The Portfolio Committee on Transport met to be briefed by the Air Traffic Navigation Service (ATNS) and the South African Maritime Authority (SAMSA) on their 2016/17 annual reports and financial statements. The two entities also gave reasons for the qualified audit opinions they had received, and explained the strategies they were implementing to resolve them.
Highlights of the briefing by the ATNS included its governance framework, its core business areas, an overview of its current services, contributions towards the state’s nine-point plan and strategic linkages to government outcomes, corporate social investments in the financial year, the ten-point plan for sustainability and climate change, and its positive employment equity statistics. The factors that had led to the qualified opinion were the non-valuation of assets, assets that could not be physically verified, the late capitalisation of assets and irregular expenditure. The plans to resolve audit findings were commitments to prioritise the resolution of audit findings and get a clean slate, embarking on consequence management and strengthening of its interim audits. Although revenue had increased by 3.3% in the 2016/17 financial year, net profit had decreased by 6.1% as a result of higher operating expenditure, so the ATNS had looked for possible ways to reverse the trend. These included finalising permission applications, to expand to other markets in the 2018/19 to 2022/23 financial years, and making air tariff adjustments for areas where air traffic had reduced because airlines used bigger aircraft to fly its routes, as against several small airplanes.
The Committee asked about the reasons for the qualified audit opinion, the role of its internal audit team, strategies to increase its revenue, its consequence management process and its Broad-based Black Economic Empowerment (BBBEE) scorecard. It wanted to know what was being done to address supply chain management issues, and to explain its financial position based on either foreign exchange gains or losses. The Committee observed that fortnightly Board meetings, where the Board task team would meet with the executive to resolve the issues that had led to a qualified audit opinion, might have financial implications, It also asked how ATNS intended to market aviation to youths in previously disadvantaged areas, and what strategies it would use to retain trainees in high positions and ensure that black trainees had practical training.
The brief by SAMSA included reasons for the late submission of its 2016/17 annual report, why it had received a qualified audit, and the steps taken to resolve it. It reported that it had not had a chief executive officer (CEO) for 16 months after the Board had made a recommendation. It described its corporate service investment activities, its achievement of 65% of its targets, the key challenges faced and its recommendations on the way forward.
The Committee expressed concern over the late submission of SAMSA’s 2016/17 annual report, and observed that SAMSA sets targets that it could not achieve. It asked about its irregular expenditure, the role of its internal audit team, its diminishing technical skills, its capacity to catch the culprits of inland water pollution, its capacity to react to major marine disasters, the maritime transport policy and its risk management mechanism. The Committee also asked SAMSA to explain why it had achieved only 65% of its targets, to present a turnaround strategy in writing, and to explain the delays in coming up with appropriate legislation. The Committee remarked that it would be in SAMSA’s best interest to outline the challenges highlighted by the Auditor General’s office, to ensure that it could intervene. It agreed that SAMSA needed legislation to empower it and assured the entity that the Committee would assist it with processes to hasten the promulgations of its legislation.
The Chairperson said the purpose of the meeting was to receive briefs from the Air Traffic Navigation Service (ATNS) and South African Maritime Authority (SAMSA) on their 2016/17 annual reports and financial statements. The two entities also had to give reasons for the qualified audit opinions received and measures to resolve them.
Air Traffic Navigation Service (ATNS): Annual report
Adv Edwin Mphahlele, Board Chairperson of ATNS, introduced his team and confirmed that during the 2016/17 financial year, the entity had received a qualified audit. The Board had constituted a task team to ensure that ATNS would resolve the issues identified in the audit opinion, and had indicated to the shareholders that it would be a profitable entity. He added that ATNS had undertaken corporate social responsibility programmes in the financial year under review.
Mr C Hunsinger (DA) asked if members of the public could acquire ATNS shares.
Adv Mphahlele replied that ATNS was a wholly-owned state entity. It had embarked on skills development in collaboration with the Department of Higher Education and Technology (DHET), and the programmes were presently awaiting accreditation by the Department. The Board was also working with ATNS management to deal with audit issues. He invited the CEO to give the brief.
Mr Thabani Mthiyane, Chief Executive Officer (CEO): ATNS, said that his brief would include measures in place to address audit issues. He described the entity’s organisational profile, its governance framework, its mandate, vision, mission and values. Its strategic imperatives were aligned with the National Development Plan (NDP) goals, the African Union 2063 agenda and the International Civil Aviation Organization (ICAO) framework and plans. The core business areas of ATNS were air traffic services, air navigation infrastructure and training institutions.
He gave an overview of its current services, the statutory and contractual service areas it operated in, its areas of responsibility, its non-regulated businesses, ATNS contributions towards the state’s nine-point plan and strategic linkages to government outcomes. He outlined the corporate social investments in the financial year mentioned by the Board Chairperson. The ten-point plan for sustainability and climate change included strategies implemented on aircraft to reduce the emission of inert gases dumped in the atmosphere, and the reduction of noise in residential areas.
Employment equity statistics showed that ATNS had met targets for females and people with disabilities in the 2016/17 financial year. It had successfully implemented the human resources partnering model, the ATNS competency model, the talent management and succession management for leadership and crucial positions, its performance management review and scorecard alignment and its transformation strategy.
The factors that had led to the qualified opinion were the accounting treatment of assets, non-valuation of assets, assets that could not be physically verified, late capitalisation of assets and irregular expenditure. He outlined the plans to resolve audit findings and made a commitment to prioritise the resolution of audit findings and get a clean state.
ATNS had also embarked on consequence management and had strengthened its interim audits. An analysis of the past five years indicated that turnover had not reached the projected increase, and this had affected net profits in the 2016/17 financial year. This was due to the grounding of airlines that had not paid their tariffs, as grounded airlines could not pay tariffs, and ATNS had had to write-off amounts owed. Presently, ATNS requested a two-month deposit on tariffs, or payments in advance. Revenue had increased by 3.3% in the 2016/17 financial year, although net profit had decreased by 6.1% as a result of higher operating expenditure, so ATNS had looked for possible ways to reverse the trend. These included finalising permission applications to expand to other markets in the 2018/19 to 2022/23 financial years, and making air tariff adjustments for areas where air traffic had reduced, because airlines used one larger aeroplane to fly its routes, as against several small aircraft.
Mr L Ramatlakane (ANC) asked ATNS to clarify why the same auditors who had not given it a qualified opinion in the past had suddenly issued it with a qualified audit opinion in the 2016/17 financial year. What was it doing to increase its revenue, and how did it intend to stop the Board task team from interfering with the activities of the executive? He asked whether the internal auditors had functioned optimally and how it managed consequences for neglect of duty by staff that had been responsible for non-compliance.
Mr C Hunsinger (DA) asked what strategies it was using to align itself with the growth in the number of people flying, despite airlines’ strategy of using bigger aircraft as opposed to the earlier practice of using many smaller aircraft. He asked for clarity on the airspace conditions for drone activities, and whether ATNS considered depreciation in the amount recorded for total assets. What strategies would it use in working on its amortisation model and to retain the best talents that graduated from its training institutions?
Mr M de Freitas (DA) asked why ATNS had received a qualified opinion and why the contractual service areas at Richards Bay had been acquired by a private company. What strategies was it using to attract young people into aviation? How had the dramatic staff increase at ATNS led to improvements in aviation? He asked ATNS to explain its financial position, based on either foreign exchange gains or losses.
Mr T Mpanza (ANC) asked how many of ATNS’s senior management were people living with disabilities, and its Broad-based Black Economic Empowerment (BBBEE) scorecard in terms empowering women, youths and black business. What strategies were used to encourage black people and females to train as pilots?
Ms N Nolutshungu (EFF) asked what strategies had been put in place to address supply chain management issues that had been identified in the qualified audit opinion.
Mr M Sibande (ANC) asked ATNS to clarify if the fortnightly Board meetings complied with the regulations, and how it intended to market aviation to youths in previously disadvantaged areas. What measures would it use to retain trainees in high positions and ensure that black trainees had practical training? He asked ATNS to identify parties who owned private landing strips, and to clarify if it had audited these strips. Why had it allowed airlines to accumulate high air traffic before they were grounded? What were the internal mechanisms it had to tackle audit issues?
Mr G Radebe (ANC) asked if ATNS had complied with the regulations in the King IV report on corporate governance, because its submission indicated that it had complied with the King III regulations only.
Adv Mphahlele indicated that in line with consequence management, the entity had suspended its chief financial officer (CFO) and company secretary over charges related to neglect of duties. The audit committee had just been constituted. The Board task team (BTT) was being constituted to ensure that Board meetings were reduced, and also ensure that whatever was represented was not a misrepresentation of the facts.
Mr Matome Moholola, Acting CFO: ATNS stated that the audit qualification was due to componentisation of assets and supply chain management issues. The componentisation of assets should have been done earlier, but it was a technical process that needed certain expertise. The componentisation of assets had started, but was ongoing. The BTT would have only an oversight role and the meeting attendance by Board members would be reduced.
Mr Ramatlakane asked what functions needed to be undertaken by the BTT in its oversight role.
Adv Mphahlele said that the meetings had not started, and would be guided by standard regulations.
Mr Ramatlakane asked if the Board intended to withdraw the powers of the CEO.
Adv Mphahlele replied that the CEO worked with the BTT as an executive and assured the Committee that the Board had no intention of withdrawing the powers of the CEO. The BTT had been constituted to address the audit issues.
The Chairperson asked if the Board would be comfortable to allow the CEO to execute an action without its presence, because the presence of the Board could create irregular expenditure.
Mr Sibande expressed concern over the duplication of responsibility between management and the BTT, as this could have financial implications.
Adv Mphahlele said that the Board would examine the consequences of the BTT before it implemented its activities, based on the advice of the Committee.
The Chairperson asked Adv Mphahlele to confirm if ATNS had a full complement of the Board.
Adv Mphahlele said that four members of the Board had resigned, and ATNS was negotiating with the executive authority to get a full complement.
South African Maritime Authority (SAMSA): Annual report
Mr Lolo Raphadu, Company Secretary: SAMSA, said that in the past, invitations received from the Committee had arrived at SAMSA offices late, but he was pleased that the invitation for the present meeting had arrived in time. He introduced the Board Chairperson, Mr Mavula Msimang.
Mr Msimang apologised for his absence during previous meetings due to various appointments that could not be changed, and for medical reasons. He said that SAMSA had been late in submitting its 2016/17 annual report due to difficulties in carrying out Board activities, including the entity’s forensic investigation. SAMSA had received a qualified audit and had not had a CEO for 16 months after the Board had made a recommendation. He highlighted SAMSA’s corporate service investment activities during the OR Tambo centenary celebrations, and said that the Board had two vacant positions.
The Chairperson asked why, after 16 months, SAMSA did not have a CEO.
Mr Msimang said that he had engaged with the Ministry on the appointment of a CEO after the Board had submitted the recommended candidates. The Deputy Minister had been assigned with the portfolio of SAMSA, but the Board had not received any information on the position yet.
The Chairperson said that the Committee would follow up, as it did not want the CEO or key positions to remain under the purview of acting officials.
Mr Sobantu Tilayi, Acting CEO and Chief Operating Officer, gave an overview of SAMSA, the governance report, and the state of the Board. Highlights of the corporate performance showed that SAMSA had achieved 65% of its objective indicators, directly saved 150 people through the coordination of the Maritime Rescue Coordination Centre (MRCC), carried out over 13 000 survey activities on vessels, achieved a level three Broad-based Black Economic Empowerment (BBBEE) scorecard, carried out 262 port state inspections, had not reported any ship losses, and successfully managed nine oil pollution incidents.
It had also passed on over 13 000 pre-arrival notifications to the Department of Transport Maritime Security Coordination Centre, had four merchant ships on the South African Ship Register -- with two registered during the 2016/17 financial year -- implemented a cadetship programme in collaboration with the Department of Higher Education and Tanning, completed the implementation of the Automated Ship Register, and re-commissioned the Department of Agriculture Forestry and Fisheries ships that were not able to carry out patrols and fisheries research duties.
As a result of the tariff adjustment implemented in June 2016, total revenue had increased by 21% in the 2016/17 financial year. With the proposed tariff increase in 2018 which was being fine-tuned by the Minister, SAMSA would remain sustainable. Total expenditure had been reduced by 9% during the 2016/17 financial year as a result of cost containment measures. He outlined the reasons for a qualified audit opinion and the measures used to stop the trend.
SAMSA’s key challenges were limited maritime enforcement resources, the qualified audit opinion during the 2016/17 financial year, under-funding of the sea watch and response operations since 2009, diminishing technical skills capacity due to an ageing work force, outdated and slow ratification of legislation, and obsolete communication infrastructure. SAMSA’s recommendations included ratification of outdated legislation, outlining a clear roadmap on the implementation of the Comprehensive Maritime Transport Policy, finalisation of the National Transport Policy and SAMSA funding model, and the transfer of SA Agulhas from SAMSA’s books, based on the Operation Phakisa initiative.
Mr Radebe expressed disappointment that the report had not been submitted when due, because it had affected the Committee’s Budgetary Review and Recommendations Report (BRRR). He observed that SAMSA set targets that it could not achieve, pointing out that it had not achieved five targets during the 2016/17 financial year, and asked why they were not achieved. He specifically asked why two service delivery targets -- port state inspection and maritime safety -- were not achieved. He observed that the tenure of some Board members had ended, and asked if SAMSA wanted the Committee’s assistance to engage with the Minister. He asked why irregular expenditure had increased from R214 million to R238 million during the 2016/17 financial year. What were the causes of non-compliance that had led to irregular expenditure in respect of National Treasury guidelines? Did SAMSA have an internal audit unit and was it effective?
Mr Mpanza asked SAMSA to state what challenges it wanted the Committee to engage the Minister on, in writing. Why had the Board’s sub-committees on audit and risk management not picked up the risk areas and resolved them before the Auditor General’s office had given SAMSA a qualified opinion? What was SAMSA’s relationship with the Auditor General’s office? Were consultants prevalent in performing its service delivery responsibilities?
Mr Sibande also expressed concern over the late submission of annual reports, and asked SAMSA to update the Committee on the state of seafarers in other provinces, apart from Limpopo. He asked if SAMSA had a risk management mechanism, because managers could resign easily if there were problems. Did SAMSA have the capacity to catch the culprits responsible for inland water pollution, and had it charged any company for polluting inland waters? He also asked SAMSA to clarify the number of boats that it had found not to have subscribed to pre-arrival registration in South African waters.
Mr Hunsinger asked SAMSA if it had the capacity to react to major marine disasters, to clarify its current capacity and the capacity required to get it up to international standards. What was the implication, framework and deadline for the implementation of the maritime transport policy? What were SAMSA’s criteria for giving performance bonuses, and the alignment between performance bonuses and performance achievements?
Mr De Freitas asked why the CEO position had not yet been filled, and why SAMSA had achieved only 65% of its targets.
Ms Nolutshungu observed that SAMSA had a lot of challenges, but was coming out with ways to resolve the challenges. She asked the team to present its turnaround strategy in writing.
Mr Ramatlakane asked SAMSA to state how it intended to deal with diminishing technical skills. He asked the Department the reasons for delays in coming up with appropriate legislation, and asked SAMSA to clarify if its institutional arrangement to engage with the Minister was working.
The Chairperson remarked that Members were already anticipating engaging with SAMSA again, so it would be in SAMSA’s best interest to outline the challenges highlighted by the Auditor General’s office to ensure that the Committee could intervene. She also agreed with Members that SAMSA legislation needed to empower it, and assured the entity that the Committee would assist it as legislators.
Mr Msimang said that a choice had to be made between either continuing with the current process for filling the CEO position or starting over, since 16 months had elapsed since the Board’s recommendation. A possible reason for the delay was that key officers who had undergone disciplinary hearings had engaged in whistle-blowing activities to the press before the Auditor General’s reports had been delivered to Cabinet. The Board and management stood by its decision, even though some of the staff had raised doubts on the efficacy of the officer it had recommended. Even though acting officials may have vested interests, SAMSA had had to do away with some of its key staff and this had led to delays and lapses. Capable key staff had also been short-listed as committee members, and this implied that all Board members had to be available to form a quorum and make decisions. He assured the Committee that members of SAMSA committees had not received any remuneration for work done.
The reason why SAMSA had not performed with some targets was due to in-house saboteurs, and this could be confirmed through the forensic report. For instance, some key staff had resigned when they were being questioned on charges of misleading management, and this had led to serious operational delays.
The technology to sight vessels that did not pre-register before arrival was expensive, and SAMSA was at risk due to limited budgetary allocations.
The Chairperson indicated that Mr Raphadu had submitted the forensic report to the Committee.
Mr Phumlani Myeni, CFO, said that SAMSA had received a qualified opinion due to supply chain management (SCM) issues around irregular expenditure and supplier commitments. SAMSA’s internal operations were weak, and it could not identify irregular expenditure. Quotations for over R500 000 did not have properly filed documents, and orders had not been closed since 2012, so SAMSA was tightening its SCM and upgrading its systems. During this period, the Chief Procurement Officer had resigned when disciplinary action was instituted. SAMSA had made conscious efforts to reduce the expense and tenure of consultants. A detailed response would be sent to the Committee in written form to clarify this and other issues.
Mr Tilayi said that when the turnaround started in June 2016, SAMSA had had to obtain an overdraft to pay salaries, but the situation had changed positively now. The key staff that had misled management had had to leave when disciplinary action was taken against them. He explained the strategies that SAMSA was using to address port state Inspections, as a rule existed that such inspections could be done only with a particular competence and training. He described the progress in training young cadets for port state inspections, and said that it was work in progress.
SAMSA was making progress on seafarers in inland provinces, but Limpopo has the highest number and the statistics would be presented to the Committee in written submissions.
Pollution of South African waters was the purview of theDepartment of Environmental Affairs, while SAMSA dealt with people injured as a result of polluted waters.
It had done a risk assessment on disaster intervention and had decided to focus on surveillance which prevented accidents from happening because it did not have the capacity to manage major marine disasters.
Mr Raphadu said that negative newspaper reporting had affected SAMSA. Committee members did not get paid, and the Board kept its members with expired tenures as committee members because of their institutional memory.
The Chairperson excused herself to attend another meeting, and nominated Mr Ramatlakane to act on her behalf.
The Acting Chairperson said that the Committee had sufficient information, and would further interrogate SAMSA after it had received its turnaround plan.
Draft of first term programme
The Acting Chairperson said that the meeting was supposed to have included the Passenger Rail Agency of SA (PRASA), but it had indicated that it would not be available. He listed the programmes that the Chairperson had observed were not in the document given, and asked for comments from Members.
Mr Radebe said that the Committee needed to summon PRASA and the Rail Safety Regulator (RSR) to explain what had happened with the two train incidents that had occurred during the festive period. He suggested that the invitation should be scheduled for the coming week.
The Acting Chairperson remarked that Members should recall that when PRASA had initially been invited, the issue raised by Mr Radebe had been part of the brief. He added that the suspension of services on the central line would also be discussed.
Mr Mpanza said that the Committee should receive public inputs on commuter asset safety in the next week, and ensure it received them before it received briefs from PRASA. During the meeting with PRASA, the Committee should address PRASA’s leadership crises, the security of assets and the suspension of the central line among other issues. The Committee should also receive updates on the way forward for the Bus Rapid Transit process.
Mr Sibande observed that the draft programme included deliberations on amendment bills, and expressed concern on whether it would affect time frames. He requested Members to go the extra mile to fulfil the Committee’s proposed work.
The Acting Chairperson indicated that the draft programme would be validated from time to time by the Chairperson and the Committee Secretary, and follow-up would be included as deemed fit. He asked Members to decide if it would be productive to receive public inputs on commuter asset safety with PRASA in attendance.
The Committee Secretary indicated that the coming week between 5 and 9 February was Committee Week, but Members needed to consider the State of the Nation Address and utilise the free days for whole day meetings.
Mr Radebe assured the Acting Chairperson that Members were available for whole day meetings.
Mr Mpanza agreed with the amendments and adjustments, and tendered apologies for some days for medical checkups.
The Acting Chairperson agreed with the amendments and adjustments to the draft programme, and asked the Committee Secretary to work on the changes and update Members.
The meeting was adjourned.
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