The South Africa to Mozambique toll road refinancing

The South African National Roads Agency (Sanral) and its Mozambican partners, Administracao Nacional de Estradas (ANE), last month closed the R2.9 billion (US$480m) refinancing of the Maputo Development Corridor (MDC) toll road - a deal that was pushed through by the operator Trans African Concessions

The initial project was first launched in 1995 - the year after both South Africa and Mozambique held their first democratic elections following the end of apartheid and a peace treaty between Frelimo and Renamo - the MDC plan was one of Africa's most ambitious regional development projects.

Prior to these historic events, the political environment did not promote trade links between the two countries. That changed back in 1995 and the toll road linking the two countries was pushed through as a bellwether for deals to come.

Both governments agreed to facilitate the construction and repair of the transport infrastructure along the route between Johannesburg and the Mozambican capital to revive trade and attract foreign investment.

This road was a pathfinder as South Africa's first significant project finance deal, as well as being one of several Spatial Development Initiatives (SDI) promoted by the government at the time.

The MDC had been an important trade route since gold was discovered at Johannesburg, and Maputo remains the logical port for South Africa's Mpumulanga province, as well as for much of Gauteng.

The Implementing Authority - a joint body set up by both Governments - issued the invitation to tender in March 1996. It required respondents to submit detailed proposals relating to technical, commercial, financial, empowerment and other aspects of the project.

Three short-listed consortia submitted initial bids in June 1996, and following a process of evaluation, the Implementing Authority reduced that to two consortia in August 1996.

BAFOs were submitted on 13 November 1996 and soon afterwards TRAC was named preferred bidder and was invited to negotiate the concession contract with the implementing authority on 5 December 1996.

On 5 May 1997, the concession contract for the Maputo Corridor Toll Road Project was signed between:

  • Republic of Mozambique
  • Republic of South Africa
  • South African Roads Board
  • Trans African Concessions (TRAC)

Financial close for the initial project was reached on 6 February 1998.

The concession contract for the design, construction, rehabilitation, financing, operation, maintenance and future expansion of a portion of National Route 4 from west of Witbank in South Africa to Maputo in Mozambique as a toll road, was signed together with the construction of five toll plazas and other facilities along the route.

The contract was worth R3bn (1996 rate of exchange) over 30 years with a total of R1.5bn allocated over the initial three-and-a-half years.

During 2004 an additional contract was signed adding the section of the N4 from Balmoral to the Hans Strydom off-ramp in Pretoria to TRAC's responsibilities. It included the Diamond Hill Toll Plaza as well as eight ramp plazas.

TRAC started work on the 525km, R1.5 billion (1998 Rand) toll road between Witbank and Maputo soon thereafter.


The MDC was one of the most ambitious initiatives undertaken within the Southern African region, stretching from near Gauteng in South Africa to Maputo in Mozambique.

The project was part of a wider ambition - to rehabilitate the core infrastructure, including road, port and dredging, electricity and the border post within the Corridor, through PPPs.

The Maputo Corridor Logistics Initiative, was created by the business sector involved to assist with and facilitate co-operation and networking locally and internationally between South Africa and Mozambique.

The Corridor has four key objectives:

  • to rehabilitate the core infrastructure along the Corridor with minimum impact on the fiscus (road, rail, port, dredging of port and border post)
  • maximise investment in both the inherent potential of the Corridor area, and added opportunities which infrastructure rehabilitation will create
  • ensure sustainability by developing policy, strategies and framework that encompass a holistic, participatory and integrated approach to development
  • ensure that the development impact of this investment is maximised, particularly to disadvantaged communities by changing the ownership base

The need to upgrade this important transport route from Witbank to Maputo was identified as a key element of the MCDI.

The objective of both governments to introduce private sector funding of the national road network has led to the development of the project on a BOT basis.


The motivation to refinance was obvious. The section of the N4 road, linking Pretoria to Maputo, was now being managed and operated by TRAC under a 30-year concession contract with the South African and Mozambican governments.

In its favour, it had a steady track record, greatly improved risk profile, established traffic patterns and market conditions which created an ideal opportunity for refinancing.

It also brought about an opportunity to revisit the obligations imposed by the first arrangement for the two governments and all major shareholders and lenders.

Investec and Standard Bank acted as the underwriters and mandated lead arrangers on the refinancing - which also covers debt funding for the TRAC Extension, 59km of toll road to Pretoria, which the consortium bagged as an operational concession in 2004. Societe Generale acted as financial adviser to the concessionaire, while Banco Espirito Santo acted for the implementing authority.

TRAC is funding itself through the issue of senior debt, synthetic CPI facilities (which rank parri-passu with the senior debt) and subordinated securities.

The facilities are:

  • senior bank facilities amounting to US$475 million
  • synthetic CPI facilities of US$99 million
  • subordinated standby facility US$20 million

TRAC's original shareholders comprised a consortium of local and international contractors and toll road operators led by Bouygues.

The new shareholders reflect the change in risk profile and have a far more local flavour. They are:

  • South Africa Infrastructure Fund with 44 per cent
  • CDC Group (27 per cent)
  • Africa Infrastructure Investment Fund (6.1 per cent)
  • Sanlam (4.5 per cent)
  • Old Murual (3.2 per cent)
  • SDMC (8 per cent)

By the end of this week (12 May 2006), CDC (through ACTIS) will have sold their shares - mostly to the Macquarie-backed SAIF and AIIF. Other players are expected to pick up some shares through their pre-emptive rights, but the Macquarie team is expected to end up with around 75 per cent of TRAC.

The drawdown at refinancing - around R2.8 billion (US$464m) - will be used to pay down R1.8 billion (US$298m) in existing debt, with the rest paid back to shareholders and used to pay off a number of expenses.

To enhance flexibility, the CPI-linked senior debt is being replaced with a synthetic CPI facility.

One credit enhancement feature previously featured in the structure was the Debt Service Reserve Account - which has now been replaced by the subordinated debt facility of R121 million.

The syndication process is well underway and it is expected to close by the end of May.


The refinancing of the MDC represents a considerable achievement for South Africa and Mozambique, as it is the first refinancing of a PPP project and the largest transport deal ever in South Africa.

This project was not only the first BOT project it was a pathfinder deal for project finance in this region of the continent. However, it proved a success from the start with an annual compound growth rate of 5.6 per cent in the five years ended September 2005.

It was also quite a feat as it ranges across borders and required substantial attention to legal detail to hammer out the respective legal positions of the South African and Mozambican governments.

In addition to all the obvious economic knock-on effects, the MDC was the forerunner of black economic empowerment (BEE) in the roads sector as it went hand-in-hand with the empowerment of communities along the way by means of targeted procurement, training and skills transfer.

That the first project closed was impressive and that the toll road proved itself to be viable and financially sound allowed it to be refinanced so soon after the original deal closed.

The project at a glance

Project Name The South Africa to Mozambique toll road, the N4 Maputo Corridor
Location South Africa
Description Refinancing of the toll road stretching from near Gauteng in South Africa to Maputo in Mozambique
Sponsors South African National Roads Agency (Sanral)
Mozambique's Administracao Nacional de Estradas (ANE)
Operator Trans African Concessions (TRAC)
Project Duration
(Including construction)
30 years
Total Project Value US$475 million
Total senior debt Refinanced debt - US$426 million
Total Mezzanine US$19 million sub debt
Mandated lead arrangers Standard Bank of South Africa
Investec Bank
Participant banks Still to be sold down in the market
Legal Adviser to TRAC Bell Dewar Hall
Financial Adviser to TRAC Societe Generale
(London Office)
Legal adviser to banks Deneys Reitz
Financial adviser to concessionaire Societe Generale
Legal adviser to government White & Case
Financial adviser to government Espirito Santo Investment
(London office)
Date of financial close 27 March 2006