ACSA + Cross-Border Roads Transport Agency 2016/17 Annual Report
17 October 2017
Chairperson: Ms D Magadzi (ANC)
The Committee met to be briefed by the Airports Company South Africa (ACSA) and the Cross-Border Roads Transport Agency (C-BRTA) on its Annual Reports and financial statements for the 2016/17 financial year.
ACSA’s external environment was characterised by low Gross Domestic Product (GDP) growth of 1.1% which was an improvement from 2016. South Africa’s economy was projected to recover in 2017 before achieving 1.8% growth in 2018. That remained questionable considering the recent economic events such as the credit ratings downgrade in the first quarter of the year. The transport sector in South Africa contributed 3.5% which equated to R12.5 billion to the country’s GDP.
ACSA’s commitment to transformation and support government’s 2030 vision through the National Development Plan (NDP) was a responsibility ACSA continued to take seriously. It approved sector transformation strategies for Information Technology (IT), construction, property, bricklaying, advertising, car rental and goods handling.
The new permission from the economic regulator brought much needed certainty to the aviation sector. ACSA tracked its Key Performance Indicators (KPI’s) and reported quarterly to the Department of Transport (DoT). With regards to its Key Performance Indicators, ACSA planned to create 25 000 jobs but managed only 24 000. Assessing customer service was a new indicator for ACSA which, although unachieved, ACSA was doing well in chasing the target. ACSA also failed to enhance non-aeronautical revenue as a percentage of total revenue because of the delayed regulator permission which ACSA was awaiting for two years. ACSA adopted a new governance model where a lot of changes took place within the company where also ACSA introduced a new revenue parity scheme in terms of job grading; all said changes occurred in 2016 and because of that ACSA was unable to carry out an employee satisfaction survey. ACSA was still struggling with irregular expenditure as it increased again but the organisation was doing all that was necessary to curb the matter.
The Committee commented that unscheduled flights increased, and it wanted to know what the control mechanisms were and what incentives were there to turn that around as the margin grew year-on-year. Members believed that there were a lot of opportunities at the smaller airports in the northern provinces which bordered other African countries and asked why that was missing from ACSA’s objectives. Members said that there were 11 categories of restated amounts between 2016 and 2017; could ACSA explain the restatement of the amounts? The Committee asked whether the R2.8 billion preferential procurement value to transformation imperatives related to the 30% of total capital budget of ACSA as promised by the President of the Republic that State-Owned Entities (SOEs) would spend. The Committee noted that security was increased at OR Tambo International Airport but the same could not be said about Cape Town International and ACSA had to be proactive and preventative in that regard as it could not always act after an incident.
The C-BRTA worked with several other role players. The Department of Home Affairs (DHA) was responsible for all immigration legislation, application processing and general administration. Immigration therefore was responsible for who could enter, what could be done and how long within the borders of SA. The Border Management Agency would be involved in handling all matters relating to South Africa’s ports of entry as a landlord to all other border entities and would account for efficiencies ensuring that there was free and quick flow of people and goods through the borders. The South African Revenue Service (SARS) customs and excise duties played an integral role in movement of people and goods entering and leaving the country. The excise division ensured the levying of duties on certain locally manufactured goods that were being exported out of South Africa, as well as imported goods coming into the country.
The C-BRTA launched the Linking Africa Plan at the OR Tambo C-BRTA International Transport Indaba. The plan had a thesis that without transport, there could be no trade and without trade there could be no meaningful industrialization and without industrialization, African economies could not be transformed and meaningfully diversified because there was no substantial buying power from individual African countries. It was for this reason that C-BRTA was driving the plan as a means through which to transform the fortunes of the South African economy.
The C-BRTA needed to secure the concurrence of other government entities before effecting meaningful change and the implementation of changes which would enable the free flow of goods and people across the region.
Uncoordinated law enforcement could be construed as revenue generation from provincial authorities and traffic officers individually, as they sometimes took bribes along the routes. However, the reality was that stoppage of big haulers transporting containers flowing from South Africa to its neighbors was that for every R200 or R500 collected from the truckers, the economy of South Africa lost millions of rands. South African goods were not competitive as statistics from Transnet Ports Authority (TPA) demonstrated that the country was increasingly losing its ‘gateway to Africa’ status. More shippers and exporters were using other ports like Walvis Bay, Maputo and Beira as alternatives to using Cape Town harbor and the port of Ngqura. With the linking Africa plan, C-BRTA planned to bring figures and facts to the Committee on how collectively South Africa was currently mismanaging its economy and destroying its own value in the global value chains.
The Committee felt that it was contradictory to find that C-BRTA received a clean audit when it achieved 12 of its 18 targets. There were also liabilities from the 2014 court challenge which put C-BRTA into technical insolvency which the agency recommended no solution to moving out of that quagmire. What alternative revenue streams did C-BRTA think of exploring in trying to keep it afloat? The Committee wanted to know what kind of relationship there was between C-BRTA and the South African Police Service (SAPS), particularly with the media coverage of theft of vehicles from South Africa which were being sold in Mozambique. It wanted C-BRTA to also brief the Committee about the resolution of the Lesotho/Free State Cross-Border passenger transport impasse through the draft Bilateral Agreement with Lesotho, as the challenge was quite old. Was the C-BRTA receiving reports about the performance of the Road Transport Inspectorate function which was transferred to the Road Traffic Management Corporation (RTMC) versus that inspectorate’s performance whilst it was still under C-BRTA? Was C-BRTA receiving revenue from fines at border gates from the inspectorate, even though it now it resided with the RTMC?
Airports Company South Africa (ACSA)
Mr Siyakhula Simelane, Non-Executive Board member, ACSA, introduced the ACSA delegation and tendered the apologies of ACSA’s interim Board Chairperson and Mr Bongani Maseko, Chief Executive Officer (CEO), ACSA, who were attending the World Airports Council International Annual General Meeting. Representing Mr Maseko was Ms Bongiwe Mbomvu, who was the Acting Chief Executive Officer (CEO).
Mr Simelane stated that ACSA would be unveiling the statue of Mr Oliver Reginald (O.R.) Tambo at the OR Tambo International Airport, honouring the life of the stalwart and his contribution to South African independence. He said that ACSA was approached by the Tambo family and the unveiling would be in a prominent location where they felt the need to showcase the life of the stalwart. The unveiling would take place on 19 October 2017 where the key note address would be delivered by the President of the Republic Mr Jacob Zuma.
Mr Simelane said that through the recent credit ratings downgrade, the Board of ACSA and management were optimistic that the business would continue to perform well, and appropriate governance processes would continue to underpin the organisation. He said that ACSA’s external environment was characterised by low Gross Domestic Product (GDP) growth of 1.1% which was an improvement from 2016. South Africa’s economy was projected to recover in 2017 before achieving 1.8% growth in 2018. That remained questionable considering the recent economic events such as the credit ratings downgrade in the first quarter of the year. The transport sector in South Africa contributed 3.5%, which equated to R12.5 billion, to the country’s GDP. ACSA’s commitment to transformation and support of government’s 2030 vision through the National Development Plan (NDP) was a responsibility ACSA continued to take seriously. It approved sector transformation strategies for Information Technology (IT), construction, property, bricklaying, advertising, car rental and goods handling.
Ms Mbomvu said that the new permission from the economic regulator brought much needed certainty to the aviation sector. ACSA tracked its KPI’s and reported quarterly to the Department of Transport (DoT). Four KPIs that ACSA did not achieve were:
- It planned to create 25 000 jobs but managed to create only 24 000.
- Assessing customer service was a new indicator for ACSA which, although unachieved, ACSA was doing well in chasing the target.
- ACSA also failed to enhance non-aeronautical revenue as a percentage of total revenue because of the delayed regulator permission which ACSA was awaiting for two years.
- Lastly, ACSA adopted a new governance model where a lot of changes took place within the company where ACSA also introduced a new revenue parity scheme in terms of job grading; all said changes occurred in 2016 and because of that ACSA was unable to carry out an employee satisfaction survey.
She said that ACSA was still struggling with irregular expenditure as it increased again but the organisation was doing all that was necessary to curb the matter.
Mr Dirk Kunz, Acting Chief Financial Officer, ACSA, took the Committee through the update from the economic regulator. He said that ACSA had a decrease in capital expenditure which led to some planned projects being delayed as it was awaiting the decision of the economic regulator that was linked to its non-achievement on the job creation KPI. He said that irregular expenditure related to ACSA’s non-compliance to its own internal call clearing procedures which was something that ACSA was considering, in terms of whether the procedures were designed appropriately to assist the organization, which led to non-compliance or not. In some cases, ACSA found that it had differences of opinion with the Auditor-General South Africa (AGSA) during an audit cycle regarding certain extensions of contracts or emergency procurement procedures, which led to some of the irregular expenditure. Secondly, ACSA was unable to sometimes produce documents when AGSA needed them but ACSA was doing quite a lot in document management and information recording.
Mr H Hunsinger (DA) said that he noticed that unscheduled flights increased, and he wanted to know what the control mechanisms were and what incentives there were to turn that around as the margin grew year-on-year. He said that he was never excited about equity investments in other countries because ACSA still had so much to do domestically, especially in the smaller airports. He believed there were a lot of opportunities in the smaller airports in the Northern provinces which bordered other African countries and he missed a vision in the strategic objectives around said opportunities; he wanted to know why that was missing from ACSA’s objectives.
He said the he noticed a substantial difference in the net debt ratio to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and he wanted some explanation on that and what financial mechanisms there were to manage that so that the difference was not so big. In the consolidated financial statements in the Annual Report under contingencies, there was a reference that ACSA signed a levy agreement in respect of the infrastructure project with the City of Cape Town (CCT) to the tune of R30 million. He said that there seemed to be a transferring of a discretionary mandate to the CCT where the CCT could chose to revoke their right in terms of the agreement; he wanted elaboration on the matter. In the notes, there were various incidences of irregular expenditure were contravention of the Supply Chain Management (SCM) policy and preferential procurement policy framework were not complied with. He wanted the details of the contraventions. In comparing 2016 and 2017 fruitless and wasteful expenditure, two of the three items reoccurred in 2017; interest on provisional payments and financial misconduct. What actions were taken to avoid the wasteful expenditure? There were 11 categories of restated amounts between 2016 and 2017; could ACSA explain the restatement of the amounts?
Advocate E Mulaudzi (EFF) said that the Committee was concerned about ACSA’s Board repeated absenteeism from the Committee when the organisation had to account. He instructed Mr Simelane to relay the message to the Board that the Committee wanted it together with its Chairperson. He asked whether the R2.8 billion preferential procurement value to transformation imperatives related to the 30% of total capital budget of ACSA as promised by the President of the Republic that State-Owned Entities (SOEs) would spend. He said that ACSA took over the Mthatha Airport since 2014 and he wanted to know what ACSA was doing about the airport in Polokwane as the Committee was to date pushing ACSA to intervene there as well. With the increase in passenger numbers at King Shaka Airport, at his recent visit he found two of the five gates opened, making queues long and passengers missing their flights. When he inquired as to why only two gates were opened, the Assistant Manager informed him that King Shaka Airport was short staffed and that was relayed to the head office of ACSA without any response. He wanted to know what ACSA would do about the matter. He said that he noted that security was increased at OR Tambo Airport but the same could not be said about Cape Town International and ACSA had to be proactive and preventative in that regard as it could not always act after an incident.
Mr K Sithole (IFP) wanted to know what mechanisms were in place to deal with wasteful expenditure as it was a repeat finding by the AGSA since 2015 to date. He wanted to know about mechanisms that ACSA had for communication by employees to customers as he found ACSA staff quite arrogant when clients required information from staff. What intervention did ACSA have for client services across its three big airports? What interventions did ACSA develop to respond to the matters of emphasis which the AGSA picked up during auditing?
Mr T Mpanza (ANC) congratulated Mr Maseko’s forthcoming assumption of chairmanship of the ACSA. He said ACSA senior management level seemed to all be assumed by acting officials even including board positions. Therefore, he wanted to know what plans there were to address that challenge. He noted a column that there were outstanding issues regarding the economic regulator permissions which were to be resolved in future; he wanted to know whether there were any timeframes set for those resolutions. What plans were there to remedy the adverse financial performance? Was the 13% employee cost increase inclusive of the salary and wage negotiations increases? What was the agreement from the collective bargaining negotiations and was there an annual or multiyear agreement?
Mr M Sibande (ANC) said that from the AGSA’s assessment of assurance in key controls at senior management, the AGSA found that to be poor, owing to the positions of acting officials but here ACSA was accounting to the Committee with acting officials still. He said that he did not accept the apology from ACSA Board Chairperson and Mr Maseko.
The Chairperson interjected suggesting that the Committee probably had to accept the submitted apologies from ACSA as the Committee was briefed by the AGSA the previous week and from that engagement the Committee decided to invite ACSA to account. Therefore, it would be unfair for the Committee to reject the apologies form ACSA as its senior officials probably already planned their diaries and appointments. Rejection of apologies would have been understandable if the Committee pre-planned before the AGSA briefing and invited ACSA as part of the Committees own programme. She pleaded with Mr Sibande to reconsider his position on the matter.
Mr Sibande respectfully disagreed with the Chairperson asking how ACSA justified having a board that never appeared before the Committee since its appointment. He asked how many security companies ACSA had. Why was it outsourcing to so many companies if it bemoaned security incidents and the impact of the security industry labour agreements resulting in increased costs? He asked what remedies ACSA implemented to curb contraventions of SCM policies as found by AGSA and what interventions were there towards changing Moody’s credit rating for the organisation. What kind of equity investments did ACSA have in Mumbai and Sao Paolo and by when would they mature? The President of the Republic, in one of his State of The Nation Addresses (SoNAs), requested that SOEs assist government in terms of job creation. How far was ACSA progressing in that regard? The Committee requested that ACSA take care of gender parity in its organogram at senior management positions. What was ACSA doing in terms of educational support for bright young minds in South Africa as the South African Maritime Safety Authority (SAMSA) was on radio the previous day informing the country about opportunities in the maritime environment?
Ms T Xego (ANC) echoed the sentiments of Mr Sibande regarding job creation and asked that ACSA elaborate on the non-achievement on job creation as presented. Did ACSA take over the airports where it was supporting through technical and advisory capacities or did it remain provincial competencies? She said that security at OR Tambo had to be increased more to curtail the criminal incidences that were taking place at that airport.
Mr L Ramatlakane (ANC) shared the sentiments of the Committee regarding interventions to remedy the issues of non-compliance with policies which led to the irregular and wasteful expenditure. Regarding write-off of debt, could ACSA elaborate what it was referring to? What was the turnaround strategy regarding filling of vacancies permanently? Was capacity the issue where AGSA found material misstatements that the adjustment of the financial statements had to take place? Could ACSA speak to commercialisation of the airports sector?
In terms of economic transformation at airports and bringing in people needing universal access for the previously disadvantage and disabled, especially in smaller airports, did ACSA have a strategy to allow said individuals to participate in that economy in terms of small businesses?
Mr Ramatlakane was also interested in why ACSA did not achieve its passenger customer service assessment as he believed that quite a lot of feedback could be given to ACSA in terms of what needed improvements at its airports, especially management of traffic.
The Chairperson said that questions that would need thorough explanation from ACSA, she would allow ACSA to answer in writing as well as information that ACSA would want to add to questions that it would attempt to respond to. There were also eight issues that emerged from the AGSA’s engagement the previous week where AGSA reported that it raised the issue with ACSA and that ACSA was requested to investigate the matters. The Committee would appreciate progress to date regarding the matters since they were raised by AGSA.
She reiterated Ms Sibande’s sentiments as to how ACSA was managing all the security companies it employed and asked if it could that not be linked to the criminal elements that since invaded ACSA operations at OR Tambo. Previously the Committee told Mr Maseko that it wanted the ACSA Board to give it its strategic plan regarding the recent muggings and robberies of foreign nationals as they left OR Tambo to their final destinations when visiting Johannesburg. She acquiesced that there were improvements in the security since the Committee’s request, but it was still lacking in other respects. She also wanted to know what returns for South Africans there were from the equity investments outside of the country.
Ms Mbomvu said that as the Chairperson advised, ACSA would submit written responses regarding the eight issues raised by AGSA. ACSA would also want to do the same regarding its whole security strategy at its airports and success stories regarding ACSA’s international activities.
Mr Girish Gopal, Acting Chief Operations Officer, ACSA, replied that unscheduled flights were generally bad for business as they disrupted operations. Revenue from such flights was quite minimal as well and there was no specific strategy to drive such as general aviation traffic worked on schedules. Therefore, there was no drive to increase them but rather ACSA had a strategy to deal with the unscheduled flights in a manageable manner which would limit disruptions to the schedule.
He stated that in the big airports, ACSA worked very closely with companies like Wesgro in Cape Town and Dube Tradeport at King Shaka and the Gauteng Route Development Committee serving on various tourism committees, together with the Department of Tourism and various components of private business, to grow international traffic into the country. The large increase in international traffic at King Shaka and Cape Town was largely due to with the work of those tourism committees. Therefore, ACSA did in fact focus on growing international traffic as well. One of the key objectives within ACSA’s strategies was to diversify its revenue as traffic was also dependent on tariffs in South Africa.
Regarding investments, ACSA provided equity where it had some control in the running of an airport. Alternatively, it had management contracts where it provided management to assist running a particular airport. Thirdly, there were the technical advisory services where ACSA provided consultancy services around infrastructure, planning or issues related to compliance. At Mthatha Airport, ACSA submitted a bid and soon it would be signing a management contract with the Eastern Cape Province; it had neither equity there nor ownership but rather would provide a management team to assist in the running of that airport. ACSA was in Polokwane about 10 years ago but with the change of government, ACSA’s management contract lapsed. ACSA was recently approached to assist in developing airports in Limpopo, not only in Polokwane, but in the province at large.
He said that ACSA’s mandate regarding security was the streaming of passengers and the safeguarding of the airside. The mandate of the landside security or managing of organised syndicates of crime was the responsibility of the South African Police Services (SAPS). At OR Tambo, ACSA saw a lack of coordination between the security agencies but since the appointment of the new Minister of Police, a task team was appointed, and an amalgamation of the security agencies occurred. There was a complete overhaul of security staff including the addition of Ekurhuleni Metro Police as one approached and left OR Tambo. Since security measures was stepped up, there was some successes in terms of drug busts and following of passengers to their destinations although it was on-going work. The same security model operating at OR Tambo would eventually be rolled out to Cape Town International and King Shaka Airports respectively.
He said that ACSA had about six to seven security companies providing security for ACSA but then each entity like South African Airways (SAA) or the ground handlers and other vendors within the airport had its own private and separate security. The idea of having a single or two companies was that there was the potential that industrial action during labour disputes could have disastrous effects for operations at the airports.
In terms of staffing levels at King Shaka, the planning of ACSA depended on peaks and drops. Early in the morning out of Cape Town there were about 1600-1800 passengers leaving per hour and immediately after that peak numbers dropped to about 700 passengers. Late afternoon there was another peak and between 18:00-19:00 there was another peak. Therefore, there were about several peaks during the day and ACSA managed that by ensuring there were adequate resources in terms of staffing levels and that was done proactively by ACSA.
Mr Kunz said that in terms of why ACSA’s negative EBITDA changed so drastically over two years, the company generated the same cash over two years and its debt levels reduced in the one year in terms of payment disparities. Since, there was no increase in tariffs over two years and ACSA put its access cash into investment instruments within the region of R1.5 to 1.7 billion. He said that the levy agreement in Cape Town probably related to commitments in terms of infrastructure provisioning commitments and development commitments relating to commercial developments.
Irregular expenditure was a concern to ACSA management as it increased; there were three components to the irregular expenditure. There were ACSA’s internal procedures manual on how it conducted SCM activities which had to be complied with by every single employee doing SCM. For example, on quotes, if there was an R11 million tender, ACSA required three quotes for that work. It happened however, from time to time, that ACSA would approach the market and only received two quotes, where the award would be done based on those two quotes. That would be considered non-compliance with ACSA’s own procedures manual and the award would be irregular. In many instances during the audit cycle such instances were picked up and ACSA acknowledged that it had to be more vigilant on its compliance and had to find ways to improve that component. Just over R100 million irregular expenditure related to documents that could not be located for presentation to AGSA during the audit cycle though ACSA would have complied during the award and some of the contracts dated to five or six years ago. ACSA introduced a document management tool two years ago to improve document management but still struggled with long term contracts documentation.
He said that there were also legislative non-compliances for example where refurbishment was commissioned. There were certain grading levels that would be required at the Construction Industry Development Board (CIDB) for that particular service provider where AGSA picked up during audit that there were some instances where the CIDB grading for service providers was inappropriate for the level of expenditure that ACSA incurred. ACSA came to understand that the root causes were two major things: one was the structure of the companies SCM organisation and the operating model of the SCM to support the business. Since the end of 2016, ACSA redesigned and reintroduced the operating model which was centralized to date regarding SCM. ACSA believed that having one area of compliance on SCM would improve its compliance for the future. ACSA also found that its own SCM procedures were designed to be very stringent in terms of compliance which the company would also be reviewing as part of its redesign of procedures in the new operating model. ACSA would proactively review all its contracts to identify irregular expenditure in terms of the items AGSA raised.
Fruitless and wasteful expenditure related to a 2011 tax assessment where there was a difference of opinion between ACSA and the South African Revenue Services (SARS) regarding a particular tax treatment where ACSA incurred penalties with interest. There was also an incident of competition law non-compliance. ACSA’s errors related to fixed assets restating problems. When AGSA stopped auditing ACSA two year prior, ACSA needed to improve its ability to identify its assets at a detailed level within its asset register as it previously bundled its assets which was not appropriate. ACSA unbundled its assets since. The accounting treatment of those assets meant that sometimes ACSA unbundled an asset, for example, a building structure line item where sometimes ACSA would have to split the item in terms of electronic appliances inside the building. Those types of adjustments occurred and depreciation charges on the items impacted on the errors.
Mr Ramatlakane interjected that whatever ACSA did not respond to could be submitted as written responses. The Committee experienced major problems with SOEs centralizing SCM processing models. ACSA did not respond appropriately to his question as he wanted to know whether the SCM model was problematic or was it non-compliance that was dogging ACSA. The responses had to be submitted no later than 20 October 2017.
Cross-Border Roads Transport Agency (C-BRTA)
Mr Moss Ramathe, Board Chairperson, C-BRTA, said the one thing that would not be appearing in their presentation was that C-BRTA held an inaugural OR Tambo cross border indaba in recognition of his centenary celebration held in Pretoria from the 10 to 13 October 2017. He said the indaba focused on transport and economic transformation of the sector, especially mutual trade, and to remove non-trade barriers in the corridors between the various African countries. All the Southern African Development Community (SADC) countries was represented at the indaba, including representatives from Egypt, Ethiopia, the European Union and United States Agency for International Development (USAID) and the exercise was quite successful.
Mr Sipho Khumalo, CEO, C-BRTA, took the Committee through the Annual Report. He said that in reality, in managing the border posts and the flow of people and goods between South Africa and its neighbours, C-BRTA worked with several other role players as listed in the presentation. He said that the Department of Home Affairs (DHA) was responsible for all immigration legislation, application processing and general administration. Immigration therefore was responsible for who could enter, what could be done and how long within the borders of South Africa. The Border Management Agency would be involved in handling all matters relating to SA’s ports of entry as a landlord to all other border entities and would account for efficiencies and ensuring that there was free and quick flow of people and goods through the borders. SARS customs and excise duties played an integral role in movement of people and goods entering and leaving the country. The excise division ensured the levying of duties on certain locally manufactured goods that were being exported out of SA, as well as imported goods coming into South Africa. SAPS border police were responsible for border policing and control, particularly regulating of illegal activities such as gumaguma’s and related crimes.
He said that the Department of Agriculture, Forestry and Fisheries (DAFF) was responsible for national resources management and prevention of predatory plants from entering South Africa. Port Health was responsible for monitoring and evaluating all foodstuffs, disinfectants, hazardous substances and prevention of all serious contagious diseases from entering SA. State Security was responsible for profiling risks and providing intelligence to all other border players including C-BRTA.
He said for a 55 million populated country, there were opportunities for South Africa to be exploring far more aggressively in terms of intra-Africa trade through cross-border transport movements. The Department of Trade and Industry (DTI) estimated intra-Africa trade at a lowly 14% from South Africa within the SADC region compared to other regions. However, South Africa contributed about 68% of intra-Africa trade in the SADC region. The C-BRTA launched the Linking Africa Plan the week of 9 October 2017 at the OR Tambo C-BRTA International Transport Indaba. The plan had a thesis that without transport there could be no trade, without trade there could be no meaningful industrialization and without industrialization, African economies could not be transformed and meaningfully diversified because there was no substantial buying power from individual African countries. It was for that reason that C-BRTA was driving the plan as a means through which to transform the fortunes of the SA economy.
Mr Khumalo said that the C-BRTA needed to secure the concurrence of other government entities before effecting meaningful change and implementation of changes which would enable the free flow of goods and people across the region. The issue was a big contributor to the high cost of doing business for South African operators and a contributor to reduction of competitiveness of goods through the major export corridors including the North-South corridor and the Trans-Kalahari corridors. Uncoordinated law enforcement could be construed as revenue generation or provincial authorities and traffic officers individually, as they sometimes took bribes along the routes. However, the reality was that stoppage of big haulers transporting containers flowing from SA to its neighbors was that for every R200 or R500 collected from the truckers, the economy of South Africa lost millions of rands. South African goods were not competitive as statistics from Transnet Ports Authority (TPA) demonstrated that the country was increasingly losing its ‘gateway to Africa’ status. More shippers and exporters were using other ports like Walvis Bay, Maputo and Beira as alternatives to using Cape Town harbor and the port of Ngqura. With the linking Africa plan, C-BRTA planned to bring figures and facts to the Committee on how collectively SA was currently mismanaging its economy and destroying its own value in the global value chains.
Mr Nchaupe Maepa, COO, C-BRTA, read the Committee through the remaining slides of the presentation.
Mr S Radebe (ANC) said that it was contradictory for him to find that C-BRTA received a clean audit when it achieved 12 of its 18 targets. There were also liabilities from the 2014 court challenge which put C-BRTA into technical insolvency which the agency recommended no solution to moving out of that quagmire. Regarding aggressive fraud and corruption bursting initiatives by government, Mr Radebe was questioning what the responsibility of the other stakeholders in the cross-border environment as listed by Mr Khumalo?
Regarding the uncoordinated law enforcement across borders, what did C-BRTA think had to be done?
What alternative revenue streams did C-BRTA think of exploring in trying to keep it afloat?
Mr Mulaudzi wanted to know what kind of relationship there was between C-BRTA and SAPS, particularly the media coverage of the theft of vehicles from SA which were being sold in Mozambique. He wanted C-BRTA to also brief the Committee about the resolution of the Lesotho/Free State Cross-Border passenger transport impasse through the draft Bilateral Agreement with Lesotho as the challenge was quite old. Was the C-BRTA receiving reports about the performance of the Road Transport Inspectorate function which was transferred to the Road Traffic Management Corporation (RTMC) versus that inspectorate’s performance whilst it was still under C-BRTA? Was C-BRTA receiving the revenue from the fines at border gates from the inspectorate, although it resided with RTMC?
He said that he was discouraging target setting only to ensure that C-BRTA focused on compliance related targets whilst others were unachieved. A clean audit had to be accompanied by 100% achievement of targets. There was a concern from C-BRTA staff that there was nepotism at the agency and he asked that C-BRTA submit to the Committee a skills audit of its employees when next returning to the Committee. Did the C-BRTA have a transversal or bilateral agreement with RTMC seeing that penalty income decreased in the year under review? Was there an understanding that money levied for contravention of the cross-border Act would be handed over to C-BRTA or was the RTMC going to keep the revenue as well? If so, how would C-BRTA increase penalty income? He understood that the accumulated deficit meant that C-BRTA was insolvent and there were no technicalities about it. If the court ruled against C-BRTA in the litigation against the agency, why did it not ask for a bail out from National Treasury (NT) or even the Public Investment Corporation (PIC) so that it could deal with the deficit?
The Acting Chairperson asked Mr Mulaudzi to write the remainder of his questions on paper and give them to the C-BRTA for written responses.
Mr Hunsinger said that the C-BRTA started out its presentation with the socioeconomic environment which seemed to have missed the important elements that affected freight and courier services in South Africa in the last 14 months which C-BRTA did not present on, yet C-BRTA decided to speak to local business expansion to gain economically on profits that possibly lied in other African countries. He said that Statistics South Africa (StatsSA) already reported a decline in that sector with close to 4000 employees being retrenched with a further 2450 being retrenched in 2017 alone. How did C-BRTA plan to balance that decline with an interest to further drive investment when the transport industry was already battling? The aspirations to increase income were not logical linked to the realities of the industry. He had further noted that the agency transferred its law enforcement division already and the Annual Report also mentioned that the cost of that exercise would be shared with RTMC but Mr Hunsinger wanted to know whether there was a remaining revenue stream that would support C-BRTA’s income. Could C-BRTA expand on what ‘other income’ it was referring to as per the presentation?
He said that the C-BRTA project that sought to introduce cross border charges to be levied against foreign vehicles entering SA explained the current unfair situation to SA carriers leaving the country to neighboring countries. C-BRTA had to be actively working on such initiatives instead of loosely mentioning them since operators were in dire straits regarding retaining employees. The Committee noted the development of a new structure of the C-BRTA as the Border Management Authority Bill was approved in Parliament in June 2017. However, not only was there an entity complaining about the Bill, Mr Hunsinger also had no recollection of the Bill coming before the Committee. Many other entities would be affected including rail and road.
Mr Sithole said that it seemed that C-BRTA achieved little in terms of gender parity. He said that the challenge of law enforcement coordination was more observable at uPhongolo as there was no more fence separating SA and Swaziland and people could simply walk across the boundary between the two countries. What was the real cause of the failure to achieve set targets and what interventions were there for the coming financial year?
Mr Sibande said that although the C-BRTA achieved 52% female representation in its staff compliment and 50% in Executive Management, before the Committee sat only male Senior Management Staff (SMS). What was C-BRTA trying to achieve with the Indaba? He said that C-BRTA was reporting on Lesotho/Free State cross-border passenger transport impasse since 2009.
Regarding bottlenecks, the Committee did an oversight visit at a border between Lesotho and South Africa where the officials wrote to C-BRTA about the upgrading of the border terminal. There were arguments about whether the infrastructure belonged to the Department of Public Works (DPW) or C-BRTA and the Committee was never clarified on that matter.
In terms of permit revenue, the Committee came across allegations of double issuing of permits by C-BRTA, the Free State Provincial Traffic Department and the national DoT. He said that the Committee’s weakness was that the Committee did not follow through with follow-ups when entities briefed Parliament.
Ms Xego asked by when C-BRTA projected to have integrated internal IT systems and a centralized permit system. C-BRTA seemed to not be doing enough on social responsibility. She was also concerned about 70% expenditure on employee costs by the C-BRTA; did that not also contributed to its challenges regarding its insolvency or was the agencies organogram set in that manner? What factor did C-BRTA identify that affected the countries position as the ‘gateway into Africa’? She was also concerned about C-BRTA not implementing its crime and corruption prevention strategy as that had to be how C-BRTA managed corruptibility of its officials.
Mr Ramatlakane said that the support that C-BRTA sought would be given on condition that it specified its recommendations and explained in detail how in intended to intervene in improving its financial position including the insolvency matter. There was also an outstanding discussion that the Committee wanted to have with C-BRTA about the unfair treatment of South Africans at border posts of SA’s neighbors as they were entering those particular countries.
The Chairperson said that the Committee would request whatever outstanding questions that C-BRTA would have not responded to. She said that she was raising some of the issues in her engagements with her counterparts from the SADC countries, especially the unfair treatment of South Africans when they visited SA neighboring countries to the extent that a passenger operator told her that carrying passengers to Zimbabwe cost him R12 000 in customs dues. Her concern was how much the operator would have made minus that amount. It would be important for the Committee to write to the Minister of Transport about the issue of the Free State/ Lesotho impasse and proposed resolution.
Mr Khumalo said of the 40 questions he noted, those he would not respond to C-BRTA would provide written response. There was no contradiction because a clean audit had nothing to do with performance on targets, as a clean audit reflected on the cleanliness of administration and that there were no matters that AGSA found to be incorrect in that regard. The agency would explain further in a report which it would furnish the Committee with how a clean audit did not relate to the targets and why only 12 targets were achieved. Moreover, C-BRTA was a self-funding entity and could only stretch itself to the limit of its resources. Until there was a hearing of the court challenge on the 2014 Permit Tariff Regulation, C-BRTA could not make it go away as the agency could not dictate turnaround times to the court.
He said that all agencies, of the several that had a role to play in the border post, had to manage strategies fighting corruption and fraud. Moreover, that spoke to the need for border agencies to synchronise governments domestically and internationally so that border management could be collectively approached in a cohesive strategy. The presentation was attempting to highlight the need for border control to work in a more coordinated way. Countries which managed to resolve border management issues were countries that implemented an approach called coordinated border management where even though agencies would have different mandates and responsibilities, all worked collectively in a way that was integrative and allowed problem solving.
In terms of uncoordinated law enforcement, C-BRTA was proposing that as a country South Africa needed to adopt a governance approach to border management that showed an appreciation of the role of cargo that flowed through SADC corridors. Law enforcement by definition in SA was resident in all spheres of government. There were municipal, provincial and national traffic police and until such time there was a mechanism protecting precious cargo flowing through SADC corridors through import to wherever in Africa, SA was failing land locked countries in so far as increasing cost of doing business; that was why to date operators were opting to use other ports of entry as mentioned. That would also be elaborated more in writing that it was in the interest of SA for citizens not to undermine C-BRTA attempts to build the SA economy by doing things that had the opposite effect of what was being attempted on the ground.
In terms of revenue shortcomings, the C-BRTA transferred its law enforcement division because the cost of managing it beyond what penalties were generated. It had made more sense to lose that function to the RTMC which had the muscle to handle the division. Moreover, C-BRTA lost both the revenue and the cost associated with the transfer.
Indeed C-BRTA had a cordial relationship with SAPS and they also sat together in the cross border joint committees where they shared intelligence on occurrences at the border posts, but the SAPS mandate remained and C-BRTA could only share information but could not enforce the law.
As the Chairperson pointed out, the responsibility of signing-off on the draft financial agreement with Lesotho lied with the Minister of Transport. Only after that position, could the C-BRTA engage Lesotho and Mr Khumalo believed the issue would be contested as Lesotho was averse to some of the conditions included in that financial agreement. The new payment system was long overdue but C-BRTA would have loved a new system; the agency was hamstrung financially as it did not have the revenue to develop such a system. Additionally, C-BRTA would repeatedly bring issues it needed assistance with to the Committee until they were resolved and would not tire of repeating matter.
Technical insolvency was not the same as pure insolvency as C-BRTA continued to have enough money to continue operating as pure insolvency would have meant that C-BRTA would not have briefed Parliament. As presented, C-BRTA managed to decrease its liabilities and even managed to negotiate a staggered repayment plan with its debtors and the debt no longer threatened the existence of the agency as much.
The Chairperson was quite aware that the agency repeatedly asked for a bail out from the DoT but there simply were no resources to assist C-BRTA, even if the DoT wanted to assist. The socioeconomic environment reflection was an attempt by Mr Khumalo to show how the trucking and logistics industries were under stress and though he may not have flagged issues of 4000 employees being retrenched, as C-BRTA had such information, but the purpose of the presentation was to highlight the current status of SA’s position as a gateway to Africa and what interventions possibly needed to be implemented to regain SA’s status in the global value chain.
The ‘other income’ category would be explained in the forthcoming report which the agency would submit soon to the Committee. The introduction of cross boarder charges was quite central to the agencies strategic and operational plans as those charges would allow C-BRTA to balance the playing field. It would also allow reciprocation of what was already ongoing in SA’s neighbors when SA operators entered their borders. The mandates of South Africa's Border Management Agency (BMA) and C-BRTA were complementary to each other and C-BRTA was not in competition with that agency.
Mr Khumalo said that the best way to respond to the question regarding the purpose of the Indaba would be to submit a full report of the objectives and recommendations of the Indaba which C-BRTA hosted.
Mr Maepa confirmed that C-BRTA was receiving reports from the RTMC regarding the work of the transferred law enforcement division. He said that ‘other income’ was from refundable claims of five year permits and C-BRTA negotiated with operators that it would not claim the permits and in terms of accounting the agency wrote back the income into the report.
The Chairperson thanked the entities for coming before the Committee and noted that C-BRTA did not speak to environmental issues, especially greenhouse gases impact, as she always asked herself what type of fuel cars from other countries used, as it entered the country with filled tanks. She said that the Committee would continue with its business the following week.
The meeting was then adjourned.
Magadzi, Ms DP
Hunsinger, Mr CH
Mpanza, Mr TS
Mulaudzi, Adv TE
Radebe, Mr GS
Ramatlakane, Mr L
Sibande, Mr MP
Sithole, Mr KP
Xego, Ms ST
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