Historic overview of the N4 toll concession

In 1994,with the election of a democratic South African government, the governments of South African and neighbour Mozambique conceptualised the development of a corridor between Pretoria in Gauteng and Maputo in Mozambique, and to re-establish trade links between the two countries. The heads of States at that time were presidents Nelson Mandela and Joachim Chissano.

Called the Maputo Development Corridor Initiative, the aim was to develop the N4 route to such an extent that it would facilitate the stimulation of trade and investment in the region and provide access to global markets through the Port of Maputo. The port, closer and more conveniently situated to landlocked industries in Gauteng, Limpopo and Mpumalanga than those in Richards Bay and Durban, had been under-resourced and under-utilised for many years because of sanctions against the apartheid government and the devastating consequences of the civil war that followed independence in Mozambique. To turn it into an important export and import harbour, it would undergo upgrading projects which, in turn, ultimately would benefit the entire region. These included the dredging of the port’s deep-water channel to increase its depth from 9.5m to 13.5m, which would double the tonne capacity of vessels able to pass into the port from 30 000 to 60 000.

By April 1995 the governments of South African and Mozambique had reached a series of agreements and had invited bidders to tender for the transformation of the N4 into the Maputo Corridor toll road. It would have to be a private sector-driven project, which required the establishment of a public-private partnership that could remove the route’s operational, maintenance and rehabilitation costs from the two governments’ operational budgets. Equally important, the bid would have to include socio-economic outcomes through a social contract. This would enable the empowerment and upliftment of communities in the immediate vicinity of the N4 through social and entrepreneurial development, job creation, and training and skills transfer in a variety of fields but, specifically, the construction industry.

By December 1996, TRAC had been named the preferred bidder after a bid development process that cost about R50-million. TRAC comprised a partnership between the French construction multinational Bouygues, and South African construction companies Basil Read and Stocks & Stocks. While TRAC would be responsible for carrying out the terms of the 30-year concession to build, operate and maintain the toll road, it appointed SBB, a joint venture between the three construction companies, to undertake the initial construction work, which lasted three-and-a-half years.

In May 1997, the concession documents were signed by TRAC and the South African and Mozambican governments, represented by their respective national roads agencies, SANRAL and ANE. By December that year, TRAC had raised the required initial R1.3-billion finance for the project.

Construction began of the Middelburg Toll Plaza, which would be the first of three plazas along the N4 in South Africa, with another two in Mozambique. Over the first three-and-half years, R1.5-billion of the contract’s R3-billion price tag was spent on upgrading the road and services, while another contract was signed in 2004 to add a section of the N4 from Balmoral to the Hans Strijdom off-ramps in Pretoria. This led to a fourth toll plaza in South Africa, Diamond Hill in Pretoria, and brought the number of toll plazas to six across the route’s total length.

The N4 is what is known as a BOT (build, operate, transfer) toll road. The two states, South Africa and Mozambique, remain the legal owners of the land on which the N4 is built and will reassume responsibility for the road once TRAC’s concession expires – after 30 years, in 2027. The economic life span of a road is around 20 to 25 years. But, because of TRAC’s continuous maintenance and rehabilitation of the N4 during the concession period, the two governments will be handed back essentially a new road. It is projected that the South African government will save R32-billion over the 30-year concession in maintenance costs on the N4 stretch inside the country.

Since the N4 toll road and its toll plazas – the facilities – were financed, designed and either rehabilitated or built, the concession’s objective has shifted to their operation, maintenance, upgrading and future expansion, in other words, providing services through the management of the facilities.

Benchmark public-private partnership

The concession represents a benchmark public-private partnership with the governments of South African and Mozambique, the private sector and the communities along the route, with each party sharing in the associated risks and rewards of the project. Along with railways, hospitals and prisons, roads are regarded as projects highly suitable for public-private partnerships. That’s because the public sector does not buy an object but a service, and many associated risks are transferred from the state to the private sector. 

SANRAL and ANE

Having signed a concession with the South African National Roads Agency Limited, which is the route’s implementation agent, TRAC can charge toll fees to manage, fund, upgrade and maintain the N4 in South Africa. http://www.sanral.co.za

It has a similar agreement with the National Roads Administration of Mozambique, the ANE (AdministraçãoNacional de Estrada) for the EN4.http://www.ane.gov.mz

Funds generated are spent on the N4 only, while tax-based revenue, as allocated by the national treasury, pays for the construction and upkeep of all South Africa’s national, provincial and local non-toll roads.