Credit ratings agency Moody’s has confirmed the South African National Roads Agency Limited’s (SANRAL) credit rating after the implementation of the controversial e-tolling system.
HumanIPO reported in September Moody’s had downgraded SANRAL’s long-term issuer ratings over a fall in cash flow related to the e-tolling project, saying the rating would be under review.
Moody’s has now announced it has maintained SANRAL’s Baa3/P-3 rating based on the likely revenues gained from e-tolling, but assigned a negative outlook to the state-owned company.
“The rating action has been prompted by the implementation of electronic tolling (e-tolling) on SANRAL’s largest toll road, the Gauteng Freeway Improvement Project, on 3 December 2013,” Moody’s said.
“E-tolls will enable SANRAL to realise the additional toll revenue necessary to absorb cash-flow pressures emanating from its high operating costs (including debt service) and to reduce its borrowing needs.”
However, Moody’s said the risks associated with e-tolling revenue collection prompted a negative outlook for SANRAL.
“The negative outlook incorporates the operational risks associated with e-toll collection, given the limited track record of the newly established method of collection, enshrined in the Transport and Related Matters Amendment Bill which is aimed at enhancing SANRAL’s capacity to enforce payment of e-tolling fees. SANRAL’s outlook also mirrors the negative outlook on South Africa’s sovereign rating,” the agency said.
“SANRAL’s failure to maintain sufficient e-toll revenue collection, leading to deteriorating budgetary performance and growing borrowing needs, would apply downward rating pressure.”
HumanIPO reported on last week the controversial Gauteng e-tolling project had gone live, though opposition to it remains strong. Unions affiliated to the Congress of South African Trade Unions (COSATU) in the South African Post Office (SAPO) and Gauteng metro police have promised to assist with the fight against the policy.