Road Accident Fund + RTIA 2016/17 Annual Report, with Deputy Minister

Meeting report

Welcome and apologies
The Chairperson said that the meeting started a few minutes late because the RTIA was a bit late and because a quorum was needed. She welcomed the RTIA delegation.

Mr L Matakana (ANC) remarked that the presentation of 132 slides appeared to be long and compared the power point presentation to a dissertation. He raised the motion that the RTIA should make presentation provided the presentation was cut down.

Mr M Sibande (ANC) disagreed. He said that the RTIA should be given an opportunity to present.

The Chairperson agreed.

Road Traffic Infringement Agency
Mr JR Chuwe, Chief Executive Officer, RTIA, noted that service delivery was a difficult one for the year under review. Municipalities of Tshwane and Johannesburg experienced significant challenge with law enforcement. Both municipalities tried to opt out of the AARTO framework until the national rollout and there was a tremendous reduction of notices due to poor service delivery from SAPO. 

Mr Chuwe said that the RTIA was completely dependent on the efforts of the infringement agencies, which operated at the coal-front of traffic law enforcement. The volume of infringement notices dropped significantly by 63.44%; that was, from 5.5 million in previous year to 2 million for the year under review. Similarly, revenue declined by 41.8% compared to previous year. The RTIA was pleased with the increase of 45.6% of AARTO 01s, from 720 000 in previous year to 1 million for period under review. Negative media publicity and litigations also impacted on declining volumes.

Mr Chuwe noted that suspect notices data was not conforming to specific predetermined business and data control rules and alluded to available elective options, which included payment of the penalty, notification to make payment in instalments, submit a representation, nomination of the driver or person in control and elect to be tried in court. He provided the Committee with statistics relating to the said elective options.

Mr Chuwe noted that strategic outcome oriented goals of the RTIA, which included discouraging the contravention of traffic laws; coordinating and facilitating readiness for national implementation of AARTO; influencing change in road user behaviour; and effective administration and resourcing of the RTIA to deliver its mandate. Most of these goals were achieved 100%.

On financial performance, Mr Chuwe said that the Audit Committee Report concurred with and recommended accepting the audited financial statements and opinion of the Auditor General South Africa (AGSA). The AGSA issued an unqualified audit opinion with no findings (clean audit) for the 2016/17 reporting period and that the financial statements were fairly presented in all material respects. It was the fifth consecutive year that the RTIA received a clean audit.  He noted that infringement fees declined by 41.8% from the previous year and that operating cash inflows declined by 89.84%. There was liquidity reserves as evidenced in the strong financial position reported at year end. The budget performance was however below target due to the significant decline in revenue. The reduction in spending allowed the agency to consolidate its spending efforts in anticipation of the AARTO national roll-out which would require approximately R250 million to achieve. Underspending occurred across all four programmes. Besides, the RTIA made significant strides in improving revenue performance and expenditure management.

Mr Chuwe said that the challenges were based on systems performance. These included deficiencies in systems interfaces (NCR-SAPO), electronic national administration traffic information system (eNaTIS) data integrity and lack of appropriate business logic and intelligence. In addition, the RTIA was challenged by inefficient legislative framework, ineffective comprehensive co-ordination and stepping up of national roll-out preparations and the fact that Board membership term would end on 30 November 2017.
 
Discussion
Mr C Hussinger (DA) welcomed the presentation and appreciated the manner in which Mr Chuwe managed to take the Committee through a 132-slide presentation within a short period of time. He said that the RTIA should arrange a workshop on road user behaviour so that the Committee would get to know the strategies that were used to change behaviours. With regard to the Annual Report, he recognised that the volume of notices dropped, and, at the same time, revenue dropped. He asked clarity on differences between the percentages of the drop-outs and which material misstatements were found by the AGSA. What accounting policy was used by the RTIA? Was it appropriate? He expressed concern over cases that were taken to court and asked what the opinion of the RTIA was. He asked what the RTIA was doing about job creation.

Mr M De Freitas (DA) stated that the strategic objectives were not impressive. He also remarked that the Annual Report talked about generation of income but did not talk about deaths on the road. The presentation contained too much information, but it did not include what measures of road safety there were. He remarked that the RTIA should be interested in reducing deaths on the roads and saving lives rather than in generating money.

Mr T Mbanza (ANC) said that he was concerned with the issue of the Board whose term was extended for three months and asked whether board membership vacancies were advertised. Any further extension of the Board’s term would look bad in terms of leadership. With regard to performance information, he noted that there was a poor service delivery because of SAPO which contributed in the reduction of revenue. What was the problem with SAPO? Was it capacity? He said that the amount classified as surplus should be classified as under-spending, which was administratively problematic.

Mr Sibande raised a concern over the increase in number of meetings and remarked that this could not go on; hence, it appeared that management used meetings as a strategy to increase their salaries. In terms of the financial information, there were contradictions in terms of declines in infringements simply because the prosecutor declined to prosecute 81% of cases. If the prosecutor declined to prosecute, then the state was losing on revenue because there were financial implications. With regards to tickets, he asked what happened if a person decided to relocate and went to stay in another province. On the Annual Performance Plan targets that were achieved, he remarked that most of them were achieved 100% and asked what challenges with those targets that were not achieved 100% were. He said that on social media, there was an official who was eating money and he asked the RTIA was steps were taken or perceived to be taken or how the RTIA dealt with this problem. The issue of eating money affected the image and reputation of the department and its entities. Finally, he asked what instruments the RTIA had in order to achieve its target at municipal level.

Mr T Mulaudzi (EFF) remarked that the APP was, in 2015/16, achieved at 84.7% and 85.9% in 2016/17. He noted that if these targets were not achieved 100%, this implied that people were not safe on the roads. The targets ought to be achieved fully. On the question of income, he said that the “other” income was R2.8 million in 2014/15, R40.3 million in 2015/16 and R151.2 million in 2016/17 and asked why income jumped so huge and where this other income was being generated? What law enforcement was being applied by the RTIA? Was it the National Road Traffic Act or was the Cross-Border Transport Act considered? He remarked that the RTIA should be congratulated for keeping a clean audit for five years.

Mr L Ramatlakane (ANC) complemented the RTIA for achieving a clean audit for a period of five years. He acknowledged the fact that some of the RTIA’s successes depended on the chain of law enforcements. The RTIA’s failure could also depend on these law enforcements. The RTIA’s failure could mean that someone else was failing in his/her duties. He expressed his concerns over yellow pages, which, in his view, spoke to the accuracy of information. For two years, there were concerns about the yellow pages and he asked what could be a problem to achieve yellow pages. He asked whether there was a financial model and what that model could be.

Mr G Radebe (ANC) said that the RTIA should be congratulated in its consistency in audit outcome. However, this was what Members expected the RTIA to achieve. He asked when board membership positions would be filled and when top positions in the management would be filled. He said that he was concerned with cameras that were installed by municipalities and asked whether these cameras were stopping deaths or whether they were installed just for the purpose of collecting revenue. He remarked that installation of cameras without the visibility of traffic officers were aimed at generating revenue and not to save lives.

The Chairperson said that she was concerned over the absence of the commitment to fill positions in the Board and top management.

Ms Sindiwe Chikunga, Deputy Minister of Transport, said that she appreciated the fact that the Committee appreciated the achievement of clean audit. She said that the meetings reflected in the presentation included ones of the Board and ones of management. There was a meeting every three months and there might be special meetings. She agreed with the Committee that meetings were too much. Thirteen meetings per annum were too much. With regard to those traffic officers who were eating money, they would be suspended. They would be dismissed. They were just an embarrassment. The issue of bribing traffic officers was a national problem. Citizens were failing in being responsible citizens because they were the ones that were ready to bribe officials. These officers, who appeared on the video brandishing piles of money in take-away containers, received money from persons who could be responsible citizens. The Department was clear on this issue that these officers could not work in any law enforcement agency tasked with defeating corruption and fraud, whether the agency was a police force or not. Stern action would be taken against these officers including the girl who was talking in the background. On accounting to the Committee, she indicated that the Minister accounted to Parliament in terms of the Constitution whereas the Board of the RTIA accounted to Parliament in terms of the Public Finance Management Act. Sometimes, the Board would insist that it would account to Parliament whereby there was reluctance of sharing information with the Minister. There was no competition in the accounting.

Mr Chuwe responded that the AGSA picked up that the RTIA made an error in terms of reporting. The errors were corrected. Errors did not mean that targets were not achieved. The AGSA pointed out details about the work they did and how they did it. The AGSA had a new a format to comply with when auditing. The AGSA did find or say that the RTIA committed corruption or fraud. These issues were not identified. The AGSA did not find any issue with internal auditing policy.

On the question of generating revenue, he noted that generating revenue had to be reported on and reflected in the APP. It was important to RTIA to show how money came in and how it was spent. The revenue was mostly generated through penalty fees. However, the RTIA was not focussing on generating revenue. The revenue was dropped because of the new model that was introduced. In this context, the more infringements went down, the more revenue would also go down. With regards to yellow faces, it came out because of errors committed in the financial reporting. The yellow pages would be prevented through careful crafting and drafting the APP and how these strategic objectives would be achieved. The discrepancies came out due to the way the APP was framed.

Mr Chuwe said that comments about the financial model were noted.

Road Accident Fund
Deputy Minister Chikunga thanked the Chairperson for introducing the members of the Committee and thus introduced members of the RAF delegation. She said that the RAF was an agency which was responsible for those who died or got injured. It was one of agencies that provided social security.

Ms Lindelwa Jabavu, Acting Chief Executive Officer, RAF, took the Committee through the presentation, which looked at the RAF’s business, 2016/17 outcomes, challenges, and the year at a glance. In the context of business, the presentation touched on strategic outcomes, business model, and operations. In terms of 2016/17 outcomes, she highlighted that 202 100 new claims were received and that 209 561 claims were finalised. Claims liabilities increased by 22% to R188 billion from R154 billion in the previous financial year. Average RAF legal and other costs per claim increased by 9% whereas average claimant legal and other costs per claim increased by 11%. She said that the RAF achieved a clean audit. There was an emphasis of matter on the net deficit retained, as in prior years, as current liabilities exceeded total assets by R179 992 925 000.

Ms Jabavu noted that there was irregular expenditure, which arose because of incorrect assessment of bid evaluation, requesting updated information from bidders resulting in uncompetitive procurement practice; contract extensions deemed unfair procurement practice by the AGSA; and failure to comply with CIDB regulations in respect of construction contracts. There was fruitless and wasteful expenditure that was incurred in terms of the legal cost bills settled through taxation.

Ms Jabavu noted that significant challenges were threefold: serious insufficient cash resources; sharp growth in the net deficit and aggressive opposition from stakeholders. Despite these challenges, the RAF succeeded in fulfilling 90% of the approved APP and winning independent awards, whilst having 2 676 members delivering services daily.
 
Discussion
Mr Lamatlakane complemented the RAF for bringing the deficit down and said that he did not support the lapses in the cases; running the RAF on the deficit of R180 billion was very risk. On the matter of achieving a clean audit, he said that that the AGSA report did not indicate that a clean audit was achieved because the RAF had a problem with deficit in the financial performance. The deficit would always bring down the entity. The RAF should clarify what the Committee would condone. He raised concerns about targets and legal fees. He said that some targets were not achieved and felt these targets were unnecessarily not achieved whereas legal fees seemed to have doubled. He felt that the prices of attorneys were not falling with the criteria. Seven billion rand was huge money that was paid on legal fees.

Mr Mulaudzi said that presentation should be sent to Members on time to be able to engage with presenters. He remarked that many cases were lapsing, and this problem was leading to court litigation and asked whether there was a strategy in place to reduce costs. The deficit was RAF’s own making because it was not complying with section 24 of the Road Accident Act. Section 24 required the RAF to finalise a claim within 120 days. Most of the cases were settled after 120 days lapsed, leading to legal costs. He asked clarity on irregular and fruitless expenditure, on levies received on petrol and on how people in rural areas (where there was no internet or physical addresses) were being assisted. On what authority was RAF to conduct a road show?

Mr Sibande said that he appreciated the fact that RAF came to account. On the question of clean audit, he asked whether the RAF had a programme to deal with matters that were raised by the AGSA. With regard to fruitless expenditure, there was an allegation of a lawyer who lodged an illegal claim and this matter appeared in the media. There was a tendency of looking at laws without taking into consideration the criminality taking place in the process of lodging claims. How many people were still committing these illegal acts and what could be implication on the financial performance? Why were these people not revealed? On the question of procedure, he asked what could be a problem with the new proposal of the dispensation. Should people wait until they died? He commented that when there was a fire, people brought extinguishers to extinguish the fire; they did not wait for the rain to extinguish the fire. Why was the RAF waiting to address the problems that it was facing? He noted that there were cases in his constituency where people were frustrated because they were no longer able to pay hospital fees.

Mr Mbanza welcomed the presentation. With regard to the staff compliment, he asked to be provided with a demographic of employees and asked whether RAF was complying with the employment equity principle? He wanted to know whether the RAF had internal capacity and asked how many black, youth and women employees were accommodated in the RAF.

Mr de Freitas raised concerns over claims that were increasing and asked how many claims were filed per day.

Mr Hussinger asked when a new CEO would be appointed and whether the Committee could be provided with more information on why the RAF was taking so long to finalise claims.

Mr Radebe asked whether there were mechanisms in place to deal with fraudulent claims and whether concerns of the majority of the people were taken into consideration. Was the RAF policy supporting the poor or the white capitalist monopoly? The latter could not be supported. How did the RAF intend to deal with R180 billion deficits?

The Chairperson asked what the RAF was doing in order to reach the community. How did the RAF collaborate with other departments such as Health and Social Development? It was a good thing to pay claims as money was good. However, people whose claims were paid out could squander their money and within three years they were no longer capable to support themselves. They had to rely on social goods such as social grants in order to survive. How could RAF deal with problems such as these? Did RAF advise recipients of claims on how best they could use their money? Was the Department of Small Business assisting in advising on financial management?

Ms Chikunga responded that deficit kept increasing because of injuries and deaths taking place on the roads. It was unfair for the AGSA not to take the road accidents into account on mere reason that the RAF had no control over those accidents. The RAF should be held account on aspects falling with its competency or which it had control over. The RAF could not be held accountable for aspects that fell in the jurisdiction of another juristic person. She noted that the Committee should bear in mind that the Bill could be initiated in two ways. The Bill could be initiated by the Department or the Committee. When the Bill was initiated by the Department, it had to go through certain processes as required by the Constitution. The executive Bill would take time to go through these processes, which could not be skipped. Should any step or process be skipped, the Department could be taken to court. On the other hand, the Committee could initiate the Bill and deal with it as it deemed best. The Committee had a prerogative power to change the executive Bill into a parliamentary Bill whereby it could be saved to go through certain processes. The prerequisite was a separation of powers.

Ms Chikunga said that it was true that the RAF expended billions of rand on litigation. This matter was difficult to change because many claimants were complaining that they were not paid and went to court. However, it appeared that lawyers of claimants were not taking 25% of the claim; rather they were taking 100% of the claim. These issues were dealt with on a daily basis and sometimes the RAF found that the money paid for a particular claim ended up in an attorney’s pocket when in court. There was huge corruption and wrongdoings taking place in the current RAF framework and to change this framework with a view to addressing these challenges was not that simple.

Mr Jabavu responded that non-achieved targets in 2016/17 included the reduction of legal costs. The RAF wanted to reduce legal costs at a certain percentage and this could not be achieved. However, the legal costs increased to R7.5 billion. On the question of direct claim, she said that would be responded to in writing. The RAF was complying with the employment equity plan and figures could be shared with Committee. On the question of litigation, the RAF noted that it had a panel of attorneys and internal litigation department. She said that RAF on the road was an initiative that was designed in terms of the constitutional principles. As an organ of the state, RAF was constitutionally required to take its services on the people.

In her concluding remarks, the Chairperson complemented the Deputy Minister on the stance of the Department with regards to law enforcement officers involved in corruption or illegal activities. She agreed that appropriate action against the officers ought to be taken, as an impression should not be created that members of the public could buy their way around law-enforcement officers. She stressed that our country should be about the accountability of our actions. For that reason, the Committee would support whatever sanction considered by the Department to be proportional to the crime. The video depicted despicable behaviour.

The meeting was adjourned.