The Railway Safety Regulator (RSR) is the custodian of railway safety in the country with the main functions include issuing and managing safety permits, conducting inspections and audits, investigating railway accidents, developing regulations for safety and issuing notices of non-conformance and, in future, will impose penalties for non-compliance with the Act and safety standards adopted by the Board of Directors.
The 2013/14 financial performance for the RSR was evaluated for both content and quality by the Audit Committee and it received an unqualified audit with no matters of emphasis from the Auditor-General. RSR revenue was R47 million in 2009/10 and this had increased to R110 million in 2013/14. The revenue was mainly sourced from safety permits and grant income. Expenditure was mostly on staff and goods and services.
Members raised concern that the Regulator relied on penalty fees as a source of funding as this meant operator non-compliance was a funding source. Why were critical posts in the Regulator not filled? What is the strategy to ensure critical posts are filled? Was the Regulator able to implement recommendations arising from investigation of accidents? What was the strategy to deal with the fluctuation in train services? What did the Auditor-General raise as a concern in the past five years?
The Cross-Border Road Transport Agency (CBRTA) mandate included improvement of the flow of passengers and freight by road transport in the region, introduction of a regulated competition in cross-border road passenger transport, reduction of operational constraints for cross-border road transport and support trade facilitation. The CBRTA had obtained an unqualified audit opinion with no material audit adjustments to the financial statements. Emphasis of matters involved the funding of operations; the court action instituted by cross-border hauliers challenging new fees for cross-border road transport permits, which was effective from 1 April 2011.
Some Members felt that the ultimate goal of getting a clean audit was overemphasised and there are other achievements such as serving the people that are often underestimated. One Member said it was concerning that when there is an improvement in performance, the compliance level continued to decline and asked if there was a strategy in place to deal with this problem. Inspector training should receive higher priority as it was a critical role for CBRTA. What was the reason for the inability to produce four newsletters a year?
The performance dashboard of the Ports Regulator for 2013/14 showed 17 out of 33 targets (51.5%) were achieved; 10 targets were partially achieved (30.3%) and 6 were not achieved (18.2%). Its CEO emphasised that the Regulator was a labour-intensive entity and needed enough revenue for this.
The Members asked if there was a strategy in place to deal with understaffing. What was the strategy in place to deal with the targets that were not achieved? What informed the target that stated 50%? Could the Committee assist the Regulator to improve its budget as this was identified as a key challenge?
South African National Road Agency Limited (SANRAL) was responsible for the provision of a superior primary road network in Southern Africa. SANRAL maintains, upgrades, operates, rehabilitate and funds national roads, and levy tolls so as to service toll roads.
The non-toll budget for SANRAL was R10 billion for 2013/14 and predicted to increase to R11 billion in 2014/15 and again to R12 billion in 2015/16 financial year. Only 15% of the roads in South Africa were funded through e-tolling and the remaining 85% was funded by National Treasury. The total toll budget was estimated to be R3 billion for 2013/14 and expected to increase to R4 billion in 2014/15 and R5 billion in 2016/17. SANRAL was proud to have awarded 175 contracts in 2013/14. These were 116 contracts for non-toll roads, 30 to toll roads and 29 to other types. SANRAL obtained an unqualified audit.
The Members asked why it had obtained an unqualified rather than a clean audit. What was the strategy in place to deal with the matters raised by the Auditor-General? What was the current development around the training academy? They asked SANRAL to prioritise skills development in universities located in rural areas. Did SANRAL had detailed information on its social responsibility programmes in each province and each universities and the designated groups and gender representation. What was the reason for the vacancy rate as SANRAL was contributing to producing critical skills?
Railway Safety Regulator (RSR) presentation on 2013/14 financial year
Mr Nkululeko Poya, RSR Chief Executive, noted the key achievements of the Railway Safety Regulator (RSR) for 2013/14 which included:
▪ Implementation of the penalty regulation
- Revised Regulation was implemented in the 2013/14 FY
- Penalties issued to 36 operators for non-compliance
▪ Boards of Inquiry (BOIs)
- Two BOI’s were conducted: The Cor Delfos-Kalafong train collision and the Hectorspruit Level Crossing collision
▪ Safety audits, inspections & investigations
- Target of 68 Audits exceeded
- Target of 90 inspections achieved
- Target of 20 Investigations exceeded
▪ Safety standards developed / amended
▪ Railway safety education and awareness campaigns
- Level Crossing awareness campaign held in Koelenhof, Cape Town (where the highest number of level crossing incidents in the Western Cape were recorded)
- Safety awareness campaigns conducted in Noupoort and Daveyton (Gauteng) during Transport Month in October 2013
▪ Improved train communication systems to reduce passenger train collusions
- Outcomes of accident investigations at Koderlfos highlighted train communication systems as a major causal factor within the Metrorail system
- RSR issued a directive for the installation of trunk radios in all passenger trains
- Follow up investigations were conducted countrywide to ensure compliance
- Compliance increased from 40% to 85% by end of 2013/14 FY.
- A tender was issued to ensure 100% compliance with the directive.
Mr Poya then took the Committee through the 2013/14 key challenges:
Financial constraints as a directive from DoT to reduce safety permit levies for the 2013/14 FY resulted in a deficit of R5 million with the following consequences:
▪ Non-achievement of the following targets: 2013/14 Annual Railway Safety Conference; establishment of a Call Centre; development of a High Speed Rail Standard; and development of four Regulations
▪ Non-implementation of the RSR’s Broad-Base Black Economic Empowerment (BBBEE) Strategy
▪ Vacant critical posts, especially in the regions, could not be filled.
Looking at the state of safety, those involving operations showed the top five occurrence categories:
Category A: Collisions during movement of rolling stock (21%)
Category B: Derailments during movement of rolling stock (16%)
Category E: People struck by trains during movement of rolling stock (13%)
Category H: People related occurrences: platform- train interchange (16%)
Category L: Fires (12%).
The number of security incidents increased from the previous year. The top 5 security incident categories: theft of assets impacting on operational safety (65%), vandalism to property impacting on operational safety (22%); personal safety on trains (6%); personal safety on stations (5%); and personal safety outside station platform area (in section between stations, including yards, sidings and depots (1%).
Areas of concern included the existence of gaps on platforms, level crossing incidents, and people struck by trains as the chances of surviving are limited. The RSR was also concerned about lack of management of the rail reserve especially in the townships where residential areas are close to railways, security at and around stations, South African Railway Police Station (SARPS) recovered R 1 041 846.50 worth of stolen cables and arrested 14 903 persons for crossing a railway track without authorisation.
Mr Poya highlighted that the2013/14 financial performance for the RSR was evaluated for both content and quality by the Audit Committee and approved by the Board of Directors for submissions to the Auditor-General (AG). The AG indicated that the financial position of the RSR and its financial performance and cash flows were in accordance with General Recognised Accounting Practice (GRAP) and the requirements of the Public Financial Management Act (PFMA). The RSR started with the revenue of R47 million in 2009/10 financial year and this increased to R110 million in 2013/14.The revenue was mainly sourced from safety permits, grant income and other form of income generation and the expenditure was mostly to the staff and goods and services. In conclusion, he emphasised that the strategic goal of RSR is to have zero accidents in the rail industry and this was possible through partnerships with stakeholders and strategic partners.
Mr M Mabika (NFP) welcomed the presentation and indicated that railway safety was of critical importance in a country where the majority of the citizens utilize the railway for commuting. How does the Regulator collect the penalties from the operators? He expressed concern that the regulator relied on penalty fees as a source of funding as this meant non-compliance of operators was key to its funding. Why were the critical posts in the Regulator not filled? What is the strategy in place to ensure that these critical posts are filled? What are the plans in place to deal with the syndicates involved cable theft?
Mr Poya responded that there was an elaborate process to charge penalty fees but there was no budget for the penalties to be collected. The challenge in filling these critical posts was the generation of enough revenue to be able to sustain the organisation. RSR was generating only R70 million from an industry that generates R90 billion and suggested that there a need for more funding for the organisation to achieve its key objectives. There was a strategy in place to deal with cable theft as it was indeed affecting the operation of the trains and this needed a collaborated effort as it involved crime syndicates.
Mr T Mulaudzi (EFF) asked if there were measures in place to deal with the safety of the passengers, especially in rural areas as there is lack of management of rail reserves. What informed the safety awareness programmes? Was there financial support from the DoT? What BBBEE challenges are there?
Mr Poya responded that safety awareness programmes were informed by the state of safety report and mostly targets the areas that required attention (hot spots). What he meant by the BBBEE challenge was that it was an internal challenge, especially implementation. He was not referring to the actual Act or strategy.
Ms S Xego-Sovita (ANC) mentioned safety awareness and the management of the rail reserve, the land immediately adjacent to the railway track). What was the strategy in place to fill critical posts as there are a lot of unemployed graduates in the country? The RSR needed to prioritise railway safety and the reporting of rail safety incidents. There was room for improvement in obtaining a clean audit. The RSR needed to focus on the problem of residential areas located in close proximity to the rail reserve, as it was clear that level crossing incidents were increasing. What was the 'other' source of revenue for the RSR?
Mr Poya agreed there was a need to deal with the management of railway reserve as 80% of fatalities are due to trespassing or crossing railway lines and also agreed that this could be solved in collaboration with municipalities and other stakeholders.
Mr C Hunsinger (DA) welcomed the presentation and indicated that there was a need to tighten rail safety as it was clear that there was an unbalanced distribution in security. It was concerning that that the Regulator relied on penalty fees as a source of funding, as enforcement of safety was likely to be compromised.
Mr Poya responded that it was important to tighten up on rail safety and this could only be achieved through police and security guard visibility. The installation of CCTV cameras also promotes the safety of passengers
Mr M de Freitas (DA) asked for clarity on whether there are railway police as it was indicated in the presentation. Financial constraints in the Regulator were directly linked to lack of funding. What was the strategy in place to ensure that there was compliance? What action taken against officials implicated on transgressions?
Mr Poya responded that the railway police are referred as Rapid Railway Police (RRP) and the police stations within the railway station were more concerned about fighting crime in the Central Business Districts (CBDs) than in the railway stations.
Mr L Ramatlakane (ANC) also expressed concern about the sustainability of the Regulator as it relied on penalty fees. He asked if there was a strategy in place to explore other sources of revenue. The presentation was silent on the matter of the licensing of the Gautrain. He asked if there was an ability to implement the recommendations stemming from accident investigations. What was the strategy to deal with the fluctuation of train services? What did the AG raise as a concern in the past five years? The presentation was silent on the complications involved in compliance with laws and regulations and the turnaround strategy to deal with this weakness. What are the reporting challenges emphasised by the AG?
Mr Poya replied that there was an ability to implement the recommendations from accident investigations. He said that non-compliance leads to penalty fees or cancellation of the operation. The RSR was not present to intervene in the licensing of Gautrain. It came in at the time when the design was completed but not during the construction phase.
Mr Solomzi Maye, Chief Financial Officer, RSR, added that the internal audits have formulated a turnaround strategy to deal with the weaknesses identified by the AG. The financial information had to be transparent with minimal or no errors which was what the AG raised as a concern.
Mr G Radebe (ANC) indicated that the presentation was comprehensive. It emphasised general challenges facing railway operators in the country. He wanted clarity on the meaning of “qualified but not clean audit”. What was the strategy in place to cut down reliance on consultants? What are the challenges that make it difficult to achieve its targets? How does one deal with the liability in current assets as it affects the current account? Safety fences were needed in residential areas located next to the rail reserve. What was the strategy in place to ensure that cables are safe as this was affecting the operation of trains?
Mr Poya replied that the Regulator obtained an unqualified audit with no matters of emphasis. The issue of liability in the current assets was raise by the AG and also emphasised by the internal audits and needed to be rectified.
Ms P Boshielo (ANC) said it was unsustainable for the Regulator to rely on penalty fees and it needed to explore other source of revenue. Safety measures for level crossings needed to be implemented. What plans are in place to deal with the disunity between Transnet, Passenger Railway Agency of South Africa (PRASA) and the DoT in the region of Eastern Cape?
Mr Poya replied that the RSR was exploring other sources of revenue and admitted that the reliance on penalty fees was not sustainable.
The Chairperson requested that the Railway Safety Regulator respond to some of the questions in writing as there was limited time.
Cross-border Road Transport Agency (CBRTA) presentation on 2013/14 financial year
Mr Sipho Khumalo, CBRTA CEO, said the strategic thrust of the CBRTA was derived from Chapters 4 and 7 of the National Development Plan (NDP); also the State of the Nation Address (SONA) and the presidential inaugural address. The Medium Term Strategic Framework (MTSF) Priority 11 focused on creating a better South Africa and contribute to a better Africa and a better world. This included increasing foreign direct investment, increasing South Africa’s exports, and strengthening regional integration. Key strategic focus areas were to enable regional growth, increase intra-regional trade and making South Africa a globally competitive economy. The CBRTA was established by the Cross-Border Road Transport Act of 1998:
- To improve the flow of passengers and freight by road transport in the region
- To introduce regulated competition in cross-border road passenger transport
- To reduce operational constraints for the cross-border road transport and to support trade facilitation
- To develop the cross-border transport industry and to establish meaningful industry partnerships
- To strategically reposition the work of the CBRTA.
The mission of the CBRTA was to spearhead social and economic development within the Southern African Development Community (SADC) region through facilitating unimpeded cross border road transport. At the beginning of 2010/11, CBRTA was on the brink of collapse, not just financially but also due to a lack of technical skills to execute its duties. The CBRTA came up with a 10 point plan that would drastically improve the situation and these included the following:
▪ Recruiting suitably qualified personnel
▪ Consensus on the mandate and legitimacy of the CBRTA
▪ Image rebuilding through obtaining an unqualified audit opinion
▪ Resolving governance lapses at Board level
▪ Developing a funding model responsive to operational imperatives
▪ An organisation structure that is consistent with the mandate
▪ Developing leadership and managerial cohesion at all levels
▪ Developing a responsive organisational culture and values
▪ Inculcating performance standards and accountability
▪ Developing strategic partnerships with key stakeholders.
Mr Khumalo indicated that the Agency had attained its first unqualified audit opinion since establishment 15 years ago for the last two financial years, 2012/13 and 2013/14. He noted the problems with a lack of systems to ensure that the Agency could account for revenue receiving, expenditures and other expenses. Employment Equity for 2013/14 showed that 83, 3% of the people employed in CBRTA were Blacks, 9, 1% were Whites, 4, 4% were Coloureds and 3, 2% were Indians. Mr Khumalo added that CBRTA was proud that females made 50, 8% of the people employed, and part of the reason for this was a special focus on empowering women from previously disadvantaged backgrounds.
Mr Khumalo stated that the CBRTA obtained an unqualified audit opinion with no material adjustments to the financial statements. Emphasis of matter included the funding of operations; court action instituted by cross-border hauliers who were challenging the new fees for cross-border road transport permits, which were effective from 1 April 2011. The outcome of this court action might have an impact on CBRTA’s ability to generate the budgeted revenue levels. In terms of reliability of reported performance information, there were significant targets within road transport inspectorate and strategic support that were not reliable when compared with reported information.
Looking into the future the CBRTA was planning the following:
- Introduction of the Operator Compliance Accreditation Scheme within SA and the SADC region
- Implementation of Operator Value-Orientated Strategy
- Need for protection of SA domestic operators in regard to conditions obtaining in our neighbouring countries – need for review of Bilateral Agreements & implementation of the SADC Protocol.
- Harmonization of Regulatory Systems between the CBRTA & OLAS.
- Need to focus on the funding model as it is evident that the current model is not sustainable.
- Need to develop the capability and competency for addressing the question of un-roadworthy cross-border vehicles and the review of SADC vehicle standards.
- Strengthening partnerships with the South African Revenue Service (SARS) and other Border Authorities.
- Appreciating the changing dynamics in border towns and the need to respond to provincial imperatives (on-going engagements with Provinces).
- Refining the work of the Profiling unit to provide intelligence to support the cross-border transport industry.
- Achieve a clean audit opinion (clean administration).
Mr Khumalo took the Committee through the key challenges and intervention areas and these included:
▪ Resolution of the Lesotho/Free State Cross Border passenger transport issue.
▪ Provision for dealing with overloaded cross-border vehicles (below 3.5 tons) and use of bus trailers for the transportation of goods.
▪ On-going litigation on the increased permit tariffs in 2011 and the newly increased tariffs in 2014.
The Agency is poised to support the National Development Plan (NDP) by championing objectives for gaining global market share and setting South Africa as an integral part of the regional growth. All future plans are aligned to the Medium Term Strategic Framework (MTSF) 2014-19 objectives.
Mr Hunsinger indicated that the ultimate goal of getting a clean audit was overemphasised and there are other achievements that need to be taken into consideration like serving the people as this was often underestimated. What was the content of the general expenditure? What are the reasons for the R70 million decline in income?
Mr Khumalo replied that the decline in income has to do with the number of permits that people applied for. When the tariff increased, there is a drop in the number of operators who came to apply for cross-border permits. This suggested that it is possible for an operator to operate without a cross-border permit and take the risk.
Mr de Freitas requested CBRTA to acquaint Members about the court judgement and the alternatives available if it were to lose in the Supreme Court. There was a need for a clear budget in recruiting high-potential employees. He suggested that inspector training should receive higher priority as it played a critical role for the entity. What was the reason for the inability to produce four newsletters? What was the reason for the absence of experts in assisting Cross-Border Amendment Regulation?
Mr Khumalo replied that if CBRTA was unsuccessful in the Supreme Court, the only alternative was to go to the Constitutional Court, although he was confident that the judgment would be in favour of CBRTA. Vehicle inspector training was dedicated to determine the roadworthiness of the vehicles but the challenge was on the availability of specialised training that is required and the entity underperformed in this aspect. The failure to produce four newsletters was an unforgiveable flaw in performance within the organisation, especially the communication department. The absence of experts in assisting in Cross-Border Amendment Regulation was caused by the inability of CBRTA to get the amendment signed off at board level in time.
Mr Ramatlakane indicated that he was concerned about the budget sustainability of the Agency. It was important for the CBRTA to establish a strategy to acquire a clean audit. What was the strategy in place to deal with 'oversight responsibility and the reliability of information' for the AG? It was concerning that 50% of the goals were not achieved and he asked if it was possible for the goals to be measureable and reliable. What was the reason for the failure to put in place the IT governance system that is prescribed by the Department of Public Service and Administration (DPSA)? It was concerning that 50% of the predetermined objectives were not achieved.
Mr Khumalo replied that it was indeed important to look at budget sustainability. It was unfair for CBRTA to survive purely on the levies obtained from operators as this was precisely against the objective of reducing the cost of doing business on the continent. There was progress in ensuring that there was an IT system as this particularly important for the reliability of the information produced and also prescribed by DPSA. It was not true that 50% of the predetermined objectives were not achieved as it was only 39%. The AG claimed that it was difficult to place reliability on 50% of the predetermined objectives and this pertained to failure of project plans being signed at the beginning.
Mr Mabika welcomed the presentation. It was concerning that the compliance level continued to decline and asked if there was a strategy in place to deal with this problem. There was a need to review the pricing of permits for foreign countries. He was concerned its performance in improving compliance continued to drop.
Mr Khumalo replied that there was indeed a tendency when performance was improving that compliance dropped and this was difficult to control in most cases.
Mr Mulaudzi asked the CBRTA to address the problem between Lesotho and South African border, especially cross-border permits, as some of the vehicles were impounded. What were strategies in place to regulate the trailers on the N1 road to Zimbabwe as they were causing a lot of fatal accidents? Why was CBRTA continuing to petition the court while it had already mentioned that it was difficult to convince the court? Why was DoT not funding the CBRTA while it funding other agencies? What was the plan in place to deal with the Dubai taxis?
Mr Khumalo replied that the fundamental problem between Lesotho and South African border was a regulation of cross-border movement of passengers between the two countries. There was a need for a clear agreement between the two countries on this. The trailers were a matter of concern and needed to be addressed promptly as was the result of people evading paying fees. He suggested that the South African Revenue Service (SARS) and CBRTA needed to form partnership to solve this problem. CBRTA needed to tighten the definition of personal effects (e.g. luggage and other small items). The regulatory committee took a decision that permanent permits would not be issued until the ministerial task team had reached a permanent solution on the matter between Lesotho and South Africa. Petitioning the Supreme Court was reasonable as CBRTA felt that there were substantive grounds to challenge the court order. CBRTA was compelled to challenge a wrong judgement that would result in a loss of R340 million. The smart law enforcement system was the use of modern gadgets to scan barcodes; this was to eliminate cloning, tampering and manufacturing of permits. The Dubai taxis are not allowed in the country as they do not meet the standard of operation. This required policy at a higher level. The problem was the bilateral agreement stated that if the vehicle is roadworthy in Mozambique or Lesotho then it will be authorised to operate in South Africa. The CBRTA was considering revisiting the bilateral agreement as cross-border vehicles continued to contribute significantly to accidents and road fatalities and this was also undermining the work of the Road Traffic Management Corporation (RTMC) and Road Traffic Infringement Agency (RTIA)
Ms Radebe firstly congratulated the CBRTA for improving its audit opinion but asked what was its strategy to progress from an unqualified to a clean audit. Was there a strategy to address the problem of capacity at the Agency? There is a need to deal with the leadership issue as raised by the AG as a matter of emphasis.
Mr Khumalo replied that the audit outcomes explained the unqualified audit and admitted that there was a need to move to a clean audit, as it took the Agency 14 years to get to an unqualified audit. There were already plans in place to tighten up and improve the predetermined objectives and the measurability of the objectives.
Ms Boshielo raised concern about the fact that South African operators were mistreated outside the borders of the country. There was a need to regulate the number of trucks on the roads as these are the major causes of fatal accidents. What was the strategy in place to curb permit fraud as this is affecting its revenue?
Mr Khumalo replied that the matter of trucks causing major accidents and road fatalities needed to be taken seriously. It was true that South African operators were mistreated outside the borders of the country and there was a need to balance the scale so that South African operators can be able to compete effectively.
The Chairperson appreciated the work done by CBRTA though there was always room for improvement. She emphasised the need to reach a permanent resolution on the Lesotho-South Africa border. Capacity building needed to be scrutinised as there was a youth unemployment problem in the country.
Ports Regulator (PR) presentation on 2013/14 financial year
Mr Mahesh Fakir, Chief Executive Officer, took the Committee through the key performance indicators and compared actual performance against the targets, explaining the challenges where targets had not been achieved. He explained some of the discrepancies and achievements.
The performance dashboard of the Ports Regulator for 2013/14 showed 17 out of 33 targets (51.5%) were achieved; 10 targets were partially achieved (30.3%) and 6 were not achieved (18.2%). Its CEO emphasised that the Regulator was a labour-intensive entity and it needed enough revenue to obtain sufficient employees. The Regulator received an unqualified audit opinion with no emphasis of matter and no lack of compliance. In the previous financial year the AG had raised concerns around non-compliance related to the Audit Committee, internal audits, no performance management system in place and lack of policy and procedures. In 2013/14 the Regulator managed to improve in those areas. It developed policy and procedures, appointed internal auditors and implemented the performance management system and as a result there were no findings from the AG. The audit of performance information indicated that there were no instances of non-compliance, but noted the non-achievement of some of the performance targets. The Regulator is moving towards obtaining a clean audit for 2014/5.
Mr Fakir took the Committee through the key challenges and these included:
▪ Funding is not sufficient to fully discharge the mandate of the Regulator
▪ Amendment to the Act required to give Regulator more powers and resources to honour its mandate
▪ Limited staff capacity due to low budget results in a slow pace of implementation of some programmes
▪ Single Transport Economic Regulator (STER) process may delay required amendments to the Act
▪ Availability of tribunal members to eliminate tribunal backlog
▪ Delays in receiving data for projects such as port efficiency, BBBEE, S56 and S57 review as well as ports benchmarking
▪ Delays on projects that need to be performed together with DoT such as review of the National Freight Logistics Strategy (NFLS)
▪ Tenure for the current Regulator members ends in June 2015.
Mr Mulaudzi asked if there was a strategy in place to deal with understaffing as this was likely to affect the way the Regulator functions. What was the strategy in place to deal with the targets that were not achieved?
Mr Fakir replied that the entity was set up as an economic regulator looking at tariffs therefore the Regulator is not expected to be present in each port around the country. However, there was a need to deal with the challenge of understaffing and getting skilled people to meet the capacity requirements and reduce external resource utilisation. There was already a strategy in place to deal with the targets not achieved and the fundamental problem was understaffing and limited budget.
Mr Ramatlakane asked there was a plan in place to deal with the challenges facing the Regulator, especially the staff complement. What informed the decision to achieve "50% of the targets"? The AG was particularly concerned about compliance, oversight responsibility and IT governance.
Mr Fakir replied that the target of 50% was decided after considering the financial constraints. It was suggested that it was better to write the target as "250 contracts reviewed" rather than merely mentioning 50% - as this was measurable. The cause of the discrepancy between the AG report and the Regulator was as a result of the amendment that was made to the revenue after the submission of Annual Financial Statement (AFS). The Regulator was assisted by the internal auditors in doing an IT audit and there were procurement delays for the Document Management System (DMS).
Mr Radebe asked if there was a way for the Committee to assist the Regulator to improve its finances as this was a key challenge.
Mr Fakir replied that the Members can assist in terms of motivating for an increase in budget that would allow the Regulator to achieve its mandate.
Mr de Freitas welcomed the presentation and also expressed concern that the Regulator had only 17 employees considering the amount of work that needed to be done. What were the reasons for the previous CEO leaving the Regulator?
Mr Fakir replied that indeed understaffing was a concern and it required sufficient funding to hire more competent employees. The previous CEO, Mr Riad Khan, left the Regulator following the expiry of the contract.
South African National Road Agency Limited (SANRAL) presentation on 2013/14 financial year
Mr Nazir Alli, SANRAL CEO, said SANRAL had an important role to play in the provision of a superior primary road network in Southern Africa. According to its enabling Act of 1998, SANRAL was to be responsible for proclaimed road network and this was both the tolled and non-toll road network. SANRAL also maintains, upgrades, operate, rehabilitate and fund national roads, and levy tolls so as to service toll roads. SANRAL advised the Minister on road related matters. South Africa has the 10th largest total and 18th longest paved road network in the world and roads represent one of the largest public infrastructure investments in most countries. The total South African road network was estimated to be 750 000 km and SANRAL was concerned about the estimated number of unproclaimed roads which was approaching a total of 131, 919 km. The road replacement cost was predicted to be around R2 trillion.
Mr Alli mentioned that SANRAL was cognisant of the goals of National Development Plan (NDP)
- Elimination of income poverty and SANRAL managed to contribute to community development programmes and also Small Medium Micro Enterprises (SMMEs)
- Reduction of inequality by developing human capital in universities and high schools.
- SANRAL also planned to contribute to enabling milestone by increasing South African employment from 13 million in 2010 to 25 million in 2050. SANRAL also planned to establish a competitive base infrastructure, human resource and regulatory framework
Public infrastructure investment was currently at 10% of Gross Domestic Product (GDP) and this was planned to increase to 30% of GDP in 2030, financed through various forms such as tariffs, public-private partnership (PPPs), taxes, loans focusing on transport, energy, water and toll roads. A transport upgrade was needed on the Durban-Gauteng freight corridor and building the N2 through the Eastern Cape.
Mr Alli stressed that SANRAL was focused on 6 outcomes identified by the DoT and these included:
- An integrated infrastructure network that serves as a catalyst for social and economic development
- A transport sector that is safe and secure
- Improved rural access, infrastructure and mobility
- Improved public transport systems
- Increased contribution of transport to job creation
- Increased contribution of transport to environmental protection.
Its Strategic Outcomes Oriented Goals (Impact) and these were as follows:
▪ Provide effective strategic road infrastructure that would facilitate development, commerce, international trade, facilitate mobility of people and freight and access to community and tourism
▪ Job creation by the implementation of projects that would provide sustainable jobs
▪ Transformation and empowerment of BBBEE, community upliftment, skills development and educational support (and this included universities, research, internships, bursaries and scholarships)
Strategic Objectives of SANRAL supported by an Annual Performance Plan (APP) included:
▪ Managing the national roads network effectively
▪ Provide safe roads
▪ Carry out Government’s targeted programmes, specifically transformation
▪ Co-operative working relationships with relevant Department, Provinces, Local Authorities and South ▪ African Developing Community (SADC) member countries
▪ Achieve and maintain good governance practice
▪ Achieve financial sustainability
▪ Pursue research, innovation and best practice
▪ Safeguard SANRAL’s reputation, specifically stakeholder communication.
Mr Alli said that the non-toll budget for SANRAL was R10 billion for 2013/14; R11 billion in 2014/15 and R12 billion in 2015/16. He emphasised that only 15% of the roads in South Africa were funded through e-tolling and 85% was funded by National Treasury. The total toll budget was estimated to be R3 billion for 2013/14; R4 billion in 2014/15 and R5 billion in 2016/17. SANRAL was proud to have awarded 116 contacts to non-toll roads, 30 to those tolled and 29 to other types and this made a total of 175 contracts awarded for 2013/14. Mr Alli stated that the repair cost of road conditions was 18x / km after 3-4 years.
Mr Alli mentioned the key priorities for 2014/15 and these comprised:
▪ Assert Management Systems for the timely maintenance of national roads
▪ Planned increase of national road network by incorporation of roads as requested by provinces
▪ Good co-operative relationships with relevant government departments, provincial and municipal authorities and this included sharing of asset management systems across jurisdictions
▪ Smooth implementation of e-tolling in Gauteng
▪ Roll out of electronic toll collection lanes at current plazas for quicker flow of vehicles
▪ N1 and N2 Wineland Toll Road (Western Cape).
Mr Alli stated that SANRAL was focused on road maintenance and the priority was repairing potholes within 72 hours of the reported case. The replacement of guardrails, sign posts, grass cutting, patching, fencing and clearing up after accidents were important for the convenience of the road users. Periodic maintenance was every 7-8 years, then followed by special maintenance. SANRAL was proud of the role it has played in transformation as seen by the Overall Empowering Rating of level 2 in 2009/10. There was a board approved Employment Equity Plan up to October 2014 and the new three-year Economic Empowerment (EE) plan was to be developed in 2014/15. SANRAL paid special attention to skills development, in the form of scholarships, bursaries, internships, funding to universities to produce local engineers that could improve the economy of South Africa.
Mr Alli said SANRAL played a major role in community outreach programmes, mainly focusing on education, and this was evident in SANRAL’s presence at national career expos and exhibitions. There was a huge focus on roadshows at secondary schools, including presentations by community development specialists to schools, use of database of the Department of Basic Education. It was important to target universities in order to spread awareness of drunk driving, speeding and how to be a responsible road users. SANRAL supported numerous universities that focused on engineering, transport or town planning and these included the University of Cape Town (UCT), University of Stellenbosch (USB), University of Witwatersrand (WITS) and University of Free State (UFS). SANRAL offered scholarship to 177 scholars from grade 10-12 across 40 schools, and 106 bursaries qualifying in engineering degrees including post graduate degrees in 7 universities. There were 196 interns training with 57 contractors across the country.
Mr Alli reiterated that SANRAL prioritised transformation and this was proven by the following:
- SMME development in routine maintenance contracts
- 72% of work to black SMMEs
- 8% to other SMMEs
- 20% to managing contractors responsible for empowerment, training and support
- Community development programmes focused on projects (generally safety related), pedestrians, walkways and roads
- Economic opportunities in rural areas
- Employment of women and youth is targeted
- Catalysts for opportunities such as tourism, hospitality industry and other related industries.
The total number of future projects were 42, with a budget of R1.03 billion and 5 641 jobs to be created
Mr Alli indicated that due to an increase in road fatalities SANRAL was now paying more attention to road safety education and awareness programmes and these included:
- Education - this involved making road safety practical in schools
- In 2013/14 1 410 educators attended workshops on road safety for students
- 5 911 educators implemented road safety education in class
- 416 739 learners received learning material.
- There was the introduction of road safety art competition to test the knowledge of learners on road safety and 1 281 schools were invited with more than 5 000 entries
- Awareness page was created on Facebook with about 10 000 followers
- T-shirt competition for students inscribed with road safety messages
- Check-iCoast – Save life campaign was launched in radios, television adverts, SABC, E-TV and selected DSTV channels
Mr Alli mentioned that it was important for Members to understand that non-toll roads were funded by NT and the MTEF submission was in July of every year and contrary to popular belief there was no borrowing allowed to fund non-tolled roads. The tolled roads were financed through toll income, the capital market, government guaranteed and non-guaranteed funding. Tolled roads were funded through PPP, mainly concessions. SANRAL's total borrowing capacity R48.64 billion (R6 billion guaranteed funding (SZ bonds), R0.73 billion N1 loan (separate guarantee), R26.91 billion guaranteed funding (HWAY bonds and other) and R15 billion non-guaranteed funding (NRA bonds).
The benefits of toll financing included:
▪ Early project implementation with economic spin-offs
▪ Releases fiscus funds for non-toll roads
▪ Concessions (build-operate-transfer (BOT) method of road construction and management): sharing of risk with private sector.
▪ For investors the focus was on long-term investment, low risk as government guaranteed (to date), improved road user benefits, time savings, safety and comfort and the reduction in vehicle operating cost
Looking at toll versus fuel levy, the limitations of a fuel levy were:
▪ Not ring-fenced and goes to general fund
▪ Fuel efficiency is an objective - which means a declining fuel levy
▪ Everyone pays regardless of use, including the poor.
Whereas with tolling:
▪ Demand management – tolling incentivises different choices i.e. public transport usage, ride sharing and time of day travel
▪ Urban sprawl is limited
▪ Pro-poor: exempt public transport
▪ Users pay fraction of benefit received
▪ Government spends more than net receipts of fuel levy on road infrastructure.
Mr Alli identified numerous challenges that are facing SANRAL:
- Resistance to e-tolling on Gauteng Freeway Improvement Project (GFIP) by interests groups
- Slow e-tag registration
- Resistance to user charge - N1/N2 Winelands, N2 Wild Coast legal action
- Need firmly communicated messages on toll road funding
- Delays in project related approval from water affairs, provinces
- Inadequate law enforcement of traffic rules, overloading by hauliers; enforcement of electronic/ open road tolling
- Driver behaviour was identified as the major cause of road fatalities - reputation risk for SANRAL and DoT
- Insufficient funding for timely upgrades and maintenance of the non-toll network
- Poor progress on SIP-1 and SIP-4 projects
- Insufficient high-level planning/co-ordination between inter-modal transport and three government spheres
Discussion was needed:
- Future of private sector investment in funding road infrastructure-toll road projects was still envisioned
- Improve inter-governmental departmental co-operation
Mr de Freitas asked about the current situation regarding the e-tolling system. What were the reasons for SANRAL obtaining an unqualified rather than clean audit? What was the strategy in place to deal with the issues raised by the AG? What was the current development around the training academy?
Mr Alli replied that the training academy was only put into place this year for the graduates who are coming out of the universities to be given practical experience.
Mr Hunsinger raised concern over the irregular expenditure of R4 billion. He wanted to know if there were any actions taken against construction companies that were involved in price collusion
Mr Alli replied that the irregular expenditure was not as a result of corruption. Action was taken against construction companies involved in price collusion.
Ms Xego-Sovita welcomed the presentation and asked SANRAL to prioritise skills development in the universities located in rural areas. She asked if SANRAL had detailed information on its social responsibility in each province and each universities and the designated groups and gender representation. What was the reason for the vacancy rate in the department as SANRAL was contributing to producing critical skills? There was a need to include environmental issues when doing road safety programmes in schools, as transport contributes to climate change and global warming. What was the reason for the investment of R0.46 billion in future investments for Northern Cape?
Mr Alli replied that skills development was of critical importance and indicated that SANRAL needed to do more in prioritising rural areas, as this is where skills are needed the most. It was discovered that most graduates assisted by SANRAL had a preference for working in the private sector as opposed to the government sector. SANRAL is currently exploring other strategies to retain critical skills within the organisation and make the government sector attractive to young graduates. There would be a focus on including the environment when doing road safety campaign as this was an important theme that needs to be taken into consideration. The budgeted amount for future investments in the Northern Cape was based on a road condition survey. This depends on the activity taking place on the road. It is important to take into consideration that Northern Cape was not the busiest in terms of number of cars and traffic volume.
Mr Mulaudzi asked for the current development around the Moloto Road as there are delays that that were mentioned by the Minister. The Members needed to be informed about the e-tolling system.
Mr Alli replied that the Moloto Road was underway but the problem had been on whether the road would be transferred to SANRAL but the Minister has intervened to resolve this issue. The ANC in Gauteng has rejected the current paying method for SANRAL’s e-tolling system.
The Chairperson thanked all the public entities present and emphasised that it was critical important for the entities to work together in reducing unemployment, poverty and inequality as mandated by the NDP and particularly emphasised during the State of the Nation Address (SONA).
The meeting was adjourned.
- PC Transport: SANRAL, Railway Safety Regulator; C-BRTA, Ports Regulator on their 2014 Annual Reports 3
- PC Transport: SANRAL, Railway Safety Regulator; C-BRTA, Ports Regulator on their 2014 Annual Reports 1
- PC Transport: Public Entities of Department of Transport on their Annual Reports and Financial Statements for 2013/14 - 2
- PC Transport: Public Entities of Department of Transport on their Annual Reports and Financial Statements for 2013/14 - 2
- PC Transport: Public Entities of Department of Transport on their Annual Reports and Financial Statements for 2013/14 - 4
- PC Transport: SANRAL, Railway Safety Regulator; C-BRTA, Ports Regulator on their 2013/14 Annual Reports 1
- PC Transport: SANRAL, Railway Safety Regulator; C-BRTA, Ports Regulator on their 2013/14 Annual Reports1
- PC Transport: SANRAL, Railway Safety Regulator; C-BRTA, Ports Regulator on their 2014 Annual Reports 2
- PC Transport: Public Entities of Department of Transport on their Annual Reports and Financial Statements for 2013/14 - 1
- PC Transport: SANRAL, Railway Safety Regulator; C-BRTA, Ports Regulator on their 2014 Annual Reports 4
- Ports Regulator 2013/14 Annual Report
- Ports Regulator 2013/14 Annual Report presentation
- South African National Roads Agency SOC Ltd Annual Report 2013/14
- South African National Roads Agency SOC Ltd presentation
- Cross Border Road Transport Agency Annual Report 2013/14
- Cross Border Road Transport Agency presentation
- Railway Safety Annual Report 2013/14
- Railway Safety 2013/14 Financial Year 2013/14
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