Department of Transport policy, and actual support to its entities: Departmental briefing

Meeting report

Chairperson’s Introductory remarks
The Chairperson explained that the Committee had called upon the Department of Transport (DoT or the Department) to engage on the support that the DoT offered to its entities to execute their mandates. This had become a concern when, throughout the year, the Committee had been focusing on human resources development (HRD), trying to understand the capacity levels at the DoT, and how these related to development of the transport industry growth at national, provincial and local government levels.

When the Committee undertook study tours in various provinces, it had found the unpleasant situation of over-dependence on consultants in the provincial DoT functions. In the North West, DoT had 110 consultants. It had furthermore discovered disjuncture between the thinking of the national and provincial governments, and in their responses to issues affecting communities, particularly the conditions of roads, maintenance programmes of road infrastructure, and upgrading of sub-standard infrastructure.

The Committee, in addition to what it observed for itself during study tours and oversight visits, had received letters of complaints from the public through constituency offices. In the North West, there was a march by taxi operators, bus drivers and community members to protest against the condition of the roads in that area. A Member of Parliament, from another Committee had also complained specifically to the Chairperson about the condition of roads in that province, asking the Committee to observe for itself the shocking conditions. Ms Motsepe, who hailed from North West, fully agreed. When the Committee visited North West, it had found an uneven level of understanding of how government should be responding to the situation. That province confirmed having received Siyahamba Sonke funds, but said it was not going to use that money to repair that road, claiming that it had its own discretion on the spending of those funds. Consultants had sued the Province for money owing and the funding was instead to be used to settle that debt. The Committee had considered the obvious anomaly that in North West, 110 consultants were hired to do the work that the incumbent public servants were hired and being paid to do.

In relation to the road infrastructure, the Committee found one road that had been repaired two years previously, but was now in such a poor state that the cars – including those driven by the provincial official who accompanied the Committee - had to drive on the pavement. One graveyard was impossible for hearses to access, so the coffins had to be carried far, and on this particular visit, the provincial officials even refused to accompany the Committee, as they did not want to damage their cars.

All of this begged the question of what the consultants were doing, as they were clearly not addressing the problems either.

When the Committee visited KwaZulu Natal (KZN), the officials wanted to take the Committee to the good roads, but the Committee had visited a road linking several schools, a clinic and a tribal authority. The road was once tarred, but was currently full of potholes. It also visited Ugu, a project which had been well-implemented some years back, when the Chairperson was Deputy Mayor. It had visited an area in which an asphalt road had been repaired using cement. The Committee had previously seen this, and had written to the municipality, pointing out that this was unacceptable, yet the municipality had ignored that recommendation and continued to repair asphalt with cement.

In Lusikisiki, the Committee discovered that an access road to the hospital, at the top of a hill, was inaccessible, so that people had to walk up a hill, and more than 100 had died on the way up. Congestion in Lusikisiki and Mthatha was particularly bad, and it took an hour to make a journey of ten minutes.

The Chairperson pointed out that the national plan and the plans of provinces were contradicting each other, and institutional arrangements were illogical. There was a national Department of Transport. In the provinces, however, road infrastructure was the responsibility of the Department of Public Works (DPW), with whom this Committee had no relationship.

Similar contradictions were apparent with the entities. The Road Accident Fund (RAF) spent R40 billion  per year as compensation for fatal accidents. However, the Road Traffic Management Corporation (RTMC), whose mandate was to prevent accidents, had way-insufficient resources. DoT was therefore spending far less on prevention, and far more on reacting to accidents, which was illogical.

The Chairperson wanted to point out further anomalies. The Constitution prescribed that all citizens should have universal access to all modes of transport. However, in reality most citizens could not fly, because of the high cost. In addition, airports were only accessible to people who could drive their own cars there, or who could pay metered taxis. Low airfare airlines were not sustainable in the country, and airport taxes were very high, even if free or concession tickets were offered. In addition, this Committee had no interaction with South African Airways (SAA) who reported to another Committee, despite its sole mandate of providing transport.

The Chairperson cited her own experiences, when trying to travel by train from Durban to Johannesburg. She was scheduled to arrive at 08:00 for her meeting, but only arrived at 12:00. Although this may be acceptable for tourists who had more time, it was not feasible for citizens who had to work.

In relation to maritime transport, she had also questioned some areas, and was told by the Speaker to arrange a joint meeting between the portfolio committees for Public Enterprises, Transport and Trade and Industry. In addition, she had found out that the South African Maritime Safety Association (SAMSA) Chairperson had been pressurised, by a former Deputy Minister, not to attend this meeting, or to confine remarks strictly to the mandate of SAMSA and not speak to any future plans.

All of these introductory remarks indicated the severe challenges, and the Committee needed to know what support DoT gave to the entities, and how it interacted with the different spheres of government, and how the Committee could assist in overcoming the problems and addressing issues that affected those on the ground. A television documentary recently described the railway system as the most dangerous in the world. Children should never have to forge rivers to get to schools. The DoT should be addressing the real issues. If the mandates of entities needed to be extended, then this must be done. For example, thought must be given to whether the South African National Roads Agency Limited (SANRAL) should be  responsible only for national roads, while there was no capacity at provincial or local government level. The issue around tolls was directly linked to the question whether it was correct that the whole country must pay levies for roads in Gauteng, while people in rural Transkei could not even reach a hospital. The Committee wanted to understand the situation, address the issues raised in public debates and strengthen the DoT so that it, together with the Committee, could get to the root of the problem. She called for an open and honest exchange of information.

Department of Transport response
Mr George Mahlalela, Director General, Department of Transport, said he had prepared a presentation, but wanted some guidance on how to proceed. Around 30% of that prepared presentation covered what the Chairperson had now questioned, and the remaining 70% could be covered during the discussions. In line with the invitation, the presentation dealt with the institutional relationships, because he had understood that the Committee wanted to know how DoT could reposition agencies so that they could deliver, and how government could arrange for sustainable funding for these agencies. He noted that the DoT itself was engaged in very serious discussions, involving the Minister and Deputy Minister, about the  effectiveness and possible restructuring of agencies. He asked whether the Committee would prefer a formal presentation, or a general discussion on obstacles to effectiveness of agencies and funding.

The Chairperson concurred with Mr Mahlalela that this meeting was not directed to hearing about institutional arrangements. Instead, the Committee wanted to know how the entities, and the three spheres of government, could address the transport mandate. In some situations, the mandates had to be changed and broadened, or the manner in which they were structured had to be changed.

The Chairperson also commented that the way in which the most recent performance assessments by the Auditor-General (AG) were done had resulted in DoT being “punished as a victim of circumstances:. She noted that the Rural Roads Plan was approved by Cabinet in 2008.That plan, however, was never funded, and even the pilot programme had been funded only to the extent of 30%. DoT had clearly not performed on that strategic plan. Rural communities would apportion blame not to National Treasury, who had not given the funding, but to the DoT, despite the fact that DoT’s hands were tied. This was another issue that the Committee had to address, and assist in removing the obstacles that hindered the Department.

Discussion
Mr L Suka (ANC) said he had gone through the proposed presentation, and had picked up some facts that could educate the Committee on how the agencies related to one another, but the document did not comprehensively address the issue of funding, and outcomes and implementation of the DoT’s programmes. It was more in the nature of an orientation document. He wanted to see government’s plans to address the real issues. He felt that Mr Mahlalela should highlight areas where the Committee needed to resolve blockages, in order to make an impact on service delivery. The Committee could also be guided by what the AG had raised

Mr Suka suggested it might be useful for this Committee to meet with the Economic Cluster, given the contribution of transport to that cluster. Mr Mahlalela had to highlight.

Mr Mahlalela fully comprehended what the Chairperson was saying. He suggested that he give a historical background, to set the framework, then flag and analyse the issues.

Mr Mahlalela said that after 1994, the government discovered it did not have funding to deliver on all the needs of the country. It had inherited huge debts from the previous government. In the specific area of transport, it needed to find ways of generating funds for transport, through user charges. In neither civil aviation nor maritime had government contributed much, and users of the services paid for them. The government therefore took a strategic decision to implement the “user-pays” principle for funding of transport projects.

The second strategic decision was that, in order for government to build capacity in the State, agencies needed to be created, and various functions needed to be devolved to where they belonged, across provinces and municipalities. Those therefore became the main delivery agents for transport, not the National DoT. The specialised agencies should not expect much funding from government and would have to raise their own funds through the “user-pays” principle.

He noted that the latest report from the AG indicated that the country spent R89 billion on transport during the last financial year. The R89 billion did not include public transport, and if this were included, the figure would be somewhere between R120 and 140 billion. The DoT only received R35 billion from the state coffers, and thus had to raise R55 billion from users.

The first step in analysing the agencies, given this background, was to gauge to what extent they were successful in raising funds from users, by way of toll gates, airport charges, port charges and fuel levies. The second question would be whether to increase the state contribution and decrease user contributions, given that the largest chunk of the funding came from the users.

He reminded Members that the agencies were subdivided into three broad categories. Safety regulators regulated safety, economic regulators regulated tariffs, and transport enterprises were autonomous companies rendering transport services. The Safety Regulators were the Civil Aviation Authority (CAA), SAMSA in the maritime environment and RTMC for roads. The Economic Regulators were the Regulations Committee for the Aviation industry and the Ports Regulator for the maritime space, both of whom determined tariffs. There was currently no roads regulator, but the DoT was planning to set one up for tolls. The Transport Enterprises were the Airports Company South Africa (ACSA), Passenger Rail Agency of South Africa (PRASA), and South African National Roads Agency Limited (SANRAL).

In other countries, the first two categories were funded entirely by the fiscus, because they had to be independent and free from influence from the private sector. South Africa had a mixture of funding. The
 original thinking around RTMC and Road Traffic Infringement Agency (RTIA) was that they would generate their own revenue. If certain things were put into place, RTMS could, in theory, generate R2 billion from road users in the form of traffic fines, and this was the reason why it had been historically under-funded, because National Treasury believed that RTMC must simply get its house in order and raise that money. Civil Aviation Authority was almost entirely user-funded, receiving only R4 million per year from the State.  

ACSA was autonomous and generated its own budget, and DoT had very little control over it, because it funded its own development, through its own balance sheet. As economists would say, the power rested with those controlling the funds. Air Traffic Navigation Services (ATNS) went from a loss making company three years ago, to a company which currently had a R250 million profit margin, due to its dynamic leadership. The Minister could, in theory, take its reserves, but recognised that it would be unfair to do so.

Mr Mahlalela agreed that the major policy question was whether the country still should rely on user charges as the key funder for transport. He commented that some time ago, the Chairperson had proposed subsidisation of local air-tickets, and stakeholders had criticised this, saying that it appeared to challenge the “user-pays” principle.

The Chairperson interjected to say that she thought it would be useful to clarify her statement. The Masakhane Document was a very useful document and she understood it very well, having been one of those contracted by the KZN government to popularise it. It had rested on seven principles, and one of those was to instil a culture of paying for services in South Africa. She outlined that at this time, the country was recovering from a period of consumer boycotts and rent boycotts. There was, however, a distinction between the user-pay principle and cross-subsidisation, and each of those must be clearly understood.

Her point about the subsidisation of low-cost airlines was misunderstood, as in fact the Chairperson had only called for the subsidisation of passengers of a particular class, who could never otherwise afford to pay, and was based on the fact that wealthier people had accumulated their wealth in part by exploiting the poor.

Mr Mahlalela said he understood this point. He wanted to use two examples. The first was a project gazetted in 2008, then intended to be user-charge based, with the R20 billion necessary coming from users. Since then, however, there had been a shift in principle, which was not acknowledged openly. Earlier in the year, the DoT had mooted that 25% of the project funding should come from the fiscus. He believed this to be a healthier situation as it achieved a better balance between state contributions and user-pay principles. He added that there had been further shifts in thinking following engagement with this Committee, and almost R6 billion had been sliced off what the users would originally have had to pay.

He turned to comments on airports. He agreed that Mthatha Airport was important for development, but everybody knew that it would take years before it would start showing profits. It was the same with King Shaka Airport, which would probably take seven years to generate profits. The question was who should carry the losses in the meantime. The answer lay in subsidisation. Limpopo Airport was subsidised by the province, and this principle was gaining acceptance from those in National Treasury (NT). He commented that there had to be augmentation of funding, specifically to carry losses of the first years in aviation projects. Pilandsburg Airport, next to Sun City, had to be closed in 2011 as a result of losses.

He then commented on Nkandla. DoT had not invested in that huge region to improve the road infrastructure. Nkandla was one of twelve Development Zones already identified in the country in the 1990s already, and had originally been named as the African Renaissance Road Upgrading Programme. It was the road called the “Great Link” between Zululand and the Midlands. Funding for some of the upgrades was taken from licence fees, and here he reminded Members that prior to 1994, licence fees had been paid to District Councils.

In a nutshell, Mr Mahlalela concluded that there had to be a shift in thinking around funding for transport. Government could not keep on relying on the user.  If the economy dropped, there would be fewer users, which meant that the funding would decrease. Equally, the impact of the fuel levy decreases if public transport was improved to the extent that fewer people used their cars would have to be considered. One view was already suggesting that South Africa was demanding too much from individuals, as they had to pay for water, electricity and public transport, and that they therefore should not be expected to pay for roads as well. However, it was clear that a balance must be found.

Mr Mahlalela noted that SANRAL owned 18 000km of road, of which only 3 500km was tolled. He quipped that in a pure dictatorship, all the roads could be tolled to raise lots of money, but again the problem was that the same user was expected to pay and pay, and the question was how long government could continue to charge the users for everything, before fundamentally affecting the standard of living of its citizens. This was why a balance was necessary. Government could say it would build the roads when there was money. The DoT would be happy to hold a public debate on transport funding, within the context of the issues raised, and the challenges for the future.

Discussion
Ms D Claude (ANC) thanked Mr Mahlalela for this useful information. She asked what the specific challenges were that were stopping the RTMC and the RTIA from generating the billions that were apparently potentially possible and how the DoT would deal with those challenges.
(Note: this question was addressed later).

Ms Dlakude thanked Mr Mahlalela for sharing the information about the development in Nkandla. This development was part of addressing the problem of inequality in the country, and needed to be developed no matter who was living there. The President had, in the last State of the Nation Address, announced that there would be  massive infrastructure development in the country, and this was sensationalised, despite the fact that 12 areas were in fact identified for development, including those at Lepalale and Joe Slovo Town, which were not publicised. She asked everyone to note that development in Nkandla had been planned way in advance, and not to sensationalise it.

Ms Dlakude agreed with the principle that the user must pay. In different parts of the country, including Gauteng, there were toll gates, and users were paying, although she admitted that the fees were quite expensive and were rising each year. However, this was the only way the country was going to develop.

Ms Matsepe hoped that Mr Mahlalela would take the questions asked by the Members to the relevant people in the relevant agencies.

Ms Matsepe said in 2010, Hatfield Station in Pretoria was closed, despite the fact that it had been a prime destination to visit the football stadium. She asked if it was set to reopen. The other problem was around the station on Greenview, which was deserted, with numerous water leaks, and people were actually walking on the railway lines from Gardens to the informal settlement.

Mr Mahlalela replied that he had understood was that Hatfield Station was closed because it was going to be linked to the Gautrain, but he would check this again. The same was the case with another two stations. The annual plans for PRASA showed that the upgrades of these stations were funded. The national DoT would investigate to see why nothing appeared to be happening.

Mr Suka said Mr Mahlalela raised the issue of contribution by the state, and contribution by users. He wanted Mr Mahlalela to prepare for a debate with the Committee, addressing all the possible implications and repercussions if the state contributed more, to allow the Committee to become better-informed. He noted that the figure of R35 billion contribution by the state to transport was mentioned, but added that of that, R2 billion had been allocated to the DoT itself. A more incisive discussion on the matter was needed. It was possible that legislation may need to be amended to accelerate service delivery.

Ms Ngele thanked Mr Mahlalela for his comments, and said that he had raised many points of which she was previously unaware. She too questioned the RTMC and RTIA, and their under-funding. She understood that they were supposed to general an income, but asked what could be done to assist them.

Mr Mahlalela replied that the problem lay not with the entities but the system. The R2 billion that was mentioned as the potential figure that RTIA could generate would depend on a proper rollout of the Administrative Adjudication of Traffic Offences Act (AARTO) on a national level. Money was needed to set up systems in the RTMC also, to enable it to do a proper rollout the RTMC, and after that it would be able to start generating income by collecting from provinces and municipalities. It was a chicken-and-egg situation, and there was a strategy to get both entities to the point where they would be able to general own funding. He had had a workshop with RTIA to see how the process could be accelerated, and the strategy could begin to resolve those funding issues.

Ms Ngele said she understood what Mr Mahlalela said, but said that surely, if an agency was unable to generate the money it needed, government needed to intervene and subsidise it in the short term.

Mr Mahlalela agreed, and said this was one of the points of debate between DoT and NT. The RTIA situation seemed to be nearing resolution, but no solution was yet apparent for RTMC, due to its past history and difficulty that it would have in turning around. He pointed out that the RTIA, for instance, had been expected to send out letters by registered mail, but was unable to afford this. In the next year, it would receive R20 million, for country-wide rollout of AARTO. The RTMC would get R18 million extra in the next year.

Mr Suka wanted to flag several points for discussion. Firstly, he concurred with the Chairperson’s criticism of such extensive use of consultants, particularly given that officials were actually holding position in the North West, but not doing the work. He also wanted to flag the question of  institutional arrangements against service delivery. He wanted to have sight of the discussion documents. He thought that North West should be used as a test case, to examine what exactly had been done after the matters of concern were raised for the second time.

The Chairperson said the present government took office in 2009, and despite the four year time lapse to 2012, the RTMC, Cross Border Agency and RTIA had still not been developed to the point where they could start generating income. They were, according to the strategy, supposed to be the cash cows for the Department. She reiterated that not all transport development in South Africa could be funded by the State and it was necessary to have income generators. These ones were in place, but were still not generating any income. She wondered what would have to be done so that RTIA could generate the expected R2 billion. Parliament, when passing the RTIA Act, said that the Post Office should be used, and she pondered if that should not be changed, so that more efficient technology could apply.

Mr Mahlalela said RTIA was paying Telkom R1.5 million per month because of the provisions of the legislation. Secondly, DoT had not implemented AARTO, although RTIA was established to implement AARTO. Thus far, only the two pilot projects in Johannesburg and Tshwane were running, but there was no income from these, as there was no penalty regime yet. The problem would continue until there was full roll-out of AARTO, so it clearly had to be accelerated. However, another snag was that after the pilot projects had been concluded the matter must be referred back to the National Economic Development and Labour Council (NEDLAC), for discussion by the social partners, and that was where the matter was at present.

Mr Mahlalela noted in the case of the RTMC, the main difficulties were structural. Traffic management was a provincial function, although it was realised that certain functions had to be coordinated at a national level. The question was how MECs could be persuaded to surrender some of those responsibilities, bearing in mind that when the functions were removed from provinces, this would adversely affect their revenue.

Mr Mahlalela suggested that if the two projects were properly addressed,  some of the challenges of the RTMC could be addressed. There was a need for an upfront capital outlay for RTMC. One of the two projects was eNatis, which was built by the private sector for government. The service providers, however, now refused to give everything back to government and the matter was being litigated.

Another Departmental representative explained that in the adjusted budget, DoT had received R297 million for this year. RTMC collected the money from the provinces, and paid it over to the DoT, who paid it into the revenue fund, then received the money back. In the previous year, the amount was R450 million. However, RTMC was holding some money back, so that it could draw and keep the interest, and this was in fact its only incentive to collect. In future, RTMC would be paid a fee for collecting. The decision for the future would also be whether to transfer e-Natis to RTMC. There was a further problem with the figures as at end September, because some money had not reverted to the DoT, and other money from years back had been irregularly spent by RTMC. If all funds went to where they were supposed to go, then e-Natis could be profitable. DoT was asking NT to condone the irregular expenditure.

The Chairperson thought another follow-up was needed on eNatis, and the powers that provinces would need to relinquish  and hand over to national. In relation to the latter, she did not see why the MEC and provinces would hold on to power if they realised that there was a substantial benefit to be gained by handing those powers over to DoT, particularly since most provinces were under the ruling party.

Mr Mahlalela explained that the Western Cape, under DA rule, was confronting the DoT openly, but other provinces were not.

The Chairperson said when an organisation was given the power to govern the country, it still had to abide by certain principles, irrespective of its own views. If the guiding principle was that government did not have enough funds to provide transport services in the country, and the RTMC was the answer to the country’s challenges, why then had government failed to do everything that was necessary to make that structure function. The RTMC simply had to be implemented, and she wondered when the DoT would approach national government. The study document to be prepared had to deal with the contradictory views in the ruling party.

She added that if RTIA was established to pilot AARTO, the DoT had to evaluate the pilot project, and identify the gaps that needed to be closed before doing a full roll-out. She asked what made it impossible to close these gaps and allow the full rollout.

Mr Mahlalela aid that there was a report, and it was not negative, as it indicated that the roll-out could happen in 2013. Many issues were raised in that report, including the challenge around collection. The implementation of AARTO would fundamentally change the situation. He cited an example of how it would work. A driver fined for speeding would, for instance, be required to pay a R1 000 fine. If the driver paid before a certain date, however, a “discount” of R500 would apply. The R500 would be paid to the RTIA, who would pay it over to the municipality, who would then pay RTMC. RTMC would be entitled to keep the money for a certain time, generating interest, before paying over to DoT, who would finally transfer the fine to NT. The problem was that in the past, RTMC had kept the money longer than it should have, and, in 2008, had used R222 million irregularly.

The Chairperson said this had been explained before. At one stage she had noted that electronic accounting systems reflected amounts, irrespective of where they had been paid.

Mr Mahlalela replied that the AARTO used one centralised system.

The Chairperson asked what prevented AARTO from being enforced.

Mr Mahlalela replied that the local authorities had employed their own technology companies, although this could be resolved in the longer-term.

The Chairperson cited other departments who had huge potential to achieve more for government, provided that the challenges were identified, and then boldly addressed.

The problems would not go away until government was bold enough to address them. Government had to move away from serving the narrow interests of individuals and serve the interests of the country. She was heavily critical of those who were obsessed with power and narrow self-interest, putting these over the interests of the country. The roads and transport systems were currently not being developed, and she did not understand why the Committee and DoT had, to date, appeared afraid of confronting the real issues that would lead to implementation of the systems.

The Chairperson said that she would return to speaking about the broader perspective. She saw contradictions in the approach of government.  On the one hand, government said transport would be funded through income generation, but at the same time, South Africa was actually not building its own transport industry, but was still outsourcing. Income would come through developing enterprises. She hoped that Mr Mahlalela would produce a document that not only set out the challenges, but also some possible solutions. The Committee and DoT should undertake joint study tours to countries whose models could well be adapted and applied to South African conditions.

On the question of the modelling, she noted that South Africa had the potential to develop the transport and rail systems. At the moment it was not doing anything to develop the manufacturing industry, and was buying in finished products from other countries, although it had a problem of unemployment. China had developed 24 manufacturing plants in underdeveloped regions, after it introduced the high speed train. In South Africa, there were 23 Presidential Poverty Nodal Points. South Africa could establish manufacturing plants in underdeveloped areas, and transport the minerals there with high-speed trains, instead of exporting them to China.

However, if the country did not pursue these goals at a national level, PRASA would not do so. She asked how the DoT linked with any beneficiation programme of the Department of Mineral Resources. She pointed out that South Africa was exporting iron ore and manganese, whereas it could use these minerals to manufacture the trains itself. DoT also had to make sure that the universities were producing graduates with the skills needed to realise these plans, and have a specific HR development plan. Its relationship with other countries must be reconsidered.

Mr Mahlalela proposed that what had been presented in this meeting should be incorporated into a discussion document, outlining the different scenarios, as an introduction for further debate, led by the Committee. This would be ready in ten days.

Other business: letter from Deputy Minister of Transport
The Chairperson said the Committee had received a letter from the Deputy Minister, who wanted to attend Committee meetings. She suggested that the Deputy Minister be advised that the protocol did not require the Minister or Deputy Minister to be present at all meetings, but they would be invited by the Committee to account or to respond to specific pertinent issues.

Adoption of Minutes
The Committee adopted minutes of meetings held on 24 April, 8, 15 and 22 May, 28 August, and 4 September 2012.

The meeting was adjourned.