Department of Transport & ACSA on their Annual Performance Plan; AGSA input with the Minister

Meeting report

Auditor-General South Africa (AGSA) on the Review of the Draft 2017-18 Annual Performance Plan (APP) of the Department of Transport

Strategic alignment of portfolio

Ms Madidimalo Singo, Senior Manager, AGSA said they had looked and confirmed that the Department of Transport (DoT) had included South African National Roads Agency Limited (SANRAL) and Road Traffic Management Corporation (RTMC) in the review of its strategic plan (SP) regarding outcomes 4 and 6 on the National Development Plan (NDP).

The Chairperson welcomed the presentation appreciating that the DoT seemed to be progressing accordingly in responding to issues previously raised by AGSA.

Mr Mathabatha Mokonyane, Acting Director-General (ADG), DoT, reminded the Committee that the original qualification found by AGSA against DoT only had to do with the National Traffic Information System (eNaTIS). AGSA had indicated that the qualification was around the issue of the court action regarding eNaTIS where he had told then Minister of Transport, Ms Dipuo Peters, that he had big problems with AGSA saying DoT were unqualified without detailing the reasons. The presentation had just evidenced the issue he had bemoaned which was that DoT had regressed from unqualified to qualified without any reasons being given. Over the years, DoT had agreed with AGSA on how the smartness of the targets would be assessed such that AGSA would review DoTs draft APP before submission so that AGSA could advise DoT, which was the current exercise which had unfolded leading to the meeting. AGSA possibly should have told the Committee that in all areas where it had findings on the draft APP, DoT had addressed the issues either through clarification of what had been meant by a particular target or modifying targets and technical indicator descriptors (TIDs).

There were various reasons for removal of targets from the APP and the revised SP gave all the reasons why that would have happened and where there had been new additional targets. There had been policy changes within Government and issues relating to achieved targets being removed. Additionally, there had been targets dependent on the Act being approved, which was still outstanding; therefore, DoT could not pursue such targets.

The DoT would explain during its presentation why some targets had been removed and others replaced.

On consultations, DoT gazetted invitations for public participation and even advertised on newspapers but had discussed with AGSA that even then; there was no guarantee that all invited stakeholders would attend. To that effect, the attendance register evidenced the fact that not all invited parties attended meetings and since AGSA audits said partially achieved targets were unachieved DoT found itself challenged in that regard.

Mr M Sibande (ANC) interjected, requesting the DoT to not pre-empt the Committee and to respond only to matters related to the AGSA presentation.

The Chairperson said from her observation the DoT was only responding to the AGSA presentation.

Mr Mokonyane affirmed that he was only responding to AGSAs presentation but could then stop elaborating on certain matters and that it would have been better for AGSA to have submitted a document to the Committee that reflected the changes DoT had made on its draft APP after the AGSA review.

The Chairperson asked whether there were any more remaining matters that AGSA wanted to further ventilate.

Ms Singo replied that AGSA understood the process of gazetting for public participation and that from the start key stakeholders had to be identified so that as the process of gazetting was unfolding for any public consultation; when the consultation was happening whatever response a Department was getting, it could gauge that against what it had identified as key stakeholders. 

The Chairperson asked whether there were any more outstanding matters that the Committee wanted to deal with regarding AGSA.

Ms Singo reminded the Committee that AGSA had also submitted a document detailing the criteria AGSA would use to assess the Committee for the 2016/17 audit outcomes.

Transport Portfolio Committee Assurance assessment criteria for the 2016-17 financial years 

Ms Singo said when AGSA did its general report it normally included an assessment of what the different levels of management assurance had been provided from the Executive Authority (EA) to the Portfolio Committee (PC). Specifically, AGSA looked at financial statements, compliance and performance information. That was based on the combined assurance model which required AGSA to observe all the different assurance providers including internal audit, audit Committees, PCs, EA and management. She read the presentation with the Committee.

The Chairperson said a sentiment of the Committee was whether it was being oversighted by AGSA and where if so, in the constitution did AGSA get such a mandate as she felt that it was the Committee rather that had to be overseeing AGSA. If AGSA were to find the Committee incompetent; how then would it be expected to lead DoT? No Chapter 9 Institution apart from the courts could say they were overseeing a Committee of Parliament.

Mr H Hunsinger (DA) wanted to know where AGSAs model came from as reading section 55.2 of the SA constitution he only saw:

 The National Assembly must provide for mechanisms—

(a) to ensure that all executive organs of state in the national sphere of Government are accountable to it; and

(b) to maintain oversight of-

(i) the exercise of national executive authority, including the implementation of legislation; and

(ii) any organ of state.

Who had designed the combined assurance model AGSA had referred to and where was the authority for such a model that a PC of Parliament was indeed a third level of assurance?

Mr L Ramatlakane (ANC) said AGSAs mandate was defined in the AGSA Act where even there, he could not find assessment of the legislature as a function of AGSA. Was the final arbiter of function of oversight by Parliament located within AGSA?

Ms S Xego (ANC) said AGSA was jumping the line in wanting to assess the Committee’s performance.

How had AGSA found a qualification against DoT on a matter that the DoT had explained during consultation during the drafting of the amended draft APP; especially eNaTIS and stakeholder participation?

Mr K Sithole (IFP) said he was also hearing for the first time that AGSA would assess a Committee’s performance.

Mr Hunsinger said having consulted the Chairperson he was surprised that she had never been consulted about the criteria to assess the Committee. Could AGSA elaborate on the criteria as well?

The Chairperson welcomed the new Minister of Transport, Mr Joe Maswanganyi, to the Committee, the Committee expected that he would work very hard in responding to the challenges the DoT faced and that since he was from the Committee i.e. knew where work was needed.

She said the Committee probably would want to meet with Mr Kimi Makwetu, the auditor-general in person so that its concerns could be addressed with him directly. However; she would allow AGSA to respond to some matters.

Ms Singo appreciated the sentiments of the Committee but clarified that AGSA were not playing an oversight role over the Committee but rather evaluated according to the accounting standards in the Public Finance Management Act (PFMA) which was assessing only financial statements, compliance and performance information.

In terms of the qualifications by AGSA against DoT; where there were disagreements between the two bodies, AGSA would consult in audit Committee, management and executive Committees (EXCO). There certainly were areas where AGSA sometimes agreed to disagree with DoT; when that happened the two bodies would engage the office of the Accountant-General as the final arbiter in such challenges.

Mr Ramatlakane wanted clarity on the assessment of financial statements and how in the PFMA those could be assessed by AGSA as he understood financial statements to be documents sent to EAs for example. He also had not read a provision in the PFMA where a Committee could be found to having been unable to provide assurance on financial statements.

Mr Hunsinger said his core question on whether the combined assurance model was a creation of the AGSA had not been answered. Could AGSA also speak to the three levels of independent assurance as indicated in its presentation?

The Chairperson said that indeed the National Assembly and provincial legislatures had the power of oversight over their respective executives, which is what the Committee thought it had been doing over the period. Therefore, the sitting was exactly how the Committee were ensuring that DoT was accountable to Parliament, thus her earlier proposal that probably Mr Makwetu would have to elaborate and respond to the questions that the Committee had asked the AGSA delegation before the Committee.

Ms Singo replied that earlier she had spoken to areas where there would have been findings on financial statements where there would have been non-compliance with the PFMA. AGSA would then look at what Action Plans (APs) DoT would have put in place to rectify said findings by AGSA or internal audit and what assurances the Committee could provide in ensuring that DoT rectified the findings.

The combined assurance model was a best practice model developed by King and AGSA focused at the base where the internal control environment took place; which the responsibility of management was.  If anything went wrong the first line of defence would be the controls that management would have put in place; which also happened to be the first level of assurance. Second level of assurance was where if the controls had not been established by management; internal audit would be the first people to hold management accountable followed by the audit Committee until the third level of assurance was reached as had been indicated in AGSAs presentation. AGSA also formed part of combined assurance since when it went to audit and found that controls had not been effective, it would identify those though of course that was based on sampling.

AGSA would assess internal audit and the audit Committee very differently from how it would assess the PC.

The Chairperson said that though there were two Committee members that wanted to engage AGSA some more she would not allow them. She asked AGSA to give an example possibly using the Budget Review & Recommendations Reports (BRRR) process of Parliament on how combined assurance would work.

Ms Singo replied that taking the performance information of DoT which they had discussed as an example and how the PC would go about assessing the quality of performance reporting submitted to the PC by DoT; one of the key questions raised by the PC had been about where there had been targets removed/ added, unachieved. The PCs role in holding DoT accountable would be an area where AGSA would be interested to assess as to why targets had been removed, were the reasons given valid, was it logical to have taken out a specific indicator. Because AGSA came in at the end whereas the Committee would have been engaging DoT management regularly it would be satisfied that management would have been taking action based on the responses from the PC which was the assurance that would be assessed.  

Mr Ramatlakane said the Committee would recommend particular actions from DoT to correct issues it would have picked up on performance information. AGSA would read that but if DoT would delay implementing PC recommendations, AGSA was saying that it would take a sledge hammer to the Committee though it would have made recommendations. The PC did not have a mechanism to coerce the DoT to do what it had recommended that matter was for the EA to execute as the PCs report went to the Minister. Why would the Committee be liable for non-compliance in the implementation of its recommendations by DoT when there was no legislative provision for the PC to act against DoT?   

Mr Sibande said he did not understand what criteria had been used to determine that AGSA had to oversight the Committee.

Ms Singo replied that the assessment was not to punish the PC and whether the DoT had not implemented recommendations from the PC; that was not a reflection on the PC and therefore AGSA could not say that the PC had provided no assurance. All AGSA was saying was that if it could discuss with the Committee and be shown evidence of oversight it would be comfortable that the necessary steps which the PC could take would have been taken and therefore there was assurance.

The Chairperson reiterated that the Committee would require Mr Makwetu to explain the assurance model and would formally request him in writing to avail himself to the Committee in that regard.

Minister’s introductory remarks

Minister Maswanganyi apologised for arriving late and said all ministers accounted to Parliament as provided for as per section 55.2 of the SA Constitution. There were consequences for not accounting to Parliament. The DoT was ensuring that the turnaround times for written responses from written Parliamentary questions were shorter as the Speaker of Parliament had raised the matter with all Departments.

There were a number of policies under review, some of which had gone to Cabinet. He had visited the Moloto Road Development Corridor where two contractors had started work. The Chinese had promised to be in South Africa by end May 2017 to cement the details of the development. DoT would table a comprehensive report on the plans for the rail development along the corridor after meeting the Chinese. The Minister would be visiting the site where the first locally manufactured passenger trains were housed.

There were issues around Bus Rapid Transport (BRT) that he had to attend to; he had been in Nelspruit on 1 May 2017 where a completed terminus had become a white elephant, where residents had turned it into a car wash.

DoT would ensure that monies transferred for public transport would be used for that by keeping the money if provincial and local Governments could not give guarantees that such would happen. DoT could not continue allocating money for BRT to local Government and be told that municipalities had the powers to do as they pleased with money that had been allocated for BRT.

DoT was also working to improve Intergovernmental Relations (IGR) and the Minister had engaged the South African National Roads Agency Limited (SANRAL) and told its leadership that he would not be a fire-fighter such that he was only called when there were problems between SANRAL and Members of the Executive Council (MECs) of Provinces. He would be part of the decision making on projects.

He would be meeting with the MEC for transport in the Eastern Cape soon as there seemed to be a problem on national route 2 (N2) toll road project and the communities along the route. The DoT believed that if it improved IGR between national, provincial and local Government at conceptualisation of projects, then particular issues could be averted.   

Minister Maswanganyi said he would be visiting Durban as well to oversight some of the Operation Phakisa projects unfolding there.

Issues around passenger rail involved reliability and safety of the transport mode; during the Easter period the Rail Safety Regulator (RSR) had explained the technicalities of the challenges in passenger rail from faulty signal equipment, platform height versus the height of the coaches. Furthermore, the issue of reliable train rosters was a challenge as passenger frustration with train delays oftentimes boiled over with passengers torching coaches. Passengers had also raised the issue of safety within coaches as thugs sometimes robbed passenger whilst the train was in motion. All of these matters were issues that DoT with its rail entities would be working on going forward.

The ADG would speak to the issue of vacancies within Dot and its entities but there was also the issue of gender equity at Senior Management Staff (SMS) levels at DoT and its entities to the extent that there currently was one female Chief Executive Officer (CEO) across all DoT entities.

The Deputy Minister of Transport had apologised because he was presenting transport Bills to Cabinet.

He said that he would be meeting lawyers of the DG of transport and the Department of Public Service and Administration (DPSA) to attend to the DGs case and would inform the Committee accordingly.

The DoT had taken over eNaTIS from Tasima and RTMC was currently running eNaTIS. 

The Chairperson thanked the Minister for his introductory remarks.

Revised Strategic Plan (2015-2020) and Annual Performance Plan (APP) 2017/18

Mr Mokonyane said since the Minister had touched on some key issues, he would elaborate with speed and present quickly. There were actually 15 memorandums (memos) that would be going before Cabinet from DoT of which five had been approved at the time. They were part of the issues that had affected the DoTs performance for the 2016/17 financial years (FY).

The presentation had been accompanied by attachments which elaborated on the summarised presentation. He then took the Committee through the presentation.
DoT Alignment to the MTSF

Outcome 7: Comprehensive Rural Development and Land Reform

Sub-Outcome 5: Increased access to quality infrastructure and functional services, particularly in education, healthcare and public transport in rural areas

Mr Mokonyane said DoT had just received news that Cabinet had recommended for approval the Rural Transport Strategy so that by the following week when the Committee met DoT would have an approved revised Rural Transport Strategy.

SONA Pronouncements impacting on the Transport Sector

To date only R3.7 billion of the R4.5 billion was guaranteed for upgrades to Moloto road. As earlier indicated by the Minister, work had commenced on the Limpopo and Mpumalanga sides of that road. In Mpumalanga DoT was busy on the major intersections and in Limpopo were busy with the route from Bloemhof to Jane Furse.

DoT had finalised analysis of the Public Utility Transport Corporation (PUTCO) bus contract and it would be designing and issuing tender contracts which would break the PUTCO contract which had been for 660 buses, into manageable volumes in terms of vehicles and capacity.

9-Point Plan: Transport Infrastructure…

Mr Mokonyane said the DoT had met all the cities to discuss the decelerated roll-out of the Integrated Public Transport Networks (IPTNs) BRTs and to find out why that had occurred. DoT would host a round table later in 2017 to try and unlock the blockage and to assist smaller municipalities as DoT had so far invested R28 billion on IPTNs without the footprint of the investment being apparent on the ground.
Upgrade of Moloto Road:  Whilst DoT was awaiting reconstruction of the road, it had been making minor changes whilst doing routine maintenance through SANRAL.

Harrismith Logistics Hub: Work had to be aligned to the recent feasibility study which had been done in the KwaZulu-Natal Province which spoke to other economic imperatives therein. That included the De Beers pass and the loop that went through Harrismith. SANRAL and the N3 consortium were currently working on the alignment therein.
 

AGSA Findings from Annual Report 2015/16 and the Action Plans

Mr Mokonyane said in the 2015/16 financial year DoT had had 15 findings by AGSA. All had been resolved except the eNaTIS issue and DoT could safely report 80% progress on the eNaTIS issue. Apart from DoT still arguing matters on the modified cash standard and auditing practices DoT had taken the system and given it to RTMC and were finalizing the accounting part therein. DoT believed that it would complete its section 42 transfer of the eNaTIS asset to RTMC quite soon.

DoT Response on the 2016 BRRR

The remainder of the file spoke to 11 annexures which were all reports on the PC recommendations from the 2016 BRRR.
 

Revisions to the DoT Strategic Plan 2015 - 2020

The SP had not changed but had been simply revised, especially the targets. He reiterated that achieved targets had been removed as they were not being pursued anymore.

Programme 1

DoT Vacancy Rate maintained at 10% - Dot had received R10 million for the 2017/18 financial year; R11.1 million for 2018/19 and R13 million for 2019/2020 FYs additional funding to fill 15 of the critical vacancies at DoT.

DoT Targets for 2017/18

Programme 3: Rail Transport

The rail policy would be submitted to Cabinet in 2018 together with the National Rail Bill.
 

Programme 7: Public Transport

DoT had targeted the district rural municipalities and would continue to assist with implementation of the IPTNs.

DoT had submitted a report as part of the BRRR recommendations on the review of the taxi recapitalisation programme (TRP) as had been requested. He said that the DoT had started to break some of the bus monopolies and were attracting taxis and small bus operators in that regard.
Key Challenges

Mr Mokonyane said DoT had been talking to higher learning institutions to intervene in the transport space in terms of skills development for municipalities across the Provinces for implementation of the ITPNs. DoT had also finalized its risk register

Public Entities Liquidity as at the end of the 3rd Quarter - 2016/17

Mr Collins Letsoalo, Chief Financial Officer (CFO), DoT, said DoT was fortunate that it still received a budget allocation that managed to keep it going through the current difficult economic climate in South Africa. A decade ago DoT had been at R20 billion whereas currently it sat at R16 billion of investments in the public transport sector.
 

SANRAL: Budget Needs vs Allocation

He said that the budget shortfall at SANRAL resulted in the current road collapse where potholes appeared everywhere.

Discussion  

Mr Hunsinger was concerned about the Minister’s assumption that trains were being vandalised due to being delayed late and unreliable, as it was early days for him though he wished Minister Maswanganyi well. He said the AGSA had raised the issue of the DoT falling short in giving reasons for particular amendments to the budget and actions to the Moloto Road project because the project had originally been budgeted for R1.1 billion. In June 2016, the previous Minister of Transport announced that the budget was R3.7 billion but at the State of the Nation Address (SoNA) 2017 the President of the Republic had declared the budget at R4.5 billion. To date the DoT budget for the project reflected R4.8 billion.

Could the DoT not re-budget, project the term of construction and rather work on an exact figure compared to creating the continued impression that the DoT did not know what was going on?

The matter also had a compliance challenge in terms of the auditing profile of DoT and where the money would come from as well if the number increased continuously.

Mr Ramatlakane wanted to know whether the budget shortfall would affect the filling of the Deputy-Directors-General (DDGs) vacancies at DoT. He also needed more detailed elaboration on the IPTNs, BRT implementation and the capacities at municipalities and how capable the DoT was in holding said municipalities to account for that implementation. What would happen to the six remaining municipalities from the 13 cities targeted for capacity development to implement the BRT as only seven had been prioritized in the budget allocation over a period of time. Possibly, the Committee would have to be afforded a meeting with DoT and the responsible people that were dealing with the 13 municipalities/cities on the BRT implementation so as to find out what had been delaying the implementation.

He said the fact that DoT was planning to develop a new subsidies policy for busses and the challenge with the TRP meant that there was to be a perpetual public transport old system of allocating subsidies. He had not heard what the turnaround time was on the policy. Why could the transport sector not have an integrated ticketing system to allow small bus and taxi operator to benefit as from the subsidy as much as Golden Arrow Busses in the Western Cape?  

Mr Ramatlakane did not understand why DoT had budgeted for 2019/2020.

Mr G Radebe (ANC) asked why the due date for finalisation of the White Paper on the National Transport Policy kept being shifted forward.

The roads as one left Vuwani in Limpopo were in a very bad state of repair because of the potholes there; could the Minister give attention to those roads?

He requested the minister to invite the Committee to the World Maritime Day event that DoT would be hosting in the future.

What would be different in the new TRP from the old one and how much budget had been projected to be set-aside for that work?

He suggested that RSR be given more powers in supervising the execution of programmes like the Moloto Rail project because a reason the RSR had given the Committee previously; when asked why RSR had not approved the new locally manufactured coaches had been that: The Public Rail Agency of South Africa (PRASA) had not worked closely with RSR and thus it had found the trains too low/high.

Ms Xego said she had learnt during the public hearings on the Administrative Adjudication of Road Traffic Offences Amendment Bill (AARTO) that there was a big difference between information sharing and consultation.

Mr Sithole asked whether DoT had measures to regulate the flourishing of driving schools across the country. DoT had actually not subsidised the taxi industry and that was evidenced by the number of taxi related killings; what plans did the DoT have as an intervention in that regard.

He wanted to know how many district municipalities DoT would be engaging in terms of the ITPNs.

DoT could not simply say was not able to replace old contracts and since 2005 no new service had been introduced. What was the plan going forward?

Mr Sibande was concerned about the reviving of railway lines and stations in the Northern Cape (NC) where DoT had not announced any plans in that regard. To his recollection, DoT had been allocated R79 million for ITPNs but had only spent R13.4 million of that money to date. Why had so little been spent to date?

What plans were there in terms of the ITPNs being inclusive of rural areas like the former kaNgwane and kwaNdebele?

Also concerning was that the DoT previously had given established bus companies like PUTCO and Golden Arrow lengthy subsidies but were currently giving small operators one year operational subsidies and compelled said operators to buy very expensive busses.

Recently PUTCO had stopped operating on particular routes in Tshwane over the issue of subsidies where DoT had to insist on Autopax filling that gap. The Gauteng provincial Government had extended the Autopax subsidy but Mr Sibande wanted to know what would happen if more local bus operators decided to leave the public transport sector because of small subsidies? Why had DoT delayed finalising the review of the subsidies system?

Mr Sibande said there was a 170 kilometres stretch of road in KwaZulu-Natal (KZN) where refurbishment had been initiated but it had since stalled; he wanted to know why the refurbishment had stopped because though the road was provincial funding still came from DoT. One day the Committee had to take the Minister to some of the rural and farm roads which were in a bad state of repair; he wanted to know how DoT monitored the use of funds by Provinces and local Government.

Mr Sibande was not satisfied with the Harrismith Hub Framework developed by March 2016 not being achieved because of pertinent issues needing a political resolution between the DoT and the Free State Province; who were the politicians? Why had the Committee not been appraised on that matter?

Mr Sibande also had issue with the language especially submissions to Cabinet which had future dates sounding as if the work had already been done when in fact it was outstanding.

He concurred with Mr Hunsinger that though DoT worked on budget estimations the Committee had to be briefed when numbers kept being revised upwards.

He wanted to know exactly what structures had already been put up in Dunottar.

Mr T Mulaudzi (EFF) was concerned about provincial and regional roads that had been overtaken by SANRAL. Had DoT already signed a transversal agreement with the Department of Small Business and Development (DSBD) for the 30% benefit to small and medium enterprises (SMMEs) and cooperatives as per the 2016/17 State of the Nation Address?

 He requested that identified risks be captured and tabled in terms of the financial years in which they arose so that whatever mitigation strategies had been put in place could be evaluated, as to whether the situation was changing. That was also to avert the Committee and DoT dealing with perpetual risks that were not being mitigated.

Mr Sibande wanted DoT to elaborate on some of the AGSAs recent findings against it.

The Chairperson said the grants that were allocated for roads to Provinces had to produce value for money therefore DoT had to ensure that before a grant was allocated it had to have seen a project proposal so that DoT could monitor the implementation of said project in all Provinces. 

Minister Maswanganyi said possibly DoT would need to meet with Municipalities at EA level, make an assessment and then submit a report on the progress of the BRTs. Since there would be a Minister and Members of Executive Council (MinMEC) on 19 May 2017, where DoT would raise the Committees concerns as the South Africa Local Government Association (SALGA) would also be in attendance.

Indeed, BRT could not be used as an excuse why the DoT or municipalities could not issue more licenses’ rather DoT would have to break-up such subsidies to give them to smaller operators instead of big bus companies.

The Mpumalanga terminus in Mbombela which had become a white elephant would get attention from the DoT and the Minister had reservations about the Province wanting to build a bigger terminus in White River. Mpumalanga would have to convince DoT why the terminus in Mbombela was not fully and effectively functional and why that Province should be allowed to build a new terminus in White River.

Minister Maswanganyi said the issue with roads transfers were the different service levels across Provinces as the Committee had made mention of the different issues on roads. When DoT had met with SANRAL previously it had indicated that SANRAL could not and was not supposed to absorb all the roads that were dumped on to it. There had been agreement that if Provinces wanted to transfer provincial roads to SANRAL the provincial budget from DoT for those roads would be withheld and given to SANRAL instead of Provinces. It was not fair for Provinces to dump liabilities without their accompanying assets onto SANRAL. SANRAL would not be able to sustain that trend as the projected amounts for tolling were far less as there was under payment of toll fees.

DoT would report on the progress of operation Phakisa as required by the Committee.

DoT would engage its Chinese partners on the Moloto road project as they had a tendency of not only bringing professional expertise but general workers sometimes which then locked out local job creation. The road project was projected to create 12 000 jobs whereas the rail project was projected to create 90 000. There had been 58 000 people registered for general work on the road project and if the Chinese came with a flight or a ship full of Chinese general workers for the rail project there would be very serious problems.

The South Africa National Taxi Council (SANTACO) had asked when DoT would be implementing the taxi subsidy and the Minister was proposing that DoT submit a memorandum to Cabinet so that DoT could be given money to implement that programme as it was a national issue.

DoT was serious about breaking the bus subsidy monopoly because PUTCO buses alone received R605 million on the Moloto route where PUTCO bought busses that it used on the Soweto route instead of Moloto where the subsidy was intended. Additionally, DoT would look at the issuing of PUTCOs permit as it had been issued by Gauteng Province though it cut across Limpopo, Mpumalanga and Gauteng. The Minister had also been informed that PUTCO buses had held the permit from 1997 to date. However; DoT would also be reviewing Star buses from the North West and Golden Arrow Buses permits and subsidy as well.

The issue of political differences between DoT and Provinces would also be attended to in ironing out tensions between DoT, Provinces and municipalities.

The Chairperson asked the DoT to try to respond to outstanding matters in writing as well as the meeting was running over time but she would allow the ADG to attempt some matter which the Minister had not spoken to.

Mr Mokonyane said any grant allocation to any beneficiary would have been preceded by a project plan but the issue could have been adhering to the submitted plan mainly which spoke to DoT implementing stricter monitoring regimes.

R1.1 billion had been the initial allocation for the Moloto road project and after further detailed designs the amount had grown to R3.7 billion. The R1.1 billion was for maintenance, improvement of street lighting and all related issues; the R4.5 billion mentioned in the SoNA was over a period and for all the three portions of the road from Mpumalanga, Limpopo and Gauteng and in fact was the total of everything.  The R3.7 billion was specifically for Limpopo and Mpumalanga so that it reached the total when Gauteng was included.

In the seven cities IPTNs were where DoT operations had already started or were about to start though the Department would continue monitoring all 13 cities earmarked for IPTNs.

DoT was developing a subsidy regime focusing on the user and not the mode; unfortunately, there those long bus contracts but DoT and some Provinces had tried that when they were to introduce new routes, the focus was on small and medium operators.

With PUTCOs contract ending on the Moloto route DoT had an idea of what to do however; since 2002 when DoT developed a new design for subsidy allocation the end result always required additional funding. Though there was no money that came, the routes still had to be maintained. In each Province, there were always one or at most two big players and DoT was willing to share its plan but only after having submitted to Cabinet and receiving support. The differentiated approach which was the basis for the plan was that solutions for urban areas would not necessarily be the same for rural areas. For example; where he originated, Ga-Mashashane, there was no need for a BRT but for a quality bus service. If DoT were to cover the whole country it would need three times the current level of investment into the subsidies which had coerced DoT to review the streams.  DoT had told the 13 cities that they were costing South Africa a lot of money without moving forward at all. There currently were only 100 kilometres (kms) of BRT trunk and about 500 kms of feeder services where R28 billion had already been spent. There were smaller cities that did not need BRT infrastructure.

Key Performance Indicators (KPIs) had unfortunately been done as far back as 2015 in the SP and DoT was keeping on course with that which was why KPIs for 2019 had been included. Of course, DoT had demonstrated KPIs that it had accelerated and achieved ahead of time. The 15 memos sent to Cabinet if approved the majority of the KPIs including those planned to be achieved in the 2018/19 FY would have been achieved before time.

A KPI was simply a desired outcome in future at a particular time which was why ‘submitted’ was used; there was no mistake in language use therein. The term did not mean DoT was done with a particular KPI but rather that by 2019 DoT should have submitted.

DoT were doing two district municipality IPTNs annually as support since DoT was not necessarily responsible for doing them and it was true indeed that the capacity to do the ITPNs was not there. One of the programmes which DoT had not reported on was the training of interns and placement of them at district municipalities. DoT sent no less than 9 annually but, there was no capacity to absorb them by such municipalities. 

As there was no new Public Transport Operational Grant (PTOG) service the transformation plan, improvement and breaking of municipalities and since the Minister had instructed the administration to request more money from Cabinet, if that could get approval DoT knew what could be done if money was available.  

Regarding BRRR, the DoT had reports on both operation Phakisa and the review on the TRP and amongst improvements was that the money for people to purchase new vehicles had been increased from R82 000 to R124 000.

There was little that DoT could do in stopping PUTCO and others from leaving the public transport sector because of there being little money which was why Autopax had been roped in as an intervention. However; Autopax were also losing money in that it was not making a profit and in fact wanted to also leave the Mamelodi route but DoT were forcing Autopax to stay as they were a state-owned entity.  

Routes like Seletjane and Kranskop as provincial routes being transferred to SANRAL created a burden if the money did not accompany the transfer.

Dunottar would be completed in June 2017 and DoT hoped to get the first passenger train out by October 2017.

Possibly DoT would have to come with the officials in charge of BRT roll out in the 13 cities so that the Committee could interact directly with on the non-standardisation of its role-out.

DoT had not signed the Memorandum of Understanding (MoU) with DSBD but DoT participated to ensure that it subscribed to state policy for empowerment of SMMEs. The 30% beneficiation had become law as the regulations had been approved since 31 March 2017 therefore even without the MoU DoT was obliged to implement the 30% beneficiation. Additionally, the amendment to the procurement Act which was being discussed would bring more reforms into the system.

The Chairperson thanked the DoT for briefing the Committee, reminding the Department that all outstanding questions would have to be responded to in writing.

Driving New Frontiers for Sustainable Growth: Strategic and Annual Performance briefing 2018 – 2020

Mr Siyakhula Simelane, Chairperson of audit and risk Committee, ACSA, apologised for the ACSA board Chairperson as he was absent and introduced the ACSA delegation. Notwithstanding the recent ratings downgrade the Board of ACSA was optimistic and had faith in the company’s management. There had been a tariff promulgated in 2016 which ACSA had adequately planned for. ACSA had seen achievements in the Skytrax Awards, Airports Council International (ACI), Airports Service Quality, ACI World Governing Body Leadership where Mr Bongani Maseko was the vice President. Mr Maseko would be the President of ACI from January 2018. In the International Monetary Fund (IMF) global competitiveness index ACSA had achieved 6/7 and was ranked 10th in the quality of transport infrastructure. 

Cape Town International Airport had moved from position 22 to number 19 in the top 100 airport world rankings; King Shaka International maintained its 35th position with O.R. Tambo also maintaining its 37th position.

ACSA had signed a partnership with the Wits University’s Tshimologong precinct; an incubation programme for 100 young potential information technology (IT) entrepreneurs over a three-year period. ACSA also supported high schools within a 3-kilometer radius of the Port Elizabeth and East London airports namely, Umtiza and Walmer High Schools. The objective of the support to the high schools was to improve performance to over 90% from 20% within the next two years.                                                                                                           

Mr Bongani Maseko, Chief Executive Officer (CEO), ACSA, said ACSAs strategy remained running airports within and outside of SA and were planning development of airports as far afield as Ghana. ACSA was also partnering with the Kenya Airports Authority and the Airports Authority of Cameroon. In growing its footprint, ACSA was duplicating what it had been doing in India and Brazil in that there were a number of tenders ACSA was responding to regarding airport concessions.

Sustainability framework

ACSA had also received ACI carbon accreditation for four of its nine airports.

Five building blocks for success

Business Digitisation

He said that spoke to IT which was an integral part of ACSAs business which had become a big component of air travel.

ACSA had received in December 2016 determination to enable it to estimate how the tariff would go which had brought more certainty compared to before. The downgrade by Standard & Poor’s (S& P) of SA had not affected ACSA but it was unable to respond to Moody’s as it had not pronounced on SA’s sovereign investment rating. Even if Moody’s downgraded SA, ACSA was certain that would have little impact on its business as ACSA were currently two notches above the sovereign investment rating.

Financial Highlights for the 2015/16 financial years

Mr Dirk Kunz, Acting CFO (ACFO), ACSA, said the only highlight for the 2015/16 financial year was the fact that ACSAs profit on tax collection had been just below R2 billion supported by growth in traffic volume in the domestic market.

The forecasts for the next three financial years ACSA anticipated healthy traffic volume growth and since the pronouncement by the regulator ACSA had tariff certainty for the next three years. The introduction of the 35.5% aeronautical charge reduction.

Three Year Funding Requirements

ACSA did not anticipate going to the market from a debt perspective for the next three years as it still could fund its Capital Expenditure (CAPEX) programme through cash generation.

Discussion

Mr Ramatlakane said the last time the Committee engaged ACSA it had asked how ACSA was accommodating Broad-Based Black Economic Empowerment (BBBEE) partners at its various airports as part of its innovation in terms of its economic transformation framework; what percentage progress had been made so far?

From personal experience, he was not sure whether floor managers at the Cape Town airport were conscious of the fact that air travel was not always for leisure as there were always long queues at the airport. That certainly was a challenge as the excuse given by said managers as to why there were few gates, were that there were not enough staff to manage the gates. Passengers would certainly walk away from South African Airlines (SAA) if that continued.

Mr Radebe asked whether ACSAs board still formed quorum as quite a few board members had resigned and others had been removed.

What had been the reason for ACSA not meeting its target for the non-aeronautical revenue generation?

He also wanted to understand why ACSA had failed to meet its job creation target for three consecutive quarters.

Mr Radebe had noticed recently that a gym that had been established at the O.R. Tambo had been closed for the past four months; what was the reason for that?

Mr Sibande said he could not reconcile the number of board subcommittees as presented compared to what he had tallied from the regular and special board meetings. He was further concerned with the number of meetings held in total. He wanted to know whether the extra meetings were remunerated.

He wanted to know how ACSA socioeconomic strategy had been spread out across all nine Provinces.

Could ACSA elaborate on what it meant with support to black entrepreneurs?

Recently there had been a launch of an airline called SANTACO; was ACSA aware of such an event?  

In terms of supply chain management evolution; he wondered if ACSA prioritized black businesses as they were part of transformation.

Mr Mulaudzi noted that ACSA had had eight special board meetings when company law stipulated only four regular board meetings annually; in 2017 ACSA had already had 4 special board meetings over and above the regular board meeting he was therefore also interested in the remuneration thereof.

He also wanted elaboration of the board replacement, removals and resignations and why certain board members still remained?

He shared similar sentiments with Mr Ramatlakane about flight delays and queues.

What input and role had ACSA played in the fast tracking of the draft regulations and promulgation of the Airports Company Amendment? Was that amendment the only one that ACSA would be affected by?

Was there a policy in terms of empowerment of black businesses or had ACSA signed any transversal agreements with (DSBD) and the previously disadvantaged?

Mr Ramatlakane asked what had transpired from the time of the heist at O.R Tambo to date; who were responsible for the security measures there and who was responsible for vetting for all the different entities at airports?

Mr M De Freitas (DA) said he had seen nothing in ACSAs presentation about future population and tourism growth including other factors that had an influence on airports. He requested an elaboration on that.

Lengthy queues affected all ACSA airports particularly at peak times; he was also interested as to why only one or two gates would be opened because there was predictability in when and how those happened.

Mr Hunsinger was interested in the Skywise airlines matter that had been well covered in the news during the December-January period of 2016/17. Had ACSA recovered the monies owed it by that airline?

He also hoped to see something about ACSAs income from the shares it had in the airports of Mumbai and Sao Paolo; could ACSA speak to that?

What budgetary impact would the agreement with labour unions have about meal allowances for ACSA employees?

Mr Maseko replied on the predetermined objectives relating to economic transformation; ACSA had very specific sectors with which it interacted. ACSA had transformation policies which spoke to the various sectors with which the company interacted. There were internal targets which ACSA had set for all of the retailers, new transformed retailers which it wanted to bring on board; which targets were set and approved by ACSAs board which ACSA had met. ACSA had set specific economic transformation strategies for the construction sector as it was to refurbish the domestic terminal in Cape Town and the runway at O.R Tambo and aprons and taxi ways at King Shaka Airports respectively. Runway work would be done in smaller airports where ACSA had set specific targets on how it would introduce BBBEE. There were similar targets around car rentals and ACSAs property development. Previously ACSA had one broad strategy but had realised that the various sectors had to be differentiated since the construction sector was not the same as the retail. Related to construction, rental cars, property and advertising, ACSA would be going out on tender in June 2017.

The Committee would recall that in the year under review there had been the VISA regulations review by the Department of Home Affairs (DHA) which created its own problems, such that ACSA had to make a donation to DHA to be able to recruit additional people over the December peak period. ACSA acknowledged that at O.R Tambo the security queues started around 5 am and went on throughout the day. ACSA was however; experiencing phenomenal growth with Cape Town International realising the largest growth in air travel. The message that ACSA was trying to get across was that its airports were not the same as five years ago, because not only were parking lots full but travellers had to equally make accommodation to get to airports a lot earlier as it took time to process travellers. It was work in progress that ACSA did with the airlines as there was sometimes a misconception that ACSA manned the queues at boarding gates when ACSA only manned the queues at security.

The board of ACSA was fully functional and quorate as the maximum number of board members that ACSA needed in terms of its Memorandum of Incorporation (MOI) was three.

In terms of the job creation KPI which had not been met; as had been earlier mentioned regarding economic regulation that ACSA had only received a tariff determination in December 2016, which effectively meant that certainty in ACSAs business was in the third quarter of the financial year. ACSA had to put a lot of its plans on hold because of that uncertainty with the tariff; and since the pronouncement, ACSA had planned to start spending the monies which it was certain it could spend on its planned projects.  

As with any creditor that owed ACSA money, if one failed to pay repeatedly though making promises to pay; ACSA had to foreclose that individual’s business. That was largely borne out of the experience ACSA had with an airline called Onetime. ACSA was still in the process of trying to recover in excess of R160 million which was owed by Onetime airlines. Though the argument could be that compared to what Onetime owed ACSA the money the gym owed was immaterial but through ACSA board guidance the leadership of the company had less tolerance to accommodate tenants which were unable to meet their financial obligations. There were actually in excess of 50 creditors that ACSA were monitoring which owed the company between R100 000 up to R5/R6 million.      

ACSA had not brought an exhaustive list of the provincial impact the company had in terms of community upliftment, as it also did work in Provinces such as the North West, Limpopo and Mpumalanga where it had no representation.    

ACSA had also heard in the news about the SANTACO matter but certainly they knew nothing about it.

Removal and replacement of board members would certainly be best placed to be responded to by the DoT and the Public Investment Corporation (PIC) which were the shareholders of ACSA. Mr Deon Botha represented the PIC and Dr John Lamola represented Government on the ACSA board, both of whose representation was determined by their respective shareholding. Mr Maseko reminded the Committee that he had reported that ACSA had an annual review to determine what skills set were requisite to augment the efficacy of the board, which was why other members stayed on longer than other on ACSAs board.

ACSA had interacted with the DSBD where Minister Lindiwe Zulu had indicated that she wanted to know more about ACSAs business so that she could see how she could augment and assist ACSA attract smaller businesses. ACSA was equally working with banks to allow companies that did not have an established credit history but had won a tender at the airport such that banks had to be forthcoming with financial guarantees. ACSA was also working with a host of associations wherein small businesses were associated to create awareness about how to tender for opportunities at ACSA and how CASA could support a small business further once having obtained business from the company.

There was an emerging threat at airports; what was called the ‘insider threat’ as defined by ACI and the International Air Transport Association (IATA) as threat from people that work within the system and understood it. On review of the heist footage ACSA had been quite clear that the heist was an inside job as the airport was a very complex environment, but the thieves that stole the money had known where to go and which container to pick-up and there were quite a host of protocols that had not been followed that day. ACSA had taken specific action taken against numerous companies and would also be calling on their insurance where that would be required. It was simply impossible that the thieves could have come into the airport and did what they did within 45 minutes for example; protocol was that all valuable cargo had to be escorted by the South African Police Service (SAPS) but on the day of the heist there were no SAPS. ACSA had impressed upon SAPS to treat everyone as a suspect as there were many entities and well over 40 000 people on ACSAs permit database that worked at O.R. Tambo. To date ACSA had had two meetings with the Portfolio Committee on Intelligence to emphasise the issue of the weakness of the capacity of the state in vetting over 40 000 people. Generally, ACSA had raised a concern around policing specifically at O.R. Tambo as there were loiterers that offered arriving clients taxi or carriage services which were elements of harassment that were non-existent at other airports. ACSA lament was that there so many SAPS officers at O.R Tambo but they were not doing their work such that as recent as the previous 3 weeks ACSA had sponsored a trip between ACSA security and SAPS to four different airports in Europe so they could understand the policing model at airports like Heathrow, Charles De Gaulle, Amsterdam Schiphol and Brussels. Hopefully from that trip ACSA security and SAPS could develop a new policing strategy.

ACSA did have a rolling 10 year forecast that it revised every three years in terms of passenger growth. What was then included in the APP was ACSAs current three year forecast which was revised when there were major global events. To date ACSA had noticed a lot of traffic from Europe directly coming into Cape Town.

Mr Maseko said ACSA had not fully recovered the R4. 2 million Skywise airlines owed the company; similarly, ACSA also had not fully recovered what it was owed by Onetime airlines as well.

ACSA would share through the Committee secretariat how its India-Brazil investments were doing. When ACSA was involved in a 20/40 year concession investment it took a view over the life of the concession.

The recent cabin crew strike was purely an SAA issue though ACSA was impacted in that when people arrive at the airport and find out there will be no flight it reflected badly collectively on SAA and ACSA which was why ACSA intervened to say why could SAA not inform clients to not leave their homes if they knew there would be no flight. ACSA continued working with SAA as the strike it seemed the strike was not over from the pronouncements by the labour union representing the cabin crew.   

Mr Kunz replied that ACSAs inability to meet its 2016/17 target for aeronautical total revenue had been mainly driven by the delay in the regulatory decision where previously in ACSAs 2017-2019 corporate plan the company had anticipated the reduction in airport charges to have come through in the 2016/17 FY already. That would have reduced ACSAs aeronautical revenue as part of the total revenue component which would then have increased the company’s non-aeronautical revenue. The decision made in December by the Regulator only introduced the reduction in charges in 2017/18 hence the change in the revenue analysis slide for 2017/18.

Regarding the question on lower growth for 2015/16 and 2016/17 on numbers for non-aeronautical revenue; as alluded to earlier by Mr Maseko, the change in clients behaviour where they took direct flights to Cape Town upon entering SA more than had been anticipated had the component that the retail and commercial offering at Cape Town were not on par with the offering at O.R. Tambo. Therefore, the spend at Cape Town per passenger was unfortunately not at the same level as well, which resulted in the rebasing of the numbers.

The draft Airports Company Amendment bill was a process led by the DoT through a steering Committee and a project team. ACSA was one of the stakeholders that formed part of that project team and the other stakeholder was the Air Traffic and Navigation Services (ATNS) since it had a very similar establishing Act and were also undergoing an amendment as the economic regulator was embedded in ACSA legislation which meant the two Acts, that of ACSA and ATNS had to be processed at the same time. There was also a regulatory Committee as part of that team and two airlines associations namely, the Airlines Association of Southern Africa (AASA) and the Board of Airline Representatives of South Africa (BARSA).

Mr Maseko reminded the Committee that when ACSA last engaged the Committee in 2016 there remained a tremendous amount of regulatory uncertainty. There had been necessary meetings that the board had to sit for to determine what the next step would be; equally as had earlier been alluded to, the board of ACSA had to take some investment decisions around what had been happening in Brazil. Additionally, the ACSAs board had to make decision on ACSAs involvement in Ghana. Seeking more and more opportunities outside SA that required ACSA to make external investments required the board of ACSA to sit and give guidance and because such sittings were not planned; they were then referred to as special board meetings.   

Mr Mulaudzi said there were no listed challenges or threats to ACSAs business; did that mean they were non-existent?

Mr Sibande said his question as to whether how many board structures there were at ACSA.

He had noted on a visit to Israel that Israel’s security measures started at ACSAs airports in SA where one would be interrogated before boarding the flight out and there he was glad ACSA had sponsored a study trip for its security together with SAPS. Hopefully the study trip would improve the security protocols at ACSA airports going forward.

Mr Maseko replied that ACSA did have its top 10 risks that it monitored and updated annually and would forward to the Committee.

The board being quorate meant that all its subcommittees were quorate as well.

Israel’s vetting processes for travellers from SA were no different from what it did for travellers from other countries visiting Israel. Israel did profiling prior to a passenger boarding an Israel bound flight and ACSA currently were dealing with a complaint from a passenger that had been profiled.                           

Ms Nosisa Kekana, Company Secretary, ACSA, replied that there were five board subcommittees, possibly Mr Sibande would have preferred that the board itself would have been included as number six. The budget that the board received was approved by the DoT and allowed were two extra ad hoc board meetings; any other board meeting by teleconferencing and was less than an hour was not remunerated.

The Chairperson said the Committee would want to know how much each creditor owed ACSA and therefore requested the company to send the information to the secretariat. The Committee would want to see the minutes of the special board meetings as well as the shareholder compact. She also asked that ACSA elaborate on what its view was on the shuttle services at its airports which shuttled passengers from the airport to their destinations. Certainly, the Committee would have to get answers from the Minister of Transport on the removals of ACSA board members.