beyond the horizon await possibilities - nra 2017-volume2.pdf · building south africa through...

Building South Africa through better roads.

POSS IB I L I T I ESB E Y O N D T H E H O R I Z O N A W A I T

I N T E G R A T E D R E P O R T: V o l u m e 2 – C o r p o r at e G o v e r n a n c e & F i n a n c i a l S tat e m e n t s

2017

ANNUAL FINANCIAL STATEMENTS

Report of Auditor-General ___________________________________ 4Director’s Report ____________________________________________ 12Statement of Responsibility of Board of Directors _______________ 20Certificate Company Secretary _______________________________ 21Statement of Financial Position _______________________________ 22Statement of Profit or Loss and Other Comprehensive Income ___ 23Statement of Changes in Equity ______________________________ 24Statement of Cash Flows ____________________________________ 25Accounting Policies _________________________________________ 26Notes to the Financial Statements ____________________________ 43

4SECTION

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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. IhaveauditedthefinancialstatementsoftheSouthAfricanNationalRoadsAgency(SOC)Limited(SANRAL)setoutonpages22to112ofVolume2,whichcomprisethestatementoffinancialpositionasat31March2017,andthestatementofprofitorlossandothercomprehensiveincome,statementofchangesinequityandstatementofcashflowsfortheyearthenended,aswellasthenotestothefinancialstatements,includingasummaryofsignificantaccountingpolicies.

2. Inmyopinion,thefinancialstatementspresentfairly,inallmaterialrespects,thefinancialpositionoftheSouthAfricanNationalRoadsAgency(SOC)Limitedasat31March2017,anditsfinancialperformanceanditscashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandards(IFRS)andtherequirementsofthePublicFinanceManagementActofSouthAfrica,1999(ActNo.1of1999)(PFMA)andtheCompaniesActofSouthAfrica,2008(ActNo.71of2008)(CompaniesAct).

Basis for opinion

3. IconductedmyauditinaccordancewiththeInternationalStandardsonAuditing(ISAs).Myresponsibilitiesunderthosestandardsarefurtherdescribedintheauditor-general’sresponsibilitiesfortheauditofthefinancialstatementssectionofmyreport.

4. IamindependentofthenationalpublicentityinaccordancewiththeInternationalEthicsStandardsBoardforAccountants’ Code of ethics for professional accountants(IESBAcode)togetherwiththeethicalrequirementsthatarerelevanttomyauditinSouthAfrica.IhavefulfilledmyotherethicalresponsibilitiesinaccordancewiththeserequirementsandtheIESBAcode.

5. IbelievethattheauditevidenceIhaveobtainedissufficientandappropriatetoprovideabasisformyopinion.

Key audit matters

6. Keyauditmattersarethosemattersthat,inmyprofessionaljudgement,wereofmostsignificanceinmyauditofthefinancialstatementsofthecurrentperiod.ThesematterswereaddressedinthecontextofmyauditofthefinancialstatementsasawholeandinformingmyopinionthereonandIdonotprovideaseparateopinionorconclusiononthesematters.

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


Key audit matter How the matter was addressed in the auditImpairment and collectability of trade receivables (toll)Asdisclosedinnote9totheannualfinancialstatements,allowancesforimpairmentlossescomprisesmainlyofe-tolldebtors.TheimpairmentlossesprovidedforinthefinancialyearunderreviewamountedtoR3,75billionofwhichR3,61billionrelatedtothee-tolldebtors.

Theassessmentandcalculationofimpairmentlossesofe-tolldebtorsrequiremanagementtomakesignificantestimationsandjudgement.Duetothesubjectivityoftheestimationsandjudgement,andthesignificantincreaseintheimpairmentlosses,Iconsidertheimpairmentandcollectabilityoftradereceivables(toll)tobeakeyauditmatter.

Iassessedthevalidityofoutstandingtradereceivables(toll)byconfirmingtheindividualtransactionsfromagantrypasstowhenatransactionisrecognisedinthereceivableaccount.Ialsoconsideredpaymentsreceivedsubsequenttoyear-endandpastpaymenthistorytoidentifypotentiallyimpairedbalances.

Theassessmentoftheappropriatenessoftheallowancefortradereceivables(toll)comprisedavarietyofauditproceduresincluding:• evaluatingtheappropriatenessandreasonablenessofthe

assumptionsappliedinthemanagement’sassessmentoftheimpairmentofe-tolldebtors;

• assessingthenatureandextentofdocumentationsupportingtheassumptions;

• verifyingreceiptsfromtradereceivables(toll)subsequenttoyear-endaswellasconsiderationofpastpaymenthistory;

• consideringthecompletenessandaccuracyofthedisclosuresrelatingtotheimpairmentandtradereceivables(tollroads).

Toaddresstheriskofmanagementbias,Ievaluatedtheresultsofmyproceduresagainstthoseonotherkeybalancestoassesswhethertherewasanindicationofbias.

Iwassatisfiedthatthetradereceivables(toll)werefairlyvaluedandadequatelyprovidedforwheredoubtexisted.Ifurtherconsideredwhethertheprovisionsweremisstatedandconcludedthattheywereappropriate,anddisclosuresrelatingtotradereceivable(toll)intheannualfinancialstatementswereappropriate.

Revaluation of road network and road structuresThecarryingvalueofthecombinedroadnetworkandroadstructuresamountedtoR303,8billion(andthefairvalueadjustmentrecordedinothercomprehensiveincomeinrespectofthecombinedroadnetworkandroadstructureswasR20,8billion.Theinputswiththemostsignificantimpactonthesevaluationsweredisclosedinnotes4and5totheannualfinancialstatements.

WhilstthefairvalueassessmentisdeterminedbySANRALinternally,independentexpertsareusedtodeterminetheunitratesutilisedinthecalculationofthedepreciatedreplacementcost.

Duetothesignificanceofthevalueoftheroadnetworkandstructurestothefinancialstatementsasawhole,combinedwiththejudgementassociatedwithdeterminingthefairvalue,Iconsiderthistobeakeyauditmatterinmyaudit.

Iusedanindependentexternalexperttoevaluatemanagement’sjudgements,andtheproceduresperformedbytheexpertincludedthefollowing:• evaluatingtheappropriatenessandreasonablenessofthe

revaluationmethodandparametersapplied;• recomputingtherevaluationcalculation;• performingavisualinspectionofasampleofroadnetworkand

roadstructurestoconfirmthecondition;• assessingthereasonablenessofthematerialunitratestomarket

dataandentity-specificinformationtoconfirmtheappropriatenessofthesejudgements.

Ialsoreviewedtheworkperformedbytheindependentexperttoconfirmthattheconclusionreachedwasinlinewiththeworkperformedandmyunderstandingoftheauditee.

Ifurtherconsideredwhetherthedisclosuresrelatingtoroadnetworkandroadstructuresintheannualfinancialstatementswereappropriate.

BasedontheproceduresperformedIamsatisfiedthattherevaluationofroadnetworkandroadstructureswasappropriateandreasonableandroadnetworkandroadstructureswerefairlyvalued.

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Key audit matter How the matter was addressed in the audit

Going concern assessment

Asdisclosedinnote45totheannualfinancialstatements,thecalculationsandassumptionssupportingthegoingconcernassessmentrequiredmanagementtomakehighlysubjectivejudgments.Thecalculationsarebasedonestimatesoffutureperformanceandfundingrequirements,andarefundamentalinassessingthesuitabilityofthebasisadoptedforthepreparationofthefinancialstatements.

Duetothesignificantauditeffortinassessingtheappropriatenessofthisassumptionincludingthetimespentonthismatterbyseniormembersofmyauditteam,Iconsideredthistobeakeyauditmatter.

Iperformedprocedurestoconfirmtheaccuracyofthecalculationsandassessedthereasonabilityoftheassumptionsusedintheestimationsoffutureperformanceandthefundingrequirements.

AsSANRAL’sborrowingsareguaranteedbytheSouthAfricanGovernmentuptoaprescribedlimit,Ialsoconsideredtheimpactoftheentity’sfuturefundingrequirementsagainstthebalanceavailableontheguaranteetodeterminewhethertheguaranteelimitwouldnotbeexceeded.

Asstatedinnote43,postyear-endthewordingoftheR31,9billionguaranteewasamended.Thisamendmentoftheguaranteeresultedinasignificantdelayinthesign-offoftheauditreport.

IconsideredthattherequirementsofIFRSregardingtheappropriatenessofthedisclosuresweremet.

BasedontheproceduresperformedIconcludedthatthegoingconcernassumptionwasappropriateandthatthedisclosureofthematerialuncertaintyrelatingtogoingconcernwasinaccordancewiththeIFRSrequirements.

Material uncertainty related to going concern

7. Idrawattentiontonote45tothefinancialstatements,whichindicatesthattheentity’scashrequirementsforthenext12monthsrelatingtotolloperationsisdependentonitsabilitytosuccessfullyraisefurtherfundingthroughauctionsandprivateplacementsandthattheboardofdirectorshasrequestedtheShareholdertoaddresstheimpactofthepoorcollectionrateontheGautengFreewayImprovementProject(e-tolls)withCabinettoensurethesustainabilityofSANRAL.Asstatedinnote45,theseeventsorconditions,alongwithothermattersassetforthinnote45,indicatethatamaterialuncertaintyexiststhatmaycastsignificantdoubtonthepublicentity’sabilitytocontinueasagoingconcern.Myopinionisnotmodifiedinrespectofthismatter.

Emphasis of matters

8. Idrawattentiontothemattersbelow.Myopinionisnotmodifiedinrespectofthesematters.

Restatement of corresponding figures

9. Asdisclosedinnote42tothefinancialstatements,thecorrespondingfiguresfor31March2016havebeenrestatedasaresultoferrorsinthefinancialstatementsoftheentityat,andfortheyearended,31March2017.

Material impairments – trade and other receivables

10. Asdisclosedinnote9tothefinancialstatements,materialimpairmentsofR3,75billionwererecognisedasaresultofadecreaseinestimatedfuturecashflowsrelatingtotradeandotherreceivables.AtotalofR3,61billionofthisimpairmentrelatestotheimpairmentofe-tolldebtors.

Irregular and fruitless and wasteful expenditure

11. Asdisclosedinnote40tothefinancialstatements,irregularexpenditureofR424,9millionwasincurred,duetonon-compliancewithprescribedprocurementprocesses.FruitlessandwastefulexpendituretotheamountofR15millionwasincurred,duetoadditionalcostsincurredonaprojectthatwascancelledastheapprovalprocessfortheprojecthadnotbeenfollowed.


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Events after the reporting period

12. Withreferencetonote43tothefinancialstatements,theMoody’sRatingAgencydowngradedSANRAL’sglobalscaleratingfromBaa3toBa1forlongtermandfromP-3toNPforshortterm.Theratingagency’sviewofthesovereigncreditrisktogetherwiththeimpactofthecontinuedoppositiontotheopenroadtollingprojectwerecitedasreasonsfortherating.

13. Asdisclosedinnote43tothefinancialstatements,inSeptember2017,theministerofTransportwiththeconcurrenceoftheministerofFinance,approvedanamendedguaranteefortheborrowingsofSANRALinrespectofitsDomesticMediumTermNoteProgramme(DMTNprogramme)andotherfinancialinstruments,clarifyingthatthelimitoftheR31,91billionguaranteeismeasuredatnominalamountsandconfirmingthatGovernmentisliableforanyandallamountspayablefordebtinstrumentsissuedunderthisguarantee.

Responsibilities of the accounting authority

14. Theboardofdirectors,whichconstitutestheaccountingauthority,isresponsibleforthepreparationandfairpresentationofthefinancialstatementsinaccordancewithIFRSandtherequirementsofthePFMAandtheCompaniesActandforsuchinternalcontrolastheaccountingauthoritydeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

15. Inpreparingthefinancialstatements,theaccountingauthorityisresponsibleforassessingtheSouthAfricanNationalRoadsAgency(SOC)Limited’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatingtogoingconcernandusingthegoingconcernbasisofaccountingunlesstheaccountingauthorityeitherintendstoliquidatethenationalpublicentityortoceaseoperations,orhasnorealisticalternativebuttodoso.

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

16. Myobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesmyopinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorinaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.

17. Afurtherdescriptionofmyresponsibilitiesfortheauditofthefinancialstatementsisincludedintheannexuretotheauditor’sreport.

Report on the audit of the annual performance report

Introduction and scope

18. InaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA)andthegeneralnoticeissuedintermsthereofIhavearesponsibilitytoreportmaterialfindingsonthereportedperformanceinformationagainstpredeterminedobjectivesforselectedobjectivespresentedintheannualperformancereport.Iperformedprocedurestoidentifyfindingsbutnottogatherevidencetoexpressassurance.

19. Myproceduresaddressthereportedperformanceinformation,whichmustbebasedontheapprovedperformanceplanningdocumentsofthenationalpublicentity.Ihavenotevaluatedthecompletenessandappropriatenessoftheperformanceindicatorsincludedintheplanningdocuments.Myproceduresalsodidnotextendtoanydisclosuresorassertionsrelatingtoplannedperformancestrategiesandinformationinrespectoffutureperiodsthatmaybeincludedaspartofthereportedperformanceinformation.Accordingly,myfindingsdonotextendtothesematters.

20. Ievaluatedtheusefulnessandreliabilityofthereportedperformanceinformationinaccordancewiththecriteriadevelopedfromtheperformancemanagementandreportingframework,asdefinedinthegeneralnotice,forthefollowingselectedobjectivespresentedintheannualperformancereportofthenationalpublicentityfortheyearended31March2017:


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Objectives Pages in the annual performance report

Objective1–Managethenationalroadnetworkeffectivelyandefficiently 110–111(Volume1)Objective2–Providesaferoads 110–111(Volume1)Objective3–Carryoutgovernment’stargetedprogrammes 112–113(Volume1)Objective6–Maintainfinancialsustainability 114–115(Volume1)

21. Iperformedprocedurestodeterminewhetherthereportedperformanceinformationwasproperlypresentedandwhetherperformancewasconsistentwiththeapprovedperformanceplanningdocuments.Iperformedfurtherprocedurestodeterminewhethertheindicatorsandrelatedtargetsweremeasurableandrelevant,andassessedthereliabilityofthereportedperformanceinformationtodeterminewhetheritwasvalid,accurateandcomplete.

22. Ididnotidentifyanymaterialfindingsontheusefulnessandreliabilityofthereportedperformanceinformationforthefollowingobjectives:• Objective1-Managethenationalroadnetworkeffectivelyandefficiently• Objective2-Providesaferoads• Objective3-Carryoutgovernment’stargetedprogrammes• Objective6-Maintainfinancialsustainability.

Other matter

23. Idrawattentiontothematterbelow.

Achievement of planned targets

24. Refertotheannualperformancereportonpages110to115ofVolume1forinformationontheachievementofplannedtargetsfortheyearandexplanationsprovidedfortheunder/overachievementofanumberoftargets.Thisinformationshouldbeconsideredinthecontextoftheconclusionsexpressedontheusefulnessandreliabilityofthereportedperformanceinformationinparagraph22ofthisreport.

Report on audit of compliance with legislation

Introduction and scope

25. InaccordancewiththePAAandthegeneralnoticeissuedintermsthereofIhavearesponsibilitytoreportmaterialfindingsonthecomplianceofthenationalpublicentitywithspecificmattersinkeylegislation.Iperformedprocedurestoidentifyfindingsbutnottogatherevidencetoexpressassurance.

26. Thematerialfindingsinrespectofthecompliancecriteriafortheapplicablesubjectmattersareasfollows:

Annual financial statements

27. Thefinancialstatementssubmittedforauditingwerenotpreparedinaccordancewiththeprescribedfinancialreportingframeworkandsupportedbyfullandproperrecords,asrequiredbysection55(1)(a)and(b)ofthePFMAandsection29(1)(a)oftheCompaniesAct.Materialmisstatementsofnon-currentassets,currentassets,revenueanddisclosureitemsidentifiedbytheauditorsinthesubmittedfinancialstatementswerecorrectedandthesupportingrecordswereprovidedsubsequently,resultinginthefinancialstatementsreceivinganunqualifiedauditopinion.

Procurement and contract management

28. ContractsandquotationswereawardedtosomesupplierswhosetaxmattershadnotbeendeclaredbytheSouthAfricanRevenueServicestobeinorderasrequiredbytreasuryregulation16A9.1(d)andthePreferentialProcurementRegulations.

29. GoodsandservicesofatransactionvalueaboveR500000werenotalwaysprocuredthroughacompetitivebiddingprocess,asrequiredbytreasuryregulations16A6.1.Somedeviationswereapprovedbytheaccountingauthorityeventhoughitwasnotimpracticaltoinvitecompetitivebids,incontraventionoftreasuryregulation16A6.4.


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30. ContractswereawardedtobiddersbasedonpreferencepointsthatwerenotalwayscalculatedinaccordancewiththerequirementsofthePreferentialProcurementPolicyFrameworkActanditsregulations.Forsomecontractsawardedinprioryears,thepricepointswereallocatedusingthebenchmarkinginstrumentwhoseexemptionwasnotobtainedfromtheministerofFinance.

Expenditure management

31. EffectivestepswerenottakentopreventirregularexpenditureofR424,9millionasdisclosedinnote40totheannualfinancialstatements,asrequiredbysection51(1)(b)(ii)ofthePFMA.Themajorityoftheirregularexpenditurewasasaresultofadditionalexpenditureinrespectofcontractsthatwereidentifiedasirregularinpreviousyears.

Asset management

32. TheAgencydisposedofanimmovablepropertyofavalueexceedingR2millionwithoutobtainingtheprescribedapprovalsfromtheexecutiveauthorityasrequiredbysection26(t)oftheSouthAfricanNationalRoadsAgencyLimitedandNationalRoadsAct,1998(ActNo.7of1998).

Other information

33. TheSouthAfricanNationalRoadsAgency(SOC)Limited’saccountingauthorityisresponsiblefortheotherinformation.Theotherinformationcomprisestheinformationincludedintheannualreportwhichincludesthedirector’sreport,theauditcommittee’sreportandthecompanysecretary’scertificateasrequiredbytheCompaniesAct.Theotherinformationdoesnotincludethefinancialstatements,theauditor’sreportthereonandthoseselectedobjectivespresentedintheannualperformancereportthathavebeenspecificallyreportedonintheauditor’sreport.

34. MyopiniononthefinancialstatementsandfindingsonthereportedperformanceinformationandcompliancewithlegislationdonotcovertheotherinformationandIdonotexpressanauditopinionoranyformofassuranceconclusionthereon.

35. Inconnectionwithmyaudit,myresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththefinancialstatementsandtheselectedobjectivespresentedintheannualperformancereport,ormyknowledgeobtainedintheaudit,orotherwiseappearstobemateriallymisstated.If,basedontheworkIhaveperformedontheotherinformationobtainedpriortothedateofthisauditor’sreport,Iconcludethatthereisamaterialmisstatementofthisotherinformation,Iamrequiredtoreportthatfact.Ihavenothingtoreportinthisregard.

Internal control deficiencies

36. Iconsideredinternalcontrolrelevanttomyauditofthefinancialstatements,reportedperformanceinformationandcompliancewithapplicablelegislation;however,myobjectivewasnottoexpressanyformofassurancethereon.Thematterreportedbelowislimitedtothesignificantinternalcontroldeficiencythatresultedinthefindingsoncompliancewithlegislationincludedinthisreport.

Leadership

37. Therehasbeenaslowresponsebyseniormanagementinaddressingthesignificantdeficienciesnotedoveritsoversightregardingthefinancialreportingprocessincludingdetailedreviewsofthefinancialreportsbydelegatedofficials,complianceandrelatedinternalcontrols.Althoughanactionplantoaddressauditfindingswascompiledbymanagement,theplanwasineffectiveintimeouslyaddressingthereportedcontroldeficienciesasanappropriatelevelofmanagementdidnotmonitorthestatusofaddressingthefindingsanddidnotensurethatthelackofprogresswasescalatedforfurtherintervention.

Other reports

38. Idrawattentiontothefollowingengagementsconductedbyvariouspartiesthathad,orcouldhave,animpactonthemattersreportedinthenationalpublicentity’sfinancialstatements,reportedperformanceinformation,compliancewithapplicablelegislationandotherrelatedmatters.Thesereportsdidnotformpartofmyopiniononthefinancialstatementsormyfindingsonthereportedperformanceinformationorcompliancewithlegislation.

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Investigations

39. AninvestigationonallegationsofmaladministrationandirregularprocurementprocessesrelatingtotheGautenge-tollcontractsisbeingconductedbythePublicProtector,intermsofsection182oftheConstitutionoftheRepublicofSouthAfrica,1996(ActNo.108of1996).Thisinvestigationhasbeenongoingsince2012.

40. TheDirectorateforPriorityCrimeInvestigationiscurrentlyinvestigatingoffencesperpetratedonSANRALbyvariousconstructioncompanies.Thisinvestigationhasbeenongoingsince2013.

Audit-related services

41. AsrequestedbySANRAL,limitedassuranceengagementswereconductedduringtheyearunderreviewonthecompliancereviewrelatingtotheProposedIssuesbytheSouthAfricanNationalRoadsAgencyLimited(SANRAL)(the“issuer”)ofGuaranteedNotes(the“Notes”)underitsamendedZAR31910000000DomesticMediumTermNoteProgramme(the“programme”),dated14April2014(“ProgrammeMemorandum”),withtherelevantprovisionsofthecommercialpaperregulations(governmentnotice2172publishedingovernmentgazetteNo.16167of14December1994)issuedbytheregistrarofbanks(the“notice”),asrequiredbyparagraph3(5)(j)ofthenotice.Thesereportscoveredtheperiod1April2016to31March2017andwereissuedasandwhenrequestedbytheaccountingauthority.

Pretoria20October2017


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1. AspartofanauditinaccordancewiththeISAs,Iexerciseprofessionaljudgementandmaintainprofessionalscepticismthroughoutmyauditofthefinancialstatements,andtheproceduresperformedonreportedperformanceinformationforselectedobjectivesandonthenationalpublicentity’scompliancewithrespecttotheselectedsubjectmatters.

Financial statements

2. Inadditiontomyresponsibilityfortheauditofthefinancialstatementsasdescribedintheauditor’sreport,Ialso:

• identifyandassesstherisksofmaterialmisstatementofthefinancialstatementswhetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisformyopinion.Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

• obtainanunderstandingofinternalcontrolrelevanttotheauditinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessofthenationalpublicentity’sinternalcontrol.

• evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebytheboardofdirectors,whichconstitutestheaccountingauthority.

• concludeontheappropriatenessoftheboardofdirectors,whichconstitutestheaccountingauthority’suseofthegoingconcernbasisofaccountinginthepreparationofthefinancialstatements.Ialsoconclude,basedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtontheSouthAfricanNationalRoadsAgency(SOC)Ltd’sabilitytocontinueasagoingconcern.IfIconcludethatamaterialuncertaintyexists,Iamrequiredtodrawattentioninmyauditor’sreporttotherelateddisclosuresinthefinancialstatementsaboutthematerialuncertaintyor,ifsuchdisclosuresareinadequate,tomodifytheopiniononthefinancialstatements.Myconclusionsarebasedontheinformationavailabletomeatthedateoftheauditor’sreport.However,futureeventsorconditionsmaycauseanationalpublicentitytoceasetocontinueasagoingconcern.

• evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthedisclosures,andwhetherthefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

Communication with those charged with governance

3. Icommunicatewiththeaccountingauthorityregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatIidentifyduringmyaudit.

4. IalsoconfirmtotheaccountingauthoritythatIhavecompliedwithrelevantethicalrequirementsregardingindependence,andcommunicateallrelationshipsandothermattersthatmayreasonablybethoughttohaveabearingonmyindependenceandhereapplicable,relatedsafeguards.

Annexure – Auditor-general’s responsibility for the audit

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2. DIRECTOR’S REPORT31 March 2017

IntroductionThedirectorspresenttheirannualreportaspartoftheauditedannualfinancialstatementsofSANRALfortheyearended31March2017.

SANRALisincorporatedasastate-ownedcompanyinSouthAfricaintermsoftheCompaniesAct(No.71of2008),andislistedasanationalpublicentityinschedule3AofthePublicFinanceManagementAct(No.1of1999)(PFMA),asamended.

TheBoardofDirectorsactsastheaccountingauthorityintermsofthePFMA,section49(2)(a).

Principal activities TheprincipalactivitiesofSANRALarethefinancing,management,control,planning,development,maintenanceandrehabilitationofSouthAfrica’sproclaimednationalroadnetwork,asprescribedbytheSouthAfricanNationalRoadsAgencyLimitedandNationalRoadsAct(No.7of1998).

Thedeclarednationalroadnetworkon31March2017was22197km.Non-tollroadscomprise87percentofthetotalandtollroadsconstitute13percent.Duringthereportingyear707kmofnon-tollroadswereincorporatedintothenationalnetworkfromtheEasternCapeandNorthernCape.Thenon-tollroadsarefullyfundedfromthefiscusthroughanannualgrant.

Althoughnationalroadsaccountfor3.6percentoftheproclaimedroadnetworkinSouthAfrica,theycarryabout 35percentofallvehiclekilometrestravelledandmorethan70percentoflong-distanceroadfreight.Traveldensitymeasuredinvehiclekilometresiscurrentlyincreasingby3.2percentperyear,drivenprimarilybyanincreaseintraffic onnationalroads.

During2016/17,R4073.4million(2016:R3043.3million)wasspentdirectlyontollroads.ThiscomprisedR2016.7millionforcapitalprojectsandR2056.7millionformaintenance.Duringthesameperiod,R12368.9million(2016:R10587.8million)wasspentdirectlyonnon-tollroads,withcapitalworksabsorbingR6276.4millionandmaintenanceR6092.5million.

WorkontheR573MolotoRoadcontinued.ThisprojectisintendedtoimproveroadsafetyandisaSIP1project, oneof20infrastructureprojectsprioritisedforacceleratedimplementationandreportedatCabinetlevel.TheroadwastransferredtoSANRALin2015/16.PhaseIofthemulti-yearproject,whichinvolvescapitalexpenditureworksfortheLimpopoandMpumalangasections,commencedinJanuary2017withsiteestablishment.

SANRALandtheMinisterofTransportconductedseveralstakeholderengagementsessionsinordertofacilitatesmoothimplementationoftheMolotoRoadprojectandthecreationofworkopportunitiesforlocalcommunities.Theplanninganddesignoflatterphasesoftheprojectareatanadvancedstage.SANRALisnotonlydirectlyresponsiblefortheMpumalangaandLimpopoportionsoftheroutebutisalsoassistingtheGautengProvincialGovernmenttoimproveitssectionofthisroad.

ThetenderfortwolargebridgesovertheMtentuandMsikabariversontheN2WildCoastwasissuedandclosedinJanuary2017.Constructionofthehaulroads,whichallowplantandmaterialtobemovedtothesegreenfieldsites,commencedearlierinthefinancialyear.Severalcommunitydevelopmentprojectshavealsobeenlaunchedinthearea.

ThetolldeclarationoftheN1/N2WinelandsroutewasreviewedandsetasidebytheSupremeCourtofAppeal(SCA).SANRALhasembarkedonaconsultationprocesswiththeCityofCapeTownandtheWesternCapeProvincialGovernmentonhowtoaddresscongestionintheCity,andhowtofundsuchinterventions.

AnumberofstrategieshavebeenlaunchedaimedatimprovingcollectionsfromtheGautengFreewayImprovementProject(GFIP).OnesuchinitiativewastheLess60discountcampaignannouncedbytheDeputyPresidentaspartoftheNewDispensationfore-tolls.Thecampaignallowedroadusers,withoverduedebton31August2015,toreceivea60percentdiscountontheirdebt,ifafullpaymentorpaymentarrangementwasmadewithinsixmonthsfollowingtheendofthediscountoffer.Thisdiscountofferendedon12May2016,aftera10-dayextensionwasgrantedbytheMinisterofTransport.Anumberofcivilsummonseswereissuedtonon-payersandtwosummaryjudgementswereissuedbytheCourts.During2017,SANRALwillcontinuepursuinglegalremediesagainstcustomersthatareinarrears.SANRALalsohastheoptionintermsoftheSANRALActtoinstitutecriminalprosecution.

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Moody’saffirmedSANRAL’snationalscaleratingasA3.za(P-2.za)withanegativeoutlookinNovember2016.However,togetherwithotherstate-ownedcompanies(SOCs),SANRAL’sratingwasplacedonreviewinMarch2017asaconsequenceofMoody’sputtingthesovereignratingonreview.SANRALhadsuccessfulauctionsinJune,JulyandSeptember2016,raisingR2588million,ofwhichR1988millionisshort-termdebt.SANRALalsosecuredR2006millionthroughprivateplacements.

InOctober2016,thePresidentialInfrastructureCo-ordinatingCommittee(PICC),representingnationalGovernment,settledoutofcourtwithconstructioncompaniesthathadbeenpenalisedforcollusivepracticesbytheCompetitionCommission.Theagreemententailsthecompaniessettingupafund,administeredbyNationalTreasury,whichwillbeusedforsocialandeconomicinvestmentprojectsovera12-yearperiod.Itwasalsoagreedthatnationaldepartmentsandpublicentities,includingSANRAL,wouldrefrainfromtakingcivilactionagainstthecompanies.

Human capital investment SANRALiscommittedtoskillsdevelopment,particularlyinthecontextofhumandevelopmentandsupportingcommunitydevelopmentprojects.Communitiesinareasclosetomajorroadprojectsbenefitfromincreasedinvestmentfrominfrastructuralimprovementsandfromtraining.

SANRALsupportsinitiativesattheUniversityoftheFreeState,NelsonMandelaUniversity,UniversityofCapeTownandStellenboschUniversitytomeetnationalskillspriorities.Somepartnershipswithuniversitiesincludeeducationalsupportprogrammessuchasprofessionalteacherandlearnerdevelopment,andtrainingofparentsbyprovidingeducationalmaterialtoassistchildrenathome,inruralanddisadvantagedcommunities.Otherpartnershipsaredirectedatspecialisedprofessionaleducationandresearchinthefieldsofengineeringandtransportation.

SANRAL’sscholarshipprogrammeisintendedtoprovidesupportforsecondaryschoollearnerswhoshowpromiseinmathematicsandscience,andtoencouragethemtoconsidercareersinvolvingthesesubjects.

Bursariesarealsoofferedfortertiarystudieswiththeaimofdevelopingapipelineofskillsinthefieldsofengineering,thebuiltenvironmentandtransportation.SANRALfacilitatesscoresofinternshipsannuallytoenableyounggraduatestoaccesstheworkexperiencerequiredtocompletetheirqualifications,therebydevelopingapipelineofskillsforthebuiltenvironment.

InDecember2016SANRALembarkedontheprocessofdraftingitsnewcorporatestrategy,Horizon2030.Thishasentailedamulti-phasedanditerativeprocesstodevelopastrategythatsetsoutthecompany’svision,utilisesinternationalbenchmarkingtodefineitsstrategicobjectives,identifieskeybusinesspillars,enablersandkeyfocusareas,aswellastheidentificationofstrategicandtacticalinterventionsandmechanismsformonitoringandimplementation.Thestrategyhadreachedanadvancedstagebytheendofthereportingyear.

TransformationisoneofthecriticalenablerscontainedinHorizon2030andthestrategyarticulatesaframeworkfortransformation.SANRALseekstomeettheobjectivesoftheNationalDevelopmentPlan(NDP)whilealsoachievingitstransformationobjectives.AtransformationpolicyinformedbytheframeworkinHorizon2030isindevelopmentandwillbeconsultedextensivelybeforeitissubmittedtotheBoardforapproval.

Horizon2030callsforSANRALtointensifyitscommunitydevelopmentprogrammeinordertoincreasetheagency’srelevanceinthelivesofSouthAfricans.Anewfocusandphilosophyareenvisagedandthestrategywillcontaininitiativestoexpandskillsdevelopment,growSMMEsandcreateeconomicopportunitiesforcommunities,anddiversifytrainingopportunitiestoensuresustainablecommunities.Thestrategymustbewell-informed,applyinnovationandensurecapitalinallitsformsremaininthecommunities.

Organisational structure SANRALismanagedinthreeclusters:finance,engineeringandcorporateserviceswhichwereheadedbyMsI.Mulder, MrK.SmitandMsH.Harperrespectivelyintheyearunderreview.

SANRALisfurtherdividedintofourregionalofficesandacorporateoffice.TheregionalmanagersareMrI.Essa(NorthernRegion–Pretoria),MrK.vanderWalt(WesternRegion–CapeTown),MrM.Peterson(SouthernRegion–PortElizabeth)andMsL.Sewnarain(EasternRegion–Pietermaritzburg).

Financial resultsIntermsoflegislation,fundingfortollroadsandnon-tollroadsrespectivelyarering-fenced.SANRALseparatesthebusinessactivitiesandaccountingrecordsintotolloperationsandnon-tolloperations.Non-tollroadsarefinancedthroughparliamentaryappropriationsunderthevoteoftheNationalDepartmentofTransport.

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Fortollroads,thedebtusedtofinancetheinitialconstructionoftheroadisamortisedoveraperiodof30yearsusingtheproceedscollectedthroughtolling.

Thefinancialstatementsonpages22to112setoutfullythefinancialposition,resultsofoperations,changesinequityandcashflowsofSANRALforthefinancialyearended31March2017.Thediscussionthatfollowssetsoutsomeofthehighlights.

Review of Profit and LossRevenueo Revenuefromnon-tolloperationswasR8671.2millionfortheyear,whichisa31.8percentincreaseonthe

previousyear.TocomplywithInternationalFinancialReportingStandards(IFRS),theportionofthegrantreceivedfromGovernment,whichisutilisedforcapitalprojects,isdeferredoverthelifeoftheasset.ThetotalgrantreceivedfromGovernmentisR13490.5million.OfthisR5693millioniscapitalisedanddeferredfortheyearasitwasspentoncapitalprojects.Theportionofpreviouslydeferredgrants,whichwererealisedinthecurrentyear,amountedtoR1544.7million.

IncludedinotherincomearecontributionsfromotherspheresofgovernmentandtheprivatesectoramountingtoR334.5million.Theserelatetoprojectswhereacost-sharingmechanismisusedeithertofundadditionalworkrequestedbytheprivatesector,suchasdevelopers,onaSANRALasset,ortoextendaSANRALprojecttoincludeworkonadjacentroadsforwhichotherspheresofgovernmentareresponsible.Thefullprojectexpenditureisincludedinthetotalexpenditurereportedinthefinancialresults.

o ThetollrevenuefromoperationswasR5283.4millionfortheyear,whichisa7.9percentincreaseonthepreviousyear.TheGFIPcontributed4.3percenttothisincreaseinrevenue.GFIPtariffswerenotadjustedforinflationin2016,sothisincreaseismainlyasaresultofanincreaseinthevolumeoftraffic.Thediscountprovidedtoroaduserswasnotrecognisedasrevenueduetothelowprobabilitythatthediscountwouldnotbegranted.Revenueisthereforenetofdiscounts.AnamountofR372.9million,netofVAT,wasreceivedfromthefiscusasagranttorecoverthelossinrevenueasaresultoftheimplementationofthenewdispensationforGFIPthatwasannouncedbytheDeputyPresidentinMay2015.

Forthe2016/17financialyear,theoveralltrafficgrowthattheconventionalSANRALtollplazas,excludingtheGFIP,was2.5percent,withrevenue(actualgrossincome)growingby6.9percent.Therevenuegrowthof6.9percentwasattributabletoanannualtariffadjustment(6.04percent)andtrafficgrowth.TheN1GreatNorthtollroutecontributed25.7percentofrevenuecollected,whiletheN1South,N17andN2Northtollroutesaccountedfor73percentoftherevenuecollectedontollroutes.TheN2NorthCoasttollrouterecordedthehighesttrafficgrowth,at4.2percent.Lightvehicletrafficgrewby2.1percentandcomprised87percentofalltraffic,whileheavyvehicletrafficincreasedby4.7percent.

o Onconventional“boomdown”SANRAL-fundedtollroads,thecomprehensivetollroadoperationsandmaintenance(CTROM)contractmodelconsolidatesresponsibilityforoperationalactivitiesandrisks.Underthisarrangement,themaincontractorisresponsibleforthetotaloperationofthespecifictollroute,togetherwithassumingtheassociatedrisks.Theoperatorpaystheactualgrossincome(tariffxvehicle)toSANRALandthenclaimsdiscounts,concessionsandviolationsasacost,basedonanagreedcostmatrix.Inessencetheoperatorassumestheriskofcollection.

o FortheGFIPtollroute,aserviceproviderwasappointedtomanagetheoperationsandcollection.TheoperatorispaidforservicesrenderedtooperatethetollingsystemandcollectthetollonbehalfofSANRAL.Theriskofnon-paymentremainswithSANRAL.Theagreementwiththeoperatorincludesperformanceclauses,aswellasaperformanceguaranteeinfavourofSANRAL.

Finance charges Netfinancecharges(financecostslessinvestmentincome)in2017wereR523.8millionmorethanthepreviousyear.

Duetothehighcashholding,theinterestonbankdepositsincreasedbyR149.8million.

InterestexpenseonliabilitiesincreasedbyR504.4million(12.2percent),asaresultofincreasedborrowingtoensuresufficientliquiditytofundoperations,servicedebtandprovidealiquiditybuffer.Furtherdetailsoffinancecostsareincludedinnote27tothefinancialstatements.

Profit before taxationo ThelossafterdeductingfinancecostsamountedtoR4962.2million(2016:R1203.4million).

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o Thenon-tolloperatinglossafterfinancecharges,fortheyearended31March2017wasR380million(2016:lossofR61.1million).Althoughincome,mainlycomprisingthegrantreceivedfromGovernment,increasedby30percent,expenditureincreasedmorerapidly(45.5percent).TheincreaseinoperationalexpenditurewasmainlyattributabletohigherlevelsofspendingontherepairandmaintenanceofroadswhichamountedtoR6395.9million.Thiswasanincreaseof48.6percent,andthespendingcoveredroutine,adhoc,specialandperiodicmaintenanceofroads.Simultaneously,thecontinuedcapitalexpenditure,involvingrehabilitationandstrengtheningprojects,resultedinanincreaseindepreciationofR218.8million.Theincreaseof11percentinthegrantreceivedfromGovernmentwasappliedtomaintenanceactionswhiletheremainderwasallocatedtocapitalprojects.

o Thetolloperatinglossafterfinancechargesfortheyearended31March2017wasR4582.2million.Therewasa12.4percentincreaseinincomefortolloperations,includinggrantsandotherincome.RepairsandmaintenanceincreasedbyR84million(4.1percent).Normaldepreciation(includingconcessionassets)increasedby R12.8million(0.89percent),duetotheincreasedspendingoncompletedcapitalworksinthetollportfolio.FinancecostsincreasedbyR923.4million(25.3percent)asaresultoftheincreasedborrowing.

TaxationSANRALwasexemptedfromincometaxintheGovernmentGazetteof22December2003(RevenueLawsAmendmentAct,2003section1(l)and2(d)).Thisexemptionwasbackdatedtotheinceptionoftheentity,andthereforenoprovisionismadeforincometaxordeferredtax.

DividendsNodividendshavebeendeclaredbySANRAL.

Review of financial positionShare capitalTheshareholdingforthecurrentyearhasremainedunchanged.TheGovernment,representedbytheMinisterofTransport,holdsallsharesissuedbySANRAL.

LandSANRAL’spropertymanagementisundertakenbyaserviceproviderthathastheskillsandresourcesrequiredtomanageandmaintainourlargelandportfolioconsistingofroadreserveandadjacentseveredproperties.Theserviceproviderisasingleentitythatdeliversallaspectsoflandsurveying,propertyvaluation,maintenanceandmanagementservices.TheserviceproviderismanagedbyateamofSANRALstafflocatedinourregional-andheadoffices.

Thecontractualtargetsincludearequirementthat50percentofallworkbesub-contracted.ThisprovidesopportunitiesforsmallandpreviouslydisadvantagedfirmstoobtainpropertyworkfromSANRAL.Thecontractorhascompliedwithcontractualrequirementsrelatedtotheprovisionoftraining,promotionofeconomicdevelopment,addressingskillsshortagesandmakingworkavailabletotargetedgroups.

InlinewiththeSANRALAct,SANRALensuresthatalllandacquiredbyitoritspredecessors,whetherinsideoroutsideoftheroadreserve,isidentifiedandtransferredintoSANRAL’sname.AlllandacquiredbySANRALsinceitsinceptionhasbeensotransferred.ThelandidentificationprocessandthetransferoflandtoSANRALwillcontinuewherefurtherroadsareaddedtothenetwork.

Landoutsideofroadreservesiscategorisedasinvestmentpropertyor“other”landifithasnoinvestmentvalueduetoitssmallsizeand/ornominalvalue.Theroadreserveconsistsof31186properties,whileinvestmentpropertiestotal 2495. Property, plant and equipmentRoadassetsarevaluedonadepreciatedreplacementcostbasis.Thevaluationoftheroadnetworkandstructureswasreviewedatyear-endandincreasedbyR20851million(7percent).LandcontributedR1459millionofthisvalue.

Theincrease,excludingland,wasaresultof:a) NewlyincorporatedroadswhichcontributedR3700million.b) Unitratesincreasingby9.97percent,mainlyduetobitumenpricesincreasingfromR3600/m3toR5300/m3.c) Significantcapitalinvestment,whichensuredthattheconditionoftheassetsincreasedby13.2percent.

Thevalueoflandincreaseddueto:a) Anaverageincreaseof11.1percentinthevalueofproperty,contributingR1384milliontotheSANRALlandvalue

adjustment.Thisvalueofpropertyissignificantlyinfluencedbytheeconomicactivityinthesurroundingareawhich,inturn,isrelatedtogoodroadaccess.

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b) Anincreaseof3.71percentinthetotalareaofland.Thisincluded3249haoflandwhichwasincorporatedwhen707kmofadditionalroadswereaddedtothenationalnetwork.

Theremaininglifeoftheseassetsisconsideredwhendeterminingtheirdepreciatedreplacementcost,takingtheconditionofthepavementintoaccount.Inthefinancialyeartheaverageconditionofnationalroadsimprovedduetothecapitalstrengtheningprojectscompleted,aswellaslowerrainfall.Furtherinformationisavailableinnotes4and5ofthefinancialstatements.

SANRALcurrentlyappliesthebenchmarktreatmentofInternationalAccountingStandard(IAS)16on“property,plantandequipment”,whichallowsforthevaluationofassetsatfairvalue.SANRALhasadoptedthisprincipleasopposedtodepreciatedcost.Fairvalueinthisinstancerepresentsthedepreciatedreplacementcost,duetothespecialnatureoftheseassets.Thismethodologytakestheunitcostforroadbed,layersandstructuresintoaccount,aswellastheconditionorremaininglifeoftheroadasset.

IntermsofIAS36,assetsmustbeassessedannuallyandimpairmentsrecordediftheirincomegeneratingpotentialisestimatedtobelessthanthecarryingvalue.Non-tollassetshavebeenidentifiedasanon-cashgeneratingunit.IFRSdonotprescribetheimpairmentofnon-cashgeneratingunitsandallowotherstandardstoapplyinsuchinstances.SANRALhaselectedtoapplytheInternationalPublicSectorAccountingStandard21todeterminethecarryingamountofanon-cashgeneratingunit. InvestmentsNosignificantacquisitionsordisposalsoccurredintheperiodunderreview.

Financialinstruments,inthemarket-makingportfolio,areusedtomanagetherisksthatSANRALisexposedtointhecapitalmarkets.

Cash and Cash equivalentsAt31March2017,cashandcashequivalentsheldwereR6570million(2016:R9490.1million).Inthenormalcourseofbusiness,SANRALlimitsliquidityriskbymaintainingahealthyliquiditybufferequivalenttothreetimestheagency’sestimatedmonthlyexpenditure.Theweightedaverageinvestmentrateforthecurrentfinancialyearwas7.81percent(2016:6.78percent).

Going concernThegoingconcernbasishasbeenadoptedinpreparingthefinancialstatements.

IAS1,paragraph25,requiresanentitytoassessitsabilitytocontinueasagoingconcernwhenpreparingfinancialstatements.Itfurtherindicatesthatitisarequirementtopreparefinancialstatementsasagoingconcern,unlessthemanagementintendstoliquidatetheentityortoceasetrading,orhasnorealisticalternativebuttodoso.

SANRAL’sassessmentofthisprincipleconsideredthefollowing:

AssetsAsastand-alonecompany,SANRAL’ssignificantassetbaseofR358200millionandnetassetvalueofR249200millionareregardedasveryhealthy.Asaproviderofnationalroads,theassetbasewouldneverbeconsideredforliquidationorsold.TheprobabilitythatGovernmentwouldconsiderthescrappingorsellingofnationalroadsisremoteastheyconstituteanationalassetwhichhelpsdrivetheeconomyofthecountry.

LiquiditySANRALreceivesanannualgrantfromthefiscustofundthenon-tollportfolio.IntheyearunderreviewthisamountedtoR13490.5million.SinceSANRAL’sinceptiontheannualincreaseinthisgranthasexceededinflation.Thisamountcoversoperationalandcapitalexpenditureonnon-tollroadswhichcomprise87percentofSANRAL’sportfolio.BudgetVote35,indicatedthatthisgrantwouldincreasetoR18064.3millionin2019/20.

RevenuefromconventionaltollroutesaddedR3048milliontocashreceiptsintheyearunderreviewandisexpectedtoincreaseannuallywithtrafficgrowthandtariffadjustments.

DuringthesameperiodGFIPcollectedR1862millionandreceivedtheadditionalgrantfromthefiscusofR372.9million.DuetothelowcollectionrateontheGFIP,thecashreceiptprojectionsareassumedtobethesameasthepast 8to10monthsinordertohaveaconservativeforecast.TheBoardhasrequestedtheShareholdertoaddresstheimpactofthepoorcollectionratewithCabinettoensurethesustainabilityofSANRAL.

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Inreviewingthecashrequirementsforthenext12monthstoSeptember2018,SANRALrequiresaminimumof R2561million.IftheredemptionoftheNRA018,whichmaturesinNovember2018,isadded,thisamountincreasestoR5531million.

During2016,SANRALhadsuccessfulauctionsandprivateplacementswhichraisedR4600million,andtheagencysuccessfullyrefinancedmorethanR3000millionofmaturingdebt.

SANRAL’sfundingstrategyfor2017/18includesauctionsandprivateplacements,aswellasextendingtheuseof R1000millionoffacilities.Inthecurrentmarketconditions,wherelocalinvestorsentimentisnegativetowardslong-terminvestments,short-termfloatingratenotesarereadilyaccessibleandSANRALwillcertainlycontinuetotapthismarkettosupplementotherfundingstrategies.

Marketconditionsdeterioratedearlierin2017duetopoliticaluncertainty,creditratingdowngradesandtheFuturegrowthmoratoriumfrom2016.DuringlateJuneandJuly2017,informaldiscussionswithbrokers,banksandinvestorsindicatedanappetiteforthree-toseven-yearpaperfromSANRAL.Corporateissuershavehadhugesuccessinissuingshorterdatedbonds.InJuly2017,FuturegrowthlifteditsmoratoriumontradinginSANRALdebt.ItshouldalsobenotedthatSANRAL’slocalscaleratingwasaffirmed-thesameasin2015to2016whenwewerefairlysuccessfulinplacingpaper.

Furthermore,variousguaranteesfromGovernmenttotalR37910million,beingtheR31910millionandR6000millionguarantees,ofwhichR28900millionhasbeenutilisedat31August2017.ThecurrentfundingrequirementsprojectthatthislimitwillonlybebreachedinFebruary2019.ApartfromtheconservativeapproachtoGFIPreceipts,theprojectionsassumenonewtollroadsandhaslimitedcapitalexpenditureonroads,wherepossibleandwithoutcompromisingtheasset.TherequesttoincreasethetotalguaranteetoR43000millionandtheborrowinglimitto R54000million(fromR47910million),wassubmittedinlate2016.R39460millionoftheborrowinglimitwasusedby31August2017.GovernmenthasalsocommittedtoprovidinganadditionalgrantofR372.9millionperannum,adjustedforinflation,tosupplementGFIPrevenues.ThisclearlyreflectsGovernment’scontinuedsupportforSANRAL.

SANRALalsohastheoptionofissuingnon-guaranteeddebtundertheR15000millionnon-guaranteedDMTNprogramme;R4100million,at31August2017,beingavailabletoissuenewbondsortapexistingbonds.However,ifalloftheabovefails,Governmentmaystepintoservicethedebt,intermsoftheR31910millionguaranteeagreement(clause6.2).

Additional considerationsSANRALmaynotbeplacedunderjudicialmanagementorinliquidationexceptbyanactofParliament(Section10oftheSANRALAct).ThisisanimpliedguaranteefromGovernment.

TheBoardofDirectorsthereforesupportsmanagement’sassessmentthatSANRALwillremainagoingconcernintheforeseeablefuture.

AuditorsTheAuditor-General(AGSA)istheexternalauditorofSANRAL,asprescribedinsection36(3)(a)oftheSANRALAct.

Materiality framework Amaterialityframeworkhasbeendevelopedforreportinglossesthroughcriminalconduct,irregular,fruitlessandwastefulexpenditureorsignificanttransactionsthatrequireministerialapproval,asenvisagedinsection54(2)ofthePFMA.TheframeworkwasfinalisedbySANRALafterconsultationwithexternalandinternalauditors,andformallyapprovedbytheBoardon25May2004.TheframeworkwasupdatedinJanuary2017toincorporatethelatestapprovedbudget,resultinginamaterialityvalueofR58million.

Contingent liabilitiesAmongstthemostsignificantcontingentliabilitiesarepossiblelegalclaims,mainlyresultingfromroad-relatedincidents.TheseareestimatedatR275.7million(2016:R245.06million)buttheoutflowofcashisremoteasduringthepastseveralyearsSANRALhaswonthemajorityofrelevantcourtcases.CasesthatwerenotwonbySANRALwerecoveredbyinsurance.

ThepotentialliabilityarisingfromthelevyingofmunicipalratesonSANRAL’slandsisestimatedatR47.8million (2016:R57.2million).Theserateshavenotyetbeenintroduced.

Inaddition,potentialclaimsmayariseduetofailuretotakestepstoprotectthepavementandincreasetollsasstipulatedinthecontractwiththeconcessionaireontheMaputodevelopmentcorridor.Thevalueofsuchclaimscouldnotbeestimated.

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Credit ratingSANRAL’sdebtmainlycomprisesbondsthatarelistedandtradedontheJohannesburgStockExchange(JSE),althoughthereareafewunlistedinstruments.TheborrowinglimitapprovedbyGovernmentisapproximatelyR47910million(dependingonCPIassumptions).UptoR37910millionofthisamountcanbeguaranteed.

Tofacilitateinvestmentinitsthedebtrelatedtoitstollportfolio,SANRALhasbeenratedbytheinternationalcreditratingagency,Moody’s,sinceMarch2007.ThecreditratingenablesSANRALtoraisenon-guaranteedandguaranteeddebtcompetitively.

Therating,asat31March2017,isasfollows:

NationalScaleIssuerRatings:Long-Term:Aa3.zaShort-Term:P-1.za

GlobalScaleIssuerRatings:Long-Term:Baa3Short-Term:P-3

SinceMarch2015,theoutlookhasbeennegative.

On4April2017Moody’splacedSANRALonreviewfordowngrade,pendingthesovereignratingoutcome.

Public-private partnerships Inadditiontoitsparliamentaryappropriation,SANRALhasimplementedpublic-privatepartnerships(PPPs)asanalternativemeansoffinancingandoperatingthenationalroadnetwork,withthecostsrecoveredthroughusercharges.PPPsallowSANRALtoleveragefundingavailablefromtheprivatesectortomeetidentifiedinfrastructureandservicedeliveryneedsinamannerthatiscost-effectiveandappropriatetoeachproject.Furthermore,theyensurethatfinancingissetasidefortheimprovementandpreservationofthecountry’sroadassetsforperiodswellbeyondGovernment’sthree-yearexpenditurehorizon.AnnuallythebenefitisreflectedintheincreasedvaluesunderProperty,PlantandEquipment(PPE)underconcessionastheconcessionairesupgradetheroadswhichbelongtoSANRAL.

TheagreementwithTransAfricanConcessions(Pty)Ltd(TRAC)becameeffectiveon6February1998andterminateson5February2028.ThisincludestheextensionoftheN4asagreedduringthe2005financialyear.

TheagreementwithN3TollConcessions(RF)ProprietaryLimited(N3TC)becameeffectiveon2November1999andterminateson1November2029.

TheagreementwiththeN1-N4BakwenaPlatinumCorridorConcessionaire(Pty)Ltd(Bakwena)becameeffectiveon27August2001andterminateson26August2031. SANRALhasconsideredtheimplicationsofInternationalFinancialReportingInterpretationCode12andtheAccountingStandardsBoard’sguidelineintermsofaccountingforassetsunderconcessions,andhasdecidedtoaccountfortheseassetsbyrecordingtheseasproperty,plantandequipment.Intheabsenceofclearaccountingguidancefromtheseguidelines,SANRALhassetoutitsinterpretationinnote4. Subsequent events Followingthesovereigndowngrade,Moody’sRatingsAgencydowngradedSANRAL’sglobalscaleratingon12June2017toBa1fromBaa3,long-term,andNPfromP-3forshort-term.ThenationalscaleratingwasaffirmedatAa3,whichispositivebecauseSANRALhasonlyissuedinthedomesticmarkettodate.Theratingsagency’sviewofthesovereigncreditriskhadasignificantimpactonthismovetodowngrademostSOCs.Inaddition,Moody’scitedSANRAL’sabilitytoenforcee-tollpaymentsislargelydependentonthecontinuedsupportofGovernment.Thistogetherwithhighdebtlevelsandaweakliquiditypositionstemmingfromcontinuedoppositiontotheopenroadtollproject-theGFIP-arereasonsfortheratingsreview.

SANRALissuedanannouncementtoitsinvestorsinJune2017,whichconfirmsthatitiscurrentlyintheprocessofworkingwithGovernment(DepartmentofTransportandNationalTreasury)withregardstoincreasingthemaximumaggregateamountguaranteedinordertoprovidegreaterheadroomforsubsequentplacementsundertheguaranteedDMTN

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programmeandtoensurethatallindebtednessunderthisProgrammeremainsguaranteed.Inthesameannouncement,Government(NationalTreasury)indicatedthatitsintentionwasthattheguaranteeutilisationbemeasuredinnominaltermswithregardtotheinflationlinkeddebt,althoughtheguaranteedobligationwouldbetheredemptionvalue.

InSeptember2017,theMinisterofTransportapproved,withconcurrenceoftheMinisterofFinance,anamendedguarantee,clarifyingthatthelimitofR31910millionismeasuredatnominalandconfirmingthatGovernmentisliableforanyandallamountspayablefordebtinstrumentsissuedunderthisguarantee,ifSANRALfailstomeettheseobligations.

Inordertoaddresstheuncertaintycreatedbycivilsocietygroupsandpoliticalparties,withregardtoSANRAL’sauthoritytolevyandcollectGFIPtolls,SANRALconsideredagreeingtoatestcasewithoneofthesegroups,theOrganisationUndoingTaxAbuse(Outa).Thiswouldhaveentailedbringingasinglenon-payertocourttoarguethelegalmeritsofoppositiontoSANRAL’sauthoritytolevyandcollectthetoll.However,OutarepeatedlydelayedprogressonthecaseandSANRALeventuallyabandonedtheprocessinordertofasttrackthecivilclaimsprocessagainsttheindividualentitiesandpersonsowingthedebt.

Intheearlyhoursof9August2017,aclosedpedestrianbridgecollapsedontheN3highwayinGauteng.SANRALandotherthirdpartieshaveprovidedevidencetotheinvestigators,includingtheinsurer,todeterminethecauseandthedamagetoberecovered.

Directors and secretarySince1March2015,theBoard,asappointedbytheMinister,hascomprisedthefollowingindividuals:

• Executive Director NAlli(ChiefExecutiveOfficer)(retired30September2016) SMacozoma(ChiefExecutiveOfficer)(appointed1December2016)

• Non-executive Directors RMorar(Chairperson) AHalstead(Publicofficial)*(appointed27May2016) CHlabisa(Publicofficial)** ZKganyago ALawless DMashile-Nkosi MMatete MMoore(Publicofficial)*(resigned26May2016).

*MsMooreandMsHalsteadaretheappointedrepresentativesoftheMinisterofFinanceandareemployeesofNationalTreasury.**MrHlabisaistheappointedrepresentativeoftheMinisterofTransportandisanemployeeoftheDepartmentofTransport.

FortheyearunderreviewMsA.MathewheldthepositionofCompanySecretary.

Directors’ interests in contracts

AlldirectorsandofficersofSANRALhaveconfirmedthattheyhadnointerestinanycontractofsignificancewithSANRALwhichcouldhaveresultedinaconflictofinterestduringthecurrentyear.

AddressesSANRAL’sbusiness,postalandregisteredaddressesareasfollows:

Business address Postal address Registered address48TambotieAvenue P.O.Box415 48TambotieAvenueValdeGrace Pretoria ValdeGracePretoria 0001 Pretoria0184 0184

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3. Statement of Responsibility by the Board of Directors

Thedirectorsareresponsibleforthepreparation,integrityandfairpresentationofthefinancialstatementsoftheSouthAfricanNationalRoadsAgencySOCLimited.Thefinancialstatementsonpages(22to117)havebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)andincludeamountsbasedonjudgmentsandestimatesmadebymanagement.ThedirectorsalsopreparedtheotherinformationincludedintheAnnualReportandareresponsibleforbothitsaccuracyanditsconsistencywiththefinancialstatements.

Thegoingconcernbasishasbeenadoptedinpreparingthefinancialstatements.Thedirectorsbelievethat,basedontheprojectedMediumTermExpenditureFramework(MTEF)allocationsandthepolicyofadjustingthetolltariffsinlinewiththeConsumerPriceIndex(CPI),SANRALwillbeagoingconcernintheforeseeablefuture.ThesefinancialstatementssupporttheviabilityofSANRAL.

Thefinancialstatementshavebeenauditedbyindependentauditors,whoweregivenunrestrictedaccesstoallfinancialrecordsandrelateddata,includingminutesofallmeetingsoftheBoardofDirectorsandcommitteesoftheBoard.

Thedirectorsbelievethatallrepresentationsmadetotheindependentauditorsduringtheirauditarevalidandappropriate.

TheauditreportoftheAuditor-Generalispresentedonpages4to11

ThefinancialstatementswereapprovedbytheBoardofDirectorson30May2017andaresignedonitsbehalf.

RoshanMorar

Chairperson

1. Auditors

TheAuditor-GeneralofSouthAfricacontinuedinofficeasauditorforthecompanyfor2017.

TheAuditor-GeneralofSouthAfricacontinuedinofficeasauditorforthecompanyfor2017.AttheAGM,theshareholderwillberequestedtoreappointTheAuditor-GeneralofSouthAfricaastheindependentexternalauditorofthecompanyforthe2017financialyear.

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4. CERTIFICATE OF THE COMPANY SECRETARY

IherebyconfirmintermsofCompaniesAct,(ActNo.71of2008),asamended,thatfortheyearended31March2017,theSouthAfricanNationalRoadsAgencySOCLimitedhaslodgedwiththeCompaniesandIntellectualPropertyCommission,allreturnsasarerequiredintermsofthisAct,andthatallsuchreturnsaretrue,correctanduptodate.

Alice MathewCompanySecretary

31March2017

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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 Financial Position as at 31 March 2017

2017 2016Restated

2015Restated

Note(s) R '000 R '000 R '000

Assets

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

345 874 924 317 115 617 310 510 625

Current AssetsTrade and other receivables 9 5 366 829 7 050 155 4 608 074Investments 8 317 157 636 814 452 605Cash 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

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

249 187 686 231 839 684 231 306 691

Liabilities

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

97 305 498 87 281 723 76 622 579

Current LiabilitiesBorrowings 14 959 226 6 443 730 10 400 637Operating lease liability 15 166 849 418Deferred income 17 4 726 558 3 814 831 2 241 726Provision for overload control 19 339 787 336 205 374 429Deferred exchange consideration 20 563 755 427 577 412 539Third-party funding 22 316 919 331 479 764 751Trade 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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Statement of Profit or Loss and Other Comprehensive Income

2017 2016Restated

Note(s) R '000 R '000

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

Operating (loss) profit (2 273 443) 1 380 926Investment income 26 1 361 793 962 273Fair value adjustments for investment properties and assets held for sale 518 051 98 594Finance 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 766Gains 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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Statement of Changes in Equity

Share capital Sharepremium

Total sharecapital

Revaluationreserve

Accumulatedloss

Total equity

R '000 R '000 R '000 R '000 R '000 R '000

Opening balance as previouslyreported

4 1 091 040 1 091 044 239 012 069 (8 506 465) 231 596 648

AdjustmentsPrior period error (Bank charges,concession assets, capitilisation,depreciation)

- - - 76 788 (366 745) (289 957)

Balance at 01 April 2015 asrestated

4 1 091 040 1 091 044 239 088 857 (8 873 210) 231 306 691

Loss for the year as previouslyreported

- - - - (954 244) (954 244)

Prior period error (Bank charges,Loss on sale of land, revenuerecognition, depreciation)

- - - (1 294) (249 181) (250 475)

Other comprehensive income aspreviously reported

- - - 904 869 766 905 635

GFIP debtor adjustments andothers

- - - - 832 077 832 077

Balance at 01 April 2016Restated

4 1 091 040 1 091 044 239 992 432 (9 243 792) 231 839 684

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

Total comprehensive Loss forthe year

- - - 22 309 993 (4 961 990) 17 348 003

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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Statement of Cash Flows

31 March2017

31 March 2016Restated

Note(s) R '000 R '000

Cash flows from operating activities

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

Cash generated from operations 29 1 798 830 2 587 944Interest income received 902 299 734 414Finance 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 356Third 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 668Cash 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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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 thedirectors on Tuesday, 30 May 2017.

1. Significant accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards, theCompanies Act, No 71 of 2008, the Public Finance Management Act, No 1 of 1999, and the South African National RoadsAgency Limited and National Roads Act, No 7 of 1998. The financial statements have been prepared on the historic costconvention, 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 AfricanRands, 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 willhave adequate resources to continue in operational existence for the foreseeable future. Thus the going concern basis ofaccounting in preparing the annual financial statements continues to be adopted. Further details are contained in theDirectors' 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 GenerallyRecognised 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 iscurrently raised through debt that is publicly traded.

Approval was therefore granted by National Treasury for SANRAL to prepare its annual financial statements in accordancewith 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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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 andassumptions 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 believedto be reasonable under the circumstances. They form the basis of the judgements about carrying values of assets andliabilities 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 arerecognised in the period in which the estimate is revised if the revision only affects that period, or in the period of therevision 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 ofassets 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 ofapplying the accounting policies and that have the most significant effect on the amounts recognised in the annual financialstatements.

Going concern

The assumptions relating to going concern are dependent on the successful issuing of bonds as well as the ability toenforce the collection of toll through legal action. These may include continuation of civil and criminal prosecution as well asthe 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 considerationreceived or receivable, SANRAL has reviewed its historic data in order to determine the probability of receipt of paymentand 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. Inestimating the probability of future economic benefits that will flow to the entity, management bases its estimates on pastexperience. In making this judgement SANRAL makes a distinction between users based on their payment patterns. Therevenue recognised takes cognisance of payment patterns.

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

Discounts

SANRAL measures revenue at the fair value of the consideration received or receivable, net of discounts. The estimateddiscounts 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 theamount of revenue that qualifies for recognition, estimates of discounts to be applied, and estimates relating to subsequentimpairments. These changes in estimates affect current and future periods' revenue and debtors are adjusted prospectivelyin 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 withprecision but can only be estimated. Estimation involves judgements based on the latest available, reliable information.

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Accounting Policies

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 andeconomic 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 weightedaverage cost of capital rate on the decommissioning liability is 9.23%. Additional disclosure of these estimates ofprovisions is included in note 18 and 19.

Impairment of assets

Property, plant and equipment including those under concession and wayleaves are assessed annually for impairmentusing 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 bythe property administrators.

Contingent liabilities

Management applies its judgement to the facts, patterns and advice it receives from its attorneys, advocates and otheradvisors in assessing if an obligation is probable or remote. This judgement is used to determine if the obligation isrecognised 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 paymentsrelating 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 postemployment benefit obligation industry. The critical estimates as used in each benefit plan are detailed in note 16 to thefinancial statements. The actuarial gains and losses on employees' benefits is calculated in terms of three maincomponents namely: the effect of changes to the economic assumptions, number of members, and changes in theexperience 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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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 Nationalroads Act, No 71 of 1998, which provides that the non-payment of toll fees is an offence. To this end toll debt can’t bewritten off, other than by a court of law, and as a criminal offence it does not prescribe. The same Act allows SANRAL topursue both criminal and civil action against a non-payer. Additionally, the PFMA in section 51 (1)(b)(i) prescribes that allrevenue due to the state must be collected.

Trade receivables, specifically toll debtors, were objectively assessed for impairment or collectibility, given the legislativeframework. 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 currentprevailing conditions and historical trends:

As a result of toll debtors being mainly LSM 9 consumers, SANRAL management considered the toll tariffs as affordable forthese users given the percentage of household income and the monthly caps which apply. The refusal to pay was notregarded 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 andthe outcome is unknown. The probability of the full amount being recovered was not certain therefore these amounts wereimpaired.

The reduction in the standard rate in 2015, announced as part of the new dispensation, was considered by management asa loss event for toll debt which preceded the new standard tariff. Based on the current and historical payment patterns theprobability 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 thereforethese 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 thedebt may prescribe after 3 years. Whilst still pursuing with civil and criminal prosecution a conservative approach was takenon 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 basedon quoted market prices at the end of the reporting period. The quoted market price used for financial assets held bySANRAL 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) isdetermined by using valuation techniques. SANRAL uses a variety of methods and makes assumptions that are based onmarket conditions existing at the end of each reporting period. Quoted market prices or dealer quotes for similarinstruments are used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determinefair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value ofthe estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted forwardexchange 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 offinancial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the currentmarket interest rate that is available to SANRAL for similar financial instruments.

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Accounting Policies

1.3 Investment property

Investment property bought during the year is recognised as an asset when, and only when, it is probable that the futureeconomic benefits that are associated with the investment property bought during the year will flow to the enterprise, andthe 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 areincluded 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 carryingvalue at the date of reclassification becomes its cost for subsequent accounting. For more information on valuation ofinvestment property see note 6.

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

When Investment property is derecognised, the carrying value is eliminated from the statement of financial position and thegains 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 whichare 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 toan 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 accumulateddepreciation and any accumulated impairment loss.

For assets that apply the revaluation model, subsequent measurement of the assets whose fair value can be measuredreliably shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequentaccumulated 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 yearsEquipment, vehicles and furniture 3 - 15 yearsRoad network - road beds 50 yearsRoad network - pavement layers 20 yearsRoad structures 50 years

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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 associateddepreciation rate is related to condition indexes calculated from detailed condition assessments. The frequency of thesecondition assessments is related to the deterioration trend of the asset component, and ranges from one to five years.

Land is not depreciated. Leasehold improvements on premises occupied under operating leases are depreciated over theirexpected 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 theexpectations 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-dayservicing 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. Gainsare 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 impairmentlosses.

Subsequent expenditure on capitalised intangible assets is capitalised only when it is probable that additional futureeconomic 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. Awayleave is amortised from the date it is available for use. The amortisation period, the amortisation method and residualvalues (if any) for a wayleave are reviewed at each reporting period. Indefinite wayleaves are not amortised but assessedfor impairment on an annual basis.

Wayleave agreements relate to agreements with landowners. The landowners make the required part of their premisesavailable to SANRAL for an agreed period of time in return for an agreed upon amount. The contract amount is amortisedover 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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Accounting Policies

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 thecomputer software will flow to SANRAL and the cost of such item can be measured reliably. All other expenditure isexpensed when incurred.

Amortisation of computer software is recognised in profit or loss on a straight-line basis over the asset's estimated usefullife. Computer software is amortised from the date it is available for use. The amortisation period and amortisation methodfor 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 (orincluded in disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for saleand 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 asrevenue.

Item Useful lifeComputer software 8 yearsWayleave agreements (definite) Contract periodWayleave 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 initialrecognition. Classification is re-assessed on an annual basis, except for derivatives (held-for-trading financial liabilities) andfinancial instruments designated as at fair value through profit or loss, which are not to be reclassified out of the fair valuethrough profit or loss category.

Initial recognition and measurement

Financial instruments are recognised initially when the company becomes a party to the contractual provisions of theinstruments. Regular way purchases and sales of financial assets are accounted for at trade date, that is the date that thecompany 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 afinancial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to theacquisition 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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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 lossesarising from changes in fair value being included in profit or loss for the period.

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

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

The company has classified the following financial assets as at fair value through profit or loss financial assets, as they areheld-for-trading:

Market-making investments (consists of approved listed non-SANRAL bonds to create a market in order toreduce 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 anactive market.

Such financial assets are subsequently measured at amortised cost using the effective interest method (EIM), lessimpairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or coststhat are an integral part of the EIM. The EIM amortisation is included in investment income in profit or loss. The lossesarising 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 theSouth 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 investmentsthat 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 liabilitiesare 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 theirproportionate 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 approximatestheir carrying value.

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Accounting Policies


Gains and losses

Gains and losses (realised and unrealised) resulting from changes in market yields and realisation on financial instrumentsat fair value through profit or loss are included in profit or loss for the period in which they arise. Unrealised gains/lossesequate 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) arederecognised when the rights to receive cash flows from the investments have expired or have been transferred and thecompany 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-througharrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferredcontrol 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 aremeasured 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 theoriginal carrying amount of the asset and the maximum amount of consideration that the company could be required torepay.

On derecognition, the difference between the carrying amount of the financial asset, proceeds receivable and any prioradjustment to reflect the fair value which has been reported in other comprehensive income and accumulated in equity, areincluded 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, includingrelated 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 determinewhether 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 initialrecognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows ofthe financial asset or the group of financial assets that can be reliably estimated. A financial asset is impaired if its carryingamount 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 itscarrying 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 areassessed 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 allamounts due according to the original terms of receivables. Significant financial difficulties of the debtor and default ordelinquency 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 toan event occurring after the impairment was recognised.

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

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Accounting Policies


Derivatives

Derivative financial instruments are initially recognised at fair value with transaction costs being accounted for in profit orloss on the date on which a derivative contract is entered into. Subsequent to initial recognition, derivatives are measured atfair value and the changes in the fair value of the derivatives are recognised immediately in profit or loss. Derivatives arecarried 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 otherconsideration and a concurrent obligation to reacquire the financial asset at a future date for an amount equal to the cash orother consideration exchanged plus interest, effectively providing the transferee with a lender’s rate of return. Repurchaseagreements are utilised to place or borrow short-term cash with different institutions. The difference between the amountpaid 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 fullytransfers ownership (lending stock, borrowing cash) of the bonds to the counterparty. There are no restrictions on the bondsduring the period of the repo transaction for either party, other than that the second leg of the repo transaction has to behonoured by both parties.

Securities purchased under agreements to resell are recognised under “receivables” as “repurchase agreements”. Theunderlying securities purchased under repurchase agreements are not recognised by the company. Likewise, underlyingsecurities sold under repurchase agreements are not de-recognised by the company. A payable is recognised for therepurchase 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 interestmethod.

Offset

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and onlywhen, the company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the assetand settle the liability simultaneously.

Loans to shareholders, directors, managers and employees

These financial assets are classified as loans and receivables.

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Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost usingthe effective interest rate method. In case of SANRAL trade and other receivables mainly constitute of e-tolls. Appropriateallowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that theasset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financialreorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. Theallowance recognised is measured as the difference between the asset’s carrying amount and the present value ofestimated 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 isrecognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against theallowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited againstoperating expenses in profit or loss.


• 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 effectiveinterest 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 theIncome 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 leaseis 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 valueof minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accountingpolicy 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 leasedasset 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 differencebetween 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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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 carryingamount will be recovered principally through a sale transaction and not through continuing use. The condition is regardedas met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its presentcondition. These assets may be a component of the company, a disposal group or an individual non-current asset.

Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured inaccordance with the company’s accounting policies. Thereafter, the assets (or disposal group) are generally measured atthe lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for saleand subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess ofany 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 anyindication that those assets may be impaired. If any such indication exists, the recoverable amount of the asset is estimatedin order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amountfor 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 assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific to the asset. For an asset that does notgenerate 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-tollassets are non-cash-generating assets. Non-toll assets do not create cash flows from their use, and a market for non-tollroads does not exist. IFRS does not specifically cover the impairment of non-cash-generating assets, and in such casesallows other sources such as pronouncements of other standard setting bodies to be considered. The determination of thecarrying 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’sremaining service potential. The present value of the remaining service potential of the asset is determined usingdepreciated replacement cost. The company measures its non-toll assets (road network, structures and land) on therevaluation model, based on depreciated replacement cost. Therefore the company’s valuation already takes anyimpairment effect into consideration, and no further specific impairment test is performed on non-toll assets. The remainingassets (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 longterm 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 hasbeen a change in the estimates used to determine the recoverable amount. Where an impairment loss subsequentlyreverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverableamount. The increased carrying amount does not exceed the carrying amount that would have been determined had noimpairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss isrecognised 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 comprehensiveincome. A reversal of impairment loss is recognised as an increase in the revaluation reserve in other comprehensiveincome, limited to the assets’ revalued amount.

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Accounting Policies

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 itsliabilities.

Currently the company has normal issued share capital and share premium accounted for as equity instruments. Directlyattributable 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-administeredfund. The provident fund is funded by payments from the company, taking into account the recommendations ofindependent qualified actuaries. The company’s contributions to the defined contribution plans are charged to the profit orloss 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 tothe GEPF are charged to profit or loss in the year to which they relate as part of cost of employment. The company has nolegal or constructive obligation to pay further contributions if the GEPF does not hold sufficient assets to pay all employeestheir 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 projectedunit 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 interimvaluation is performed at an earlier date.

Past service costs are recognised immediately to the extent that the benefits are already vested, and are otherwiseamortised 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 demonstrablycommitted 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 benefitobligation, the right to reimbursement is recognised as a separate asset. The asset is measured at fair value. In all otherrespects, the asset is treated in the same way as plan assets. In profit or loss, the expense relating to a defined benefit planis 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 obligationas adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduces by the fair valueof plan assets.

Any asset is limited to unrecognised actuarial losses and past service costs, plus the present value of available refunds andreductions in future contributions to the plan.

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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 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 theeffect of discounting to present values is material, provisions are adjusted to reflect the time value of money, and whereappropriate, 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 orconstructing the road networks and increased over the life span of the project. Once the project is complete, the provisionfor 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. Rehabilitationcosts 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 theeffect of discounting to present value is material, provisions are adjusted to reflect the time value of money, and whereappropriate, 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 concessionairesregarding control of overloading on the road network operated by concessions. SANRAL expects concessionaires to claimamount 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 innon-current liabilities as deferred income and are released to income on a systematic basis in subsequent years over theestimated life of the related assets. Government grants received as compensation for acquisition of land are recognised asincome when received, because land is not deferred.

Government grants that compensate the company for expenses incurred are recognised in profit or loss immediately. Theunspent portion of a grant is included in non-current liabilities as deferred income.

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Accounting Policies

1.15 Revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates andsimilar allowances.

Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction atfinancial 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 economicbenefits will flow to the entity; and when specific criteria have been met for each of the SANRAL activities as describedbelow. SANRAL bases its estimate for discounts on historical results, taking into account the type of customer, thetransaction 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 valueadded 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 withthe transaction will flow to the entity and the amount of revenue can be measured reliably. Management uses accumulatedexperience 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 beenidentified as a valid e-toll passage. (A valid e-toll passage is when a vehicle passes a gantry and all the identificationprocesses are completed.)

Measurement

E-toll revenue is measured at the fair value of the consideration received or receivable. Revenue is measured at the tariffsgazetted in the Government Gazette No 37038 dated 19 November 2013, less VAT and discounts provided for in the saidgazette 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 theGORT 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 thetariffs gazetted in the Government Gazette No 37038 dated 19 November 2013, less VAT and discounts provided for in thesaid gazette.

1.16 Other income

Other income includes contributions from other spheres of government and the private sector. For managing projects thisincludes assets owned by other entities and they contribute their proportionate share to the projects for SANRAL’smanagement.

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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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-tradingfinancial liabilities.

Interest income and expenses are recognised on a time proportion basis, taking account of the principal outstanding andthe effective interest rate over the period to maturity. Interest income and expenses are recognised in profit or loss for allinterest-bearing instruments on an accrual basis using the effective interest method, except for market-making financialassets and liabilities.

The coupon interest of bonds included in market-making financial assets and liabilities is included under interest incomeand expense respectively. The remaining difference between interest calculated on amortised cost based on the effectiveinterest and coupon interest is disclosed as part of held-for-trading gains and losses. Where financial assets have beenimpaired, 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 initialcarrying amount of an interest-bearing instrument and its amount at maturity calculated on an effective interest methodbasis.

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 orsale.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which theyhave 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 andbuilding 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 developedin 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. Incircumstances where the concessionaire is required to pay a fee to the company, this amount is recognised as concessionincome 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 ownershipof the assets. Items of property, plant and equipment under concession agreements are recognised and measured inaccordance 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 toconstruction 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 PublicFinance Management Act. Fruitless and wasteful expenditure means expenditure that was made in vain and would havebeen avoided had reasonable care been exercised. All irregular, fruitless and wasteful expenditure is recorded asexpenditure in the year that it was incurred. After an investigation is conducted and it was found that an official wasnegligent, 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 businesssegments' operating results are regularly reviewed by the entity's chief operating decision maker, and used to makedecisions 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 beallocated on a reasonable basis. Unallocated items comprise investments (other than investment properties) and relatedrevenue, 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 andequipment. 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 andintangible assets other than goodwill and are directly attributable to the segment or can be allocated to the segment on areasonable 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 wellas from concession fees from the concession contracts entered into with the concessionaires of certain national roads inSouth Africa. Specific grants from government for toll funding are also recognised as revenue, to the extent they have beenrealised. 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 purposesof making decisions about allocating resources to the segments and assessing their performance.

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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 currentfinancial year and that are relevant to its operations:

Standard/ Interpretation: Effective date:Years beginning on orafter

Expected impact:

Amendments to IAS 16 and IAS 38: Clarification ofAcceptable Methods of Depreciation and Amortisation

01 January 2016 The impact of the standardis not material.

IFRS 14 Regulatory Deferral Accounts 01 January 2016 The impact of theamendment is notmaterial.

Amendment to IFRS 5: Non-current Assets Held for Saleand Discontinued Operations: Annual Improvements project

01 January 2016 The impact of theamendment is notmaterial.

Amendment to IFRS 7: Financial Instruments: Disclosures:Annual Improvements project


Amendment to IAS 19: Employee Benefits: AnnualImprovements project


Disclosure Initiative: Amendment to IAS 1: Presentation ofFinancial Statements


Amendment to IAS 34: Interim Financial Reporting. AnnualImprovements project


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 andare mandatory for the company’s accounting periods beginning on or after 01 April 2017 or later periods:

Standard/ Interpretation: Effective date:Years beginning on orafter

Expected impact:

IFRS 16 Leases 01 January 2019 Impact is currently beingassessed

IFRS 9 Financial Instruments 01 January 2018 Impact is currently beingassessed

IFRS 15 Revenue from Contracts with Customers 01 January 2018 Impact is currently beingassessed

Amendments to IFRS 15: Clarifications to IFRS 15 Revenuefrom Contracts with Customers

01 January 2018 Impact is currently beingassessed

Amendments to IFRS 4: Applying IFRS 9 FinancialInstruments with IFRS 4 Insurance Contracts

01 January 2018 Impact is currently beingassessed

Amendments to IAS 7: Disclosure initiative 01 January 2017 Impact is currently beingassessed

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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 carryingvalue 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 betweenmarket participants at the measurement date. The fair value measurement is based on the presumption that the sale ortransfer 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 pricingthe asset or liability, assuming that market participants, act in their economic best interest. A fair value measurement ofnon-financial assets takes into account a market participants ability to generate economic benefits by using the asset in itshighest 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 tomeasure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Allassets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fairvalue 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 orindirectly observable.

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement isunobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, SANRAL determines whethertransfers have occurred between the levels in the hierarchy by re-assessing categorisation (based on the lowest level inputthat 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 thenature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

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4. Property, plant and equipment under concession

31 March2017

31 March2016

Cost /Valuation

R'000

Accumulateddepreciation

R'000

CarryingvalueR'000

Cost /Valuation

R'000


R'000

CarryingvalueR'000

Buildings 967 613 (155 518) 812 095 967 613 (136 504) 831 109Road structures 7 386 933 (931 541) 6 455 392 6 317 987 (385 369) 5 932 618Equipment 470 214 (243 572) 226 642 606 893 (296 914) 309 979Property, plant andequipment under construction

2 075 646 - 2 075 646 1 333 448 - 1 333 448

Road network 42 003 705 (8 057 424) 33 946 281 37 472 034 (8 401 659) 29 070 375Total 52 904 111 (9 388 055) 43 516 056 46 697 975 (9 220 446) 37 477 529

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4. Property, plant and equipment (continued)

Pledged as security

None of PPE under concession are pledged as security for liabilities

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available forinspection 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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Revaluation

Revaluation of road network and structures

Road network and structures are valued at depreciated replacement cost based on the estimated present cost ofconstructing existing assets by the most appropriate current method of construction, reduced by factors for the age andcondition of the asset. The estimated present material unit costs are assumed to be uniform across the country. The unitrate, 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, asutilised by SANRAL, is in direct alignment with the recommendations contained within International InfrastructureManagement Manual (IIMM) for specialised assets which are rarely, if ever, sold on the open market. This manual is usedinternationally in Australia, New Zealand, United Kingdom, Canada, South Africa, and other countries. The replacementcost 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-baseddepreciation for the pavement layers and structures. Pavement condition data is collected using survey vehicles equippedwith lasers and 2D/3D cameras enabling the determination of various pavement condition indicators for each 10m of theroad 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 each1km 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 ofroads from provinces has increased this over the period, bringing the total to 21 490km at the end of March 2016. Thisexpansion had a significant impact on the value of assets. During the 2016/17 financial year 707km of non-toll roads wereincorporated into the national road network.

b. % CPA Change: In determining replacement cost, the cost of construction is driven by various input costs such as thecost of bitumen (crude oil), diesel for construction plant operations, cement, steel and aggregate. Stats SA publishes theConstruction 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 theasset, 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, determinethe standard to which the road must be built or maintained. This means that a road carrying 200 000 vehicles a day, willrequire additional lanes per direction and more pavement layers using higher quality materials than a road carrying lessthan 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 onthe 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 withinlayers 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 thereplacement cost of the 1 km section of road. All the above factors and associated changes are considered within the SANRAL ITIS Asset Value Calculation procedurethat 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 increasein material unit rates; and due to the unique nature of the assets, and the extensive detailed condition data required of theroad network, structures and material unit costs, SANRAL performed the revaluation internally on road assets utilisinginformation supplied by industry experts.

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31 March2017

31 March2016

The Carrying values of property, plant and equipment underconcession if all accounted for under the cost model would havebeen:

R'000 R'000

Building 812 095 831 109Road structures 469 157 344 973Equipment 226 642 309 978Property, plant and equipment under construction 2 075 646 1 333 448Road network 4 569 359 4 557 778

8 152 899 7 377 286

5. Property, plant and equipment

31 March2017

31 March2016

Cost orrevaluation

R'000


R'000

Carryingvalue R'000

Cost orrevaluation

R'000


R'000

Carryingvalue R'000

Land 20 213 288 - 20 213 288 18 687 010 - 18 687 010Buildings 2 216 559 (266 244) 1 950 315 1 813 709 (220 529) 1 593 180Equipment, vehicles andfurniture

1 944 434 (1 061 375) 883 059 1 929 199 (958 406) 970 793

Road network 293 771 387 (85 823 860) 207 947 527 277 278 802 (82 354 949) 194 923 853Property, plant andequipment under construction

13 652 776 - 13 652 776 11 779 427 - 11 779 427

Road structures 64 311 730 (8 803 704) 55 508 026 54 680 070 (4 750 117) 49 929 953Total 396 110 174 (95 955 183) 300 154 991 366 168 217 (88 284 001) 277 884 216

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The revaluation increase of R1.458bn for land is merely as a result of market price increases. During the 2016/17 financialyear 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 thecarrying amount. The decrease in the recoverable amount relates to cash flow predictions that decreased due to estimatedincrease in maintenance costs in the future. This resulted in impairment of the cash generating unit. Magalies toll plaza fallsunder 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 2017

R'000

31 March2016

R'000

Land 886 486 819 183Buildings 1 950 315 1 593 180Equipment, vehicles and furniture 883 059 970 793Road network 48 953 547 46 557 431Property, plant and equipment under construction 13 652 776 11 779 427Road structures 6 700 228 6 301 584

73 026 411 68 021 598

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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 forinspection 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 assetsunder 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 ofland is determined based on recent selling prices of vacant land with comparable location and, where applicable, adjustedin respect of engineering services' status and development rights on the road reserves. Applying the across-the-fencevaluation model, valuation was performed on the land component as at 31 March 2017 by an independent professionalvaluator.

Revaluation of road network and structures

Road network and structures are valued at depreciated replacement cost based on the estimated present cost ofconstructing existing assets by the most appropriate current method of construction, reduced by factors for the age andcondition of the asset. The estimated present material unit costs are assumed to be uniform across the country. The unitrate, 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, asutilised by SANRAL, is in direct alignment with the recommendations contained within International InfrastructureManagement Manual (IIMM) for specialised assets which are rarely, if ever, sold on the open market. This manual is usedinternationally in Australia, New Zealand, United Kingdom, Canada, South Africa, and other countries. The replacementcost 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-baseddepreciation for the pavement layers and structures. Pavement condition data is collected using survey vehicles equippedwith lasers and 2D/3D cameras enabling the determination of various pavement condition indicators for each 10m of theroad 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 each1km of road and to the structures.

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Notes to the Financial StatementsFactors 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 ofroads from provinces has increased this over the period, bringing the total to 21 490km at the end of March 2016. Thisexpansion had a significant impact on the value of assets. During the 2016/17 financial year 707km of non-toll roads wereincorporated into the national road network.

b. % CPA Change: In determining replacement cost, the cost of construction is driven by various input costs such as thecost of bitumen (crude oil), diesel for construction plant operations, cement, steel and aggregate. Stats SA publishes theConstruction 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 theasset, 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, determinethe standard to which the road must be built or maintained. This means that a road carrying 200 000 vehicles a day, willrequire additional lanes per direction and more pavement layers using higher quality materials than a road carrying lessthan 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 onthe 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 withinlayers 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 thereplacement cost of the 1 km section of road. All the above factors and associated changes are considered within the SANRAL ITIS Asset Value Calculation procedurethat 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 increasein material unit rates; and due to the unique nature of the assets, and the extensive detailed condition data required of theroad network, structures and material unit costs, SANRAL performed the revaluation internally on road assets utilisinginformation supplied by industry experts.

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6. Investment property

Valuation31 March

2017

Valuation31 March

2016R '000 R '000

Investment property 1 812 370 1 404 075Total 1 812 370 1 404 075

Reconciliation of investment property - 31 March 2017

Openingbalance

Disposals Classified asheld for sale

Fair valueadjustments

Total

R '000 R '000 R '000 R '000 R '000Investment 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

Openingbalance

Additions Disposals Classified asheld for sale

Fair valueadjustments

Total

R '000 R '000 R '000 R '000 R '000 R '000Investment 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 March2017

31 March2016

R '000 R '000

Details of investment property

Investment properties

Improved property 229 720 209 743Vacant property 1 582 650 1 194 332

1 812 370 1 404 075

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6. Investment property (continued)

A register containing the information required by Regulation 25(3) of the Companies Regulations, (2011) is available forinspection at the registered office of the company.

Additional information

Investment property comprises a number of freehold properties (surplus or severed land) kept for appreciation in their valueand for purpose of rental income. SANRAL's primary responsibility relates to the construction and maintenance of nationalroads, but during the execution of its normal responsibilities SANRAL may also become the owner of surplus land. Althoughsuch land is often alienated, SANRAL does not, per se, hold it for sale as part of its ordinary course of business. All surplusland 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", takinginto 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 arecognised and relevant professional qualification and has recent experience in the location and category of the investmentproperty being valued. Valuation of investment property is done on an annual basis.

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Notes to the Financial Statements 2017 2016

R '000 R '000

7. Intangible assets (continued)

Pledged as security

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 therewas no indicator for impairment

8. Investments

At fair value through profit or loss - held for tradingMarket-making investmentsMarket-making investments consist of bonds. These bonds had yields of between8.09% and 8.61% as at 31 March 2017 (31 March 2016: 9.81%). Market-makinginvestments are held to manage liquidity and to reduce the cost of borrowing.

317 157 636 814

317 157 636 814

Loans and receivables at amortised costCapped insurance receivableIn September 2015 SANRAL signed a three-year insurance agreement with SantamInsurance. SANRAL made an upfront deposit, and all claims up to the balance of thedeposit are recovered from the funds deposited.

Claims in excess of this deposit are paid by the insurer. The agreement provides forthe repayment of the balance of the deposit at the end of the agreement period. Theamount of R329.7 million (31 March 2016: R289.1 million) represents the balance forthe period ending 31 March 2017.

These funds earn interest at the three-month Jibar-based deposit rate of 7.0028% (31March 2016: 6.6585%). The policy is renewed annually.

329 739 289 093

Total other financial assets 646 896 925 907

Non-current assetsLoans and receivables at amortised cost 329 739 289 093

Current assetsAt fair value through profit or loss held for trading 317 157 636 814

646 896 925 907

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R '000 R '000

9. Trade and other receivables

Trade receivables (toll) 8 798 399 6 620 088Bad debts written off (33 100) -Other receivables 186 620 317 964Other receivables due from related parties 139 163 100 499Accrued interest 73 850 83 047Other receivables due from third party funding 47 336 20 401Impairment 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 ofgovernment and private sector. R3.613bn (2016: R89.9m) of the impairment losses relate to the impairment of e-tolldebtors.

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 Nationalroads Act, No 71 of 1998, which provides that the non-payment of toll fees is an offence. To this end toll debt can’t bewritten off, other than by a court of law, and as a criminal offence it does not prescribe. The same Act allows SANRAL topursue both criminal and civil action against a non-payer. Additionally, the PFMA in section 51 (1)(b)(i) prescribes that allrevenue due to the state must be collected.


• 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 currentprevailing conditions and historical trends:

As a result of toll debtors being mainly LSM 9 consumers, SANRAL management considered the toll tariffs as affordable forthese users given the percentage of household income and the monthly caps which apply. The refusal to pay was notregarded 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 andthe outcome is unknown. The probability of the full amount being recovered was not certain therefore these amounts wereimpaired.

The reduction in the standard rate in 2015, announced as part of the new dispensation, was considered by management asa loss event for toll debt which preceded the new standard tariff. Based on the current and historical payment patterns theprobability 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 thereforethese 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 thedebt may prescribe after 3 years. Whilst still pursuing with civil and criminal prosecution a conservative approach was takenon the probability of recovering the full amounts outstanding and these amounts were impaired.

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R '000 R '000

10. Assets classified as held for sale

Assets and liabilities

Assets of disposal groupsOpening balance 20 096 26 971Investment property sold during the year (11 956) (9 541)Additions to investment property held for sale 69 353 20 556Fair 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 13Bank balances 45 107 61 747Money 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.% (31March 2016: 5.08% and 7.48%), and the deposits have an average maturity of 26 days (31 March 2016: 18 days).

12. Share capital

Authorised4 000 ordinary shares of R1 each 4 4

Issued4 000 ordinary shares of R1 each 4 4Share 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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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 037Road network assets (comprising road layers, road beds and road structures) (PPEincludng PPE under concession)

242 969 412 222 118 395

262 302 424 239 992 432

A breakdown of the revaluation movement for the period affecting the statement of profit or loss and other comprehensiveincome is reflected below:

Increase in revaluation amount for land 1 458 975 1 392 801Increase/(decrease) in revaluation amount for road network assets (PPE includingPPE under concession) (comprising road layers, road beds and road structures)

20 851 018 (489 226)

22 309 993 903 575

Accumulated lossAccumulated 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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R '000 R '000

14. Borrowings (continued)

Held at amortised costBorrowings - Capital market loan (Long-term) 42 298 177 37 373 645

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)The CPI-linked loan is repayable in monthly CPI-linked installments at real interest rateof 3.91% per annum (31 March 2016 3.91%) until 31 October 2018. This loan isguaranteed by government equal to the original. This loan has its own separateguarantee.

187 153 198 106

Borrowings - EIB loan (Long-term) 1 051 472 1 080 001

Borrowings - EIB loan (Short-term)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 respectivelyduring the 2011 financial year. The tranches bear interest at a fixed rate of 8.315% and9.227% respectively. The loan is repayable over 20 years in semi-annual installments.Repayments are made in South African Rands and commenced in the 2015 financialyear. This loan, including interest accrued, is guaranteed by government, under theR31.91bn guarantee.

28 529 26 184

Borrowings - ECA supported loan (Long-term) 66 777 119 087

Borrowings - ECA supported loan (Short-term)SANRAL has entered into a loan facility with the ABSA bank amounting to R523 102562 for the purchase of goods or services to support the open road tolling system ofGFIP. 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 isrepayable over 10 years commencing in June 2012. The loan is supported by theRepublic of Austria through Oesterreichische Kontrollbank Aktiengesellschaft, anExport Credit Agency (ECA). The loan may be declared due and payable in the eventof SANRAL's Moodys rating falling below investment grade Baa3. It also provides for aperiod of negotiation in such event to amend the finance documents.

52 310 52 310

Borrowings - Repurchase agreements 13 607 391 394

Borrowings - call bondsSANRAL has issued call bonds under its R6bn guarantee to meet its short-termfunding requirements. The call bonds, which are repayable on demand, bear interestat the money market rate which at 31 March 2017 was 7.30%

125 000 1 000 000

43 903 478 44 201 00048 754 687 48 845 162

Non-current liabilitiesFair value through profit or loss 4 298 582 3 558 733At amortised cost 43 496 879 38 842 700

47 795 461 42 401 433

Current liabilitiesFair value through profit or loss 552 627 1 085 428At amortised cost 406 599 5 358 301

959 226 6 443 72948 754 687 48 845 162

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14. Borrowings (continued)

Capital market loans

In April 2014, the South African Government issued guarantees of R31.91bn for borrowings by SANRAL, of which theutilisation 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 DomesticMedium Term Note (DMTN) programme (HWAY bonds). The redemption amount of capital market loans, including interestaccrued, issued under the R31.91bn guarantee at 31 March 2017 was R30.33bn (31 March 2016 R28.69bn). The fundsraised 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 anominal value of R6bn. SANRAL has issued a nominal of R4.189bn as at 31 March 2017 (31 March 2016 R5.08bn) underthis 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 at31 March 2017 (31 March 2016 R15bn). SANRAL issued a nominal value of R9.98bn as at 31 March 2017 (31 March 2016R10.27bn) under the non-guaranteed DMTN programme (NRA bonds). The funds raised through these borrowings canonly 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 745Current liabilities 166 849

166 2 594

Balance brought forward 2 594 1 140Amount 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. Leasecontracts run over various periods of time and the last contract ends in 2021.

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16. Employee benefits

Defined benefit plan

Post-retirement health-care benefits

Movement in liability for obligation:

Accrued liability at beginning of the year 36 924 32 450Benefits paid out (754) (589)Interest cost 3 441 2 812Service cost 3 304 3 017Acturial gain/loss (192) (766)

42 724 36 924

Net expense recognised in profit or loss

Current service cost 3 304 3 017Interest 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 completinga minimum service period, and is subject to periodic review. SANRAL recognises the estimated liability on an accrued basisover the working life of the eligible employees. During 2014, SANRAL extended its post-retirement medical aid benefits toall its employees.The entitlement is based on the employee remaining in the employment of the organisation for a period of15 years' uninterrupted service until retirement. An additional 155 employees qualified as from April 2013. The accruedliability 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 March2017 using the Projected Unit Method. The next valuation of the employer's liability will be in March 2018. No plan assetsare 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 yearsMembership discontinued at retirement 0 0Discount rates used %8,75 %9,32Health cost inflation %7,34 %8,10

Historical information 2017 2016 2015 2014 2013R '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 keyassumptions, we set out below how the results would vary if these assumptions are changed. These scenarios may also beof 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 realdiscount rate of 1.31% per annum in this valuation.

The following sensitivities were analysed:

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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 inassumptions Liability

%change

ServiceCost

%Change

InterestCost

% change

Centralassumptionused (current)

42 723 3 651 3 738

Medicalinflation

1% decrease

1% increase

35 938

51 318

19%

-17%

2 937

4 590

24%

-20%

3 144

4490

19%

-17%

Withdrawalassumptions

50% less 44 135 -3% 4 109 -11% 3 861 -3%

Post-retirementmortality

-1 year 44 128 -3% 3 763 -3% 3 861 -3%

Defined Contribution Plan Provident and pension fund

The Alexander Forbes Retirement Fund: South African National Roads Agency Limited Provident Fund (the fund) is adefined contribution plan and is registered in terms of the Pension Funds Act 24 of 1956, as amended. Contributionscomprise 20.5% of pensionable emoluments. SANRAL contributes 20.5% of which administration and insurance costsamount to 3.59%. The Fund is administered by Alexander Forbes and 338 of the 339 permanent employees (2016: 304 ofthe 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 ofwhich members pay 7.5% and SANRAL contributes 13%. Contributions are recognised in profit or loss when thecontributions are made.

Pension costs 38 35Provident 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 nationalroutes. The portion spent on capital expenses is being amortised over the useful lives of the underlying assets. Grants forland, which is not depreciated, are treated as income when received. The unutilised portion of the grant at year end is alsodeferred until utilised.

SANRAL receives prepayments on concession contracts. These payments are deferred over the life of the concessioncontract. Refer to note 38 for details of the concession arrangements.

Non-current liabilities 41 920 985 38 071 742Current liabilities 4 726 558 3 814 831

46 647 543 41 886 573

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17. Deferred income (continued)

Concession contracts

N3 Toll Concession

Non-currentBalance brought forward 600 461 648 180Amount transferred to current (47 719) (47 719)Balance at end of the period 552 742 600 461

CurrentBalance brought forward 47 719 47 719Amount realised in profit or loss (47 719) (47 719)Amount transferred from non-current 47 719 47 719Balance at end of the period 47 719 47 719Total 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-currentBalance brought forward 114 780 125 356Amount transferred to current (10 576) (10 576)Balance at end of the period 104 204 114 780

CurrentBalance brought forward 10 576 10 576Amount realised in profit or loss (10 576) (10 576)Amount transferred from non-current 10 576 10 576Balance at end of the period 10 576 10 576Total balance for TRAC N4 114 780 125 356

Bakwena concession

Non-currentBalance brought forward 21 785 21 785Total 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 defrayexpenditure that will need to be incurred to maintain certain infrastructure. Income is recognised when the expenditure isincurred.

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17. Deferred income (continued)

Non-toll projects

Non-currentBalance brought forward 37 334 717 32 942 760Capital portion of government grants received 5 693 050 5 961 843Decrease 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

CurrentBalance brought forward 1 303 799 1 037 712Increase as a result of increase in asset base 240 856 266 087Amount realised in profit or loss (1 544 655) (1 303 799)Transferred from non-current 1 544 655 1 303 799Balance at end of the period 1 544 655 1 303 799Unutilised government grant surplus (current)Balance brought forward 2 452 737 1 145 720Amounts deferred/(utilised) 670 871 1 307 017Balance at end of the year 3 123 608 2 452 737Total balance for government non-toll grants 45 910 519 41 091 253

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18. Provision for rehabilitation costs

Reconciliation of provision for rehabilitation costs - 31 March 2017

Openingbalance

Utilisedduring the

year

Total

R'000 R'000 R'000Provision for rehabilitation costs 5 954 (2 658) 3 296

5 954 (2 658) 3 296

Reconciliation of provisions - 31 March 2016

Openingbalance

Utilisedduring the

year

Total

R'000 R'000 R'000Provision 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 negativeenvironmental impacts.

SANRAL, as a holder of mining permits, is ultimately responsible for the restoration of borrow pits. A provision wastherefore raised at the 2011 year end for SANRAL's obligation to rectify environmental damage caused during constructionand 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 totheir original condition. This was calculated by engineers and project managers as a reasonable indication of the marketrelated 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 wereexpensed immediately.

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19. Provision for overload control

Reconciliation of provision for overload control - 31 March 2017

Openingbalance

Utilisedduring the

year

Total

R'000 R'000 R'000Provision for overload control 336 205 3 582 339 787

336 205 3 582 339 787

Reconciliation of provision for overload control - 31 March 2016

Openingbalance

Utilisedduring the

year

Total

R'000 R'000 R'000Provision 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 ofoverloading.

20. Deferred exchange consideration

Opening balance 7 191 503 6 536 161Increase as a result of increase in asset base (additions) 1 479 039 1 082 919Exchange consideration realised to profit or loss (563 755) (427 577)

8 106 787 7 191 503Non-current portion 7 543 032 6 763 926Current 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 aresubject 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 ofthe exchange consideration – the provision of access to such assets, which will occur over the remainder of the period ofthe 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 991Accrued interest on financial instruments 864 102 862 721

4 803 541 3 836 712

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22. Third-party funding

Balance brought forward 331 478 764 751Interest 71 59Add: Debit balances reclassified to debtors 26 935 20 401Add: Contributions received during the current year 514 793 146 990Less: 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 roadsthat 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 iscapitalised for the benefit of the third party or SANRAL, depending on the specific agreement. The funds are repayable asper 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 880Government grants - non-toll 8 671 220 6 577 427Government 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 feesamounted to R3.048bn (31 March 2016: R2.868 bn)

Toll fees reconciliationTotal fees charged during the year 6 985 210 7 891 464Less 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 revenuewould be received. Therefore all possible discounts, including the Less60 campaign were excluded from revenue. (Revenueis 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 theannual financial statements as there is no reliable measure for the amount, and the timing of receipts is unknown.

Government grants (non-toll) included in revenueGovernment grants received 13 490 486 12 542 488Less: 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 tostrengthening and maintenance of the coal haulage roads.

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24. Other income

Concession income 995 2 867Realised portion of concession contract revenue (N3 Toll Concession) 47 719 47 719Realised portion of concession contract revenue (TRAC N4) 10 577 10 577Rental income investment property 47 447 47 709Sundry revenue 463 338 323 896Realised portion of previously deferred exchange consideration from tollconcessionaires

563 755 427 577

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 310Administration 733 675 748 099Advertising 160 291 173 847Straight-lining of leases 14 384 8 232Amortisation on intangible assets 4 757 5 985Depreciation on property, plant and equipment 2 728 950 2 518 100Depreciation - Concession 399 587 378 843Employee costs 268 379 230 953Repairs and maintenance 8 520 440 6 345 285Auditors' remuneration 38 684 39 067Bank charges 166 423 41 516Director and management emoluments 27 573 25 642Impairment on PPE 8 291 -Impairment for debtors 3 753 595 90 194Bad debts written off 33 105 17Loss on sale of assets 108 522 44 671Total expenses

17 361 900 10 953 761

26. Investment income

Gains on financial instrumentsNet change in fair value of financial assets at fair value through profit or loss 10 879 (7 093)Interest incomeInterest on bank deposits 660 810 511 016Interest income on repurchase agreements 208 411 153 499Other short-term interest 24 641 19 051Interest income on financial assets at fair value through profit or loss 12 428 -Other income interest 5 206 5 196Discounting of trade receivables 439 418 280 605

1 361 793 962 274

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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 823Interest on financial liabilities at fair value through profit and loss 463 670 390 752Borrowing 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 amountof borrowing costs eligible for capitalisation in the 2017 financial year. The total borrowing costs capitalised to qualifyingassets 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 IncomeTax Act, 1962. This exemption was backdated to the inception of the entity, therefore no provision has been made forincome 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 843Depreciation - PPE 2 728 950 2 518 100Amortisation 4 757 5 985Impairment loss on PPE 8 291 -Impairment loss debtors 3 753 595 90 194Fair value adjustment on investment property and Fair value adjustment on Non-current assets held for sale.

(518 051) (98 594)

(Profit) / Loss on sale of PPE 108 522 44 671Investment revenue (1 361 793) (962 273)Finance cost 4 568 583 3 645 220Movement in operating lease assets and accruals 11 956 9 686Movement in retirement benefit asset and liability 5 608 3 708Movement in provisions - rehabilitation cost expenses (2 658) (7 558)Deferred exchange consideration (563 755) (427 577)Bad debts written off 33 105 17Deferred 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 capitalTrade 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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30. Cash paid to suppliers and employees

Expenses per statement of comprehensive income 17 361 900 10 953 761Movement 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 224Movement 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 342Movements in trade receivables (1 590 106) (1 336 563)Other income 1 133 831 860 345Deferred 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 017Government 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 receivedCapital portion of government grant - non-toll (note 17) 5 693 050 5 961 845

5 693 050 5 961 845

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33. Commitments

Estimated capital expenditure

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 sectorand is expected to be incurred as follows:

Within one year - Toll 2 148 125 2 095 366Within one year - Non-toll 5 672 770 5 361 531Thereafter - Toll 2 606 726 2 232 001Thereafter - Non-toll 7 461 035 8 029 569

17 888 656 17 718 467

Operating leases – as lessee (expense)

Minimum lease payments dueWithin one year 10 715 11 247In second to fifth year inclusive 8 463 13 093Later 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 forrental, parking, fixed services and storage space. The lease contracts make provision for escalations annually, and renewaloptions 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, legalproceedings instituted against the then South African Roads Board with the cause of action arising before the incorporationdate of SANRAL must be instituted against the Minister of Transport as respondent. Due to the nature of these claims andthe fact that judgments in these cases could be to the detriment of SANRAL, it was agreed (at the time of establishingSANRAL) that, although the actions be instituted against the Minister, SANRAL will bear the costs and be actively involvedin defending such action.

Contingent liabilities estimated at R275.69m (2016: R245.06m) exist regarding possible claims against SANRAL, mainlyresulting from road related accidents. The outflow of cash is remote as during the past several years SANRAL has won themajority 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 nationalroads, in terms of the Municipal Property Rates Act, No 6 of 2004. Not all municipalities have chosen to exercise thisstatutory power and some have not yet implemented the Act. The property rates used, as well as the valuation amount ofSANRAL's infrastructure, have not been determined by the municipalities. In order to arrive at an estimate of the potentialrates liability, nationally, actual rates levied by some municipalities were applied to the entire declared national roadnetwork, 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 theconcession agreement. In their opinion, this has caused deterioration of the road significantly earlier than calculated bythem. In the event that such a claim succeeds and that compensation is due to the concessionaire, the Mozambicangovernment will become liable to compensate the concessionaire. In the event that the Mozambican government fails tocompensate the concessionaire according to the determined claim amount, the South African government throughSANRAL, will become liable for compensating the concessionaire in terms of the “mutually and severally liability” clauses inthe 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 adjustmentsamount within 14 days after having been called upon to do so in writing by the concessionaire. This has not been donewhich resulted in a revenue shortfall. The value is estimated at R10.5m. In the event that the Mozambican government failsto compensate the concessionaire according to the determined claim amount, the South African government throughSANRAL, will become liable for compensating the concessionaire in terms of the “mutually and severally liability” clauses inthe concession agreement.

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35. Related parties

RelationshipsHolding company Department of TransportShareholder The principal shareholder of SANRAL is the Minister

of Transport being part of national governmentMembers of key management Key management personnel are defined as executive

and non executive management of SANRAL. Keymanagement personnel compensation is detailed innote 36.

Related-party relationships exist between SANRAL, its directors, key management personnel and parties within the nationalsphere of government.

SANRAL is a Schedule 3A public entity in terms of the PFMA. It therefore has a number of related parties, including otherstate-owned entities, government departments and all other entities within the national sphere of government. SANRALused the database maintained by National Treasury to identify related parties in line with IAS 24 (Amended). Transactionswith parties identified as related parties were concluded on an arm's length basis, except for the sale of investment propertyto 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 therelationship on the financial statements, the directors are of the opinion that the following transactions require disclosure asrelated-party transactions.

Transactions with related parties

Transactions with related parties mainly comprise sale and purchases of goods and services including properties. Thefollowing is a summary of transactions with related parties during the year and balances due at year end.

Government grants received funding infrastructureNational Department of Transport 13 915 586 12 542 488

Other services provided to related partiesNational Department of Transport 36 756 18 251Airports Company South Africa (Investment property sold) - -

Services provided by related partiesAirports Company South Africa (8) (11)

Period end balances arising from services provided to related partiesNational Department of Transport 108 773 72 017Road Accident Fund 30 390 28 482

Summary of related parties' balances at period endTotal 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 SANRALwhich 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 Performancebonus and

long serviceawards

Total

R'000 R'000 R'000Mr S Macozoma (Chief Executive Officer) 1 200 - 1 200Mr N Alli (Chief Executive Officer) 1 551 1 320 2 871

2 751 1 320 4 071

2016

Salary Performancebonus and

long serviceawards

Othercontributions*

Pensioncontributions

Total

R'000 R'000 R'000 R'000 R'000Mr 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 TotalR'000 R'000

Ms A Halstead (Public official) - -Mr C Hlabisa (Public official) - -Ms Z Kganyago (Independent) 840 840Dr A Lawless (Independent) 672 672Mr M Matete (Independent) 929 929Ms D Mashile-Nkosi (Independent) 381 381Mr R Morar (Chairperson) 1 108 1 108Ms M Moore (Public official) - -

3 930 3 930

2016

Directors' fees TotalR'000 R'000

Mr C Hlabisa (Public official) - -Ms Z Kganyago (Independent) 732 732Dr A Lawless (Independent) 601 601Mr M Matete (Independent) 830 830Ms D Mashile-Nkosi (Independent) 513 513Mr R Morar (Chairperson) 983 983Ms M Moore (Public official) - -

3 659 3 659

Public Officials are not remunerated.

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36. Directors' and prescribed officers' emoluments (continued)

Executive members

2017

Salary Performancepayments andlong service

awards

Othercontributions*

Pensioncontributions

Total

R'000 R'000 R'000 R'000 R'000IN Essa (Regional Manager - Northern) 1 274 518 163 282 2 237H Harper (Corporate Services Executive) 1 067 421 57 221 1 766A Mathew (Company Secretary) 1 106 442 34 224 1 806I Mulder (Chief Financial Officer) 2 024 767 66 365 3 222MS Peterson (Regional Manager -Southern)

1 498 571 12 296 2 377

L Sewnarain (Regional Manager -Eastern)

1 376 534 81 254 2 245

JJ Smit (Engineering Executive) 2 141 844 57 385 3 427JC Van Der Walt (Regional Manager -Western)

1 533 607 43 309 2 492

12 019 4 704 513 2 336 19 572

2016

Salary Performancepayments andlong service

awards

Othercontributions*

Pensioncontribution

Total

R'000 R'000 R'000 R'000 R'000IN Essa (Regional Manager - Northern) 1 177 487 174 261 2 099H Harper (Corporate Services Executive) 988 339 70 204 1 601A Mathew (Company Secretary) 1 032 389 39 207 1 667I Mulder (Chief Financial Officer) 1 866 646 89 336 2 937MS Peterson (Regional Manager -Southern)

1 385 498 55 274 2 212

L Sewnarain (Regional Manager - Eastern) 1 220 450 98 227 1 995JJ Smit (Engineering Executive) 1 919 714 103 390 3 126JC Van Der Walt (Regional Manager -Western)

1 432 543 64 261 2 300

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 anoptimal 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 cashequivalents 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 marketmaker in its own capital market stock.

The company manages liquidity risk through the compilation and monitoring of cash flow forecasts, as well as ensuring thata 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 ofmaturity

Nominalvalue

Carryingvalue

Nominalvalue

Carryingvalue

R '000 R '000 R '000 R '000R204 (2018) %8,00 21-Dec-2018 1 230 1 238 1 230 1 218R209 (2036) %6,25 31-Mar-2036 303 500 216 039 768 500 537 311R2035 (2035) %8,875 28-Feb-2035 44 000 41 412 44 000 40 692R2037 (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 ofmaturity

Nominalvalue

Carryingvalue

Nominalvalue

Carryingvalue

R '000 R '000 R '000 R '000R186 (2026) %10,50 21-Dec-2026 176 900 195 757 96 900 106 030R207 (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 tonote 14.

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37. Risk management (continued)

31 March 2017 31 March 2016Funding portfolio atamortised cost

Coupon rate Date ofmaturity

Nominalvalue

Carryingvalue

Nominalvalue

Carryingvalue

R '000 R '000 R '000 R '000Guaranteed bondsSZ25 %9,00 30-Sep-2025 2 432 784 2 461 515 2 432 784 2 463 890HWAY20 %9,75 31-Jul-2020 5 781 300 5 846 712 5 781 300 5 862 637HWAY23 5,50% + CPI 7-Dec-2023 2 917 353 8 413 856 2 917 353 8 050 219HWAY24 5,50% + CPI 7-Dec-2024 1 499 000 4 491 577 1 499 000 4 301 106HWAY33 2,25% + CPI 28-Feb-2033 1 401 000 1 464 872 870 000 846 771HWAY34 %9,25 31-Jul-2034 4 065 800 3 973 503 3 990 800 3 904 914HWAY35 %9,25 31-Jul-2035 1 544 000 1 510 797 1 334 000 1 321 217HWF02U matured 30-Sep-2016 - - 1 500 000 1 517 781HWF05U matured 09-Oct-2016 - - 1 604 000 1 616 350HWF06U matured 20-Nov-2016 - - 550 000 556 175HWF08 %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 bondsNRA18 %12,25 30-Nov-2018 2 390 623 2 437 477 2 441 283 2 511 808NRA22 %12,25 31-Oct-2022 2 623 000 2 774 703 2 623 000 2 793 342NRA23 5.00% + CPI 31-May-2023 909 750 1 557 395 909 750 1 474 516NRA28 %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 2016Funding portfolio at fair value Coupon rate Date of

maturityNominal

valueCarrying

valueNominal

valueCarrying

valueR '000 R '000 R '000 R '000

Guaranteed bondsSZ25 %9,00 30-Sep-2025 1 631 189 1 557 980 1 646 945 1 571 542HWAY20 %9,75 31-Jul-2020 1 032 452 1 066 150 1 267 351 1 283 032HWAY34 %9,25 31-Jul-2034 886 539 789 802 76 420 67 138HWAY 35 %9,25 31-Jul-2035 481 000 427 839 426 000 372 766Unguaranteed bondsNRA22 %12,25 31-Oct-2022 23 484 26 141 32 077 35 012NRA28 %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 maturitygroupings based on the remaining period at the statement of financial position to the contractual maturity date. Theamounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal theircarrying balances as the impact of discounting is not significant.

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Market-making portfolio at fair value

31 March 2017 31 March 2016Market-making portfolio atfair value


Nominalvalue

Carryingvalue

Nominalvalue

Carryingvalue

R '000 R '000 R '000 R '000Guaranteed bondsSZ25 %9,00 30-Sep-2025 - - - -HWAY20 %9,75 31-Jul-2020 1 242 1 283 1 242 1 257HWAY 34 %9,25 31-Jul-2034 - - 637 120 559 742HWAY 35 %9,25 31-Jul-2035 322 486 286 845 207 100 181 220Unguaranteed bondsNRA18 %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 thatmarket prices will decline significantly in the foreseeable future. The company has not entered into derivative contracts tomanage the risk of a decline in market prices. The company reviews its outlook for market prices regularly in consideringthe need for active financial risk management.

31 March 2017 31 March 2016Other financial liabilities atamortised cost


Nominalvalue

Carryingvalue

Nominalvalue

Carryingvalue

R '000 R '000 R '000 R '000Guaranteed financialliabilitiesCPI-linked loan %3,91 31-Oct-2018 267 606 267 606 468 074 468 074EIB loan - Tranche 1 %8,32 15-Jun-2034 541 231 541 231 554 628 554 628EIB loan - Tranche 2 %9,23 15-Mar-2034 538 770 538 770 551 557 551 557ECA-supported loan %9,09 15-Mar-2022 119 087 119 087 171 397 171 397Callable bonds Variable Callable 125 000 125 000 1 000 000 1 000 000Unguaranteed financialliabilitiesRepurchase 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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Maturity profile

The following are the contractual maturities of financial liabilities:

The table below contains only cash flows relating to financial instruments. It does not include future cash flows expectedfrom the normal course of business.

Financial liabilities31 March 2017

Carryingamount

Cash flow in1 year

Due in 1 - 5years

Due in 5 - 10years

Due after 10years

Total

R '000 R '000 R '000 R '000 R '000 R '000

Capital market loan - funding (Amortisedcost)

42 298 177 2 973 226 24 073 537 28 867 730 7 290 327 63 204 820

Capital market loan - held-for-trading(funding portfolio)

4 298 582 426 719 2 939 189 3 582 496 1 146 233 8 094 637

Capital market loan - held-for-trading(market-making portfolio)

300 970 31 439 136 557 155 887 163 030 486 913

CPI-linked floating secured loan 267 606 193 780 81 522 - - 275 302EIB loan 1 080 001 122 633 490 531 613 163 613 163 1 839 490ECA-supported loan * 119 087 61 365 71 439 - - 132 804Repurchase agreements 13 607 14 819 - - - 14 819Callable bonds 125 000 134 125 - - - 134 125Trade and other payables 4 803 541 4 803 541 - - - 4 803 541Provision for overload control 339 787 339 787 - - - 339 787Third 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 KontrollbankAktiengesellschaft, an export credit agency.

Financial liabilities31 March 2016

Carryingamount

Cash flow in1 year

Due in 1 - 5years

Due in 5 - 10years

Due after 10years

Total

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 271Capital market loan - held-for-trading(funding portfolio)

3 558 773 349 406 2 812 865 2 706 903 1 194 629 7 063 803

Capital market loan - held-for-trading(market-making portfolio)

742 220 78 211 314 022 881 457 1 423 536 2 697 226

CPI-linked floating secured loan 468 074 213 068 277 671 - - 490 739EIB loan 1 106 185 122 633 490 531 613 163 1 010 682 2 237 009ECA-supported loan 171 397 65 653 132 339 - - 197 992Repurchase agreements 391 394 391 394 - - - 391 394Callable bonds 1 000 000 1 000 000 - - - 1 000 000Trade and other payables 3 836 712 3 836 712 - - - 3 836 712Provision for overload control 336 205 336 205 - - - 336 205Third-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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R '000 R '000


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 SANRALbonds held-for-trading. Liquidity in the market-making portfolio is managed by financial instruments having similar maturitiesand 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 inmarket 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 thisprice risk exposure through its treasury function which is responsible for the monitoring and management of the price risksin terms of guidelines set out in the Treasury Policy and Control Framework approved by the Board. The treasury function isalso responsible for identifying opportunities for the natural setoff of market risks and the management of the resultant netexposures in the most cost-effective manner through the operation of a market making portfolio. Price risk is accepted bythe Board on the company's liabilities in its funding portfolio held-for-trading as these liabilities fund long-term capitalexpenditure. Price risk before maturity is therefore unrealised.

Funding liabilities transferred from the market-making to the funding portfolios are classified as held-for-trading financialliabilities and are therefore carried at fair value. The fair value movements on these financial liabilities will not be realised asthese 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 assetsBond investments 317 157 636 814Fixed deposits 2 600 000 2 350 000Investments - repurchase agreements 1 352 635 3 066 066

Insurance receivable 329 739 289 093Financial liabilitiesCapital market loans (held-for-trading) 4 599 551 4 645 453Capital market loans (amortised cost) 22 833 437 22 701 033EIB loan 1 080 001 1 106 185

33 112 520 34 794 644

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Variable rate instruments

Financial assetsCall deposits 782 000 2 780 000Money market instruments 1 766 800 1 208 740Financial liabilitiesCPI-linked loan 267 606 468 074Capital market loans (amortised cost) 19 464 740 19 362 919ECA-supported loan 119 087 171 397Callable loan 125 000 1 000 000Repurchase 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 theamounts shown below. A decrease in 100 basis points would increase profit by the same amount. The analysis assumesthat all other variables remain constant. Variable rate instruments are capital market bonds held in the funding portfolio andmarket-making portfolio held-for-trading.

31 March 2017 31 March2016

R'000 R'000100 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 itscontractual obligations leading to financial loss.

Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. Thecompany only deposits cash with major banks with high quality credit standing and limits exposure to any one singlecounter party.

Credit exposure to any counterparty is managed by setting transaction exposure limits, as authorised by the Asset andLiability 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 arepresented net of the allowance for impairment.

The company is exposed to credit-related losses in the event of non-performance by counterparties of capital marketinvestments as well as a price risk in the event of the downgrading of their credit rating. Capital market investments are heldwith 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 entersinto contracts with any one party.

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R '000 R '000


Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. For the fair values of the financialinstruments refer to the fair values analysis in note 41 and 42. The maximum exposure to credit risk at the reporting datewas: `

Market-making investments - bonds 317 157 636 814Insurance receivable 329 739 289 093Trade and other receivables 5 366 829 7 050 155Cash and cash equivalents 6 570 000 9 490 108

Concentrations of credit risk Value Percentage Value PercentageR '000 % R '000 %

Market-making investments - bonds 317 157 %2 636 814 %4Insurance receivable 329 739 %3 289 093 %2Trade and other receivables 5 366 829 %43 7 050 155 %40Cash 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 beeninsured or adequately provided for.

Collateral is held against repurchase investments in the form of government or corporate bonds approved by the Assetsand 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 990Eastern Region 848 12Western 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 0888 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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R '000 R '000


Northern Region 120 580 61Eastern Region 8 197 (61 676)Western Region 36 173 28 880Southern Region 111 874 121 887Head 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 2016Gross Impairment Gross ImpairmentR '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 2016Gross Impairment Gross ImpairmentR '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 ImpairmentR '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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R '000 R '000


31 March2017

31 March2016

R '000 R '000Balance 1 April 421 286Impairment loss recognised 139 152Bad 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 March2017

31 March2016

R '000 R '000Balance 1 April 89 962 142 570Impairment 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 March2017

31 March2016

R '000 R '000Balance 1 April 1 882 1 650Impairment 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 areR1 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 thatare carried in the financial statements.

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R '000 R '000


Carrying values Fair value31 March

201731 March

2016 31 March

201731 March

2016R '000 R '000 R '000 R '000

Financial assetsInvestments - market-making 317 157 636 814 317 157 636 814Trade and other receivables 5 366 829 7 050 155 5 366 829 7 050 155Cash and cash equivalents 5 217 365 6 424 042 5 217 365 6 424 042Repurchase agreements 1 352 635 3 066 066 1 365 549 3 066 066

12 253 986 17 177 077 12 266 900 17 177 077Financial liabilitiesCapital market loan - funding 42 298 177 41 063 952 41 410 332 40 210 521Capital market loan - held-for-trading 4 599 551 4 300 953 4 599 551 4 300 953CPI-linked loan 267 606 468 074 270 400 478 930EIB loan 1 080 001 1 106 185 994 220 982 050ECA-supported loan 119 087 171 397 118 418 168 099Repurchase agreement 13 607 391 394 13 683 391 394Callable 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 exchangedin 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 carryingamounts 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 otherfinancial 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, operationand 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 thispurpose.

The concession contract with Trans Africa Concessions (TRAC) for the construction and maintenance of the N4 Tollhighway from the Gauteng-Mpumalanga border to the Maputo harbour (Mozambique) is for a period of 30 years, endingFebruary 2028.

The concession contract was extended from the Gauteng-Mpumalanga border to the Tshwane Metropolitan border. Anamount 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 theupgrading, maintenance and operation of the N1/N4 Platinum Toll Highway. The contract is for a period of 30 years, endingAugust 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 the2008 financial year. The concessions are for a specified period of 30 years. For the N1/N4 route no payment wasreceived from the concessionaire. Significant terms that may affect the amount, timing or certainty of future cash flows aresummarised below.

The concessionaires on the N3 and N4 Maputo Toll Roads are also required to pay SANRAL a Highway Usage Fee incertain circumstances (section 2.5 of the concession contract and annexure 15 to the concession contract). The HighwayUsage Fee is a mechanism for limiting the return on the project which can be distributed by the concessionaire to itsshareholders. 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 requiredto 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, theproperty is “under the care, custody and control of the concessionaire” and the concessionaire bears the risks associatedwith 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 orleasehold rights or any other rights” in the site and title to the site remains with SANRAL. SANRAL is required to ensure thatthe concessionaire has access to and the right of use in respect of the site and equipment (as necessary for it to perform itsobligations 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 orthings of geological or archaeological interest or burial sites” on the site during the concession period, these will be theproperty 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 theconcessionaire or any of the subcontractors for the purpose of the project is required to be transferred to SANRAL at theend of the concession period. Furthermore, the concessionaire is required to hand over the highway and its rights orinterest 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 theconstruction / repair of toll plazas)

Additional construction works relating to the road and related facilities (i.e ; required construction work other thanthe 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 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 toappoint 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 isrequired to approve any additional indebtedness of the concessionaire. SANRAL would take over the concessionaire'sindebtedness in the event of concessor (SANRAL) default.

Classification

SANRAL recognises no revenue from services provided to the public for these concessions, except where fees (HighwayUsage 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 2016Toll

operationsNon-toll

operationsTotal Toll

operationsNon-toll

operationsTotal

R '000 R '000 R '000 R '000 R '000 R '000Revenue 4 910 511 8 671 220 13 581 731 4 632 880 6 577 427 11 210 307GFIP grant 372 895 - 372 895 264 035 - 264 035Other income 787 436 346 395 1 133 831 502 360 357 985 860 345Other expenses * (6 155 412) (8 064 903) (14 220 315) (2 506 976) (5 543 855) (8 050 831)Earnings before interest, taxes,depreciation and amortisation (84 570) 952 712 868 142 2 892 299 1 391 557 4 283 856Depreciation 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 underconcession

(399 587) - (399 587) (378 845) - (378 845)

Amortisation (1 082) (3 675) (4 757) (1 415) (4 570) (5 985)Change in Fair value adjustment oninvestment property and Fair valueadjustment on Non-current assetsheld for sale.

161 074 356 977 518 051 76 972 21 622 98 594

Profit before finance income andcost

(1 367 691) (387 701) (1 755 392) 1 545 828 (66 308) 1 479 520

Finance income 1 354 107 7 686 1 361 793 957 077 5 196 962 273Finance 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:


operationsNon-toll


operationsNon-toll

operationsTotal

R '000 R '000 R '000 R '000 R '000 R '000Fees for services, other expenditureand lease payments

(40 045) (1 104 353) (1 144 398) (485 320) (1 534 103) (2 019 423)

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 2016Material non-cash items (otherthan depreciation andamortisation)

Tolloperations

Non-tolloperations

Total Tolloperations

Non-tolloperations

Total

R '000 R '000 R '000 R '000 R '000 R '000Change in fair value of investmentproperty

161 074 356 977 518 051 76 972 21 622 98 594

Exchange consideration from tollconcessionaires

563 755 - 563 755 427 577 - 427 577

Revaluation of road network andstructures assets

6 801 697 14 049 321 20 851 018 (5 606 353) 5 117 127 (489 226)

Revaluation of land 1 059 250 399 725 1 458 975 703 255 689 547 1 392 8028 585 776 14 806 023 23 391 799 (4 398 549) 5 828 296 1 429 747

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39. Segment information (continued)

31 March 2017 31 March 2016Statement of Financial Position Toll

operationsNon-toll


operationsNon-toll

operationsTotal

R '000 R '000 R '000 R '000 R '000 R '000Reportable segment assetsNon-current assetsInvestments - 329 739 329 739 - 289 093 289 093Property, plant and equipmentincluding those under concession,and Intangible assets

129 298 629 214 434 186 343 732 815 136 573 800 178 848 649 315 422 449

Investment property 1 163 168 723 428 1 886 596 1 057 685 366 486 1 424 171130 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 077Total assets 142 283 449 215 919 687 358 203 136 154 480 084 179 832 706 334 312 790

31 March 2017 31 March 2016Statement of Financial Position Toll

operationsNon-toll


operationsNon-toll

operationsTotal

R '000 R '000 R '000 R '000 R '000 R '000Reportable segment liabilitiesNon-current liabilitiesDeferred income * 737 024 45 910 519 46 647 543 737 025 41 149 548 41 886 573Deferred exchange consideration 7 543 032 - 7 543 032 6 763 926 - 6 763 926Other 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 554Current liabilities 4 152 696 2 830 698 6 983 394 11 102 186 274 366 11 376 552Total 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 2016Capital expenditure Toll

operationsNon-toll


operationsNon-toll

operationsTotal

R '000 R '000 R '000 R '000 R '000 R '000Additions to property, plant andequipment

1 890 494 5 862 664 7 753 158 1 304 773 6 081 850 7 386 623

Property, plant and equipment -borrowing costs capitalised to work inprogress

100 988 - 100 988 141 082 - 141 082

Additions to intangible assets 750 5 069 5 819 1 637 21 043 22 6801 992 232 5 867 733 7 859 965 1 447 492 6 102 893 7 550 385

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39. Segment information (continued)


operationsNon-toll


operationsNon-toll

operationsTotal

R '000 R '000 R '000 R '000 R '000 R '000Capital expenditure - assets underconcession

1 479 039 - 1 479 039 1 082 919 - 1 082 919

Capitalisation/(utilisation) ofrehabilitation costs for borrow pits

(21 256) 24 552 3 296 1 813 4 141 5 954

Amendments to internal reporting organisation

No changes were made to the structure of SANRAL's internal organisation that causes the composition of its reportablesegments to change.

Entity-wide disclosures

All of SANRAL's operations are situated within South Africa. All revenues from external customers, as well as non-currentassets, are attributable to SANRAL's South African domicile.

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40. Irregular, fruitless and wasteful expenditure

31 March2017

31 March2016

R '000 R '000Supply chain policy not adhered toOpening balance 9 709 256 8 552 961Add: Irregular expenditure - current year 424 949 1 156 295Less: 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 classificationCurrent year 424 949 1 156 295Prior year 9 709 256 8 552 961Total 10 134 205 9 709 256

Details of irregular expenditure - current yearCompetitive bidding process not followed 549 -Deviations approved by the accounting authority as urgent procurement - 2 408Bid not awarded to the lowest bidder 33 -Awarding of preference points to tenders without original or certified BEE certificates 134 493 39 531Procurement model for routine road maintenance projects 134 037 1 109 714Deviations not done under emergency, sole provider circumstances or impractical togo out on competitive bidding

9 423 941

Invalid tax clearance certificates 7 798 -Takeover of site and materials testing - 2 350Contracts not advertised for at least five working days 78 008 -Extended contracts 14 487 -Conflict of interest 3 734 1 324Deviations approved by the accounting authority even though it was practical to invitecompetitve bids

1 263 -

Bid not evaluated for preference points 41 093 -Quotations not invited 31 27

424 949 1 156 295

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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. Theoutcome of the investigations and any action taken will be reported and the amounts classified as irregular if found to befraud 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 appointinga service provider above the threshold of R500 000. At the time the price excluding VAT was below the limit but with VATincluded, it surpassed the threshold and tenders should have been called for. This has led to irregular expenditure in theamount 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, thesuccessful bidder could not provide SANRAL with all of the documentation required in terms of the Financial IntelligenceCentre Act and subsequently the second lowest bidder was awarded the contract. In the second instance, the lowestbidder could not deliver the required goods as per the quotation to SANRAL and the next bidder was finally awarded thequote. 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 anoriginal or certified copy of the successful tenderers BBBEE certificates in hand, but only copies thereof, resulted inexpenditure 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 aProcurement 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 (ofwhich 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 besustained. Due to the smaller economy of scale of work packages the realistic rates at which SMMEs can do the work for afair price is generally higher than a main contractor.

SANRAL uses a proven mathematical equation, calculated independently by the University of Pretoria, to determine thelowest acceptable tender price that allows the appointment of a contractor with the most realistic and lowest acceptablerates at which SMMEs can do the work and be financially viable. The tender methodology and adjudication method areclearly stipulated in the tender documentation and is fair and reasonable to SMMEs and the management contractor. Thedeviation 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 statisticalmethod. 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 documentationto unbundle the project into smaller portions. The unbundling of the projects into smaller projects was as a result of a policychange that the Board was investigating at that stage to encourage transformation of the industry and especially allowinglower grade CIDB contractors the opportunity to compete. The extensions are not justifiable as it did not constitute anemergency, 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 heldfor architects to submit designs for the Tshwane Bus Rapid Transit stations and as a result the winner of the competitionretained copyright and therefore SANRAL had no other avenue than to accept that the winning architect must be seen as asole provider and hence competition for the further work could not be sourced. It also needs to be pointed out that in orderfor SANRAL to minimise its risk, especially in terms of professional indemnity it is common practice in the built environmentthat the consulting engineer, or architect in this case that came up with the design also do the supervision of theconstruction.

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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 theJustice of the Peace and Commissioner of Oaths Act, 1963 (Act 16 of 1963). The certified copies are not acceptable basedon a paragraph on the certificate from SARS that indicates that photocopies are not acceptable. One project to the value ofR4 394 258 was awarded on a Tax Clearance certificate that was found to be possibly fraudulent that will form part of aninvestigation.

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 firstclarification 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 inanticipation of obtaining National Treasury's approval of longer extensions of the contracts. Subsequently National Treasuryhas approved the further extensions and confirmed it to be justifiable. However, the approval from Treasury did not indicateapproval for the initial short period, between the end of the contract and having received National Treasury’s approval andare 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 interestamounted to irregular expenditure for the 2016/17 financial year of R3 734 403. Disciplinary action was undertaken againstemployee.

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 approvedas a deviation from normal SCM procedures due to the specific circumstances relating to each project. Disciplinary actionagainst 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 evaluationphase not all bidders were evaluated for price and preference. Mathematically, based on the tendered price, a number ofbidders would have scored such a low score on price alone that such bidders would not have been in contention for winningthe tenders. In many cases they would have achieved negative scores. These bidders were not taken into account in thefinal 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 ableto provide the full required services and was subsequently awarded the quotation. The deviation and the reasons for nothaving at least three quotations were not separately approved.

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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 dueto the condition of a road. Therefore all SANRAL roads have a routine road maintenance contractor on site continuously onall national roads.

Due to a contractor being under investigation for unethical business practices, the extension of a routine road maintenancecontract was not exercised, However, to limit the exposure to public liability, another contractor was appointed in theinterim, until a public tender could be concluded for the said project. The deviation was approved by the AccountingAuthority.

A similar situation arose where another contract was terminated due to lack of performance by the contractor, but thecontractor then commenced with legal action to prevent the termination. The Executive Authority decided not to award anyfurther contracts to this contractor, until the matter was concluded. This necessitated the urgent procurement, which wasapproved 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 orcertified copy of the certificate. Four tenderers were awarded contracts to the value of R39 530 882 without submittingoriginal 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 aprocurement 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 toSMMEs, 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 ofsustaining. Due to the smaller economies of scale of work packages, the realistic rates at which SMMEs can do the work fora fair price is generally higher than a main contractor.

SANRAL uses a proven mathematical equation, calculated independently by the University of Pretoria, to determine thelowest acceptable tender price that allows the appointment of a contractor with the most realistic and lowest acceptablerates at which SMMEs can do the work and be financially viable. The tender methodology and adjudication method areclearly stipulated in the tender documentation. This is fair and reasonable to SMMEs and the management contractor. Thedeviation from PPPFA has not been approved by the Minister of Finance.

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The disclosed amount is the remaining balance of the RRM contracts awarded using the University of Pretoria statisticalmethod. 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

Due to tender for website and other communication platforms not being awarded, the delay necessitated the extension ofthe existing website service provider, for R15 603, until the re-tender was concluded. The delay could not have beenforeseen 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 onits market analysis.

A contract to the value of R559 854 was awarded without following the competitive bidding process, due to the naturalcontinuation of a previous engagement, as allowed in the National Treasury Regulations, which proved to be more costeffective.

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 materialstesting laboratory not performing to the required standards. After following the contractual mitigation measures it wasdecided with all parties' agreement, to cede the contract to a new laboratory able to perform the work. The new laboratorystarted 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 matteris 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 March2017

31 March2016

R'000 R'000Cancellation 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 intosmaller projects was as a result of a policy change that the Board was investigating at that stage to encouragetransformation of the industry and especially allowing lower grade CIDB contractors the opportunity to compete, which withlarger 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 hadto be paid to the service provider as the Scheme Developer in the event that the project will not go ahead. Compoundinterest was paid while the agreement was silent as to whether interest is compounded or simple, therefore simple interestshould have been paid and not compound interest, the difference between the two is fruitless and wasteful expenditure.

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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 8Investments - market-making 317 157 636 814

Cash and cash equivalents 11Cash 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 209Capital 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 119Capital market loan - held at amortised cost 41 410 332 42 063 951Total other 41 424 015 42 455 070

Level 2


Liabilities

Other 14EIB loan 994 220 982 050N1 loan 270 400 478 930ECA loan 118 418 168 099Total other 1 383 038 1 629 079

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41. Fair value information (continued)

Information about valuation techniques and inputs used to derive level 2 fair values

N1 Loan

Valuation technique

The N1 Loan is an inflation linked amortizing loan where the future monthly real payments are predetermined. These realpayments 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 31March 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 R700000).

EIB Loan

Valuation technique

The EIB Loan is an amortizing loan in two tranches, each tranche payable semi-annually. The tranches are notsynchronised, 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 equatesto 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 R11950 000).

ECA Supported Loan

Valuation technique

The ECA loan is non-guaranteed and amortizing with quarterly payments. Because the total facility was never drawn downand capital repayments are based on the total facility, it results in a rapid repayment of the loan. The interest rate on thisloan is linked to 3-month Jibar.

Spreads on non-guaranteed SANRAL debt have widened significantly over the last two years. Spreads vary from 180 pointsfor short-dated bonds to 275 points for longer-dated bonds. A spread of 250 points for this loan was assumed. TheBEASSA curve as at 31 March 2017 was used and 250 basis points (31 March 2016" 225) was added to the total. Theoutstanding payments were discounted using the rates derived as described.

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R '000 R '000


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


Assets Note(s)

Investment property 6Investment property 1 812 370 1 404 075

Property, plant and equipment including concession assets 4 and 5Land 20 213 288 18 687 010Road network and structures 303 857 226 279 856 799Total property, plant and equipment 324 070 514 298 543 809

Trade and other receivablesTrade and other receivables 5 366 829 7 050 155

Trade and other payablesTrade and other payables, 4 803 541 3 836 712Third-party funding 316 919 331 479Provision for overload control 339 787 336 205Total 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 5Investment property 74 226 20 096

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Information about valuation techniques and inputs used to derive level 3 fair values

Land

Valuation technique(s)

The valuation technique adopted for land is based on the “across the fence” method using comparable sales (stripvaluation).

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 financialyear.

As a result the total land area increased by 3 249ha (3.27%). The average strip value increased from R521 805/ha to R579587/ha (11.1%). In areas of high economic activity, strip values increase by much higher values due the adjustments todevelopment rights and updated sales information that became available. For 2016/17 financial year the market value ofthe 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


Direct comparison of selling prices achieved in respect of comparable prices.


Selling prices of comparable properties. Subjective adjustments by the valuer to account for differences between thesubject property and comparable properties sold in terms of location, physical features, current and future land use aswell 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 IPpolicy 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 otherreceivables.


Discounted cash flows using SANRAL's weighted average overdraft rate for consumers


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. Therate for 2016/17 was 9.6605%

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Road network and structures

Valuation technique

Depreciated replacement cost


Replacement cost

SensitivityThe 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 provincesduring a year, as well as the upgrading of roads from single carriageway to four-lane road or dual carriageway, impacts onthe value of assets, as asset value is calculated for every carriageway km of road as at 31 March of each year. For the2015/2016 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, labourcosts, market conditions (supply and demand that determines mark-up of contractors). For the 2016/17 financial year theunit rates increased by +9.95%.

Change in condition: Since the depreciation of the pavement layer component and the structures component are directlyrelated to condition of the asset, deterioration in condition ( due to traffic and climate) will result in a decrease indepreciated replacement cost. The opposite also applies if the condition of asset improved due to maintenance actions. Ascan be appreciated, for each carriageway-km as used in asset valuation, the condition will be changing based on numerouslocal 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. Forthe 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) ontoday's prices, based on the traffic expected over the next 25 years, the impact of change in traffic is obvious. If the roaddesign class is close to a transition interface, then a small increase in traffic over year, can result in a change in the MEArequired (more layers and/or higher quality materials), with associated cost increases for specific road assets. The oppositeapplies if the traffic decreases. SANRAL has over 1 000 traffic monitoring stations on the network. On some sections trafficincreases and on others it decreases from one year to another. For the 2016/17 financial year the length of network withmore 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 ofpaved shoulders, addition of lanes, addition of climbing lanes will increase the replacement cost of each carriageway-km ofroad 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

While preparing the financial statements of the company for the period 31 March 2017, management discovered that theclassification of non-current and current borrowings was done incorrectly in the 2016 financial year. The total liabilityamount 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 theaccounting error. The prior period error resulted in the following restatements:

2016R'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 bankcharges relating to conventional tolls for the previous financial years were not being expensed but rather capitalised tooperator debt (Trade and other receivables)

2016R'000

2015R'000

Decrease in retained earnings 36 397 359 090Decrease 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 anunderstatement of third-party funding and an understatement of Trade and other receivable. The correction resulted in thefollowing adjustments:

2016R'000

Increase Trade and other receivables 20 401Increase 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 wasunderstated in 2016. The correction resulted in the following adjustement

2016R'000

Decrease in retained earnings 45 708Decrease 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 theprobability criteria was recognised as revenue in the 2015/16 financial year. The correction resulted in the followingadjustment

2016R'000

Decrease in retained earnings 167 004Decrease in VAT payable 23 381Decrease 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 wereincorrectly capitalised as the road network. This resulted in a misstatement between the road structures and road network.The correction resulted in the following adjustment:

2016R'000

2015R'000

Increase in cost of road structures 137 330 289 744Decrease in cost of road network (138 623) (231 840)Decrease in accumulated depreciation for road network 137 329 289 744Increase in accumulated depreciation for road structures (137 329) (289 744)Decrease in revaluation reserve - structures 937 777 2 907 315Increase 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 assetsaccumulated depreciation was misstated. The correction resulted in the following adjustment:

2015R'000

Decrease in accumulated depreciation road structures 26 128Decrease in accumulated depreciation buildings 11 612Decrease in accumulated depreciation equipment 4Increase in accumulated depreciation road network (45 012)Decrease in retained earnings 7 268Increase in road network revaluation 45 012Decrease 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 buildingwhich was not accounted for. The correction resulted in the following adjustment:

2016R'000

2015R'000

Increase in buildings - 189Increase in accumulated depreciation (4) (61)Decrease / (Increase) in retained earnings 4 (128)

- -

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Notes to the Financial Statements42.9 Plaza buildings

During the preparation of the current financial statements, SANRAL's management noted that there were plaza buildingswhich were misclassified under road network. The correction resulted in the following adjustment:

2016R'000

2015R'000

Increase in buildings - 68 132Decrease in road network - (68 132)Decrease in accumulated depreciation roads network 1 292 10 229Increase 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 2017to Ba1 from Baa3, long-term, and NP from P-3 for short-term. The national scale rating was affirmed at Aa3, which ispositive because SANRAL has only issued in the domestic market to date. The ratings agency’s view of the sovereign creditrisk had a significant impact on this move to downgrade most SOCs. In addition, Moody’s cited SANRAL's ability to enforcee-toll payments are largely dependent on the continued support of Government and this together with high level debts and aweak liquidity position stemming from continued opposition to the open road toll project, GFIP, are reasons for the ratingsreview. 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 workingwith government (Department of Transport and National Treasury) with regards to increasing the maximum aggregateamount guaranteed in order to provide greater headroom for subsequent placements under this DMTN Programme and toensure that all indebtedness under this Programme remains guaranteed. In the same announcement, government (NationalTreasury) has indicated that its intention was that the guarantee utilisation be measured in nominal terms with regard to theinflation 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 amendedguarantee, clarifying that the limit of R31.91 billion is measured at nominal and confirming that government is liable for anyand 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 SANRALsauthority to levy and collect toll on the Gauteng Freeway Improvement Project (GFIP), SANRAL considered agreeing to atest case with one of these groups, Organisation Undoing Tax Abuse (OUTA). The test case would have brought a singlenon-payer to Court to argue the legal opposition to SANRAL’s authority to levy and collect the toll. However, due to OUTArepeatedly delaying the progress of the case, SANRAL eventually abandoned the process in order to fast track the civilclaim process against the individual entities and persons owing the debt. The value of this subsequent event cannot bequantified.

N3 Pedestrian bridge

In the early hours of 9 August 2017 a closed pedestrian bridge collapsed on the N3 highway in Gauteng. SANRAL andother third parties have provided evidence to the investigators, including the insurer, to determine the cause and thedamage 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 wasbased on the estimates made before the projects were awarded.

Subsequently, the Presidential Infrastructure Coordinating Commission reached a settlement agreement with theconstruction cartel and requested SANRAL to rescind its claim. The agreement was announced on 20 October 2016 byMinister in the Presidency, Jeff Radebe. The contractors are required to contribute to a (Tirisano) development fund. Thefund is meant to be used for skills development in the construction industry. The contribution amount is R125 million perannum for a period of 12 years. The contributions will be made to the National Revenue Fund, and will be appropriated tothe Department of Economic Development.

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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 goingconcern, in preparing financial statements. It further indicates that it is a requirement to prepare financial statements as agoing concern, unless the management either intends to liquidate the entity or to cease trading, or has no realisticalternative 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 isregarded 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 nationalasset 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 toR13 490.5 million. Since inception this grant has been increased annually by more than the annual inflation. This amountcovers the operational and capital expenditure for 86 percent of SANRAL’s portfolio, being the non-toll roads. The BudgetVote 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 yearunder review and is expected to increase annually with traffic growth and tariff adjustments. During the same period GFIPcollected R1 850 million and received the additional grant from the fiscus of R372.9 million. Due to the low collection rate onGFIP, the cash receipt projections are assumed to be the same as the past 8 to 10 months in order to have a conservativeforecast. The Board has requested the shareholder to address the impact of the poor collection rate with Cabinet to ensurethe sustainability of SANRAL.

In reviewing the cash requirements for the next 12 months to September 2018, SANRAL requires a minimum of R2 561million. If the redemption of the NRA018, which matures in November 2018, is added this amount increases to R5 531million. During 2016 SANRAL was able to have successful auctions and private placements which raised R4 600 millionand SANRAL managed to successfully refinance more than R3 000 million of maturing debt. SANRAL’s funding strategy for2017/18 includes auctions and private placements as well as extending the use of R1 billion of facilities. In the currentmarket conditions where local investor sentiment is negative towards long-term investments, short-term floating rate notesare 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 Futuregrowthmoratorium from 2016. During late June and July of 2017, informal discussions with brokers, banks and investors indicatedan appetite for three- to seven year paper from SANRAL. Corporate issuers have had huge success in issuing shorterdated bonds. In July 2017, Futuregrowth lifted its moratorium on trading in SANRAL debt. It should also be noted thatSANRAL’s local scale rating was affirmed and therefore the same as in 2015 to 2016 when we were fairly successful inplacing 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 onlybe breached in February 2019. Apart from the conservative approach to GFIP receipts, the projections assume no new tollroads and limited capital expenditure on roads, where possible but without compromising the asset. The request to increasethe 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 anadditional grant of R372.9 million per annum, adjusted with inflation, to supplement GFIP revenues. This clearly reflectsgovernment’s continued support for SANRAL.

SANRAL has the option of issuing non-guaranteed debt under the R15 billion non-guaranteed DMTN programme; R4.1billion, 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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45. Going concern (continued)South African National Roads Agency and National Roads Act No 7 of 1998.) This is an implied guarantee from theRepublic.The Board of Director’s therefore supports management’s assessment that SANRAL will remain a going concern in theforeseeable future.

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THE SOUTH AFRICAN NATIONAL ROADS AGENCY SOC LTD (SANRAL) Head office

48 Tambotie AvenueVal de Grace

PretoriaPO Box 415

Pretoria 0001

South Africa

Tel: +27 (0) 12 844 8000Fax: +27(0) 12 844 8200

www.sanral.co.za

Registration Number: 1998/009584/30RP 179/2017

ISBN: 978-0-621-45547-2

Produced by Communications and Marketing

SANRAL, PretoriaTel: +27 (0) 12 844 8000

[email protected]

Contact Details for SANRAL’s Fraud Hotline/Tip-Offs AnonymousToll-Free Phone No: 0800 204 558

Toll-Free Fax No: 0800 007 788E-mail: [email protected]

Postal address:Tip-Offs Anonymous

Freepost DN 298Umhlanga Rocks

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