Committee Report on Draft White Paper on National Commercial Ports Policy: finalisation; Department of Transport; Metrorail: bud

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20 March 2002
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Meeting Summary

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Meeting report

20 March 2002

Chairperson: Mr J P Cronin (ANC)

Documents handed out:
Committee Report on Draft White Paper on the National Commercial Ports Authority (see Appendix)
Presentation by Mr Msikinya
Presentation by Mr Makokoane
Presentation by Mr Mofi
Metrorail Presentation
Intersite Presentation (not presented)

The Committee Report on the Draft White Paper on the National Commercial Ports Authority was discussed, and certain provisions were reformulated.

The Department of Transport delegation addressed the committee on various aspects of its 2002/3 budget, and discussed policy developments to address the problems currently facing the Department of Transport. Secondly, whether sufficient funds have been allocated by the Treasury Department, efforts being made to equalize the discrepancies in the bus transport subsidies and the need for a total paradigm shift to address current and future problems.

Metrorail briefed the Committee and the following matters were discussed. The shortcomings in the rail infrastructure caused by problems with rail safety and security, problems with the current institutional arrangement and plans to address this issue and strategies to ensure Metrorail's financial survival in view of its current budgetary shortage. They also raised the need for a paradigm shift needed to address current problems, and the need for institutional coherence to achieve its objectives.

Committee Report on the Draft White Paper on the National Commercial Ports Authority
The Chair read the Committee Report to Members'.

Mr SB Farrow (DP) said that the absence of the "cost centers" was problematic, as these are vital in deciding to whom the tender would be awarded as well as whether the operation would be controlled by the State or the market itself. Furthermore, the tariff structure is not reflected in the Report, and this seems to present certain containers that carry a high volume with an unfair advantage, as high volume means high value.

Mr JH Slabbert (IFP) replied to the second concern regarding inter-port competition by contending that this does not automatically cover tariffs, because if one port charges too high a tariff the others would benefit from it.

The Chair informed Mr Slabbert that Mr Farrow was referring to point 3.2 of the Report, which could probably be reformulated to read "The committee believes that any restructuring of port operations must be based on in-depth research into the viability or sustainability of any proposal, and such restructuring must also be carried out within the context of the National Framework Agreement on the restructuring of state-owned enterprises". Alternatively, should Members feel this formulation is too specific, a more general provision could be adopted, to the effect that "The committee feels that the whole structure of port charges must be looked at to ensure that there are no anomalies".

Mr Farrow suggested that a general statement is preferred that calls for some sort of rationalisation.

The Chair suggested "The committee recommends that urgent attention be given to the restructuring of port charges and tariffs to ensure there are no anomalies". The inter-port competition issue raised by Mr Slabbert would thus be excluded from this provision. The Chair noted that Members agreed to this formulation, and that the Report was agreed to.

Mr Farrow suggested that the legal jargon be left to the drafters to refine the wording of the provision.

The Chair stated that, in order to fulfil its oversight function, this Committee would be visiting the Durban port to inspect the freight-handling system and private sector operations, which should take at least one day. Plans have also been made to visit the PretCon and City Deep sites in Gauteng, and these visits should occur either on Monday or Tuesday on April 23 or 29-30.

Department of Transport
Mr Sipho Msikinya, the Director General (DG), introduced the members of the delegation, who would each be dealing with a specific section of the presentation. Mr Jerry Makokoane, the Deputy Director General (DDG), Mr Sipho Khumalo, Senior General Manager of Regulations and Safety and Mr Mosengwa Mofi, the Acting General Manager of Corporate Services.

The DG's presentation served as a short overview and introduction for the more detailed discussions to be conducted by the rest of the delegation.

Mr Slabbert asked what progress had been made on the taxi recapitalisation programme.

The Chair replied that this will be dealt with largely by the Department of Trade and Industry, and not the Department of Transport.

Mr Farrow acknowledged this, but requested some sort of indication on the rollout for this year, and any strategies that have been devised by the Department to deal with this initiative.

The DG informed Mr Farrow that Mr Makokoane will deal with the policy developments regarding rail, bus and taxi transportation.

The presentation by the DDG focused primarily on the Department's performance and achievements during 2001/2, its plans and priorities for 2002/3 and policy, strategy and implementation with view of budgetary allocations with regard to rail, bus and taxi transportation.

State subsidies, risk assessment with the current budget, specific areas of concern and the Department's goals for 2002/3 with regard to bus transport were discussed.

The taxi recapitalisation programme was discussed in significant detail, and the technological and financial advancements to be made in this regard were highlighted, together with the key challenges facing the Department in implementing this programme.

The Chair commented that the presentation focused primarily on policy developments, and the DDG was requested to explain whether these would take the form of White Paper-type processes.

The DDG replied that the functional and key issues gleaned from the Department's 1996 White Paper were "lifted", and a similar process is envisaged for 2002/3. It has been decided that a Green Paper-type process will not be employed as the Department does not have sufficient time for it. Lessons have been learnt from the past, and the Department will be engaging in broad consultations with the South African Rail Commuters Corporation (SARCC), Metrorail, Spoornet, organised labour and the Portfolio Committee before committing to a specific route. Furthermore, the Treasury Department would be consulted on Monday 25 March on this matter.

The Chair contended that the White Paper has been used in matters involving budget debates, as public participation is valued here because it provides the relevant Department with better arguments to present to the Treasury when requested funds for projects.

The DG informed Members that energy in transformation is a big issue this year, and the Department recognises that it has to lead from the front in this regard.

Mr GD Schneemann (ANC) requested clarity on the Department's plans for the internodal facilities in place in urban areas.

Mr AR Ainslie (ANC) suggested that the "reference group" referred to during the DDG's presentation should cover all stakeholders, and that not only organised labour and the consultants referred to should be allowed to play a role or lead the process.

The DDG informed Mr Ainslie that the services of consultants will not be enlisted for the National Commercial Ports Policy, but they were however necessary for the National Railway Safety Regulator Bill because a specialised level of technical knowledge was needed. These consultants would not, as suggested, be leading the process.

Secondly, where would the Department find the funds for the refurbishing of the 176 new rail coaches?

The DDG said that this would be capital-funded, as these are the only funds that have been made available by the Treasury Department.

Mr Slabbert requested an explanation for the KwaZulu-Natal province not getting what it is supposed to with regard to bus transport subsidies.

The DDG responded that distribution services throughout the country are not properly balanced, and all efforts are currently being made by the Department to equalise it.

The DG stated that a total paradigm shift from a nodal transportation model to an integrated vision of public transportation is needed for the Department to successfully implement the planned objectives for 2002/3.

The Chair agreed completely with this, and hoped that this shift would be implemented successfully in the foreseeable future.

Mr Sipho Khumalo: Senior General Manager of Regulations and Safety, dealt with the regulations, safety and infrastructure component of the Department's plans for 2002/3. He requested a special session to brief the Committee on the Roads Safety Development Plans, so that it may guide this initiative and steer it on the right track.

The presentation discussed the Regulations and Safety budget and key priorities for 2002/3, the implementation of the Road to Safety Strategy and the objectives of a road infrastructure strategic framework. The Department's aim to devise a plan of action for the South African roads system and the current problems with overloading and future plans to address this matter were outlined.

Mr Slabbert stated that much confusion surrounds the current and future status of the King Shaka Airport, because the Premier of KwaZulu-Natal has said that it would remain, whereas the Airport Corporation of South Africa (ACSA) has stated the opposite. Could the Department clarify this matter?

The DG replied that it would be happening and the only contention was the matter of timing. Indeed, the negotiations have focused primarily on this issue.

Mr Slabbert accepted this explanation and contended that the Durban Airport is significantly under-utilised. The Department was requested to explain the decision to upgrade King Shaka Airport and the subsequent relegation of the recognition and needs of the Durban Airport. At some stage Durban airport had up to 200% more landings than any other national airport and has recently received a huge investment and is more luxurious than Cape Town International Airport.

The DG replied that the reason for this is that the Department acknowledges that Durban Airport has limited growth potential and is thus not the most viable option. King Shaka Airport has thus been identified as the feasible solution here.

Mr Farrow referred to the problems with overloading on South African roads, and suggested that the Department enlist the participation of all role-players in familiarising them with all the relevant issues, so that fixed stations may be established to monitor incidences of overloading. These stations are currently vandalized and are far too often simply avoided by transports exceeding the prescribed freight limit. Furthermore, the national regulatory framework should be adjusted in accordance with international norms on this matter. This is one of the most important concerns on which the Department has to focus during 2002/3.

Mr Khumalo replied that the records of these stations or portable weight bridges are not recognised in South African courts, and serious efforts are being made to recognize these via amendments to the Road Traffic Act.

Mr Schneemann also referred to the problem with overloading and suggested SADC harmonisation, as there is significant traffic across South Africa's national borders.

Mr Khumalo said that this is a very important issue. The Road Freight Association has labeled this a damning issue in their Focus publication, and sought to fault the Department for not listening to the urgent concerns and for failing to control the Cross Border Roads Agency in allowing overloaded vehicles entrance into the Republic.

Secondly, Mr Schneemann commented that the Department should interact with Spoornet to arrive at workable means to improve the quality of these services. The recent trend has seen the increase in the use of roads to transport goods, because the current rail system is so bad.

Mr Khumalo replied that this forms part of the wider road to rail debate.

Mr Farrow inquired whether the Arrive Alive Campaign is on track, or whether other methods have been devised and implemented to enforce traffic laws and to increase a law enforcement presence.

Mr Khumalo responded that this campaign has achieved good results to date, such as successfully enlisting the co-operation of all three spheres of government in this initiative. The Department has, however, recognized its limited potential and for this reason the Road Safety Strategy has been devised because it lists nine different ways in which this issue may be addressed.

Mr Farrow stated that this was just what he wanted to hear.

The Chair requested Mr Mosengwa Mofi to address the committee.

Mr Mosengwa Mofi's presentation focused on the budget allocations and composition of the Corporate Support Service section of the Department.

The Chair stated that the Department had a significant turnover during 2001/2, and requested an explanation for the attrition and the Department's plans to address this issue.

The DG replied that the ideological changes that occurred within the Department is the fundamental cause, which resulted in a paradigm shift from a functional silo to a more team-driven approach.

The DG contended that strategic planning needs the active participation of this Committee.

Mr Farrow also commended the Department on the improvements made, but expressed concern at the fact that the presentations still refer to Arrive Alive campaigns initiated as far back as 1998. This has to be considered further.

Mr Ainslie requested clarity on whether mechanisms have been put in place to ensure that the discrepancies in the bus subsidies are not aggravated. Furthermore, the Department should inform the Committee of the progress made in this regard, as it is thought that all the interim contracts have been converted to competitive tendering contracts. It has been reported that this process has been extended, and clarity is needed on this.

The DG replied that the New Public Transport Policy addresses these very issues. The contracting logic of the Department is very restrictive, as there is an assumption that one size fits all. This has to be remedied.

Secondly, complaints have been received from the small/medium/micro enterprises (SMME's) requesting inclusion in these processes. These have to be allowed to participate so that the SMME's at grassroots level could be assisted.

The DDG informed Mr Ainslie that his concern is addressed under the heading "Risk Assessment" in his presentation.

Mr Honey Mateya, Chief Executive Officer of Metrorail, said that the presentation would deal primarily with the means by which rail safety and security can be improved via advances in rail infrastructure. The need for institutional reform to catch-up with the financial backlog in the South African rail system would also be outlined.

The presentation dealt with the funding and budget of Metrorail; the major challenges facing Metrorail posed by aging and outdated infrastructure, inefficient land use, public safety and outdated technology; the institutional arrangement and future projections for Metrorail.

Ms Lauriette Modipane, Metrorail Finance Executive, detailed Metrorail's financial and budgetary framework and highlighted the fare revenue and expenses incurred, subsidies procured and the Metrorail operational expenses.

Mr Ainslie stated that the summary of expenses in the presentation indicates that the expenses exceed the income, whereas the next slide entitled "Fare Revenue vs Bid" creates the impression that the profit exceeds the expenditure.

The Chair informed Mr Ainslie that fare revenue refers to income and includes the subsidy received from SARCC.

Mr Mateya said that it is not profit in the conventional sense of the word, but could more accurately be described as "excess".

Mr Ainslie inquired whether this "excess" is then reinvested in Metrorail or whether it is redistributed to SARCC.

Mr Mateya stated that it is returned to SARCC.

A Member referred to the public safety issues highlighted by Mr Mateya and contended that significant funding is needed to enable Metrorail to achieve its objectives. The presentation revealed that the rolling stock and infrastructure is owned by SARCC and Metrorail is only responsible for the operating function. This institutional arrangement causes significant trouble, especially in the event of the ever-popular cable theft or crossed line signals. This has to be resolved as a matter of urgency, and Metrorail is requested to outline any plans it has made to remedy this situation.

Mr Mateya informed members of the current Rail Commuters Action Group (RCAG) case against Metrorail regarding rail safety, and stated that Metrorail has actually overspent on security but is still unable to operate at an acceptable standard. This shortcoming then has negative effects on the service infrastructure, such as the problems with signals. An additional 200 personnel have been employed to patrol stations that are experiencing a serious threat to safety and security from encroaching squatter camps, as these are the areas in which "bulk cable theft" occurs. This is not technically Metrorail's concern, but these measures have been engaged in the spirit of a collective effort to solving this problem.

The Chair stated that this is the big challenge facing all relevant parties involved in South African rail, and the participation and input of the Department is vital here.

Mr Farrow asked Metrorail to explain how it plans to cope without the R94 million owed to it by the Department.

Mr Mateya replied that Metrorail has been informed by SARCC that it would not be able to fulfill its contract price in terms of the agreement between the two. The result is that Metrorail is nevertheless expected to provide the same standard of service less the R78 million, which it will not be paid for the month of March. The reason for the defaulting payment is understood, but it has to be acknowledged that it is flawed in principle, and this matter will have to be discussed with them further as a matter of urgency. Indeed, the time has to come when the rail industry has to evaluate the amount of resources and funds it could save by consolidating operations and functions which are currently being duplicated by rail bodies.

Mr Farrow pointed out that there has been a marked drop in passenger use of the rail transportation system and there has been an attempt to compensate for this by increasing the fares. The concern here is that Metrorail is limited by its agreement with SARCC, which places a 7% cap on such increases until 2003. Surely this agreement can be amended to assist Metrorail to achieve its objectives, in view of its current circumstances?

Mr Mateya replied that the numbers have dropped because of the problems with rail security. Also, the trains are filled beyond capacity and the stations have not been designed to deal with fare terminals. All these factors contribute to the rapid drop in the number of rail passengers. The designing and implementation of an automated fare collecting system programme is larger than Metrorail and other industry leaders, but a merger here should not be regarded as the panacea for all the rail safety and security problems. The Department is needed here, and a possible R100million could be unleashed back into the coffers of the system.

The Chair agreed with the strategy outlined by Mr Mateya, and suggested that a major part of the solution lies in the need for a drastic institutional change. The DDG is requested to elaborate on this paradigm shift referred to earlier by the DG.

The DDG said that it is true that the Department is currently evaluating various models for its asset core and its operational requirements, following a principled decision taken by Cabinet to collapse Metrorail and SARCC into a corporation in an attempt to also address subsidisation in these bodies. The harsh reality is that Metrorail suffers because it has not reached a level of technological advancement to address all of its objectives. In this regard the short-term challenges facing the South African rail industry will be addressed, including those posed by the Legal Succession Act, and in this regard an agreement can be reached with both Metrorail and SARCC without resorting to amending that Act.

In fact, an agreement has already been concluded on such matters with their parent body, Transnet, and these include the current contract arrangements with SARCC referred to earlier by Mr Ainslie. The current arrangement binds Metrorail till 31 March 2003, but a number of flaws have been unearthed in the contract which make a mockery of the contractual arrangement. These include the imposition of penalties on Metrorail should it fail to meet set standards, which are wrong in view of the recent proliferation of cable theft incidences, for example, for which Metrorail cannot be held responsible.

With regard to the concern raised in terms of Metrorail's current funding problems, there are simply no more funds available to address the various needs of the rail industry, and the question which now arises is the manner in which this has to be communicated to the relevant parties. The Treasury Department has already awarded an additional amount, but these funds have already been channeled into rail projects. If no funding is received in the immediate future the Treasury would again have to be resorted to, because the budget allocation for 2003 has already been implemented.

Mr Cronin stated that the level of government commitment to the recent Growth and Development Summit as well as to the President's call for a shift from macro- to microeconomic policies, during the 2001 State of the Nation address, should be stepped up. During 2002 these issues have to be dealt with, and Metrorail, Transnet, SARCC, the Department, Spoornet and other industry players have to make a collaborative effort to ensure the success of this initiative.

With regard to institutional coherence referred to earlier, this process has to move very quickly to achieve the vision of rail structuring and funding. Indeed, these two objectives are interlinked, and the sooner significant progress is made in one aspect, the sooner similar progress will be made in the other.

The issue of personal security has formed the focus of deliberations on the National Railway Safety Regulator Bill, and it is the very urgent recommendation of this Committee that the Rail Transit Police be reintroduced. The current RCAG case referred to earlier by Mr Mateya has highlighted the importance of this issue, and in this regard this committee has requested joint hearings with the Department of Safety and Security to arrive at workable means to remedy this problem.

The vital role to be played by the general South African public has, to date, been overlooked, but bodies such as the RCAG are invaluable here. The victims of rail accidents and injuries should be consulted so that public pressure on this issue may be increased, and thereby raising the public profile of this problem.

Mr Farrow suggested that the proposed extension of the Khayelitsha rail link, as mentioned in the budget, is a feasible option and would not be more of a headache in light of all these problems.

The DDG replied that a single agency comprising different business units is envisaged here and a joint effort is required to successfully effect this shift, as Shosholoza Mail falls under the Department, Metrorail under Transnet and SARCC is an agency of Spoornet.

Secondly, it has been suggested that a task team be established to evaluate the feasibility of consolidating Shosholoza Mail and Metrorail, but this team has not yet been finalised. Although these serve two different services (with Shosholoza Mail providing more of a long distance rail service) real synergy is needed here so that a further duplication of functions and bodies is avoided, such as with Metrorail and SARCC as mentioned earlier.

The DDG responded that the existing line will only be extended by four kilometres with the cost of the infrastructure amounting to R79 million, to be rolled out over a period of three years.

Mr Khumalo mentioned the Growth and Development Summit, referred to earlier by the Chair. He suggested that, if significant progress is to be made, a transport workshop for the respective rail sectors should be scheduled, so that they may better prepare themselves with concrete questions and issues regarding the ways in which the South African rail transport system can assist growth and development for the Republic as a whole.

The Chair commended Mr Khumalo for this brilliant idea, and assured him that the Department could commence planning for this workshop.

The meeting was adjourned.

Transport Portfolio Committee
Committee Report

1. The Transport Portfolio Committee was briefed, on 13 March 2002, by officials of the National Department of Transport on the Draft White Paper on National Commercial Ports Policy (January 2002). This briefing follows committee hearings on an earlier draft, and submissions made to the Committee by a range of stakeholders in the course of 2001. In this context, the Portfolio Committee has also conducted oversight visits to the ports of Cape Town, Durban and Richards Bay.

2. The Committee welcomed the opportunity for further engagement on the Draft White Paper. It also welcomes many amendments that reflect concerns raised by the Committee and by stakeholders in earlier hearings of the Committee.

3. The Committee believes, however, that further amendments are required in the following four significant respects:

3.1 There is vagueness about the end-state institutional location of the proposed National Ports Authority. Given the proposed regulatory, strategic policy-making and landlord functions envisaged for the NPA, we believe that the White Paper must unambiguously state that the NPA should, eventually, be answerable to the National Department of Transport.

3.2 The present draft assumes that it is a foregone conclusion that all port operations will be concessioned out. While this may well be the most desirable outcome, the Committee believes that the White Paper should not pre-empt in-depth research and effective negotiations within the context of the National Framework Agreement on the restructuring of state-owned enterprises.

3.3 The present draft introduces the notion of inter-port competition. The Committee believes that the White Paper must make clear that any inter-port competition should be strictly within the framework of an overall, emerging South African growth and development strategy

3.4 In general, the White Paper should more clearly emphasise the critical and overarching necessity of linking port policy to an emerging national growth and development strategy.


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