The Department of Transport (DoT) briefed the Committee on its 2nd Quarter 2013/14 expenditure. It was noted that the budgets were generally presented in a linear fashion, but that certain transfers were paid over specific periods: for instance, the South African National Rail Agency Ltd was paid monthly, but the Railway Safety Regulator received an annual advance payment and other entities were paid quarterly in advance. The search and rescue operations payments were phased according to plans. The provincial and local government payments schedules were agreed to by the recipients and National Treasury.
The report gave a detail breakdown of the budget spending up to the end of quarter 2. The percentages f spending were, for Provincial and Local Governments 43.4%, whilst spending on Departmental agencies and accounts was 28.6%, public corporations at 24.3%, goods and services at 1.4%, households 1.3%, compensation of Employees 0.9%, and other at 0.1%. A breakdown per programme was also given. The Administration Programme budget was R165.543m and the expenditure was R136.339m, showing under-spending of R29. 204m.The total budget for the Integrated Transport Planning Programme was R34.569m, and the expenditure was R32. 769m, representing an under-spend of R1. 8m. The Rail Transport budget was R4.6 billion and it had under spent R3m. The Road Transport budget was R10 billion, with under spending of R11m. The Maritime Transport budget was R49m and there had been an under spending of R5m. The Public Transport budget was R3.8 billion with an under spending of R173 million. It was explained that the underspending for compensation of employees of about 25m was mainly because of vacant posts that had not been filled. In respect of goods and services, the largest amount spent related to the R58 million spent for the Taxi Scrapping Administrator, so as to re-capitalise the taxi industry, followed by R21million which was spent on maritime transport, to prevent oil pollution. R15 million was spent in developing the programme S’hamba Sonke.
In this quarter, the Department had been busy in the Integrated Transport Planning Programme, with the development of the National Transport Master Plan (NATMAP) which was presented to Cabinet, who had resolved that there was a need for further review with the Inter Ministerial Committee, and further consultations with the Presidential Infrastructure Coordinating Commission. The first draft Position Paper on a Single Transport Economic Regulator (STER) was produced after extensive consultations. Preparations were under way to launch awards for Women in Transport. The study on regional infrastructure had been completed, but a final report must still be drawn. The Rural Accessibility framework was completed and a pilot process initiated. Adoption of other plans and completion of bridges and roads were noted. 159 rail coaches had been complete and handed over. The introduction of world class passenger trains would bring safety and comfort to commuters and the programme would create over 33 000 direct and indirect jobs over the next ten years. Designs and site had been approved for the Gauteng Train Control Nerve Centre. 134 stations should be modernised, upgraded and branded in preparation for new rolling stock up to 2020. The National Land Transport Amendment Bill had been submitted to the State Law Advisers. Under the Taxi Recapitalisation Programme 1 181 vehicles were scrapped. A cooperative model for small bus operators was being developed.
Members of the Committee asked clarity as to the basis of accounting used, noting that many of the payments in this quarter related to late-presented invoices. They asked about under expenditure on civil aviation of R25m, highlighted the lack of capacity that had been identified at lower spheres of Government and wondered if the DoT was helping other spheres of government to develop capacity. They questioned the upgrading of equipment for the taxi scrapping Administrator, and the current rate of scrapping. They enquired why the DoT had a budget for supporting the taxi Council, and why the Department had consulted with the ANC’s Economic Committee.
The Committee considered, and adopted, its draft Oversight Report on the visit to the Passenger Rail Agency of South Africa, with amendments, and the draft Oversight Report to Airports Company South Africa (ACSA) with amendments. It also adopted the minutes of meetings on 4 and 5 February, and the 1st term Committee programme.
Chairperson’s opening remarks
The Chairperson noted the programme for the day and said that the Committee would be considering its first term programme, since Mr Ollis had raised some matters, for which she thanked him. These included issues around road accidents and road safety, where the Department of Transport (DoT or the Department) did not appear to be meeting targets. The Committee needed to understand if that Department’s strategy for reducing fatal accidents was not working and what interventions were needed to ensure that it would meet the targets.
Another issue for discussion was the apparently chaotic billing by South African National Roads Agency Limited (SANRAL) on e-Tolls, on which the Minister and SANRAL needed to brief the Committee. Apart from this issue being raised by Mr I Ollis (DA), she had also been approached by others, including other MPs, who noted that people who had not actually used the roads were receiving bills and threatening letters from SANRAL.
The Chairperson noted that the delegation from the Department of Transport would also need to brief the Committee again, before it rose on 14 March, on its third quarter expenditure. In addition, there were matters to be considered that had to be carried forward in the legacy report, such as the matter on civil aviation raised by Mr G Krumbock (DA), as well as marginalisation of smaller trucking companies, for the incoming Committee to consider and carry through.
Department of Transport 2nd quarter expenditure report 2013/14
Mr Collins Letsoalo, Chief Financial Officer, Department of Transport, firstly apologised that the Director-General of the Department of Transport could not attend, due to other commitments. Mr Letsoalo thanked the Committee for the support it had given to the Department over the years, particularly for the increased budget. He noted that linear phasing of budgets across the year was done for the standard items, so that matters such as compensation of employees were reflected quarterly. The same applied to goods and services and machinery and equipment, with some adjustments as needed. However, there was a slightly different system for transfer payments, for SANRAL, for instance, received monthly payments whilst the Railway Safety Regulator (RSR) received one payment in advance for the whole year and other public entities were paid quarterly in advance. The payment for the Transport Sector Education and Training Authority (SETA) was not yet due. Households payments went according to a linear plan. Non Profit Institutions search and rescue organisations were phased according to planned payments, and SANTACO was phased linearly throughout the year. Provincial and Local Government payments schedules were agreed to by the recipients and National Treasury. In public corporations and private enterprises, the payment schedule was amended on a monthly basis for the capital portion.
Mr Letsoalo gave a detailed breakdown of the budget up to quarter 2, where expenditure on Provincial and Local Governments was sitting at 43.4%, Departmental agencies and accounts were at 28.6%, Public corporations at 24.3%, Goods and Services 1.4%, Households 1.3%, Compensation of Employees 0.9%, and others at 0.1%.
He then described the expenditure, per programme. Programme 1: Administration budgeted to spend R165.543 million (m) and the expenditure was R136.339m, with under-spending of R29.204m.The total budget for Integrated Transport Planning was R34. 569m, and the expenditure was R32.769m, so it under spent by R1.800m. The Rail Transport budget was R4.6 billion and it had under spent R3m. The Road Transport budget was R10 billion, with under spending of R11m. The Maritime Transport budget was R49m and there had been an under spending of R5m. The Public Transport budget was R3.8 billion with an under spending of R173 million.
Mr Letsoalo then noted the breakdowns according to line item on slide 6 (see attached presentation for details). Under compensation of employees, there had been under spending of about 25 million, mainly because of vacant posts that had not been filled. There was an accelerated programme in the Department to make sure that all those posts were filled, supported by the Minister. In respect of goods and services the largest amount spent related to the R58 million spent for the Taxi Scrapping Administrator, so as to re-capitalise the taxi industry, followed by R21million which was spent on maritime transport, to prevent oil pollution. R15 million was spent in developing the programme S’hamba Sonke.
Ms Lumka Lubisi, Chief Director: Special Planning, Department of Transport, reported that in the second quarter, DoT had been busy, in the Integrated Transport Planning programme, with development of the National Transport Master Plan (NATMAP). It had been presented to the Cabinet who had resolved that there was a need for a further review with the Inter Ministerial Committee, and to ensure there were further extensive consultations with the Presidential Infrastructure Coordinating Commission (PICC), so that there was proper alignment and integration.
Ms Lubisi reported on the establishment of the Single Transport Economic Regulator (STER). The first draft Position Paper on STER was produced after extensive consultations with sector role players and the ANC Economic Transformation Committee. In terms of Women Empowerment, the South African National Women in Transport (SANWIT) National Executive meeting was held on August 2013 and preparations were underway to launch Women Awards.
Ms Lubisi said that the study on the Status of Regional Infrastructure in SA was completed but a final report must still be completed. There was an approved rural accessibility / multi-deprivation index. The Rural Accessibility framework was completed and a pilot process initiated. The KSD Municipality Integrated Rural Transport Plan was adopted by its mayoral infrastructure committee and Mayoral Council. The aMthatha Bridge was completed and Viegiesville Interchange was under way.
Ms Lubisi said that pursuant to the Rail Rolling Stock Acquisition programme, 159 coaches were completed at end of Quarter 2. Coaches were only handed over when there was a complete train set. There was continuous engagement between DoT, Passenger Rail Agency of South Africa (PRASA) and National Treasury (NT) to discuss funding options. The introduction of world class passenger trains would bring safety and comfort to commuters and the programme would create over 33 000 direct and indirect jobs over the next ten years.
Ms Lubisi said that in terms of the Station Improvement and Upgrade Programme, site establishment and approval of detailed designs for the Gauteng Train Control Nerve Centre were completed. The Greenview – Pienaarspoort Rail Extension project was in progress, with construction of stations and pathways. The Bridge City Rail Extension project was approaching completion (98%) with the commissioning scheduled for October 2013. 134 stations would be modernised, upgraded and branded in preparation for the new rolling stock over the medium term (2014 – 2020).
Ms Lubisi concluded that, under the Public Transport programme, consultations were completed for the National Land Transport Amendment Bill and the Bill had been submitted to the State Law Advisers for preliminary approval. Under the Taxi Recapitalisation Programme 1 181 vehicles were scrapped during the period under review. Under the Empowerment of Small Bus Operators (SBOs), the Cooperative Model for SBOs was being developed.
Mr G Krumbock (DA) said that the financial year end for government departments was 31 March and the third quarter would end by 30 September. He was concerned that much of the expenditure in this quarter appeared to be linked to late invoicing. One of the four concepts of accounting was known as the accrual concept, where departments should be matching the income and expenditure correctly in the month where it was incurred rather than when it was actually paid. Using this basis of accounting, if the Department was expecting to spend in September and incurred the cost in that month, but only received the supplier’s invoice in October, the correct accounting procedure was to include the invoice (even though it was late) in the September figures. He was not sure why the late expenditure was happening. He drew the distinction between assessing the invoices, not backdating them but recording them as accrued.
Mr Letsoalo responded that government departments were actually not using the accrual system, but the cash accounting system. Cash accounting was used to account for what had actually been spent, and that was why the figures appeared as they did.
Mr Dan Pretorius, Chief Director: Finance, Department of Transport, agreed that the DoT used the cash basis of accounting. The accruals were disclosed on the financial statements, although they were not included in the accounting as they would have been under an accrual system.
Mr Krumbock noted that the Department had under expenditure on civil aviation, which related to watch-keeping services, of R25 million. He noted that this represented about 30% of the whole budget for that item, and asked for an explanation.
Mr Pretorius noted that the watch keeping services were rendered by Telkom, which had been a sole service provider for many years. The service was used for calls from ships and airplanes across certain area of land and sea in Southern Africa. It was a service that other departments were rendering for international agreements, as part of the search and rescue warning system. In respect of any ship in distress, the signal would go to those watch keeping systems and be conveyed to the relevant organisations, which would then deploy rescue teams. The same would happen for aircraft in distress.
Ms R Motsepe (ANC) noted that on page 37 of the report, which dealt with the integrated public transport networks, Tswane was not mentioned, but there was a project called Ariye Bus transport which might not be part of the budget of the department. She asked for clarity.
Mr Letsoalo responded that indeed Tswane was part of the DoT’s budget. He noted that not every project had, however, been listed, but he could assure her that Tswane did receive a big chunk of the budget. He referred her to page 23 of the report which showed that Tswane had already spent more than what had been budgeted.
The Chairperson said that she was interested more in what had been reflected as under expenditure, and how did the Department intervened when under expenditure had been identified. In the previous week, Chairpersons and Whips had a session with the relevant infrastructure Ministers, in which it was indicated that interventions took place at national level as soon as a problem of lack of capacity was identified at the lower spheres of Government. After that, an analysis would be done into the lack of a capacity. She cited the Vembe District Municipality, in Limpopo, where it was discovered that the problem of the lack of water actually emanated from lack of skilled people employed for water supply. The intervention was then to deploy people with required skills, and in this case, 52 technical engineers were deployed to respond to that situation. She wondered if the DoT was doing the same kind of analysis, to identify what caused the under spending, and what it was doing to identify lack of skills.
Mr Letsoalo said that capacity challenges were acknowledged by the Department, which was well aware that they were lacking in most of the municipalities. The first challenge was that the Department itself had no capacity to deploy engineers and go to do the work. It had raised and discussed the problem with NT, asking for support them in capacity building. He pointed out that although DoT had an infrastructure budget, it had not received an operations budget to support that infrastructure. One example of this was with S’Hamba Sonke in provinces, where money was transferred but later the DoT would see that it was not spent. The planning took too long, but the DoT did not have the budget to intervene. It was now agreed that for every budget for infrastructure, there should also be an amount included for capacity building, to set up a “crack team” to be able to go in and deal with the issues. However, this would only really be seen in the following financial year. In fact, most often it was not resources deployed, but human capacity, that was lacking. The DoT was equally concerned about this, and was trying to address this. He also said that DoT had spent quite a lot on the education centres and universities, and the people that it supported through the programmes should be deployed to the municipalities after finishing their training. This would be repeated again, so that money was used to build areas of excellence, and then deploy the people trained to wherever capacity was lacking. DoT was trying to get municipalities to partner with each other because in some areas there was capacity, and in others none.
Mr I Ollis (DA) noted that on page 12 of the presentation the Department spoke about taxi scrapping and the Administrator needing to upgrade equipment to the tune of R58 million. However, it had only paid out R100m to scrap taxis. He felt that there was a huge amount budgeted to re-capacitate the administrator, given that it was getting fewer taxis scrapped every year. He asked for clarity.
Mr Ollis also noted the budget of R8.8m for the taxi corporation SANTACO, but asked why, for he was not aware of it having a historical connection with the DoT.
Mr Letsoalo said that R58 million had to be budgeted because the infrastructure was old and needed to be replaced, and this included both machinery and improvements to the systems. DoT was not in fact slowing down on the re-capitalisation, but would try to accelerate that process as and when it needed capacity. In many cases replacement was because of depreciation, and DoT was not implying that it did not need to replace simply because there were fewer scrapings occurring. The aim was rather to re-capitalise the Administrator. Full details of this could be brought to the Committee.
Mr Letsoalo then addressed the budget for SANTACO. He reminded the Committee that at one stage there was “blood on the floor” in severe taxi fights, and government wanted to intervene. After that, the operators claimed that for all the years they had been operating, government had not cared. The DoT wanted to get the taxi industry into order, and in order to do that, it was felt that one Council (SANTACO) should be formed, comprising several operators, as no such structure had existed prior to this. That led to a lessening of the violence. The DoT also agreed to support the taxi industry. The Council requested that the DoT budget for it, each year, to cover its operational costs, and that had been agreed to. Some people might regard it as not useful, but he pointed out that for an industry so large, the Department considered it value for money spent, as it would also enable the Department to engage with, and influence the direction the taxi industry was moving into.
Mr Ollis asked why the Department met with the ANC’s Economic Transformation Committee.
Mr Letsoalo pointed out that the Minister of Transport was an ANC member, and the ANC was itself a stakeholder in transport. The Department would be happy to meet also with the DA, if requested. His point was that DoT should be able to engage with any stakeholders.
Mr Krumbock said that he was aware that the Minister was a member of the ANC but that was not the issue. He assumed, from what Mr Letsoalo had said, that the request did not came from the ANC, but in fact the Department invited the ANC. He invited Mr Letsoalo to retract what he had said if this was not correct.
Mr Letsoalo said that he was not going to retract what he had said, and it should be understood that stakeholders were stakeholders, regardless of their affiliations, including both the DA and ANC, and when DoT met stakeholders “they met everybody”.
The Chairperson said that she could clarify this. She served on the Transformation Committee of the ANC. The Department of Transport was invited, by the sub-Committee of the Economic Transformation Committee of the ANC, chaired by Mr Godongwana. The meeting was held at the Premier Hotel in Johannesburg. Many of the other sub-committee Chairpersons of the ANC Economic Committees were also invited in that meeting. It should be understood that government was made up of political parties. If a department was developing something, political parties had every right to invite that department to present on what it was doing. That was what happened in this case; the ANC Sub-Committee on Economic Transformation had invited the Department of Transport to come and present. If the DA was not doing something similar, she suggested that it should, for it would give the party a better understanding of what was being done by Government, which was not out of line.
Mr Ollis asked why DoT had refurbished only 159 coaches in half a year in terms of the rail rolling stock acquisition. It was planned that 250 coaches be done. He wondered if some companies doing the job had been dismissed, or whether money was being paid too slowly.
Ms Lubisi said the figure of 159 coaches refurbished was only for the second quarter, and not the two quarters taken together. This was work in progress. She could provide the cumulative figure if the Committee needed it.
Mr Pretorius added to the comments on taxi recapitalisation, and said that the R58 million was not the total spent on the capital replacement. The total budget for running the scrapping of taxis, according to the contract, was R99.4m per year. The budget for the half year up to the end of quarter 2 could be between R50m to R58m. Up to this time, the DoT had spent R8.5m for the replacement of machinery, although by the end of quarter 2 it was anticipated that the replacement costs for machinery to have been around R20m.
Other Committee business:
Draft Committee Report on Oversight visit to Passenger Rail Agency of South Africa (PRASA)
The Chairperson reminded the Committee that certain amendments had to be made to this report last week, and asked Members to check whether the amendments proposed had been properly reflected.
Mr Ollis said that he agreed with the recommendations set out in the Report. He wanted, however, to tighten up the wording for recommendation number 4 which read: “PRASA creates awareness amongst its passengers about the communication modes that exist and informs passengers about delays and cancellations, and provides SMS services”. He agreed, but wanted to add that the electronic notice boards and intercoms, although installed, had not been switched on, so PRASA should be making sure that they were actually switched on and operational daily. It did not help if the new and exciting equipment was not properly used.
Mr Ollis said that the DA did not agree with Finding number 3, on page 12 of the report, and would like its disagreement to be noted. This was a policy issue. Presently, the sentence read : “The Company called the Union Carriage and Wagon would have been a strategic partner if it was acquired by a state entity”. The DA disagreed with that; it held the view that the private company was doing better quality work than Transnet, and the Committee’s Report had already stated that the quality of trains coming out of Transnet for PRASA were not so good. It believed that Union Carriage and Wagon should remain a private company, and disagreed with the ANC that the work should be done by a state entity. He requested that either that sentence be removed, or a note inserted that this was not a view shared by the DA.
The Chairperson said that first of all there was commitment in Government to capacitate state owned companies. There was also a Private Public Partnerships policy in the country. If used for Union Carriage and Wagon, it could help money to rotate, using the skill in the private company that was lacking in state owned entities. Secondly, she made the point that the Report noted that Transnet was producing poor quality, but the Committee was pointing out that in China, the state owned entities actually produced better quality. It was a question of wanting to change the mindset. The President had raised that issue when he established a Committee to investigate how to turnaround state owned companies and make them fully productive.
Mr Ollis agreed with the sentiments of the Chairperson, but did not like the word “acquired”. He agreed too on the concept of the Private Public Partnerships (PPPs), which were used for Gautrain and could be used successfully again. If the Report removed the word “acquired” he could agree to the rest, because it was fine to say that Union Carriage and Wagon should be a strategic partner of state owned companies, which should be fine. The word “acquired” suggested that Government was attempting to take over the company.
The Chairperson said that this was why Members had been asked to check the report. Indeed, the word “acquired” was not meant to imply that government was going to buy that company, but that it could well be used in line with the PPP policy, and to ensure that skills there were transferred to Transnet, to build capacity within Transnet, similar to how China had operated. She suggested that the sentence be changed to: “Union Carriage and Wagon should be a strategic partner of state owned companies with a purpose to build capacity”.
Mr Ollis agreed, thanked her, and moved for the adoption of the report, seconded by Mr M Duma (ANC)
The Committee adopted the draft report.
Draft Report Oversight Report to Airports Company South Africa (ACSA)
Mr Ollis said that the Department should put greater effort into creating an economic and regulatory environment that was conducive to the establishment and ongoing survival of low cost airlines.
The Chairperson said that the Department needed to come up with a low cost system for the ongoing survival of low fare airlines.
The Committee adopted the report.
Minutes of 4 and 5 February 2014
The Committee adopted both sets of minutes.
First Term Committee Programme
The Committee adopted the programme.
The meeting was adjourned.
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