Department of Transport on its 2014/15 first quarter performance

Meeting report

Department of Transport (DoT) on its 2014/15 first quarter performance
Mr Mawethu Vilana, DoT Acting Director-General, briefed the Committee on the DoT’s 1^st quarterly expenditure through a breakdown of expenditure per programme. Out of a total of 80 targets, 66 (82.5%) were achieved and 14 (17.5%) were not, with a spend of 30% of its R48.727 billion total budget. In terms of expenditure per economic classification, there was an underspend on Administration due to vacant posts not being filled before staff members leave. Whilst 28 posts were filled, 24 were opened when staff left or were promoted. The overspending on Goods and Services was due to the electronic National Administration Traffic Information System (e-NaTIS).

Programme 1 – Administration
Key achievements in this area included the submission of the Merchant Shipping Bill to Cabinet and its subsequent approval, as well as negotiations being conducted with the South African Graduate Development Association (SAGDA) to develop a joint MoU to facilitate graduate placement across government. The alignment of the production of students was according to government priorities in key areas – training and skills in the maritime space and bringing women into critical areas.

The draft Communication and Marketing Strategy and International Relations Strategy had not been developed according to plan because the DoT did not have the capacity it wanted in the Department or in the sector in general. The underspending in Transfers and Subsidies was because the first quarterly payment to Higher Education Institutions had not yet been paid due to delays in receiving invoices.

Programme 2 – Integrated Transport Planning
Key achievements included the conduction of a situational assessment and finalisation of the Position Paper completed for the establishment of the Single Transport Economic Regulator (STER), the Transport BBBEE Charter Council being approved by the Minister and the finalisation of the short listing of Council members. The Rural Accessibility Index Survey was also carried out in various district municipalities across several provinces.

25% of the programme’s targets were not achieved - the inception report for the development of the Multi-Modal Transport Planning and Coordination Bill was not developed, sufficient data was not collected for the compilation of a Status Quo Report according to the Energy Consumption Reduction Study, and the Greenhouse Gas Inventory Report for Tier 1 had not been reviewed. The transport sector uses lots of unsustainable fossil fuels, so there is an attempt to reduce dependence to make transport a low carbon emitting sector. There was an underspend on Goods and Services as a result of several ongoing projects.

Programme 3 – Rail Transport
All of the targets for this programme were achieved, notably the completion of the literature review exercise on the Railway Safety Regulation Gap Analysis and the establishment of the Project Implementation Management Office (PIMO) for the Moloto Rail Development Project on track for an October launch.

There was overspending on Machinery and Equipment because of office furniture purchased during the renovation of the building for the year. There was underspending on Transfers and Subsidies due to the prioritisation on the establishment of Project Implementation Management Office (PIMO) with PRASA for the Feasibility study on Moloto Rail Corridor, Rail Policy Act and Branchline Strategy. The overspending on Goods and Services was the result of payments to PRASA.        

Programme 4 – Road Transport
80% of the programme’s targets were met, including the rehabilitation of 418 lane-km surfaced roads, the re-gravelling of 774 km of gravel roads and 337,592 m2 of blacktop patched.

Targets not achieved were the blading of 70,000km of gravel roads and the establishment of the framework for development of the Road Safety Policy. There was underspending in Goods and Services on the S’hamba Sonke programme and Road Infrastructure Policy but an over expenditure of R162 million (338.54%) on maintaining and operating e-NaTIS due to a court order.

Programme 5 – Civil Aviation
Main achievements of Civil Aviation were the release of 31 aircraft investigation reports and the generation of 12 safety recommendations. 54 schools were visited between April – June 2014 in relation to the aviation career awareness campaigns. This reached out to an estimated 750 learners in Limpopo, 996 in Gauteng and 684 in Mpumalanga.

Of the 25% of targets not achieved, these included the negotiation of 1 bilateral air service agreement, a conduct consultation with ICAO on the 1st draft Action Plan on Carbon Dioxide Emission Reduction and raising industry awareness on the phasing out of the Chapter 2 Aircraft through advertisements and meetings. There was underspending on Goods and Services due to the National Airports Development Plan and the National Civil Aviation Policy, and on Transfers and Subsidies because of membership fees to the African Civil Organisation, International Civil Aviation Organisation and COSPAS-SARSAT having not been paid.

Programme 6 – Maritime Transport
Highlighted achievements included the site visits made as fact-finding missions on the implementation of conventions and the Maritime Labour Bill being submitted to Parliament for presentation to the Committee.

The target not achieved was the amendment of Maritime Security Regulations to incorporate input from stakeholder consultations into existing regulations. There was underspending on Goods and Services due to various project delays and overspending due to membership fees to the International Maritime Organisation and the Indian Ocean Memorandum of Understanding which were paid earlier than projected.

Programme 7 – Public Transport
11 of 12 targets were achieved. Notably bilateral progress meetings with six municipalities regarding the Integrated Public Transport Networks (IBTN) project, with specific targets met such as Tshwane’s receipt of buses and Nelson Mandela Bay’s launching of Cleary Park service by October 2014. The National Land Transport Amendment Bill was approved by the Minister to proceed to NEDLAC and a consultation was held between the DoT and DBE regarding finalisation of the National Learner Transport Policy in June 2014, with the draft policy subsequently being amended.

The aim of scrapping 1,875 old taxis as part of the Taxi Recapitalisation Scheme (TRS) was not achieved, with the underspending on Transfers and Subsidies being the result. There was also underspending on Goods and Services due to several other projects.

Transfer Payments
Mr Vilana highlighted the R7.693 billion paid to PRASA as 51% of its budget. The total budget for the Railway Safety Regulator was transferred as per the payment schedule because they receive their permit fees in July onwards. In terms of the Provincial Road Maintenance Grant (PRMG), North West was the worst performing province having only spent 2.37% of its budget, but the DoT was in discussion with the province to see it progress. The Public Transport Operations Grant (PTOG) was on average being spent according to plan across the provinces.

The monitoring mechanism for transfer payments was outlined. The cash flow projections and the payment schedule for provinces must be approved before they are aligned, and a Compliance Certificate granted according to section 38 of the Public Finance Management Act (PFMA). If provinces are compliant they will get the money and a MoU to do the work. They are required to produce quarterly financial and non-financial reports to the Department and the National Treasury.

Discussion
Mr T Mulaudzi (EFF) asked about the funding to the higher education institutions to assist with transport. Which universities are these? What about those within disadvantage communities? The issue with Moloto Road is that the provincial department is unwilling to hand it over to the South Africa National Roads Agency (SANRAL). How much progress has the DoT made with that? People are dying on the road in numbers. What mechanism is going to be used to minimise the unachieved targets in the DoT to less than 10? It will accumulate over the financial year. Is there a strategy to address this tendency? In terms of the provinces that underspend, what is DoT doing to make sure those funds are not diverted to other projects?

Mr G Radebe (ANC) commented on the schools visited in April and June. This Committee had a responsibility to ensure that the visits are followed up, and the pupils continue to receive encouragement about getting into the industry. The Committee has a school visiting programme and on those visits must be able to give career exhibitions, encouraging children to take notes and pass exams so they get support. On transfers, will not transferring more than expected affect the audit outcome? It is effectively an overspending. What will the DoT do to address this? One of the targets not fulfilled is the development of the inception report for the Multi-Modal Transport Planning and Coordination Bill. When is the Department intending to fulfil this? If there are challenges the Committee can help.

Ms S Xego-Sovita (ANC) referred to the movement of staff. Does the DoT have a retention strategy? They must not lose skilled personnel. On the target for the Taxi Recapitalisation Scheme, given that DoT has budgeted so much and expected to scrap so many, what is the reason taxi owners are giving for not scrapping their vehicles? Is the offer for old taxis so little that it does not suffice as a deposit for a new vehicle? What problem has DoT identified as to why provinces are underspending? Have they convinced the AG about the transfer overspend so it is not queried in audit outcomes?

Mr L Ramatlakane (ANC) said that last time DoT presented, concerns about monitoring expenditure were raised by the Committee. According to the predetermined expenditure, what percentage is permissible in terms of consultancy? Large amounts of money have gone into consultancy but not so much the work on the ground. It is encouraging to see the MoU, but are the constraint measures built into it sufficient? How is the process taken forward towards the next cycle? The problem with the Taxi Recapitalisation Scheme is the DoT scrapping allowance. There are not enough incentives for taxi operators. As it is in the interests of safety, the encouragement needs to be enough. What is the DoT's analysis of the problem? What has it got to do with the incentives? What is the solution going forward? Regarding the 338% overspend on Goods and Services in the Road Transport programme, it is a large percentage. It is a court order, but it does not just happen on the day and should have been foreseen if enough planning had taken place for the worst case scenario. PMFA covers the regulations about transferring funds from one entity into another. The transferring authority has responsibility for ensuring the one that is receiving funds has sufficient capacity to implement them appropriately. DoT would carry the flack should the money be used for items it is not intended for. How will it approach this problem? In terms of the underspending due to vacancies, what is the plan to address this? Has the staffing structure been signed off to give an idea of posts that need advertising? How critical are the positions that are vacant? Sometimes they are critical managerial positions that enable DoT to function properly which is a particular cause for concern.

The Chairperson stated that budgets are drawn up with the intention of implementing them. Several targets have not been met because DoT still has to develop various strategies, why does this still need to be done given that it knows the money will not be utilised in that particular area? There is underspending on the infrastructure in some provinces, are there monitoring mechanisms in place for the money that gets transferred to them? There is an indication that there are some things DoT has not been ensuring get done. For example, going into some communities, MPs are told that the potholes there have been there since the rains in 2012. Money is transferred for this, but are there systems that ensure the province did the work it was supposed to? DoT indicated there are non-profit institutions who are given money. Who are they? What is it that they are doing? Are there punitive measures if the province or municipality is not implementing the budget as outlined? Are there measures in place so that, if money is not spent in the 1st quarter, it can be improved upon in the 2nd?

Mr Vilana responded that there did not used to be any measures in place when money was transferred, but in creating the conditional grant there were mechanisms that were used to check what the provinces were spending. The MoU is used to agree upfront on what needs doing. If a province underspends within this item, DoT will withhold funds. This does not necessarily help as the province may need to develop capacity. The rich provinces spend whilst the poor ones do not - and so they need help. DoT is putting mechanisms in place to deal with this, so existing inequalities are not perpetuated, such as increasing capacity to assist provinces that are not spending.

A DoT representative added that the biggest challenge was not being adequately capacitated to monitor. One of the grants is R4.9 billion but there is only R5 million to monitor it, equating to 0.01% when it is normally 2.5-10%. DoT is applying to National Treasury to take some money out of the grant to assist with monitoring. There are more support units and structures inside National Treasury so they tend to know more than DoT in terms of what is happening on the ground.`

Mr Vilana listed the names of the universities as being North-West, Tshwane University of Technology, Stellenbosch and Johannesburg amongst others. It is spread around the country because DoT want to draw the pool across all provinces. Examples of non-profit institutions DoT is affiliated with include the International Maritime Organization (IMO) and Maputo Corridor Logistics Initiative (MCLI), and funding is in line with what DoT wants to see happening. There are no challenges with the Moloto Road anymore in terms of the handover to SANRAL to do the work - the National Treasury has provided the necessary funding to begin construction. As for the 338% overspend, it is a problem which will remain until the end of the financial year. DoT have no option but to pay because the contract extension was irregular. They are in discussions with the CEOs of the two companies to see how best to deal with it because DoT does not have the money to continue to pay for this. It is an unauthorised expenditure but there are systems in place to help remedy it. The Cape Town agreement was delayed but DoT will come to the Committee to ask for ratification of the Standards of Training, Certification and Watchkeeping for Fishing Vessel Personnel (STCW-F) in the 2nd quarter. The 54 schools visited are primarily in Limpopo, Mpumalanga and Gauteng. DoT will provide the Committee with the list. The transfer to PRASA would not create an audit qualification as it was an agreed on schedule based on discussions with National Treasury. In terms of the Multi-Modal Transport Planning and Coordination Bill, the purpose is to create alignment across the field as transport is a sector concurrent with parts of the Constitution. There is a National Transport Forum which aims to create an integrated plan across all of the spheres which will help DoT deal with the challenges. The vacancy rate will remain a big challenge. Funding is received on an annual basis from National Treasury to fill some of the vacancies so there is not a fully funded vacant structure. Another problem is contract terminations because some people leave when others are appointed, making it difficult to retain the skills DoT needs. In some positions there are people employed outside the establishment because DoT cannot afford to pay them, but DoT needs to be active in dealing with the issue because there are critical skills that it cannot afford to lose. The highest band of pay still does not meet the requirement.

A DoT representative added that a retention strategy exists and was recently reviewed. They are engaging with the DPSA on how to deal with it. On the Taxi Recapitalisation Scheme, the new vehicles are subsidised at a certain rate which allows the owner to recoup the money over the lifetime of the asset at a lower value. There is also an operations subsidy which DoT wants the taxi industry to get involved in. The issues identified would suggest that the incentives are not ever going to be enough because the old vehicle is already paid for, and the new one will not bring in any extra money. Sometimes taxi owners are not able to get a new vehicle as they are expensive, and some are not ready to let go of certain vehicles due to a cultural attachment. Equally, whether the deposit is enough to buy a new vehicle is dependent on an owner's creditworthiness. It is enough if they have a good credit record, but if not, they are unlikely to get funding. DoT is engaging with financial institutions to see whether they can assist the taxi industry going forward. The PFMA effect on transfers is an issue. Municipalities are told they will not receive the money until the next financial year, when they must start spending the money as DoT has indicated. The misalignment creates a problem, and the lack of capacity needs to be dealt with. Investigations have found provincial spending on certain items that are not in line with the MoU. In reference to the underspending on vacancies, they have not been used to increase savings. DoT has tried to fill all the posts and for critical positions have head-hunted. With regard to annuities, the President issued a proclamation for a Special Investigating Unit (SIU) investigation and there will be cases where people have done wrong that will need to be dealt with. It will take about three months for the report to be completed. Criminal matters have got to be dealt with and a case of fraud has been opened in the hope that some money can be reclaimed from certain individuals.

A DoT representative said that in 2007 the deposit given for the scrapping of a vehicle was around 50%. It is now the equivalent of 18% and the new vehicles are becoming unaffordable to owners in the industry. Financial institutions see it as a high risk business and sometimes require a deposit of as much as 70%. DoT is trying to form cooperatives of taxi owners as the industry provides a lot to the economy – close to R40 billion annually. If some of that money can be redirected to finance new vehicles, financial institutions will no longer complain about it being a risky business because it will not be justified. It is legislated that those who develop operational contracts on bus rapid transit (BRT) routes must involve the current taxi operators on that particular corridor. DoT has noticed there are different negotiation mechanisms, but national standards need to be developed to ensure this is not taken for granted. The volumes on the route will determine the types of vehicles that will be deployed on them. The challenge for taxi owners is affordability of new vehicles.

The Chairperson indicated that she had received several letters of complaint from communities raising critical issues about the BRT systems which she was going to send to the Minister. They are policy matters that she can look in to and take measures where necessary. In areas where targets were not being achieved, DoT should fast-track these and ensure the Committee is aware of what is going on.

Mr Ramatlakane commented that there were problems brewing with Metrorail due to fare increases on the Cape Town to Worcester line. It is a commuter issue and could be an explosive matter. It requires management and will be referred to the DoT.

The Chairperson agreed that protests sometimes resulted in the destruction of property and the loss of life so it needed to be addressed.

Consideration and Adoption of Minutes:
Mr Ramatlakane moved for the adoption of the minutes for the 16th September 2014. The movement was seconded Mr Mulaudzi and Mr Radebe.

The Committee proceeded to discuss the programme for the second term before the meeting was adjourned.