Transport Laws & Related Matters Amendment "e-Toll" Bill [B30D-2012]; re-adoption; Transport Dept's Use of Consultants, with Deputy Minister

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26 February 2013
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

With the Deputy Minister of Transport in attendance, the Committee deliberated on a further amendment to the Transport Laws and Related Matters Amendment Bill [B30D-2012]. The Parliamentary Legal Advisor took the Committee through the proposed committee amendments to the Bill. The Bills Office had advised that because the Committee had already adopted a B version of the Bill, it was therefore logical to followup with a C version of the Bill (Portfolio Committee amendments) and a D version (Portfolio Committee amendments incorporated into the B version of the Bill). This would be explained to the National Assembly; that the Bill was referred back so that the Committee could consider a further amendment.

The Committee heard the two opinions about the applicability of the National Credit Act. The first was by the State Law Advisor that it was an incidental credit agreement and the second view was by a Senior Counsel who said that it was not an agreement to start off with, and if there was uncertainty about it then it would have to be changed. The provisions of the Public Finance Management Act (PFMA) would trump the National Credit Act and the Parliamentary Legal Advisor advised that to avoid tension, the National Credit Act be excluded.

The DA asked that there be a condition reminding the South African National Roads Agency Limited (SANRAL) of the undertaking to inform motorists timeously about additional costs. SANRAL informed the Committee that mechanisms were in place to address this matter. The Transport Laws and Related Matters Amendment Bill [B30D-2012] was approved by the Committee. The DA noted that it did not support the Bill in total.

The Deputy Minister noted that the Director-General position had been advertised, and she introduced the  Acting Director-General who had been appointed.

The Office of the Auditor-General presented its report on the Use of Consultants at the Department. Members heard that there had been a growing reliance on the use of consultants. The focus should not only be on consultants, but also on contract deviations and extensions that went against the supply chain management framework. Members asked if it was not more expensive to use consultants than to build internal capacity within the Department. The importance of proper planning was communicated to the Committee as a way to reduce the problems incurred with consultants. The E-Natis project budget had increased from R1 billion to R1.5 billion. Costs unrelated to software maintenance had been paid for and skills had not been transferred to the State.

Members asked about the transfer of skills. Proper mechanisms had to be put in place to ensure that "skills were transferred" because some contracts omitted to stipulate this. The Auditor-General stated that it was up to the client to ensure that they were getting value for their money. The Committee was referred to the January 2012 performance audit of eight department s done by the Auditor-General which provided detailed answers for some of the questions asked. Members spoke about the exploitation of government and a lack of patriotism. The absence of proper records and the lack of accountability was raised as possible answers to the Taxi Recapitalisation problem.

The Acting Director General said the three most important issues about consultants identified by the Department in moving forward were: planning, monitoring and the transfer of skills. 

Meeting report

Mr L Suka (ANC) was nominated to be Acting Chairperson until the Chairperson arrived. The Deputy Minister Sindy Chikunga was acknowledged and welcomed to the meeting.

Proposed amendment to Transport Laws and Related Matters Amendment Bill [B 30C-2010]
Due to the State Law Advisor, the Parliamentary Legal Advisor took the Committee through the changes to Clause 3 and read the proposed amendments. The substantive amendment was that after Section 27(4)(b), the following would be inserted:
"(bB) a notice of the publication of the report contemplated in paragraph (bA) is published in the Gazette, indicating the availability of such report;"

This published report would contain a study of the socio-economic as well as traffic impact.

The Bills Office had advised that because the Committee had already adopted a B version of the Bill, it was a logical process to name these proposed amendments before the Committee as the C list. Although this procedure was not 100% certain, a problem was not anticipated. In the end what was needed was a document that could be placed before the National Assembly for a second reading. The legal team had thus proceeded with the C list and the D version of the Bill, and when the Committee Report on the Bill would be presented in the House, this would be explained to the National Assembly. The Committee Report would indicate that it had been referred back to the Committee which had considered a further amendment.

The Parliamentary Legal Advisor advised further that an ‘and’ would be inserted at the end of paragraph (b)(bA) so that it was clear that paragraphs (bA) and (bB) had to be done (see documents).

Mr Suka asked if there was general agreement to these additions and the Committee agreed.

Application of the National Credit Act
The Parliamentary Legal Advisor (PLA) reiterated her concern that she would again have to argue the case of someone else (the State Law Advisor). The possible disadvantage was that she would have to give weight to that person’s argument. In order to be fair to the State Law Advisor, the PLA took the Committee through the arguments from the SLA about whether the National Credit Act was applicable to the collection of tolls. The SLA had provided a definition of the word ‘toll’ from the Collins English Dictionary.  The word ‘toll’ had not been defined in the SANRAL Act.

The argument by the SLA had looked at what constituted a credit agreement, and it was concluded that the toll levied was not a credit agreement. An incidental credit agreement was explained. The Senior Council argument was that the agreement was not an incidental credit agreement; therefore the relationship between a toll user and SANRAL was not an agreement. There were two views about the National Credit Act. First the one by the State Law Advisor said that it was an incidental credit agreement and the second view by Senior Counsel which said that it was not an agreement to start off with, and if there was uncertainty about it, then it would have to be changed. The PLA did not think that the ‘incidental agreement’ was applicable here. This meant that the National Credit Act was not applicable and should not be included. The National Credit Act was not an overarching piece of legislation (see Legal Opinion: Transport Laws and Related Matters Amendment Bill).

Mr I Ollis (DA) asked if consumers were being adequately protected by the Bill as per its purpose. The current billboards specified the least expensive toll fees and people especially those from rural areas might not understand. He would not make a fuss about the National Credit Act no longer being there, as long as there was a condition that reminded SANRAL of the undertaking to make it clear to motorists that they may pay additional costs.

Mr Alex van Niekerk, Toll and Traffic Manager: SANRAL, said that this matter was being addressed and tariffs were going to be adequately advertised.

Adv A Alberts (Freedom Front Plus) asked, if the National Credit Act was not applicable, then what was being put in place by government and SANRAL to provide remedies to protect users.

Adv Alberts said that on the exclusion of National Credit Act, the PFMA stated that registration should happen. All SANRAL had to do was then not to register. On the incidental agreement, a levy was imposed, so it was a public relationship. He felt that serious consideration should be given to retagging this Bill if the relationship was different He did not agree with the conclusion.

The Chairperson said that this issue had been debated and the Freedom Front Plus had been given the opportunity to present proposals, but at the end of the day decisions had to be taken by this Portfolio Committee and no more time was going to be spent discussing this issue again. A ruling had been made that the Committee was done with this argument. SANRAL and the Department had committed themselves to take care of motorists and the law.

Most of the submissions were related to Clause 3. Adv Adam Masombuka (Head of Department Legal Services) was asked to read Clause 3 with the proposed amendments.

The Parliamentary Legal Advisor asked if she could withdraw her proposal that the word ‘and’ be added so that the D version of the Bill remained as it was.

Mr Ollis asked why there was ‘and’ at end of Section 3(bB) and not after Section 4(b)

The PLA said that ‘and‘ was inserted at the second last paragraph of clause. The reason for ‘and’ at the end of paragraph (bB) was because in Clause 3, it was the second last paragraph. Sub-section 4 paragraph (bA) was not going to be the second last paragraph. Subsection 4 went up to (d) so different rules were applied. This was a technical issue and simply a drafting style principle.

The Chairperson said that this did not interfere with the content of the Bill.

Mr Alberts asked Adv Masombuka to read Clause 3 again.

Mr Suka said that it needed to be formally stated that the Committee subscribed to the new version.

Mr Ollis said the DA agreed with all the amendments, but reserved their right with regard to the funding model for e-toll.

Adv Alberts said that he was happy with the amendments, but stated his opposition to the funding model.

The Chairperson said that the funding model was not part of the discussion for approving the Bill.

Voting on the Bill
The Report on the Proposed Amendments to the Transport Laws and Related Matters Amendment Bill [B 30D] was read out. The Bill and all its provisions and amendments were agreed upon.

Ms R Motsepe (ANC) proposed and Ms N Ngele (ANC) seconded the proposal for the approval of the Transport Laws and Related Matters Amendment Bill [B 30D-2012]
The Transport Laws and Related Matters Amendment Bill [B 30D] was approved.

Mr Ollis said that he would like it on record that the DA did not support the Bill in total. His caucus would be upset if this point was not made in the minutes.

The Chairperson said that this Bill would be debated in the National Assembly on the 5 March 2013.

Deputy Minister of Transport introduces the Acting Director-General
Ms Sindy Chikunga, Deputy Minister of Transport, expressed appreciation for being able to attend this meeting. The position of Director-General has been advertised as the contract of the current Director-General has not been renewed. The position of Acting Director-General had been filled by Dr Maria du Toit, until this position was filled. The names of prospective candidates were going to be taken to Cabinet, after which an appointment would be made. The Portfolio Committee was requested to accept Dr Du Toit.

Ms Chikunga commented that she had woken up in her four bedroom house in Pelican Park this morning, which was not a "R4.6 million house". She said she had nothing to do with the procurement process as she had been appointed only in June 2012.

The Chairperson expressed pleasure with her appointment and thanked the Deputy Minister for bringing Dr Du Toit to be introduced to the meeting.

Performance Audit of Use of Consultants at Department of Transport: Auditor-General Report
Mr Naeem Seedat, Corporate Executive: Auditor-General South Africa (AGSA), first detailed the difference between a performance audit and other types of audits. A scan of the consultant landscape represented a significant R102 billion expenditure over three years by government. The A-G was not advocating the termination of the relationships with the consulting sector. There was acknowledgment that the country did have a skills shortage and there was the need to engage them. This was not about money, but about the value derived. A performance audit focussed on value for money and had three key areas of focus: economy, efficiency and effectiveness.

Mr Jacques Boshoff, Acting Senior Manager: AGSA, provided details about the contracts with consultants, compliance, whether there were price variations and key recommendations.

Mr Seedat highlighted the challenges and key recommendations of the audit (see Performance Audit of the use of Consultants at the Department of Transport)

Mr G Kumbrock thanked the A-G for the report and said he would have liked to have seen a high level historical overview of the situation. He asked the A-G to comment on how it saw this trend of consultants consuming larger amounts of money over time. He asked further that they isolate and analyse this trend as it was climbing steadily. He acknowledged that this answer required some research, but if the A-G did not have the figures now, perhaps the answer could be presented on another occasion.

Mr Seedat replied that in terms of the trend there had been a growth in consultancy fees. A historical analysis had not been done on why an increasing trend was prevalent. Work had also not been done on the underlying causes for this trend. The growing proportion of consultants was not unique to South Africa. The United Kingdom had done a similar study and their findings were not too far from the findings of the Auditor-General here, that there was a growing reliance on consultants. Hence there was an upward trend and a significant increase in the growth and use of consultants.

Mr Vusi Msibi, Business Executive: Auditor-Genera,l said that he wanted to add to this answer about trends, and link this to what the A-G was picking up from the external audit. The slide about Compliance with Procurement Policy confirmed that the trend was on the increase. From the external audit side, the whole universe of contracts was looked at to ascertain whether it was consultants alone or all service providers. What was often picked up was general non-compliance with procurement policy, and this could be either deviations or extensions of contracts. Mr Msibi said the entire problem should not be focussed on consultants only, it had to do with the general supply chain management structure.

With regard to key challenges and capacity, Ms Ngele asked if it was not more expensive to use consultants than to build the internal capacity of the Department.

Mr Seedat replied that it depended on the circumstances and, yes, consultants did make a big profit.  In some instances consultants did bring skills that were too expensive for government to develop themselves. It was a problem that the government did not have the economies of scale. The important thing to do was to plan properly. This was one of the key messages. One had to ask what was the most cost effective option before implementation.

Mr Ollis asked for more information about the E-Natis project where a contract of half a billion rand became 1 and half billion rand. He asked how this had happened.

Mr Boshoff replied that the contract was originally developed for E-Natis, and when it came to an end, the services had to be transferred back to the Department. Part of the contract was that there had to be a Document Transfer Management Plan in place. There were two anomalies: there was no Document Transfer Management Plan to say how the documents were going to be transferred back to the state; and secondly the problem of capacity to take the services back to E-Natis. There was an agreement that the contract would continue on a month to month basis. However the only cost that should have been made from the Department to the service provider should have been for software maintenance. Costs unrelated to software maintenance had been paid for up to R936 million. The contract had also been extended in May 2010 for another five years. When the contract came to an end the services should have been transferred. The lead period was for five years for when the services should have been transferred back to the State. The only cost that should have been paid was one in relation to software maintenance and not for anything else. The findings also pointed this out that costs unrelated to software maintenance had been paid and this was part of the R936 million.  

Mr Suka said that the shortage of skills was a historical issue; A comprehensive strategy was needed to deal with the backlog.

Mr Suka asked how the transference of skills was working in relation to consultants.

Mr Seedat replied that one could get into trouble if one did not put proper mechanisms in place with regard to dealing with consultants. Some consultants did try to make sure that a skills transfer would take place, however sometimes there were no bodies to which the skills could be transferred. Some consultants did put it in their contracts and some got away with not doing it because of weaknesses in the system. The situation needed monitoring. The responsibility lay with the client to make sure they were getting value for their money.

Mr Suka asked how the eight departments were chosen for the performance audit.

Mr Seedat replied that the choice was not guided by any department in particular; it was an independent selection on the part of the A-G.

Mr Suka asked what tools the A-G was giving to the Committee to help them ask the right questions and to empower the Committee.

Mr Seedat said that they had presented the Committee with the report, which was an exceptionally valuable tool. Page 108 of the report should be noted as it brought some important issues to the fore..

Mr Suka asked what caused the Department not to finish on time.

Mr Seedat said that the robustness of the planning process had to be firmed up, because planning was at the heart of the matter.

Mr P Mbhele (COPE) said that on the matter of consultants exploiting the government, he did not think that only engagement could actually assist the process as it needed people a high level of patriotism. With regard to the taxi recapitalisation process, he asked if the possibility existed for a Combi to be scrapped twice.
Mr Seedat replied that in the absence of proper records and accounting around what happened to this money, many questions arose. Many of the questions asked today related to the absence of proper records and accountability, and it was difficult to answer these kinds of questions.

Mr Mbhele asked if in the eight departments audited, the same remedies were processed for all the challenges encountered; and if the challenges were the same, would the same remedies be used for all the departments audited.

Mr Seedat said that the A-G had seen slight variations here and there - there were subtle nuances in the contracts. A similar picture emerged with the challenges. By and large planning and appointments were the major problems.

Ms N Mdaka (ANC) asked for clarity about the project on page 13 of the presentation where the Taxi Recapitalisation Project and the Maritime Pollution Prevention Response and Services showed steep increases in costs due to poor planning. She asked if consultants were involved in the early planning stages.

Mr Seedat replied that the root cause for the increases in the budget were due to planning. One planned on the basis of a set of specifications, and if it turned out that those specifications were incorrect then the budget had to be revisited. It was therefore important to make sure that there was an understanding of the specifications of a project.

Mr Ollis asked if the E-Natis project was contained in the January 2013 performance audit.

Mr Seedat said that it was contained in the report and the specific overruns were highlighted and what the extra R1 billion accounted for.

The Chairperson asked with regard to the E-Natis project, what did the government hope to gain and what value or benefit was actually received. Could a breakdown of the costs be shown? What were we buying and how much did we pay for each item? The administration of the system came with the transfer of skills. How was this broken down, who was going to understudy those skills and how were the skills going to be transferred to the Department?

Mr Seedat said that the answers to the previous two questions about the breakdown of costs could be echoed here. The Department was better positioned to answer some of the questions here. For example, what value was hoped to be achieved by embarking on this project in the first place.  With regard to the breakdown of costs, Section One of the Performance Audit  tried to piece together what the R1.5 billion was for. As the project ran through it extensions the original estimate in May 2007 was an amount of R594 million of which R94 million was for software development of that system. Roughly half a billion rand was for non-software related stuff. When we reflected on the R1.5 billion in total we saw that software as a line item had escalated in cost to R305 million. R269 million was paid for services in addition to what was in the contract, so these were outside the contract itself. On the question who would be the understudies, and who the skills would be transferred to, the Department was better placed to answer this question.

Response by Acting Director-General
Ms Marie du Toit appreciated the presentation made by the Auditor-General. It was well known that the whole usage of consultants was not new concept. "We have had quite a number of criticisms with regard to vacancies in the Department, a lack of skills development, and particularly the usage of consultants". It has recognised that there was a need to engage the external private sector as we do not have all the skills in the Department. For us it was also critical to ensure that Batho Pele principles of value for money were adhered to , not only from an audit perspective but also from a strategic positioning perspective, to ensure proper service delivery of the Department’s national mandate.

The Acting Director-General said that in principle, the Department had a proper understanding of all the audit findings. Although the focus was on a performance audit, it was quite clear from some of the investigations done that  wasteful expenditure and irregularities were found to be some of the key problems. Hence the Department welcomed the audit and in discussions with the role players, remedial processes had been executed. This would be explained in a presentation.

The three most important issues identified by the Department in moving forward were: planning, monitoring and the transfer of skills.  The Department has taken note of the root causes as raised in this meeting and also the lack of skills in the planning and monitoring components. The Department would be vigilant in striving to deal with these challenges.  

The Chairperson thanked Members for being focussed with the questions raised. The trends as raised by Members need to be made real. The tender system has created a problem in the country. Former public sector employees now appeared as consultants in the private sector, and this coupled with a lack of patriotism was creating a disadvantage in service delivery to the community. It was for love of country when choosing between making more money or building the country.

The Chairperson thanked the Office of the Auditor-General and promised further engagement, not only with the Department but with other spheres of government to arrive at a common level of understanding, and to raise the levels of awareness out there. The Committee would indicate when a follow up would be made.

The meeting was adjourned.



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