Transport Entities on their 2009/10 Annual Reports: hearings

Meeting report

Opening remarks by the Chairperson
The Chairperson commented that there was a ruling party in South Africa. Parties won elections on the strength of their manifestos. The people then expected the party to deliver, what it had promised the voters. The Department of Transport (DoT) had to consider to what extent its programmes addressed the needs of communities. What an entity within a department had to consider was to what extent its programme fitted into the departmental programme of addressing the needs of communities.

When looking at a strategic plan, one had to ask what was achieved. The Auditor-General’s report stated whether the financial report of the departments achieved a qualified or unqualified audit. However, a clean audit, if and when achieved, was not enough. The Portfolio Committee wanted to see that the funds that the Department had spent, made a real material difference to the lives of poor South Africans.

The Portfolio Committee did not only rely on the Department and the entities to decide how the money had to be spent. The Committee also had to give input, based on what they observed during their constituency work and their engagement with communities. This was an activist Parliament, in other words, it looked at service delivery from a developmental perspective. Not only infrastructure, but also economic and social development had to be delivered to the communities

The Portfolio Committee would look at the annual report presentations against the background of what it had learnt from its engagement with the Auditor-General as well as what the entity presented as its strategic plan.

The Chairperson explained the Committee’s choice to have the Annual Report presentations in the form of a hearing. It was to allow all entities in the Department of Transport (DoT) family to hear the reports of other entities. By hearing each other’s Annual Reports, the entities could learn from each other and advise and assist each other in order to resolve problems in their respective organisations. It also created deeper insight and understanding within the entities of the functioning and role of the other entities, and areas of cooperation and synergies would be identified. The Chairperson stressed the fact that the Committee and the DoT and its entities were one team, and if any part of it did not perform, the whole team failed. Only one entity was excluded from this meeting, the Road Traffic Management Corporation (RTMC) There was a problem with that entity and the Committee would wait for the Minister to give direction in that regard. The Committee would listen to all the presentations after which the discussion would take place.

Airports Company South Africa (ACSA) 2009/10 Annual Report
ACSA CEO, Ms Monhla Hlahla, spoke of the highlights:
▪ Over the period of the investment cycle that ran from 2008 to 2010, it spend R 6.6 billion to build King Shaka International, R2.3 billion to upgrade OR Tambo and R1.6 billion to upgrade Cape Town International Airport. All work was completed within the allotted time and within budget. ACSA facilitated the FIFA Soccer World Cup Tournament seamlessly.
▪ It managed to obtain the appropriate funding for the capital investment, despite the economic recession. It invested R70 billion in infrastructure and other necessities. Although it was paying off its debt, it generated enough revenue to manage it well and remain liquid.
▪ Revenue increased by 12% to R3.5 billion although passenger traffic decreased by 2% to 16,5 million, but. The net earnings, including profits on sale of assets, increased to R 901 million and Capital Expenditure increased to R 5.2 billion.
▪ Baggage pilferage was reduced due to the implementation of a new baggage handling system. Punctuality had improved in terms of scheduled departure times.
▪ In terms of compliance to Broad-Based Black Economic Empowerment (BBBEE), R7.6 billion of its total expenditure of R9.1 billion went to black-owned businesses, of which 11.5% was black women-owned.
▪ ACSA had been managing Mumbai Airport for four years and was looking to derive revenue from similar contracts in other parts of the world. It successfully shut down Durban International Airport and started up King Shaka International Airport within 6 hours. This showed the level of skill it had developed in its workforce.
▪ By extending the retail space in airports, many job opportunities were created. Airports also formed hubs which generated the development of a host of related industries around it, creating even more jobs.

Road Accident Fund (RAF) 2009/10 Annual Report
RAF CEO, Mr Jacob Modise, noted that motor vehicle fatalities dropped  from 15 419 in 2006 to 13 768 in 2009. Of these, 4 678 were pedestrians, 4 066 were drivers and 5 023 were passengers.

Challenges facing the RAF were dissatisfied and disillusioned stakeholders, inadequate systems and processes, prevalence of fraud and corruption, high legal costs, an unsustainable economic model and poor financial health. The actions it undertook to resolve its challenges were to move towards a more efficient and client centric RAF, to support the DoT in the implementation of the no-fault defined benefit accident compensation system, as well as the Revenue Requirement Model. Other key challenges were constitutional challenges to the RAF Amendment Act, the implementation of no-fault, and effecting amendments to the current Act to reduce subjectivity. Financial challenges were short-term liquidity constraints, long-term re-capitalisation and the utilisation of the Revenue Requirement Model. Fraud and corruption stemmed from a lack of proper systems and controls in IT, finance and payroll, as well as manipulation by corrupt lawyers, over-servicing by corrupt doctors as well as uncooperative and corrupt police officials.

The net fuel levy income was around R 10 million for the year. As a result the RAF could only pay out claims to the amount of R10 million, but it had accumulated a deficit of R40 million over 30 years, which it would not be able to meet without re-capitalisation. Currently 94% of its income was spent on claims, 4% on staff costs and 2% on administrative and other expenses.
 
All interventions would lead to the establishment of the no-fault system where the benefit scheme would be equitable, sustainable, reasonable and affordable. It would be based on social security principles to align with the broader social security system of the country. Benefit would be inclusive and based on need, not fault. Immediate access to medical treatment and rehabilitation would reduce the impact of injuries, and payments would be made periodically, not in a lump sum. In terms of fraud and corruption interventions in 2009/10, 154 arrests were made, there were 176 convictions and approximately 6000 claims were being investigated.

The RAF have extended its geographic access by establishing offices at hospitals around the country in order to provide a more efficient service to its stakeholders.
 
In terms of employment equity, the composition of the RAF staff roughly corresponded with South African demographic. Gender-wise the balance was 57% female and 43% male. In terms of the race analysis per category of staff, there were notably no coloured people at the level of CEO and executives.

The Road Accident Fund (RAF) achieved an unqualified audit report. There was however emphasis of matters in terms of its liquidity and the sheriff and interest costs leading to fruitless and wasteful expenditure. However, the challenge was that the RAF did not have enough funds to settlement invoices within 120 days. As a result of the delay in payment, summonses and warrants were issued against the entity. This had become the norm as it guaranteed an increase in legal fees. Currently there were more than 100 000 summonses per year. It was impossible to settle Loss of Earnings and certain General Damages claims within 120 days. When the RAF did not comply, the plaintiff could force the RAF to pay, by issuing a writ of execution against RAF property. The RAF’s inability to pay caused more writs to be issued. The sheriff issued between 100 and 200 writs per day and wanted immediate payment or else assets were attached.

The RAF wanted taken away the incentive to litigate over the quantum of the claim. It wanted future loss of earnings to be paid monthly, and based on pre-determined objective scales. It wanted legislative changes to be made so that the RAF did not have to litigate. In the interim it tried to buy time through approaching the Court Rules Board. The RAF was building an integrated litigation system to assist in the management of summonses. It was taking disciplinary action where negligence was involved.

Rail Safety Regulator of South Africa (RSR) 2009/10 Annual Report
Mr Mosenenngwa Mofi, CEO, and Ms Martina Ntlangula, CFO, presented. Its mandate was to oversee safety of railway transport, while operators would remain responsible for managing safety of their own operations. Incidents of derailments and collisions showed an increase from financial years 05/06 to 08/09 when it peaked at 2 356 and then it decreased significantly to 1 998 in 09/10, which showed RSR measures were bearing fruit.

Its key challenges were the poor safety record of the railways over the past four years, 04/05 to 08/09. Another concern was the cost of accidents and incidents. From 04/05 to 08/09, combined accrued costs for Transnet Freight Rail /Metrorail amounted to just over R 3 billion, excluding indirect costs. Collisions and derailments contributed over 90% of the combined incident costs for both TFR and Metrorail.

It had major concerns about the condition of aging infrastructure, rolling stock, signalling and radio systems, capacity planning, vandalism and theft of infrastructure and assets, especially R54 million worth of cable theft. The RSR lagged behind in its capacity to meet demands and it had direct safety implications.

Personal safety in trains and stations was a problem as was vehicle driver behaviour at level crossings and the shortage of technical skills to address the issues mentioned. There were challenges in terms of balancing investments between maintaining the current system, while migrating to new technologies, without compromising safety. Another challenge was the negative perception about rail transport in relation to safety and operational efficiency.

In order to address these issues, several initiatives were implemented. Key Priorities for 2009/10 were the strengthening of the Railway Safety Regulatory Regime, the improvement of safety compliance and adequacy, the promotion of stakeholder partnerships to promote and improve safety, as well as the pro-active support of key initiatives, for example the safety oversight of the Gautrain Project, the safety oversight dedicated to 2010 World Cup services and reviews and assessments of capital programmes by major operators.

Several steps were taken to improve institutional effectiveness. Safety audits, inspections and occurrence investigations were done, and the Passenger Rail Agency of South Africa (Prasa) and Transnet Freight Rail (TFR) underwent technical audits. The audits highlighted areas of risk and immediate actions were taken where there were immediate safety threats. Directives were issued to improve safety where necessary and non-compliance to safety regulations were highlighted and focused on, with directives to the entity involved to institute compliance.

There was an investment backlog of R20 billion. The rolling stock needed a recap of R60 billion. 40% of the fleet was over 37 years of age, a third was permanently out of service and reliability and performance was poor.
The signalling system was at the end of its economic life – only 23 (14%) of the 162 signalling installations had not exceeded their design life.

Key Performance highlights included the Gautrain Rapid Rail project. The RSR issued its Construction Train Safety Permit and Test and Commissioning Safety Permit. The RSR developed a Hazard Log that identified possible risks in the entire life cycle of the Gautrain project and monitored and undated it on a regular basis.

Another key performance highlight was the 2010 World Cup readiness. Four Prasa (Metrorail) region based audits were conducted, Prasa’s station programme was evaluated and 8 audits were conducted on tourist operators.

Employment equity was fairly representative although it was notable that no coloured males were employed by the entity in its entirety, and no coloured person was employed at the CEO, executive management levels.

The RSR received an unqualified audit opinion from the Auditor-General on its financial statements. The Auditor-General’s report on other legal and regulatory requirements contained some negative findings. In terms of its strategic objectives, the reasons for major variances between planned and actual reported targets were not explained. The quarterly reporting on performance information was inadequate. In some cases cumulative reporting was done and in other cases reporting for a specific period. The information could not be used for performance monitoring and evaluation and thus could not be used to institute corrective action. Planned and reported indicators were not well defined or verifiable. Reported targets were not reliable when compared to source information. There was non-adherence to Section 53(4) of the Public Finance Management Act in the sense that the RSR incurred a deficit of R 1 493 719.00 for the year. Leadership had not been exercised in order to put systems and procedures in place to correct previously identified deficits. Information was included in the report that had not been reviewed for accuracy and completeness.

South African Maritime Safety Authority (SAMSA) 2009/10 Annual Report
Commander Tsietsi Mokhele, SAMSA CEO, said the total sea-land of South Africa was 2.8 times the size of the land mass. South Africa had a coast line of about 3,000 km in length. It had 8 commercial ports and many fishing and recreational harbours. It was surrounded by 3 oceans and owned MarionIsland and had a science station in Antarctica. About 30% of the world’s crude and petrochemical production was transported through South African waters. Africa was the world’s largest Island, surrounded by 4 oceans. Of 54 African states, 39 were littoral and island states, 91% of trade was by sea with only about 9% intra-regional trade. South Africa was the biggest importer of goods as well as the biggest exporter into the continent. South Africa had a population of 49 million people, SADC had 240 million people and the African market had a billion people.

SAMSA’s first mandate was to ensure safety of life and property at sea, and now extended to maritime safety and security. This included search and rescue services, salvage interventions to ships in distress, the enforcement of safety standards in the working conditions of seafarers, serving as the countries lead custodian of maritime education and the seafarer’s qualification authority, controlling the quality of ships, their safe operating standards, including oil and gas platforms and boats. This included long range tracking and identification of ships. Other mandates were to prevent and combat pollution of the marine environment by ships and was to promote South Africa’s maritime interests. In the economic sphere, it had to promote the maritime industry as the new engine of economic growth. It had to assist in creating a conducive regulatory and economic environment to release the full potential of South Africa’s maritime industry. It also had to ensure the modernisation of the country’s shipping administration and growth of its ship registry.

Socially, it had to create awareness of the role of the seafaring industry in job creation and economic growth. It facilitated social transformation of the maritime sector, through the involvement of women and black people. The maritime industry was potentially an opportunity-rich industry for the rural young, especially in offering access to jobs on the world fleet (currently partnering with the Eastern Cape and KwaZulu Natal).

SAMSA’s revenue generation had increased from R57 million in 2005/06 to R 154 million in 2009/10. SAMSA administered the Maritime Fund on behalf of the Minister of Transport. In March 2010 it only had R16 million in reserve, which would be inadequate if an environmental disaster like the oil spill in the Gulf of Mexico were to strike South Africa. The Western Indian Ocean included five coastal countries, one large island state, three small island states and the island territories of Reunion. SAMSA was project managing, on behalf of the government of South Africa, the Marine Highway Project (WIOMH) funded by the World Bank. SAMSA had managed to get clean audits for the financial years 2008 and 2009 from the project’s auditors.

It noted as highlights: Development of seafaring skills in women and the establishment of a number of maritime high school and university courses. A major ‘lowlight’ was the untimely passing at sea of a South African female cadet amidst suspicions of sexual violation. Investigations were ongoing in South Africa, Croatia and the UK. Another highlight was the successful implementation of the Audit Recovery Plan to reverse the 2007 disclaimer financial audit, to achieve clean audit opinions for 2008/09 and 2009/10. However there were emphasis of matters. As a result of a mistake discovered on 31 March 2010, the figures for 31 March 2009 was re-stated in the report. An amount of R37 million was registered as irregular expenditure, because it was incurred prior to final budget approval. In terms of predetermined objectives, there was non-compliance with regulatory and reporting requirements.

SAMSA requested the Committee to assist it in acquiring the SA Agulhas as a training vessel to train its cadets on, after its decommissioning.

Passenger Rail Agency of South Africa (Prasa) 2009/10 Annual Report
Mr Tshepo Lucky Montana, Group CEO, said that Financial Year 2009/10 was significant in the sense that it represented the conclusion of the stabilisation phase of Prasa’s turnaround strategy from 1 April 2007 to 31 March 2010. This paved the way for a new strategic focus in the life of Prasa. Prasa was mandated by the Minister to arrest the decline and possible collapse of commuter rail services, consolidate passenger rail entities into a single public entity and prepare Rail for the 20101 FIFA World Cup.

Prasa delivered on key commitments such as the accelerated Rolling Stock Investment Program, and reached its target of 2000 upgraded coaches by 31 March 2010. Secondly it delivered on key 2010 FIFA World Cup infrastructure with major new stations and station upgrades. Prasa operated in a particularly challenging economic environment, due to the global economic downturn, characterised by massive job losses in the economy, increased energy costs, increased labour costs, and a decline in patronage and revenues in commuter rail. Its highlights for this period were:
▪ Prasa achieved an unqualified audit opinion for the fifth consecutive year.
▪ It built three new stations, Rhodesfield, Moses Mabhida and century City. It upgraded 50 stations including Nasrec, Cape Town, Orlando, Doornfontein, Durban, Rissik.
▪ It upgraded 505 coaches which ensured that Prasa exceeded the target of 2000 coaches for the period of 1 April 2007, - 31 March 2010.
▪ It successfully provided transport during the Confederations cup and World Cup. It made 644 million metro rail trips, 2.9 million Shosholoza Meyl and 2.4 Million Autopax trips.
▪ It reduced the accident rate in Metrorail by 14% and the injury rate by 17%.
▪ There was a revenue increase for Shosholoza Meyl and Autopax despite a decline in patronage.
▪ It spent R 953 million out of R1.2 Billion on BBBEE. It made more than 1000 learnerships available to security officials, technicians and drivers.

Challenges were that there was a funding shortfall of R 1 billion and a loss of R 281 million for 2009/11.There was fruitless expenditure of R 3.7 million. Financially, Prasa had a weak balance sheet and a weak liquidity situation. According to the Auditor General, Prasa was still a going concern. Prasa had plans and strategies in place to address the situation. It also had plans in place to expand it network and its services.

Discussion
Mr M De Freitas (DA) asked the entities to send their reports and presentations in advance in the future, so that he could have time to study it, in order to have meaningful engagement after the presentations. He congratulated the all-women team of ACSA on their achievements. Despite all the good work, baggage theft still happened and there was a lot of it during the World Cup. What was ACSA doing about it?

Ms N Ngele (ANC) asked whether the cameras placed baggage were handled, had been dismantled since the World Cup, because she knew about a suitcase that had been tampered with the previous week. She asked why the cameras did not pick up when bags were being tampered with.

Mr Bongani Maseko, Group Executive: Airports Operations, said that there was a dramatic decrease in baggage theft. No cameras had been dismantled or removed. The ones installed for the World Cup were still operational. Most baggage handling areas were under surveillance, but it was impossible to cover all places. Luggage was being tampered with in the cargo space of the aeroplane, where there were no cameras. ACSA was determined to deliver. It would take the key lessons gained from the World Cup and would see what was sustainable. ACSA was in discussions with airlines. It was considering a name and shame campaign in order to put pressure on airlines to work harder to solve the problem. It would work with airlines where the problem was more severe to combat it.

Mr De Freitas addressed ACSA and said that customs officials were often the first local people that visitors met after landing. Were they aware and adequately prepared for the huge public relations responsibility that rested on their shoulders?

Ms Ngele said that ACSA also had to treat local travellers with the same respect as it treated foreign visitors.

The Chairperson said that she as a local person, contributed more to the economy than a person who visited for thirty days. The level of service had to be the same, foreign or domestic. She asked if the training of the staff was aimed at foreigners or towards people at large. She paid for the service and she was a taxpayer. It was disheartening when a visitor was treated with more respect than herself as a South African, who sacrificed a lot, to grow the country to where it was currently. The attitude and service delivery of customs officials and airport staff had to stay at the same level as it was during the World Cup.

Mr Maseko replied that customer service training started more than a year before the World Cup. There was a general complaint about the level of customer service. ACSA embarked on a training program of stakeholders to take collective responsibility. The campaign was successful because the level of service was excellent during the World Cup. It was a challenge to sustain the level of service achieved during the World Cup. The training was not World Cup specific. Currently there were challenges with Department of Home Affairs officials stationed at airports, which ACSA was taking up with Home Affairs. These challenges were not there during the World Cup. ACSA reminded staff that they owed their jobs to air passengers and people who want goods moved

Mr Maseko added that the customs officials and immigration police did the country proud during the World Cup. The challenge was to get them to retain that level of service. After the public service strike, there was a dramatic decrease in service levels, but they were constantly reminded that they were brand ambassadors for the country. They were still being trained to treat all people in a professional manner.

Mr De Freitas asked whether a study was done to find out why there was a decrease in passenger traffic.

Mr Maseko said that the decrease in passenger traffic was obviously due to the recession. Especially on the domestic market, the passenger numbers dropped, because people could teleconference, instead of travel.

Ms Priscillah Mabelane ¸Finance Director, added that studies showed that GDP was a good forecaster for air traffic.Until March 2010 there was a negative trend in GDP and it showed up in air traffic, especially on the domestic side, but from 1 April till end September there was a positive trend. This excluded the World Cup traffic. It showed an approximately 6% increase.

Mr De Freitas congratulated the RAF on the good work it had done. It achieved an unqualified audit opinion, but the entity was inliquid and insolvent. Did the Auditor-General’s report give an explanation for the insolvency?

Mr Andre Gernandt, Chief Operations Officer and acting Chief Financial Officer replied on the insolvency and liquidity outlined on page 32 of the RAF document.

The RAF had developed a revenue required model, which was basically a system of requesting a bigger portion of the fuel levy. In terms of this model, the RAF needed to receive a 38 cents increase. If the RAF got the 38 cents increase, it would be solvent until 2017.

Mr De Freitas commended SAMSA for its achievement of an unqualified audit opinion from the Auditor-General. Was the Minister involved in stabilising the board?

Mr Mokhele of SAMSA answered that he wanted to leave it to the Department. He had spoken to the Minister and was waiting for a reply.

Mr De Freitas said that the Auditor-General’s report on the RSR talked about the RSR not following through on its predetermined objectives. He asked what it would do to meet the Auditor-General’s requirements.

Mr De Freitas asked the RSR about technical delays in the operation of the Gautrain. He asked whether the RSR was involved and what its findings were. She noted that there were two collisions on the rail network during the last financial year. Was there an investigation to determine the cause?

Mr De Freitas asked Prasa why there was a war between Transnet and Prasa. He suggested that Prasa and Transnet should be located in the same Ministry in order to end the tug of war. Communities complained about a non-existent service. Regarding Shosoloza Meyl, was the Minister involved, could Prasa explain what was happening there? He disagreed with Mr Montana that there would be a crisis in the future. The crisis was already here. There had to be a change in attitude. The Minister agreed, but did not act.

Mr Montana replied that the media had said that Prasa owed Transnet R1,3 billion. It was not true. During the last financial year, Transnet billed Prasa and part of it was legitimate. Prasa paid part of what it legitimately owed amounting to R 210 million. The difference was disputed. Transnet practised blanket billing for Shosholoza Meyl, not taking into account that these trains had a seasonal cycle, sometimes more trains were running and sometimes less. Passenger trains did not get priority on Transnet’s lines. South Africa was the only country in the world where this was not the case. If trains were delayed for more than three hours, alternative transport had to be arranged, for which Prasa paid. People had to be put up in hotels if the delays were longer, and Prasa paid. Prasa then started to demand refunds of these expenses caused by Transnet delays. Transnet did not want to hear any of it. Prasa had paid and would continue to pay for legitimate services, but where services have not been delivered, it would not pay. He was glad for the opportunity to clarify the situation.

The second service that Transnet delivered to Prasa was the maintenance of locomotives. Transnet had the monopoly to repair Shosholoza Meyl locomotives. When it came back from repairs, it could not complete a single journey before breaking down again. Prasa demanded value for money. When it came back, half of the money was paid. When it broke down again, Transnet had to fix it for free. Transnet prices were also unstable and differed from day to day. Mr Montana and the head of Transnet would take this issue up with the Ministers, the next day. Prasa wanted good service. The day that Prasa agreed to bad service was the day it renounced its mandate. Eighty per cent of Prasa delays were caused by Transnet. The meeting the next day with the two entities and the Ministers was to resolve the issues. This issue had far-reaching results, because when the rail service was bad, people used taxis which was not the best mode of transport over long distances.

Mr Montana said there was a crisis that needed to be addressed. New rolling stock was needed, and it needed time to be effected. If one ordered it now, one would have it in three year’s time, so it had to be ordered now. On the future of Shosholoza Meyl, he said even if one started today there would be a high speed train running between Cape Town and Johannesburg only in 12 to 15 years. Prasa have to ensure that the service was attractive and competitive. The Minister believed that long distance rail travel had an important role to play. He believed that speed restrictions on the networks had to be reviewed and that one could not have a passenger train doing 40 – 60 km/h on long distance. A long distance passenger train had to travel at 130-140 km/h. There had to be a review of slots. In all other countries, freight had to dominate by night, and passenger services during the day. Current locomotive usage was not efficient. Shunting took a lot of time. There was technology available to cut down on shunting time and make it more time-efficient.

In reply to Mr Defreitas, yes, there were problems, but Prasa had been working hard to respond to the challenges on the ground. There were improvements in the frequency of trains. Prasa believed in the future of the service in the long and short term. The whole signal system was going to be renewed and the tender was already out. South Africa needed to create a modern railway, safe with improved speeds and electronic interlocking. Even former communist Eastern Europe had done it. Prasa had R1.9 billion for the modernisation of the passenger rail system and would make a full announcement about this soon. The fight between Prasa and Transnet made them lose their synergy. The whole signalling system had to be renewed, funded by the country, not by any of the two. He expressed the hope that the two entities would be able to address their differences and restore a positive working relationship.

Ms Ngele welcomed the new RAF offices in hospitals, because it would make the service more efficient. She asked the RAF what criteria it used to determine who to pay and who not.

Mr Gernandt replied this was a very subjective decision and showed the inefficiency of systems. Loss of support and loss of income had to be paid on a monthly basis and not in a lump sum as was currently still the case. The RAF had to act within the law. It prioritised by paying court orders first, then medical costs, then loss of support, then loss of earnings, then general damages, while the no-fault system was being developed.




Ms Ngele said to the RSR that there were too many vacancies and equipment theft. She asked what it was doing about this. SAMSA said that there would be more water than land. She wanted an explanation.

Mr Mokhele replied that the sea 12 nautical miles off the coast as well as the airspace over it belonged to the territory of South Africa. A country could make a claim to an economic exclusive zone which extended 350 – 400 km out into the sea. All fish, oil and mineral deposits found here belonged to that particular country, so effectively the border of the country moved into the sea. Now the UN had made it possible to make a continental shelf claim for more sea-land. Within this territory, the fishing stock was not necessarily exclusive, but dead assets were exclusively territorial. The country must demonstrate the capacity to control and regulate the waters against pollution and other unwanted activities.

Ms Ngele asked why there were no security on the train between Pretoria and Johannesburg. She liked the idea of the cheaper trains from China.

Mr Montana replied that although crime was still present, it had declined by 40%. People were using their computers on the trains. There were 4000 railway police and 2000 security officials on the network

Mr P Mbhele (COPE) referred to p33 of the ACSA Annual Report. There was an amount of money used for World Cup tickets. The tickets cost R22 000 each. He asked what else was included in the package and did it all cost exactly the same.

Ms Mabelane replied it was true the World Cup tickets were R22 000 each. It was a strategy to stimulate traffic by inviting key leaders and executives during the early stages of the World Cup. It was a marketing tool as guests ended up staying and buying tickets for the second and third rounds, which were more expensive.

Mr Mbhele asked Prasa if a payment expected at a specific date had been paid, and if not, was there a time frame wherein it had to be paid. On the issue on tickets, what was the required criteria for qualifying for tickets.

Mr Montana replied about the 2010 tickets bought by Prasa, saying that its own international guests benefited from the tickets, at the request of government. Prasa ran competitions for tickets for employees as well as commuters at stations. Prasa sold long distance packages. Prasa identified schools in the rural areas and took them to some games. The goal was 100 000 tickets. Prasa reached an agreement with FIFA RSA but Munich did not agree, because they feared that Prasa would make money out of them. Prasa had already paid for the tickets by then. Prasa had recovered some of the money and would eventually recover more or all of it.

The Chairperson said that the RAF did not see itself with problems first. The RAF was not funded adequately. It had been proposing an increase in the percentage of the petrol levy it received for a couple of years, but it never received that increase, always less than asked for. As a result it was not able to carry out its mandate. The RAF requested that the Committee lobbied for an increase and justify why the RAF needed an increase. The Committee did that in two ways. Firstly, it went into the report that the Committee had to submit to Treasury and secondly, the Committee could ask a question directed to the Minister about it.
 
The Committee could lobby for the RAF to be allowed to pay loss of support and loss of income claims in instalments. If this change were effected, it would avoid the liquidity problems that it experienced in having to pay lump sums, and it would avoid the massive amounts of interest the RAF paid on lump sum late payments.

Mr Modise pointed out that some items were critical like paying in instalments as lawyers took 50% of the money paid in lump sums as the RAF paid the money to the lawyer and the lawyers paid the people.

The Chairperson said that she would engage with the RAF on the fuel levy determination model. Fuel legislation needed to be reviewed. If the Committee thought it was the correct road to take, then the Department had to start the process of drafting the Bill. The Committee did not hear a proposal from ACSA regarding its intervention.

Ms Mabelane replied that ACSA was in the process of reviewing tariffs.

The Chairperson asked for proposals from SAMSA.

Mr Mokhele replied that SAMSA was given mandates that were under-funded. As reflected in the 2008/09 Annual Report, SAMSA thought that it had an agreement with the Department and Treasury to have operations funded for which there were no customers, such as Search and Rescue Operations and boats sinking, but there was no funding.

Before 2007, new mandates such as inland waterways and boating activities were not regulated. SAMSA had to make money from deep sea ships to subsidise inland boating activities. This was not entirely fair. SAMSA was requesting the assistance of the Committee in correcting the balancing in the funding of the entity.

The Chairperson acknowledged that what was being proposed would be discussed by the Committee and put into its report.

Mr Mokhele replied that SAMSA was expediting the appointment of a permanent board. The legislation had been drafted. There were 37 pieces of legislation in the pipeline. South Africa was not able to enforce international laws, but would be after those pieces of legislation were passed.

Mr Mokhele said that there was a need for a Maritime Fund. There was a principle that operated in aviation where in the case of a major aviation disaster, National Treasury would release funds. This did not apply to a maritime disaster.

The Chairperson commented about the 2010 World Cup tickets. ACSA took a huge number of people with disabilities to watch the opening match. That was not wasteful expenditure. If private companies could buy tickets for people, why could public company not buy for deserving citizens. The R22 000 spent on a person who would come back and invest, was a marketing strategy. ACSA had to motivate people to come. The Chairperson said that from her own perspective, she agreed with it and would encourage it to happen again. Government was not going to invest so much money and not go and see the end result of its investment.

The Chairperson said about the Prasa-Transnet issue that when one dealt with symptoms, one did not deal with the root cause of the problem. The railway transportation was incorrectly structured. You could not have two state-owned entities, responsible for rail transport, reporting to different government departments. Another root cause was that the rail infrastructure belonged to Transnet. Transnet was referee and player. Transnet did not report to the DoT, but to the Department of Public Enterprises. Since rail infrastructure belonged to Transnet, it would always prioritise goods as along Apartheid lines. Rail infrastructure was degraded and outdated. Trains were serving beyond their expected lifespan. Lawmakers would re-establish rail transportation as the backbone of transport in RSA. The root cause was a failure to have a common understanding. The leaders of the two entities had to see things from a common perspective. Another problem was that state-owned enterprises were projecting themselves as profit driven businesses. When state-owned enterprises became service driven, they would understand the benefit of this. If the focus was on profit, it did not prepare South Africa to be ready for investment.

Ms Ngele remembered in the early 2000, there was a lady who drove a train in Pretoria. Was she the only one?

Mr Montana replied that 40% of all drivers, metro guards and driver assistants were women.

Mr Letsane Rathaba, Principal Inspector, RSR, said that the technical delays were viewed in a serious light. The Gautrain almost came to a halt and the RSR inspectors embarked on an investigation to determine the cause. The decline in collisions and derailment was because a lot of it happened in the shunting yard. The reason for the decline was a reduction in activity levels. Also Transnet piloted several shunting yard automation projects, so the decline was due to automation, but also due to staff being up-skilled.

Mr Letsane Rathaba said there was under investment regarding infrastructure. There was skills investment to deal with skills gaps. There was natural attrition due to people reaching retirement age. However, lots were leaving the industry with their experience and skill, which could not be replaced overnight. Prasa had done a lot of work towards establishing its own training schools. Training took time. For now it was a challenge. One would see the result within the next two years.

On vandalism and theft, because the railway network was open, it was vulnerable to theft. They stole fences and power cables. Signalling equipment theft crippled the signalling system. It had a big impact and was very disruptive. Security deployment happened in the form of the National Crime Combating Forum, a body that served all rail services. Major risk areas had been identified, where the railway police would start intensifying their actions. As they were able to reduce crime on the passenger side, hopefully they would be able to do it in other parts of the service.

Mr J Maake (ANC) commented that there were too many vacancies in Risk Management divisions. He was not sure if legislation compelled all institutions to have risk management. Hospitals had no risk management. Transnet had no Risk Management. Education had. He also understood that the security personnel had no enforcement capacity. If there were risk managers, it would have made life easier. If the legislation had to be amended in order to effect it, it had to be done.

Mr Maake said that in 2013 and 2014 the whole train system was going to collapse. How could the Committee help to avoid that? Did Government have to give the money?

Mr Maake asked about the SA Agulhas. SAMSA replied that it had been fully depreciated. Did SAMSA want it to belong to a training institution? What exactly needed to happen?

Mr Maake said that ACSA said that passenger traffic decreased, but there was an increase in revenue. How?

Mr De Freitas noted that Prasa said that unless an order was placed now, new trains would not be available by 2013-14. Had the order been placed?

Ms Priscillah Mabelane from ACSA answered that ACSA had a 17% increase in revenue 50% of its revenue came through aeronautica. Tariffs, leases, advertising and property had increased by 7%.

Mr Rathaba, RSR, said that Risk Management was a major concern, but it did not go down to operational levels. There was a risk management department and there was a standard. This risk management department had to formulate risk-mitigating steps. Operations were compelled to have systems in place.

Parliament had processed the legislation to introduce a penalty system. The Minister had signed the penalty system regulations. Government would be able to impose fines when negligence could be proven.

Mr Montana replied that within four years there would be a shrinkage of the system because many coaches would have reached the end of their life-span. If nothing was done about the situation, in 10 years there would be a collapse. Entities were driven by commercial objectives, engaged in commercial activity and had a shareholder, but there were entities like Prasa that existed mainly for service, building infrastructure and training people. Prasa now had the powers to go and borrow money. Parliament had helped it to take the first few steps. There was a process underway that involved the DoT, Treasury, the DTI and Prasa. In November Cabinet was supposed to discuss this particular issue, and once discussions have been completed, the tenders could go out for the new rolling stock. Transaction advisors would be involved to ensure the health of the transactions that were going to be made.

Mr Mokhele, SAMSA, replied that Freight Rail was not doing well and it affected shipping logistics and efficiency. The Durban Corridor was the largest corridor in the country and one would think that rail would have a share, but it was not the case. It dropped year by year. Twenty per cent of containers were handled by rail. This made SAMSA uncompetitive.

He spoke about the opportunities for job creation in maritime. There were jobs readily available on the international fleet. The RSA generated 3% of sea borne trade. There were 220 000 seafarers worldwide. Only 1 800 were from South Africa. Three per cent of seafarers jobs was roughly 40 000. South Africa lost its fleet when SAFMARINE was sold. For a maritime nation to have no vessels, was bad, because South Africa had to depend on the whims of other nations. With the loss of vessels, there was no facility to train seafarers.
Seafaring had become an issue of economics and geo-political power. Where ships paid taxes, those governments dictated the terms of who they would train in exchange for tax concessions. The condition was that only seafarers of that country may be trained on the vessel. Currently,120 seafarers were trained per year, but less than 30 were at sea. They had to do one year theoretical training and one year practical aboard a seagoing vessel. At this point, the opportunity to do the practical training was missing. South Africa needed its own national fleet in order to close that gap. The SA Agulhas could take 94 passengers and 34 crew. It could do government contract work up and down the coastline. The question was, was it available for training purposes?

The South African government owned vessels, under environmental affairs, agriculture, etc. The DoT was about to build two salvage vessels. The SA Agulhas still had five to eight years of trade left in it. SAMSA was the inspecting body which would decide when to decommission it. SAMSA knew the SA Agulhas would be useful if it could be made available to institutions. SAMSA wanted a private company to manage the ship, while the salvage vessels were still being built in Finland. These would be delivered in 2012. Transfer could happen by June 2011. SAMSA wanted the Committee to recommend to government not to sell the ship. Further it wanted the Committee to have the SA Agulhas declared a dedicated training vessel. A feasibility study had to be done to see what would be the best model to operate the ship. It would also give SAMSA a sense of how to address the problem into the future, whether South Africa had to get another training vessel, or could develop a civilian fleet again. The SA Navy was weak. There was a shortage of officers. The Navy would also benefit from a civilian fleet. SAMSA would come back to the Committee on the matter of the training vessel. A domestic fleet could be a complementary service to rail and road. No maritime nation in the world has opened its coastline to trade and foreign investment. That infrastructure was left to the domestic operators. On the back of that, the training could be done, and seafarers could then join the international fleet.

A DoT official replied about the question on the SAMSA board, saying the Minister have submitted a memo. The Committee secretary needed to make a summary out of the issues for the Minister.

The Chairperson asked for anybody to comment on any submission heard.

Mr Modise said that RAF and RSR could have a closer working relationship for the sake of exchanging information not only people who died, but also those in accidents. The RAF had already drafted the Amendment Act with the Department of Transport. When a train hit a taxi, the train derailed and many people were injured, the RAF would be liable for those as well. When a car hit a plane on a runway, the RAF would also be liable.

Mr Montana replied that attorneys were now targeting Prasa just as they targeted the RAF before.

Mr Montana said that Prasa and other entities could learn from how ACSA derived revenue from properties. SANRAL had similar experiences and it was important to share experiences as a transport family.

Mr Mofi, RSR, said that RSR impacted on rail, telecommunications, and power supply (Eskom). He was of the view that if the Committee were to raise the issue of theft of assets, the impact would get larger - if one looked at the cost associated with it.

There were significant failures when signals were on manual mode. He wanted the issue to be taken up about trading in second hand goods such as copper cables. It was defintely affecting society. RSR faced the problem that it had only 13 inspectors inspecting 22 000 km of rail network, hundreds of stations and level crossings. The inspectors made an insignificant impact. The message from Treasury was to generate revenue from those entities that you regulate, which meant that the RSR had to get money from Prasa. It did not make sense. The Government had to take responsibility. The RSR needed resources for consulting and advisory sources.

The RSR could double permit fees but its clients were Transnet and Prasa which were both government institutions.

Mr Montana replied to the RSR that instead of hiring more resources, it had to focus all the existing resources, on TFR.

The Chairperson said that when issues were discussed between the Prasa and Transnet, it was not done in a constructive manner. The Committee would not overlook poor and under-performance. The Committee would not overlook fruitless spending.

The Committee appreciated the work done, because these were the foot soldiers of the government The Committee was the legislative arm of the DoT. The Committee had to work together as a team with the DoT. The Committee would hold the DoT accountable, but in a constructive manner. It would recognise the challenges that the DoT was operating under. The Committee may call individual entities back for a lack of adherence to strategic plans. The focus of the committee researcher in drawing up the Committee Budget Review and Recommendations Report would be more on strategic objectives as opposed to the Auditor-General who concentrated more on the expenditure patterns. The researcher served the Committee to see if the brief of government was effected. When entities were called back, they would have to answer if the country had received value for their money, as well as the results of the spending. It was not enough to refurbish rolling stock. Rolling stock and infrastructure had to be refurbished while engaging in social development.

Terminology determined how people thought and behaved. What made the ANC and government shift from service delivery to community development. The community development approach made the people part of the process. They would have a sense of belonging and ownership and thus would not vandalise the infrastructure. There would always be vandalism and theft as long as people did not have a place in the system.

Women in Rail was involved in empowering communities along the routes of the trains. The Committee had not measured the entities on their compliance to BBBEE. The Committee would invite DoT and its entities to account on this.

Communities had to be allowed to participate. Unemployable young people had to be trained as security guards at stations. Employment contributed to community development. There were still people who would put a pot on the stove with only water boiling in it, pretending to the neighbours to be cooking, because of shame.

The issues raised by the entities  had to be brought back to the Committee. The Committee on Public Enterprises as well as Transnet had to be brought on board and rail had to be declared the backbone transport of South Africa. All transport had to be under one roof. The Public Transport Survey done in 2003 had to be looked at. The lessons from the study tour to China had to be remembered to respond to some of the issues raised here. On 1 September the Committee had submitted a report. Some of the issues raised here were recommendations in that report. She wanted the entities present to familiarise themselves with that report.

Load shedding by ESKOM impacted on rail transport and goods and people could not be transported. The transport family worked well together and had respect for each other. Things had to continue in this way. The Transnet problem was a symptom. Issues raised by the Auditor-General such as employees paid after resignation, R17 million interest on late payment of suppliers, inadequate planning and project management of renovations were things that entities had to account for and were not acceptable. What happened to the person who was the cause of the fruitless and wasteful expenditure?

She said that she worked in a chain store in 1981. There was a computer system that centralised all transactions, so that it did not matter where the transaction happened, there was a central database that stored all of it. It was transparent. If that technology was available in 1981, why did government not employ it to get a better handle on fruitless and wasteful expenditure?

The meeting was adjourned.