Road Traffic Management Corporation: hearing with Deputy Minister in attendance

Meeting report

Fiscal Sustainability and Road Traffic Infringement Agency questions
Mr N Singh (IFP) asked if the RTMC had paid more than R1.3 million for 2010 World Cup tickets.

Mr George Mahlalela, Director-General, Department of Transport, answered that this figure referred to tickets for the Confederations Cup and not the World Cup. All of these tickets were “hospitality” tickets and were, on average, R7 500 per ticket. No money was spent on tickets for the World Cup.

Mr Singh asked about staffing, especially at management level.

Mr Collins Letsoalo, Acting CEO, RTMC, answered that the Acting CEO was appointed due to the CEO being suspended pending the outcome of a Ministerial Task Team investigation set up in February 2010. A decision was taken to appoint the interim management. Four management personnel were suspended as a result of the findings of this Task Team. The organisation is enjoying more stability as a result.

Mr Singh asked why this process was taking so long. Were the CEO and suspended managers still being paid full salaries? What is the outcome of this investigation?

Mr Letsoalo answered that they were being paid salaries while disciplinary actions were being taken against them. The RTMC had opened a case of fraud with the police. The Task Team’s report was released in August and tabled in Parliament in November.

The Chairperson asked when the case had been opened.

Mr Letsoalo answered that the case was opened a week ago.

Mr Singh asked why the case had only been opened a week ago.

Mr Letsoalo answered that the RTMC could not proceed with this matter until given the go-ahead to do so by the Department.

Mr Mahlalela added that the Department had received the final forensic report in August 2010 and had to verify the legalities of it. While doing this, however, it engaged with the police. The opening of this case was the culmination of a process.

Mr Singh asked how much was paid out in salaries to the suspended staff thus far.

Mr Letsoalo answered that between R6 million and R7 million had been paid out to date.

Mr R Ainslie (ANC) asked what disciplinary measures had been taken against the Board [which was dissolved in April 2010 over its neglect of its fiduciary duties].

Mr Letsoalo answered that his power in this regard was limited and that the matter had been handed over to the police.

Mr Mahlalela added that their services had been terminated but that the shareholder’s committee would have to decide on this once other processes had been factored into.

The Chairperson asked whether the RTMC had simply handed the forensic report over to the police or whether it had laid charges against specific individuals.

Mr Letsoalo answered that the report had been handed over to the police.

The Chairperson asked whether this meant no actual charges had been laid.

Mr Letsoalo answered that this was correct.

Ms Ruth Bhengu, Chairperson of Portfolio Committee on Transport, said that the Committee had, in a previous meeting, recommended that charges be brought against the relevant members of staff.

A member of the Portfolio Committee on Transport asked what the timeframes were in relation to the continued payment of salaries to suspended staff members.

Mr Letsoalo answered that, as there were processes to follow, he could not say with accuracy when this would happen.

The Chairperson said that the Committee was not satisfied with the speed at which the disciplinary action against these employees was moving. Charges should be laid against specific individuals. The root of this problem came from the poor performance of the Board.

Mr Singh asked why it had failed to provide separate financial statements. Why had it received a qualified audit?

Mr Letsoalo answered that the Board had done this as they believed the two organisations were going to merge into one single entity.

Mr Singh asked whether it had budgeted for a deficit.

Mr Letsoalo answered that the electronic National Traffic Information System (eNatis) transaction fees were used to cover
this deficit. The transaction fees, which were meant for eNaTIS, were utilised by the RTMC and not given to the Department. This had resulted in its liabilities exceeding its assets. Until this was regularised this would remain the case.

Mr Mahlalela added that this had been as a result of it having no independent financial systems. Discussions around the funding challenge of the RTMC were being conducted with the National Treasury in order to resolve this issue.

A National Treasury representative confirmed that the Department had, in 2007, approached it for the eNaTIS transaction fees to flow to the Department. When, in 2008/09, it was discovered that some of this money was being held back by the RTMC, the Department requested that the practice notes be changed so that funds no longer flowed to the RTMC. National Treasury was, however, unable to change this flow of funds as a result of a regulation signed by the Minister in 2007. This regulation was therefore posing a problem in relation to this.

Mr M Steele (DA) asked why there was such a significant increase in the amount of assets written off.

Mr Sam Manamela, CFO: RTMC, answered that a large part of this was due to the cancellation of the ERP computer software and also cars that were purchased by the entity being transferred to provinces at book value.

Mr Farrow, member of the Portfolio Committee on Transport, asked who had authorised the use of the eNaTIS money which should have gone to the National Treasury. Was this situation continuing under the current management?

Mr Mahlalela answered that this situation was stopped in October 2009.

Restatement of Corresponding Figures and Irregular, Fruitless and Wasteful Expenditure 
Mr Ainslie asked what the actual figure was in relation to the unauthorised eNaTIS transaction figures.

Mr Manamela answered that, for the 2008/09 and 2009/10 financial years combined, this figure was R200 million.

Mr Ainslie asked whether there was currently an offset policy.

Mr Manamela answered that there was no offset policy, though it was known what this money was used for, including operational expenditure.

Mr Letsoalo added that this money was no longer used in this way.

Mr Ainslie asked why there was no mention of the irregular lease agreement [of R658 million over a 10-year-period] under Irregular Expenditure.

Mr Letsoalo answered that this was not mentioned as when it had received the forensic report, it had already closed its books. This would, however, be included in the 2010/11 Annual Report.

Mr Ainslie asked what internal control mechanisms there were. What happened to the internal audit committee?

Mr Letsoalo answered that there had been a collapse in internal controls. The audit committee was dysfunctional in that it never sat and some of its members had resigned.

Mr S Thobejane (ANC) asked for clarity around the matter of rent being paid for unoccupied premises.

Mr Manamela answered that this occurred as a result of its relocation to different premises happening in stages.

Ms M Matladi (UCDP) asked why furniture had been bought without a tender being put out. How could National Treasury condone this?

Mr Letsoalo answered that this was not condoned by National Treasury but rather ratified by the Board after it noted the irregular expenditure by management.

A National Treasury representative added that, although immediate reasons for this could not be provided, it would provide the Committee with its list of criteria for condonement.

Ms A Muthambi (ANC) asked whether charges had been laid against any of the lower-level employees.

Mr Letsoalo answered that some of these employees were given final written warnings, while others had resigned after a case of fraud against them had been opened.

The Chairperson asked why, if it had done this, it had not laid charges against the relevant senior officials.

Mr Letsoalo answered that it had to assess the legalities of the situation before it could proceed, especially as there were many other individuals and companies it suspected were involved in the matter.

Ms T Chiloane (ANC) asked whether the Supply Chain Management team was currently operating more effectively.

Mr Letsoalo answered that an experienced person had been hired to head this division.

Mr P Pretorius (DA) asked how the salary adjustments were determined as they appeared to be too high. Were any performance bonuses paid out to those who had been suspended?

Mr Manamela answered that these increases were in line with the Department of Public Service and Administration. This was a possibility.

The Chairperson asked what oversight the Department conducted of its entities.

Mr Mahlalela answered that the Department signed its entities’ business plans annually. Oversight was therefore focussed on service delivery. Matters related to corporate governance were the responsibility of the relevant Boards. This has been identified as a problem and, as a result, each Board now included one Department representative.

Mr Jeremy Cronin, Deputy Minister, Department of Transport, said that charges will be laid against specific individuals. The Department would also look into the regulations which complicated the re-flow of eNaTIS funds. If the Committee planned on holding a second round of meetings on these matters, it could be helpful to have other parties such as the shareholders, former Board members and consultants in attendance. There were serious systemic issues within the RTMC, though the current management was committed to building a more effective entity.

The meeting was adjourned.