Department of Transport 2012/13 Fourth Quarter Expenditure Report

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04 June 2013
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Department of Transport (DOT) presented its 2012/13 Fourth Quarter Expenditure to the Portfolio Committee on Transport. The presentation focused on giving an analysis of expenditure, major under-and over-expenditure, transfer payments, shifted or reprioritised funds, and rollovers that had been requested. It was noted that the total budget allocation for the DOT was R39.6 billion, of which about 99.2% was spent at the end of the fourth quarter. This left a variance of R319 million, which was recorded as savings and under expenditure. Details of the expenditure by programme were given, with a note of what each of the programmes received, and what they had spent. The transfer payments to other agencies and entities affiliated with the DOT amounted to R37.8 billion, representing about 96.1% of the Department’s total budgetary allocation. The presentation also detailed the projects where funds had been allocated, but were either over- or under-spent. It was noted that, under the Goods and Services allocation, there had been general underspending (excluding Mthatha Airport) of R105.2 million, whilst the position with Mthatha Airport was that the project was inherited mid-way from the Department of Defence and the Eastern Cape Province, and there had been initial over-allocations which could not be spent. Other areas of underspending included the Public Transport Infrastructure and Systems project of the City of Johannesburg, Taxi Recapitalisation, Machinery and Equipment, and Compensation of Employees. As a result of the under spending, funds were shifted or reprioritised across programmes after the adjusted budget. Goods and services received the bulk of transferred funds, particularly in order to try to complete the Mthatha Airport project. There were also various rollovers requested, either in full or in part, for uncompleted projects, which were also detailed.

The DOT highlighted its achievements in the 2012/13 fiscal year. These included the commencement of the national household travel survey, the development of a single transport economic regulator, progress on the Durban-Free State-Gauteng Logistics and Industrial Corridor, completion of the freight movement optimisation plans, and studies on macro economic impact of transport, an update of the National Freight Corridor framework, the completion of the study on the devolution of the rail function to metropolitan areas, the initiation of the project for the acquisition of new rolling stock over a twenty year period and upgrade of some rolling stock. Further projects included the introduction of a new provincial road maintenance grant allocation formula, refurbishment of the Mthatha Airport, the completion of a draft Green Paper on the Maritime Transport sector, and the facilitation and development of an integrated public transport network.

Whilst Members were appreciative of the presentations in general, they raised a number of concerns. They felt that the terminology was not user-friendly, and the Chairperson said that the presentation had confined itself to stating the figures only, but had not given an adequate report on progress made in relation to the DOT milestones, nor on the general impact that the spending had, and how and where the underspending impacted on the programme objectives. They questioned why there was such persistent underspending and need for virements across all programmes, projects, municipalities and provinces, which led to further questions as to whether the DOT was monitoring the spending of transfers. Whilst they recognised that the mandate of the DOT required it to make substantial transfers, they nonetheless also suggested that future reports should give more clarity on where exactly the underspending was apparent in municipalities and provinces, and what the DOT was doing to trying to control it better. Some Members also questioned the DOT’s use of terminology, pointing out that it needed to be more careful of whether it described lack of spending as “savings” or “underspending”, and asking if it was aware of the 8% limit on virements. Members also needed to know the current status of the Mthatha Airport, when the project would be completed, and why funds had been transferred to the Province instead of finishing the project. The Chairperson and other Members expressed their serious concerns about the inadequate attention being given to rural transport infrastructure and development, especially the non-implementation of the Rural Transport Development Policy, noting that the potential for social and economic development of the rural areas would remain locked until attitudes changed. They also requested further updates on the status of the Shova Kalula project, scholar transport, the Green Paper on Maritime and the emphasis that should be shown to the maritime sector this year, the Moloto project and some provincial projects.

Meeting report

Department of Transport 2012/13 Fourth Quarter Expenditure: Briefing
Mr Dan Pretorius, Acting Chief Financial Officer, Department of Transport, presented the Department’s report on its Fourth Quarter Expenditure for 2012/13, which included the analyses of expenditure, major under and over-expenditure in different categories, transfer payments, and shifted or reprioritised funds as well as requested rollovers.

Mr Pretorius stated that the Department of Transport (DOT or the Department) had received an allocation R39.6 billion in the 2012/13 fiscal year. The percentage of funds spent in the first quarter, as a proportion of the total budget allocation, was 21.2%, and this reached 44.7% in the second quarter. About 72.4% of the total budget allocation had been spent by the end of the third quarter, while the total funds spent at the end of the fourth quarter amounted to 99.2% of the total allocation. The total money spent at the end of the fourth quarter was R39.3 billion. This left a variance of R319 million, as savings and under expenditure.

He gave a breakdown of the expenditure by programmes. Administration and integrated transport planning received R390.9 million and R111.7 million respectively. Rail transport, road transport, civil aviation, maritime transport and public transport were allocated R10.29 billion, R18.23 billion, R520 million, R135 million and R9.6 billion respectively. Transfer payments to other agencies and entities affiliated with the Department had received R37.8 billion, representing about 96.1% of the Department’s total budgetary allocation, while ‘other expenditure’ was R1.53 billion, accounting for 3.9% of the total allocation.

Mr Pretorius indicated that ‘other expenditure’ included:
- Compensation of Employees, R287 million
-Goods and Services, R1.2 billion
Machinery and Equipment, R7.57 million
-Thefts and Losses, R4.96 million.

Expenditure on Goods and Services comprised spending on Mthatha Airport, which accounted for 28.2% of the total expenses under Goods and Services, whilst the Electronic National Traffic information System (eNaTIS) accounted for 24.2%, and other expenses on Goods and Services accounted for the remaining 47.6%. He further noted that the Passenger Rail Agency of South Africa (PRASA) got the highest allocation in terms of transfer payments, receiving R10.2 billion, representing 27.1% of the total expenditure on transfer payments. Other transfer payments made were to the South African National Roads Agency (SANRAL), Provincial Roads Maintenance, Public Transport Infrastructure and Systems, Public Transport Operations, Taxi Recapitalisation Programme (TRP), and ‘other payments’. Respectively, the percentages that they received were 25.7%, 21.1%, 12.9%, 11.4%, 1.1% and 0.7% respectively. All the transfers provided for in the budget were made, with the exception of the Transport Sector Education and Training Authority (Transport SETA) payment.

Mr Pretorius expanded on the Department’s projects where funds allocated were under or overspent. A sum of R105.2 million was underspent under the Goods and Services appropriation. However, it was necessary to explain the position with Mthatha Airport. The Mthatha Airport project was also categorised under Goods and Services, and it had under spent a sum of R104.7 million, because of an initial over allocation. The payment for the Public Transport Infrastructure and Systems to the City of Johannesburg was stopped as a result of persistent under spending, and so the final result for this project was an underspending of R103.7 million.

The sums of R5.8 million, R1.8 million and R1.5 million were under spent on Taxi Recapitalisation, Machinery and Equipment and Compensation of Employees respectively. The under spending recorded in both Machinery and Equipment and Compensation of Employees was due to the non-filling of every vacant post in the Department. Other areas or programmes where funds allocated were underspent included Foreign Memberships, Universities and Technikons, Transport Education and Training Sector Education Authority, and Leave pay and donations, where the sums of R439 000, R242 000, R207 000 and R160 000 were under spent respectively. Losses written off, however, constituted the only category where there was overspending.

Mr Pretorius stated that funds were also shifted or reprioritised after the adjusted budget. The sums of R17.7 million and R28.8 million were shifted from compensation of employees and taxi recapitalisation respectively, to goods and services to cover projects. The sum of R450 million was shifted from transfer payments to goods and services, specifically to cover Mthatha Airport, while R14 million was shifted to the Road Traffic Infringements Agency (RTIA). Funds were also shifted across programmes to administration, in the region of R57 million. Funds spent as a proportion of respective total allocations indicated that Administration spent 92% of its allocation, while Integrated Transport Planning spent 92.6%. Rail transport, road transport, civil aviation, maritime transport and public transport spent 99.9%, 100%, 79.1%, 92.0% and 98.5% of their respective allocations.

Mr Pretorius remarked that the various programmes that underspent had made requests to National Treasury for partial or full rollovers of funds they did not utilise. Administration and Civil Aviation requested that all their underspent funds be rolled over. Integrated Transport Planning requested a rollover of the funds designated for the development of a transport rural accessibility or multi-deprivation index. Rail Transport requested a rollover for the Moloto Development Corridor. Road Transport asked for a rollover for its project on investigations into the issuance of fraudulent roadworthy certificates.

In the Public Transport programmes, there had been underspending on the Public Transport Infrastructure and Systems Grant, the development of a Scholar Transport Framework, a migration plan for Scholar Transport, as well as on the implementation of the ‘Shova Kalula’ (bicycle transport) programme in provinces. Public transport also requested rollovers in areas where funds were unspent, and this included funds for the development of a national transport regulator, the implementation of the taxi recapitalisation 2020 strategy, the oversight of integrated rapid public transport networks, and the development of National Transport Information Systems. The total amount requested as rollovers was R187.9 million, out of the total R319 million that was underspent or saved.   

Mr Pretorius further highlighted the major projects or achievements of the Department in the 2012/13 fiscal year. For Integrated Transport Planning, achievements included the commencement of the national household travel survey, the development of single transport economic regulator, progress on the Durban-Free State-Gauteng logistics and industrial corridor [Strategic Infrastructure Project (SIP) 2], completion of the freight movement optimisation plans and studies on macro economic impact of transport and competitiveness for transport, as well as the update national freight corridor framework.

Achievements under the Rail sector programmes, among others, included the initiation of the project for the acquisition of new rolling stock over a twenty year period and upgrade of some rolling stock, the development of an institutional framework and arrangements for interim rail economic regulator, the completion of the study on the devolution of the rail function to metropolitan areas, as well as the review of the draft Green Paper on Rail Policy and the commencement of the drafting of this legislation.

In the Road Transport area, a new provincial road maintenance grant allocation formula was introduced; provinces were assisted to implement the S'hamba Sonke road maintenance programme, and different initiatives relating to road safety were developed. Consultations were ongoing on the National Airport Development Plan.

Mthatha Airport refurbishment continued in the Civil Aviation sector. The key achievement relating to the Maritime sector was the completion of a draft Green Paper on Maritime Transport Policy.

Under the Public Transport programme, a total of 6 457 taxis had been scrapped, the National Land Transport Act was reviewed, public transport regulators were established at the national, provincial and municipal levels, while integrated public transport networks were being facilitated and developed.

Ms N Ngele (ANC) commended the presentation, but said that it was not clear what exactly the status of the Mthatha Airport was. She noted that, based on her own understanding, the runway of the Mthatha airport was completed. She expressed concern about the many instances of underspending and transfer of funds from one unit to the other. She further asked why the Department was giving funds initially meant for the runway away to the provinces, while the Airport was not yet completed.

Mr Mathabatha Mokonyama, Deputy Director General: Public Transport, Department of Transport, replied that the Mthatha Airport was almost finished, the runway had been completed, but work such as excavations, tarring and perimeter fencing was still ongoing. The Department would commission the major part of the airport construction project at the end of June 2013.

Ms Ngele asked if the runway and facilities development of the Mthatha Airport were separate projects, or were parts of one big project.

Mr Mokonyama replied that the Mthatha Airport was one big project, which included the runway and facilities development.

Ms Ngele responded that it was expected that if there were any funds left from the runway, these should then be put to the building or facilities development, and questioned again why the funds went to the province.

Mr Pretorius replied that the Department took responsibility for only the runway, at a cost of R355 million, but not for the terminal building. The Eastern Cape Province wanted to take responsibility for the terminal building, but had requested the Department to get the money from the National Treasury for it to do so.

Mr Mokonyama added that the issues surrounding the Mthatha Airport project were largely historical. The project was “inherited” midway from the Department of Defence and the province. The province accounted for the procurement decisions that would be taken.

Ms Ngele requested further clarification on the Rea Vaya Phase 1b project, which involved the ordering of buses for public transport, which were due to be delivered in June 2013.

Mr Mokonyama noted that Rea Vaya Phase 1b ran with the Empire Road, and the construction had been completed, but vehicles were being awaited because the Department was exploring the option of localisation, or production of vehicles in South Africa. The project would, however, be launched and become operational in 2013, and that would mark the completion of Phase 1. 

Mr I Ollis (DA) demanded a further explanation on the variance of R109 million that was underspent in Civil Aviation, pointing out that this amount was not the same as the Mthatha Airport amount.

Mr Mokonyama clarified that the excess money that was not spent on Mthatha airport was around R400 million, and from this amount, the sum of R104 million was being requested as a rollover.

Mr Ollis asked why the R765 000 that was saved on investigations was regarded as a “saving” instead of an under spending, particularly since the investigations were still ongoing.

Mr Pretorius remarked that the variance of R109 million under civil aviation was a positive variance, and was significantly influenced by the savings on Mthatha Airport. He agreed that the R765 000 that was purported to be “saved” on investigations should rather have been stated as “rollover”, as the investigations were still ongoing.

Mr Ollis asked why freight logistics concerns were listed under “Major Achievements of the Department”, as freight logistics was not the mandate of this Department, but rather that of Transnet and the Department of Public Enterprises. He noted that achievements pertaining to freight logistics should not be listed, since the DOT did not have control over the container terminals.

Mr Mokonyama stated that the Department had a freight logistics strategy. Whilst it was true that Transnet was the implementation agency, the overall actions and policy intentions were guided by the Department of Transport.

Ms D Dlakude (ANC) appreciated the transfers made to different entities, especially those to the Road Traffic Management Corporation (RMTC), noting that this unit was performing credibly. She however questioned the “incessant” under-spending, shifting and rollovers across all programmes, and asked if the Department had plans in place to ensure that each project or programme would spend all its allocation. She also wanted to know when the feasibility study on the Moloto Corridor would be completed, as the road was presently a death trap for commuters.

Mr Mokonyama replied that a pre-feasibility study was conducted on the Moloto project some years back, but the National Treasury insisted that there was a need for a full feasibility study that would take into cognisance all the alternatives, and not merely concentrate on an already-chosen option. Hence, the Department of Transport was instructed to carry out the full feasibility study for the Moloto project. The Department would report back to the National Treasury with the full feasibility study, stating the preferred option, in the 2013/14 financial year. 

Ms R Motsepe (ANC) questioned the rationale for the non-inclusion of the Nthwane Project in the presentation, pointing out that this project was not yet completed. She further expressed concern about the monitoring of the projects, noting that the presentation did not amplify on monitoring, especially when money was not spent. She wanted to know more specifically how monitoring was done in the Department.

Mr Mokonyama remarked that the Nthwane Project was not off the list, and the Department tried as much as possible to include projects of provinces and agencies. He added that the agencies could, however, be called to account for what they did with the money they received. He affirmed that the presentation also captured monitoring in broad terms, but that the Department could go into an in-depth analysis of what was spent, and how it was spent, in respect of each programme, if Members wanted. He noted that some of the issues the Department had with monitoring were not necessarily technical, but had to do with policies and disagreement among stakeholders.

Mr Pretorius added that the Department always received progress and quarterly reports from every agency to whom funds were transferred. The Department also had monitors on the ground, who were seconded to the agencies, to monitor expenditure.

Mr L Suka (ANC) commended the presentation, especially the openness on underspending. However, he made the observation that the terminology used in the presentation was not easy for everyone to understand. He asked why the Department was effectively serving as a body that attended mostly to transferring funds, noting that of the total allocation, around 97% was transferred to other entities. He also wanted to know the plans the Department had to assist the municipalities in ensuring that money allocated was spent.

Mr Mokonyama agreed that the Department was mainly transferring funds to other entities related to it, but noted that this was the role the Department was meant to play. However, the monitoring and evaluation capacity of the Department would be strengthened, in order to ensure an efficient utilisation of released funds.

Mr Suka decried the bias towards urban transport in the budget, noting that not enough emphasis was placed on rural transport and rural roads.

Mr Mokonyama conceded that there had been inadequate attention to rural transport and infrastructure in the past, and agreed that urgent attention needed to be given to rural transport development. He added that the “Urban Infrastructure Development Unit” in the Department of Transport needed to be changed to reflect that it was merely an “Infrastructure Development Unit”, in order to incorporate the rural areas in transport infrastructure development.

Mr Suka asked if the Department was aware of the allowable percentage in terms of shifting money across projects.

Mr Mokonyama clarified the difference between savings and under spending, noting that savings entailed money that had been saved after the completion of a project, but under spending referred to money that was left when a project was not completed after a fiscal year and that rollovers were requested only for uncompleted projects.

Mr Pretorius added that the Department was mindful of the 8% virement limit that it may not exceed, with respect to shifting of funds across programmes.

Mr Suka requested further clarification about the under spending recorded for the Compensation of Employees, asking if this implied that vacant posts could not be filled, even when unemployment was widespread in the country.

Mr Mokonyama responded that the Department had a serious challenge of attracting the required skills for the vacant posts, especially engineering, hence the under spending in the compensation of employees.

Mr Suka wanted more details of how the Department intended to implement, in the next academic year, the Scholar Transport initiative, which had been an ongoing concern for a while.

Mr Mokonyama explained that the main outstanding issue with scholar transport had to do with the localisation of bicycle production, procurement and distribution, but the Department would deal with the issues in the next fiscal year.

Mr Suka further asked what the plan of the Department was for the Maritime sector, especially as the year 2013 had been dubbed the “Maritime Year”.

Mr Mokonyama remarked that the focus on 2013 as the Maritime Year would be reflected in the next fiscal year.

The Chairperson commented that whilst this presentation had focused on presenting expenditure figures only, this Committee, in the process of fulfilling its oversight role, was interested not only in the expenditure figures, but also in the progress the Department was actually making, in terms of whether it was reaching the milestones and what impact the spending was achieving. She affirmed that the role of the Committee was therefore to consider how much was spent, how it was spent, and the changes that had been effected as a result of the spending. This would make it more clear that where there had been under-spending, there had not been achievement of the full aims of the programmes.

Mr Mokonyama replied that the Department would be mindful to take into consideration the reporting of the achievements of the objectives in the future, rather than just reporting on financial results.

The Chairperson remarked that there was still a negative attitude towards rural transport. She noted that the Rural Development Plan, despite being approved, had still not been implemented, stating that this implied a discrimination against rural areas, which was clearly contrary to the Constitution, while also contradicting what the Department of Transport stood for. She opined that this negative attitude would ensure a continual blocking of the potential for social and economic development of the rural areas. She therefore argued that policy change was needed, particularly the policy relating to road construction that stated that a minimum of 200 cars must travel on a gravel road before it could be regarded as needing to be tarred.

Mr Mokonyama noted the criticisms around the bias towards urban transport, and said that these concerns about the neglect of rural transport would strengthen the hands of the Department, as it sought to take the matter up with National Treasury. He added that reliance on data would always favour the urban areas in terms of population and present facilities, but agreed that a mind shift was needed to give greater assistance in rural areas.

The Chairperson asked if the Green Paper on Maritime Transport Policy was the same one that generated such disagreements and conflicts in the past, or if this referred to a further paper, and whether all stakeholders had agreed to it. She asked if there was a common agreement both within the Department in terms of the Green Paper, and if there was a shared vision between DOT and the South African Maritime Safety Authority (SAMSA).

The Chairperson asked if the Shova Kalula intervention was a short term or a long term intervention.

Mr Mokonyama stated that Shova Kalula was not a short term project. There was a need to localise the manufacturing of bicycles in order to sustain the project. The distribution strategy of the bicycles would be looked into. He also added that there would be a Scholar Transport policy finalised in the 2013/14 financial year.

Mr Suka stated that the Department must be careful with the use of terminology. He requested further clarification on what the DOT meant by “condonation” and emphasised again the need to distinguish clearly between savings and underexpenditure. He alluded to the news reports that provinces underspent a sum of R2.7 billion, noting that this was had not been mentioned in the Department’s presentation. He therefore requested the Department to elaborate on the issue, and noted that the Committee needed analyses of the spending of each province.

Mr Pretorius replied that the National Treasury gave the “condonation” to the Department to finance Mthatha Airport, because proper process for procurement was not followed initially. He emphasised that approval was thus indeed granted by the National Treasury to transfer funds to goods and services. He also noted that the one grant in which the Department showed major underspending was the Public Transport Expenditure Infrastructure System Grant, where underspending was recorded across the board, for every implementing agent. He stated that details on what each municipality received and spent would be made available to the Committee.

Mr Mokonyama added that another issue with the municipalities was that their financial year had not yet ended, and this no doubt contributed to the underspending at the municipal level. There were also municipalities who were given funds for construction, but had not started construction.

The Chairperson suggested that the Department needed to give a clearer separation of the transfers made to the municipalities and provinces.

Mr Suka added that this separation was needed also in order to identify the provinces who showed the largest under-spend.

Mr Mokonyama agreed on this and noted that it would be looked into for future presentations.

Mr Suka asserted that the Department should show a greater sense of urgency on its projects, especially the issue of feasibility studies and the Moloto Corridor.

The Chairperson again decried the non-implementation of the Rural Transport Development policy, warning that people would conclude from this that the Department had failed. She stated that the Committee would also hold the Department accountable for the non-implementation. She did, however, recognise that the National Treasury was to some extent disabling the Department from implementing the policy by not giving the Department the financial resources needed to implement. She requested the Department to report this so that the Parliament could support the Department. Finally, she commended Mr Pretorius and Mr Mokonyama on their presentation and responses.

The meeting was adjourned.


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