The Office of the Auditor-General briefed the Committee on the audit outcome of the Department of Transport for the 2011/12 financial year. It reported that the Department had received unqualified audit opinions in the last four years including the current one. The Auditor-General stated that the Department needed to look at in the supply chain management in order to ensure compliance with legislative requirements on procurement. There was a noticeable regression on human resources and the Information Technology (IT) controls. Finances of the Department were impacted by a recurring overdraft amounting to over a billon rands. But also there was a contract where evidence was not received according to the 90/10 rule, governing the preferential procurement. This involved a case where a contract with the lowest rating was recommended for tender. The Department had an overall vacancy rate of 33% as a result of the Department's inability to attract people with requisite skills.
Members voiced displeasure with the overdraft, and said it ought to be reflecting on National Treasury. The Committee heard the Department had failed to provide satisfactory motivation, on why it had opted for a lowest ranked bidder in a multi-million contract awarded. Members said the use of consultants needed to be looked at given that they charged exorbitantly with no transfer of skills. They also examined the high vacancy levels, the accounting system used by the Department and the awarding of a contract for conference held by the Department.
The Committee also heard the Western Cape Small Bus Operators Council (WCSBOC), needed the support of the Members. The Organisation intended setting up a provincial business unit.
The meeting discussed correspondence received on transport regulations that were gazetted without the Committee seeing them. Finally, Members discussed the correspondence it had received regarding the deterioration of airspace in Gauteng. Experts in the aviation field had expressed concern on the proliferation of airstrips that had an impact on the approaching flights and take-offs. This posed a risk of air crashes and near misses in the province. There appear to be a lack of regulation and the danger of crashes loomed large.
The Chairperson said the Committee would receive two presentations from the Auditor General's (AG) office, and the Small Bus Operators (SBOs). The Committee would not deliberate on the Small Bus Operators presentation; a separate meeting would be arranged at a convenient time. It would then conclude by addressing the two issues of transport regulations, and Gauteng airspace.
The Chairperson further noted that the agenda of the meeting was slightly changed following requests by Members of the Democratic Alliance. Members proposed that on top of the two agenda items, the meeting discuss correspondence received on transport regulations that were gazetted without the Committee seeing them. According to the Act Members were supposed to get the regulations before they were gazetted; that never happened. But the Committee also needed to deal with correspondence that was received regarding the deterioration of airspace in Gauteng. Experts in the aviation field had expressed concern on the proliferation of airstrips that had an impact on the approaching flights and take-offs. This posed a risk of air crashes and near misses in the province. Members agreed to changes on the agenda.
Department of Transport (DoT) Audit outcomes 2011/12: briefing by Office of the Auditor-General of South Africa (AGSA)
Mr Vusi Msibi, Business Executive, AGSA, said that the purpose of the briefing was to report on the audit outcome of the DoT for the 2011/12 financial year. The Department had consistently received unqualified audit opinions in the last four years. Key focus areas that were looked at included supply chain management; predetermined objectives, human resources management; Information Technology (IT) controls; material errors/omissions in the Audited Financial Statements submitted for audit; and the financial health status of the Department. This pertained to how the Department managed its money and if it was in a position to discharge obligations, and if auditors were paid in time and the collection of debtors.
There were issues that the management structure needed to look at in the supply chain management in order to ensure compliance with legislative requirements on procurement. There were no significant issues on predetermined objectives on the reporting period. The Department had resolved issues that were raised in previous audits.
There was a noticeable regression on human resources and the IT controls. There were however significant plans on IT to deal with the issues. The audit report highlighted the weaknesses around the IT governance and the general controls. There was also one issue with material omissions, but the quality of the financial statement submitted was satisfactory.
On the financial health status, Mr Msibi reported that the Department had materially under spent its budget- under spending amounted to R 320,9 million. It also currently had an overdraft of R1,4 billion.
There was a contract where evidence was not received according to the 90/10 rule, governing the preferential procurement. This involved a case where a contract with the lowest rating was recommended for tender. The AG wanted to audit the entire appointment process especially around the issue of motivation. This resulted in the Department incurring an irregular expenditure of R12.4 million.
The issue was not initially disclosed, but when DoT was engaged it was eventually disclosed in the financial statements revenue. The report also explained the root causes and a recommendation on the issue and an indication was that all the provision of the triple PFA Act were adhered to, and in fact the Department provided trail of procurement services.
There was an overall vacancy rate of 33% in the Department; at the senior management level there was a 20% vacancy rate and this had an impact on service delivery. These vacancy levels were as a result of the Department's inability to attract people with requisite skills. Some positions related to the restructuring process that was vetted very late. The recruitment and vetting process took longer before positions were filled. The Department ought to move swiftly in ensuring that the vacancies were filled before disruptions occurred in service delivery.
There were key focus areas on IT that the audit focussed on, and they included looking the IT governance framework. This looked at things like unauthorised access to the systems, as that posed serious risks. The report also looked at the backup restoration in cases of disaster emergencies. There were limitations to the national system like BAS where it was difficult to set up other control measure like the firewalls. It was important that there were adequate IT skills to deal with challenges in the Department, but also to operate the e-natis system.
On material omissions there was an irregular expenditure of R12 million. There was an under expenditure of R320 million, mainly due to the revised strategic plan. This resulted in projects being delayed and thereby impacting on spending. The Department had an overdraft of R1.4 billion as a result of bus subsidy claims incurred in the last three years. The authorised expenditure had not yet been condoned, and it had to be funded. The project was in the pipeline, but the Department would continue operating on the R1.4 billion overdraft.
The AG also wanted to highlight the issue of a little amount of R49 000 that was recorded as fruitless expenditure; the amount was insignificant, but if not attended to could become a bigger amount. Total amount for irregular expenditure, including the R12 million, was at R48 million. It was incurred as a result of non-compliance with supply chain management procedures. There was an ongoing investigation into supply chain management processes.
Ms N Ngele (ANC) sought clarity on the R1.4 billion overdraft and the under expenditure of R320 million. She asked how it was possible that under expenditure was incurred on overdraft.
Mr Suka sought clarity on the condonment of the R1.4 billion overdraft. This was a substantial amount and was a burden carried by the Department every financial year.
Mr Msibi replied that overdraft came from previous financial years, as a result of the Department spending more than what was allocated for by National Treasury (NT). The Department was sitting with an issue of negative cash, and it related to the question of condonment. It was only NT that needed to fund the overdraft; it had to get resources from somewhere. This meant for as long as the R1.2 billion was not given as additional funded cash, DoT would continue operating on overdraft. However if one looked at the budget for 2011 there was an under spending of R20 million, and this would reduce the overdraft slightly.
The Chairperson interjected and said it was not the first time the Committee dealt with the overdraft issue. When the Department appeared before the Standing Committee on Public Accounts (Scopa) the Committee was part of those proceedings. The Committee understood the issue to be a problem caused by NT. The overdraft got reflected on the Department because it had to pay service providers. If DoT failed to honour the payments, service providers could either take the Department to court or simply stop providing the service.
The Chairperson wanted to know the kind of steps that the AG's office could take against NT. The overdraft was not the only instance that a similar situation had been reflected on the Department, whereas the root cause came from elsewhere. She cited the rural transport plan as an example and said it was approved by Cabinet, but was partially funded. If NT thought the plan would not work it had to come out clear at Cabinet level, so that such plans could be deferred until there was enough funding.
The problem was not underperformance or regression by the Department. The blame needed to be channelled the right way, because when Cabinet approved a plan but later challenges with funding were encountered, who should take blame. Did the AG approach NT when failure to implement project was as a result of lack of funding?
Mr I Ollis (DA) said although this was the scenario, departments needed to be responsible with spending as they could not spend money that was not there. He disagreed with the Chairperson's assessment and said when one got funding there was time to adjust the business plan to reflect what was in the pocket.
The Chairperson agreed and said that this was the case with the rural transport. There was nothing the Department could do in the case of bus subsidies. Service providers were transporting the people; if DoT did not pay the subsidies, it would be taken to court. The Department was in an unenviable position; the question then became, would the AG approach NT to provide funding?
Mr Msibi replied that the AG did not question NT when departments failed to meet targets as a result of limited funding. What the AG looked at was the authorised budget and what the departments planned for a particular period. It was crucial that departments adjust strategic objectives in line with available resources.
The Chairperson interjected and asked if this meant putting one department at an advantaged position over others.
Mr Msibi replied that he was trying to explain that the role of the AG as an office was limited.
The Chairperson said NT was a department that dealt with allocating funds, and was not above others. Funds were a financial implication to other department's programmes. The role of the AG should not be limited when NT failed to perform according to expectation. Departments got lambasted on account of NT's failure to provide adequate funding. If NT had powers to ask questions of other departments; why would it not be asked similar questions by the AG's office?
Mr Msibi replied that NT had its own programmes over and above doing the budget allocations. The AG did report when there was under spending at NT as was the case in the period under review. The challenge was with the National Revenue Fund (NRF) as it had not been in a surplus position. This made it difficult for the AG put NT under pressure to avail funding.
The Chairperson said inability to raise adequate funding programmes agreed to by Cabinet appeared to be underperformance on NT's part. Such inability had reflected badly on the Department’s bank books. There should be a way to express the overdraft audit finding as NT's failure; the root cause of the problem lay with NT. The AG's audit report should be able to highlight such situations when they crop up at departments.
Mr Msibi replied that he shared the same sentiment and would, thus, facilitate engagements to that effect with both the Chairpersons of the Portfolio Committees on Transport and Finance. The bottomline was that there had to be a way to fund the overdraft.
The Chairperson said there would be a follow up so that the issue about the recurring overdraft was resolved.
Mr Ollis sought clarity and requested further details on the R12 million bid awarded irregularly and the R49 000. What did the invoice stipulate; what was it for?
Mr Vinay Ramballi, Senior Manager, AGS, replied the R12 million was in respect of a conference of which details were not availed to the AG.
The Chairperson replied that the conference was not know to the Committee and if the conference had occurred, and given the nature of preparatory work that went into organising a conference; much more information should have been readily available.
Mr Ramballi noted that the normal procurement processes were followed, but the issue was with the calculation of the 90/10-point system where the lowest scoring company was preferred.
The Chairperson enquired if reasons for awarding the contract to the lowest scoring bidder were provided.
Mr Ramballi replied that the Department had explained that the highest scoring bidders lacked the capacity to carry out the work. The AG did not accept that explanation, as there were no documents to support that kind of reasoning.
Mr Ollis asked if the Department had given an indication as to why it sat with such a big vacancy rate.
Mr Ramballi replied that the delay in the restructuring process, the Department's inability to attract the right skilled staff and the time it took to appoint staff contributed to the high vacancy rate.
Mr Msibi said that the restructuring was meant to strengthen the oversight over the entities that reported to the Department. Once the process was done there would be senior managers dedicated to oversee all the different modes of transport.
Mr R Krumbock (DA) wanted to know why it was so difficult to find skilled employees in the sector. He sought clarity on whether the inability to find right skilled people was further compounded by transformation needs. Was the country making it hard for itself or was it the case of not having skilled people? Lastly, he asked if the Department had looked at the option of trying to lure back into the country those technically skilled people working abroad.
Mr L Suka (ANC) commented that he found it strange that the vacancy rate would be so high in a country with a population as SA. He wanted to know if tertiary institutions had been engaged on finding the suitably qualified persons, or whether the issue was with the salary offered in the public service.
The Chairperson commented that skilled people worked in the private sector as consultants. Outsourcing of government work made it impossible to attract requisite skills into departments. DoT was engineering orientated and needed to have resident engineers. But outsourcing militated against that objective. When the AG looked at the figures paid to consultants what was the office's understanding and assessment?
Mr Msibi agreed, and said that outsourcing contributed to the lack of attraction of skills. The private sector paid well for skilled people compared to government. The role of the AG as an office was to look at the issue of service delivery and raise it with departments, but it could not do much.
The Chairperson said the explanation empowered the department. There was also a challenge on the filled vacancies, because some people were employed to do the work, and yet they relied on consultants. The overuse of consultants indicated the lack of skill in government departments.
The Chairperson said the restructuring needed to address the question of relevantly skilled personnel, where appropriately qualified people were recruited. The process needed to address all the four modes of transport in the country, with managers who had background in their fields. Government could never get value for money on using consultants, as they were profit driven.
Mr Msibi said there was a performance audit done on the use of consultants, and the report was in the process of being tabled. It was a very important report that picked up on issues including low transfer of skills, and low management.
Mr Suka asked why the country still operated on different audit accounting systems. The BAS system had been coming for a while now. Was there a single system that emphasis could be put on so as to curb loopholes that were there?
Mr Msibi replied all that departments used the one of the following systems - BAS, Persal and Logis. Both NT and the Development Bank of SA were engaged with a view to examine the possibility of using one IMFS system that was meant to address all the challenges on other systems. The project was ongoing but NT and the State Information Technology Agency (SITA) had delayed progress. The idea was to install a system that could handle all forms of data including human resource, finance, procurement and other modules.
Mr Suka said the Department appeared to be struggling on critical areas like supply chain management. What kind of assistance did the AG in relation to finances and human capacity give?
Mr Msibi replied there were quarterly engagements with management where key internal controls were discussed. The meeting looked at leadership; finance and performance management; and governance areas in relation to internal audit. The objective was to engage the departments in all the weak areas identified. Potential risks were picked and departments were alerted. The departments would in turn craft an action plan in addressing the issues. The AG office advises where possible and assisted management as possible as it could. There had been an improvement based on this process.
Mr Suka wanted to know whether action had been taken against those fingered in the report as having interfered with tendering processes. It was not clear whether criminal prosecution had been considered against those suspected of wrongdoing.
Mr Suka said some of the questions should be addressed to the Department instead. He wanted to know if there were timeframes in introducing the common system. The new system had been in the pipeline for some time and yet NT seemed not to get it right. When could the new system be expected to addressed the loopholes; there were financial implications concerning this matter.
Mr Msibi replied there had been significant delays in the completion of the new system but some modules were at the testing stage. It was difficult to say when the system would be finished. One of the limitations as far as the project was concerned was that SITA had been struggling to attract people with the requisite IT skills to operate the system. This was one of the contributing factors causing the delays. There had been financial implications; the AG did not have issues with spending on the IFMS rather the delays. He said he could not give the timelines. He however agreed that the project had taken a little longer; especially that it had started in 2007. There had been significant delays.
Mr Suka voiced displeasure and said it seemed that there was no light. The matter needed to be taken up as the cost to have it ready looked to be escalating.
Mr Krumbock sought further clarity on the R49 000 irregular expenditure.
Mr Ramballi replied that it was for flights and accommodation for staff that were not cancelled in time, and was not directly linked to the R12 million.
The Chairperson sought clarity on the scoring of service providers that had scored higher points but would not, in the view of the department, complete the job. What reasons were there for this; did the company have a history of failing?
Mr Ramballi replied that no documentation was availed to support that reasoning, despite it being requested from the Department. The AG concluded that the bidder who scored the highest points should have been awarded; if not, the second highest, but this was not done and there was no justification for this.
Mr Krumbock commented that there was a challenge when a department would simply refuse the AG information during the audit process. This was unacceptable. He said it shocked him that Members were relaxed about that situation; the Committee needed to lay a complaint.
Mr Suka said the AG had made the Committee aware, and all the questions needed to be directed to the Department.
Small Bus Operators (SBO) presentation
The Chairperson clarified that she had met with the SBO and it had raised issues that required the attention of the whole Committee. One of the issues that was raised at that meeting included a concern that they were not being subsidised like other companies. It was argued that this disadvantaged and discriminated against the organisation and contravened the constitution.
Most of the SBOs operated in rural areas where road conditions impacted on the lifespan of their buses. There was no uniform approach in looking at the rural roads. The operators faced stiff competition from subsidised companies; but also from owners whose vehicles were not designed to transport people. Vans, tractors and trucks operated in areas where they operated.
She said that the SBOs argued that there was a slow movement from the Department in assisting them into becoming a national structure. Their feeling was that the Portfolio Committee could assist; this engagement was therefore a beginning of a process.
Mr Ashley Paulse, Executive Committee Member, Western Cape: Small Bus Operators Council (WCSBOC), said the organisation had a just cause to be heard by Parliament. The organisation wanted to leave Members grappling with the question about the kind of assistance they could give to SBOs. Operators needed the support of the Members, as they had tried to be heard but with little luck in the WC.
SBOs had worked with DoT since 2009, and the Department had assisted with the formalisation process. The Department of Transport in the Province had also spent a bit of money to allow for travelling in the province to ascertain those members who were out there.
The organisation intended setting up a provincial business unit. In the province there was a business unit set up in 2008. The next objective would be to establish a centre of excellence to counter the skills challenge. SBO was engaged with auditing of its membership not only in the province but in other provinces as well. The Organisation was not waiting for handouts in terms of who would assist but was taking the lead in the industry.
Mr Paulse said SBO would use the international norms and standards to run the centre of excellence. The centre was not a training academy, but would rather be a component within SBO mechanism that would ensure that plans were monitored and evaluated. The centre would look at the kind of infrastructure operators required. But also it would help people understand the industry better. There was a plan in place, and once fully established at the end of October, SBOs would engage with all the stakeholders.
Another objective was engaging government on various issues such as poor roads, licensing, operations of law enforcement agencies and the management of all transport matters. There was a proper strategic plan, but there was a need to operationalise the plan. This was the area where support was needed; without that kind of support the Organisation would not get anywhere.
The SBOs were looking to lobby government to assist with a draft SBO funding Model as there was sufficient money in the country. When looking at the kind of the money availed to the big operators, the organisation believed there were funds to help SBO's become part of the mainstream economy. There was no need for members of the SBO to receive handouts. Some operators were a third or fourth generation.
Another objective was participating in Infrastructure Development Plans (IDPs). And also the Organisation was in the process of developing a communication strategy. There had already been a meeting with the Department of Trade and Industry (DTI) to that effect. The DTI was helping with the website development. All the plans in the report were in line with national plans. The Organisation in the WC required the support of all the stakeholders.
Mr Paulse said it was difficult to reach officials in the province; continuous attempts to meet with provincial government officials had fallen on deaf ears. There was a comprehensive database and there was a buy-in from all operators. The Western Cape (WC) Department of Transport had spent a lot of money to get the Organisation into the rural areas. There was a provincial constitution, and a number of people had wanted to assist in drawing the document up. The SBO had a strategic plan, but had also prepared districts for elections.
It was concerning that the Organisation was not being recognised. Only the National Department of Transport had recognised the organisation, and in fact had come to verify whether SBO structures were sound. He said that the provincial department did not want to hear the plight of the operators, as they tended to walk out on SBO. Senior officials had continuously refused to meet, and opted to send junior officials.
Mr Paulse said the Bus Rapid Transit system was being rolled out whilst small bus operators were excluded. He pleaded with Members to seriously look at the organisation's dilemma. There had been lack of support for further services. Decent offices in town meant nothing, but meaningful participation to the economic activity was the real issue. Over 2000 people were employed within the sector in the country.
While the Memorandum of Understanding had been signed with the National Department, and provinces like the Northern Cape, the WC still lagged behind. He doubted if senior officials at the Department were aware of the existence of the document. There was no provision for support services.
Mr Paulse said the SBOs wanted to ensure that formalisation would be done. At the end of the month the DoT would be launching the National Small Buses Operators Council. WCSBO was least satisfied with the role it had to play. When it came to skills development the province would spend more money on any other service, but not where it mattered. The Committee needed to take note of that.
The industry would benefit hugely from the work that small bus operators were doing. Apart from being safe the general public would find decent employment with the SBO. There was a serious plan when it came to social responsibility. He said the role of the Committee in the WC was to tell the provincial government to listen to SBOs. It took a lot of courage to engage the provincial government.
The Chairperson said the Committee's understanding was that the SBO members were frustrated with the provincial attitude in the WC. This needed not be the case because the Provincial MEC (Mr Robin Carlisle) was part of the national structure where decisions were made. The Committee could seek clarity on the roles DoT nationally, and provincially played as far as setting up structures. The Committee wanted to ease the frustration without apportioning the blame.
The Chairperson said she expected to hear from the presentation more of the things that the SBOs wanted to be assisted on, as opposed to accounts of who had helped and not. The Committee wanted to hear the operational challenges of the industry. The presentation could have dwelled on where the structure was in terms of business, and where it wanted to be. The Committee had to find solutions to issues that affected the industry. To blame each other would not assist in any way.
Mr Suka agreed and said the important issue was bettering the lives of the people than personalities. The document did not cover substantive matters, but structural issues. He said he needed more clarity, because he failed to understand why the WC could not give an important stakeholder as the SBO a hearing. He did not believe the statement that the MEC and senior officials refused to hear the Organisation. It was important that focus was given to fundamental challenges, with the hope that such an exercise could lead to a workshop.
Ms Ngele commented that she was confused as to where the request came from. She commented that it was not clear whether it was the WC wanted to be part of a national structure.
Mr Ollis disputed statement that the senior government officials in the province refused to hear the Organisation. MEC Carlisle indicated that he had addressed the SBO conference in 2010, and that he had not received a memorandum of understanding from the SBO.
Mr P Mbhele (COPE) said that the engagement was premature because a provincial structure sought to engage the Committee on a national issue. The Committee should wait until SBO leadership was elected at the end of the month. The resulting national structure could then be invited so it could be engaged.
The Chairperson said the speaker did not present the same way he did when they met, as the presentation focused more on the lack of access to the provincial government. Access was not an issue. The SBO had raised three issues and they included DoT organising the operators nationally. The WC was frustrated because the national conference was approaching without them having gone to their conference. The second issued raised was how the Committee could intervene in expediting the process of organising the subsidies for the industry, along similar lines to the taxi recapitalisation programme. There was no provincial government that could come with a subsidy to small bus operators. WCSBOC asked the Committee to facilitate subsidies with DoT. The third matter related to the issue of the road infrastructure that was, in essence, a national competence. Provinces and municipalities operated on limited resources. Money came from NT and the distributed to provinces and in that there were side issues like licences and the market. Because of the conditions of the roads, vans that were meant to transport goods found gaps. This was the gist of the meeting the Chairperson had with WCSBOC earlier, but the presentation had significantly reneged. The issues WCSBOC raised were those that required the Committee's intervention to engage the Department and the Minister.
Mr Suka commented that there were two available processes that could be followed. The Committee could accept the presentation and interact with DoT on the plight SBO's. Alternatively, it could wait for coordination around the MOU to conclude, where DoT interacted with provinces on progress made, so as to make the environment conducive for small bus operators.
The Chairperson said the Committee would interact with the Department and the MECs in ensuring that the process of establishing a national structure was finalised, and that it would not overstep the mandate of provinces. Whatever was happening had to happen through the provinces as SBOs were based in provinces. After engagements with the Director General and the Minister, the Committee would be in contact with the SBOs. That might not be as soon as hoped, but the Committee sadly had to focus on the budget review. Correspondence would be entered into, even if a follow up meeting would be next year.
The Regulations dilemma
Mr Ollis alerted the Committee to regulations that had been promulgated without the knowledge of the Committee. The Act required the Committee to have a copy and make recommendations. Something had gone wrong; the Committee had missed an opportunity to comment on the process. He wanted to know what actions were there for the Committee to follow, as the regulations were illegal. In terms of the Act the Committee should receive the regulations four weeks before they were promulgated. The regulations were supposed to be part to a three sets of regulations. And if this was so what had happened to the other two.
The Committee Secretary said the only regulations tabled were on 26 September. When that happened a notice was sent immediately.
Mr Suka said the confusion around regulations might have happened during the time the Secretary of Parliament was having personal problems, and had therefore forgot availing those regulations to the Committee.
The Chairperson said there would be a follow up on the matter.
Gauteng's congested airspace
Mr Krumbock informed the Committee that he had received correspondence from an expert in aviation around an issue of air trafficking in Gauteng especially around Lanseria and the Rand Airports. Indication had been that there was a proliferation of small unscheduled air-flights that took off around Gauteng. There appeared to be a lack of regulation and the danger of crashes loomed large. The problem was getting bigger and bigger, and there was a need to recognise the problem and plan forward. He had tried to organise a meeting with the Minister but was unsuccessful. The Committee needed to be proactive and prevent the problem happening. He suggested that a meeting be set up with the Ministers and the experts some of whom were general managers of the airports. This needed to be dealt with in a non-partisan manner.
Mr Suka said any stakeholder wanting to meet with the Committee had a right to do that. The experts could formalise their request, and the Committee should be open to hear them out, as the matter was critical.
Mr Ollis said this was important as lots of little planes were taking off around Gauteng. There could be crashes with big flights as most of these little flights were not regulated.
The Chairperson said the matter was critical and warranted that the experts were invited to Parliament where the Ministers were invited. The matter would be treated with urgency, as it also related to the security of the country not only the accident scenarios.
The meeting was adjourned.
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