 18 Oct 18 Nov 21 Feb member 2016 2016 2016 2016 2017 Ms A Halstead Non-executive chairperson √ √ √ √ √ Ms D Mashile-Nkosi Non-executive member √ √ √ A A Mr N Alli CEO, executive member √ √ - - - Mr K Smit Acting CEO, executive member - - √ √ - Mr S Macozoma CEO, executive member - - - - √

√: Member present A: Member absent -: Not appointed

Principle 9: Evaluation of performance of governing CEO body Following the retirement of the founding CEO on The governing body should ensure the evaluation of its 30 September 2016, the current CEO commenced own performance and that of its committees, its chair duties on 1 December 2016 on a five-year contract, and its individual members, and support continued with a notice period of a month, as provided in the improvement in its performance and effectiveness. SANRAL Act. The CEO reports to the Board which is responsible for the performance evaluation of the CEO The performance of the Board and its committees was and for making a recommendation on his annual salary evaluated formally during 2016/17 by an external, adjustment to the Minister of Transport. independent evaluator who rated the performance of the Board and SANRAL’s corporate governance practice The CEO is accountable for the implementation and as satisfactory. One area of concern was that the size execution of approved strategy and policy, and for of the Board, with eight members, was considered as oversight of operational planning and implementation. small and a few more members were required, given He serves as the chief link between the Board and the growth in SANRAL’s mandate and operations. management. Increasing the size of the Board would require a change in legislation, and the Board has raised this matter with The CEO’s major contractual responsibilities are the Minister of Transport. delivering the KPAs captured in the shareholder compact, managing business operations, driving Another area of concern was succession planning and company strategy, maintaining technical excellence in the time it took to appoint a suitable CEO. The serving delivery, and addressing key company challenges. CEO had reached retirement age in May 2016 but continued to serve under contract extensions and a new The CEO has no other professional commitments. CEO was only appointed on 1 December 2016. Mr Macozoma was appointed by the Minister of The Board considered that the evaluation had Transport on the recommendation of the Board after an added value to its functioning and created greater intense recruitment process. appreciation of its oversight role and fiduciary responsibilities. The evaluation report was made The Board has approved a delegation of authority available to the Minister of Transport and to to the CEO. This is governed by the requirements of Parliament’s Portfolio Committee on Transport. relevant legislation and general governance principles, ensuring adequate control and oversight by the Board Principle 10: Appointment and delegation to while ensuring that the CEO has the authority to management implement and execute Board-approved strategy. The The governing body should ensure that the delegations of powers are reviewed annually and when appointment of management and delegation to statutory changes necessitate their revision. management contribute to role clarity and effective exercise of authority and responsibilities. The CEO has also issued delegations of power to the management team to ensure appropriate levels of

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delegated authority and segregation of duties among The Board is ultimately accountable for risk staff. The Board is satisfied that the delegation of management and the Audit and Risk Committee authority framework applicable in SANRAL contributes monitors risk management on an ongoing basis on to role clarity and the effective exercise of authority behalf of the Board. CORPORATE GOVERNANCE CORPORATE and responsibilities. Principle 12: Technology and information Company Secretary governance The Board has appointed a Company Secretary, as The governing body should govern technology and required by the Companies Act. The position is at information in a way that supports the organisation in arms-length of the Board and the Company Secretary setting and achieving its strategic objectives. is not a member of the Board. Her performance and independence are reviewed and evaluated by the The Information Technology Governance Committee Board every year. (ITGC) is constituted as a management committee and its duties have been assigned by the Board in The Company Secretary is responsible for providing accordance with the SANRAL ICT Charter and ICT support to the Board and developing systems and Governance Policy Framework. The ITGC has no processes to enable the Board to function effectively. decision-making powers except where expressly She provides guidance and support with regard to the provided by the Board through the delegation of powers, roles and responsibilities of the Board and authority framework and approved policies. its committees, as well as to individual members. She guides the Board on corporate governance matters, The ITGC oversees the development and including the requirements of the Companies Act and implementation of ICT governance policies. These other governance-related legislation. The Company are integrated with the business strategy process Secretary is considered by the Board to be fit and and facilitate the achievement of SANRAL’s strategic proper for the position and is qualified to perform the objectives, thereby improving SANRAL’s performance duties which are required of the role. She reports to the and sustainability. Board functionally and to the CEO administratively.

The Audit and Risk Committee exercises oversight of IT 1.4 Governance functional areas governance on behalf of the Board.

Principle 11: Risk governance The following policies were reviewed, updated and The governing body should govern risk in a way that approved by the Board during the financial year: supports the organisation in setting and achieving its • ICT Charter strategic objectives. • ICT Governance Framework • ICT Project Governance Framework. The Board has approved the Risk Management Policy and Framework, which is reviewed and approved annually. The following major IT acquisitions were made: The Board delegated to management the • IT hardware refresh projects establishment of a Risk Focus Group which meets • Information security services project quarterly and reviews the primary risk register and the • Video conferencing facilities and services. secondary risk register. The ITGC reports to the Audit and Risk Committee SANRAL uses an enterprise-wide risk management every quarter to ensure that IT processes are capable methodology to assess both strategic and operational of delivering the intended outcomes cost-effectively. risks in the light of SANRAL’s strategic objectives. These monitoring measures focus on key aspects of IT capability, such as systems performance, availability, The annual governance, risk and compliance agility and integrity, as well as the development of new roadshow to all of SANRAL’s offices provides a solutions, the ability to operate reliable and secure reminder to all employees about SANRAL’s risk services in an increasingly demanding environment, and management and anti-fraud and anti-corruption the development of human resources and skills. philosophy. It is also an opportunity to highlight the risks and failures experienced. Development of the 2030 ICT Strategy commenced in

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2016/17 along with the overall business strategy. The strategic objectives and positive outcomes in the short, activities envisaged as part of the new strategy include: medium and long term. • Starting the design of a unified communications solution, integrated with the newly deployed state- SANRAL’s Human Resources Policy contains a chapter of-the-art video conferencing solution which describes remuneration policy and sets out the • Maturing ICT governance practices and defining the process for determining remuneration. The policy desired ICT maturity level in SANRAL is updated annually and approved by the Board, • Reducing IT complexity on the recommendation of the Social, Ethics and • Upgrading the enterprise resource planning system, Transformation Committee. It is also tabled and starting with system design and requirements approved at the shareholder meeting. • Focusing on innovative efforts and creating a more enabling and strategic IT set-up. SANRAL has appointed consultants to conduct remuneration surveys to ensure market-related Principle 13: Compliance governance remuneration for employees. The remuneration The governing body should govern compliance with comparator group research provides information which applicable laws and adopted, non-binding rules, codes allows for market related remuneration scales for all and standards in a way that supports the organisation employee grades. Any adjustment to remuneration has being ethical and a good corporate citizen. to be within the limits approved by the Board.

Compliance is a non-negotiable part of SANRAL’s ethos The performance of employees is appraised annually and is integral to every activity and operation of the and remuneration adjustments are based on the organisation. The annual governance, risk and compliance performance rating received by each employee. roadshow to all employees signals the importance of SANRAL’s short-term incentive scheme is entirely compliance within every function. A Compliance Policy performance-based. has been adopted and this clearly states SANRAL’s commitment to comply not only with legislation but also The Minister approves the scale of remuneration for the with codes, standards and best practice. Chairperson and the members of the Board annually. The Board is then remunerated at a daily rate for every The identification of statutory obligations is part of the day spent on SANRAL business. compliance culture within SANRAL as are continuous monitoring and reporting in a pro-active and positive Details of Board and management remuneration are manner. A database has been created which lists all published in the annual integrated report. sections of all laws and regulations which impose a responsibility on SANRAL. Principle 15: Assurance The governing body should ensure that assurance Compliance with procurement legislation is also services and functions enable an effective control closely monitored through SANRAL’s Supply Chain environment, and that they support the integrity of Management Unit, which is required to ensure that information for internal decision-making and the any changes are implemented by all SANRAL offices organisation’s external reports. and challenges are immediately managed throughout the organisation. Strict adherence to supply chain Internal Audit has confirmed to the Audit and Risk management regulations is critical as is the avoidance Committee that, for the current financial year, SANRAL’s of any real or perceived conflict of interest. governance, risk management and control processes are effective in all material aspects. There have been no regulatory penalties, sanctions or fines for non-compliance or contravention of statutory Also refer to the Audit and Risk Committee Report on obligations by the Board or senior management since page 114. SANRAL’s establishment. 1.5 Stakeholder relationships Principle 14: Remuneration governance The governing body should ensure that the Principle 16: Stakeholders organisation remunerates fairly, responsibly and In the execution of its governance role and transparently so as to promote the achievement of responsibilities, the governing body should adopt a

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stakeholder-inclusive approach that balances the needs, In all such meetings SANRAL strives to understand interests and expectations of material stakeholders in the concerns and address the expectations of the best interests of the organisation over time. stakeholders. It is the agency’s firm belief that this approach bears fruit over time as stakeholders are CORPORATE GOVERNANCE CORPORATE As a corporate citizen SANRAL is enjoined by prescripts consulted about SANRAL activities that affect them and good governance practices, such as the King IV and they often influence the decisions taken. Report on Corporate Governance, to place stakeholder engagement at the heart of its operations. SANRAL’s strategic approach during 2016/17 was a planned programme of stakeholder outreach Evidence of SANRAL’s inclusion of stakeholders is which spanned all regions and focused particularly reflected in the number and nature of engagements undertaken, particularly in relation to project flashpoints. on potential flashpoints, such as the proposed N3 These included interactions with chambers of commerce, Development Expressway, the N2 Wild Coast road and information sessions with communities affected by the Moloto Road improvement. projects such as the Moloto Road upgrade, the official opening of projects such as the R71 Moria Interchange, Through flagship programmes, such as Taking and presentations to provincial governments about key SANRAL to the People and ChekiCoast, SANRAL projects, such as the interoperable tag that can be used conducted public information and education activities at toll plazas across the country. in various regions.

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2. Corporate performance information

Programme performance indicators and targets for 2016/17

Programme 1 – Strategic Objective 1: Manage the national road network effectively and efficiently

Programme performance indicator Reporting period Baseline Annual target 2016/17 Quarter 4: 31 March 2017 Actual 2015/16 Achieved Variation Comments/reasons for variation 1.1 Smooth travel exposure (STE) Quarterly 95.75 ≥ 95% 97.0% +2.11% Accelerated reseal projects 1.2 Low rut exposure (LRE) Quarterly 95.74 ≥ 95% 99.9% +5.16% Accelerated reseal projects 1.3 High texture exposure (HTE) Quarterly 98.90 ≥ 95% 99.5% +4.74% Accelerated reseal projects 1.4 Bridge condition exposure (BCE) Quarterly 92.89 ≥ 90% 93.6% +4.00% New 5 yearly condition assessments completed over the network 1.5 Routine maintenance: km Quarterly 21 490 21 579 22 197 +2.86% Additional roads incorporated during course of the year 1.6 Network resurfaced: km Annual 1 563 900 1 891 +110.11% Reseal projects on newly incorporated roads accelerated to minimise the deterioration of roads 1.7 Roads strengthened, improved and new: Annual 370 450 575 +27.77% Projects on newly incorporated roads accelerated to address sections in poor (CAPEX) km to very poor condition 1.8 SIP-1 Annual Maintenance of N1, N4, R33, Annual 885 885 885 0% Active RRM on all routes R510, R511 and R520 National Road to Lephalale (km) 1.9 SIP-4 Annual Maintenance of National Roads in Annual 2 598 2 598 2 598 0% Active RRM on all routes North West Province: (km) 1.10 Traffic information collection and dissemination Quarterly Information on the full Collection and Collection and 0% Ongoing traffic information and dissemination on FMS (Freeway Management System) network of 450 km is dissemination of real dissemination of network being received time information information on 100% (expected travel times) (450km) of FMS on 100% (450km) of network is happening FMS network currently

Note: 1.5, 1.6 and 1.7 – As in SANRAL Roadworks Classification document and under construction

Programme 2 – Strategic objective 2: Provide safe roads

Programme performance indicator Reporting period Baseline Annual Target Quarter 4: 31 March 2017 Actual 2015/16 2016/17 Achieved Variation Comments/reasons for variation 2.1 Identify, Investigate and Propose Remedial Quarterly 18 pedestrian Identify, investigate 13 Pedestrian +8.33% Emphasis on road safety projects Measures for 12 Pedestrian Hazardous hazardous locations and propose remedial Hazardous Locations Locations identified, investigated measure at 12 identified, investigated and remedial measures hazardous locations and remedial measures proposed per year proposed 2.2 Road Safety Audits completed for upgrade Quarterly 100% progress in 4 8 audits 14 Road Safety Audits +75% Emphasis on road safety audits at design phase and/or improvement projects in the Project road safety audits have been completed Detail Design Phase

2.3 Road safety education and awareness Semi-annual 42 educational 15 educational Programmes in 54 +260% Emphasis on road safety education and awareness programmes at sites programmes at selected educational districts districts/sites districts education districts/sites identified by Regional Offices in a 5km radius of the national network and linked to SANRAL construction projects

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2. Corporate performance information

Programme performance indicators and targets for 2016/17 CORPORATE GOVERNANCE CORPORATE Programme 1 – Strategic Objective 1: Manage the national road network effectively and efficiently

Programme performance indicator Reporting period Baseline Annual target 2016/17 Quarter 4: 31 March 2017 Actual 2015/16 Achieved Variation Comments/reasons for variation 1.1 Smooth travel exposure (STE) Quarterly 95.75 ≥ 95% 97.0% +2.11% Accelerated reseal projects 1.2 Low rut exposure (LRE) Quarterly 95.74 ≥ 95% 99.9% +5.16% Accelerated reseal projects 1.3 High texture exposure (HTE) Quarterly 98.90 ≥ 95% 99.5% +4.74% Accelerated reseal projects 1.4 Bridge condition exposure (BCE) Quarterly 92.89 ≥ 90% 93.6% +4.00% New 5 yearly condition assessments completed over the network 1.5 Routine maintenance: km Quarterly 21 490 21 579 22 197 +2.86% Additional roads incorporated during course of the year 1.6 Network resurfaced: km Annual 1 563 900 1 891 +110.11% Reseal projects on newly incorporated roads accelerated to minimise the deterioration of roads 1.7 Roads strengthened, improved and new: Annual 370 450 575 +27.77% Projects on newly incorporated roads accelerated to address sections in poor (CAPEX) km to very poor condition 1.8 SIP-1 Annual Maintenance of N1, N4, R33, Annual 885 885 885 0% Active RRM on all routes R510, R511 and R520 National Road to Lephalale (km) 1.9 SIP-4 Annual Maintenance of National Roads in Annual 2 598 2 598 2 598 0% Active RRM on all routes North West Province: (km) 1.10 Traffic information collection and dissemination Quarterly Information on the full Collection and Collection and 0% Ongoing traffic information and dissemination on FMS (Freeway Management System) network of 450 km is dissemination of real dissemination of network being received time information information on 100% (expected travel times) (450km) of FMS on 100% (450km) of network is happening FMS network currently

Note: 1.5, 1.6 and 1.7 – As in SANRAL Roadworks Classification document and under construction

Programme 2 – Strategic objective 2: Provide safe roads

Programme performance indicator Reporting period Baseline Annual Target Quarter 4: 31 March 2017 Actual 2015/16 2016/17 Achieved Variation Comments/reasons for variation 2.1 Identify, Investigate and Propose Remedial Quarterly 18 pedestrian Identify, investigate 13 Pedestrian +8.33% Emphasis on road safety projects Measures for 12 Pedestrian Hazardous hazardous locations and propose remedial Hazardous Locations Locations identified, investigated measure at 12 identified, investigated and remedial measures hazardous locations and remedial measures proposed per year proposed 2.2 Road Safety Audits completed for upgrade Quarterly 100% progress in 4 8 audits 14 Road Safety Audits +75% Emphasis on road safety audits at design phase and/or improvement projects in the Project road safety audits have been completed Detail Design Phase

2.3 Road safety education and awareness Semi-annual 42 educational 15 educational Programmes in 54 +260% Emphasis on road safety education and awareness programmes at sites programmes at selected educational districts districts/sites districts education districts/sites identified by Regional Offices in a 5km radius of the national network and linked to SANRAL construction projects

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Programme 3 – Strategic objective 3: Carry out government’s targeted programmes

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 3.1 Percentage of the Routine Road Maintenance Quarterly 85% >65 % 76% +17% BBBEE credentials of contractors better than expected project contract value contracted to SMMEs and black-owned companies and in terms of Black ownership of the main contractor 3.2 Percentage of the Non-Routine Road Quarterly 46% >35 % 50% +43% BBBEE credentials of contractors better than expected Maintenance project contract value contracted to SMMEs and black-owned companies and in terms of Black ownership of the main contractor 3.3 Jobs created on project (full-time) Quarterly 15 721 21 000 19 047 -9.30% Increased disruption of various SANRAL projects Male = 79.1% Female = 20.9% Youth = 59.0% 3.4 Number of SMMEs working for SANRAL* Quarterly 2056 1 200 1 833 +52.75% Increased community participation goals stipulated in SANRAL tenders 3.5 Number of internships (practical experience Quarterly 326 121 304 +151% More students than anticipated were awarded internships for under-graduate studies) 3.6 Number of external bursaries (tertiary) Quarterly 122 85 133 +56% More students than anticipated were awarded bursaries 3.7 Number of scholarships Quarterly 196 200 194 -3% Applications received on closing date did not meet the requirements as outlined in the scholarship applications 3.8 Employment Equity Plan (EE Plan) Annual Targets achieved as per Achieve annual targets as 98.18% of the target -1.82% Slightly delayed employee intake Board approved EE Plan per Board approved EE achieved Plan 3.9 Community development infrastructure Annual 18 projects in construction 12 projects in construction 24 projects in 100% Projects continuing from previous years and construction start of projects which projects construction completed the design phase

Note: 3.1 and 3.2 – As in SANRAL roadworks classification document * 3.4 – The number includes SMMEs counted more than once when providing services on different project types (routine maintenance, special maintenance, strenghtening, toll and non-toll projects). The total number of unique SMMEs is 1 312.

Programme 4 – Strategic objective 4: Co-operative working relationships with all spheres of government and SADC member countries

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 4.1 Ensure minimum of two annual meetings for Annual 2 meetings held for 2 2 0% Required meetings held as scheduled each COTO sub-committee chaired by SANRAL Road Asset Management Systems (RAMS) and Roads Materials Committee (RMC) and Structures 4.2 Revise following TRH/TMH guidelines through Annual TMH3, TMH8, TMH9, TRH5; TRH13; TRH14 TRH8, TRH13, and -100% The revision of TRH5 and TRH14 awaiting completion in terms of SANS COTO sub-committees and submit to COTO TMH13, TMH14, TMH18, TRH21: circulated with standards. As substitutes, TRH8 and TRH21 were revised instead for approval TMH19 and TMH22 - COTO sub-committee Revised and submitted to COTO for approval 4.3 Revision of the COTO standard specifications Annual 60% completed 100% 100% 0% Final draft of chapters submitted for external technical review for road and bridge works

4.4 Construction of Botswana Border Bridge Annual 75% construction has been 100% construction Construction 100% 0% Project completed on target (Notwane River) completed completed completed 4.5 National Technical Committee to produce four Quarterly 4 IMS reports completed Production of 4 IMS reports 4 IMS reports produced 0% Regular monitoring of IMS reports Incident Management System (IMS) reports for and presented to COTO via for COTO and sent to COTO COTO NDOT

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Programme 3 – Strategic objective 3: Carry out government’s targeted programmes

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation

3.1 Percentage of the Routine Road Maintenance Quarterly 85% >65 % 76% +17% BBBEE credentials of contractors better than expected GOVERNANCE CORPORATE project contract value contracted to SMMEs and black-owned companies and in terms of Black ownership of the main contractor 3.2 Percentage of the Non-Routine Road Quarterly 46% >35 % 50% +43% BBBEE credentials of contractors better than expected Maintenance project contract value contracted to SMMEs and black-owned companies and in terms of Black ownership of the main contractor 3.3 Jobs created on project (full-time) Quarterly 15 721 21 000 19 047 -9.30% Increased disruption of various SANRAL projects Male = 79.1% Female = 20.9% Youth = 59.0% 3.4 Number of SMMEs working for SANRAL* Quarterly 2056 1 200 1 833 +52.75% Increased community participation goals stipulated in SANRAL tenders 3.5 Number of internships (practical experience Quarterly 326 121 304 +151% More students than anticipated were awarded internships for under-graduate studies) 3.6 Number of external bursaries (tertiary) Quarterly 122 85 133 +56% More students than anticipated were awarded bursaries 3.7 Number of scholarships Quarterly 196 200 194 -3% Applications received on closing date did not meet the requirements as outlined in the scholarship applications 3.8 Employment Equity Plan (EE Plan) Annual Targets achieved as per Achieve annual targets as 98.18% of the target -1.82% Slightly delayed employee intake Board approved EE Plan per Board approved EE achieved Plan 3.9 Community development infrastructure Annual 18 projects in construction 12 projects in construction 24 projects in 100% Projects continuing from previous years and construction start of projects which projects construction completed the design phase

Note: 3.1 and 3.2 – As in SANRAL roadworks classification document * 3.4 – The number includes SMMEs counted more than once when providing services on different project types (routine maintenance, special maintenance, strenghtening, toll and non-toll projects). The total number of unique SMMEs is 1 312.

Programme 4 – Strategic objective 4: Co-operative working relationships with all spheres of government and SADC member countries

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 4.1 Ensure minimum of two annual meetings for Annual 2 meetings held for 2 2 0% Required meetings held as scheduled each COTO sub-committee chaired by SANRAL Road Asset Management Systems (RAMS) and Roads Materials Committee (RMC) and Structures 4.2 Revise following TRH/TMH guidelines through Annual TMH3, TMH8, TMH9, TRH5; TRH13; TRH14 TRH8, TRH13, and -100% The revision of TRH5 and TRH14 awaiting completion in terms of SANS COTO sub-committees and submit to COTO TMH13, TMH14, TMH18, TRH21: circulated with standards. As substitutes, TRH8 and TRH21 were revised instead for approval TMH19 and TMH22 - COTO sub-committee Revised and submitted to COTO for approval 4.3 Revision of the COTO standard specifications Annual 60% completed 100% 100% 0% Final draft of chapters submitted for external technical review for road and bridge works

4.4 Construction of Botswana Border Bridge Annual 75% construction has been 100% construction Construction 100% 0% Project completed on target (Notwane River) completed completed completed 4.5 National Technical Committee to produce four Quarterly 4 IMS reports completed Production of 4 IMS reports 4 IMS reports produced 0% Regular monitoring of IMS reports Incident Management System (IMS) reports for and presented to COTO via for COTO and sent to COTO COTO NDOT

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Programme 5 – Strategic objective 5: Maintain good governance practice

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 5.1 Fraud Hotline Quarterly Reported incidents have been Reported incidents to be All reported incidents have been 0% Ongoing efforts to reduce fraudulent and investigated and action has been investigated and action to investigated or are under investigation corrupt activity within SANRAL procurement taken or was being taken as be taken as appropriate and action has been taken or is being and other operational processes appropriate undertaken as appropriate

Programme 6 – Strategic objective 6: Maintain financial sustainability

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 6.1 Private Sector Investment Index (PSII) Quarterly 22.15% >18% 24.20% +34.44% Accelerated expenditure on Toll Capex projects, associated with reduced expenditure on non-toll projects due to community protest actions 6.2 Expenditure Efficiency Index (EEI) Quarterly 4.13% < 10% 5.25% +47.5% Emphasis on efforts to reduce overheads

Programme 7 – Strategic objective 7: Pursue research, innovation and best practice

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation

7.1 Complete the development and testing Annual 50% complete 75% 75% 0% Development and testing on target of SARDS (SA Road Design Software) portal (% compelte) 7.2 Number of formalisedSARDS (SA Road Annual 4 courses 4 0 -100% Training on software use cannot commence Design Software) training courses until SANRAL IT hardware upgrade is presented to users and user certification complete. According to SANRAL IT the hardware upgrade will now only be complete by July 2017 7.3 Three-year longitudinal study to Annual 33% of study complete 66% 66% completed 0% Research project on target determine the knowledge and behaviour of road users in selected areas

Programme 8 – Strategic objective 8: Safeguard SANRAL’s reputation

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 8.1 Commication: promote awareness of Quarterly Achieved with at least 15 positive Profile at least six positive Achieved with at least 15 positive stories +150% Appropriate communication is essential for SANRAL's mandate and contribution to stories profiled per month on messages in national/ profiled per month on various mediums SANRAL society various mediums nationally regional press (print, per month broadcast or online) per month

8.2 External Publications Semi-annual 5 issues of By the Way were Publish 2 issues of By the 5 issues of By the Way published +150% Appropriate communication is essential for published Way SANRAL 8.3 Stakeholder engagement Semi-annual 8 roundtable discussions/ Hold four roundtable 13 roundtable discussions/stakeholder +225% Stakeholder communication is essential stakeholder engagement discussions engagements were held particularly for large projects which affect sessions held. communities significantly

Programme 9 – Strategic objective 9: Pursue and maintain environmental sustainability and best practice

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 9.1 Undertake six environmental applications Annual Two environmental authorisation Undertake 2 environmental Two environmental authorisation 0% Emphasis on in-house skills development inhouse for the three year period applications has been authorisation applications applications have been undertaken (10 over 5 year period) and submit them undertaken inhouse. One has inhouse, submit for inhouse. Both submitted for final for external review and/or decisions been submitted for review and external review and/or final decisions and decisions have been the other for final decisions decisions received. which have been received.

114 3

Programme 5 – Strategic objective 5: Maintain good governance practice

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 5.1 Fraud Hotline Quarterly Reported incidents have been Reported incidents to be All reported incidents have been 0% Ongoing efforts to reduce fraudulent and

investigated and action has been investigated and action to investigated or are under investigation corrupt activity within SANRAL procurement GOVERNANCE CORPORATE taken or was being taken as be taken as appropriate and action has been taken or is being and other operational processes appropriate undertaken as appropriate

Programme 6 – Strategic objective 6: Maintain financial sustainability

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 6.1 Private Sector Investment Index (PSII) Quarterly 22.15% >18% 24.20% +34.44% Accelerated expenditure on Toll Capex projects, associated with reduced expenditure on non-toll projects due to community protest actions 6.2 Expenditure Efficiency Index (EEI) Quarterly 4.13% < 10% 5.25% +47.5% Emphasis on efforts to reduce overheads

Programme 7 – Strategic objective 7: Pursue research, innovation and best practice

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation

7.1 Complete the development and testing Annual 50% complete 75% 75% 0% Development and testing on target of SARDS (SA Road Design Software) portal (% compelte) 7.2 Number of formalisedSARDS (SA Road Annual 4 courses 4 0 -100% Training on software use cannot commence Design Software) training courses until SANRAL IT hardware upgrade is presented to users and user certification complete. According to SANRAL IT the hardware upgrade will now only be complete by July 2017 7.3 Three-year longitudinal study to Annual 33% of study complete 66% 66% completed 0% Research project on target determine the knowledge and behaviour of road users in selected areas

Programme 8 – Strategic objective 8: Safeguard SANRAL’s reputation

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 8.1 Commication: promote awareness of Quarterly Achieved with at least 15 positive Profile at least six positive Achieved with at least 15 positive stories +150% Appropriate communication is essential for SANRAL's mandate and contribution to stories profiled per month on messages in national/ profiled per month on various mediums SANRAL society various mediums nationally regional press (print, per month broadcast or online) per month

8.2 External Publications Semi-annual 5 issues of By the Way were Publish 2 issues of By the 5 issues of By the Way published +150% Appropriate communication is essential for published Way SANRAL 8.3 Stakeholder engagement Semi-annual 8 roundtable discussions/ Hold four roundtable 13 roundtable discussions/stakeholder +225% Stakeholder communication is essential stakeholder engagement discussions engagements were held particularly for large projects which affect sessions held. communities significantly

Programme 9 – Strategic objective 9: Pursue and maintain environmental sustainability and best practice

Programme performance indicator Reporting Baseline Annual target 2016/17 Quarter 4: 31 March 2017 period Actual 2015/16 Achieved Variation Comments/reasons for variation 9.1 Undertake six environmental applications Annual Two environmental authorisation Undertake 2 environmental Two environmental authorisation 0% Emphasis on in-house skills development inhouse for the three year period applications has been authorisation applications applications have been undertaken (10 over 5 year period) and submit them undertaken inhouse. One has inhouse, submit for inhouse. Both submitted for final for external review and/or decisions been submitted for review and external review and/or final decisions and decisions have been the other for final decisions decisions received. which have been received.

115 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

3. Report of the Audit and Risk Committee In executing its duties during the reporting period, the ARC has: In terms of Treasury Regulation 27(1) of the Public 2.1 Reviewed and considered the annual integrated Finance Management Act (PFMA), as amended, the report and financial statements. Audit and Risk Committee presents its report for the 2.2 Monitored and supervised the effective operation financial year ended 31 March 2017. of the internal control and internal audit function. 2.3 Overseen the external audit process and the 3.1 Audit and Risk Committee members and review of the report of the Auditor-General. meetings 2.4 Ensured that an effective, efficient and transparent system of risk management is maintained. The Audit and Risk Committee (ARC) consists of 2.5 In reviewing the reports from internal and external three independent non-executive directors. During audit as well as the reports from the internal risk the current year five meetings were held. The Chief function, the committee has performed an oversight Executive Officer, Chief Financial Officer, Corporate role to ensure compliance with laws and regulations. Services Executive, Chief Risk Officer, ICT Manager, 2.6 Assisted the Board in carrying out its IT Internal Audit and the External Auditors attend governance responsibilities. meetings by invitation. 2.7 The Committee has assisted the Board with the following: The committee members were as follows: a) Reviewing the Strategic Plan and Annual Dr Allyson Lawless Chairperson (Independent Performance Plan prior to Board approval. non-executive Board b) Reviewing the annual budget prior to Board member) approval. c) Reviewing the summary of public liability Ms Zibusiso Kganyago Member (Independent claims and other legal actions prior to Board non-executive Board approval. member) d) Considering the concerns raised with regard to SANRAL’s going concern status as a result Mr Matete Matete Member (Independent of the low collection rate of the Gauteng non-executive Board Open Road Tolling (GORT) project and has member) proposed actions to the Board, to mitigate this risk. On 27 March 2017, the Board resolved that Ms Zibusiso e) Performing such other oversight functions as Kganyago be replaced as an Audit and Risk Committee may be determined by the Board. member by Ms Daphne Mashile-Nkosi, an independent non-executive Board member. 3.3 Adequacy of internal controls

The Committee was assisted by Mr Akhter Moosa, as an SANRAL’s system of internal control is designed independent adviser. to provide reasonable assurance that assets are safeguarded and that liabilities and working capital are 3.2 Responsibilities of the committee efficiently managed.

The Audit and Risk Committee is constituted in terms The ARC is pleased to report that nothing came to of the Companies Act 2008, as amended, as a statutory its attention suggesting that any material breakdown Board committee. The Audit and Risk Committee had occurred in the functioning of the systems, has adopted the Audit and Risk Committee Charter, procedures and controls that could lead to material which has been confirmed by the Board. The charter losses, contingencies or uncertainties that would prescribes the mandate of the committee. require disclosure in the financial statements. Any control deficiencies identified by the internal and During the financial year the committee has conducted external auditors were brought to the attention of the its affairs with integrity, impartiality and objectivity. It has Committee and management implemented corrective complied with its roles and responsibilities as stated in action. Where internal controls did not operate the Act and its charter. effectively throughout the year, compensating controls

116 3

or corrective action or both were used to eliminate • Manage and maintain effective, efficient and or reduce risks. For Gauteng Open Road Tolling transparent systems of financial and risk management (GORT), a specific risk realisation process concluded and internal control that no material errors or breaches materialised as a • Manage available working capital efficiently and CORPORATE GOVERNANCE CORPORATE result of the control weaknesses identified. Additional economically substantive tests were performed to ensure that • Manage and safe-guard the assets and manage the reported financial results were materially accurate. revenue, expenditure, and liabilities of SANRAL • Ensure compliance with any tax, levy, duty, pension, The committee has further reviewed the written and audit commitments as required by legislation. assessment from internal audit on the design, implementation and effectiveness of the internal 3.6 Evaluation of annual financial statements financial controls. Based on the results of this review, the committee is of the opinion that the internal The Audit and Risk Committee has: financial controls form a sound basis for the preparation • Reviewed and discussed with the Auditor-General of reliable financial statements and the Board of Directors the audited financial statements to be included in the report 3.4 Internal audit • Reviewed the Auditor-General’s management and audit reports The internal audit function is outsourced. The appointed • Reviewed changes in accounting policies and service provider from 1 March 2016 for a period of three practices years is Business Innovation Group (BIG). The committee • Reviewed significant adjustments resulting from the has considered and reviewed the performance of the audit service provider on a continuous basis and has been • Reviewed the annual integrated report and kept informed as such by both the Chief Financial Officer recommended it for Board approval. (CFO) and the external auditor. For the year under review the CFO has also managed the function of the Chief The Audit and Risk Committee concurs and accepts Audit Executive, however, this role has been redefined the conclusions of the Auditor-General on the annual and will be separated in the new financial year. financial statements and is of the opinion that the audited financial statements be accepted and read The ARC reviewed and amended the Internal Audit together with the report of the Auditor-General. Charter, which stipulates the terms of reference for the internal audit. The internal audit annual operational and 3.7 Risk management three-year-plans were considered and approved by the ARC. All internal audit work performed, internal audit The committee has oversight of fraud, and information reports and progress reports were reviewed by the ARC. technology risks. The committee fulfills an oversight role regarding financial reporting risks, internal financial Internal audit also actively participated in SANRAL’s Risk controls, fraud and information technology risks as they Cluster, identifying and assessing risks. relate to financial reporting.

3.5 Expertise and effectiveness of the Chief 3.8 Going concern Financial Officer and the finance function The committee assessed the going concern premise of The committee examines and reviews the competence SANRAL, for the foreseeable future, and confirms this of the Chief Financial Officer and the finance function, status to the Board. annually. It is satisfied that the Chief Financial Officer and the finance function have the appropriate expertise and experience. It further considered and satisfied itself of the overall appropriateness of the expertise and adequacy of resources of the finance function. Allyson Lawless On behalf of the Audit and Risk Committee Accordingly, the committee has considered the as at 31 March 2017 effectiveness of the CFO and the finance function to be adequate in order to: Date: 25 May 2017

117 Acronyms

ARC Audit and Risk Committee Bakwena Bakwena Platinum Corridor Concessionaire BBBEE Broad-based black economic empowerment BEE Black economic empowerment CBD Central business district CDP Community development project CEO Chief executive officer

CCTV Closed circuit television cameras CPI Consumer price index CSI Corporate social investment DBSA Development Bank of Southern Africa DEA Department of Environmental Affairs DMR Department of Mineral Resources

DoE Department of Education DWS Department of Water and Sanitation EIA Environmental impact assessment EMP Environmental management plan EWT Endangered Wildlife Trust FMS Freeway management system GCIS Government Communication and Information System GDP Gross domestic product GFIP Gauteng Freeway Improvement Project IAS International Accounting Standard ICT Information communication technology IDP Integrated development plan IFRS International Financial Reporting Standards IT Information technology ITS Intelligent transport system Km Kilometres M Metres MoU Memorandum of understanding NMMU Nelson Mandela Metropolitan University N3TC N3 Toll Concession OCI Overall condition index ORT Open road tolling OUTA Organisation Undoing Tax Abuse PFMA Public Finance Management Act PPP Public-private partnerships RRM Routine Road Maintenance RSE Road Safety Education RTMS Road Traffic Management System SANRAL South African National Roads Agency SOC Limited SAPS South African Police Service SETC Social, Ethics and Transformation Committee SIP Strategic Integrated Project SMME Small, medium and micro enterprise SOC State-owned company SOE State-owned enterprise STEM PP Science Technology Engineering and Mathematics Pipeline Project TMC Traffic management centre TRAC Trans African Concessions

UFS University of the Free State VMS Variable message signs Wits University of the Witwatersrand THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LTD (SANRAL) Head office 48 Tambotie Avenue Val de Grace Pretoria PO Box 415 Pretoria 0001 South Africa

Tel: +27 (0) 12 844 8000 Fax: +27(0) 12 844 8200 www.sanral.co.za

Registration Number: 1998/009584/30 RP 179/2017 ISBN: 978-0-621-45547-2

Produced by Communications and Marketing SANRAL, Pretoria Tel: +27 (0) 12 844 8000 [email protected]

Contact Details for SANRAL’s Fraud Hotline/Tip-Offs Anonymous Toll-Free Phone No: 0800 204 558 Toll-Free Fax No: 0800 007 788 E-mail: [email protected]

Postal address: Tip-Offs Anonymous Freepost DN 298 Umhlanga Rocks

BEYOND THE HORIZON AWAIT POSSIBILITIES

INTEGRATED REPORT: Volume 2 – Corporate Governance & Financial Statements 2017 Building South Africa through better roads.

SECTION 4

ANNUAL FINANCIAL STATEMENTS

Report of Auditor-General______4 Director’s Report______12 Statement of Responsibility of Board of Directors______20 Certificate Company Secretary______21 Statement of Financial Position______22 Statement of Profit or Loss and Other Comprehensive Income____ 23 Statement of Changes in Equity______24 Statement of Cash Flows______25 Accounting Policies______26 Notes to the Financial Statements______43

3 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

1. Report of the auditor-general to Parliament on the South African National Roads Agency (SOC) Limited

Report on the audit of the financial statements

Opinion

1. I have audited the financial statements of the South African National Roads Agency (SOC) Limited (SANRAL) set out on pages 22 to 112 of Volume 2, which comprise the statement of financial position as at 31 March 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the South African National Roads Agency (SOC) Limited as at 31 March 2017, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Companies Act of South Africa, 2008 (Act No. 71 of 2008) (Companies Act).

Basis for opinion

3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of my report.

4. I am independent of the national public entity in accordance with the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code) together with the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code.

5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Key audit matters

6. Key audit matters are those matters that, in my professional judgement, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole and in forming my opinion thereon and I do not provide a separate opinion or conclusion on these matters.

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1. Report of the auditor-general to Parliament on the South African National Roads Agency (SOC) Limited

Key audit matter How the matter was addressed in the audit Impairment and collectability of trade ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL receivables (toll) As disclosed in note 9 to the annual financial I assessed the validity of outstanding trade receivables (toll) by statements, allowances for impairment losses confirming the individual transactions from a gantry pass to when a comprises mainly of e-toll debtors. The transaction is recognised in the receivable account. I also considered impairment losses provided for in the financial payments received subsequent to year-end and past payment history year under review amounted to R3,75 billion of to identify potentially impaired balances. which R3,61 billion related to the e-toll debtors. The assessment of the appropriateness of the allowance for trade The assessment and calculation of impairment receivables (toll) comprised a variety of audit procedures including: losses of e-toll debtors require management to • evaluating the appropriateness and reasonableness of the make significant estimations and judgement. assumptions applied in the management’s assessment of the Due to the subjectivity of the estimations and impairment of e-toll debtors; judgement, and the significant increase in the • assessing the nature and extent of documentation supporting the impairment losses, I consider the impairment assumptions; and collectability of trade receivables (toll) to be • verifying receipts from trade receivables (toll) subsequent to year- a key audit matter. end as well as consideration of past payment history; • considering the completeness and accuracy of the disclosures relating to the impairment and trade receivables (toll roads).

To address the risk of management bias, I evaluated the results of my procedures against those on other key balances to assess whether there was an indication of bias.

I was satisfied that the trade receivables (toll) were fairly valued and adequately provided for where doubt existed. I further considered whether the provisions were misstated and concluded that they were appropriate, and disclosures relating to trade receivable (toll) in the annual financial statements were appropriate. Revaluation of road network and road structures The carrying value of the combined road I used an independent external expert to evaluate management’s network and road structures amounted to judgements, and the procedures performed by the expert included the R303,8 billion (and the fair value adjustment following: recorded in other comprehensive income in • evaluating the appropriateness and reasonableness of the respect of the combined road network and road revaluation method and parameters applied; structures was R20,8 billion. The inputs with • recomputing the revaluation calculation; the most significant impact on these valuations • performing a visual inspection of a sample of road network and were disclosed in notes 4 and 5 to the annual road structures to confirm the condition; financial statements. • assessing the reasonableness of the material unit rates to market data and entity-specific information to confirm the appropriateness Whilst the fair value assessment is determined of these judgements. by SANRAL internally, independent experts are used to determine the unit rates utilised in the I also reviewed the work performed by the independent expert calculation of the depreciated replacement cost. to confirm that the conclusion reached was in line with the work performed and my understanding of the auditee. Due to the significance of the value of the road network and structures to the financial I further considered whether the disclosures relating to road statements as a whole, combined with the network and road structures in the annual financial statements were judgement associated with determining the fair appropriate. value, I consider this to be a key audit matter in my audit. Based on the procedures performed I am satisfied that the revaluation of road network and road structures was appropriate and reasonable and road network and road structures were fairly valued.

5 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

1. Report of the auditor-general to Parliament on the South African National Roads Agency (SOC) Limited

Key audit matter How the matter was addressed in the audit Going concern assessment As disclosed in note 45 to the annual financial I performed procedures to confirm the accuracy of the calculations statements, the calculations and assumptions and assessed the reasonability of the assumptions used in the supporting the going concern assessment estimations of future performance and the funding requirements. required management to make highly subjective judgments. The calculations are based on As SANRAL’s borrowings are guaranteed by the South African estimates of future performance and funding Government up to a prescribed limit, I also considered the impact of requirements, and are fundamental in assessing the entity’s future funding requirements against the balance available the suitability of the basis adopted for the on the guarantee to determine whether the guarantee limit would not preparation of the financial statements. be exceeded.

Due to the significant audit effort in assessing As stated in note 43, post year-end the wording of the R31,9 billion the appropriateness of this assumption including guarantee was amended. This amendment of the guarantee resulted the time spent on this matter by senior members in a significant delay in the sign-off of the audit report. of my audit team, I considered this to be a key audit matter. I considered that the requirements of IFRS regarding the appropriateness of the disclosures were met.

Based on the procedures performed I concluded that the going concern assumption was appropriate and that the disclosure of the material uncertainty relating to going concern was in accordance with the IFRS requirements.

Material uncertainty related to going concern

7. I draw attention to note 45 to the financial statements, which indicates that the entity’s cash requirements for the next 12 months relating to toll operations is dependent on its ability to successfully raise further funding through auctions and private placements and that the board of directors has requested the Shareholder to address the impact of the poor collection rate on the Gauteng Freeway Improvement Project (e-tolls) with Cabinet to ensure the sustainability of SANRAL. As stated in note 45, these events or conditions, along with other matters as set forth in note 45, indicate that a material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern. My opinion is not modified in respect of this matter.

Emphasis of matters

8. I draw attention to the matters below. My opinion is not modified in respect of these matters.

Restatement of corresponding figures

9. As disclosed in note 42 to the financial statements, the corresponding figures for 31 March 2016 have been restated as a result of errors in the financial statements of the entity at, and for the year ended, 31 March 2017.

Material impairments – trade and other receivables

10. As disclosed in note 9 to the financial statements, material impairments of R3,75 billion were recognised as a result of a decrease in estimated future cash flows relating to trade and other receivables. A total of R3,61 billion of this impairment relates to the impairment of e-toll debtors.

Irregular and fruitless and wasteful expenditure

11. As disclosed in note 40 to the financial statements, irregular expenditure of R424,9 million was incurred, due to non- compliance with prescribed procurement processes. Fruitless and wasteful expenditure to the amount of R15 million was incurred, due to additional costs incurred on a project that was cancelled as the approval process for the project had not been followed.

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1. Report of the auditor-general to Parliament on the South African National Roads Agency (SOC) Limited

Events after the reporting period

12. With reference to note 43 to the financial statements, the Moody’s Rating Agency downgraded SANRAL’s global scale rating from Baa3 to Ba1 for long term and from P-3 to NP for short term. The rating agency’s view of the sovereign STATEMENTS FINANCIAL ANNUAL credit risk together with the impact of the continued opposition to the open road tolling project were cited as reasons for the rating.

13. As disclosed in note 43 to the financial statements, in September 2017, the minister of Transport with the concurrence of the minister of Finance, approved an amended guarantee for the borrowings of SANRAL in respect of its Domestic Medium Term Note Programme (DMTN programme) and other financial instruments, clarifying that the limit of the R31,91 billion guarantee is measured at nominal amounts and confirming that Government is liable for any and all amounts payable for debt instruments issued under this guarantee.

Responsibilities of the accounting authority

14. The board of directors, which constitutes the accounting authority, is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and the requirements of the PFMA and the Companies Act and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

15. In preparing the financial statements, the accounting authority is responsible for assessing the South African National Roads Agency (SOC) Limited’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the accounting authority either intends to liquidate the national public entity or to cease operations, or has no realistic alternative but to do so.

Auditor-general’s responsibilities for the audit of the financial statements

16. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

17. A further description of my responsibilities for the audit of the financial statements is included in the annexure to the auditor’s report.

Report on the audit of the annual performance report

Introduction and scope

18. In accordance with the Public Audit Act of South Africa, 2004 (Act No.25 of 2004) (PAA) and the general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

19. My procedures address the reported performance information, which must be based on the approved performance planning documents of the national public entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

20. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected objectives presented in the annual performance report of the national public entity for the year ended 31 March 2017:

7 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

Objectives Pages in the annual performance report Objective 1 – Manage the national road network effectively and efficiently 110 – 111 (Volume 1) Objective 2 – Provide safe roads 110 – 111 (Volume 1) Objective 3 – Carry out government’s targeted programmes 112 – 113 (Volume 1) Objective 6 – Maintain financial sustainability 114 – 115 (Volume 1)

21. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

22. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following objectives: • Objective 1 - Manage the national road network effectively and efficiently • Objective 2 - Provide safe roads • Objective 3 - Carry out government’s targeted programmes • Objective 6 - Maintain financial sustainability.

Other matter

23. I draw attention to the matter below.

Achievement of planned targets

24. Refer to the annual performance report on pages 110 to 115 of Volume 1 for information on the achievement of planned targets for the year and explanations provided for the under/overachievement of a number of targets. This information should be considered in the context of the conclusions expressed on the usefulness and reliability of the reported performance information in paragraph 22 of this report.

Report on audit of compliance with legislation

Introduction and scope

25. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the compliance of the national public entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

26. The material findings in respect of the compliance criteria for the applicable subject matters are as follows:

Annual financial statements

27. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records, as required by section 55(1)(a) and (b) of the PFMA and section 29(1)(a) of the Companies Act. Material misstatements of non-current assets, current assets, revenue and disclosure items identified by the auditors in the submitted financial statements were corrected and the supporting records were provided subsequently, resulting in the financial statements receiving an unqualified audit opinion.

Procurement and contract management

28. Contracts and quotations were awarded to some suppliers whose tax matters had not been declared by the South African Revenue Services to be in order as required by treasury regulation 16A9.1(d) and the Preferential Procurement Regulations.

29. Goods and services of a transaction value above R500 000 were not always procured through a competitive bidding process, as required by treasury regulations 16A6.1. Some deviations were approved by the accounting authority even though it was not impractical to invite competitive bids, in contravention of treasury regulation 16A6.4.

8 4

30. Contracts were awarded to bidders based on preference points that were not always calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and its regulations. For some contracts awarded in prior years, the price points were allocated using the benchmarking instrument whose exemption was not obtained from the minister of Finance.

Expenditure management

31. Effective steps were not taken to prevent irregular expenditure of R424,9 million as disclosed in note 40 to the annual STATEMENTS FINANCIAL ANNUAL financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was as a result of additional expenditure in respect of contracts that were identified as irregular in previous years.

Asset management

32. The Agency disposed of an immovable property of a value exceeding R2 million without obtaining the prescribed approvals from the executive authority as required by section 26(t) of the South African National Roads Agency Limited and National Roads Act, 1998 (Act No. 7 of 1998).

Other information

33. The South African National Roads Agency (SOC) Limited’s accounting authority is responsible for the other information. The other information comprises the information included in the annual report which includes the director’s report, the audit committee’s report and the company secretary’s certificate as required by the Companies Act. The other information does not include the financial statements, the auditor’s report thereon and those selected objectives presented in the annual performance report that have been specifically reported on in the auditor’s report.

34. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

35. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this auditor’s report, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

Internal control deficiencies

36. I considered internal control relevant to my audit of the financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance thereon. The matter reported below is limited to the significant internal control deficiency that resulted in the findings on compliance with legislation included in this report.

Leadership

37. There has been a slow response by senior management in addressing the significant deficiencies noted over its oversight regarding the financial reporting process including detailed reviews of the financial reports by delegated officials, compliance and related internal controls. Although an action plan to address audit findings was compiled by management, the plan was ineffective in timeously addressing the reported control deficiencies as an appropriate level of management did not monitor the status of addressing the findings and did not ensure that the lack of progress was escalated for further intervention.

Other reports

38. I draw attention to the following engagements conducted by various parties that had, or could have, an impact on the matters reported in the national public entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

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Investigations

39. An investigation on allegations of maladministration and irregular procurement processes relating to the Gauteng e-toll contracts is being conducted by the Public Protector, in terms of section 182 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996). This investigation has been ongoing since 2012.

40. The Directorate for Priority Crime Investigation is currently investigating offences perpetrated on SANRAL by various construction companies. This investigation has been ongoing since 2013.

Audit-related services

41. As requested by SANRAL, limited assurance engagements were conducted during the year under review on the compliance review relating to the Proposed Issues by the South African National Roads Agency Limited (SANRAL) (the “issuer”) of Guaranteed Notes (the “Notes”) under its amended ZAR31 910 000 000 Domestic Medium Term Note Programme (the “programme”), dated 14 April 2014 (“Programme Memorandum”), with the relevant provisions of the commercial paper regulations (government notice 2172 published in government gazette No. 16167 of 14 December 1994) issued by the registrar of banks (the “notice”), as required by paragraph 3(5)(j) of the notice. These reports covered the period 1 April 2016 to 31 March 2017 and were issued as and when requested by the accounting authority.

Pretoria 20 October 2017

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Annexure – Auditor-general’s responsibility for the audit

1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the financial statements, and the procedures performed on reported performance information for selected objectives and on the national public entity’s compliance with respect to the selected subject matters. ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Financial statements

2. In addition to my responsibility for the audit of the financial statements as described in the auditor’s report, I also:

• identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the national public entity’s internal control.

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors, which constitutes the accounting authority.

• conclude on the appropriateness of the board of directors, which constitutes the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the South African National Roads Agency (SOC) Ltd’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of the auditor’s report. However, future events or conditions may cause a national public entity to cease to continue as a going concern.

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Communication with those charged with governance

3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and here applicable, related safeguards.

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2. DIRECTOR’S REPORT

31 March 2017

Introduction The directors present their annual report as part of the audited annual financial statements of SANRAL for the year ended 31 March 2017.

SANRAL is incorporated as a state-owned company in South Africa in terms of the Companies Act (No. 71 of 2008), and is listed as a national public entity in schedule 3A of the Public Finance Management Act (No. 1 of 1999) (PFMA), as amended.

The Board of Directors acts as the accounting authority in terms of the PFMA, section 49(2)(a).

Principal activities The principal activities of SANRAL are the financing, management, control, planning, development, maintenance and rehabilitation of South Africa’s proclaimed national road network, as prescribed by the South African National Roads Agency Limited and National Roads Act (No. 7 of 1998).

The declared national road network on 31 March 2017 was 22 197km. Non-toll roads comprise 87 percent of the total and toll roads constitute 13 percent. During the reporting year 707km of non-toll roads were incorporated into the national network from the Eastern Cape and Northern Cape. The non-toll roads are fully funded from the fiscus through an annual grant.

Although national roads account for 3.6 percent of the proclaimed road network in South Africa, they carry about 35 percent of all vehicle kilometres travelled and more than 70 percent of long-distance road freight. Travel density measured in vehicle kilometres is currently increasing by 3.2 percent per year, driven primarily by an increase in traffic on national roads.

During 2016/17, R4 073.4 million (2016: R3 043.3 million) was spent directly on toll roads. This comprised R2 016.7 million for capital projects and R2 056.7 million for maintenance. During the same period, R12 368.9 million (2016: R10 587.8 million) was spent directly on non-toll roads, with capital works absorbing R6 276.4 million and maintenance R6 092.5 million.

Work on the R573 Moloto Road continued. This project is intended to improve road safety and is a SIP 1 project, one of 20 infrastructure projects prioritised for accelerated implementation and reported at Cabinet level. The road was transferred to SANRAL in 2015/16. Phase I of the multi-year project, which involves capital expenditure works for the Limpopo and Mpumalanga sections, commenced in January 2017 with site establishment.

SANRAL and the Minister of Transport conducted several stakeholder engagement sessions in order to facilitate smooth implementation of the Moloto Road project and the creation of work opportunities for local communities. The planning and design of latter phases of the project are at an advanced stage. SANRAL is not only directly responsible for the Mpumalanga and Limpopo portions of the route but is also assisting the Gauteng Provincial Government to improve its section of this road.

The tender for two large bridges over the Mtentu and Msikaba rivers on the N2 Wild Coast was issued and closed in January 2017. Construction of the haul roads, which allow plant and material to be moved to these greenfield sites, commenced earlier in the financial year. Several community development projects have also been launched in the area.

The toll declaration of the N1/N2 Winelands route was reviewed and set aside by the Supreme Court of Appeal (SCA). SANRAL has embarked on a consultation process with the City of Cape Town and the Western Cape Provincial Government on how to address congestion in the City, and how to fund such interventions.

A number of strategies have been launched aimed at improving collections from the Gauteng Freeway Improvement Project (GFIP). One such initiative was the Less60 discount campaign announced by the Deputy President as part of the New Dispensation for e-tolls. The campaign allowed road users, with overdue debt on 31 August 2015, to receive a 60 percent discount on their debt, if a full payment or payment arrangement was made within six months following the end of the discount offer. This discount offer ended on 12 May 2016, after a 10-day extension was granted by the Minister of Transport. A number of civil summonses were issued to non-payers and two summary judgements were issued by the Courts. During 2017, SANRAL will continue pursuing legal remedies against customers that are in arrears. SANRAL also has the option in terms of the SANRAL Act to institute criminal prosecution.

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Moody’s affirmed SANRAL’s national scale rating as A3.za (P-2.za) with a negative outlook in November 2016. However, together with other state-owned companies (SOCs), SANRAL’s rating was placed on review in March 2017 as a consequence of Moody’s putting the sovereign rating on review. SANRAL had successful auctions in June, July and September 2016, raising R2 588 million, of which R1 988 million is short-term debt. SANRAL also secured R2 006 million through private placements.

In October 2016, the Presidential Infrastructure Co-ordinating Committee (PICC), representing national Government,

settled out of court with construction companies that had been penalised for collusive practices by the Competition STATEMENTS FINANCIAL ANNUAL Commission. The agreement entails the companies setting up a fund, administered by National Treasury, which will be used for social and economic investment projects over a 12-year period. It was also agreed that national departments and public entities, including SANRAL, would refrain from taking civil action against the companies.

Human capital investment SANRAL is committed to skills development, particularly in the context of human development and supporting community development projects. Communities in areas close to major road projects benefit from increased investment from infrastructural improvements and from training.

SANRAL supports initiatives at the University of the Free State, Nelson Mandela University, University of Cape Town and Stellenbosch University to meet national skills priorities. Some partnerships with universities include educational support programmes such as professional teacher and learner development, and training of parents by providing educational material to assist children at home, in rural and disadvantaged communities. Other partnerships are directed at specialised professional education and research in the fields of engineering and transportation.

SANRAL’s scholarship programme is intended to provide support for secondary school learners who show promise in mathematics and science, and to encourage them to consider careers involving these subjects.

Bursaries are also offered for tertiary studies with the aim of developing a pipeline of skills in the fields of engineering, the built environment and transportation. SANRAL facilitates scores of internships annually to enable young graduates to access the work experience required to complete their qualifications, thereby developing a pipeline of skills for the built environment.

In December 2016 SANRAL embarked on the process of drafting its new corporate strategy, Horizon 2030. This has entailed a multi-phased and iterative process to develop a strategy that sets out the company’s vision, utilises international benchmarking to define its strategic objectives, identifies key business pillars, enablers and key focus areas, as well as the identification of strategic and tactical interventions and mechanisms for monitoring and implementation. The strategy had reached an advanced stage by the end of the reporting year.

Transformation is one of the critical enablers contained in Horizon 2030 and the strategy articulates a framework for transformation. SANRAL seeks to meet the objectives of the National Development Plan (NDP) while also achieving its transformation objectives. A transformation policy informed by the framework in Horizon 2030 is in development and will be consulted extensively before it is submitted to the Board for approval.

Horizon 2030 calls for SANRAL to intensify its community development programme in order to increase the agency’s relevance in the lives of South Africans. A new focus and philosophy are envisaged and the strategy will contain initiatives to expand skills development, grow SMMEs and create economic opportunities for communities, and diversify training opportunities to ensure sustainable communities. The strategy must be well-informed, apply innovation and ensure capital in all its forms remain in the communities.

Organisational structure SANRAL is managed in three clusters: finance, engineering and corporate services which were headed by Ms I. Mulder, Mr K. Smit and Ms H. Harper respectively in the year under review.

SANRAL is further divided into four regional offices and a corporate office. The regional managers are Mr I. Essa (Northern Region – Pretoria), Mr K. van der Walt (Western Region – Cape Town), Mr M. Peterson (Southern Region – Port Elizabeth) and Ms L. Sewnarain (Eastern Region – Pietermaritzburg).

Financial results In terms of legislation, funding for toll roads and non-toll roads respectively are ring-fenced. SANRAL separates the business activities and accounting records into toll operations and non-toll operations. Non-toll roads are financed through parliamentary appropriations under the vote of the National Department of Transport.

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For toll roads, the debt used to finance the initial construction of the road is amortised over a period of 30 years using the proceeds collected through tolling.

The financial statements on pages 22 to 112 set out fully the financial position, results of operations, changes in equity and cash flows of SANRAL for the financial year ended 31 March 2017. The discussion that follows sets out some of the highlights.

Review of Profit and Loss Revenue o Revenue from non-toll operations was R8 671.2 million for the year, which is a 31.8 percent increase on the previous year. To comply with International Financial Reporting Standards (IFRS), the portion of the grant received from Government, which is utilised for capital projects, is deferred over the life of the asset. The total grant received from Government is R13 490.5 million. Of this R5 693 million is capitalised and deferred for the year as it was spent on capital projects. The portion of previously deferred grants, which were realised in the current year, amounted to R1 544.7 million.

Included in other income are contributions from other spheres of government and the private sector amounting to R334.5 million. These relate to projects where a cost-sharing mechanism is used either to fund additional work requested by the private sector, such as developers, on a SANRAL asset, or to extend a SANRAL project to include work on adjacent roads for which other spheres of government are responsible. The full project expenditure is included in the total expenditure reported in the financial results.

o The toll revenue from operations was R5 283.4 million for the year, which is a 7.9 percent increase on the previous year. The GFIP contributed 4.3 percent to this increase in revenue. GFIP tariffs were not adjusted for inflation in 2016, so this increase is mainly as a result of an increase in the volume of traffic. The discount provided to road users was not recognised as revenue due to the low probability that the discount would not be granted. Revenue is therefore net of discounts. An amount of R372.9 million, net of VAT, was received from the fiscus as a grant to recover the loss in revenue as a result of the implementation of the new dispensation for GFIP that was announced by the Deputy President in May 2015.

For the 2016/17 financial year, the overall traffic growth at the conventional SANRAL toll plazas, excluding the GFIP, was 2.5 percent, with revenue (actual gross income) growing by 6.9 percent. The revenue growth of 6.9 percent was attributable to an annual tariff adjustment (6.04 percent) and traffic growth. The N1 Great North toll route contributed 25.7 percent of revenue collected, while the N1 South, N17 and N2 North toll routes accounted for 73 percent of the revenue collected on toll routes. The N2 North Coast toll route recorded the highest traffic growth, at 4.2 percent. Light vehicle traffic grew by 2.1 percent and comprised 87 percent of all traffic, while heavy vehicle traffic increased by 4.7 percent.

o On conventional “boom down” SANRAL-funded toll roads, the comprehensive toll road operations and maintenance (CTROM) contract model consolidates responsibility for operational activities and risks. Under this arrangement, the main contractor is responsible for the total operation of the specific toll route, together with assuming the associated risks. The operator pays the actual gross income (tariff x vehicle) to SANRAL and then claims discounts, concessions and violations as a cost, based on an agreed cost matrix. In essence the operator assumes the risk of collection.

o For the GFIP toll route, a service provider was appointed to manage the operations and collection. The operator is paid for services rendered to operate the tolling system and collect the toll on behalf of SANRAL. The risk of non-payment remains with SANRAL. The agreement with the operator includes performance clauses, as well as a performance guarantee in favour of SANRAL.

Finance charges Net finance charges (finance costs less investment income) in 2017 were R523.8 million more than the previous year. Due to the high cash holding, the interest on bank deposits increased by R149.8 million.

Interest expense on liabilities increased by R504.4 million (12.2 percent), as a result of increased borrowing to ensure sufficient liquidity to fund operations, service debt and provide a liquidity buffer. Further details of finance costs are included in note 27 to the financial statements.

Profit before taxation o The loss after deducting finance costs amounted to R4 962.2 million (2016: R1 203.4 million).

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o The non-toll operating loss after finance charges, for the year ended 31 March 2017 was R380 million (2016: loss of R61.1 million). Although income, mainly comprising the grant received from Government, increased by 30 percent, expenditure increased more rapidly (45.5 percent). The increase in operational expenditure was mainly attributable to higher levels of spending on the repair and maintenance of roads which amounted to R6 395.9 million. This was an increase of 48.6 percent, and the spending covered routine, ad hoc, special and periodic maintenance of roads. Simultaneously, the continued capital expenditure, involving rehabilitation and strengthening projects, resulted in an increase in depreciation of R218.8 million. The increase of 11 percent in the grant received from Government was

applied to maintenance actions while the remainder was allocated to capital projects. STATEMENTS FINANCIAL ANNUAL

o The toll operating loss after finance charges for the year ended 31 March 2017 was R4 582.2 million. There was a 12.4 percent increase in income for toll operations, including grants and other income. Repairs and maintenance increased by R84 million (4.1 percent). Normal depreciation (including concession assets) increased by R12.8 million (0.89 percent), due to the increased spending on completed capital works in the toll portfolio. Finance costs increased by R923.4 million (25.3 percent) as a result of the increased borrowing.

Taxation SANRAL was exempted from income tax in the Government Gazette of 22 December 2003 (Revenue Laws Amendment Act, 2003 section 1(l) and 2(d)). This exemption was backdated to the inception of the entity, and therefore no provision is made for income tax or deferred tax.

Dividends No dividends have been declared by SANRAL.

Review of financial position Share capital The shareholding for the current year has remained unchanged. The Government, represented by the Minister of Transport, holds all shares issued by SANRAL.

Land SANRAL’s property management is undertaken by a service provider that has the skills and resources required to manage and maintain our large land portfolio consisting of road reserve and adjacent severed properties. The service provider is a single entity that delivers all aspects of land surveying, property valuation, maintenance and management services. The service provider is managed by a team of SANRAL staff located in our regional - and head offices.

The contractual targets include a requirement that 50 percent of all work be sub-contracted. This provides opportunities for small and previously disadvantaged firms to obtain property work from SANRAL. The contractor has complied with contractual requirements related to the provision of training, promotion of economic development, addressing skills shortages and making work available to targeted groups.

In line with the SANRAL Act, SANRAL ensures that all land acquired by it or its predecessors, whether inside or outside of the road reserve, is identified and transferred into SANRAL’s name. All land acquired by SANRAL since its inception has been so transferred. The land identification process and the transfer of land to SANRAL will continue where further roads are added to the network.

Land outside of road reserves is categorised as investment property or “other” land if it has no investment value due to its small size and/or nominal value. The road reserve consists of 31 186 properties, while investment properties total 2 495.

Property, plant and equipment Road assets are valued on a depreciated replacement cost basis. The valuation of the road network and structures was reviewed at year-end and increased by R20 851 million (7 percent). Land contributed R1 459 million of this value.

The increase, excluding land, was a result of: a) Newly incorporated roads which contributed R3 700 million. b) Unit rates increasing by 9.97 percent, mainly due to bitumen prices increasing from R3 600/m3 to R5 300/m3. c) Significant capital investment, which ensured that the condition of the assets increased by 13.2 percent.

The value of land increased due to: a) An average increase of 11.1 percent in the value of property, contributing R1 384 million to the SANRAL land value adjustment. This value of property is significantly influenced by the economic activity in the surrounding area which, in turn, is related to good road access.

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b) An increase of 3.71 percent in the total area of land. This included 3 249ha of land which was incorporated when 707km of additional roads were added to the national network.

The remaining life of these assets is considered when determining their depreciated replacement cost, taking the condition of the pavement into account. In the financial year the average condition of national roads improved due to the capital strengthening projects completed, as well as lower rainfall. Further information is available in notes 4 and 5 of the financial statements.

SANRAL currently applies the benchmark treatment of International Accounting Standard (IAS) 16 on “property, plant and equipment”, which allows for the valuation of assets at fair value. SANRAL has adopted this principle as opposed to depreciated cost. Fair value in this instance represents the depreciated replacement cost, due to the special nature of these assets. This methodology takes the unit cost for road bed, layers and structures into account, as well as the condition or remaining life of the road asset.

In terms of IAS 36, assets must be assessed annually and impairments recorded if their income generating potential is estimated to be less than the carrying value. Non-toll assets have been identified as a non-cash generating unit. IFRS do not prescribe the impairment of non-cash generating units and allow other standards to apply in such instances. SANRAL has elected to apply the International Public Sector Accounting Standard 21 to determine the carrying amount of a non-cash generating unit.

Investments No significant acquisitions or disposals occurred in the period under review.

Financial instruments, in the market-making portfolio, are used to manage the risks that SANRAL is exposed to in the capital markets.

Cash and Cash equivalents At 31 March 2017, cash and cash equivalents held were R6 570 million (2016: R9 490.1 million). In the normal course of business, SANRAL limits liquidity risk by maintaining a healthy liquidity buffer equivalent to three times the agency’s estimated monthly expenditure. The weighted average investment rate for the current financial year was 7.81 percent (2016: 6.78 percent).

Going concern The going concern basis has been adopted in preparing the financial statements.

IAS 1, paragraph 25, requires an entity to assess its ability to continue as a going concern when preparing financial statements. It further indicates that it is a requirement to prepare financial statements as a going concern, unless the management intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

SANRAL’s assessment of this principle considered the following:

Assets As a stand-alone company, SANRAL’s significant asset base of R358 200 million and net asset value of R249 200 million are regarded as very healthy. As a provider of national roads, the asset base would never be considered for liquidation or sold. The probability that Government would consider the scrapping or selling of national roads is remote as they constitute a national asset which helps drive the economy of the country.

Liquidity SANRAL receives an annual grant from the fiscus to fund the non-toll portfolio. In the year under review this amounted to R13 490.5 million. Since SANRAL’s inception the annual increase in this grant has exceeded inflation. This amount covers operational and capital expenditure on non-toll roads which comprise 87 percent of SANRAL’s portfolio. Budget Vote 35, indicated that this grant would increase to R18 064.3 million in 2019/20.

Revenue from conventional toll routes added R3 048 million to cash receipts in the year under review and is expected to increase annually with traffic growth and tariff adjustments.

During the same period GFIP collected R1 862 million and received the additional grant from the fiscus of R372.9 million. Due to the low collection rate on the GFIP, the cash receipt projections are assumed to be the same as the past 8 to 10 months in order to have a conservative forecast. The Board has requested the Shareholder to address the impact of the poor collection rate with Cabinet to ensure the sustainability of SANRAL.

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In reviewing the cash requirements for the next 12 months to September 2018, SANRAL requires a minimum of R2 561 million. If the redemption of the NRA018, which matures in November 2018, is added, this amount increases to R5 531 million.

During 2016, SANRAL had successful auctions and private placements which raised R4 600 million, and the agency successfully refinanced more than R3 000 million of maturing debt.

SANRAL’s funding strategy for 2017/18 includes auctions and private placements, as well as extending the use of STATEMENTS FINANCIAL ANNUAL R1 000 million of facilities. In the current market conditions, where local investor sentiment is negative towards long- term investments, short-term floating rate notes are readily accessible and SANRAL will certainly continue to tap this market to supplement other funding strategies.

Market conditions deteriorated earlier in 2017 due to political uncertainty, credit rating downgrades and the Futuregrowth moratorium from 2016. During late June and July 2017, informal discussions with brokers, banks and investors indicated an appetite for three- to seven-year paper from SANRAL. Corporate issuers have had huge success in issuing shorter dated bonds. In July 2017, Futuregrowth lifted its moratorium on trading in SANRAL debt. It should also be noted that SANRAL’s local scale rating was affirmed - the same as in 2015 to 2016 when we were fairly successful in placing paper.

Furthermore, various guarantees from Government total R37 910 million, being the R31 910 million and R6 000 million guarantees, of which R28 900 million has been utilised at 31 August 2017. The current funding requirements project that this limit will only be breached in February 2019. Apart from the conservative approach to GFIP receipts, the projections assume no new toll roads and has limited capital expenditure on roads, where possible and without compromising the asset. The request to increase the total guarantee to R43 000 million and the borrowing limit to R54 000 million (from R47 910 million), was submitted in late 2016. R39 460 million of the borrowing limit was used by 31 August 2017. Government has also committed to providing an additional grant of R372.9 million per annum, adjusted for inflation, to supplement GFIP revenues. This clearly reflects Government’s continued support for SANRAL.

SANRAL also has the option of issuing non-guaranteed debt under the R15 000 million non-guaranteed DMTN programme; R4 100 million, at 31 August 2017, being available to issue new bonds or tap existing bonds. However, if all of the above fails, Government may step in to service the debt, in terms of the R31 910 million guarantee agreement (clause 6.2).

Additional considerations SANRAL may not be placed under judicial management or in liquidation except by an act of Parliament (Section 10 of the SANRAL Act). This is an implied guarantee from Government.

The Board of Directors therefore supports management’s assessment that SANRAL will remain a going concern in the foreseeable future.

Auditors The Auditor-General (AGSA) is the external auditor of SANRAL, as prescribed in section 36(3)(a) of the SANRAL Act.

Materiality framework A materiality framework has been developed for reporting losses through criminal conduct, irregular, fruitless and wasteful expenditure or significant transactions that require ministerial approval, as envisaged in section 54(2) of the PFMA. The framework was finalised by SANRAL after consultation with external and internal auditors, and formally approved by the Board on 25 May 2004. The framework was updated in January 2017 to incorporate the latest approved budget, resulting in a materiality value of R58 million.

Contingent liabilities Amongst the most significant contingent liabilities are possible legal claims, mainly resulting from road-related incidents. These are estimated at R275.7 million (2016: R245.06 million) but the outflow of cash is remote as during the past several years SANRAL has won the majority of relevant court cases. Cases that were not won by SANRAL were covered by insurance.

The potential liability arising from the levying of municipal rates on SANRAL’s lands is estimated at R47.8 million (2016: R57.2 million). These rates have not yet been introduced.

In addition, potential claims may arise due to failure to take steps to protect the pavement and increase tolls as stipulated in the contract with the concessionaire on the Maputo development corridor. The value of such claims could not be estimated.

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Credit rating SANRAL’s debt mainly comprises bonds that are listed and traded on the Johannesburg Stock Exchange (JSE), although there are a few unlisted instruments. The borrowing limit approved by Government is approximately R47 910 million (depending on CPI assumptions). Up to R37 910 million of this amount can be guaranteed.

To facilitate investment in its the debt related to its toll portfolio, SANRAL has been rated by the international credit rating agency, Moody’s, since March 2007. The credit rating enables SANRAL to raise non-guaranteed and guaranteed debt competitively.

The rating, as at 31 March 2017, is as follows:

National Scale Issuer Ratings: Long-Term: Aa3.za Short-Term: P-1.za

Global Scale Issuer Ratings: Long-Term: Baa3 Short-Term: P-3

Since March 2015, the outlook has been negative.

On 4 April 2017 Moody’s placed SANRAL on review for downgrade, pending the sovereign rating outcome.

Public-private partnerships In addition to its parliamentary appropriation, SANRAL has implemented public-private partnerships (PPPs) as an alternative means of financing and operating the national road network, with the costs recovered through user charges. PPPs allow SANRAL to leverage funding available from the private sector to meet identified infrastructure and service delivery needs in a manner that is cost-effective and appropriate to each project. Furthermore, they ensure that financing is set aside for the improvement and preservation of the country’s road assets for periods well beyond Government’s three- year expenditure horizon. Annually the benefit is reflected in the increased values under Property, Plant and Equipment (PPE) under concession as the concessionaires upgrade the roads which belong to SANRAL.

The agreement with Trans African Concessions (Pty) Ltd (TRAC) became effective on 6 February 1998 and terminates on 5 February 2028. This includes the extension of the N4 as agreed during the 2005 financial year.

The agreement with N3 Toll Concessions (RF) Proprietary Limited (N3TC) became effective on 2 November 1999 and terminates on 1 November 2029.

The agreement with the N1-N4 Bakwena Platinum Corridor Concessionaire (Pty) Ltd (Bakwena) became effective on 27 August 2001 and terminates on 26 August 2031.

SANRAL has considered the implications of International Financial Reporting Interpretation Code 12 and the Accounting Standards Board’s guideline in terms of accounting for assets under concessions, and has decided to account for these assets by recording these as property, plant and equipment. In the absence of clear accounting guidance from these guidelines, SANRAL has set out its interpretation in note 4.

Subsequent events Following the sovereign downgrade, Moody’s Ratings Agency downgraded SANRAL’s global scale rating on 12 June 2017 to Ba1 from Baa3, long-term, and NP from P-3 for short-term. The national scale rating was affirmed at Aa3, which is positive because SANRAL has only issued in the domestic market to date. The ratings agency’s view of the sovereign credit risk had a significant impact on this move to downgrade most SOCs. In addition, Moody’s cited SANRAL’s ability to enforce e-toll payments is largely dependent on the continued support of Government. This together with high debt levels and a weak liquidity position stemming from continued opposition to the open road toll project - the GFIP - are reasons for the ratings review.

SANRAL issued an announcement to its investors in June 2017, which confirms that it is currently in the process of working with Government (Department of Transport and National Treasury) with regards to increasing the maximum aggregate amount guaranteed in order to provide greater headroom for subsequent placements under the guaranteed DMTN

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programme and to ensure that all indebtedness under this Programme remains guaranteed. In the same announcement, Government (National Treasury) indicated that its intention was that the guarantee utilisation be measured in nominal terms with regard to the inflation linked debt, although the guaranteed obligation would be the redemption value.

In September 2017, the Minister of Transport approved, with concurrence of the Minister of Finance, an amended guarantee, clarifying that the limit of R31 910 million is measured at nominal and confirming that Government is liable for any and all amounts payable for debt instruments issued under this guarantee, if SANRAL fails to meet these obligations. ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL In order to address the uncertainty created by civil society groups and political parties, with regard to SANRAL’s authority to levy and collect GFIP tolls, SANRAL considered agreeing to a test case with one of these groups, the Organisation Undoing Tax Abuse (Outa). This would have entailed bringing a single non-payer to court to argue the legal merits of opposition to SANRAL’s authority to levy and collect the toll. However, Outa repeatedly delayed progress on the case and SANRAL eventually abandoned the process in order to fast track the civil claims process against the individual entities and persons owing the debt.

In the early hours of 9 August 2017, a closed pedestrian bridge collapsed on the N3 highway in Gauteng. SANRAL and other third parties have provided evidence to the investigators, including the insurer, to determine the cause and the damage to be recovered.

Directors and secretary Since 1 March 2015, the Board, as appointed by the Minister, has comprised the following individuals:

• Executive Director N Alli (Chief Executive Officer) (retired 30 September 2016) S Macozoma (Chief Executive Officer) (appointed 1 December 2016)

• Non-executive Directors R Morar (Chairperson) A Halstead (Public official)* (appointed 27 May 2016) C Hlabisa (Public official)** Z Kganyago A Lawless D Mashile-Nkosi M Matete M Moore (Public official)* (resigned 26 May 2016).

* Ms Moore and Ms Halstead are the appointed representatives of the Minister of Finance and are employees of National Treasury. ** Mr Hlabisa is the appointed representative of the Minister of Transport and is an employee of the Department of Transport.

For the year under review Ms A. Mathew held the position of Company Secretary.

Directors’ interests in contracts

All directors and officers of SANRAL have confirmed that they had no interest in any contract of significance with SANRAL which could have resulted in a conflict of interest during the current year.

Addresses SANRAL’s business, postal and registered addresses are as follows:

Business address Postal address Registered address 48 Tambotie Avenue P.O. Box 415 48 Tambotie Avenue Val de Grace Pretoria Val de Grace Pretoria 0001 Pretoria 0184 0184

19 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17

3. Statement of Responsibility by the Board of Directors

The directors are responsible for the preparation, integrity and fair presentation of the financial statements of the South African National Roads Agency SOC Limited. The financial statements on pages (22 to 117) have been prepared in accordance with International Financial Reporting Standards (IFRS) and include amounts based on judgments and estimates made by management. The directors also prepared the other information included in the Annual Report and are responsible for both its accuracy and its consistency with the financial statements.

The going concern basis has been adopted in preparing the financial statements. The directors believe that, based on the projected Medium Term Expenditure Framework (MTEF) allocations and the policy of adjusting the toll tariffs in line with the Consumer Price Index (CPI), SANRAL will be a going concern in the foreseeable future. These financial statements support the viability of SANRAL.

The financial statements have been audited by independent auditors, who were given unrestricted access to all financial records and related data, including minutes of all meetings of the Board of Directors and committees of the Board.

The directors believe that all representations made to the independent auditors during their audit are valid and appropriate.

The audit report of the Auditor-General is presented on pages 4 to 11

The financial statements were approved by the Board of Directors on 30 May 2017 and are signed on its behalf.

Roshan Morar

Chairperson

1. Auditors

The Auditor-General of South Africa continued in office as auditor for the company for 2017.

The Auditor-General of South Africa continued in office as auditor for the company for 2017. At the AGM, the shareholder will be requested to reappoint The Auditor-General of South Africa as the independent external auditor of the company for the 2017 financial year.

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4. CERTIFICATE OF THE COMPANY SECRETARY

I hereby confirm in terms of Companies Act, (Act No. 71 of 2008), as amended, that for the year ended 31 March 2017, the South African National Roads Agency SOC Limited has lodged with the Companies and Intellectual Property Commission, all returns as are required in terms of this Act, and that all such returns are true, correct and up to date. ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL

Alice Mathew Company Secretary

31 March 2017

21 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017

Statement of Financial Position as at 31 March 2017

2017 2016 2015 Restated Restated Note(s) R '000 R '000 R '000

Assets Non-Current Assets Property, plant and equipment under concession 4 43 516 056 37 477 529 42 379 807 Property, plant and equipment 5 300 154 992 277 884 216 266 508 339 Investment property 6 1 812 370 1 404 075 1 318 565 Intangible assets 7 61 767 60 704 44 009 Investments 8 329 739 289 093 259 905

345 874 924 317 115 617 310 510 625

Current Assets Trade and other receivables 9 5 366 829 7 050 155 4 608 074 Investments 8 317 157 636 814 452 605 Cash and cash equivalents 11 6 570 000 9 490 108 9 479 440

12 253 986 17 177 077 14 540 119

Non-current assets held for sale 10 74 226 20 096 26 971

Total Assets 358 203 136 334 312 790 325 077 715

Equity and Liabilities Equity Share capital 12 1 091 044 1 091 044 1 091 044 Revaluation reserves 13 262 302 424 239 992 432 239 088 857 Accumulated loss 13 (14 205 782) (9 243 792) (8 873 210)

249 187 686 231 839 684 231 306 691

Liabilities Non-Current Liabilities Borrowings 14 47 795 461 42 401 432 36 714 191 Employee benefits 16 42 724 36 924 32 450 Operating lease liability 15 - 1 745 722 Deferred income 17 41 920 985 38 071 742 33 738 081 Provision for rehabilitation costs 18 3 296 5 954 13 512 Deferred exchange consideration 20 7 543 032 6 763 926 6 123 623

97 305 498 87 281 723 76 622 579

Current Liabilities Borrowings 14 959 226 6 443 730 10 400 637 Operating lease liability 15 166 849 418 Deferred income 17 4 726 558 3 814 831 2 241 726 Provision for overload control 19 339 787 336 205 374 429 Deferred exchange consideration 20 563 755 427 577 412 539 Third-party funding 22 316 919 331 479 764 751 Trade and other payables 21 4 803 541 3 836 712 2 953 945

11 709 952 15 191 383 17 148 445

Total Liabilities 109 015 450 102 473 106 93 771 024

Total Equity and Liabilities 358 203 136 334 312 790 325 077 715

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Statement of Profit or Loss and Other Comprehensive Income

2017 2016 Restated Note(s) R '000 R '000

Revenue 23 13 954 626 11 474 342 STATEMENTS FINANCIAL ANNUAL Other income 24 1 133 831 860 345 Operating expenses 25 (17 361 900) (10 953 761)

Operating (loss) profit (2 273 443) 1 380 926 Investment income 26 1 361 793 962 273 Fair value adjustments for investment properties and assets held for sale 518 051 98 594 Finance cost 27 (4 568 583) (3 645 220)

Loss for the year (4 962 182) (1 203 427)

Other comprehensive income

Items that will not be reclassified to profit or loss: Re-measurements on net defined benefit liability 192 766 Gains on revaluations 13 22 309 993 903 575

Total items that will not be reclassified to profit or loss 22 310 185 904 341

Other comprehensive income 22 310 185 904 341

Total comprehensive income (loss) for the year 17 348 003 (299 086)

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23 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Statement of Changes in Equity

Share capital Share Total share Revaluation Accumulated Total equity premium capital reserve loss R '000 R '000 R '000 R '000 R '000 R '000

Opening balance as previously 4 1 091 040 1 091 044 239 012 069 (8 506 465) 231 596 648 reported Adjustments Prior period error (Bank charges, - - - 76 788 (366 745) (289 957) concession assets, capitilisation, depreciation)

Balance at 01 April 2015 as 4 1 091 040 1 091 044 239 088 857 (8 873 210) 231 306 691 restated

Loss for the year as previously - - - - (954 244) (954 244) reported Prior period error (Bank charges, - - - (1 294) (249 181) (250 475) Loss on sale of land, revenue recognition, depreciation) Other comprehensive income as - - - 904 869 766 905 635 previously reported GFIP debtor adjustments and - - - - 832 077 832 077 others

Balance at 01 April 2016 4 1 091 040 1 091 044 239 992 432 (9 243 792) 231 839 684 Restated

Loss for the year - - - - (4 962 182) (4 962 182) Other comprehensive income - - - 22 309 993 192 22 310 185

Total comprehensive Loss for - - - 22 309 993 (4 961 990) 17 348 003 the year

Balance at 31 March 2017 4 1 091 040 1 091 044 262 302 425 (14 205 782) 249 187 687

Note(s) 12 12 12 13

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Statement of Cash Flows

31 March 31 March 2016 2017 Restated Note(s) R '000 R '000

Cash flows from operating activities STATEMENTS FINANCIAL ANNUAL

Cash receipts from customers 31 12 002 516 10 515 469 Cash paid to suppliers and employees 30 (10 203 686) (7 927 527)

Cash generated from operations 29 1 798 830 2 587 944 Interest income received 902 299 734 414 Finance costs paid (4 636 620) (4 097 270)

Net cash from operating activities (1 935 491) (774 912)

Cash flows from investing activities

Purchase of property, plant and equipment 5 (7 652 171) (7 245 540) Proceeds from sale of assets 43 227 - Purchase of intangible assets 7 (5 820) (22 679) Acquistion of investments - (303 537) Proceeds from investments 216 040 - Purchase of Investment property - (33 191)

Net cash in investing activities (7 398 724) (7 604 947)

Cash flows from financing activities

Proceeds from borrowings 742 151 2 882 356 Third party funding (21 094) (453 673) Proceeds from repo bonds sold - - Capital portion of government grant 5 693 050 5 961 844

Net cash from financing activities 6 414 107 8 390 527

Net increase/(decrease) in cash and cash equivalents for the period (2 920 108) 10 668 Cash and cash equivalents at the beginning of the period 9 490 108 9 479 440

Total cash and cash equivalents at end of the period 11 6 570 000 9 490 108

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25 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

Corporate information

South African National Roads Agency SOC Limited is a public company incorporated and domiciled in South Africa.

The financial statements for the year ended 31 March 2017 were authorised for issue in accordance with a resolution of the directors on Tuesday, 30 May 2017.

1. Significant accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards, the Companies Act, No 71 of 2008, the Public Finance Management Act, No 1 of 1999, and the South African National Roads Agency Limited and National Roads Act, No 7 of 1998. The financial statements have been prepared on the historic cost convention, except for the following:  Held-for-trading financial instruments within the toll segment (measured at fair value)  Land (measured at revalued amount)  Road network and road structures assets (measured at revalued amount)  Investment property (measured at fair value).

The financial statements incorporate the principal accounting policies set out below. They are presented in South African Rands, the functional currency of the company, and are rounded to the nearest thousand.

These accounting policies are consistent with the previous period. Refer to note 2.

Going concern

The directors have, at the time of approving the annual financial statements, a reasonable expectation that SANRAL will have adequate resources to continue in operational existence for the foreseeable future. Thus the going concern basis of accounting in preparing the annual financial statements continues to be adopted. Further details are contained in the Directors' Report and note 45 (Going concern).

1.1 Statement of compliance

Public Finance Management Act (PFMA)

The PFMA requires the South African National Roads Agency SOC Limited (SANRAL) to report in terms of Generally Recognised Accounting Practice (GRAP), (PFMA chapter 6 para 55 (1)(b)).

The nature of SANRAL’s operations is such that large amounts of finance are required from time to time. This finance is currently raised through debt that is publicly traded.

Approval was therefore granted by National Treasury for SANRAL to prepare its annual financial statements in accordance with IFRS from the 2007 financial year onwards.

The financial statements have been prepared according to the International Financial Reporting Standards (IFRS).

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that may affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. They form the basis of the judgements about carrying values of assets and STATEMENTS FINANCIAL ANNUAL liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the next financial year are outlined below.

The following are the critical judgements, apart from those involving estimations, that SANRAL has made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the annual financial statements.

Going concern

The assumptions relating to going concern are dependent on the successful issuing of bonds as well as the ability to enforce the collection of toll through legal action. These may include continuation of civil and criminal prosecution as well as the roll out of the e-natis block for licence renewal, which is imminent.

Gauteng Open Road Tolling

Revenue recognition

For the purpose of measuring revenue arising from e-toll activities, which is measured at the fair value of the consideration received or receivable, SANRAL has reviewed its historic data in order to determine the probability of receipt of payment and expected future economic benefits.

Probability of future economic benefits

SANRAL only recognises revenue to the extent that it is probable that future economic benefits will flow to the entity. In estimating the probability of future economic benefits that will flow to the entity, management bases its estimates on past experience. In making this judgement SANRAL makes a distinction between users based on their payment patterns. The revenue recognised takes cognisance of payment patterns.

As a result, revenue is not initially recognised from transactions where future inflow of economic benefits is assessed as improbable on the date of the transaction.

Discounts

SANRAL measures revenue at the fair value of the consideration received or receivable, net of discounts. The estimated discounts are based on SANRAL's past experience with similar transactions.

Changes in estimates

As SANRAL's historical data and experience increases, management is able to continuously refine estimates relating to the amount of revenue that qualifies for recognition, estimates of discounts to be applied, and estimates relating to subsequent impairments. These changes in estimates affect current and future periods' revenue and debtors are adjusted prospectively in the year that new information becomes available.

As a result of the uncertainties inherent in business activities, many items in financial statements cannot be measured with precision but can only be estimated. Estimation involves judgements based on the latest available, reliable information.

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1.2 Significant judgements and sources of estimation uncertainty (continued)

Property, plant and equipment including those under concession

Useful lives and residual values

The estimated useful lives and residual values are reviewed annually taking cognisance of the forecast commercial and economic realities.

Refer to note 1.4 for the estimated useful lives for property, plant and equipment and note 1.5 for intangible assets.

Provisions

Provisions were raised and management determined an estimate based on the information available. SANRAL's weighted average cost of capital rate on the decommissioning liability is 9.23%. Additional disclosure of these estimates of provisions is included in note 18 and 19.

Impairment of assets

Property, plant and equipment including those under concession and wayleaves are assessed annually for impairment using the LSR (Loans supported by revenue) method.

Refer to note 4, 5 and 7 for estimates and assumptions made for impairment of assets.

The impairment of investment property debtors is based on the values per the age analysis. These figures are calculated by the property administrators.

Contingent liabilities

Management applies its judgement to the facts, patterns and advice it receives from its attorneys, advocates and other advisors in assessing if an obligation is probable or remote. This judgement is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability (Note 34)

Commitments

Commitment comprises of estimated expenditure as approved by the board of directors, and minimum lease payments relating to operating leases which are measured in terms of IAS17 (Note 33)

Post-employment benefit obligations

In applying its judgement to defined benefit plans, management consulted with external experts in the accounting and post employment benefit obligation industry. The critical estimates as used in each benefit plan are detailed in note 16 to the financial statements. The actuarial gains and losses on employees' benefits is calculated in terms of three main components namely: the effect of changes to the economic assumptions, number of members, and changes in the experience compared to what was expected as at the previous valuation.

Revaluation of property, plant and equipment and investment property

Refer to note 4, 5 and 13 for revaluation of property, plant and equipment and note 6 for revaluation of investment property.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.2 Significant judgements and sources of estimation uncertainty (continued)

Impairment of trade receivables

Toll tariffs are charged in terms of an Act of Parliament, the South African National Roads Agency Limited and National roads Act, No 71 of 1998, which provides that the non-payment of toll fees is an offence. To this end toll debt can’t be STATEMENTS FINANCIAL ANNUAL written off, other than by a court of law, and as a criminal offence it does not prescribe. The same Act allows SANRAL to pursue both criminal and civil action against a non-payer. Additionally, the PFMA in section 51 (1)(b)(i) prescribes that all revenue due to the state must be collected.

Trade receivables, specifically toll debtors, were objectively assessed for impairment or collectibility, given the legislative framework. Allowances for estimated irrecoverable amounts were made, which included the following:

• Debt older than three years

• Debtors currently in liquidation or under business rescue

In assessing toll debtors for impairment, the following were the significant judgements considered based on the current prevailing conditions and historical trends:

As a result of toll debtors being mainly LSM 9 consumers, SANRAL management considered the toll tariffs as affordable for these users given the percentage of household income and the monthly caps which apply. The refusal to pay was not regarded as an inability to pay.

Corporates under business rescue or in liquidation are considered to be a loss event as they are in financial difficulty and the outcome is unknown. The probability of the full amount being recovered was not certain therefore these amounts were impaired.

The reduction in the standard rate in 2015, announced as part of the new dispensation, was considered by management as a loss event for toll debt which preceded the new standard tariff. Based on the current and historical payment patterns the probability of the full amount being recovered was not certain therefore these amounts were impaired.

Accounts under R500 are considered a loss event by management, as the cost of recovery may exceed the debt therefore these amounts were impaired.

Debt older than 3 years is considered to be a loss event by management, as there is a probability that the civil claim of the debt may prescribe after 3 years. Whilst still pursuing with civil and criminal prosecution a conservative approach was taken on the probability of recovering the full amounts outstanding and these amounts were impaired.

Fair value estimation

The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by SANRAL is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. SANRAL uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the end of the reporting period.

The fair value of trade receivables and trade payables is determined by using discounted cash flows . The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to SANRAL for similar financial instruments.

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1.3 Investment property

Investment property bought during the year is recognised as an asset when, and only when, it is probable that the future economic benefits that are associated with the investment property bought during the year will flow to the enterprise, and the cost of the investment property bought during the year can be measured reliably.

Investment property bought during the year is initially recognised at cost. Transaction and directly attributable costs are included in the initial measurement.

Investment property is held either to earn rental income or for capital appreciation or for both purposes.

When the use of investment property changes such that it is reclassified as property, plant and equipment, its carrying value at the date of reclassification becomes its cost for subsequent accounting. For more information on valuation of investment property see note 6.

Costs include costs incurred initially and costs incurred subsequently to add to, replace part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property bought during the year, the carrying amount of the replaced part is derecognised.

When Investment property is derecognised, the carrying value is eliminated from the statement of financial position and the gains or losses arising from the disposal is recognised in profit or loss.

Fair value

Subsequent to initial measurement investment property is measured at fair value.

A gain or loss arising from a change in fair value is included in net profit or loss for the period in which it arises.

There are no property interests held under operating leases which are recognised as investment property during the year.

1.4 Property, plant and equipment

Property, plant and equipment are tangible assets which the company holds for its own use or for rental to others and which are expected to be used for more than one year.

The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if: (a) it is probable that future economic benefits associated with the item will flow to the entity; and (b) the cost of the item can be measured reliably.

An item of property, plant and equipment that qualifies for recognition as an asset shall be measured at its cost.

SANRAL shall choose either the cost model or the revaluation model as its accounting policy and shall apply that policy to an entire class of property, plant and equipment.

For assets that apply the cost model, subsequent measurement of the asset is carried at its cost less any accumulated depreciation and any accumulated impairment loss.

For assets that apply the revaluation model, subsequent measurement of the assets whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment lossess.

SANRAL depreciates its depreciable assets on a straight-line over its useful life.

SANRAL useful lives are as follows:

Item Average useful life

Buildings 50 years Equipment, vehicles and furniture 3 - 15 years Road network - road beds 50 years Road network - pavement layers 20 years Road structures 50 years

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.4 Property, plant and equipment (continued)

Road beds are initially assumed to have a useful life of 50 years, and for road layers and structures the associated depreciation rate is related to condition indexes calculated from detailed condition assessments. The frequency of these condition assessments is related to the deterioration trend of the asset component, and ranges from one to five years. ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Land is not depreciated. Leasehold improvements on premises occupied under operating leases are depreciated over their expected useful lives or, where shorter, the term of the lease.

The residual value, useful life and depreciation method of each asset is reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

SANRAL does not recognise in the carrying amount of an item of property, plant and equipment the costs of the day-to-day servicing of the item. Rather, these costs are recognised in profit or loss as incurred.

SANRAL derecognises the carrying amount of an item of property, plant and equipment:

(a) on disposal; or

(b) when no future economic benefits are expected from its use or disposal.

The gains or losses from derecognition of an item of property, plant and equipment are recognised in profit or loss. Gains are not classified as revenue.

1.5 Intangible assets

A wayleave is recognised when:  It is probable that the expected future economic benefits that are attributable to the wayleave will flow to SANRAL; and  The cost of the wayleave can be measured reliably.

A wayleave is initially recognised at cost together with directly attributable costs.

Subsequent to initial recognition, a wayleave is carried at cost less any accumulated amortisation and any impairment losses.

Subsequent expenditure on capitalised intangible assets is capitalised only when it is probable that additional future economic benefits embodied within the wayleave will flow to SANRAL and the cost of such item can be measured reliably. All other expenditure is expensed as incurred.

Amortisation of wayleave is recognised in profit or loss on a straight-line basis over the asset's estimated useful lives. A wayleave is amortised from the date it is available for use. The amortisation period, the amortisation method and residual values (if any) for a wayleave are reviewed at each reporting period. Indefinite wayleaves are not amortised but assessed for impairment on an annual basis.

Wayleave agreements relate to agreements with landowners. The landowners make the required part of their premises available to SANRAL for an agreed period of time in return for an agreed upon amount. The contract amount is amortised over the contract period.

Computer software

Computer software is recognised when:  It is probable that the expected economic benefits attributable to the computer software will flow to SANRAL; and  The cost of the computer software can be measured reliably.

Expenditure on computer software research is recognised as an expense when incurred.

Computer software arising from development is recognised when:

 It is technically feasible to complete the computer software so that it is available for use.  There is intention to complete and use the computer software.  There is ability to use the computer software.  The computer software will probably generate future economic benefits.

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1.5 Intangible assets (continued)  There are available technical, financial and other resources to complete the development and use the computer software.  The expenditure attributable to the computer software during its development can be measured reliably.

Computer software is carried at cost less any accumulated amortisation and impairment losses.

Subsequent expenditure is capitalised only when it is probable that additional future economic benefits embodied within the computer software will flow to SANRAL and the cost of such item can be measured reliably. All other expenditure is expensed when incurred.

Amortisation of computer software is recognised in profit or loss on a straight-line basis over the asset's estimated useful life. Computer software is amortised from the date it is available for use. The amortisation period and amortisation method for computer software is reviewed at each reporting period

SANRAL ceases amortisation at the earlier date the computer software or wayleave is classified as held for sale (or included in disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for sale and Discontinued Operations and the date the computer software or wayleave is derecognised.

SANRAL derecognise the carrying amount of an intangible assets: (a) on disposal; or (b) when no future economic benefits are expected from its use or disposal.

The gains or losses from derecognition of an intangible asset are recognised in profit or loss. Gains are not classified as revenue.

Item Useful life Computer software 8 years Wayleave agreements (definite) Contract period Wayleave agreements (indefinite) Not amortised

1.6 Financial instruments

Classification

The company classifies financial assets and financial liabilities into the following categories:  Financial assets at fair value through profit or loss  Loans and receivables  Financial liabilities at fair value through profit or loss  Financial liabilities measured at amortised cost.

Classification depends on the purpose for which the financial instruments were obtained/incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives (held-for-trading financial liabilities) and financial instruments designated as at fair value through profit or loss, which are not to be reclassified out of the fair value through profit or loss category.

Initial recognition and measurement

Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments. Regular way purchases and sales of financial assets are accounted for at trade date, that is the date that the company commits itself to purchase or sell the asset.

When a financial asset or financial liability is recognised initially, SANRAL measures it at its fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss when incurred.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.6 Financial instruments (continued)

Subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period. STATEMENTS FINANCIAL ANNUAL

An instrument is classified as at fair value through profit or loss if it is held-for-trading or is designated as such upon initial recognition.

Financial instruments at fair value through profit or loss are subsequently measured at fair value and changes therein are recognised in profit or loss.

The company has classified the following financial assets as at fair value through profit or loss financial assets, as they are held-for-trading:  Market-making investments (consists of approved listed non-SANRAL bonds to create a market in order to reduce the cost of funding).

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Such financial assets are subsequently measured at amortised cost using the effective interest method (EIM), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIM. The EIM amortisation is included in investment income in profit or loss. The losses arising from impairment are recognised in profit or loss as an impairment loss.

Impairment of trade and other receivables is assessed after taking into account the provisions IFRS, the PFMA, and the South African National Roads Agency Limited and National Roads Act, No 7 of 1998. The SANRAL Act makes non- payment of a toll a criminal offence. The PFMA requires SANRAL to collect all debts that are due.

The company has classified the following as loans and receivables:  Money market instruments (callable loan, cash deposits, cash on hand and current bank accounts)  Receivables (trade and other receivables as well as accrued income).

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Subsequently to initial measurement, they are measured at amortised cost which approximates fair value.

Financial liabilities at amortised cost

Financial liabilities not classified as at fair value through profit or loss are classified at amortised cost. Financial liabilities are measured at amortised cost using the effective interest method.

The company has classified the following financial liabilities as financial liabilities at amortised cost:  SANRAL bonds included in the funding portfolio  CPI linked loan  Repurchase transactions where SANRAL is the initial seller of assets  Interest-bearing loans and borrowings (such as the European Investment Bank (EIB) loan)  Trade and other payables.

Third-party funding

Third-party funds are moneys received in advance from other entities (to the extent that they have already been expensed) which relate to projects managed by SANRAL, including assets owned by the other entities. They contribute their proportionate share to the projects.

Third-party funding is measured at cost as it does not have a fixed maturity date. The fair value of such items approximates their carrying value.

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1.6 Financial instruments (continued)

Gains and losses

Gains and losses (realised and unrealised) resulting from changes in market yields and realisation on financial instruments at fair value through profit or loss are included in profit or loss for the period in which they arise. Unrealised gains/losses equate to the difference between the fair value (clean price) at the previous valuation period and the fair value (clean price) at valuation date. Realised gains/losses comprise proceeds of the carrying amount.

Gains and losses due to impairment are recognised as stated in the paragraph dealing with impairment.

Derecognition

Financial assets (or, where applicable, parts of financial assets, or parts of a group of similar financial assets) are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the company has transferred substantially all risks and rewards of ownership.

When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the company’s continuing involvement in the asset.

In that case, the company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the company could be required to repay.

On derecognition, the difference between the carrying amount of the financial asset, proceeds receivable and any prior adjustment to reflect the fair value which has been reported in other comprehensive income and accumulated in equity, are included in profit or loss for the period.

Financial liabilities (or portions thereof) are derecognised when the obligation specified in the contract is discharged, cancelled or expired. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and the amount paid for it, are included in profit or loss for the period.

Impairment of financial instruments

The company assesses carrying amounts of financial assets carried at amortised cost at each reporting date to determine whether there is any indication of impairment. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

Significant individual financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

Impairment of trade receivables is recognised when there is objective evidence that SANRAL will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor and default or delinquency in payments are considered indicators that the trade receivable is impaired.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised.

For financial assets measured at amortised cost, the reversal is recognised in profit or loss. Impairment charges/reversals are recognised in profit or loss.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.6 Financial instruments (continued)

Derivatives

Derivative financial instruments are initially recognised at fair value with transaction costs being accounted for in profit or

loss on the date on which a derivative contract is entered into. Subsequent to initial recognition, derivatives are measured at STATEMENTS FINANCIAL ANNUAL fair value and the changes in the fair value of the derivatives are recognised immediately in profit or loss. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Sale and repurchase agreements

A repurchase agreement is an agreement to transfer a financial asset to another party in exchange for cash or other consideration and a concurrent obligation to reacquire the financial asset at a future date for an amount equal to the cash or other consideration exchanged plus interest, effectively providing the transferee with a lender’s rate of return. Repurchase agreements are utilised to place or borrow short-term cash with different institutions. The difference between the amount paid for purchase of financial assets and the amount received for the sale of financial assets represents interest.

SANRAL entered into repurchase agreements (repo) as part of its trading activities.

When entering a repo transaction, SANRAL either becomes the outright owner (borrowing stock, investing cash), or fully transfers ownership (lending stock, borrowing cash) of the bonds to the counterparty. There are no restrictions on the bonds during the period of the repo transaction for either party, other than that the second leg of the repo transaction has to be honoured by both parties.

Securities purchased under agreements to resell are recognised under “receivables” as “repurchase agreements”. The underlying securities purchased under repurchase agreements are not recognised by the company. Likewise, underlying securities sold under repurchase agreements are not de-recognised by the company. A payable is recognised for the repurchase transaction, and recognised as “repurchase obligations” under “payables”.

The risk that the company is exposed to is discussed in note 37.

The differences between the purchase and sale prices are treated as interest and are accrued using the effective interest method.

Offset

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Loans to shareholders, directors, managers and employees

These financial assets are classified as loans and receivables.

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35 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.6 Financial instruments (continued)

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. In case of SANRAL trade and other receivables mainly constitute of e-tolls. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.

Trade receivables, specifically toll debtors, were objectively assessed for impairment or collectibility, given the legislative framework. Allowances for estimated irrecoverable amounts were made, which included the following:

• Debt older than three years • Debtors currently in liquidation or under business rescue

Trade and other receivables are classified as loans and receivables.

Trade and other payables

Trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.

1.7 Tax

SANRAL was exempted from income tax in the Government Gazette of 22 December 2003, in terms of S10(1)(t)(iii) of the Income Tax Act of 1962. This exemption was backdated to the inception of the company.

1.8 Leases

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Operating leases - lessor

Operating lease income is recognised as income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments is recognised as an operating lease asset. This asset is not discounted.

Any contingent rents are expensed in the period they are incurred.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.9 Non-current assets held for sale

Non-current assets (or disposal groups comprising assets and liabilities) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction and not through continuing use. The condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present

condition. These assets may be a component of the company, a disposal group or an individual non-current asset. STATEMENTS FINANCIAL ANNUAL

Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the company’s accounting policies. Thereafter, the assets (or disposal group) are generally measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

1.10 Impairment of assets

Impairment of toll assets (Road construction assets self-funded through toll fees)

At each reporting date, the company reviews the carrying amounts of its toll assets to determine whether there is any indication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount for an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

The recoverable amount of toll assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash- generating unit to which the asset belongs.

Impairment of non-toll assets (State-funded through government grants)

The recoverable amount of non-toll assets is the greater of an asset’s fair value less cost to sell and value in use. Non-toll assets are non-cash-generating assets. Non-toll assets do not create cash flows from their use, and a market for non-toll roads does not exist. IFRS does not specifically cover the impairment of non-cash-generating assets, and in such cases allows other sources such as pronouncements of other standard setting bodies to be considered. The determination of the carrying amount of non-cash-generating assets are discussed in International Public Sector Accounting Standard 21 (IPSAS 21). In accordance with IPSAS 21 value in use of a non-cash-generating asset is the present value of the asset’s remaining service potential. The present value of the remaining service potential of the asset is determined using depreciated replacement cost. The company measures its non-toll assets (road network, structures and land) on the revaluation model, based on depreciated replacement cost. Therefore the company’s valuation already takes any impairment effect into consideration, and no further specific impairment test is performed on non-toll assets. The remaining assets (equipment, vehicles, furniture, buildings and assets under construction) are measured on the cost model.

Impairment loss

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its long term recoverable amount. Impairment losses are recognised in profit or loss.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount. The increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately in profit or loss.

Revalued assets

Impairment loss on revalued assets are recognised as a decrease in the revaluation reserve in other comprehensive income. A reversal of impairment loss is recognised as an increase in the revaluation reserve in other comprehensive income, limited to the assets’ revalued amount.

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1.11 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Currently the company has normal issued share capital and share premium accounted for as equity instruments. Directly attributable costs with issuing of equity instruments are deducted against equity.

1.12 Employee benefits

Defined contribution plans

The company operates a defined contribution plan (GEPF), the assets of which are held in a separate trustee-administered fund. The provident fund is funded by payments from the company, taking into account the recommendations of independent qualified actuaries. The company’s contributions to the defined contribution plans are charged to the profit or loss as an employee benefit expense in the year to which they relate.

The company also has employees who are members of the Government Employee Pension Fund (GEPF). Contributions to the GEPF are charged to profit or loss in the year to which they relate as part of cost of employment. The company has no legal or constructive obligation to pay further contributions if the GEPF does not hold sufficient assets to pay all employees their benefits relating to employee service in the current and prior periods.

Defined benefit plans

For defined benefit plans (post retirement medical aid) the cost of providing the benefits is determined using the projected unit credit method.

Separate actuarial valuations are conducted for this plan on an annual basis by independent actuaries.

Consideration is given to any event that could impact the funds up to the end of the reporting period where the interim valuation is performed at an earlier date.

Past service costs are recognised immediately to the extent that the benefits are already vested, and are otherwise amortised on a straight-line basis over the average period until the amended benefits become vested.

Actuarial gains and losses are recognised in the year in which they arise, in other comprehensive income.

Gains or losses on the curtailment or settlement of a defined benefit plan is recognised when the company is demonstrably committed to curtailment or settlement.

When it is virtually certain that another party will reimburse some or all of the expenditure required to settle a defined benefit obligation, the right to reimbursement is recognised as a separate asset. The asset is measured at fair value. In all other respects, the asset is treated in the same way as plan assets. In profit or loss, the expense relating to a defined benefit plan is presented as net of the amount recognised for a reimbursement.

The amount recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduces by the fair value of plan assets.

Any asset is limited to unrecognised actuarial losses and past service costs, plus the present value of available refunds and reductions in future contributions to the plan.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.13 Provisions

Provision for rehabilitation costs

Provision for rehabilitation costs is recognised when:

 SANRAL has a present obligation as a result of damage to the environment from digging burrow pits STATEMENTS FINANCIAL ANNUAL  It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation  A reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the obligation. Where the effect of discounting to present values is material, provisions are adjusted to reflect the time value of money, and where appropriate, the risk specific to the liability. The unwinding of discount is recognised as finance cost.

Rehabilitation costs are provided for, based on the contractual agreement signed with the contractors maintaining or constructing the road networks and increased over the life span of the project. Once the project is complete, the provision for rehabilitation costs is reversed as the actual cost has been incurred and paid for.

Rehabilitation costs provided for projects that are capital in nature are capitalised to the respective asset. Rehabilitation costs provided for projects that are operational in nature are expensed in profit or loss.

Provisions are not recognised for future losses.

Provision for overload control

Provision for overload control is recognised when:  SANRAL has a present obligation as a result of damage caused by overloading on roads operated by concessionaires  It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation  A reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the obligation. Where the effect of discounting to present value is material, provisions are adjusted to reflect the time value of money, and where appropriate, the risk specific to the liability. The unwinding of discount is recognised as finance cost.

Provision for overload controls is provided for, based on the contractual agreement signed with the concessionaires regarding control of overloading on the road network operated by concessions. SANRAL expects concessionaires to claim amount due within a year, as they rehabilitate the road network.

Provisions are not recognised for future operating losses.

1.14 Government grants

Government grants are recognised when there is reasonable assurance that:  The company will comply with the conditions attached to them  The grants will be received.

Government grants received that compensate the company for capital expenditure (the cost of an asset) are included in non-current liabilities as deferred income and are released to income on a systematic basis in subsequent years over the estimated life of the related assets. Government grants received as compensation for acquisition of land are recognised as income when received, because land is not deferred.

Government grants that compensate the company for expenses incurred are recognised in profit or loss immediately. The unspent portion of a grant is included in non-current liabilities as deferred income.

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39 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.15 Revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and similar allowances.

Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at financial position date.

Revenue from contracts is recognised on the accrual basis in accordance with the substance of the relevant agreements. SANRAL recognises revenue when the amount of revenue can be reliably measured; when it is probable that economic benefits will flow to the entity; and when specific criteria have been met for each of the SANRAL activities as described below. SANRAL bases its estimate for discounts on historical results, taking into account the type of customer, the transaction and the type of arrangement

Toll income

Toll income from conventional plazas comprises the value of toll tariffs charged in respect of the toll operations, net of value added tax. Toll income is recognised when toll fees are received.

Concession income

Concession income is recognised on a straight-line basis over the term of the concession contract.

Gauteng Open Road Tolling

Revenue recognition

Gauteng Open Road Tolling (GORT) revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the entity and the amount of revenue can be measured reliably. Management uses accumulated experience to estimate the probability of economic benefits flowing to SANRAL based on historic data.

E-toll revenue is recognised when a vehicle (class A to C) has passed through the GORT gantry and the vehicle has been identified as a valid e-toll passage. (A valid e-toll passage is when a vehicle passes a gantry and all the identification processes are completed.)

Measurement

E-toll revenue is measured at the fair value of the consideration received or receivable. Revenue is measured at the tariffs gazetted in the Government Gazette No 37038 dated 19 November 2013, less VAT and discounts provided for in the said gazette as well as any further gazetted tariff adjustments and discounts which may be published from time to time. Accumulated experience is used to determine the timing of receipts.

Revenue received in advance

E-toll revenue received in advance is deferred and recognised only when the vehicle (class A to C) has passed through the GORT gantry and the vehicle has been identified as a valid e-toll passage.

Revenue received in advance is measured at the fair value of the consideration received. Revenue is measured at the tariffs gazetted in the Government Gazette No 37038 dated 19 November 2013, less VAT and discounts provided for in the said gazette.

1.16 Other income

Other income includes contributions from other spheres of government and the private sector. For managing projects this includes assets owned by other entities and they contribute their proportionate share to the projects for SANRAL’s management.

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Accounting Policies

1.17 Investment income and finance cost

Investment income comprises interest income on funds invested and changes in fair value of financial assets held-for- trading. Finance expenses comprise interest expenses on funds borrowed and changes in fair value of held-for-trading financial liabilities. ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Interest income and expenses are recognised on a time proportion basis, taking account of the principal outstanding and the effective interest rate over the period to maturity. Interest income and expenses are recognised in profit or loss for all interest-bearing instruments on an accrual basis using the effective interest method, except for market-making financial assets and liabilities.

The coupon interest of bonds included in market-making financial assets and liabilities is included under interest income and expense respectively. The remaining difference between interest calculated on amortised cost based on the effective interest and coupon interest is disclosed as part of held-for-trading gains and losses. Where financial assets have been impaired, interest income continues to be recognised on the impaired value, based on the original effective interest rate.

Interest income and expense include the amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest method basis.

1.18 Borrowing costs

Borrowing costs comprise interest and other costs that the company incurs in connection with the borrowing of funds.

A qualifying asset comprises an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they have been incurred.

1.19 Public Private Partnerships (PPPs)

PPPs entail private entities taking substantial risks for financing a project’s capital and operating costs, designing and building a facility, and managing its operations to specified standards, normally over a significant period of time. In a PPP, the land typically belongs to the public institution, not to the private party, and the property, plant and equipment developed in terms of the PPP are thus state property.

Concession revenues

Where concessionaires have the right to charge and collect tolls, the company does not recognise any revenue. In circumstances where the concessionaire is required to pay a fee to the company, this amount is recognised as concession income and included in revenue.

Assets and depreciation

Toll concessions give the concessionaire the right to use the toll assets, while the company retains the title and ownership of the assets. Items of property, plant and equipment under concession agreements are recognised and measured in accordance with policies for property, plant and equipment.

Guarantees

Concessionaires are required to obtain guarantees in the form of performance bonds in favour of the company, relating to construction work, operation and maintenance activities of the concessionaire.

1.20 Irregular and fruitless and wasteful expenditure

Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of the Public Finance Management Act. Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. All irregular, fruitless and wasteful expenditure is recorded as expenditure in the year that it was incurred. After an investigation is conducted and it was found that an official was negligent, income is recognised with a corresponding debtor.

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1.21 Segment information

Operational segment identification

For management purposes, SANRAL is currently organised into two divisions: toll and non-toll operations. These business segments' operating results are regularly reviewed by the entity's chief operating decision maker, and used to make decisions about resources to be allocated to the segments, as well as to assess their performance.

SANRAL considered the following factors during the identification of the reportable segments:  Nature of the products/services rendered by the segment  Nature of revenues generated by the segment  Nature of expenses incurred by the segment  Nature of the funding used to finance segment activities.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise investments (other than investment properties) and related revenue, loans and borrowings and related expenses, corporate assets (primarily head office) and head office expenses. There are no transactions between the business segments. Segment assets consist primarily of land, buildings, roads and equipment. Segment liabilities comprise deferred income and long-term liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than goodwill and are directly attributable to the segment or can be allocated to the segment on a reasonable basis.

Source of segment revenue

The toll operating segment derives its revenue from levying toll fees to the users of the tolled roads in South Africa, as well as from concession fees from the concession contracts entered into with the concessionaires of certain national roads in South Africa. Specific grants from government for toll funding are also recognised as revenue, to the extent they have been realised. The balance is deferred.

The non-toll operating segment derives its revenue from government funding in the form of government grants.

Measurement of items reported in segment reporting

The amount of each segment item reported is the measure reported to the chief operating decision-maker for the purposes of making decisions about allocating resources to the segments and assessing their performance.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

2. New Standards and Interpretations

2.1 Standards and interpretations effective and adopted in the current year

In the current year, the company has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations: STATEMENTS FINANCIAL ANNUAL

Standard/ Interpretation: Effective date: Expected impact: Years beginning on or after  Amendments to IAS 16 and IAS 38: Clarification of 01 January 2016 The impact of the standard Acceptable Methods of Depreciation and Amortisation is not material.  IFRS 14 Regulatory Deferral Accounts 01 January 2016 The impact of the amendment is not material.  Amendment to IFRS 5: Non-current Assets Held for Sale 01 January 2016 The impact of the and Discontinued Operations: Annual Improvements project amendment is not material.  Amendment to IFRS 7: Financial Instruments: Disclosures: 01 January 2016 The impact of the Annual Improvements project amendment is not material.  Amendment to IAS 19: Employee Benefits: Annual 01 January 2016 The impact of the Improvements project amendment is not material.  Disclosure Initiative: Amendment to IAS 1: Presentation of 01 January 2016 The impact of the Financial Statements amendment is not material.  Amendment to IAS 34: Interim Financial Reporting. Annual 01 January 2016 The impact of the Improvements project amendment is not material.

2.2 Standards and interpretations not yet effective

The company has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the company’s accounting periods beginning on or after 01 April 2017 or later periods:

Standard/ Interpretation: Effective date: Expected impact: Years beginning on or after  IFRS 16 Leases 01 January 2019 Impact is currently being assessed  IFRS 9 Financial Instruments 01 January 2018 Impact is currently being assessed  IFRS 15 Revenue from Contracts with Customers 01 January 2018 Impact is currently being assessed  Amendments to IFRS 15: Clarifications to IFRS 15 Revenue 01 January 2018 Impact is currently being from Contracts with Customers assessed  Amendments to IFRS 4: Applying IFRS 9 Financial 01 January 2018 Impact is currently being Instruments with IFRS 4 Insurance Contracts assessed  Amendments to IAS 7: Disclosure initiative 01 January 2017 Impact is currently being assessed

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43 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

3. Fair value

SANRAL measures financial instruments, such as investments, bonds, and borrowings, at fair value at each reporting date. The fair value of financial instruments measured at amortised cost is disclosed should it be determined that the carrying value of these instruments does not reasonably approximate their fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the sale or transfer takes place either:  In the market for the asset or liability; or  In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to SANRAL.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants, act in their economic best interest. A fair value measurement of non-financial assets takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

SANRAL uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, SANRAL determines whether transfers have occurred between the levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, SANRAL has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

4. Property, plant and equipment under concession

31 March 31 March 2017 2016

Cost / Accumulated Carrying Cost / Accumulated Carrying STATEMENTS FINANCIAL ANNUAL Valuation depreciation value Valuation depreciation value R'000 R'000 R'000 R'000 R'000 R'000 Buildings 967 613 (155 518) 812 095 967 613 (136 504) 831 109 Road structures 7 386 933 (931 541) 6 455 392 6 317 987 (385 369) 5 932 618 Equipment 470 214 (243 572) 226 642 606 893 (296 914) 309 979 Property, plant and 2 075 646 - 2 075 646 1 333 448 - 1 333 448 equipment under construction Road network 42 003 705 (8 057 424) 33 946 281 37 472 034 (8 401 659) 29 070 375 Total 52 904 111 (9 388 055) 43 516 056 46 697 975 (9 220 446) 37 477 529

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45 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 46 THE SOUTHAFRICANNATIONAL ROADSAGENCYSOCLIMITEDINTEGRATED REPORT 2016/17 Notes to the Financial Statements

4. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment under concession - 2017

Opening Additions Disposals Transfers Revaluation Depreciation Total balance R'000 R'000 R'000 R'000 R'000 R'000 R'000 Buildings 831 109 - - - - (19 014) 812 095 Road structures 5 932 618 108 457 - - 424 719 (10 402) 6 455 392 Equipment 309 979 19 232 (84 956) 21 343 - (38 956) 226 642 Property, plant and equipment under construction 1 333 448 1 269 278 - (527 080) - - 2 075 646 Road network 29 070 375 82 072 - 505 737 4 619 312 (331 215) 33 946 281 37 477 529 1 479 039 (84 956) - 5 044 031 (399 587) 43 516 056

Reconciliation of property, plant and equipment under concession - 2016

Opening Additions Transfers Revaluation Depreciation Total balance Restated R'000 R'000 R'000 R'000 R'000 R'000 Buildings 718 961 4 460 126 247 - (18 559) 831 109 Road structures 4 893 536 12 455 - 1 035 530 (8 903) 5 932 618 Equipment 290 649 6 463 49 433 - (36 566) 309 979 Property, plant and equipment under construction 1 094 245 986 533 (747 330) - - 1 333 448 Road network 35 382 416 73 007 571 650 (6 641 883) (314 815) 29 070 375 42 379 807 1 082 918 - (5 606 353) (378 843) 37 477 529

52 4

South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

4. Property, plant and equipment (continued)

Pledged as security

None of PPE under concession are pledged as security for liabilities ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company

Depreciation method

Property, plant and equipment under concession are depreciated on a staightline basis over its useful life.

Impairment assessment

Property, plant and equipment under concession has been assessed for impairment.

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47 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

4. Property, plant and equipment (continued)

Revaluation

Revaluation of road network and structures

Road network and structures are valued at depreciated replacement cost based on the estimated present cost of constructing existing assets by the most appropriate current method of construction, reduced by factors for the age and condition of the asset. The estimated present material unit costs are assumed to be uniform across the country. The unit rate, as at 31 March 2017, is determined by an independent quantity surveyor.

The Depreciated Replacement Cost methodology, where replacement cost is based on that of Modern Equivalent Asset, as utilised by SANRAL, is in direct alignment with the recommendations contained within International Infrastructure Management Manual (IIMM) for specialised assets which are rarely, if ever, sold on the open market. This manual is used internationally in Australia, New Zealand, United Kingdom, Canada, South Africa, and other countries. The replacement cost is calculated using unit rates determined by an independent quantity surveryor.

The depreciation of the asset is then calculated using straight-line depreciation for the roadbed portion and condition-based depreciation for the pavement layers and structures. Pavement condition data is collected using survey vehicles equipped with lasers and 2D/3D cameras enabling the determination of various pavement condition indicators for each 10m of the road network on a two-year basis. The bridges are inspected by certified independent inspectors on a five-year basis.

The actual condition is then used to determine the depreciation rate that should be applied to the pavement layers for each 1km of road and to the structures.

Factors impacting on the value of SANRAL roads: a. % Network Change: In 1998, SANRAL had just less than 7000km of roads in its asset portfolio. The incorporation of roads from provinces has increased this over the period, bringing the total to 21 490km at the end of March 2016. This expansion had a significant impact on the value of assets. During the 2016/17 financial year 707km of non-toll roads were incorporated into the national road network. b. % CPA Change: In determining replacement cost, the cost of construction is driven by various input costs such as the cost of bitumen (crude oil), diesel for construction plant operations, cement, steel and aggregate. Stats SA publishes the Construction Price Adjustment (CPA) factor, which all construction contracts are linked to, on a monthly basis. c. % Good Condition: Any reseal, overlay, or strengthening work performed on the assets impact on the condition of the asset, the remaining life of the asset and thus the condition-based depreciation of the asset. d. %> 5000 vehicles per day: The volume and composition of traffic (lights/heavy vehicles) which a road carries, determine the standard to which the road must be built or maintained. This means that a road carrying 200 000 vehicles a day, will require additional lanes per direction and more pavement layers using higher quality materials than a road carrying less than 500 vehicles a day. This all impacts on the replacement cost of the 1km section of road. e. The topography that is flat, rolling or mountainous, has an impact on the size and extent of cuttings and fills and thus on the replacement cost of the 1 km section of road. f. The climate - arid, moderate, wet - has an impact on the number of pavement layers, the quality of the material within layers and thus replacement cost of the 1 km section of road. g. Similarly any cross sectional changes, that is paved shoulders, additional lanes, or climbing lanes will increase the replacement cost of the 1 km section of road.

All the above factors and associated changes are considered within the SANRAL ITIS Asset Value Calculation procedure that is performed for each 1km section of road and structure on an annual basis.

Management reviewed the valuations of the road network and structures as at 31 March 2017 due to decrease or increase in material unit rates; and due to the unique nature of the assets, and the extensive detailed condition data required of the road network, structures and material unit costs, SANRAL performed the revaluation internally on road assets utilising information supplied by industry experts.

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48 4

South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

4. Property, plant and equipment (continued)

31 March 31 March 2017 2016 The Carrying values of property, plant and equipment under R'000 R'000 concession if all accounted for under the cost model would have STATEMENTS FINANCIAL ANNUAL been: Building 812 095 831 109 Road structures 469 157 344 973 Equipment 226 642 309 978 Property, plant and equipment under construction 2 075 646 1 333 448 Road network 4 569 359 4 557 778 8 152 899 7 377 286

5. Property, plant and equipment

31 March 31 March 2017 2016 Cost or Accumulated Carrying Cost or Accumulated Carrying revaluation depreciation value revaluation depreciation value R'000 R'000 R'000 R'000 R'000 R'000 Land 20 213 288 - 20 213 288 18 687 010 - 18 687 010 Buildings 2 216 559 (266 244) 1 950 315 1 813 709 (220 529) 1 593 180 Equipment, vehicles and 1 944 434 (1 061 375) 883 059 1 929 199 (958 406) 970 793 furniture Road network 293 771 387 (85 823 860) 207 947 527 277 278 802 (82 354 949) 194 923 853 Property, plant and 13 652 776 - 13 652 776 11 779 427 - 11 779 427 equipment under construction Road structures 64 311 730 (8 803 704) 55 508 026 54 680 070 (4 750 117) 49 929 953 Total 396 110 174 (95 955 183) 300 154 991 366 168 217 (88 284 001) 277 884 216

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49 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 50 THE SOUTHAFRICANNATIONAL ROADSAGENCYSOCLIMITEDINTEGRATED REPORT 2016/17 Notes to the Financial Statements

Reconciliation of property, plant and equipment - 2017

Opening Additions Borrowing Disposals Transfers Revaluations Depreciation Impairment Total balance costs loss Restated capitalised R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 Land*** 18 687 010 67 303 - - - 1 458 975 - - 20 213 288 Buildings 1 593 180 274 - - 402 574 - (38 489) (7 224) 1 950 315 Equipment, vehicles and furniture 970 793 23 555 - (4 500) 5 791 - (111 513) (1 068) 883 059 Road network 194 923 853 - 1 636 - 4 814 990 10 627 621 (2 420 573) - 207 947 527 Property, plant and equipment under 11 779 427 7 662 025 (1 636) (6 667) (5 780 374) - - - 13 652 776 construction Road structures 49 929 953 - - - 557 019 5 179 429 (158 375) - 55 508 026 277 884 216 7 753 157 - (11 167) - 17 266 025 (2 728 950) (8 292) 300 154 991

Reconciliation of property, plant and equipment - 2016

Opening Additions Borrowing Disposals Transfers Revaluations Depreciation Total balance Restated costs Restated capitalised R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 Land 17 206 830 87 379 - - - 1 392 801 - 18 687 010 Buildings 1 624 034 5 041 - - - - (35 895) 1 593 180 Equipment, vehicles and furniture 1 089 912 8 127 - (2 572) - - (124 674) 970 793 Road network 189 971 848 1 504 411 4 791 - 4 872 412 790 593 (2 220 202) 194 923 853 Property, plant and equipment under construction 11 950 071 5 781 665 (4 791) - (5 947 518) - - 11 779 427 Road structures 44 665 643 - - - 1 075 106 4 326 533 (137 329) 49 929 953 266 508 338 7 386 623 - (2 572) - 6 509 927 (2 518 100) 277 884 216

56 4

South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

The revaluation increase of R1.458bn for land is merely as a result of market price increases. During the 2016/17 financial year 707 km of non-toll roads were incorporated into the national road network.

Revaluation are disclosed net of depreciation

During the 2017 financial year, the recoverable amount of a cash generating unit (Magalies toll plaza) was less than the STATEMENTS FINANCIAL ANNUAL carrying amount. The decrease in the recoverable amount relates to cash flow predictions that decreased due to estimated increase in maintenance costs in the future. This resulted in impairment of the cash generating unit. Magalies toll plaza falls under the northern region toll sector segment.

The carrying amount of idle Property, Plant and Equipment (road network) amounts to R1.337m

Carrying values

The carrying value of property, plant and equipment if all accounted for under the cost model would have been:

31 March 31 March 2017 2016 R'000 R'000

Land 886 486 819 183 Buildings 1 950 315 1 593 180 Equipment, vehicles and furniture 883 059 970 793 Road network 48 953 547 46 557 431 Property, plant and equipment under construction 13 652 776 11 779 427 Road structures 6 700 228 6 301 584 73 026 411 68 021 598

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51 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

Property, plant and equipment encumbered as security

None of SANRAL's property, plant and equipment are pledged as security for liabilities

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the company

Useful lives

The estimate useful lives are reflected in note 1.4

Property, plant and equipment under construction

Property, plant and equipment under construction refer to capital expenditure on roads such as strengthening, improvements, new roads building and highway monitoring equipment. No impairment testing was considered for assets under construction as the risk of impairment is transferred to the contractor.

Land Identification process

In terms of the identification process, which was initiated on 1 April 1998, SANRAL has identified 31 186 (2016: 29 686) properties falling within road reserves and 2 495 (2016: 2 131) investment properties which fall outside of the road reserve. The values are shown in the financial statements. For investment property values refer to note 6.

Depreciation method

Property, plant and equipment are depreciated on a staightline basis over its useful life.

Revaluation

Revaluation of land

The land component of the road reserve was valued in terms of the depreciated replacement cost. The replacement cost of land is determined based on recent selling prices of vacant land with comparable location and, where applicable, adjusted in respect of engineering services' status and development rights on the road reserves. Applying the across-the-fence valuation model, valuation was performed on the land component as at 31 March 2017 by an independent professional valuator.

Revaluation of road network and structures

Road network and structures are valued at depreciated replacement cost based on the estimated present cost of constructing existing assets by the most appropriate current method of construction, reduced by factors for the age and condition of the asset. The estimated present material unit costs are assumed to be uniform across the country. The unit rate, as at 31 March 2017, is determined by an independent quantity surveyor.

The Depreciated Replacement Cost methodology, where replacement cost is based on that of Modern Equivalent Asset, as utilised by SANRAL, is in direct alignment with the recommendations contained within International Infrastructure Management Manual (IIMM) for specialised assets which are rarely, if ever, sold on the open market. This manual is used internationally in Australia, New Zealand, United Kingdom, Canada, South Africa, and other countries. The replacement cost is calculated using unit rates determined by an independent quantity surveryor.

The depreciation of the asset is then calculated using straight-line depreciation for the roadbed portion and condition-based depreciation for the pavement layers and structures. Pavement condition data is collected using survey vehicles equipped with lasers and 2D/3D cameras enabling the determination of various pavement condition indicators for each 10m of the road network on a two-year basis. The bridges are inspected by certified independent inspectors on a five-year basis.

The actual condition is then used to determine the depreciation rate that should be applied to the pavement layers for each 1km of road and to the structures.

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52 4

South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

Factors impacting on the value of SANRAL roads: a. % Network Change: In 1998, SANRAL had just less than 7000km of roads in its asset portfolio. The incorporation of roads from provinces has increased this over the period, bringing the total to 21 490km at the end of March 2016. This expansion had a significant impact on the value of assets. During the 2016/17 financial year 707km of non-toll roads were incorporated into the national road network. ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL b. % CPA Change: In determining replacement cost, the cost of construction is driven by various input costs such as the cost of bitumen (crude oil), diesel for construction plant operations, cement, steel and aggregate. Stats SA publishes the Construction Price Adjustment (CPA) factor, which all construction contracts are linked to, on a monthly basis. c. % Good Condition: Any reseal, overlay, or strengthening work performed on the assets impact on the condition of the asset, the remaining life of the asset and thus the condition-based depreciation of the asset. d. %> 5000 vehicles per day: The volume and composition of traffic (lights/heavy vehicles) which a road carries, determine the standard to which the road must be built or maintained. This means that a road carrying 200 000 vehicles a day, will require additional lanes per direction and more pavement layers using higher quality materials than a road carrying less than 500 vehicles a day. This all impacts on the replacement cost of the 1km section of road. e. The topography that is flat, rolling or mountainous, has an impact on the size and extent of cuttings and fills and thus on the replacement cost of the 1 km section of road. f. The climate - arid, moderate, wet - has an impact on the number of pavement layers, the quality of the material within layers and thus replacement cost of the 1 km section of road. g. Similarly any cross sectional changes, that is paved shoulders, additional lanes, or climbing lanes will increase the replacement cost of the 1 km section of road.

All the above factors and associated changes are considered within the SANRAL ITIS Asset Value Calculation procedure that is performed for each 1km section of road and structure on an annual basis.

Management reviewed the valuations of the road network and structures as at 31 March 2017 due to decrease or increase in material unit rates; and due to the unique nature of the assets, and the extensive detailed condition data required of the road network, structures and material unit costs, SANRAL performed the revaluation internally on road assets utilising information supplied by industry experts.

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53 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

6. Investment property

Valuation Valuation 31 March 31 March 2017 2016 R '000 R '000 Investment property 1 812 370 1 404 075 Total 1 812 370 1 404 075

Reconciliation of investment property - 31 March 2017

Opening Disposals Classified as Fair value Total balance held for sale adjustments R '000 R '000 R '000 R '000 R '000 Investment property 1 404 075 (43 670) (69 353) 521 318 1 812 370 1 404 075 (43 670) (69 353) 521 318 1 812 370

Reconciliation of investment property - 31 March 2016

Opening Additions Disposals Classified as Fair value Total balance held for sale adjustments R '000 R '000 R '000 R '000 R '000 R '000 Investment property 1 318 565 33 191 (10 417) (20 096) 82 832 1 404 075 1 318 565 33 191 (10 417) (20 096) 82 832 1 404 075

31 March 31 March 2017 2016

R '000 R '000

Details of investment property

Investment properties

Improved property 229 720 209 743 Vacant property 1 582 650 1 194 332 1 812 370 1 404 075

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

6. Investment property (continued)

A register containing the information required by Regulation 25(3) of the Companies Regulations, (2011) is available for inspection at the registered office of the company.

Additional information STATEMENTS FINANCIAL ANNUAL

Investment property comprises a number of freehold properties (surplus or severed land) kept for appreciation in their value and for purpose of rental income. SANRAL's primary responsibility relates to the construction and maintenance of national roads, but during the execution of its normal responsibilities SANRAL may also become the owner of surplus land. Although such land is often alienated, SANRAL does not, per se, hold it for sale as part of its ordinary course of business. All surplus land that is not "owner occupied" is considered to be investment property.

The fair value of investment property is based on a valuation using the widely accepted "comparable sales method", taking into consideration the size, shape, accessibility and existing rights of the property.

The valuation was done by an independent valuer during the financial year ending 31 March 2017. The valuer holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. Valuation of investment property is done on an annual basis.

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55 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 56 THE SOUTHAFRICANNATIONAL ROADSAGENCYSOCLIMITEDINTEGRATED REPORT 2016/17 Notes to the Financial Statements

7. Intangible assets

31 March 2017 31 March 2016 Cost Accumulated Carrying Cost Accumulated Carrying amortisation value amortisation value R '000 R '000 R '000 R '000 R '000 R '000 Computer software 38 383 (18 542) 19 841 37 850 (17 290) 20 560 Way leave agreements 57 707 (15 781) 41 926 52 421 (12 277) 40 144 Total 96 090 (34 323) 61 767 90 271 (29 567) 60 704

Reconciliation of intangible assets - 31 March 2017

Opening Additions Amortisation Total balance R '000 R '000 R '000 R '000 Computer software 20 560 533 (1 252) 19 841 Way leave agreements 40 145 5 286 (3 505) 41 926 60 705 5 819 (4 757) 61 767

Reconciliation of intangible assets - 31 March 2016

Opening Additions Amortisation Total balance

R '000 R '000 R '000 R '000 Computer software 18 951 2 853 (1 244) 20 560 Way leave agreements 25 058 19 827 (4 740) 40 145 44 009 22 680 (5 984) 60 705

62 4

South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

7. Intangible assets (continued)

Pledged as security ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL None of SANRAL's intangible assets are pledged as security for liabilities.

Impairment assessment

SANRAL has assessed the intangible assets for impairment using the LSR method. For the 2016/17 financial year there was no indicator for impairment

8. Investments

At fair value through profit or loss - held for trading Market-making investments 317 157 636 814 Market-making investments consist of bonds. These bonds had yields of between 8.09% and 8.61% as at 31 March 2017 (31 March 2016: 9.81%). Market-making investments are held to manage liquidity and to reduce the cost of borrowing. 317 157 636 814

Loans and receivables at amortised cost Capped insurance receivable 329 739 289 093 In September 2015 SANRAL signed a three-year insurance agreement with Santam Insurance. SANRAL made an upfront deposit, and all claims up to the balance of the deposit are recovered from the funds deposited.

Claims in excess of this deposit are paid by the insurer. The agreement provides for the repayment of the balance of the deposit at the end of the agreement period. The amount of R329.7 million (31 March 2016: R289.1 million) represents the balance for the period ending 31 March 2017.

These funds earn interest at the three-month Jibar-based deposit rate of 7.0028% (31 March 2016: 6.6585%). The policy is renewed annually. Total other financial assets 646 896 925 907

Non-current assets Loans and receivables at amortised cost 329 739 289 093

Current assets At fair value through profit or loss held for trading 317 157 636 814 646 896 925 907

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57 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

9. Trade and other receivables

Trade receivables (toll) 8 798 399 6 620 088 Bad debts written off (33 100) - Other receivables 186 620 317 964 Other receivables due from related parties 139 163 100 499 Accrued interest 73 850 83 047 Other receivables due from third party funding 47 336 20 401 Impairment losses - toll and other receivables (3 845 439) (91 844) 5 366 829 7 050 155

Trade and other receivables comprises mainly e-toll debtors and share of joint project costs from other spheres of government and private sector. R3.613bn (2016: R89.9m) of the impairment losses relate to the impairment of e-toll debtors.

Reconciliation of credit losses (impairment)

Opening balance (91 844) (1 650)

Impairment (3 753 595) (90 194)

Closing balance (3 845 439) (91 844)

Toll tariffs are charged in terms of an Act of Parliament, the South African National Roads Agency Limited and National roads Act, No 71 of 1998, which provides that the non-payment of toll fees is an offence. To this end toll debt can’t be written off, other than by a court of law, and as a criminal offence it does not prescribe. The same Act allows SANRAL to pursue both criminal and civil action against a non-payer. Additionally, the PFMA in section 51 (1)(b)(i) prescribes that all revenue due to the state must be collected.

Trade receivables, specifically toll debtors, were objectively assessed for impairment or collectibility, given the legislative framework. Allowances for estimated irrecoverable amounts were made, which included the following:

• Debt older than three years • Debtors currently in liquidation or under business rescue

In assessing toll debtors for impairment, the following were the significant judgements considered based on the current prevailing conditions and historical trends:

As a result of toll debtors being mainly LSM 9 consumers, SANRAL management considered the toll tariffs as affordable for these users given the percentage of household income and the monthly caps which apply. The refusal to pay was not regarded as an inability to pay.

Corporates under business rescue or in liquidation are considered to be a loss event as they are in financial difficulty and the outcome is unknown. The probability of the full amount being recovered was not certain therefore these amounts were impaired.

The reduction in the standard rate in 2015, announced as part of the new dispensation, was considered by management as a loss event for toll debt which preceded the new standard tariff. Based on the current and historical payment patterns the probability of the full amount being recovered was not certain therefore these amounts were impaired. Accounts under R500 are considered a loss event by management, as the cost of recovery may exceed the debt therefore these amounts were impaired.

Debt older than 3 years is considered to be a loss event by management, as there is a probability that the civil claim of the debt may prescribe after 3 years. Whilst still pursuing with civil and criminal prosecution a conservative approach was taken on the probability of recovering the full amounts outstanding and these amounts were impaired.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

10. Assets classified as held for sale

Assets and liabilities ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL

Assets of disposal groups Opening balance 20 096 26 971 Investment property sold during the year (11 956) (9 541) Additions to investment property held for sale 69 353 20 556 Fair value adjustment (3 267) (460) Reclassified assets held for sale (no longer meeting recognition criteria) - (17 430) 74 226 20 096

Investment property held for sale comprises excess land which was acquired for future road construction.

11. Cash and cash equivalents

Cash and cash equivalents consist of:

Cash on hand 14 13 Bank balances 45 107 61 747 Money market deposit accounts 6 524 879 9 428 348 6 570 000 9 490 108

The effective interest rates on bank balances and money market deposit accounts was between 4.81% and 8.03.% (31 March 2016: 5.08% and 7.48%), and the deposits have an average maturity of 26 days (31 March 2016: 18 days).

12. Share capital

Authorised 4 000 ordinary shares of R1 each 4 4

Issued 4 000 ordinary shares of R1 each 4 4 Share premium (4 000 ordinary shares issued at a premium of R272 760 per share) 1 091 040 1 091 040 1 091 044 1 091 044

Shares are held by the the Government of South Africa, represented by the Minister of Transport.

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59 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

13. Reserves

Revaluation reserves

Revaluation reserves are not distributable.

The revaluation reserve relates to the revaluation of the following property, plant and equipment components:

Land 19 333 012 17 874 037 Road network assets (comprising road layers, road beds and road structures) (PPE 242 969 412 222 118 395 includng PPE under concession) 262 302 424 239 992 432

A breakdown of the revaluation movement for the period affecting the statement of profit or loss and other comprehensive income is reflected below:

Increase in revaluation amount for land 1 458 975 1 392 801 Increase/(decrease) in revaluation amount for road network assets (PPE including 20 851 018 (489 226) PPE under concession) (comprising road layers, road beds and road structures) 22 309 993 903 575

Accumulated loss Accumulated loss (14 205 782) (9 243 792) (14 205 782) (9 243 792)

14. Borrowings

At fair value through profit (loss) Designated at fair value through profit or loss - - Borrowings - SANRAL Capital market loan (Long-term) 4 298 582 3 558 733

At fair value through profit (loss): Held for trading - - Borrowings - SANRAL Capital market loan (Short-term) 300 970 742 220

Market-making liability (non-SANRAL) bonds 251 657 343 209

4 851 209 4 644 162

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

14. Borrowings (continued)

Held at amortised cost Borrowings - Capital market loan (Long-term) 42 298 177 37 373 645 STATEMENTS FINANCIAL ANNUAL

Borrowings - Capital market loan (Short-term) - 3 690 306

Borrowings - CPI linked loan (Long-term) 80 453 269 967

Borrowings - CPI linked loan (Short-term) 187 153 198 106 The CPI-linked loan is repayable in monthly CPI-linked installments at real interest rate of 3.91% per annum (31 March 2016 3.91%) until 31 October 2018. This loan is guaranteed by government equal to the original. This loan has its own separate guarantee.

Borrowings - EIB loan (Long-term) 1 051 472 1 080 001

Borrowings - EIB loan (Short-term) 28 529 26 184 SANRAL has entered into a loan agreement with the European Investment Bank (EIB). The loan was drawn in two tranches of R572 784 000 and R573 918 000 respectively during the 2011 financial year. The tranches bear interest at a fixed rate of 8.315% and 9.227% respectively. The loan is repayable over 20 years in semi-annual installments. Repayments are made in South African Rands and commenced in the 2015 financial year. This loan, including interest accrued, is guaranteed by government, under the R31.91bn guarantee. Borrowings - ECA supported loan (Long-term) 66 777 119 087

Borrowings - ECA supported loan (Short-term) 52 310 52 310 SANRAL has entered into a loan facility with the ABSA bank amounting to R523 102 562 for the purchase of goods or services to support the open road tolling system of GFIP. The first tranche of R182 184 245 was drawn during the 2012 financial year. The tranche bears interest at a rate of three-months Jibar plus 1.75%. The loan is repayable over 10 years commencing in June 2012. The loan is supported by the Republic of Austria through Oesterreichische Kontrollbank Aktiengesellschaft, an Export Credit Agency (ECA). The loan may be declared due and payable in the event of SANRAL's Moodys rating falling below investment grade Baa3. It also provides for a period of negotiation in such event to amend the finance documents.

Borrowings - Repurchase agreements 13 607 391 394

Borrowings - call bonds 125 000 1 000 000 SANRAL has issued call bonds under its R6bn guarantee to meet its short-term funding requirements. The call bonds, which are repayable on demand, bear interest at the money market rate which at 31 March 2017 was 7.30% 43 903 478 44 201 000 48 754 687 48 845 162

Non-current liabilities Fair value through profit or loss 4 298 582 3 558 733 At amortised cost 43 496 879 38 842 700 47 795 461 42 401 433

Current liabilities Fair value through profit or loss 552 627 1 085 428 At amortised cost 406 599 5 358 301 959 226 6 443 729 48 754 687 48 845 162

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61 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

14. Borrowings (continued)

Capital market loans

In April 2014, the South African Government issued guarantees of R31.91bn for borrowings by SANRAL, of which the utilisation was capped up to a nominal value of R31.9bn for the 31 March 2017 financial year (31 March 2016: R28bn). SANRAL has issued a nominal of R24.55bn as at 31 March 2017 (31 March 2016 R23.77bn) under a guaranteed Domestic Medium Term Note (DMTN) programme (HWAY bonds). The redemption amount of capital market loans, including interest accrued, issued under the R31.91bn guarantee at 31 March 2017 was R30.33bn (31 March 2016 R28.69bn). The funds raised through these borrowings can only be used for toll operations.

On 16 November 1999, the South African Government issued guarantees for borrowings (SZ bonds) by SANRAL up to a nominal value of R6bn. SANRAL has issued a nominal of R4.189bn as at 31 March 2017 (31 March 2016 R5.08bn) under this guaranteed programme. The funds raised through these borrowings can only be used for toll operations. The South African Government also approved an unguaranteed borrowing capacity of up to a nominal value of R15bn as at 31 March 2017 (31 March 2016 R15bn). SANRAL issued a nominal value of R9.98bn as at 31 March 2017 (31 March 2016 R10.27bn) under the non-guaranteed DMTN programme (NRA bonds). The funds raised through these borrowings can only be used for toll operations.

For further terms and conditions, including risk management information, refer to note 37.

15. Operating lease liability

Non-current liabilities - 1 745 Current liabilities 166 849 166 2 594

Balance brought forward 2 594 1 140 Amount realised in profit or loss (2 428) 1 454 166 2 594

The operating lease liability arises from the straight lining of lease payments over the period of the contract. Lease contracts run over various periods of time and the last contract ends in 2021.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

16. Employee benefits

Defined benefit plan ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Post-retirement health-care benefits

Movement in liability for obligation:

Accrued liability at beginning of the year 36 924 32 450 Benefits paid out (754) (589) Interest cost 3 441 2 812 Service cost 3 304 3 017 Acturial gain/loss (192) (766) 42 724 36 924

Net expense recognised in profit or loss

Current service cost 3 304 3 017 Interest cost 3 441 2 812 6 745 5 829

The expense is recognised in the operating expenses line item in profit or loss.

The entitlement of these benefits is dependent upon the employee remaining in service until retirement age and completing a minimum service period, and is subject to periodic review. SANRAL recognises the estimated liability on an accrued basis over the working life of the eligible employees. During 2014, SANRAL extended its post-retirement medical aid benefits to all its employees.The entitlement is based on the employee remaining in the employment of the organisation for a period of 15 years' uninterrupted service until retirement. An additional 155 employees qualified as from April 2013. The accrued liability of R42.72m is a provision for the period ending 31 March 2017 (2016: R36.92m).

The last valuation of the obligation was performed by Poneso Employee Benefits and Actuarial Consultants as at 31 March 2017 using the Projected Unit Method. The next valuation of the employer's liability will be in March 2018. No plan assets are recognised, therefore the value of the unfunded liability is equal to the accrued liability.

Key assumptions used

Assumptions used in last valuation on 31 March 2017:

Average retirement age 65 years 65 years Membership discontinued at retirement 0 0 Discount rates used 8,75 % 9,32 % Health cost inflation 7,34 % 8,10 %

Historical information 2017 2016 2015 2014 2013 R '000 R '000 R '000 R '000 R '000 Accrued liability at year end 42 724 36 924 32 450 28 587 11 564

Sensitivity analysis

The results are sensitive to a number of assumptions. In order to illustrate the sensitivity of the results to certain key assumptions, we set out below how the results would vary if these assumptions are changed. These scenarios may also be of use in illustrating the possible effect of changes in policy on the liability.

The variable having the greatest effect is the real discount rate, that is, the discount rate net of health care cost inflation. Even relatively small changes to these assumptions have a relatively large impact on the liabilities. We have used a real discount rate of 1.31% per annum in this valuation.

The following sensitivities were analysed:

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63 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

16. Employee benefits (continued)

 1% increase/decrease in the health care cost assumption  A 50% decrease in withdrawal rates  A one-year reduction in the post-retirement mortality, that is, assuming that someone aged 70 will experience the mortality of a 69-year-old person. This is an additional year younger than assumed for the standard basis

Changes in % Service % Interest % assumptions Liability change Cost Change Cost change

Central 42 723 3 651 3 738 assumption used (current)

Medical 1% decrease 35 938 19% 2 937 24% 3 144 19% inflation

1% increase 51 318 -17% 4 590 -20% 4490 -17%

Withdrawal 50% less 44 135 -3% 4 109 -11% 3 861 -3% assumptions

Post- -1 year 44 128 -3% 3 763 -3% 3 861 -3% retirement mortality

Defined Contribution Plan Provident and pension fund

The Alexander Forbes Retirement Fund: South African National Roads Agency Limited Provident Fund (the fund) is a defined contribution plan and is registered in terms of the Pension Funds Act 24 of 1956, as amended. Contributions comprise 20.5% of pensionable emoluments. SANRAL contributes 20.5% of which administration and insurance costs amount to 3.59%. The Fund is administered by Alexander Forbes and 338 of the 339 permanent employees (2016: 304 of the 314) are currently members of the Fund. One employee (2016: one) is a member of the Government Employees' Pension Fund. Contributions to the Government Employees' Pension Fund comprise 20.5% of pensionable emoluments of which members pay 7.5% and SANRAL contributes 13%. Contributions are recognised in profit or loss when the contributions are made.

Pension costs 38 35 Provident costs 36 019 30 236

17. Deferred income

Deferred income consists of deferred government grants and advances from concession contracts.

SANRAL is awarded government grants. These grants relate to the capital and operational expenses on non-toll national routes. The portion spent on capital expenses is being amortised over the useful lives of the underlying assets. Grants for land, which is not depreciated, are treated as income when received. The unutilised portion of the grant at year end is also deferred until utilised.

SANRAL receives prepayments on concession contracts. These payments are deferred over the life of the concession contract. Refer to note 38 for details of the concession arrangements.

Non-current liabilities 41 920 985 38 071 742 Current liabilities 4 726 558 3 814 831 46 647 543 41 886 573

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

17. Deferred income (continued)

Concession contracts ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL

N3 Toll Concession

Non-current Balance brought forward 600 461 648 180 Amount transferred to current (47 719) (47 719) Balance at end of the period 552 742 600 461

Current Balance brought forward 47 719 47 719 Amount realised in profit or loss (47 719) (47 719) Amount transferred from non-current 47 719 47 719 Balance at end of the period 47 719 47 719 Total balance for N3 Toll Concession 600 461 648 180

The amount realised in profit or loss is calculated as the total amount received from the N3 Concessionaire divided by the remaining concession contractual period. This results in a realisation of R47.719m per annum.

TRAC N4

Non-current Balance brought forward 114 780 125 356 Amount transferred to current (10 576) (10 576) Balance at end of the period 104 204 114 780

Current Balance brought forward 10 576 10 576 Amount realised in profit or loss (10 576) (10 576) Amount transferred from non-current 10 576 10 576 Balance at end of the period 10 576 10 576 Total balance for TRAC N4 114 780 125 356

Bakwena concession

Non-current Balance brought forward 21 785 21 785 Total balance for Bakwena concession 21 785 21 785

This amount represents a contingency fund in terms of the concession agreement, with its main purpose being to defray expenditure that will need to be incurred to maintain certain infrastructure. Income is recognised when the expenditure is incurred.

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65 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

17. Deferred income (continued)

Non-toll projects

Non-current Balance brought forward 37 334 717 32 942 760 Capital portion of government grants received 5 693 050 5 961 843 Decrease as a result of increase in asset base (240 856) (266 087) Transferred to current portion (1 544 655) (1 303 799) Balance at end of the period 41 242 256 37 334 717

Current Balance brought forward 1 303 799 1 037 712 Increase as a result of increase in asset base 240 856 266 087 Amount realised in profit or loss (1 544 655) (1 303 799) Transferred from non-current 1 544 655 1 303 799 Balance at end of the period 1 544 655 1 303 799 Unutilised government grant surplus (current) Balance brought forward 2 452 737 1 145 720 Amounts deferred/(utilised) 670 871 1 307 017 Balance at end of the year 3 123 608 2 452 737 Total balance for government non-toll grants 45 910 519 41 091 253

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

18. Provision for rehabilitation costs

Reconciliation of provision for rehabilitation costs - 31 March 2017

Opening Utilised Total

balance during the STATEMENTS FINANCIAL ANNUAL year R'000 R'000 R'000 Provision for rehabilitation costs 5 954 (2 658) 3 296 5 954 (2 658) 3 296

Reconciliation of provisions - 31 March 2016

Opening Utilised Total balance during the year R'000 R'000 R'000 Provision for rehabilitation costs 13 512 (7 558) 5 954 13 512 (7 558) 5 954

Sec 41(1) of the Mineral and Petroleum Resources Development Act of 2002 requires an applicant for a prospecting right, mining right or mining permit to make the prescribed financial provision for the rehabilitation and management of negative environmental impacts.

SANRAL, as a holder of mining permits, is ultimately responsible for the restoration of borrow pits. A provision was therefore raised at the 2011 year end for SANRAL's obligation to rectify environmental damage caused during construction and maintenance of the national roads through the use of borrow pits.

The contractual rehabilitation costs per project were utilised to determine the most accurate cost of restoring borrow pits to their original condition. This was calculated by engineers and project managers as a reasonable indication of the market related price of restoration. Rehabilitation of the borrow pits is performed on an ongoing basis throughout the project, therefore the contractual cost was straight-lined over the remaining period of the project.

Rehabilitation costs pertaining to capital projects were capitalised at year end whereas maintenance projects were expensed immediately.

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67 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

19. Provision for overload control

Reconciliation of provision for overload control - 31 March 2017

Opening Utilised Total balance during the year R'000 R'000 R'000 Provision for overload control 336 205 3 582 339 787 336 205 3 582 339 787

Reconciliation of provision for overload control - 31 March 2016

Opening Utilised Total balance during the year R'000 R'000 R'000 Provision for overload control 374 429 (38 224) 336 205 374 429 (38 224) 336 205

The provision of R340m (2016: R336m) relates to claims from concessionaires for damages to pavement as a result of overloading.

20. Deferred exchange consideration

Opening balance 7 191 503 6 536 161 Increase as a result of increase in asset base (additions) 1 479 039 1 082 919 Exchange consideration realised to profit or loss (563 755) (427 577) 8 106 787 7 191 503 Non-current portion 7 543 032 6 763 926 Current portion 563 755 427 577 8 106 787 7 191 503

SANRAL does not have a contractual obligation towards the concessionaires. SANRAL controls the assets, which are subject to the concession agreement, and the concessionaires have the right to use the assets for the concession period.

The right granted to the concessionaires reflects income (exchange consideration) received in advance of performance.

This is because SANRAL is receiving an inflow of resources, in the form of assets, without having delivered on its portion of the exchange consideration – the provision of access to such assets, which will occur over the remainder of the period of the concession agreement. The liability is realised to profit or loss over the remaining concession contract period.

The expected realisation for the following financial year is recognised as a current liability.

21. Trade and other payables

Trade payables 3 939 439 2 973 991 Accrued interest on financial instruments 864 102 862 721 4 803 541 3 836 712

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

22. Third-party funding

Balance brought forward 331 478 764 751 Interest 71 59 STATEMENTS FINANCIAL ANNUAL Add: Debit balances reclassified to debtors 26 935 20 401 Add: Contributions received during the current year 514 793 146 990 Less: Expenditure incurred during the current year (556 358) (600 722) 316 919 331 479

Funds have been received from third parties (to be administered by SANRAL) mainly for the development of specific roads that do not form part of the declared national road infrastructure.

This balance is supported by cash held in call accounts (refer to note 11). All interest received on cash balances is capitalised for the benefit of the third party or SANRAL, depending on the specific agreement. The funds are repayable as per the agreement. The effective interest rate on the cash held is 6.8% per annum (31 March 2016: 6.8% per annum).

23. Revenue

Toll revenue 4 910 511 4 632 880 Government grants - non-toll 8 671 220 6 577 427 Government grants - GFIP 372 895 264 035 13 954 626 11 474 342

For the year ending 31 March 2017, toll fees amounted to R4.910bn (31 March 2016: R4.633bn). Of these fees, R1.862bn (31 March 2016: R1.765bn) relates to Gauteng Open Road Tolling (GORT), while conventional toll fees amounted to R3.048bn (31 March 2016: R2.868 bn)

Toll fees reconciliation Total fees charged during the year 6 985 210 7 891 464 Less fees that don't meet the recognition criteria (discount on alternative tariff) (2 074 699) (3 258 584) Total revenue recognised 4 910 511 4 632 880

IFRS prescribes that discounts provided should not be included in revenue, as it was never probable that this revenue would be received. Therefore all possible discounts, including the Less60 campaign were excluded from revenue. (Revenue is presented net of the expected discount on the alternative tariff.)

The probability of alternate revenue being realised is remote as:  No international references, in terms of size, exist from which SANRAL can predict payment patterns in the post prosecution period.  The announcement of 60% discount for outstanding debt was made in the 2015/16 financial year.

Because of these uncertainties, SANRAL has not recognised the additional portion of the alternate tariff as revenue in the annual financial statements as there is no reliable measure for the amount, and the timing of receipts is unknown.

Government grants (non-toll) included in revenue Government grants received 13 490 486 12 542 488 Less: Capital portion of grants received (5 693 050) (5 961 843) Add/(Less): Surplus government grants deferred (670 871) (1 307 017) Realised portion of previously deferred government grant 1 544 655 1 303 799 8 671 220 6 577 427

Included in the capital portion of government grants received is an amount of R733m (2016: R696.1m) relating to strengthening and maintenance of the coal haulage roads.

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69 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

24. Other income

Concession income 995 2 867 Realised portion of concession contract revenue (N3 Toll Concession) 47 719 47 719 Realised portion of concession contract revenue (TRAC N4) 10 577 10 577 Rental income investment property 47 447 47 709 Sundry revenue 463 338 323 896 Realised portion of previously deferred exchange consideration from toll 563 755 427 577 concessionaires 1 133 831 860 345

25. Operating expenses

Operating (loss) profit for the year is stated after accounting for the following:

Technical and computer services 395 244 303 310 Administration 733 675 748 099 Advertising 160 291 173 847 Straight-lining of leases 14 384 8 232 Amortisation on intangible assets 4 757 5 985 Depreciation on property, plant and equipment 2 728 950 2 518 100 Depreciation - Concession 399 587 378 843 Employee costs 268 379 230 953 Repairs and maintenance 8 520 440 6 345 285 Auditors' remuneration 38 684 39 067 Bank charges 166 423 41 516 Director and management emoluments 27 573 25 642 Impairment on PPE 8 291 - Impairment for debtors 3 753 595 90 194 Bad debts written off 33 105 17 Loss on sale of assets 108 522 44 671 Total expenses 17 361 900 10 953 761

26. Investment income

Gains on financial instruments Net change in fair value of financial assets at fair value through profit or loss 10 879 (7 093) Interest income Interest on bank deposits 660 810 511 016 Interest income on repurchase agreements 208 411 153 499 Other short-term interest 24 641 19 051 Interest income on financial assets at fair value through profit or loss 12 428 - Other income interest 5 206 5 196 Discounting of trade receivables 439 418 280 605 1 361 793 962 274

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

27. Finance costs

Net change in fair value on financial liabilities at fair value through profit or loss 31 570 (347 274) Interest on financial liabilities measured at amortised cost 4 174 331 3 742 823 STATEMENTS FINANCIAL ANNUAL Interest on financial liabilities at fair value through profit and loss 463 670 390 752 Borrowing costs capitalised for the year (100 988) (141 082) 4 568 583 3 645 219

The weighted average cost of capital of 9.23% (2016: 9.03%) was used as the capitalisation rate to determine the amount of borrowing costs eligible for capitalisation in the 2017 financial year. The total borrowing costs capitalised to qualifying assets amounted to R830.816m (2016: R666.012m).

28. Taxation

SANRAL was exempted from taxation in the Government Gazette of 22 December 2003 in terms of S10(1)(t)(iii) of Income Tax Act, 1962. This exemption was backdated to the inception of the entity, therefore no provision has been made for income tax.

29. Cash generated from operations

Loss for the year (4 961 990) (1 202 659) Adjustments for: Depreciation - PPE under concession 399 587 378 843 Depreciation - PPE 2 728 950 2 518 100 Amortisation 4 757 5 985 Impairment loss on PPE 8 291 - Impairment loss debtors 3 753 595 90 194 Fair value adjustment on investment property and Fair value adjustment on Non- (518 051) (98 594) current assets held for sale. (Profit) / Loss on sale of PPE 108 522 44 671 Investment revenue (1 361 793) (962 273) Finance cost 4 568 583 3 645 220 Movement in operating lease assets and accruals 11 956 9 686 Movement in retirement benefit asset and liability 5 608 3 708 Movement in provisions - rehabilitation cost expenses (2 658) (7 558) Deferred exchange consideration (563 755) (427 577) Bad debts written off 33 105 17 Deferred income - non cash (932 080) (55 078) Movement in short term Market-Making financial instruments - - Movement in provision for over load control 3 582 (38 224) Changes in working capital Trade and other receivables (1 590 106) (1 336 563) Trade and other payables 102 727 20 046 1 798 830 2 587 944

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71 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

30. Cash paid to suppliers and employees

Expenses per statement of comprehensive income 17 361 900 10 953 761 Movement in trade payables (102 727) (20 046) Impairment loss on assets (8 291) - Depreciation - PPE (2 728 950) (2 518 100) Loss on sale or scrapping of asset (108 522) (44 671) Depreciation - PPE under concession (399 587) (378 843) Amortisation (4 757) (5 985) Movement in provision for over load control (3 582) 38 224 Movement in retirement benefit asset and liability (5 800) (4 474) Lease liability movement (11 956) (9 686) Impairment loss debtors (3 753 595) (90 194) Bad debts written off (33 105) (17) Movement in provisions - rehabilitation cost expenses 2 658 7 558 10 203 686 7 927 527

31. Cash receipts from customers

Income per statement of comprehensive income 13 954 626 11 474 342 Movements in trade receivables (1 590 106) (1 336 563) Other income 1 133 831 860 345 Deferred exchange consideration realised (563 755) (427 577) Deferred income - non cash (932 080) (55 078) 12 002 516 10 515 469

32. Capital portion of government grant and deferred income

N3 Concession contract realised in the statement of comprehensive income (47 719) (47 719) TRAC Concession realised in the statement of comprehensive income (10 577) (10 577) Government grant (non-toll) charged to statement of comprehensive income (1 544 655) 1 307 017 Government grant (non-toll) realised in statement of comprehensive income 670 871 (1 303 799) Total income realised (932 080) (55 078) Movement in deferred income 6 625 129 6 016 923 5 693 050 5 961 845

Summary of capital portion of government grant received Capital portion of government grant - non-toll (note 17) 5 693 050 5 961 845 5 693 050 5 961 845

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

33. Commitments

Estimated capital expenditure ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL

 Contracts for capital expenditure authorised - Toll 4 754 852 4 327 367  Contracts for capital expenditure authorised - Non-toll 13 133 804 13 391 100 17 888 656 17 718 467

The expenditure will be financed from government grants, toll income and financial instruments issued to the private sector and is expected to be incurred as follows:

Within one year - Toll 2 148 125 2 095 366 Within one year - Non-toll 5 672 770 5 361 531 Thereafter - Toll 2 606 726 2 232 001 Thereafter - Non-toll 7 461 035 8 029 569 17 888 656 17 718 467

Operating leases – as lessee (expense)

Minimum lease payments due Within one year 10 715 11 247 In second to fifth year inclusive 8 463 13 093 Later than five years - - 19 178 24 340

In addition SANRAL leases some of its offices under operating leases. The operating lease rental includes a charge for rental, parking, fixed services and storage space. The lease contracts make provision for escalations annually, and renewal options if SANRAL wants to renew the lease at the end of the lease term.

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34. Contingent liabilities

Claims against SANRAL due to South African National Road Agency Limited and National Road Act.

In terms of section 61 of the South African National Roads Agency Limited and National Roads Act, 1998, legal proceedings instituted against the then South African Roads Board with the cause of action arising before the incorporation date of SANRAL must be instituted against the Minister of Transport as respondent. Due to the nature of these claims and the fact that judgments in these cases could be to the detriment of SANRAL, it was agreed (at the time of establishing SANRAL) that, although the actions be instituted against the Minister, SANRAL will bear the costs and be actively involved in defending such action.

Contingent liabilities estimated at R275.69m (2016: R245.06m) exist regarding possible claims against SANRAL, mainly resulting from road related accidents. The outflow of cash is remote as during the past several years SANRAL has won the majority of the court cases. The cases that were not won by SANRAL were covered by insurance.

Claims against SANRAL due to the Municipality Property Rates Act

Individual municipalities have discretionary powers to levy rates on Public Service Infrastructure (PSI), including national roads, in terms of the Municipal Property Rates Act, No 6 of 2004. Not all municipalities have chosen to exercise this statutory power and some have not yet implemented the Act. The property rates used, as well as the valuation amount of SANRAL's infrastructure, have not been determined by the municipalities. In order to arrive at an estimate of the potential rates liability, nationally, actual rates levied by some municipalities were applied to the entire declared national road network, arriving at an estimated figure of R47.8m (2016: R57.2m).

Maputo Development Corridor

The concessionaire has claimed that the Mozambican government has not protected the pavement as stipulated in the concession agreement. In their opinion, this has caused deterioration of the road significantly earlier than calculated by them. In the event that such a claim succeeds and that compensation is due to the concessionaire, the Mozambican government will become liable to compensate the concessionaire. In the event that the Mozambican government fails to compensate the concessionaire according to the determined claim amount, the South African government through SANRAL, will become liable for compensating the concessionaire in terms of the “mutually and severally liability” clauses in the concession agreement. The value of the claim can’t be reasonably established at this stage.

Non-adjustments of toll tariffs by Mozambique government

In terms of the N4/Maputo development corridor contract, the independent engineer shall determine the tariff adjustments amount within 14 days after having been called upon to do so in writing by the concessionaire. This has not been done which resulted in a revenue shortfall. The value is estimated at R10.5m. In the event that the Mozambican government fails to compensate the concessionaire according to the determined claim amount, the South African government through SANRAL, will become liable for compensating the concessionaire in terms of the “mutually and severally liability” clauses in the concession agreement.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

35. Related parties

Relationships Holding company Department of Transport STATEMENTS FINANCIAL ANNUAL Shareholder The principal shareholder of SANRAL is the Minister of Transport being part of national government Members of key management Key management personnel are defined as executive and non executive management of SANRAL. Key management personnel compensation is detailed in note 36.

Related-party relationships exist between SANRAL, its directors, key management personnel and parties within the national sphere of government.

SANRAL is a Schedule 3A public entity in terms of the PFMA. It therefore has a number of related parties, including other state-owned entities, government departments and all other entities within the national sphere of government. SANRAL used the database maintained by National Treasury to identify related parties in line with IAS 24 (Amended). Transactions with parties identified as related parties were concluded on an arm's length basis, except for the sale of investment property to Airports Company South Africa with a fair value of R36m sold for R100.

Having considered the potential for transactions to be impacted by related-party relationships, the entity’s pricing strategy, buying and approval processes, and what information would be necessary for an understanding of the potential effect of the relationship on the financial statements, the directors are of the opinion that the following transactions require disclosure as related-party transactions.

Transactions with related parties

Transactions with related parties mainly comprise sale and purchases of goods and services including properties. The following is a summary of transactions with related parties during the year and balances due at year end.

Government grants received funding infrastructure National Department of Transport 13 915 586 12 542 488

Other services provided to related parties National Department of Transport 36 756 18 251 Airports Company South Africa (Investment property sold) - -

Services provided by related parties Airports Company South Africa (8) (11)

Period end balances arising from services provided to related parties National Department of Transport 108 773 72 017 Road Accident Fund 30 390 28 482

Summary of related parties' balances at period end Total receivables arising from services provided to related parties 139 163 100 499

Directors and related party transactions

All directors and officers of SANRAL have confirmed that they had no interest in any contract of significance with SANRAL which could have resulted in a conflict of interest during the current year.

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36. Directors' and prescribed officers' emoluments (continued)

Executive

2017

Salary Performance Total bonus and long service awards R'000 R'000 R'000 Mr S Macozoma (Chief Executive Officer) 1 200 - 1 200 Mr N Alli (Chief Executive Officer) 1 551 1 320 2 871 2 751 1 320 4 071

2016

Salary Performance Other Pension Total bonus and contributions* contributions long service awards R'000 R'000 R'000 R'000 R'000 Mr N Alli (Chief Executive Officer) 2 502 1 280 46 185 4 013

* Other contributions comprise travel allowance and medical benefits

Non-executive

2017

Directors' fees Total R'000 R'000 Ms A Halstead (Public official) - - Mr C Hlabisa (Public official) - - Ms Z Kganyago (Independent) 840 840 Dr A Lawless (Independent) 672 672 Mr M Matete (Independent) 929 929 Ms D Mashile-Nkosi (Independent) 381 381 Mr R Morar (Chairperson) 1 108 1 108 Ms M Moore (Public official) - - 3 930 3 930

2016

Directors' fees Total R'000 R'000 Mr C Hlabisa (Public official) - - Ms Z Kganyago (Independent) 732 732 Dr A Lawless (Independent) 601 601 Mr M Matete (Independent) 830 830 Ms D Mashile-Nkosi (Independent) 513 513 Mr R Morar (Chairperson) 983 983 Ms M Moore (Public official) - - 3 659 3 659

Public Officials are not remunerated.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

36. Directors' and prescribed officers' emoluments (continued)

Executive members

2017 ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Salary Performance Other Pension Total payments and contributions* contributions long service awards R'000 R'000 R'000 R'000 R'000 IN Essa (Regional Manager - Northern) 1 274 518 163 282 2 237 H Harper (Corporate Services Executive) 1 067 421 57 221 1 766 A Mathew (Company Secretary) 1 106 442 34 224 1 806 I Mulder (Chief Financial Officer) 2 024 767 66 365 3 222 MS Peterson (Regional Manager - 1 498 571 12 296 2 377 Southern) L Sewnarain (Regional Manager - 1 376 534 81 254 2 245 Eastern) JJ Smit (Engineering Executive) 2 141 844 57 385 3 427 JC Van Der Walt (Regional Manager - 1 533 607 43 309 2 492 Western) 12 019 4 704 513 2 336 19 572

2016

Salary Performance Other Pension Total payments and contributions* contribution long service awards R'000 R'000 R'000 R'000 R'000 IN Essa (Regional Manager - Northern) 1 177 487 174 261 2 099 H Harper (Corporate Services Executive) 988 339 70 204 1 601 A Mathew (Company Secretary) 1 032 389 39 207 1 667 I Mulder (Chief Financial Officer) 1 866 646 89 336 2 937 MS Peterson (Regional Manager - 1 385 498 55 274 2 212 Southern) L Sewnarain (Regional Manager - Eastern) 1 220 450 98 227 1 995 JJ Smit (Engineering Executive) 1 919 714 103 390 3 126 JC Van Der Walt (Regional Manager - 1 432 543 64 261 2 300 Western) 11 019 4 066 692 2 160 17 937

* Other contributions comprise travel allowance and medical benefits

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37. Risk management

Capital risk management

SANRAL's objectives when managing capital are to safeguard its ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of SANRAL consists of debt, which includes the borrowings disclosed in notes 14, cash and cash equivalents disclosed in note 11, and equity as disclosed in the statement of financial position.

Shares are held by the Minister of Transport, and new share issues are authorised by the Minister of Transport.

Liquidity risk

Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due.

Liquidity risk management

Liquidity risk arises primarily from an uncertainty in cash flows, as well as the company's commitment to act as market maker in its own capital market stock.

The company manages liquidity risk through the compilation and monitoring of cash flow forecasts, as well as ensuring that a satisfactory level of cash and cash equivalents are maintained.

Terms of Market-making assets

Terms and conditions of market-making assets (held-for-trading) refer to note 8.

31 March 2017 31 March 2016

Non-SANRAL bonds Coupon rate Date of Nominal Carrying Nominal Carrying maturity value value value value R '000 R '000 R '000 R '000 R204 (2018) 8,00 % 21-Dec-2018 1 230 1 238 1 230 1 218 R209 (2036) 6,25 % 31-Mar-2036 303 500 216 039 768 500 537 311 R2035 (2035) 8,875 % 28-Feb-2035 44 000 41 412 44 000 40 692 R2037 (2037) 8,50 % 31-Jan-2037 65 000 58 468 65 000 57 592 413 730 317 157 878 730 636 813

Terms of Market-making liability (non-SANRAL) bonds

Terms and conditions of market-making assets (held-for-trading) refer to note 14.

31 March 2017 31 March 2016

Non-SANRAL bonds Coupon rate Date of Nominal Carrying Nominal Carrying maturity value value value value R '000 R '000 R '000 R '000 R186 (2026) 10,50 % 21-Dec-2026 176 900 195 757 96 900 106 030 R207 (2020) 7,25 % 15-Jan-2020 56 600 55 900 247 600 237 179 233 500 251 657 344 500 343 209

Funding portfolio at amortised cost and at fair value

Terms and debt repayment schedule

Terms and conditions of outstanding loans are reflected in the table that follows. For further terms and conditions, refer to note 14.

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37. Risk management (continued)

31 March 2017 31 March 2016 Funding portfolio at Coupon rate Date of Nominal Carrying Nominal Carrying amortised cost maturity value value value value

R '000 R '000 R '000 R '000 STATEMENTS FINANCIAL ANNUAL Guaranteed bonds SZ25 9,00 % 30-Sep-2025 2 432 784 2 461 515 2 432 784 2 463 890 HWAY20 9,75 % 31-Jul-2020 5 781 300 5 846 712 5 781 300 5 862 637 HWAY23 5,50% + CPI 7-Dec-2023 2 917 353 8 413 856 2 917 353 8 050 219 HWAY24 5,50% + CPI 7-Dec-2024 1 499 000 4 491 577 1 499 000 4 301 106 HWAY33 2,25% + CPI 28-Feb-2033 1 401 000 1 464 872 870 000 846 771 HWAY34 9,25 % 31-Jul-2034 4 065 800 3 973 503 3 990 800 3 904 914 HWAY35 9,25 % 31-Jul-2035 1 544 000 1 510 797 1 334 000 1 321 217 HWF02U matured 30-Sep-2016 - - 1 500 000 1 517 781 HWF05U matured 09-Oct-2016 - - 1 604 000 1 616 350 HWF06U matured 20-Nov-2016 - - 550 000 556 175 HWF08 8,79 % 15-Jul-2019 1 000 000 1 000 387 - - HWF09 8,79 % 19-Sep-2019 1 838 000 1 836 908 - - HWF010U 8,90 % 30-Sep-2019 700 000 699 745 - - Unguaranteed bonds NRA18 12,25 % 30-Nov-2018 2 390 623 2 437 477 2 441 283 2 511 808 NRA22 12,25 % 31-Oct-2022 2 623 000 2 774 703 2 623 000 2 793 342 NRA23 5.00% + CPI 31-May-2023 909 750 1 557 395 909 750 1 474 516 NRA28 12,25 % 30-Nov-2028 3 476 769 3 828 730 3 476 769 3 843 225 32 579 379 42 298 177 31 930 039 41 063 951

31 March 2017 31 March 2016 Funding portfolio at fair value Coupon rate Date of Nominal Carrying Nominal Carrying maturity value value value value R '000 R '000 R '000 R '000 Guaranteed bonds SZ25 9,00 % 30-Sep-2025 1 631 189 1 557 980 1 646 945 1 571 542 HWAY20 9,75 % 31-Jul-2020 1 032 452 1 066 150 1 267 351 1 283 032 HWAY34 9,25 % 31-Jul-2034 886 539 789 802 76 420 67 138 HWAY 35 9,25 % 31-Jul-2035 481 000 427 839 426 000 372 766 Unguaranteed bonds NRA22 12,25 % 31-Oct-2022 23 484 26 141 32 077 35 012 NRA28 12,25 % 30-Nov-2028 407 129 430 669 222 129 229 244 4 461 793 4 298 581 3 670 922 3 558 734

The table below analyses the company’s financial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

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37. Risk management (continued)

Market-making portfolio at fair value

31 March 2017 31 March 2016 Market-making portfolio at Coupon rate Date of Nominal Carrying Nominal Carrying fair value maturity value value value value R '000 R '000 R '000 R '000 Guaranteed bonds SZ25 9,00 % 30-Sep-2025 - - - - HWAY20 9,75 % 31-Jul-2020 1 242 1 283 1 242 1 257 HWAY 34 9,25 % 31-Jul-2034 - - 637 120 559 742 HWAY 35 9,25 % 31-Jul-2035 322 486 286 845 207 100 181 220 Unguaranteed bonds NRA18 12,25 % 30-Nov-2018 1 146 1 207 - - NRA 28 12,25 % 30-Nov-2028 11 000 11 636 - - 335 874 300 971 845 462 742 219

Other financial liabilities at amortised cost

The company is exposed to financial risks arising from changes in market prices. The company does not anticipate that market prices will decline significantly in the foreseeable future. The company has not entered into derivative contracts to manage the risk of a decline in market prices. The company reviews its outlook for market prices regularly in considering the need for active financial risk management.

31 March 2017 31 March 2016 Other financial liabilities at Coupon rate Date of Nominal Carrying Nominal Carrying amortised cost maturity value value value value R '000 R '000 R '000 R '000 Guaranteed financial liabilities CPI-linked loan 3,91 % 31-Oct-2018 267 606 267 606 468 074 468 074 EIB loan - Tranche 1 8,32 % 15-Jun-2034 541 231 541 231 554 628 554 628 EIB loan - Tranche 2 9,23 % 15-Mar-2034 538 770 538 770 551 557 551 557 ECA-supported loan 9,09 % 15-Mar-2022 119 087 119 087 171 397 171 397 Callable bonds Variable Callable 125 000 125 000 1 000 000 1 000 000 Unguaranteed financial liabilities Repurchase agreements 7,25 % 07-Apr-2017 13 607 13 607 391 394 391 394 1 605 301 1 605 301 3 137 050 3 137 050

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37. Risk management (continued)

Maturity profile

The following are the contractual maturities of financial liabilities: ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL The table below contains only cash flows relating to financial instruments. It does not include future cash flows expected from the normal course of business.

Financial liabilities Carrying Cash flow in Due in 1 - 5 Due in 5 - 10 Due after 10 Total 31 March 2017 amount 1 year years years years R '000 R '000 R '000 R '000 R '000 R '000

Capital market loan - funding (Amortised 42 298 177 2 973 226 24 073 537 28 867 730 7 290 327 63 204 820 cost) Capital market loan - held-for-trading 4 298 582 426 719 2 939 189 3 582 496 1 146 233 8 094 637 (funding portfolio) Capital market loan - held-for-trading 300 970 31 439 136 557 155 887 163 030 486 913 (market-making portfolio) CPI-linked floating secured loan 267 606 193 780 81 522 - - 275 302 EIB loan 1 080 001 122 633 490 531 613 163 613 163 1 839 490 ECA-supported loan * 119 087 61 365 71 439 - - 132 804 Repurchase agreements 13 607 14 819 - - - 14 819 Callable bonds 125 000 134 125 - - - 134 125 Trade and other payables 4 803 541 4 803 541 - - - 4 803 541 Provision for overload control 339 787 339 787 - - - 339 787 Third party funding 316 919 316 919 - - - 316 919 53 963 277 9 418 353 27 792 775 33 219 276 9 212 753 79 643 157

* The ECA-supported loan is a domestic loan, guaranteed by the Republic of Austria through Oesterreichische Kontrollbank Aktiengesellschaft, an export credit agency.

Financial liabilities Carrying Cash flow in Due in 1 - 5 Due in 5 - 10 Due after 10 Total 31 March 2016 amount 1 year years years years R '000 R '000 R '000 R '000 R '000 R '000

Capital market loan - funding 41 063 952 6 459 650 21 689 361 29 195 201 15 480 059 72 824 271 Capital market loan - held-for-trading 3 558 773 349 406 2 812 865 2 706 903 1 194 629 7 063 803 (funding portfolio) Capital market loan - held-for-trading 742 220 78 211 314 022 881 457 1 423 536 2 697 226 (market-making portfolio) CPI-linked floating secured loan 468 074 213 068 277 671 - - 490 739 EIB loan 1 106 185 122 633 490 531 613 163 1 010 682 2 237 009 ECA-supported loan 171 397 65 653 132 339 - - 197 992 Repurchase agreements 391 394 391 394 - - - 391 394 Callable bonds 1 000 000 1 000 000 - - - 1 000 000 Trade and other payables 3 836 712 3 836 712 - - - 3 836 712 Provision for overload control 336 205 336 205 - - - 336 205 Third-party funding 331 479 331 479 - - - 331 479 53 006 391 13 184 411 25 716 789 33 396 724 19 108 906 91 406 830

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37. Risk management (continued)

Market-making portfolio

The company classifies certain of its bonds as financial liabilities at fair value through profit or loss (held-for-trading). Included in the portfolio are market-making assets, consisting of government bonds with maturities similar to the SANRAL bonds held-for-trading. Liquidity in the market-making portfolio is managed by financial instruments having similar maturities and the value of the financial liabilities and financial assets being closely matched.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The company is exposed to the following market risks: price risk and interest rate risk.

Financial instruments affected by market risk include capital market loans held at fair value, CPI-linked loans, ECA- supported loans, call bonds and trade and other payables.

The company is exposed to price risk on its marketable assets and liabilities held-for-trading. The company manages this price risk exposure through its treasury function which is responsible for the monitoring and management of the price risks in terms of guidelines set out in the Treasury Policy and Control Framework approved by the Board. The treasury function is also responsible for identifying opportunities for the natural setoff of market risks and the management of the resultant net exposures in the most cost-effective manner through the operation of a market making portfolio. Price risk is accepted by the Board on the company's liabilities in its funding portfolio held-for-trading as these liabilities fund long-term capital expenditure. Price risk before maturity is therefore unrealised.

Funding liabilities transferred from the market-making to the funding portfolios are classified as held-for-trading financial liabilities and are therefore carried at fair value. The fair value movements on these financial liabilities will not be realised as these bonds form part of the funding portfolio and will therefore usually be held to maturity date.

Interest rate re-pricing profile at 31 March 2017 is summarised as follows:

At reporting date the interest profile of the company's interest-bearing instruments was as follows:

Fixed rate instruments

Financial assets Bond investments 317 157 636 814 Fixed deposits 2 600 000 2 350 000 Investments - repurchase agreements 1 352 635 3 066 066

Insurance receivable 329 739 289 093 Financial liabilities Capital market loans (held-for-trading) 4 599 551 4 645 453 Capital market loans (amortised cost) 22 833 437 22 701 033 EIB loan 1 080 001 1 106 185 33 112 520 34 794 644

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37. Risk management (continued)

Variable rate instruments ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Financial assets Call deposits 782 000 2 780 000 Money market instruments 1 766 800 1 208 740 Financial liabilities CPI-linked loan 267 606 468 074 Capital market loans (amortised cost) 19 464 740 19 362 919 ECA-supported loan 119 087 171 397 Callable loan 125 000 1 000 000 Repurchase agreements 13 607 391 394 22 538 840 25 382 524

Price risk sensitivity of variable rate instruments

An increase of 100 basis points (2016: 100 basis points) in interest rates at the reporting date would decrease profit by the amounts shown below. A decrease in 100 basis points would increase profit by the same amount. The analysis assumes that all other variables remain constant. Variable rate instruments are capital market bonds held in the funding portfolio and market-making portfolio held-for-trading.

31 March 2017 31 March 2016 R'000 R'000 100 basis points increase (effect on profit or loss) 247 609 198 293

Credit risk

Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations leading to financial loss.

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one single counter party.

Credit exposure to any counterparty is managed by setting transaction exposure limits, as authorised by the Asset and Liability Committee. The credit qualities of counterparties are also reviewed on a continuous basis.

Ongoing credit evaluations are performed on the financial condition of receivable counterparties. Trade receivables are presented net of the allowance for impairment.

The company is exposed to credit-related losses in the event of non-performance by counterparties of capital market investments as well as a price risk in the event of the downgrading of their credit rating. Capital market investments are held with counterparties who have a short-term credit rating of A1 and above and/or a long-term credit rating of A and above. SANRAL continually monitors its positions and the credit ratings of its counterparties, and limits the extent to which it enters into contracts with any one party.

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37. Risk management (continued)

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. For the fair values of the financial instruments refer to the fair values analysis in note 41 and 42. The maximum exposure to credit risk at the reporting date was:

`

Market-making investments - bonds 317 157 636 814 Insurance receivable 329 739 289 093 Trade and other receivables 5 366 829 7 050 155 Cash and cash equivalents 6 570 000 9 490 108

Concentrations of credit risk Value Percentage Value Percentage R '000 % R '000 % Market-making investments - bonds 317 157 2 % 636 814 4 % Insurance receivable 329 739 3 % 289 093 2 % Trade and other receivables 5 366 829 43 % 7 050 155 40 % Cash and cash equivalents 6 570 000 52 % 9 490 108 54 % 12 583 725 100 % 17 466 170 100 %

At 31 March 2017, the company did not consider there to be any significant concentration of credit risk that had not been insured or adequately provided for.

Collateral is held against repurchase investments in the form of government or corporate bonds approved by the Assets and Liabilities Committee. Repurchase and bond investments are held with counterparties with a minimum of an A rating.

Property portfolio

The maximum exposure to credit risk relating to the rental receivables at the reporting date by geographic region was:

Northern Region 8 364 16 990 Eastern Region 848 12 Western Region 146 2 338 9 358 19 340

Toll receivable

The maximum exposure to credit risk relating to the toll receivables at the reporting date by geographic region was:

Northern Region 8 798 399 6 620 088 8 798 399 6 620 088

Sundry Debtors

The maximum exposure to credit risk relating to the sundry debtors at the reporting date by geographic region was:

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37. Risk management (continued) ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL

Northern Region 120 580 61 Eastern Region 8 197 (61 676) Western Region 36 173 28 880 Southern Region 111 874 121 887 Head office 109 210 34 263 386 034 123 415

Past due analysis

The ageing of property portfolio (rental receivables) at the reporting date was:

31 March 2017 31 March 2016 Gross Impairment Gross Impairment R '000 R '000 R '000 R '000 Due 1 to 30 days 644 (73) 1 940 (48) Past due 31 - 60 days 171 (77) 109 (45) Past due 61 - 90 days 817 (52) 58 (44) Past due 91 - 120 days 119 (53) 9 114 (35) More than 120 days 7 607 (300) 8 119 (249) 9 358 (555) 19 340 (421)

The ageing of toll receivables at the reporting date was:

31 March 2017 31 March 2016 Gross Impairment Gross Impairment R '000 R '000 R '000 R '000 0- 30 days 1 723 916 - 730 666 - Past due 31 - 60 days 268 516 - 204 904 - Past due 61 - 90 days 323 089 - 47 155 - More than 91 days 6 482 878 (3 523 465) 5 637 363 (89 962) 8 798 399 (3 523 465) 6 620 088 (89 962)

The ageing of sundry debtors at the reporting date was:

Gross Impairment Gross Impairment R '000 R '000 R '000 R '000 0- 30 days 134 050 - 127 478 - Past due 31 - 60 days 13 900 - 6 364 - Past due 61 - 120 days 88 - 1 064 - More than 121 days 237 996 (230 130) (11 491) (232) 386 034 (230 130) 123 415 (232)

The movement in the allowance for impairment in respect of rental receivables during the year was as follows:

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37. Risk management (continued)

31 March 31 March 2017 2016 R '000 R '000 Balance 1 April 421 286 Impairment loss recognised 139 152 Bad debt written off (5) (17) 555 421

The movement in the allowance for impairment in respect of toll receivables during the year was as follows:

31 March 31 March 2017 2016 R '000 R '000 Balance 1 April 89 962 142 570 Impairment loss recognised 3 523 465 (52 608) 3 613 427 89 962

The movement in the allowance for impairment in respect of sundry debtors during the year was as follows:

31 March 31 March 2017 2016 R '000 R '000 Balance 1 April 1 882 1 650 Impairment loss recognised 230 130 232 232 012 1 882

Security relating to rental receivable

Securities held against rental receivables comprise deposits. The estimate of the fair value of the securities held are R1 318 777 (2016: R1 201 521).

Fair value analysis

Set out below is a comparison by class of the carrying amounts and fair value of the company’s financial instruments that are carried in the financial statements.

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37. Risk management (continued) ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Carrying values Fair value 31 March 31 March 31 March 31 March 2017 2016 2017 2016 R '000 R '000 R '000 R '000 Financial assets Investments - market-making 317 157 636 814 317 157 636 814 Trade and other receivables 5 366 829 7 050 155 5 366 829 7 050 155 Cash and cash equivalents 5 217 365 6 424 042 5 217 365 6 424 042 Repurchase agreements 1 352 635 3 066 066 1 365 549 3 066 066 12 253 986 17 177 077 12 266 900 17 177 077 Financial liabilities Capital market loan - funding 42 298 177 41 063 952 41 410 332 40 210 521 Capital market loan - held-for-trading 4 599 551 4 300 953 4 599 551 4 300 953 CPI-linked loan 267 606 468 074 270 400 478 930 EIB loan 1 080 001 1 106 185 994 220 982 050 ECA-supported loan 119 087 171 397 118 418 168 099 Repurchase agreement 13 607 391 394 13 683 391 394 Callable bonds 125 000 1 000 000 125 000 1 000 000 48 503 029 48 501 955 47 531 604 47 531 947

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Fair value of listed bonds is based on quoted prices at the reporting date. The fair value of loans from banks and other financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.

38. Public Private Partnerships - toll collection service concession arrangements

Description of the arrangements

SANRAL constructively engages the private sector to promote and implement the design, financing, construction, operation and maintenance of specified portions of:  The N3 from Cedara in KwaZulu-Natal to Heidelberg South Interchange  The N4 from Tshwane Metropolitan Border to Maputo harbour  The N1/N4 Platinum Toll Highway (Bakwena) from Pretoria to Lobatse (border with Botswana).

This was achieved by entering into a PPP agreement (that is the concession contract) with each concessionaire for this purpose.

The concession contract with Trans Africa Concessions (TRAC) for the construction and maintenance of the N4 Toll highway from the Gauteng-Mpumalanga border to the Maputo harbour (Mozambique) is for a period of 30 years, ending February 2028.

The concession contract was extended from the Gauteng-Mpumalanga border to the Tshwane Metropolitan border. An amount of R251m was received on 28 February 2005 and is amortised over the remaining life of the concession.

During the financial year ending 31 March 2000, SANRAL entered into a concession contract with the N3 Toll Concession (N3TC) for the upgrading, maintenance and operation of the N3 toll highway. The contract is for a period of 30 years, ending November 2029.

During the financial year ending 31 March 2002, SANRAL entered into a concession contract with Bakwena TC for the upgrading, maintenance and operation of the N1/N4 Platinum Toll Highway. The contract is for a period of 30 years, ending August 2031.

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38. Public Private Partnerships - toll collection service concession arrangements (continued)

Significant terms of the arrangements

For the N3 Toll route, SANRAL received an upfront payment of R1.380bn and an additional payment of R52m during the 2008 financial year. The concessions are for a specified period of 30 years. For the N1/N4 route no payment was received from the concessionaire. Significant terms that may affect the amount, timing or certainty of future cash flows are summarised below.

The concessionaires on the N3 and N4 Maputo Toll Roads are also required to pay SANRAL a Highway Usage Fee in certain circumstances (section 2.5 of the concession contract and annexure 15 to the concession contract). The Highway Usage Fee is a mechanism for limiting the return on the project which can be distributed by the concessionaire to its shareholders. On the N4 Platinum a revenue share mechanism is achieving the same objective.

SANRAL does not guarantee the minimum third-party revenue that the concessionaire will collect. SANRAL is not required to compensate the concessionaire if the traffic on the highway is less than expected.

The nature and extent of the arrangement

Right of use of specified assets

The costs of acquiring the site were borne by SANRAL. Once the site has been delivered to the concessionaire, the property is “under the care, custody and control of the concessionaire” and the concessionaire bears the risks associated with the property (section 15.5 of the concession contract).

The concession contract specifically states that the concessionaire has “no title to, ownership interest in, or liens or leasehold rights or any other rights” in the site and title to the site remains with SANRAL. SANRAL is required to ensure that the concessionaire has access to and the right of use in respect of the site and equipment (as necessary for it to perform its obligations in terms of the contract) throughout the concession period.

Should the concessionaire discover any “fossils, coins, articles of value or antiquity, and structures and other remains or things of geological or archaeological interest or burial sites” on the site during the concession period, these will be the property of SANRAL.

SANRAL has ownership of the road and related facilities (for example plaza buildings) throughout the concession period.

Obligations to deliver or rights to receive specified assets at the end of the concession period

The ownership of any drawings, data, books, reports, documents, software, any other information owned by the concessionaire or any of the subcontractors for the purpose of the project is required to be transferred to SANRAL at the end of the concession period. Furthermore, the concessionaire is required to hand over the highway and its rights or interest in the developments to SANRAL, free of charge. These assets are required to be free from any liens, claims, encumbrances and liabilities and are required to be in a specified condition with a specified remaining useful life.

Obligations to provide or rights to expect provision of services

The concession contract requires the concessionaire to perform the following:  Operation and routine maintenance activities, to ensure the proper operation and maintenance of the highway

Obligation to acquire or build items of property, plant and equipment (PPE)  Initial construction works relating to the highway and associated facilities (as specified in the concession contract and including, for example repairs and replacements relating to specified sections of the highway and the construction / repair of toll plazas)  Additional construction works relating to the road and related facilities (i.e ; required construction work other than the initial construction works)  Upgrade works according to the provisions in the contract

Renewal and termination options

The concession rights will terminate if either SANRAL or the concessionaire terminates the concession contract.

SANRAL has the right to terminate the concession contract in any of the following circumstances:  There is court action for the dissolution and / or liquidation of the concessionaire

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38. Public Private Partnerships - toll collection service concession arrangements (continued)  The concessionaire receives a court order to be placed into judicial management or to commence liquidation procedures  The concessionaire fails to complete the initial construction works within three years from commencement of the concession contract

 The concessionaire ceases to operate and maintain the highway STATEMENTS FINANCIAL ANNUAL  All (or substantially all) of the concessionaire’s indebtedness becomes due and payable as a result of default by the concessionaire  The concessionaire fails to report a material related party transaction (as required by the concession contract)  The concessionaire commits a material breach of the provisions of the concession contract.

If any of the abovementioned is not remedied by the concessionaire within a specific period, then SANRAL has the right to appoint a substitute entity in the place of the concessionaire.

The concessionaire has the right to terminate the concession contract in any of the following circumstances:  SANRAL commits a material breach of the provisions of the concession contract  There is a material impairment of the concession rights as a result of the concessionaire being nationalised / expropriated or the project land / highway being compulsorily acquired from the concessionaire by the state  Certain material adverse governmental action takes place

Other rights and obligations

The concessionaire is only permitted to raise debt (from lenders) as specified in the concession contract. SANRAL is required to approve any additional indebtedness of the concessionaire. SANRAL would take over the concessionaire's indebtedness in the event of concessor (SANRAL) default.

Classification

SANRAL recognises no revenue from services provided to the public for these concessions, except where fees (Highway Usage Fees) are payable to SANRAL by the concessionaire according to the service concession agreement.

SANRAL recognises no operational costs related to the operations of the public infrastructure under concession.

SANRAL recognises no obligations to restore infrastructure to a specified level of serviceability.

SANRAL recognises the upfront payment received from operators over the period of the concession arrangement.

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39. Segment information

31 March 2017 31 March 2016 Toll Non-toll Total Toll Non-toll Total operations operations operations operations R '000 R '000 R '000 R '000 R '000 R '000 Revenue 4 910 511 8 671 220 13 581 731 4 632 880 6 577 427 11 210 307 GFIP grant 372 895 - 372 895 264 035 - 264 035 Other income 787 436 346 395 1 133 831 502 360 357 985 860 345 Other expenses * (6 155 412) (8 064 903) (14 220 315) (2 506 976) (5 543 855) (8 050 831) Earnings before interest, taxes, (84 570) 952 712 868 142 2 892 299 1 391 557 4 283 856 depreciation and amortisation Depreciation on assets (1 035 235) (1 693 715) (2 728 950) (1 043 183) (1 474 917) (2 518 100) Impairment on assets (8 291) - (8 291) - - - Depreciation on assets under (399 587) - (399 587) (378 845) - (378 845) concession Amortisation (1 082) (3 675) (4 757) (1 415) (4 570) (5 985) Change in Fair value adjustment on 161 074 356 977 518 051 76 972 21 622 98 594 investment property and Fair value adjustment on Non-current assets held for sale. Profit before finance income and (1 367 691) (387 701) (1 755 392) 1 545 828 (66 308) 1 479 520 cost Finance income 1 354 107 7 686 1 361 793 957 077 5 196 962 273 Finance cost (4 568 583) - (4 568 583) (3 645 220) - (3 645 220) Segment profit or loss (4 582 167) (380 015) (4 962 182) (1 142 315) (61 112) (1 203 427)

* Excluding depreciation, amortisation & impairment.

Material items of income and expense disclosed in accordance with IAS 1:

31 March 2017 31 March 2016 Toll Non-toll Total Toll Non-toll Total operations operations operations operations R '000 R '000 R '000 R '000 R '000 R '000 Fees for services, other expenditure (40 045) (1 104 353) (1 144 398) (485 320) (1 534 103) (2 019 423) and lease payments Repairs and maintenance (2 124 502) (6 395 938) (8 520 440) (2 040 548) (4 304 737) (6 345 285) (2 164 547) (7 500 291) (9 664 838) (2 525 868) (5 838 840) (8 364 708)

31 March 2017 31 March 2016 Material non-cash items (other Toll Non-toll Total Toll Non-toll Total than depreciation and operations operations operations operations amortisation) R '000 R '000 R '000 R '000 R '000 R '000 Change in fair value of investment 161 074 356 977 518 051 76 972 21 622 98 594 property Exchange consideration from toll 563 755 - 563 755 427 577 - 427 577 concessionaires Revaluation of road network and 6 801 697 14 049 321 20 851 018 (5 606 353) 5 117 127 (489 226) structures assets Revaluation of land 1 059 250 399 725 1 458 975 703 255 689 547 1 392 802 8 585 776 14 806 023 23 391 799 (4 398 549) 5 828 296 1 429 747

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

39. Segment information (continued)

31 March 2017 31 March 2016 Statement of Financial Position Toll Non-toll Total Toll Non-toll Total operations operations operations operations

R '000 R '000 R '000 R '000 R '000 R '000 STATEMENTS FINANCIAL ANNUAL Reportable segment assets Non-current assets Investments - 329 739 329 739 - 289 093 289 093 Property, plant and equipment 129 298 629 214 434 186 343 732 815 136 573 800 178 848 649 315 422 449 including those under concession, and Intangible assets Investment property 1 163 168 723 428 1 886 596 1 057 685 366 486 1 424 171 130 461 797 215 487 353 345 949 150 137 631 485 179 504 228 317 135 713 Current assets 11 821 652 432 334 12 253 986 16 848 599 328 478 17 177 077 Total assets 142 283 449 215 919 687 358 203 136 154 480 084 179 832 706 334 312 790

31 March 2017 31 March 2016 Statement of Financial Position Toll Non-toll Total Toll Non-toll Total operations operations operations operations R '000 R '000 R '000 R '000 R '000 R '000 Reportable segment liabilities Non-current liabilities Deferred income * 737 024 45 910 519 46 647 543 737 025 41 149 548 41 886 573 Deferred exchange consideration 7 543 032 - 7 543 032 6 763 926 - 6 763 926 Other non-current liabilities ** 47 816 929 24 552 47 841 481 42 377 993 68 062 42 446 055 56 096 985 45 935 071 102 032 056 49 878 944 41 217 610 91 096 554 Current liabilities 4 152 696 2 830 698 6 983 394 11 102 186 274 366 11 376 552 Total liabilities 60 249 681 48 765 769 109 015 450 60 981 130 41 491 976 102 473 106

* Non-current and current portion included.

** Excluding deferred income and deferred exchange consideration.

31 March 2017 31 March 2016 Capital expenditure Toll Non-toll Total Toll Non-toll Total operations operations operations operations R '000 R '000 R '000 R '000 R '000 R '000 Additions to property, plant and 1 890 494 5 862 664 7 753 158 1 304 773 6 081 850 7 386 623 equipment Property, plant and equipment - 100 988 - 100 988 141 082 - 141 082 borrowing costs capitalised to work in progress Additions to intangible assets 750 5 069 5 819 1 637 21 043 22 680 1 992 232 5 867 733 7 859 965 1 447 492 6 102 893 7 550 385

97

91 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

39. Segment information (continued)

31 March 2017 31 March 2016 Toll Non-toll Total Toll Non-toll Total operations operations operations operations R '000 R '000 R '000 R '000 R '000 R '000 Capital expenditure - assets under 1 479 039 - 1 479 039 1 082 919 - 1 082 919 concession Capitalisation/(utilisation) of (21 256) 24 552 3 296 1 813 4 141 5 954 rehabilitation costs for borrow pits

Amendments to internal reporting organisation

No changes were made to the structure of SANRAL's internal organisation that causes the composition of its reportable segments to change.

Entity-wide disclosures

All of SANRAL's operations are situated within South Africa. All revenues from external customers, as well as non-current assets, are attributable to SANRAL's South African domicile.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

40. Irregular, fruitless and wasteful expenditure

31 March 31 March 2017 2016

R '000 R '000 STATEMENTS FINANCIAL ANNUAL Supply chain policy not adhered to Opening balance 9 709 256 8 552 961 Add: Irregular expenditure - current year 424 949 1 156 295 Less: Amounts recoverable (not condoned) - - Less: Amounts not recoverable (not condoned) - - Irregular expenditure awaiting condonation - - Irregular expenditure awaiting condonation 10 134 205 9 709 256

Analysis of irregular expenditure awaiting condonation per age classification Current year 424 949 1 156 295 Prior year 9 709 256 8 552 961 Total 10 134 205 9 709 256

Details of irregular expenditure - current year Competitive bidding process not followed 549 - Deviations approved by the accounting authority as urgent procurement - 2 408 Bid not awarded to the lowest bidder 33 - Awarding of preference points to tenders without original or certified BEE certificates 134 493 39 531 Procurement model for routine road maintenance projects 134 037 1 109 714 Deviations not done under emergency, sole provider circumstances or impractical to 9 423 941 go out on competitive bidding Invalid tax clearance certificates 7 798 - Takeover of site and materials testing - 2 350 Contracts not advertised for at least five working days 78 008 - Extended contracts 14 487 - Conflict of interest 3 734 1 324 Deviations approved by the accounting authority even though it was practical to invite 1 263 - competitve bids Bid not evaluated for preference points 41 093 - Quotations not invited 31 27 424 949 1 156 295

99

93 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

40. Irregular, fruitless and wasteful expenditure (continued)

Three investigations are ongoing on possible fraud by employees but will only be completed in the next financial year. The outcome of the investigations and any action taken will be reported and the amounts classified as irregular if found to be fraud in the financial statements of the next financial year.

31 March 2017

Competitive bidding process not followed

In the 2015/16 financial year, irregular expenditure were identified as a result of SANRAL inviting a quotation and appointing a service provider above the threshold of R500 000. At the time the price excluding VAT was below the limit but with VAT included, it surpassed the threshold and tenders should have been called for. This has led to irregular expenditure in the amount of R548 968 in this financial year. A disciplinary was followed in the previous financial year.

Bid not awarded to the lowest bidder

Two quotations to the value of R32 943 were not awarded to the bidder with the lowest quote. In the first instance, the successful bidder could not provide SANRAL with all of the documentation required in terms of the Financial Intelligence Centre Act and subsequently the second lowest bidder was awarded the contract. In the second instance, the lowest bidder could not deliver the required goods as per the quotation to SANRAL and the next bidder was finally awarded the quote. The necessary documentation in both instances was not kept up to date.

Awarding of preference points to tenders without original or certified BEE certificates

Irregular Expenditure identified in 2014/15 and 2015/16 where at the time of award of the tenders, SANRAL did not have an original or certified copy of the successful tenderers BBBEE certificates in hand, but only copies thereof, resulted in expenditure in this financial year of R134 492 628. A disciplinary process was followed in the previous financial years.

Procurement model for routine road maintenance projects

As part of SANRAL’s strategy to develop small contractors as per Government’s aims and objectives, SANRAL uses a Procurement model that will ensure that the prices tendered will protect and develop Small Micro and Medium Enterprises (SMMEs). The model is aimed at appointing a Management Contractor that will sublet 80% of routine maintenance work (of which more than 90% are Black Economic Empowerment (BEE) companies) to SMMEs.

The work will go out on tender in smaller work packages, which SMME’s are more capable of undertaking and can be sustained. Due to the smaller economy of scale of work packages the realistic rates at which SMMEs can do the work for a fair price is generally higher than a main contractor.

SANRAL uses a proven mathematical equation, calculated independently by the University of Pretoria, to determine the lowest acceptable tender price that allows the appointment of a contractor with the most realistic and lowest acceptable rates at which SMMEs can do the work and be financially viable. The tender methodology and adjudication method are clearly stipulated in the tender documentation and is fair and reasonable to SMMEs and the management contractor. The deviation from PPPFA has not been approved by the Minister of Finance.

The disclosed amount is the remaining balance of the RRM contracts awarded using the University of Pretoria statistical method. Since the 2013/14 financial year SANRAL has awarded RRM contracts based on the lowest bidder.

Deviations not done under emergency, sole provider circumstances or impractical to go out on competitive bid

Projects to the value of R5 961 692 were extended for a short period to allow for the drafting of new contract documentation to unbundle the project into smaller portions. The unbundling of the projects into smaller projects was as a result of a policy change that the Board was investigating at that stage to encourage transformation of the industry and especially allowing lower grade CIDB contractors the opportunity to compete. The extensions are not justifiable as it did not constitute an emergency, a sole provider or impractical to go out on a competitive basis.

For a project to the value of R3 460 696, the relevant Architect was sourced through means of a competition that was held for architects to submit designs for the Tshwane Bus Rapid Transit stations and as a result the winner of the competition retained copyright and therefore SANRAL had no other avenue than to accept that the winning architect must be seen as a sole provider and hence competition for the further work could not be sourced. It also needs to be pointed out that in order for SANRAL to minimise its risk, especially in terms of professional indemnity it is common practice in the built environment that the consulting engineer, or architect in this case that came up with the design also do the supervision of the construction.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

40. Irregular, fruitless and wasteful expenditure (continued)

Invalid tax clearance certificates

Five projects to the value of R3 403 410 were awarded on duly certified copies of Tax Clearance Certificates in terms of the

Justice of the Peace and Commissioner of Oaths Act, 1963 (Act 16 of 1963). The certified copies are not acceptable based STATEMENTS FINANCIAL ANNUAL on a paragraph on the certificate from SARS that indicates that photocopies are not acceptable. One project to the value of R4 394 258 was awarded on a Tax Clearance certificate that was found to be possibly fraudulent that will form part of an investigation.

Contracts not advertised for at least 5 working days

Five contracts to the value of R78 007 983 were found to have been advertised less than five working days before the first clarification meeting as prescribed by the Standard of Uniformity of the Construction Industry Development Board.

Extended contracts

Two contracts to the value of R14 486 620 for overload control centres were extended for a short period of time in anticipation of obtaining National Treasury's approval of longer extensions of the contracts. Subsequently National Treasury has approved the further extensions and confirmed it to be justifiable. However, the approval from Treasury did not indicate approval for the initial short period, between the end of the contract and having received National Treasury’s approval and are therefore regarded as not within the prescripts of the PFMA for inviting bids on a competitive basis.

Conflict of interest

A conflict of interest identified in the 2015/16 financial year by a member of the evaluation committee not declaring interest amounted to irregular expenditure for the 2016/17 financial year of R3 734 403. Disciplinary action was undertaken against employee.

Deviations approved by the accounting authority even though it was practical to invite competitive bids

Irregular expenditure identified in 2015/16 financial year. The appointment of the service providers were done and approved as a deviation from normal SCM procedures due to the specific circumstances relating to each project. Disciplinary action against employees were undertaken.

Bidders not evaluated for preference points

Four contracts to the value of R41 093 117 were awarded to the highest scoring bidders, however, during the evaluation phase not all bidders were evaluated for price and preference. Mathematically, based on the tendered price, a number of bidders would have scored such a low score on price alone that such bidders would not have been in contention for winning the tenders. In many cases they would have achieved negative scores. These bidders were not taken into account in the final calculation for price and preference.

Three quotations not invited

Two quotations to the total value of R31 400 were solicited from suppliers but in both instances only one supplier was able to provide the full required services and was subsequently awarded the quotation. The deviation and the reasons for not having at least three quotations were not separately approved.

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95 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

40. Irregular, fruitless and wasteful expenditure (continued)

31 March 2016

Deviations approved by accounting authority as urgent procurement

SANRAL is exposed to public liability in event of a road user suffering loss, including loss of life, or damage to a vehicle due to the condition of a road. Therefore all SANRAL roads have a routine road maintenance contractor on site continuously on all national roads.

Due to a contractor being under investigation for unethical business practices, the extension of a routine road maintenance contract was not exercised, However, to limit the exposure to public liability, another contractor was appointed in the interim, until a public tender could be concluded for the said project. The deviation was approved by the Accounting Authority.

A similar situation arose where another contract was terminated due to lack of performance by the contractor, but the contractor then commenced with legal action to prevent the termination. The Executive Authority decided not to award any further contracts to this contractor, until the matter was concluded. This necessitated the urgent procurement, which was approved by the Accounting Authority as a deviation.

Awarding of preferential points without original or certified BEE certificates

Due to some rating agents issuing electronic BEE certificates, it is not possible for tenderers to submit an original or certified copy of the certificate. Four tenderers were awarded contracts to the value of R39 530 882 without submitting original or certified BEE certificates. The matter has been brought to the attention of National Treasury.

Procurement model for routine road maintenance projects

As part of SANRAL’s strategy to develop small contractors as per Government’s aims and objectives, SANRAL uses a procurement model that will ensure that the prices tendered will protect and develop small micro and medium enterprises (SMMEs). The model is aimed at appointing a management contractor that will sublet 80% of routine maintenance work to SMMEs, of which more than 90% are black economic empowerment (BEE) companies.

The work will go out on tender in smaller work packages, which SMMEs are more capable of undertaking and capable of sustaining. Due to the smaller economies of scale of work packages, the realistic rates at which SMMEs can do the work for a fair price is generally higher than a main contractor.

SANRAL uses a proven mathematical equation, calculated independently by the University of Pretoria, to determine the lowest acceptable tender price that allows the appointment of a contractor with the most realistic and lowest acceptable rates at which SMMEs can do the work and be financially viable. The tender methodology and adjudication method are clearly stipulated in the tender documentation. This is fair and reasonable to SMMEs and the management contractor. The deviation from PPPFA has not been approved by the Minister of Finance.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

40. Irregular, fruitless and wasteful expenditure (continued)

The disclosed amount is the remaining balance of the RRM contracts awarded using the University of Pretoria statistical method. Since the 2013/14 financial year SANRAL has awarded RRM contracts based on the lowest bidder.

Deviations not done under emergency, sole provider circumstances or impractical to go out on competitive bid STATEMENTS FINANCIAL ANNUAL

Due to tender for website and other communication platforms not being awarded, the delay necessitated the extension of the existing website service provider, for R15 603, until the re-tender was concluded. The delay could not have been foreseen and was therefore approved as a deviation for urgent procurement to ensure the website continues operating.

A contract to the value of R925 680 was awarded, as SANRAL regarded the service provider to be a sole provider based on its market analysis.

A contract to the value of R559 854 was awarded without following the competitive bidding process, due to the natural continuation of a previous engagement, as allowed in the National Treasury Regulations, which proved to be more cost effective.

No expenditure was incurred in the current year.

Takeover of site and materials testing was not approved in line with delegation

Two projects to the value of R2 350 378 were not approved in line with delegation. The projects concerned a materials testing laboratory not performing to the required standards. After following the contractual mitigation measures it was decided with all parties' agreement, to cede the contract to a new laboratory able to perform the work. The new laboratory started with the work before finalising the cession agreement and obtaining the delegated officials approval.

Conflict of interest

An employee failed to declare a conflict of interest on three projects which had a combined value of R1 323 860. The matter is under investigation.

Three quotations not invited

In three instances the minimum of three quotations were not invited. The total value of these contracts was R27 413.

Fruitless and wasteful expenditure 31 March 31 March 2017 2016 R'000 R'000 Cancellation of tender 108 - Unbundling of projects 69 - Legal costs 1 594 - Interest 13 321 - 15 092 -

31 March 2017

Cancellation of tender and Unbundling of projects

Two project were re-advertised as the projects were unbundled into smaller projects.The unbundling of the projects into smaller projects was as a result of a policy change that the Board was investigating at that stage to encourage transformation of the industry and especially allowing lower grade CIDB contractors the opportunity to compete, which with larger projects they are unable to do so.

Legal costs and interest

As part of the Unsolicited Bid of service provider on the N1/N2 Winelands Toll Highway, interest and financial charges had to be paid to the service provider as the Scheme Developer in the event that the project will not go ahead. Compound interest was paid while the agreement was silent as to whether interest is compounded or simple, therefore simple interest should have been paid and not compound interest, the difference between the two is fruitless and wasteful expenditure.

103

97 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

41. Fair value information

Financial instruments measured at fair value

Level 1

Recurring fair value measurements

Assets Note(s)

Financial assets at fair value through profit or loss - held for trading 8 Investments - market-making 317 157 636 814

Cash and cash equivalents 11 Cash and cash equivalents 6 570 000 9 490 108

Liabilities

Financial liabilities at fair value through profit or loss 14 - - Market making short term liabilities 251 657 343 209 Capital market loan - held-for-trading 4 599 551 4 300 953 - - - - Total financial liabilities at fair value through profit or loss 4 851 208 4 644 162

Financial liabilities held at amortised cost Repurchase agreements 13 683 391 119 Capital market loan - held at amortised cost 41 410 332 42 063 951 Total other 41 424 015 42 455 070

Level 2

Recurring fair value measurements

Liabilities

Other 14 EIB loan 994 220 982 050 N1 loan 270 400 478 930 ECA loan 118 418 168 099 Total other 1 383 038 1 629 079

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

41. Fair value information (continued)

Information about valuation techniques and inputs used to derive level 2 fair values

N1 Loan ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL Valuation technique

The N1 Loan is an inflation linked amortizing loan where the future monthly real payments are predetermined. These real payments are adjusted for inflation each month.

The nearest comparable inflation linked guaranteed debt SANRAL has is the HWAY23.

The HWAY23 yield was 3.02% (31 March 2016: 2.24%) on 31 March 2017. Assume future inflation of 6% (31 March 2016: 6%) to the maturity date of the HWAY23 and calculate the IRR = 9.114% (31 March 2016:8.589%).

The loan, given the outstanding CPI adjusted payments, which would equalise the IRR to 9.114% is R270.4 million at 31 March 2017.

Significant observable inputs

HWAY23

Sensitivity

A change of 20 basis points in IRR changes the value of the loan by 0.13%, or R351 500 (March 2016: 0.18%, or R700 000).

EIB Loan

Valuation technique

The EIB Loan is an amortizing loan in two tranches, each tranche payable semi-annually. The tranches are not synchronised, resulting in quarterly payments. Final payment 30 June 2034. The rate is fixed.

The nearest SANRAL bond is the HWAY34 with a yield of 10.64% on 31 March 2017(31 March 2016: 9.078%. This equates to an IRR of 10.92% on 31 March 2017 (31 March 2016: 11.07%).

The loan, given all the outstanding payments to give an IRR of 10.912% is equal to R994 million as at 31 March 2017.

Significant observable inputs

HWAY34

Sensitivity

A change of 20 basis points in IRR changes the value of the loan by 1.11%, or R10 936 420 (March 2016: 1.21%, or R11 950 000).

ECA Supported Loan

Valuation technique

The ECA loan is non-guaranteed and amortizing with quarterly payments. Because the total facility was never drawn down and capital repayments are based on the total facility, it results in a rapid repayment of the loan. The interest rate on this loan is linked to 3-month Jibar.

Spreads on non-guaranteed SANRAL debt have widened significantly over the last two years. Spreads vary from 180 points for short-dated bonds to 275 points for longer-dated bonds. A spread of 250 points for this loan was assumed. The BEASSA curve as at 31 March 2017 was used and 250 basis points (31 March 2016" 225) was added to the total. The outstanding payments were discounted using the rates derived as described.

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99 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LIMITED INTEGRATED REPORT 2016/17 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements 2017 2016 R '000 R '000

41. Fair value information (continued)

Significant observable inputs

BEASSA yield curve

Sensitivity

A change of 20 basis points in the spread changes the value of the loan by 0.22% or 256 750.

Level 3

Recurring fair value measurements

Assets Note(s)

Investment property 6 Investment property 1 812 370 1 404 075

Property, plant and equipment including concession assets 4 and 5 Land 20 213 288 18 687 010 Road network and structures 303 857 226 279 856 799 Total property, plant and equipment 324 070 514 298 543 809

Trade and other receivables Trade and other receivables 5 366 829 7 050 155

Trade and other payables Trade and other payables, 4 803 541 3 836 712 Third-party funding 316 919 331 479 Provision for overload control 339 787 336 205 Total trade and other payables 5 460 247 4 504 396

Non recurring fair value measurements

Assets held for sale and disposal groups in accordance with IFRS 5 Investment property 74 226 20 096

106

100 41. Fair value information (continued)

Reconciliation of assets and liabilities measured at level 3

Note(s) Opening Gains/losses Gains/losses Purchases/ Sales/ Classified as Impairment Bad debts Payments Closing balance recognised in recognised in Transfers/ receipts held for sale loss / written off balance profit or loss other Expenditure Depreciation comprehensive income

R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Company - 2017

Assets

Investment property 6 Investment property 1 404 075 521 318 - - (43 670) (69 353) - - - 1 812 370

Property, plant and 4 and 5 equipment including under concession assets Land 18 687 010 - 1 458 975 67 303 - - - - - 20 213 288 Road network and 279 856 799 - 20 851 081 6 069 911 - - (2 920 565) - - 303 857 226 structures Total property, plant 298 543 809 - 22 310 056 6 137 214 - - (2 920 565) - - 324 070 514 and equipment

Investment property Non- current assets 20 096 (3 267) - 69 353 (11 956) - - - - 74 226 held for sale

Trade and other receivables Trade and other 7 050 155 - - - 5 422 291 - (3 753 595) (33 105) (3 318 917) 5 366 829 receivables 101 107

ANNUAL FINANCIAL STATEMENTS 4 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 102 THE SOUTHAFRICANNATIONAL ROADSAGENCYSOCLIMITEDINTEGRATED REPORT 2016/17 Notes to the Financial Statements

Note(s) Opening Gains/losses Gains/losses Purchases/ Sales/ Classified as Impairment Bad debts Payments Closing balance recognised in recognised in expenditure receipts held for sale loss written off balance profit or loss other comprehensiv e income R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

41. Fair value information (continued)

Trade and other payables Trade and other 3 836 712 - - 966 829 - - - - - 4 803 541 payables Third-party funding 331 479 - - - (14 560) - - - - 316 919 Provision for overload 336 205 - - 3 582 - - - - - 339 787 control Total other 4 504 396 - - 970 411 (14 560) - - - - 5 460 247 Total 302 513 739 518 051 22 310 056 5 236 156 5 381 225 (69 353) (6 674 160) (33 105) (3 318 917) 325 863 692

108 41. Fair value information (continued)

Company - 2016 Opening Gains (losses)Gains (losses) Purchases/ Sales/ Classified as No longer Impairment Payments Closing balance recognised in recognised in Transfer/ Receipts held for sale meet the loss/ balance profit (loss) other Expenditure recognition as Depreciation/ comprehensiv held for sale Write off e income R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000

Assets

Investment property 6 Investment property 1 318 565 82 832 - 33 191 (10 417) (20 096) - - - 1 404 075

Property, plant and 4 and 5 equipment including concession assets Land 17 206 830 - 1 392 801 87 379 - - - - - 18 687 010 Road network and 274 913 443 - (489 227) 8 113 832 - - - (2 681 249) - 279 856 799 structures Total property, plant 292 120 273 - 903 574 8 201 211 - - - (2 681 249) - 298 543 809 and equipment

Investment properties Non-current assets 26 971 (460) - 20 556 (9 541) - (17 430) - - 20 096 held for sale

Trade and other 8 receivables Trade and trade 4 608 074 - - - 5 007 352 - - (90 211) (2 475 060) 7 050 155 receivables

Trade and other payables Trade and other 2 953 945 - - 882 767 - - - - - 3 836 712 payables Third-party funding 764 751 - - - (433 272) - - - - 331 479 Provision for overload 374 429 - - - (38 224) - - - - 336 205 control Total other 4 093 125 - - 882 767 (471 496) - - - - 4 504 396 Total 293 980 758 82 372 903 574 7 372 191 5 458 890 (20 096) (17 430) (2 771 460) (2 475 060) 302 513 739 103 109

ANNUAL FINANCIAL STATEMENTS 4 South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 104 THE SOUTHAFRICANNATIONAL ROADSAGENCYSOCLIMITEDINTEGRATED REPORT 2016/17 Notes to the Financial Statements

41. Fair value information (continued)

* Gains and losses recognised in profit or loss are included in Other income on the Statement of Comprehensive Income, except for gains and losses on financial assets and liabilities which have been included in Fair value adjustments.

# Gains and losses recognised in other comprehensive income are included in Gains and losses on property revaluation.

** This column refers to the amount of total gains or losses included in profit or loss that is attributable to the change in unrealised gains or losses for assets and liabilities held at the end of the reporting period.

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

41. Fair value information (continued)

Information about valuation techniques and inputs used to derive level 3 fair values

Land ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL

Valuation technique(s)

The valuation technique adopted for land is based on the “across the fence” method using comparable sales (strip valuation).

Significant unobservable inputs

Significant unobservable inputs were adjustments to development rights, engineering services or crop improvements.

Sensitivity

The carriageway length of the road network increased from 23 765 km to 24 637 km (+3.67%) from 2016 to 2017 financial year.

As a result the total land area increased by 3 249ha (3.27%). The average strip value increased from R521 805/ha to R579 587/ha (11.1%). In areas of high economic activity, strip values increase by much higher values due the adjustments to development rights and updated sales information that became available. For 2016/17 financial year the market value of the road reserve/land increased by R1.46 billion (9.1%), which is in line with long-term property value growth of between 6% and 9% in nominal terms.

Investment property

Valuation technique(s)

Direct comparison of selling prices achieved in respect of comparable prices.

Significant unobservable inputs

Selling prices of comparable properties. Subjective adjustments by the valuer to account for differences between the subject property and comparable properties sold in terms of location, physical features, current and future land use as well as prevalent market conditions at date of sales.

Sensitivity

During the 2017 financial year the SANRAL Investment Property (IP) policy was amended to only consider properties >R10,000 in value outside of declared road reserve, and those properties with valid lease income. Based on the new IP policy a total of 2495 investment properties were identified to the value of R1 886 596 916.

Trade and other receivables and trade and other payables

Trade and other receivables and payables are accounted for in terms of IAS 39. Discounting is applied to trade and other receivables.

Valuation technique(s)

Discounted cash flows using SANRAL's weighted average overdraft rate for consumers

Significant unobservable inputs

Weighted average overdraft rate for consumers.

Sensitivity

During the year under review, the weighted average overdraft rates were used to discount trade and other receivables. The rate for 2016/17 was 9.6605%

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41. Fair value information (continued)

Road network and structures

Valuation technique

Depreciated replacement cost

Significant unobservable inputs

Replacement cost

Sensitivity The following factors impact the annual change in the Gross Replacement Cost and Depreciated Replacement Cost of SANRAL roads:

Change in network length: The incorporation of the remainder of strategic and primary road network from provinces during a year, as well as the upgrading of roads from single carriageway to four-lane road or dual carriageway, impacts on the value of assets, as asset value is calculated for every carriageway km of road as at 31 March of each year. For the 2015/2016 to 2016/2017 financial year the carriageway length increased from 23 765 km to 24 637 km (+3.67%)

Change in unit rates: Change in standard unit rates from one year to another are influenced by exchange rate fluctuations, crude oil prices (impacts bitumen and diesel prices), steel prices, cement prices, equipment prices, labour costs, market conditions (supply and demand that determines mark-up of contractors). For the 2016/17 financial year the unit rates increased by +9.95%.

Change in condition: Since the depreciation of the pavement layer component and the structures component are directly related to condition of the asset, deterioration in condition ( due to traffic and climate) will result in a decrease in depreciated replacement cost. The opposite also applies if the condition of asset improved due to maintenance actions. As can be appreciated, for each carriageway-km as used in asset valuation, the condition will be changing based on numerous local climate, traffic and maintenance impacts.

Maintenance: Any reseal, overlay, or strengthening work performed on the assets impacts on the condition of the asset, the remaining life of the asset and thus the condition-based depreciation of each carriageway-km of road is affected. For the 2016/17 financial year the length of network in good condition increased from 12 664 km to 14 339 km (+13.23%).

Change in traffic: Since the Depreciated Replacement Cost (DRC) method is based on Modern Equivalent Asset (MEA) on today's prices, based on the traffic expected over the next 25 years, the impact of change in traffic is obvious. If the road design class is close to a transition interface, then a small increase in traffic over year, can result in a change in the MEA required (more layers and/or higher quality materials), with associated cost increases for specific road assets. The opposite applies if the traffic decreases. SANRAL has over 1 000 traffic monitoring stations on the network. On some sections traffic increases and on others it decreases from one year to another. For the 2016/17 financial year the length of network with more than 5 000 vehicles per day increased from 8 130 km to 8 546 km (+5.12%).

Change in dimensions: Since the DRC method is based on replacing current road width with Modern Equivalent Asset (MEA), any change in road width or structure area from one year to the other due to maintenance actions, i.e. addition of paved shoulders, addition of lanes, addition of climbing lanes will increase the replacement cost of each carriageway-km of road affected. For the 2016/17 financial year the average cross section of the network increased from 11.25m to 11.85m (+5.33%).

The net impact of all of the above resulted in a change for the 2016/17 financial year in the depreciated replacement value, from R260 612 129 936 (2016) to R303 858 341 300 (2017) or, 16.59%

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42. Prior period errors

The 2016 financial statements have been restated to correct the prior period errors set out below.

42.1 Borrowings ANNUAL FINANCIAL STATEMENTS FINANCIAL ANNUAL While preparing the financial statements of the company for the period 31 March 2017, management discovered that the classification of non-current and current borrowings was done incorrectly in the 2016 financial year. The total liability amount is the same and unchanged, only the split between current and non-current needed to change. Consequently, SANRAL adjusted all comparative amounts presented in the current period's financial statements affected by the accounting error. The prior period error resulted in the following restatements:

2016 R'000 Increase in non-current liabilities (borrowings) (3 558 733) Decrease in current liabilities (borrowings) 3 558 733 -

42.2 Bank charges

While preparing the financial statements for the 2016/17 financial year, SANRAL management discovered that bank charges relating to conventional tolls for the previous financial years were not being expensed but rather capitalised to operator debt (Trade and other receivables)

2016 2015 R'000 R'000 Decrease in retained earnings 36 397 359 090 Decrease in Trade and other receivables (36 397) (359 090) - -

42.3 Third-party funding

Debit balances of third-party funding was not reclassified to debtors in the 2015/16 financial year. This resulted in an understatement of third-party funding and an understatement of Trade and other receivable. The correction resulted in the following adjustments:

2016 R'000 Increase Trade and other receivables 20 401 Increase in Third-party funding (20 401)

-

42.4 Loss on sale of Land

During the preparation of the 2017 annual financial statements, management discovered that loss on sale of land was understated in 2016. The correction resulted in the following adjustement

2016 R'000 Decrease in retained earnings 45 708 Decrease in trade and other receivables (45 708) -

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42.5 Revenue recognition

During the preparation of the 2017 annual financial statements, it was discovered that revenue that does not meet the probability criteria was recognised as revenue in the 2015/16 financial year. The correction resulted in the following adjustment

2016 R'000 Decrease in retained earnings 167 004 Decrease in VAT payable 23 381 Decrease in Trade and other receivables (190 385) - 42.6 Road Network and structures

During the preparation of the current financial statements, SANRAL's management noted that the road structures were incorrectly capitalised as the road network. This resulted in a misstatement between the road structures and road network. The correction resulted in the following adjustment:

2016 2015 R'000 R'000 Increase in cost of road structures 137 330 289 744 Decrease in cost of road network (138 623) (231 840) Decrease in accumulated depreciation for road network 137 329 289 744 Increase in accumulated depreciation for road structures (137 329) (289 744) Decrease in revaluation reserve - structures 937 777 2 907 315 Increase in revaluation reserve - road network (936 484) (2 965 219) - -

42.7 Concession assets

During the preparation of the current financial statements, SANRAL's management noted that Concession assets accumulated depreciation was misstated. The correction resulted in the following adjustment:

2015 R'000 Decrease in accumulated depreciation road structures 26 128 Decrease in accumulated depreciation buildings 11 612 Decrease in accumulated depreciation equipment 4 Increase in accumulated depreciation road network (45 012) Decrease in retained earnings 7 268 Increase in road network revaluation 45 012 Decrease in road structures revaluation (26 128) Increase in revaluation reserve (18 884) -

42.8 Plaza building

During the preparation of the current financial statements, SANRAL's management noted that there was a plaza building which was not accounted for. The correction resulted in the following adjustment:

2016 2015 R'000 R'000 Increase in buildings - 189 Increase in accumulated depreciation (4) (61) Decrease / (Increase) in retained earnings 4 (128) - -

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South African National Roads Agency SOC Limited (Registration number 1998/009584/30) Financial Statements for the year ended 31 March 2017 Notes to the Financial Statements

42.9 Plaza buildings

During the preparation of the current financial statements, SANRAL's management noted that there were plaza buildings which were misclassified under road network. The correction resulted in the following adjustment:

2016 2015

R'000 R'000 STATEMENTS FINANCIAL ANNUAL Increase in buildings - 68 132 Decrease in road network - (68 132) Decrease in accumulated depreciation roads network 1 292 10 229 Increase in accumulated depreciation buildings (1 362) (10 744) Decrease in retained earnings 70 515 - -

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43. Events after the reporting period

Moody's Ratings

Following the sovereign downgrade, Moody’s Ratings Agency downgraded SANRAL’s global scale rating on 12 June 2017 to Ba1 from Baa3, long-term, and NP from P-3 for short-term. The national scale rating was affirmed at Aa3, which is positive because SANRAL has only issued in the domestic market to date. The ratings agency’s view of the sovereign credit risk had a significant impact on this move to downgrade most SOCs. In addition, Moody’s cited SANRAL's ability to enforce e-toll payments are largely dependent on the continued support of Government and this together with high level debts and a weak liquidity position stemming from continued opposition to the open road toll project, GFIP, are reasons for the ratings review. The value of this subsequent event cannot be quantified.

Government guarantee

SANRAL issued an announcement to its investors in June 2017, which confirms that it is currently in the process of working with government (Department of Transport and National Treasury) with regards to increasing the maximum aggregate amount guaranteed in order to provide greater headroom for subsequent placements under this DMTN Programme and to ensure that all indebtedness under this Programme remains guaranteed. In the same announcement, government (National Treasury) has indicated that its intention was that the guarantee utilisation be measured in nominal terms with regard to the inflation linked debt, although the guaranteed obligation would be the redemption value.

DMTN Programme

In September 2017, the Minister of Transport approved, with concurrence of the Minister of Finance, an amended guarantee, clarifying that the limit of R31.91 billion is measured at nominal and confirming that government is liable for any and all amounts payable for debt instruments issued under this guarantee, if SANRAL fails to meet these obligations.

GFIP test case

In order to address the uncertainty created by civil rights/interest groups and political parties, with regard to SANRALs authority to levy and collect toll on the Gauteng Freeway Improvement Project (GFIP), SANRAL considered agreeing to a test case with one of these groups, Organisation Undoing Tax Abuse (OUTA). The test case would have brought a single non-payer to Court to argue the legal opposition to SANRAL’s authority to levy and collect the toll. However, due to OUTA repeatedly delaying the progress of the case, SANRAL eventually abandoned the process in order to fast track the civil claim process against the individual entities and persons owing the debt. The value of this subsequent event cannot be quantified.

N3 Pedestrian bridge

In the early hours of 9 August 2017 a closed pedestrian bridge collapsed on the N3 highway in Gauteng. SANRAL and other third parties have provided evidence to the investigators, including the insurer, to determine the cause and the damage to be recovered. The value of this subsequent event cannot be quantified.

44. Settlement agreement on collusion of prices

In the financial year ended 31 March 2016, SANRAL issued summonses in the Gauteng Local Division of High Court, claiming damages totalling R760m against construction contractors. The amount claimed was not tested in court and was based on the estimates made before the projects were awarded.

Subsequently, the Presidential Infrastructure Coordinating Commission reached a settlement agreement with the construction cartel and requested SANRAL to rescind its claim. The agreement was announced on 20 October 2016 by Minister in the Presidency, Jeff Radebe. The contractors are required to contribute to a (Tirisano) development fund. The fund is meant to be used for skills development in the construction industry. The contribution amount is R125 million per annum for a period of 12 years. The contributions will be made to the National Revenue Fund, and will be appropriated to the Department of Economic Development.

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Notes to the Financial Statements

45. Going concern

The going concern basis has been adopted in preparing the financial statements.

International Accounting Standard (IAS) 1, paragraph 25, requires an entity to assess its ability to continue as a going

concern, in preparing financial statements. It further indicates that it is a requirement to prepare financial statements as a STATEMENTS FINANCIAL ANNUAL going concern, unless the management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

SANRAL’s assessment of this principle considered the following critical areas:

Assets

As a stand-alone company, SANRAL’s significant asset base of R358.2 billion and net asset value of R249.2 billion is regarded as very healthy. As a provider of national roads, the asset base would never be considered for liquidation or sold. The probability that the government would consider the scrapping or selling of national roads is remote as it is a national asset which drives the economy of the country.

Liquidity

SANRAL receives an annual grant from the fiscus to fund the non-toll portfolio. For the year under review this amounted to R13 490.5 million. Since inception this grant has been increased annually by more than the annual inflation. This amount covers the operational and capital expenditure for 86 percent of SANRAL’s portfolio, being the non-toll roads. The Budget Vote 35, reflects that this grant will increase to R18 064.3 million in 2019/20.

Revenue from conventional toll routes, which are funded by SANRAL, added R3 048 million to cash receipts in the year under review and is expected to increase annually with traffic growth and tariff adjustments. During the same period GFIP collected R1 850 million and received the additional grant from the fiscus of R372.9 million. Due to the low collection rate on GFIP, the cash receipt projections are assumed to be the same as the past 8 to 10 months in order to have a conservative forecast. The Board has requested the shareholder to address the impact of the poor collection rate with Cabinet to ensure the sustainability of SANRAL.

In reviewing the cash requirements for the next 12 months to September 2018, SANRAL requires a minimum of R2 561 million. If the redemption of the NRA018, which matures in November 2018, is added this amount increases to R5 531 million. During 2016 SANRAL was able to have successful auctions and private placements which raised R4 600 million and SANRAL managed to successfully refinance more than R3 000 million of maturing debt. SANRAL’s funding strategy for 2017/18 includes auctions and private placements as well as extending the use of R1 billion of facilities. In the current market conditions where local investor sentiment is negative towards long-term investments, short-term floating rate notes are readily accessible, and SANRAL will certainly continue to tap this market to supplement the other funding strategies.

Market conditions deteriorated earlier in 2017 due to political uncertainty, credit rating downgrades and the Futuregrowth moratorium from 2016. During late June and July of 2017, informal discussions with brokers, banks and investors indicated an appetite for three- to seven year paper from SANRAL. Corporate issuers have had huge success in issuing shorter dated bonds. In July 2017, Futuregrowth lifted its moratorium on trading in SANRAL debt. It should also be noted that SANRAL’s local scale rating was affirmed and therefore the same as in 2015 to 2016 when we were fairly successful in placing paper.

Furthermore, the government issued guarantees totaling R37.91 billion, being the R31.91 billion and R6 billion guarantees, of which R28.9 billion has been utilised at 31 August 2017. The current funding requirements project that this limit will only be breached in February 2019. Apart from the conservative approach to GFIP receipts, the projections assume no new toll roads and limited capital expenditure on roads, where possible but without compromising the asset. The request to increase the total guarantee to R43 billion and the borrowing limit to R54 billion (from R47.91 billion), was submitted in late 2016. R39.46 billion of the borrowing limit was utilised by 31 August 2017. The government has also committed to providing an additional grant of R372.9 million per annum, adjusted with inflation, to supplement GFIP revenues. This clearly reflects government’s continued support for SANRAL.

SANRAL has the option of issuing non-guaranteed debt under the R15 billion non-guaranteed DMTN programme; R4.1 billion, at 31 August 2017 being available to issue new bonds or tap existing bonds. However, if all of the above fails, government has the right to step-in to service the debt, in terms of the R31.91 billion guarantee agreement (clause 6.2).

Additional considerations

SANRAL may not be placed under judicial management or in liquidation except by an act of Parliament (Section 10 of the

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Notes to the Financial Statements

45. Going concern (continued) South African National Roads Agency and National Roads Act No 7 of 1998.) This is an implied guarantee from the Republic. The Board of Director’s therefore supports management’s assessment that SANRAL will remain a going concern in the foreseeable future.

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112 THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LTD (SANRAL) Head office 48 Tambotie Avenue Val de Grace Pretoria PO Box 415 Pretoria 0001 South Africa

Tel: +27 (0) 12 844 8000 Fax: +27(0) 12 844 8200 www.sanral.co.za

Registration Number: 1998/009584/30 RP 179/2017 ISBN: 978-0-621-45547-2

Produced by Communications and Marketing SANRAL, Pretoria Tel: +27 (0) 12 844 8000 [email protected]

Contact Details for SANRAL’s Fraud Hotline/Tip-Offs Anonymous Toll-Free Phone No: 0800 204 558 Toll-Free Fax No: 0800 007 788 E-mail: [email protected]

Postal address: Tip-Offs Anonymous Freepost DN 298 Umhlanga Rocks