Department of Transport Third Quarter Expenditure and Performance 2013/14

Meeting report

Opening remarks by Chairperson

The Chairperson welcomed everyone to the meeting and apologised for the late start. She handed over to the Department of Transport (DTO) to make their presentation on the Third Quarter Expenditure and Performance for 2013/14.

Briefing by Department of Transport

Mr Collins Letsoalo, Chief Financial Officer (CFO), introduced his delegation and indicated that the content of the presentation entailed expenditure to 31 December 2013.   This included the phasing of budgets, the breakdown of the budget to Quarter 3, expenditure per programme and expenditure per standard item.  The presentation would also cover under and over expenditure, transfer payments, conditional grants per provinces and municipalities.

After explaining how the Department’s budgets were phased – either linearly or according to planned payments – he provided a breakdown of budget per programme up to Quarter 3.  This showed that road transport takes a big chunk (58%), followed by rail transport (25.1%) and public transport (22.4%).  Administration (0.8%), civic aviation (0.4%), maritime transport (0.4%) and integrated transport planning (0.2%) made up the balance.   Overall, up to the end of the third quarter, the budget of R29.8bn had been overspent by R523.7m, which was due to road transport overspending by R1 037m.  The other programmes had all underspent.

For compensation of employees, there was under expenditure of almost R31m, which was because vacant posts could not be filled. This figure was expected to improve in the fourth quarter.  There was an over expenditure on the eNatis contract of R1 052m, but transfers to provincial and local governments had been below budget owing to consistent under-expenditure.  The Department had tried to find a way of shifting funds to reduce unauthorised expenditure resulting from eNatis costs.  Further expenditure R114m was expected in the fourth quarter, meaning a total potential unathorised expenditure of R1 166.5m.  A R300m reduction in the impact of this expenditure was possible through projected savings on the taxi recapitalisation programme, the withholding of transfers to the Road Traffic Management Corporation (RTMC) and savings on the Mthatha airport budget.   

Details of over and under-expenditure were provided for the various programmes covered in the “goods and services” category, and the amounts spent on the Department’s projects were listed.  (See presentation)

Mr Letsoalo said transfer payments up to Quarter 3 clearly indicated that provincial road maintenance, public transport operations and rural road asset management had all been transferred successfully. However, there had been an under-expenditure on public transport infrastructure and public transport network operations. The Department was satisfied that 98.5% of the transfer had been spent, although there was a concern about the slow pace of taxi scrapping, as only 58% of the allocated transfer had been spent.  A summary of conditional grants showed that the Provincial Road Maintenance Grant (PRMG) had spent 84.1%, the Public Transport Operations Grant (PTOG) was at around 97.9%, the Public Transport Infrastructure Grant (PTIG) was at 157.6%, the Public Transport Network Operations Grant (PTNOG) was 146.3%, and the Rural Road Asset Management Grant (RRAMG) had transferred around 61.7%.

The conditional grants expenditure per province clearly showed that Northern Cape was the best performing province for PRMG expenditure (99%) while Limpopo was the worst performing, with under-expenditure of 50%.  A total of 84.1% of conditional grants for PRMG had been transferred.  The conditional grant for PTOG also showed that Eastern Cape (100%), Kwa-Zulu Natal (102.6%) and Limpopo (104.1%) were the best performing provinces, while Western Cape (91.9%) and North West (92%) lagged behind.  Overall, the Department was pleased that most of the provinces had managed to spend conditional grants efficiently, as the overall percentage was 97.9 %.  The conditional grants for PTNOG showed clearly that Buffalo City in Eastern Cape (0.4%) and George in the Western Cape were two of the worst performing municipalities, while Tshwane (207.3%), Cape Town (145.7%) and Johannesburg (150.6%) were the best performing municipalities in terms of expenditure of PTNOG conditional grants.  The Department expressed concern over both Gert Sibande and Nkangala in Mpumalanga, as they had spent nothing of the allocated RRAMG conditional grant, while Uthukela  in KZN (109.3%), and Capricorn (166.3%) and Mopani (121.3%) in Limpopo, were considered as best performing municipalities.   The Department needed to work on accelerating conditional grants in rural areas, as this was where they were needed the most.

Mr Letsoalo handed over to Ms Lumka Lubisi, Chief Director of Service Development,   to take the Committee through analysis of selected indicators from April to December 2013.

Ms Lubisi said that Integrated Transport Planning was going well.  Regarding approval of the National Transport Master Plan (NATMAP) 2050, draft terms of references have been developed, based on the Cabinet resolution for further consultations. These terms of reference would form the basis of consultation with the Inter-Ministerial Committee (IMC) and Presidential Infrastructure Co-ordinating Committee (PICC).  A second draft legislative framework for the establishment of a single transport economic regulator, was completed and discussed at the Steering Committee, and there was also a need for continuous engagement with stakeholders and intervention by the Minister.  The Department had also introduced extensive research into the impact of freight accidents on South African roads, and an inception report has already been developed. 

The Department had introduced a transport energy consumption study and reduction strategy which had commenced in December 2013, and was still in progress.  Household questionnaires concerning an approved rural accessibility / multi-deprivation index were revised and the pilot project report reviewed and approved. Possible funding sources for identified projects for the King Sabatha Dalindyebo Municipality’s integrated rural transport plan were being sought. 

The summary of Integrated Transport Planning’s Quarter 3 performance showed that 27% was on target, and 21% was work in progress, but 8% was off target, for 15% there was no milestone, and for 29% information was not provided.

In the rail transport section, focusing on rail rolling stock acquisition, 256 coaches had been completed at the end of Quarter 2.  Coaches were handed over only when a train set was completed .There was still a continuous engagement between the Department of Transport, the Passenger Rail Agency of SA (PRASA) and National Treasury (NT) to discuss funding options. Under the station improvement and upgrade programme, the construction of the Gauteng Train Control Nerve Centre was 30% complete. The contractors for Greenview-Pienaarspoort Rail Extension were already on site.  Documents had been signed for Greenview and Mamelodi, the overhead slab had been completed at Pienaarspoort and handover documents were already signed.   The Department was proud to have completed and launched the Bridge City Rail project. The options analysis for the Moloto Development Corridor had been completed and taken through government structures.  Under the National Rail Transport Policy, a Green Paper had been developed and presented to the Cabinet Committee, and further consultation was to be conducted with Department of Public Enterprises. The regulatory gap analysis was also underway to ensure a reduction of accidents and incidents. The summary of rail transport for Quarter 3 showed that 50% was work in progress, 40% was on target, while 10% was off target.

Under the provincial roads maintenance grant (PRMG), 40.7km of roads were rehabilitated in Mpumalanga province, while 1 773 624 driving licence cards were manufactured and delivered to provinces in the period under review.

The finalisation of the White Paper on the National Civil Aviation Policy was still in process. Chapters on aircraft noise and engine emission had been redrafted and aligned with applicable resolutions of the International Civil Aviation Organisation (ICAO). The finalisation of the National Airports Development Plan (NADP) was in process, and broader consultations had already been held with the South African Civil Aviation Authority and the Eastern Cape.

In public transport, specifically focusing on the Integrated Transport Networks, the preliminary designs were in progress in Ekurhuleni, while in Msunduzi planning was completed and the project was awaiting the go-ahead to start construction.  In Polokwane the project was ready for construction to commence. The Department was proud to have completed a project in George, and operations would start after mid-2014. Planning in Mbombela was almost done, and operational planning was almost complete in Mangaung. The planning to implement an extended pilot corridor to Cleary Park in Nelson Mandela Bay after mid 2014 was also under way.  Several additional My CiTi feeder routes were operational, as well as trunk routes to Melkbosstrand and Omarumba in Cape Town.  The Rea Vaya planning in Johannesburg would be in full phase by April 2014.

The National Land Transportation Amendment Bill was also under way as consultations had been completed and Bills submitted to the State Law Advisor for preliminary approval.  The National Scholar Transport Policy had been submitted and approved by the Social Cluster in October 2013. A Cabinet Memorandum had been submitted and an inter-ministerial Committee had already been approved to finalise the draft policy.

Under the Taxi Recapitalisation, the Department reported that 2 752 vehicles had been scrapped during the period under review.  The Department planned to empower Small Business Operators (SBO’s), and consultative workshops on cooperatives were held in 7 provinces.

Ms Khibi Manana, Chief Director of Public Transport Strategy, said that R1.2m had been allocated for the Shova Kalula Bicycle Programme. The aim was to roll out 2 000 bicycles which would be procured by the DOT.  There was an agreement that provinces would be provided with additional bicycles, with the tender that had been awarded.  A process to establish a bicycle manufacturing plant was also under way, and the DOT was in discussion with NT and the Department of Trade and Industry (DTI)

Discussion

Mr I Ollis (DA) asked why the Department was over-spending by over R1 billion on the eNatis system in one quarter. Why was R23m withheld from the Road Traffic Management Corporation (RTMC), and what were the reasons for the slow pace of the taxi recapitalization programme?   He said it was impossible for the Rural Road Asset Management Grant (RRAMG) to have 100%+ spending in Quarter 1 when no transfer had been made.  Why had the Department provided both Quarter 1 and 2 reports on the refurbishment of 256 coaches by PRASA, but not for Quarter 3?   He was concerned that the Department was unable to provide 41.69% of the information, as it was supposed to be their priority to provide the Committee Members and general public with detailed available information.  

Mr Letsoalo responded that the over-expenditure on the eNatis had not happened in one Quarter or one financial year, but it had been an ongoing problem, and was in relation to transaction fees. The transaction fees were according to Section 24 of the Road Traffic Management Corporation (RTMC).  In 2007 the NT had taken the money from the RTMC and given it to the Department so as to fund the eNatis system.  The RTMC had approached the Financial and Fiscal Commission (FFC) and a decision had been taken that the money now belonged to the RTMC, as per the Act and the way the money was levied.  The possible withholding of transfers to the RTMC was because the money had been appropriated, and therefore RTMC was entitled it.

The slow pace of the taxi recapitalisation programme was due to a fact that the majority of South Africans were heavily indebted, including the taxi operators, and therefore it was extremely difficult for them to get funding. This meant taxi operators chose to keep their old taxis, rather than having to go through the process of recapitalisation.  Another reason was that the price of new taxis had gone up relative to the amount offered by the Department as a scrapping allowance.   The Department needed to look at various ways to accelerate taxi recapitalisation in order to ensure that the safety of the South African passengers remained a priority.

Mr Dan Pretorius, Chief Director (CD): Finance, explained that the RRAMG expenditure was shown as 100%+ in the first quarter because of timing issues involving when the Department transferred funds and metros spent them.

Ms Lubisi said that the percentage of information that was not provided referred to when the report was submitted, and did not necessarily speak of the targets.  This was information that had no relevance for the Department in order to assess the performance of a particular branch. She also said that the target for the refurbishment of coaches for Quarter 3 was 170, but PRASA had been able to refurbish only 97 coaches.

Mr Ollis (DA) expressed his dismay that such information was clearly available but had not been provided in the actual presentation.

Ms Lubisi sincerely apologised for the omission of such valuable information.   

Ms R Motsepe (ANC) asked whether the Shova Kalula project was included under the project of accelerating the process of preparing learners for driving licences before they pass the matric.

Mr Letsoalo responded that issue around driving licences for learners before they passed matric was something that the Department still needed to look at.

Ms Motsepe said the reason she had asked about the driver’s licence for learners was because the project was already running, but there was no visible operation, especially in rural areas.

Mr Letsoalo responded that work had already been done, but there was an issue over the criteria used for the selection of indicators, and this was creating a stumbling block for the full operation of the driving license for learners project.

The Chairperson emphasised that the Department needed to go beyond looking at the money spent for a particular project, but rather focus on the socio-economic impact on ordinary people. She said that the provision of a driver’s license for matriculants needed to be directly linked to a reduction in road fatalities.   

The Chairperson said it did not make sense that the Department had to take five years in order to come up with a Scholar Transport Policy. This was concerning, considering that on 14 March Parliament was rising.  The Scholar Transport Policy should be the Department’s main priority, as the age group with the most road fatalities was between 0-14 years.  It was a known fact that many school children in South Africa were transported in unroadworthy vehicles, and the development of a Scholar Transport Policy was not a matter of awarding a tender, but of providing a safe mode of transport to prevent road fatalities. If road fatalities were happening to those in the age group of 0-14, this had a great potential to affect the productivity of the South African economy.  

The current government had committed itself in building a developmental state and one of the pillars of developing a developmental state was capacity building. She wanted to know whether the Department had managed to come up with interventions to tackle the problem of skills shortages and under expenditure in the country, especially at the municipal level.  She challenged the Department to explore further the socio-economic impact of the Shova Kalula Bicycle Programme in addressing unemployment, poverty and inequality, especially in the most underdeveloped areas.  

 Mr Letsoalo agreed that five years for the development of the Scholar Transport Policy, or any policy, was very long and the Department was not going to try and defend itself for its late implementation. This policy should have been passed already, but there were complications on whether this was going to be the policy of the DOT or the Department of Education.  It was sad that people had to suffer because the main issue was about who would control the policy -- and this was the same government aiming to create a better life for all South African citizens. He indicated that there was also a provincial problem, as in some provinces scholar transport was operating smoothly, while in others there were a number of challenges, and this depended entirely on how the province was structured.  The Department needed to find a way to fast track the Scholar Transport Policy.

The Chairperson interjected, and expressed her disapproval of the fact that the Department was mainly concerned about the control and location of the Scholar Transport Policy, rather than the monitoring of vehicles transporting learners, especially those located in rural areas. She again asked the Department to elaborate on the process and the number of activities that were undertaken when developing a policy. 

Mr Letsoalo responded that he was yet to see a policy development process from initialisation to finalisation and implementation. He repeated that the Department did not need to be defensive in admitting that five years was very long for developing one policy. He also agreed that indeed there was a need to develop a Scholar Transport Policy, considering road fatalities involving learners.  The Department had also not decided on where Shova Kalula would be located, but the agreement was that the project should be located in rural municipalities.    

Mr Letsoalo indicated that most of the questions asked by Committee Members were tough for the team to answer.

The Chairperson interjected and said that this was why it was always important for the team from the Department to be led by a Director-General (DG), as he/she would have an overall responsibility to deal with questions related to possible interventions.  

The Chairperson wanted to know what informed the decision to procure 2 000 bicycles, considering the many children who walk about 5km to school. She also wanted to know the criteria that would be used for the issuing of bicycles. 

Ms Manana responded that the Department was not in possession of such information at the moment.

The Chairperson indicated that part of the reason for not knowing such an answer was because the Department was mainly focused on expenditures and numbers, rather than the socio-economic impact of the projects.  If the bicycles were given to people who did not really need them, this would not solve the key fundamental problem.  Finally, the Chairperson advised the Department to focus mainly on the triple challenges identified by the South African government, of unemployment, poverty and inequality.

She thanked everyone present to the Committee meeting and complemented the Department for being honest in mentioning their shortcomings and the areas of improvement.

The meeting was adjourned.