Road Maintenance Funding Plan: Department of Transport briefing

Meeting report

Road Maintenance Funding Plan: Department of Transport (DoT) briefing
In the absence of the Chairperson, Ms N Bengu (ANC), Ms D Dlakude was appointed as Acting Chairperson.

Ms Johanna Mulaudza, Acting Chief Director, Department of Transport, tabled and explained the Road Maintenance Funding Plan of the Department of Transport (DoT or the Department). She gave a background to the South African Road Network, and outlined the road maintenance allocation, budget and expenditure for construction (CAPEX), and maintenance breakdown per province for the Expanded Public Works Programme (EPWP) as well as EPWP up-scaling allocations per province.

Ms Mulaudza reported that the South African National Roads Agency Limited (SANRAL) was currently occupying 16 170 kilometres (km) of paved roads, but no gravel roads. The nine provinces, metros and the municipalities had 153 719 km of paved roads and 453 259 km of gravel roads. 140 000 km of gravel roads were un-proclaimed. A total of R5.5 million was allocated to road maintenance in all provinces in the 2008/9 financial year, and a total of R5 million in 2009/10. Free State and Northern Cape received the least allocations, whilst Kwazulu Natal received the highest allocation, since the expenditure of the province for road maintenance had been the highest.

Ms Mulaudza outlined the budgets and spending, per province, for EPWP, maintenance and access roads (see attached presentation for full details). R1.9 billion had been spent. The target for work opportunities was 38 872 but 86 665 work opportunities were achieved. The EPWP up scaling allocations per province over the 2010 MTEF period was R2.2 billion over all nine provinces in the 2010/11 financial year, an estimated R2.7 billion in 2011/12 and R3.2 billion in 2012/13.

The Department faced challenges because it was limited to working on National Roads assets. Most existing roads had exceeded their design life and upgrading, and construction of rural access roads was not fast enough. This was mainly done through the EPWP programme, because the allocation for this was not sufficient. The overall level of road funding was lagging, which implied that backlogs were created rather than being addressed.

Mr James Mlau, Acting Deputy Director General: Roads and Transport, DoT, reported on some of the interventions. The National Infrastructure Maintenance Strategy (NIMS) was headed by National Treasury and was addressing challenges around asset management practices, norms and standards, budget constraints and backlogs, skills capacity and institutional arrangements. There had been a Construction and Maintenance Summit in May 2010, which had addressed fiscal and non fiscal funding options, guidelines and best practice for asset preservation, efficiency outcomes, the development of  Women Enterprises in Transport (SANWIT) and road safety. Five resolutions were made, covering the delivery models, funding and asset management systems, capacity development, road safety and BEE and women empowerment.

In terms of funding, it was noted that there should be dedicated funding from the fuel levy, and that budget increases and capacity needed to be phased in. there was a need to ensure that allocated budgets were spent on roads.

In terms of the delivery model resolutions, the Department was up scaling the Zibambele programme across the country which would create more jobs to attract EPWP incentive funding  and provide infrastructure cost effectively. The Department was developing a flagship programme for the creation of jobs and maintenance infrastructure. Mr Mlau said that one of the possible benefits from a national roll out of Zibambele could be a 438 000km lift from the current 750 000km backlog.

The Department was developing an asset management framework, and had signed a Memorandum of Understanding (MOU) with Development Bank of Southern Africa (DBSA) to deal with the asset management system, funding model, sector skills and review of the roll out of the integrated networks. Following this asset management system resolution, a portion of 60% of the maintenance budgets was allocated for routine and periodic preventative maintenance.

Mr Mlau stated in conclusion that the present allocations should be streamlined to achieve effectiveness. The Department needed to develop implementation proposals with provinces to seek funding and to refocus from policy development to implementation coordination. The Department was repositioning itself to take charge of grants.

Discussion
Mr S Farrow, (DA) referred to the asset management process which was under way, and asked whether the information was 12% outstanding or 88% outstanding, as this was not clear from the presentation. He said the correct information would determine the way forward, as it was important to know what precisely was the status of the roads, in order to allocate funds accordingly.

Ms Mulaudza answered that there were 14 161 km of gravel roads at a metro level. However, information had been collated through the process with SANRAL, which produced information on pavement management systems of the metros for only 12% of the gravel roads. The problem was that when the Department did a conditional assessment, the roads proved not to be cost-effective with rain conditions. She understood that there was some difficulty in reading the statistics. The network percentage was reflected at 103.89, but that related to the information was collected.

Mr Farrow stated that the SANRAL paved roads assessment of 16 000 km was outdated. According to SANRAL’s latest report, there were closer to 20 000 km of paved roads. He said that many municipalities and local governments were handing over roads which they did not have the capacity to handle, which was putting SANRAL in more funding difficulties, and could turn out to be detrimental to the country as it would probably have to move over to a system of toll roads. He therefore enquired about the escalation of roads being handed over to SANRAL.

Ms Mulaudza responded that 16 170 km reflected the current number of kilometres being managed by SANRAL. This included the transfers from provinces, up to 2008. The 20 000 km figure was the determination of the total paved road network, and the appropriate network that SANRAL could manage. In essence, there was a plan for all provinces to transfer roads, up to 20 000 km, by 2008. In reality, SANRAL was only currently managing 16 170 km.

Mr Farrow said the Minister of Finance had indicated that R3 billion would be given to the Road Maintenance Fund over three years, but he did not see this reflected in the presentation as a possible way forward, or as a solution to kick start the process. In the 2009/10 budget review there was a very profound statement by the Minister of Finance, to the effect that out of the fuel levy of approximately R30 billion per year, 23% would be going to the metros. There were currently six metros, which meant that they should be getting R1 billion each. He did not see this reflected in the presentation. This amount was supposed to be a substitution for the former Regional Service Levies (RSC), and would be dedicated for roads and transport. If that R6 billion was being paid, the Department needed to establish where it was going, who was going to coordinate the funding, and how it would assist in the overall funding of the maintenance plan. He said that the statement by the Minister had further stipulated that ultimately the cities and the provinces would accrue the actual amount of levy that would go into the tank at the point of supply. This meant that in another three or four years, the amount of R6 billion could be raised to R30 billion. He asked whether the Department had factored in these figures.

Ms Mulaudza said that the Department and the road coordinating body had discussed the plans for 20% of fuel levy to be paid to metros. She said that the R6 billion would indeed be transferred to metros, but their understanding was that it would replace the RSC levy. The Department was talking to National Treasury to specify the conditions under which the metros would receive the levy for roads and transport. She said it was currently a suggestion, rather than a condition.

Mr Farrow said that the RSC had had a component that went into rural roads. He said that R1 billion going to metros was a lot of money, and there was a need to ensure that this funding was used to catch up on the backlogs.

Mr Farrow mentioned that the policy relating to maintenance must be defined and sent out as a clear message. If the provinces were going to put 67% of new roads in the Capex market, it must also be borne in mind that as soon as a new road was built it would immediately incur maintenance costs. From an engineering perspective, unless there was a 10% allocation from each capital expenditure put into a fund, to take care of that road over its life, the Department would only be adding to the current burdens. The real issue, which was mentioned only very briefly, was the lack of capacity. The shortage of engineers needed to be addressed.

Mr Mlau replied that this was a very valid point, and the Department had been stressing the issue. There was also the question of how powers and functions were allocated. The Department had no “pot of gold” from which money could be paid. Municipalities, who received the Municipal Infrastructure Grant (MIG), and provinces, who had their own equitable share allocations, were making their own decisions. The Department, in order to meet the national interest, had to decide what instruments must be used to turn the situation around.

Mr Mlau said that progress had been made since the summit, and the Department was ensuring that everyone was using the same approach. This was not going to be easy, since in the past the grants to provinces had been implemented in a certain way, but now the provinces seemed to agree that a uniform percentage split would be applied, with the national department coordinating. This was being put in place through MinMEC meetings and other bodies.

Mr M De Freitas (DA) asked that the Committee should be informed of summits, such as the Road and Construction Maintenance Summit.

Mr Mlau said that the Department had informed the Committee about it during the last meeting, and added that the Department could share the report on the summit with the Committee.

Mr De Freitas referred to the statistics, and asked whether the information presented there was more accurate than the information given during a previous meeting. He noted that graphs indicated the percentages of networks, with data, but these seemed to be quite high in comparison to what was previously presented, and he asked if the Department was confident that the information was accurate and up to date. Last time, the local authorities gave very low percentages of information. He asked how the Department could ensure that the information provided by local authorities was accurate, saying that until the audit was accurate, it would be difficult to allocate the funds.

Ms Mulaudza said that the information was still the same as that presented in May. The Department was working on part of the resolution of the Summit. The Department had developed a policy framework that would be part of its maintenance policy as well, and that would require local authorities to undertake assessments on a regular basis. The Department had already investigated the kinds of assessments that needed to be done. However, the processes were information-intensive, and it became expensive for local authorities feed information through.

Mr De Freitas noted the table of EPWP per province. The achieved work opportunities were far higher than the targets for work opportunities, and he enquired how the targets were set, and how the Department had managed to budget for the actual opportunities in view of the disparity in figures.

Ms Mulaudza said when the expansion of the EPWP took place, there were many labour intensive programmes being implemented at a small scale. The Department had undertaken investigations to look at exactly what was being implemented by local authorities. The targets had been set against benchmarking on Zibambele, and were calculated according to how many jobs could be created for every R8 million spending. Other provinces, which did not have labour intensive programmes, were asked to start thinking about what jobs they could create out of their allocation.

Mr De Freitas asked whether labour intensive opportunities were used at the cost of efficiency. He said that he would like to see the Department go further than merely creating work opportunities, and create an industry where the work was done more efficiently, thus creating longer term employment. He asked whether the Department had been looking at that.

Mr Mlau answered that when a labour intensive programme was undertaken, it meant the roads had to be built to a certain standard, so that they could afterwards be maintained. The Department would, before bringing in labour, re-gravel the road and deal with drainage systems. There were capacity and management challenges in the provinces. He noted that if the Department was to engage labour-intensive methods appropriately, it would both maintain the road network that was outlined, and would also create jobs. He added that when programmes were designed and targets were drawn, there was a need to consider what people were being paid and the value achieved, which meant that there was a need to cost the task. If it was possible to turn a programme around and look at the values achieved, the beneficiaries should be full-time, and be paid a full-time stipend. Zibambele was not a full time programme.

Mr De Freitas wanted to know whether there were monitoring mechanisms to ensure that the provinces were using the money as effectively as possible, so that actual results could be seen on the roads.

Ms Mulaudza answered that the model for monitoring them would have the Department directly responsible for the projects, therefore creating the capacity which was required. The Department did not deal with even a fraction of the capacity that was given to Department of Public Works. The Department of Transport did not have a footprint at provincial level to be able to do monitoring, but it was working on this issue at present.

Mr De Freitas referred to the slide relating to challenges. He said that it was true that the Department’s mandate was to deal with national roads. However, since the money was coming from the Department, he asked whether the Department could not specify the criteria that had to be met. It was normal business practice that funders would, before funding, ensure that certain requirements were fulfilled. This would not be contrary to the Constitution, as the Department would still be respecting the functions of different spheres of government, but creating an inter-sphere cooperation.

Mr De Freitas said that there were other innovative ways of ensuring that the roads remained maintenance-free while being used. Putting overload devices on vehicles, for example, could go a long way to ensuring that the roads lasted longer. A policy that encouraged rail-freight instead of road-freight could also prove effective in the long term preservation of roads.

Mr Mlau said a road freight strategy had been developed by the Department, which looked at what kinds of freight needed to be taken off the roads. However, there were challenges in legislating for this because of the backlogs. If a commodity had to get to a port fast, there would be problems if the rail system was not ready to carry that commodity efficiently. The Department was anticipating that the rail strategy itself should categorise what freight was most appropriate to rail, and to road.

Mr Farrow found the EPWP commendable. However, he did not believe that it should be left entirely to the Department of Public Works, which was primarily responsible for maintenance of buildings rather than roads, as this was akin to saying that school educators should be responsible for school transport. The Department had to achieve the right mix. He cited a road in Brits, which ran next to a railway line. The road, instead of rail, was used to transport minerals extracted from the mines, and as a result the road was severely pot-holed. Whilst he was hesitant to harken back to the past, during the 1970s there were transport police that prevented certain types of goods being transported by road, unless there were special permits, or there were no alternative means of transport. He said that the Department could easily regulate this again.

Ms Mulaudza said that the Department was intending to increase the market share of rail. The figures were conservative at present, envisaging that between 177 and 250 million tonnes per annum would be moved. The Minister would be signing that commitment as part of the delivery agreement.

Ms P Ngwenya-Mabila (ANC) asked how long the roads would remain unproclaimed, and who would be responsible for proclaiming them.

Ms Ngwenya-Mabila pointed out that the budget for maintenance was incrementally based and not performance based, and wanted to know whether the Department would be able to achieve its objectives with the estimated budget.

Mr Mlau said that the Department would be seeking the Committee’s assistance in turning the situation around. The budget allocations were historical. The Department was locked into a cycle of chasing up maintenance. By the time the Department got around to dealing with potholes, they had reached a difficult stage, because the potholes should ideally have been dealt with through preventative or periodical maintenance. The Department was looking into what systems could be designed to avert that situation.

Ms Ngwenya-Mabila said that there was failure on the part of municipalities and other government authorities in spending conditional grants. She asked whether municipalities had the capacity to spend those conditional grants, because in most cases they were diverting those grants to other services.

Mr Mlau said that the problem had been two-fold. Firstly, the municipalities got the grants and applied them in areas that were not critical for road maintenance, and sometimes not even related to roads. However, a recent report had indicated that there were many municipalities who had returned money that fell under those grants. The Department wanted more money to go to maintenance, but there were capacity issues there too.

The Acting Chairperson asked what the Department’s plan was for ensuring that the money was not returned but was spent properly. She noted that roads were not maintained, and said that maintenance involved fixing potholes and problems on the road surface, not merely working on the side of the roads. On the Zibambele project, the only tools available were slashers and grass cutting tools. This was unacceptable.

Mr Farrow said that the North West province had handed over a particularly badly-potholed road to what used to be the Transvaal Agricultural Union. Farmers would have to fix the potholes in order to transport their produce to market. However, the road did not improve. If the Department of Transport was to allow EPWP or Public Works labour-intensive programmes take place, then it should at the very least ensure that proper training was in place. The model that the DoT wished to roll out needed to be very carefully analysed. It was necessary to ensure value for money. If potholes were to be fixed one day, and would develop again the next day, then this was tantamount to throwing money away.

Mr Mlau said that the flagship programme of the National Department was intended to deal precisely with this situation. This was an important issue. It was necessary to have a central body to monitor it.

Mr Mlau noted that there had been under spending by municipalities, but said that the DoT was not at the centre of discussions when National Treasury determined what amount of money was to be allocated to municipalities, and they used the money as they saw fit.

Mr Farrow said that before the Department rolled out the Zibambele nationally, it must first analyse what had been achieved by it, particularly looking at its affordability, efficiency and employment of women. In the Eastern Cape, three weeks ago, he had heard during an indaba that some women had managed to amass substantial sums, and he believed that getting the successful women involved in other projects could assist in creating work.

Ms Ngwenya-Mabila agreed with Mr de Freitas that the Committee needed to be informed about the Summit. After that summit, the Department was expected to develop a plan. She asked how the resolutions were to be put into operation, and if this had started. She also enquired whether the plan was addressing the maintenance challenges, and enquired about the status of the plan.

Ms Ngwenya-Mabila agreed that the Zibambele project in Mpumalanga largely seemed to involve grass-cutting at the side of the road, rather than doing proper maintenance on the potholes. The Department was allocating contracts to service providers who were not up to standard, and was not monitoring properly. This remained a challenge.

A Member asked why the EPWP figures reflected the 2008/09 year, rather than the last financial year.

The same Member indicated that one of the challenges was that construction and upgrade of rural access roads was not fast enough. He asked why this was so, what the progress was, and what the timeframe was for upgrading.

Mr Mlau said that this was due to the need to split between maintenance and construction. The backlog was enormous. The Department would need to do a programme evaluation. He noted that six out of the nine provinces had in fact rolled out Zibambele, but the Department would have to investigate whether that rollout had been done effectively, and whether value for money had been achieved, and draw a report.

A Member said that although the EPWP budget was allocated to every province, both the budget and maintenance in Free State were low. He asked how the Department would check that maintenance for each province had been done. He further asked how many female entrepreneurs were involved in that maintenance project.

Mr Mlau said that he did not have the exact figures, but that 40 000 people were involved in Zibambele. There were target programmes which were looking specifically at women empowerment.

The Acting Chairperson asked whether the National Department had a strategy to capacitate people involved in the EPWP. She wanted to know whether the municipalities had a direct mandate or instruction on what to do with maintenance grants. She agreed with Ms Ngwenya-Mabila that the projects seemed to be limited to grass-cutting rather than real maintenance.

A Member indicated that the Department had already received R2 billion of funding, yet wanted to create more jobs and get more funding. He thought that the youth could be more involved, especially since many of the youth did not seem to have employment prospects because they were unskilled.

Mr Mlau said that this was certainly something the Department was considering in its flagship programme. There were challenges around collating information across the country, and the collection of information was ongoing. There were issues in the transport sector about sector skills. The Department would try to involve the youth on an ongoing basis, and would report back to the Committee with some proposals.

Ms Ngwenya-Mabila asked what the Department was doing to assist the South African National Union of Women in Transport (SANWIT), and what programmes were in place to ensure that they were capacitated, as she could see nothing tangible.

Ms Mulaudza said that SANWIT was established for women who wanted to become involved in transport, as there were very few female-owned companies in the transport sector. The Department had made some commitments, and considered in which industry they could be best placed. The infrastructure of government had been increasing, and the Department had provided office space and assisted SANWIT in developing a database of projects that were going to be implemented for women’s participation. SANWIT was not taking projects and giving them to women, but rather helping women to establish their own transport companies, and it was not easy to publicise if women had been able to access the opportunities.

The Acting Chairperson asked for a report on the resolution of the summit.

The meeting was adjourned.