Road Traffic Infringement Agency, PRASA, RAF & South African Maritime Safety Authority on their 2013/14 Annual Reports

This premium content has been made freely available

Transport

17 October 2014
Chairperson: Ms Dikeledi Magadzi (ANC)
Share this page:

Meeting Summary

The Portfolio Committee met to be briefed by the Department of Transport’s public entities on the 2013/14 annual plan and financial statements. The Road Traffic Infringement Agency (RTIA’s) commenced with an outline of its vision. The Agency prioritises on penalising guilty offenders through demerit points, rewards good behaviour through reduction of points and also strengthens cooperation between law enforcement and prosecuting authorities. Under its 2013/14 Strategic Objectives, RTIA committed to the following 5 objectives including discouragement and penalisation of those contravening with road traffic law, encourage payment of penalties, public awareness and education, administration and resourcing of the RTIA and rollout of the Administrative Adjudication of Road Traffic Offences (AARTO) across the country.  In the year under review, infringement revenue for RTIA increased significantly from prior years and there was an overall increase in expenditure as the Agency capacitated itself and obtained the necessary resources to fulfil its mandate. . The AARTO was transferred to RTIA in October 2013 and audited by the Auditor-General(AG). Prior to October 2013 issuing authorities were not receiving any infringement revenue and therefore not cooperating and the AG suggested reviewing AARTO accounts in line with municipality year ends.The AG will assess and conclude on AARTO accounts separately.

Members expressed concern that most of the public awareness programmes were focused on Tshwane and around Johannesburg and asked whether there was a strategy in place to spread to other provinces. What plans were in place to explore other sources of funding as it was unsustainable to rely on penalty fees? Members asked whether there was a strategy in place to deal with data integrity as it was clear this was affecting the inputs. Members asked what gave rise to the deficit of R2 billion in traffic infringement fees. Members asked whether there was a plan in place to deal with drunk-driving as this was contributing to road fatalities. What was the reason for the low statistics in the number of people caught drunk driving considering the prevalence of the problem? Members opined that there was a need to increase the number of traffic officers in the country as the number of vehicles continued to increase. It was concerning that South Africa’s quality of law enforcement rates amongst the worst in the world – 2.6 out of 10, compared with world average of 6.0 and a high of 8.6 (France) and was even below neighbouring countries like Zimbabwe.

PRASA commenced its presentation by highlighting it was established in March 2009 to provide passengers with rail and bus services and also champion the transformation and integration of public transport. The PRASA strategy was also to improve mobility and accessibility of the rail for all South Africans in pursuit of a better life for all. The legal mandate of PRASA, in terms of the Legal Succession Act of 2008 was to ensure that, at the request of the Department of Transport (DoT), rail commuter services were provided within, to and from the Republic in the public interests and also to provide, in consultation with the DoT, for long-haul passenger rail and bus services within, to and from the Republic in terms of the principles set out in section 4 of the National Land Transport (Transnational) Act no.22 of 2000. The PRASA group represented three primary groups, - property, rail and bus.  PRASA showed that the value of its assets had increased from R7, 1 billion in 2006/7 to over R36 billion in 2014/15 financial year and this growth was driven by massive government investment of 25 billion to upgrade the infrastructure. The total rail network in the country was 2 230 km and the majority was located in the Metropolitan areas. For commuter rail, there were currently 4 638 Metro coaches, 700 buses and 560 of those buses were still new as they were introduced during the 2010 FIFA World Cup. PRASA received an unqualified Audit for the 9th consecutive year, as well as clean audits for Intersite and Autopax. 

Members suggested that PRASA needed to build local based skill capacity to deal with the maintenance of trains, so as to empower local people and solve the problem of capital flight.  Members highlighted that there was a need to consider the issue of affordability in the introduction of new modern trains, as the target group was mainly the working class. Was there a programme in place to solve the problem of low staff productivity? Would the creation of 65 000 jobs be permanent or temporary jobs? Were Universities offering relevant courses in their curriculum to the skills required by PRASA? It was concerning that there was a fruitless expenditure of R98 million in late payments of fees as this was a basic financial accounting and needs to be rectified.

The Road Accident Fund presentation began with a brief introduction- RAF was established in May 1997, under Road Accident Fund Act, 1996 (Act No.56 of 1996 and RAF Amendment Act, 2005 (Act No.19 of 2005) assuming at the time, all the rights, obligation, assets and liabilities of the Multilateral Motor Vehicle Accidents Fund to provide compulsory social insurance cover to all users of South African roads. The RAF is also mandated to rehabilitate and compensate persons injured as a result of negligent driving of motor vehicle in a timely and caring manner and to actively promote the safe use of all South African roads. The RAF is a national public entity- Scheduled 3A of the Public Finance Management Act and the Constitutional Court rulings and legal precedents have all contributed to shaping its mandate especially in relation to passengers and life partners. Its income is generated from the amount of fuel sold and forms part of its investment income. It also receives grants from the National Treasury (NT). There was revenue increase of 13% to R20, 6 billion in 2013/14 financial year. RAF received a “clean” and unqualified audit opinion with emphasis of matter on going concern, irregular expenditure and restatement of corresponding figures. There were no findings on predetermined objectives, compliance with laws and regulations and internal controls. In the financial year under review, RAF achieved 83% of its set targets and failed to achieve 14%- the targets that were not achieved relates to 5% reduction in the deficit, turnaround time for complex claims, prevalence of litigated cases and completion of all performance reviews.

Members asked for the clarity on the post-finalisation process to the claims of accident victims. What was the average number of claims on a day? How was it possible that RAF obtained a Clean Audit Award in 2012/13 and 2013/14 but in the Internal Audit Findings there were 338 cases. It was commendable that the entity managed to achieve 84% of its targets but it still needed to have a strategy in place to speed up the payment of claims as this was likely to affect the financial stability of the entity.

SAMSA’s presentation commenced with an overview of its mandate- SAMSA is to ensure the safety of life and property at sea, prevent and combat pollution from ships in the marine environment and also promote the Republic’s maritime interests. The Maritime Search Rescue and Domain Awareness (MSRDA) operates a 24/7 service with the focus primarily on monitoring coastal and offshore activities, manage maritime communication system(s) , Regulate coastal and inland waterways aids to navigation including vessel traffic services. SAMSA also focuses on administration of the Merchant Shipping National Small Vessel Safety Regulation, 2007, as amended. The regulations extends SAMSA’s core mandate to include inland waterways (only waterways accessible to the public) within the Republic and this is to ensure boating safety on the country’s waters. SAMSA had been obtaining an unqualified audit opinion with matters of emphasis since 2009 and this was particularly concerning for the sustainability of the entity. There was also concern around the issue of decline in revenue and this has been linked to SA Agulhas not sailing due to funding constraints, resulting in no charters fees, no revenue was received from wreck removals as nothing was sold from marine intervention operation. There was also a decrease in contribution from partners for financing of skills development programmes. Its revenue was higher in 2013 financial year due to transfer of ship at 0 value. Some of the reasons for the 6% increase in expenditure which is within the inflation trend included the fact that expenditure remained high due to cadetship and SA Agulhas training projects which were funded from the organisation’s resources.

Members remarked that the presentation by SAMSA showed lack of effective leadership as it had been receiving an unqualified audit with matters of emphasis since 2009- this was particularly concerning for the sustainability of the entity. What was the strategy in place to implement the recommendations suggested by the AG? Were there plans in place to explore alternative funding models for maritime projects and securing funding commitments for cadetship and SA Agulhas training project?

Meeting report

The Road Traffic Infringement Agency (RTIA) on it’s Annual Report and Financial Performance for the 2013/14 Financial Year

Mr Japh Chuwe, Chief Executive Officer (CEO), RTIA, introduced the delegation from RTIA and indicated that the Board dispensed its mandate as best it could and exercised its fiduciary duties vigilantly.The Board and management was committed to good governance, evidenced by excellent audit performance. The performance is attributable to strict control and compliance environment. The Agency duly implemented the Minister’s resolution regarding the transfer of the Administrative Adjudication of Road Traffic Offences (AARTO) function and bank accounts, an impediment that plagued the Agency from inception. Since the take-over of AARTO function, more than R250m has been disbursed to Issuing Authorities (IAs) and the Agency to date. The Minister and the Deputy Minister’s leadership role on road safety with the 2013 summit has galvanised the Agency’s efforts. New partnerships have been established, in particular, with the interfaith movement from the local community. The presentation further highlighted the RTIA’s vision (see document). The Agency prioritised penalising guilty offenders through demerit points, rewarding good behaviour through reduction of points and strengthened cooperation between law enforcement and prosecuting authorities.

Mr Chuwe indicated that the 2013/14Strategic Objectives was committed to the following 5 strategic objectives

§  Discourage and penalise contravention of road traffic laws

§  Encourage payment of penalties

§  Public awareness & education

§  Administration & resourcing of the RTIA

§  Rollout of the AARTO across the country

Strategic objective 1 focuses on discouraging and penalising and contravention of road traffic laws and the sub-programmes here focus on implementing effective adjudication processes, rehabilitation programme and establishment of Traffic Rehabilitation Schools (TRS) model. The emphasis is also on serving courtesy letters and enforcement orders and providing an updated and reliable National Contraventions Register (NCR). The RTIA managed to achieve 151, 734 adjudications and this was more than planned target of 44 000- the reason for  the exceeded target was mainly due to Johannesburg Metropolitan Police Department (JMPD) adjudications for infringement notices issued outside the provisions of Section 30 of the Act. The target on establishment of TRS model was partly achieved as desk study report was completed. The target of establishing an updated and reliable NCR was partly achieved as approximately 85% of assessment was completed and the delays were caused by the inability of the eNaTIS contractor to respond in time to requests for the provision of specifications and related NCR development documents.

Strategic objective 2 focuses on encouraging payment of penalties and the sub-programmes focus on increasing collection of current infringement revenue (new infringements) and outstanding infringement revenue (old debt). The target of increasing collection of current infringement revenue was achieved at R80.7 million and that of increasing outstanding infringement for old debt was partly achieved at R4.0 million of planned target of R45.4 million was collected- the reason for this included non-rollout of AARTO and non-compliance with the AARTO Act by all role players.  

Strategic objective 3 focuses on public awareness and education and the sub-programmes here focus on reviewing and enhancing the effectiveness of public awareness and education programme entering into strategic partnerships to market AARTO with key strategic stakeholders. Both of these sub-programmes were achieved although insufficient financial resources presented challenges.

Strategic Objective 4 mainly focuses on administration and resourcing of the RTIA and the sub-programmes highlighted the need for human capital capacitation of the RTIA and acquiring enabling infrastructure. The strategic objective of human capital capacitation of the RTIA was partly achieved as 26 vacancies out of planned 48 were filled and the reason for non-achievement was based on non-rollout of AARTO as well as insufficient funding which affected the filling of positions. As a result, only key positions were prioritised. The acquiring of enabling infrastructure was achieved as enabling infrastructure was acquired.

Strategic objective 5 pays more attention on the rollout of the AARTO across the country and the sub-programmes included the preparation report of AARTO rollout readiness for all Issuing Authorities, rollout AARTO       to Issuing Authorities and then monitoring the implementation of the AARTO in all authorities. The preparation to rollout the AARTO across the country was achieved as 3 reports were submitted and presented to the Minister, although there was concern around the access to system documents. The rollout of AARTO to Issuing Authorities was not achieved and the final Assessment Report verifying the interventions deployed will inform the way forward. The monitoring of the implementation of the AARTO in all authorities was partly achieved.

Mr Chuwe indicated that it was important to ensure that there was highly visible and efficient law enforcement operation on a continuous basis. However, world-wide best practice proves that for law enforcement to be effective, it must be supported by equally effective public awareness, communication and education programmes; as well as a highly efficient, transparent and expeditious adjudication process to bring traffic offenders to task. According to World Health Organisation(WHO) “Global Status Report on Road Safety” indications are that South Africa’s quality of law enforcement rates amongst the worst in the world – 2.6 out of 10, compared with world average of 6.0 and a high of 8.6 (France). The country was doing poorly in comparison to neighbouring countries like Swaziland 5.8; Zimbabwe = 5.0 and Namibia = 4.4. The RTIA also assists IAs to monitor adherence with road safety programmes, plans and targets through the provision of performance information collected by means of the AARTO process .Evaluate measures taken by IAs to combat and resolve the contributory factors relating to the “What”, “When”, “Where” and “Why” questions on road crashes with the view to promote road safety.

Ms Palesa Moalusi, Chief Financial Officer (CFO) stated that Infringement Revenue has increased significantly from the prior period (55.5%) and there was an overall increase in expenditure as the Agency capacitates itself and obtains the necessary resources to fulfil its mandate. The going concern assumption was now positive due to improved performance and financial indicators. Cash flow is strong and net surplus was realised in the financial period. TheAARTO was transferred to RTIA in October & audited by the AG. The monthly reconciliation were done and the revenue was disbursed to IAs - R133m was the total revenue disbursed to IAs by 31 March 2014. 98% of revenue was paid out with 2% payable after collection from other municipalities. Prior to October 2013, Issuing Authorities were not receiving infringement revenue and therefore not cooperating. The AG suggested reviewing AARTO accounts in line with municipality year ends-the AG will assess and conclude on AARTO accounts separately. The Agency obtained a clean audit for the 2013/14 financial year and this was the first comprehensive and integrated audit undertaken. The AG audited performance information and issued an opinion on each strategic objective individually for the first time. AARTO accounts were also reviewed separately and no material findings were issued. The RTIA recognises the critical role it plays on road safety and is fully committed to achieving its mandate. During the current financial period 2014/15, the Agency planned to continue with its relentless focus towards effectively dispensing its duties and establishing a lasting legacy for sustainable road safety.

Mr Chuwe took the Committee through the challenges still facing the entity, including- NCR functionality; Lack of correct address details on NCR (62% rejection by SAPO); Lack of update on document delivery status; Incorrect vehicle type list and rules on the system; Refusal by eNaTIS Contractor to cooperate with assessment; Road safety education, marketing & communication; Lack of Comprehensive National Road Safety Strategy; Enforcement of penalties & credible database

Discussion

Mr M Sibande (ANC) commended the presentation and asked whether there was a reason the Agency focused on Tshwane and Johannesburg and neglected rural areas for public awareness programmes.

Mr Thabo Tsholetsane, Chief Operating Officer (COO), RTIA, responded that there was a need to deal with cost of employment and the hiring of skilled employees. The issue of expanding public awareness programme was still limited to Tshwane as there were provinces that did not have RTIA offices.

Mr M Hunsinger (DA) indicated that it was concerning that the entity relied on traffic infringement as a source of funding and there was a need to explore other alternative sources of funding.

Ms Moalusi responded that the foremost priority of RTIA was on road safety, curbing reckless driving and also issuing an enforcement order against infringers who failed to comply. There were already plans in place to explore other sources of funding, as the reliance on penalty fees was unsustainable.   

Mr L Ramatlakane (ANC) asked whether there was a strategy in place to deal with data integrity as it was clear this was affecting the inputs of the entity. How did the entity evaluate overachievement? What was the way to quantify the revenue to be paid for outstanding fees? What was the reason for the R2 billion deficit in traffic infringement?

A representative of the Agency responded that the issue of data integrity needed close collaboration with sister entities and the RTIA has approached consumer council to get the access to data integrity.      

Mr T Muluadzi (EFF) expressed concern over the lack of capacity to rollout case studies and also asked if there was a way to expand the public safety awareness programmes to other provinces as most rural areas were not aware of the RTIA. What was the strategy in place to deal with drunk-driving as this was contributing to road fatalities. Why was the statistic on the number of people caught drunk driving low, considering the prevalence of the problem? There was a need to increase the number of traffic officers in the country as the number of vehicles continued to increase. It was concerning that South Africa’s quality of law enforcement rates amongst the worst in the world – 2.6 out of 10, compared with world average of 6.0 and a high of 8.6 (France) and even below neighbouring countries like Zimbabwe. There was a need to deal with the issue of road-rage as this has been escalating throughout the country and in some cases innocent people have lost their lives.

Mr Tsholetsane responded that there was a need to focus on drunk-driving as this was also affecting innocent road users. The National Traffic Officers (NTO) had already introduced stringent penalties for drunk-driving. The quality of law enforcement was directly linked to the number of traffic officers in the country as only 17 000 traffic officers currently dealt with more than 10 million vehicles.

Ms S Boshiole (ANC) asked what the relationship between the RTIA and the provincial municipalities was. It was concerning that the department planned to promote the utilisation of the public transport while RTIA mostly relied on traffic infringement from private vehicles as a major source of revenue. RTIA needed to have a single road safety programme with other sister entities in order to avoid competition. There was a need to move away from postal services to electronic services to send invoices on traffic infringement as this was more convenient and likely to save scarce resources. What is the reason for hosting conferences costing the entity huge amounts of money?

Mr Tsholetsane responded that the issue of sending invoices via electronic services will require the amendment of the legislation and the RTIA was already planning to move towards that path.

The Chairperson congratulated the entity on the clean audit and also supported the need to expand its awareness programmes throughout the country. What was the way to maximise the utilisation of resources for public awareness programme, using social networks, radio and other form of media.  There was a need to deal with road rage in the country as this was indeed a growing phenomenon. RTIA was directed to respond to some of the questions posed by the Members in a form of writing due to time constraints.

Passenger Railway Agency of South Africa (PRASA) on it’s Annual Report and Financial Performance for the 2013/14 Financial Year

Mr Lucky Montana: Chief Executive Officer (CEO), PRASA introduced his delegation and indicated that PRASA was established in March 2009 to provide passengers with rail and bus services and also champion the transformation and integration of public transport. The PRASA strategy was to improve mobility and accessibility of rail for all South Africans in pursuit of a better life for all. The legal mandate of PRASA, in terms of the Legal Succession Act of 2008 was to ensure that, at the request of the Department of Transport (DoT), rail commuter services were provided within, to and from the Republic in the public interests and also to provide, in consultation with the DoT, for long-haul passenger rail and bus services within, to and from the Republic in terms of the principles set out in section 4 of the National Land Transport (Transnational) Act no.22 of 2000. The PRASA group represented three primary groups- property; rail and bus.  The value of the assets of PRASA had increased from R7, 1 billion in 2006/7 to over R36 billion in 2014/15 financial year and this growth was driven by massive government investment of 25 billion to upgrade infrastructure. The total rail network in the country was 2 230, majority of which was located in the Metropolitan areas for commuter rail, there were currently 4 638 Metro coaches, 700 buses and 560 of those buses were still new as they were introduced during the 2010 FIFA World Cup. PRASA was impressed by passenger numbers, as Metrorail managed about 550 million passenger trips, and the bus service also showed massive increase as it currently had 3.1 million passengers, while ShosholozaMeyi had only 1, 5 million long distance passengers. The number of train stations also increased with a growing demand in the Metropolitan areas- as it stands there were more than 585 stations in the country. After the Board was dissolved in September 2010, the focus was on the delivery of top quality transport services, unlocking the value of the property assets and also shifting from refurbishment to replacement of operating new assets.

The key strategic objectives of PRASA focused on the following:

§  Strengthening the Financial Position

§  Improvement of Financial Performance

§  Improvement of Operational Effectiveness

§  Investment in new capacity to meet Passenger Demands in the Medium to Long-term

§  Building human capital and technical capacity

§  Improving performance and sustainability through effective implementation and adherence to good corporate governance principles and risk management.

Mr Montana maintained that in 2010, PRASA managed to identify the key risks that needed to be addressed, and these included on-going concern issue, liquidity challenges identified by the Auditor-General (AG) and failure to generate income from the property portfolio. PRASA also identified that after the 2010 FIFA World Cup, there was a problem of massive and sudden decline in the availability of coaches from R643 million to R490 million passenger trips, agent fleet and infrastructure and this resulted in the decline in the level of reliability which often resulted in commuter backlash. It was important to ensure that the problems facing Metrorail were addressed as they affected the majority of poor citizens who commute by train on a daily basis, and failure to address these issues could negatively impact on the economy of the country.  There were key challenges that still faced Metrorail and these included:

§  Railway infrastructure and technology had reached the end of its design lifespan

§  Poor levels of reliability and predictability

§  High costs of maintenance  

§  Failure to contribute to an efficient transport system

§  Overcrowding, slow journey times, poor modal integration

§  Lack of off-peak services, ticketing and irregular time-tables

§  Inability to support economic activity

§  Limited access to socio-economic opportunities for rural and urban poor

§  Economic and structural viability, factors include long distances, low densities and low income commuters

§  The last train sets were purchased in the mid-1980s

§  Technology is old and inherently obsolete-1950s

§  The average of current coach is 40 years

Mr Montana noted that PRASA had identified a three phased turnaround plan and these included stabilising commuter rail in which R16 billion was invested from 2006/07 to 2008/09, consolidation of Pax Rail Entities and modernisation of the Asset base. The stabilisation of commuter rail came after a serious decline in fleet and infrastructure, loss of critical skills (e.g. engineers, artisans and technicians) as some moved abroad and also a huge loss of market in terms of decline in passenger trips. The consolidation of Pax Rail entities in 2009/10-2013/14 focused on the integration of different businesses with disparity culture, amendment of Legal Succession Act of 1989 and the creation of a new public entity focusing on passenger services and reporting to the Minister of Transport about current and future challenges. The modernisation of Asset base was mainly based on the replacement strategy from 2014/15 to 2024/25 and this has a potential to unlock the value assets and also reversing the historical under-investment in passenger railways.

There was a need to strengthen the financial position of PRASA and this included the increase in net liability ratio as part of balance sheet restructuring. There has been an increase in value of assets with doubling of assets in 5 years, from R17.8 million in 2010 to R36.2 million in 2014. PRASA also managed to improve financial performance as reduced net shortfall to a net surplus of R336 million and operationally generated revenue excluding subsidy. The fare revenue grew by 4.2% in 2014 and rental income grew by 16.8 as result of the lease-buy-back as part of the real estate strategy. low lights of PRASA included the decline of long-distance rail services and the R75 million unrealised revenue from two major strikes from Autopax. Intersite also lost R20 million unrealised revenue and this was caused by the fact that a major Limpopo contract was substantially scaled down(less revenue and the delay in new development plan approval of station process. The target training for signalling was not met. PRASA’s performance on Human Capital Development included:

§  430 Bursaries awarded both externally fulltime and internally part-time

§  2 252 learnerships were completed or in progress inclusive of 859 learners on TETA accredited “My Station” Programme

§  Challenges with signalling learners and rolling stock programme learners

§  153 RS learners on programme of which 121 were artisans

PRASA’s performance on good corporate governance included:

§  Unqualified Audit for PRASA for 9th consecutive year and clean audits for Intersite and Autopax

§  Functional Audit Committee meetings, and 3 meetings held with Governance and Performance Committee addressing the issue of 4th meeting as per its mandate

§  Risk costs contained with cost of risk of 1.1% lower than target

§  BEE achievements shows clearly that 108% against target of 80%

§  Black equity ownership-56.4 (black empowerment supplies

Discussion

Mr Ramatlakane remarked that the presentation was detailed and the direction was clear that public transport, especially rail needed to be the backbone of the South African economy. The magnitude of future projects by PRASA would require management structures and there was a need to consider price overrun and the budget management so as to meet the time-frames stipulated. PRASA needed to build local based skill capacity to deal with the maintenance of trains, so as to empower local people and solve the problem of capital flight. What was the leap period on the Moloto Corridor and what kind of job opportunities was it expected to create

Mr Montana also agreed that mega projects were costly and the major risk was on the Rand and Dollar fluctuations, which has affected the cost running projects. it was important to prioritise on quality than the cost, as the cutting of costs sometimes come at the cost of quality. PRASA was already in plans to build local based skill capacity to assemble and maintain the trains. There was a possibility that the Moloto Corridor would be built in the next two years, because of the nature of the project and admitted that the operation of the rail was also likely to take time.         

Ms S Xego-Sovita (ANC) commended PRASA for its excellent work and said this was a detailed presentation that covered comprehensive issues. It was, however, of concern that the presentation did not touch on ways to address the imbalances of the past in terms of railway investment, especially in rural areas. There was a need to consider the issue of affordability in the introduction of new modern trains, as the target group was mainly the working class. Was there a programme in place to solve the problem of low staff productivity? On the creation of 65 000 jobs - would they be permanent or temporary jobs? Wer Universities were offering relevant courses in their curriculum to provide the skills required by PRASA?

Mr Montana responded that the government invested massively on public transport and this was evident during the 2010 FIFA World Cup with an estimated R150 billion invested just on public transport. More importantly, over the R103 billion invested on government infrastructural development, about R800 million was in transport. The government spent almost R6 billion on the subsidisation of the public transport, and this subsidy comes from the DoT and PRASA. However PRASA was also aware that poor households were still paying almost 30% of their disposable income on transportation and this was because of people living far from places of work. Low staff productivity was identified as the risk and one of the ways to motivate the staff was to increase their remuneration and also introduce training for various ways of dealing with the customers. The  65 000 were expected to be permanent as the people hired in the projects also acquired experience to be able to easily enter the labour market Upon completion of the project.

Mr Hunsinger also stated that he was pleased with the presentation as it conveyed Concerns remained about the interconnectedness of different modes of transport, and it was suggested that PRASA needed to prioritise on integrated transport system, between taxi, bus and rail and also pedestrians. Was PRASA importing any train rails to the country? It was concerning that there was a fruitless expenditure of R98 million in late payments of fees as this was a basic financial accounting. 

Mr Montana responded that PRASA prioritised on the integrated transport planning as this was also likely to save the cost of travelling. The interconnectedness of different modes of transport was complicated and required the utilisation of all the strengths of different modes of transport, especially in corridors. PRASA also took into consideration the future demands and the budgeting looked beyond 40 years.

Mr M de Freitus (DA) remarked that Mr Montana was a vibrant CEO who always motivated its Board and this was clear on the presentation on current and future projects and reiterated that there was no doubt that rail needed to be the backbone of public transport in the country. Was there a strategy in place to resolve the problem between PRASA and Transnet?  Clarification was requested from PRASA on current and future rail gauging and how these linked with Transnet network. South Africa needed to aspire to become a First World county and the public needed be educated that eating and littering in trains is forbidden. Was PRASA looking beyond the 40 year plan, in terms budgeting and upgrading of current trains, as the technology was moving very quick? What was the reason for the dismissal of two officials?

Mr Montana responded that PRASA had resolved the dispute with Transnet and the root-cause of the conflict was on the access to the networks and rail policy between the two entities. PRASA would use the old railways to the new trains, as they only needed to be maintained at the highest level. There was a need to educate the public about keeping the trains in high standard (clean and safe) and PRASA was consulting relevant structures to address this problem. The new trains were designed for a  lifespan of 40 years; however the strategic plan was looking at long term. The two officials were found to be part of the syndicated criminals involved in cable theft.

Ms Boshielo observed that most of the PRASA renovations of railway stations were mostly in big cities and the rural areas were neglected. There was a need to have a single plan coordinating and talking to each other, at the national, provincial and local level. 

The Road Accident Fund (RAF) on it’s Annual Report and Financial Performance for the 2013/14 Financial Year

Dr Eugene Watson, Chief Executive Officer (CEO), RAF, indicated that RAF was established in May 1997, under the Road Accident Fund Act, 1996 (Act No.56 of 1996 and RAF Amendment Act, 2005 (Act No.19 of 2005) assuming at the time, all the rights, obligation, asserts and liabilities of the Multilateral Motor Vehicle Accidents Fund to provide compulsory social insurance cover to all users of South African roads. RAF was also mandated to rehabilitate and compensate persons injured as a result of negligent driving of motor vehicle in a timely and caring manner and to actively promote the safe use of all South African roads. RAF was a national public entity, Scheduled 3A of the Public Finance Management Act and the Constitutional Court rulings and legal precedents have shaped the mandate especially in relation to passengers and life partners.

Dr Watson said the business model of RAF was not complicated as 98% of the income was generated from the amount of fuel sold and formed part of its investment income. RAF also received grants from the National Treasury (NT). The cost side was centred on road activity, because of higher road use and the crashes varied in number and severity, this was likely to influence the volume of claims. RAF had 5 pillars and this included origination and this was where people access the funds and claims are verified and through this structure there were 83 hospital-based offices. The plan was to increase them to 90. There were 4 customer-service based centres and 5 regional offices. The bulk of the work was on determination of claims as this was a process of assessing and adjudicating and quantifying so as to determine the merits and the state in which there was wrong-doing or negligence. Litigation was a step where claimants make use of legal representative to argue to the extent in which there was a wrong-doing and negligence or suffered damages. Finalisation was a financial step and basically a payment process and was immediately followed by post-finalisation as this was where provision of post-crash care to accident victims was accessed- there were about 120 000 people who were dependent on RAF for post-crash care.

South Africa had the top 5 largest road networks in the world with 10 million vehicles and 25 million people travelling on the roads daily. It estimated that about 1 000 people die on South African roads on a monthly basis and no less than 40 lose their lives daily while more than 14 000 people are killed annually. This placed a heavy burden on the entity as it needed more funds to ensure that those who suffered from accidents were compensated. RAF was a 70 year old regime that was driven by an accessible revenue stream. RAF moved from protecting a wrongdoer from being sued to supporting victims. Compensation was fault-based and fault must be proven or excluded. There were people who were seriously injured but could not meet the requirements. Court rulings and orders were not always consistent as there was a great deal of subjectivity. The micro-economy had been created and was sustained by the RAF and there were lawyers, advocates, assessors and experts and there were also contingency fees in excess of 25%. More than 50% of the matters were settled in court and this had an impact on the Justice System ability to perform effectively. It was still a concern that claimants were often not the primary beneficiary of RAF benefits and this was, unfortunately, the legacy of the past. 

A summary of RAF highlights for 2013/14 included:

§  Revenue increased by 13% to R20,6 billion

§  Claims processing improved by 47% to a record high of R22,2 billion

§  Cash expenditure on claims exceeded the net Fuel Levy by R1,9 billion

§  Proactively made business operations more accessible and efficient

§  More than 220,000 calls were responded to by the Call Centre

§  Over 25,000 people follow RAF’s social media presence

§  Engagement with road accident victims through the “RAF on the Road”

§  Interacted with more than 20,000 claimants and settled R161 million in claims

§  New organisational structure and business processes were fully rolled out

§  Productivity improved

§  Quality Assurance Managers tested operational performance and compliance

§  Compliant experience had been reduced

§  Vacancy rate has now been reduced to below 10%

§  Policy business unit had been formally established

§  Clean Audits by the Auditor-General of South Africa for 2012/13 and 2013/14

§  The draft Road Accident Benefit Scheme (RABS) Bill was published for a second round of public comments

The Minster approved the new 2013-2017 Strategic Plan and the 2013/14 Annual Performance Plan (APP). The values of RAF were based on Ubuntu, excellence and efficiency. There were currently 4 strategic objectives and objective 1 focused on legislative dispensation that is aligned to principles of social security, while objective 2 was to effectively manage the Fund’s finances and pursue sustainability. Objective 3 prioritised on a customer-centric, operationally effective and efficient RAF and Objective 4 was to transform and capacitate the institution and this was where the focus was on transforming people’s lives. At the revenue level, the net fuel was estimated to increase at a constant rate of 2%, comprising of Gross Domestic Product at 3%. There was fuel efficient improvement of 1%. It was a concern that fuel consumption had gone down as this was likely to have an impact on  RAF as it would affect the revenue. The fuel levy rate had increased by 8 cents per annum and this amount on a bigger base was becoming a smaller percentage. 96% of the fuel levy was utilised to pay claims and claims related expenditure as this was evident in the 2013/14 financial year. It was also a concern that productivity exceeds available cash as the claim expenditure was limited to available cash and from 2014/15 available cash was a material constraint. On the administration level, RAF used Consumer Price Index (CPI) plus an increase relating to initiative being put in place to improve productivity in the claims environment of 7, 5% and the Personnel costs estimated rate of 8% relating to costs of living plus 7, 5% for improved productivity. The provision for claims incurred reduces slightly due to an increase in claims payments. Increases due to inflation as sufficient claims would not be paid to cover the inflation increase.

Other most pressing challenges still faced by RAF included:

§  Revenue from  fuel levy has grown below CPI, despite good levy increases

§  Statutory Actuary projects unpaid claims to be worth approximately R97 billion as at 31March 2014

§  Operational productivity has improved which sees more claim payments made from R15 billion in 2013 to R22 billion in 2014

§  Problem statement included increased settlements which have seen cash holdings reduce from

o    R6,1 billion to R2,5 billion for the period ending 31 March 2014

o    R2,5 billion to R1,3 billion for the period ending 30 June 2014

Solutions proposed focused on the following:

§  Ensure that the Fund has sufficient funds to settle claims

§  Proactive engagement with Minister, DoT and NT

§  Continuous monitoring of cash flow

§  Implementation of cash flow management strategies

§  Manage negativity and subsequent increase in costs

§  The definite solution looking into long term was to appreciate that for 33 years, the current financial arrangement, financially and socially, was not sustainable

§  The need for the implantation of RABS

On the way forward, the following was proposed:

§  The 2014/15 APP and Strategic plan remain a continuation of the current strategy

§  Reducing the backlog, promoting and paying direct claim, improving operational efficiency and effecting legislative changes (RAF and RABS)

§  Maintaining capacity (people, processes and infrastructure and infrastructure)

§  Contributing to national priorities (BBBEE, road safety, employment and gender representivity)

§  Great effort would be placed on fulfilling the APP and Strategic Plan deliverables

§  Addressing the challenges and risks

§  Preventing the catastrophic socio-economic effects of accidents in our society

§  It was proposed that PCOT noted the presentation and support the RAF’s 2014/15 APP and Strategic Plan

Irregular expenditure arose as a result of non-compliance with Supply Chain Management practices as stipulated in the Supply Chain Management Policy, and the Public Finance Management Act (PFMA).

§  RAF Instituted disciplinary action, where applicable but also improved processes and ensure awareness and training

§  ICT licenses of R13.9 million that was not renewed in line with the approved procedures

§  The appointment of Recruitment Agencies which did not comply with approved procedures

§  Number of instances however decreased from 260 in 2012/13 to 92 at the end of 2013/14

§  2014/15 financial year sees further improvements to processes, reporting and education to ensure effective prevention of instances and rigorous follow up and oversight should instances be identified

§  Fruitless and Wasteful Expenditure arises as a result of Interest Costs charged for late payments following a settlement agreement or a order of the Court – which are due immediately

§  The RAF is compelled to comply with PFMA (30 days) and Court rules (Immediately)

For the 2013/14 financial year:

§  Number of bills settled through taxation: 26,698 (2012/13: 21,137)

§  Number of bills where savings was made through taxation: 25,677 (2012/13: 20,653)

§  Amount saved through taxation: R966,168,695 (2012/13: R386,559,115)

§  The success rate in terms of saving legal cost bills was 96% (2012/13: 98%)

§  5,595 WRITS were received – this is 28.67% lower than in 2012/13

According to the AG, RAF received a “clean” and unqualified audit opinion with emphasis of matter on going concern, irregular expenditure and restatement of corresponding figures. There were no findings on predetermined objectives, compliance with laws and regulations and internal controls. In the financial year under review, RAF achieved 83% of the targets and failed to achieve 1%. The targets that were not achieved relate to 5% reduction in the deficit, turnaround time for complex claims, prevalence of litigated cases and completion of all performance reviews.   

Discussion

Mr De Freitus asked for the clarity on the post-finalisation process to the accident victims. What was the average number of claims on a day? How was it possible that RAF obtained a Clean Audit Award in 2012/13 and 2013/14 but in the Internal Audit Findings there were 338 cases. It was commendable that the entity managed to achieve 84% of the targets but still needed to have a strategy in place to speed up the payment of claims as this was likely to affect the financial stability of the entity.

Dr Watson responded that the post-finalisation was the rehabilitation process and to this was to restore those who were disabled from road accidents. There were about 70-150 claims per day. The overall average payment for the direct and represented claims was R104 000 and the personal claim had gone up from R138 000 to R194 000. It was concerning that the average taxpayer in the country earned R200 000 per annum, the average national income in the country earned R43 000 annually and the RAF’s average payment for the loss of income was R650 000 annually. RAF was  audited daily, weekly and on a monthly basis and those findings constitute the numbers in the internal audit and were resolved.     

Mr Hunsinger welcomed the opening of new customer service centres and hoped that it would improve efficiency in the system, while requesting for elaboration on the scheduled new offices. Was the figure of R376 million an adequate compensation. How would the fuel levy fund RAB’s bill? The expenditure was far greater than the revenue. 

Dr Watson responded that RAF was present in all provinces in the country and there was a plan to expand to other areas. There was a need to balance between access and affordability. The expenditure was indeed far greater than the revenue.

Mr Ramatlakane wanted to know how old the backlog of R97 billion was. Was the payment of the fund informed by the years or the magnitude? Would the appointment of short-term attorneys come from the new set of attorneys? The backlog of R97 billion, the increase in road fatalities and accidents and the appointment of short-term attorneys were likely to make it difficult for the current strategy to be manageable.  Clarification was requested on the 225 days target for the payment of the fund.  What was the strategy in place to implement the recommendations made by the AG?

Dr Watson responded that 40% of the claims were more than 3 years old and 33% were less than a year. R70 billion was the value of the claims and the R27 billion was for the possible claims that might come in. The criterion for payment was difficult and was decided by various panels and mostly depended on severity of the accident. There was a need to review the issue of the affordability of RABS Bill and other alternative source of funding. The target from the date of getting a claim to the day of payment was targeted to be 225 days.  

South African Maritime Authority (SAMSA) on it’s Annual Report and Financial Performance for thee 2013/14 Financial Year

Mr Tsietsi Mokhele, Chief Financial Officer (CEO), SAMSA, indicated that the South African Maritime Authority (SAMSA) was established on 1 April 1998 under SAMSA Act 5 of 1998. The mandate of SAMSA is to ensure safety of life and property at sea, prevent and combat pollution from ships in the marine environment and also promote the Republic’s maritime interests. The Maritime Search Rescue and Domain Awareness (MSRDA) operates a 24/7 service with the focus primarily on monitoring coastal and offshore activities, Manage maritime communication system(s) for SAR Regulate coastal and inland waterways aids to navigation including vessel traffic services. The SAMSA also focused on administration of the Merchant shipping National Small Vessel Safety regulation, 2007, as amended. The regulations extends SAMSA’s core mandate to include inland waterways (only waterways accessible to the public) within the Republic and this is to ensure boating safety on the country’s waters.

The strategic highlights for SAMSA included the following:

§  2013 was designated “The Year of Maritime” by the Minister of Transport

§  Operation Phakisa: Unlocking South Africa’s oceans economic potential

§  Adoption of the African Union’s Integrated Maritime Strategy (AIMS20150)

§  International and National Awards for SAMSA and its leadership

§  Tax incentives for Shipping to promote and develop the SA Ship Registry

§  Hosted the 2nd Heads of African Maritime Administrators conference

§  16th year Anniversary of SAMSA

Mr Mokhele stated that SAMSA had been obtaining an unqualified audit opinion with matters of emphasis since 2009 and this was particularly concerning for the sustainability of the entity. There were also concerns around the issue of decline in revenue and this has been linked to SA Agulhas not sailing due to funding constraints, resulting in no charters fees, no revenue was received from wreck removals as nothing was sold from marine intervention operation. There was also a decrease in contribution from partners for financing of skills development programmes. Revenue was higher in the 2013 financial year due to transfer of ship at 0 value. Some of the reasons for the 6% increase in expenditure which is within the inflation trend included the fact that expenditure remained due to cadetship and SA Agulhas training projects were funded from the organisation’s resources.  The increase in expenses forces the entity to do non-adjustments of tariffs, funding of skills development programmes.

The way forward in order to ensure that the entity remained effective and deal with all the key challenges were identified as follows:

§  Adequate government funding for Centre for Sea Watch

§  Securing funding commitments for cadetship and SA Agulhas training project

§  Periodic adjustment of tariffs in line with inflation and other factors

§  Development and implementation of funding models for maritime projects

Discussion

Mr Sibande remarked that the presentation by SAMSA showed lack of effective leadership as it had been receiving an unqualified audit with matters of emphasis since 2009 and this was particularly concerning for the sustainability of the entity. What strategy was in place to implement the recommendations suggested by the AG?

Mr Mokhele responded that the internal audits have already reviewed the recommendations suggested by the AG in order to improve financial performance. SAMSA was still battling in terms of capturing the percentage of cargo carried on South African ships by 2016.    

Mr Ramatlakane asked if there was a plan in place to explore different funding models for maritime projects and securing funding commitments for cadetship and SA Agulhas training project.

Mr Mokhele responded that SAMSA was focused on exploring other funding models for maritime projects as this would ensure that the entity was sustainable and contributing to the economy of the country. It was important to note that expenditure increased by 6% due to cadetship and SA Agulhas training project which were funding from the organisation’s resources. 

Mr Sibande indicated that the Chairperson had already departed due to other commitments at another meeting and then thanked all the entities present. It was clear that there was a lot that had been achieved by most entities although there were also challenges presented, ranging from lack of budget to lack of effective leadership to carefully utilise scarce resources.

The meeting was adjourned.

 

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: