SANRAL irregular, fruitless, wasteful expenditure, deviations, expansions; with Minister and Deputy Minister

Public Accounts (SCOPA)

07 March 2018
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Standing Committee on Public Accounts (SCOPA) met to review the irregular, fruitless and wasteful expenditure incurred by the South African National Roads Agency (SANRAL). SCOPA was concerned that that SANRAL had consciously ignored Treasury regulations and failed to adhere to the Public Finance Management Act.

SANRAL had continued on the path of irregular, fruitless and wasteful expenditure, and did not follow supply chain management processes, which was something that had being ongoing for years. Its audit outcomes had been unqualified for four consecutive years, and it had amassed irregular expenditure of R10bn and fruitless expenditure of R15m for the 2016/17 financial year alone, which was a big drain on taxpayers’ money. Of concern too was the large amount requested in deviations, which could have been avoided if proper accounting practices had been followed. The Chairperson said that deviations and expansions could be allowed only under extraordinary circumstances, and not taken as a norm.

Members said SANRAL had been receiving unqualified audit findings for four consecutive years, but in their written document, they had contended that there was improvement. However, going through the same document there had been no improvement. The Committee wanted clarifications, because the situation was getting worse. Others asked why tenders were not awarded to the lowest bidders. Two quotations to the value of R32 943 had not been awarded to a bidder with the lowest quote, although the successful bidder could not provide all of the documentation required in terms of the Financial Intelligence Centre Act. Other issues raised dealt with SANRAL’s transformation policy, the awarding of preference points without original black economic empowerment (BEE) certificates being provided, challenges with procurement and contract management, irregular expenditure and deviations.

The newly appointed Minister of Transport thanked the Chairperson for the invitation to attend the hearing, and said that this invitation had been an important induction into the Department. He added that the Auditor-General’s reports had to be taken seriously by all government departments.

Meeting report

The Chairperson welcomed the Minister, Deputy Minister and the leadership of the South African National Roads Agency Limited (SANRAL), and congratulated the new Minister on his appointment. Their coming as political heads would help to familiarise them with issues affecting SANRAL which were of concern to the Committee, and which could also be incorporated in the monitoring duties of the entity. This was a follow-up to the meeting held last year and was aimed at tying loose ends and getting answers from concerns previously raised. 

Questioning of SANRAL’s financial performance

Mr E Kekana (ANC) led the Members’ questioning. He said it would be based on the documents provided to the Committee as a follow-up from the last meeting. The Chief Executive Officer (CEO) of SANRAL was responsible for ensuring that there was no irregular expenditure in terms of Public Finance Management Act (PFMA), and providing a justification for such expenditure was in itself incorrect. The information provided in the document provided to this Committee would form the basis of the questioning.

The first issue to be looked at was that SANRAL had been receiving unqualified audit findings for four consecutive years, but in their document it was said that there had been an improvement. Going through this document, there had been no improvement. Moving forward, the Committee would want clarifications, because the situation was worse.

Bidding processes not followed

Looking at the first item in the document provided, about competitive bidding processes not being followed to the tune R549m, it was indicated that during the 2015/16 financial year irregular expenditure had been identified as a result of SANRAL inviting quotations and appointing a service provider above the threshold of R500 000. What was not understood was that if a price of R500 000, exclusive of VAT, would amount to above the R500 000 threshold when VAT was added. Why, then, had this been done?

Mr Skhumbuzo Macozoma, CEO SANRAL, agreed that any irregular expenditure was unacceptable and the responsibility of the organisation was to ensure that irregular and wasteful expenditure did not exist, and that process was ongoing. The company had investigated the specific case raised and the issue had been a fundamental misunderstanding by the staff concerned of the implications of adding or not adding VAT to the total, and how that affected compliance and non-compliance. There had been no sinister motive beyond that lack of understanding by the staff concerned, who thought that the limit applied without VAT.

Mr Kekana asked how literate the staff concerned was, and how they could get confused by something so simple.

Mr Macozoma answered that they were literate enough, and accepted it was a mistake that should not have been made.

Mr S Booi (ANC) countered that the response from the CEO was unacceptable, and wondered whether SANRAL had qualified persons in these positions. What had just been said was embarrassing, because the Committee expected staff to know what to do at this level. Did SANRAL not take appointed staff through the processes and provide training?  How were interviews conducted by SANRAL before making appointments? Saying that staff did not understand, and this should be taken as an excuse, would not fly with SCOPA. It was the public purse one was talking about and for the public to hear excuses like this from the CEO of a government entity was a shame to the organisation he represented. SCOPA wanted proper responses. It had also been stated that there had been a disciplinary hearing, with certain individuals identified, and its outcome had been a warning letter. He asked the CEO to explain how an issue involving a certain amount of money could end with only a warning letter at a disciplinary hearing.

Mr Macozoma replied that he was in no way trying to defend any official, but to provide the answers demanded by the Committee. The disciplinary process had been conducted independently, based on the evidence gathered on the specific matter being looked at. When this issue in question was investigated, it was deemed an error due to oversight. The disciplinary committee had considered what the results and proceeds that came out of the procurement had been, and whether the result had led to wasteful expenditure, and if the company had derived value from what was procured. The conclusion was that even though there was an oversight, the money was spent in the intended manner for the product and value was derived by the organisation from the intended product. No malice was found from the procurement process and the appropriate sanction should be a warning to staff concerned not to repeat the same mistake.

Mr Kekana directed the Committee to a footnote regarding corrective measures. When did SANRAL realise there were problems, and when were such corrective measures instituted?

Mr Macozoma replied that the matter dated back to the 2015/16 financial year and had been duly captured by the Auditor-General (AG) in the annual financial report, so management might have been aware of it during the 2016/17 financial year, and that was when corrective action was initiated. He gave no undertaking that such mistakes would not be made again, but said that controls had been put in place and if not adhered to, action would be taken against offending staff. The commitment of the SANRAL was to move to a clean audit as well.

The Chairperson wanted to know if the controls mentioned would lead to positive outcomes and curb irregular expenditure going forward.

Mr Macozoma agreed to that assertion, and promised that it was the intention of the organisation not to have repeat findings. The controls were to ensure the movement from unqualified audit outcomes to a qualified one. Since assuming the helm at SANRAL, he had embarked on internal re-engineering of the organisation by setting up a supply chain unit which had never existed before, appointed additional supply chain managers across the regions, implemented a new bid adjudication policy and reviewed the delegation of powers to the regions in order to improve procurement processes, among other measures.

However, one area that would work against SANRAL attaining its stated objectives was still the E-toll project and its challenges.

Mr Kekana said it would be good if all this could change the trajectory of SANRAL, but what was important was that when all was said, and CEOs and other organisational heads were tested, a different outcome was arrived at.

Bid not awarded to lowest tender

Another issue was a bid not awarded to the lowest tender. Two quotations to the value of R32 943 were not awarded to the bidder with the lowest quote. In the first instance, the successful bidder could not provide SANRAL with all of the documentation required in terms of the Finance Intelligence Centre Act (FICA), and subsequently the contract was awarded to the second lowest bidder. In the second instance, the lowest bidder could not deliver the required goods as per the quotation to SANRAL and the next bidder was finally awarded the quote. How was this bidder successful in being awarded this tender? The CEO had just stated that they had controls, and it would be assumed that with controls there was checklist, and all these issues should have been picked up.

Mr Macozoma said SANRAL believed it did the right thing in these two instances. When the organisation went through the documentation, it discovered that the lowest bidder had not submitted the documentation that was required. That had led to the lowest bidder being disqualified. Being guided by procurement regulations, the service was awarded to the next bidder that had submitted a bid, which happened to be the second lowest bidder. SANRAL believed it was correct to do so.

The Chairperson interposed that the Committee was not interested in SANRAL’s belief, because that did not matter anymore -- there was already a finding by the Auditor General (AG) that it was irregular.

Mr Kekana wanted to test that belief. He said that according to SANRAL, the successful bidder could not produce the documents required according to the Act. A successful bidder is one who has gone through the process and been accepted by the organisation satisfying itself that they met the requirements. With a checklist in place, all the boxes were ticked, yet the one that was not initially qualified turned out to be the successful bidder ahead of the one the organisation deemed the most appropriate. This anomaly should be clarified.

Mr Macozoma responded said that it was because of the internal controls put in place that the organisation had picked up the non-compliance after the evaluation process of the bid.  It was a normal procedure for the organisation to check the credentials of the suppliers when the tenders were received, prior to evaluation.  It was also done post-adjudication, before the offer letters were signed for the services to be provided. It was important to do them at both stages, because some credentials changed during the course of the bid process. A tax clearance certificate might expire at some date during the course of the bid process, or before it was finalised.

The Chairperson wanted to know what had happened in this case, without theorising.

Mr Macozoma said after consulting the Acting Chief Financial Officer (CFO), it was indeed the tax clearance certificate that had expired in the course of the evaluation in this case. The evidence could be sent to the Committee should they wish.

The Chairperson was of the opinion that sending the evidence to the Committee would change nothing, because it was the AG who had made those findings and it should have been sent to them instead.

Preference points without original BEE certificates

Mr Kekana moved on to the awarding of preference points to tenders without original/certified black economic empowerment (BEE) certificates, for R134m. He was unhappy that the CEO was not concentrating when being addressed, because he would either want the question to be repeated or respond to something unrelated. The CEO and his officials should have had a management meeting before coming to the Committee, and all necessary preparations made with the briefing of the CFO. 

On item three, it was stated that six occurrences leading to irregular expenditure had totalled R134 492 628. Irregular expenditure had been identified in 2014/15 and 2015/16 where, at the time of awarding the tenders, SANRAL did not have an original or certified copy of the successful tenderers’ BEE certificates at hand, but only copies thereof. This had resulted in expenditure of R134 492 628.  What did this mean? If SANRAL did not have the originals, but only duplicate copies, where had it got the duplicate copies from?

Ms Allyson Lawless, Chair: Audit and Risk Committee, SANRAL Board answered that the incidence had been identified in the 2014/15 and 2016/17 financial years. At that time, the agencies were issuing electronic copies, and SANRAL believed it was acceptable to accept electronic copies. The AG had since made it clear that it was unacceptable.

Mr Booi, on a point of order, interjected that it was not her personal money this Committee was dealing with. This was the public purse and Parliament was not her house. This Committee would deal with her if it was undermined. The Chairperson had to be spoken to with respect.

The Chairperson said the word “believe we were right” should not be used, because the Committee was talking about policy and regulations. We all had different beliefs.

Ms Lawless apologised, and added that the new methodology had been put in place to ensure that only original copies were henceforth accepted. This historical error had now been corrected.

Mr Roshan Morar, Chairperson: SANRAL Board, further added that for the financial year of 2016/17, no deviations had been identified by the AG. The Committee was assured that going forward, these issues would not be seen.

Mr Kekana was not convinced that this was the last the Committee would see of deviations emanating from this company, because all departments promised and later failed. When were these policy regulations formulated? Why wait for the AG to tell SANRAL a simple thing like that? How could senior officials like all those at the meeting not know? The Committee only wanted credible answers. All contractors know they have to submit original documents when they apply for a tender, yet senior officials of SANRAL were saying they did not know. Just explain, how did this happen?

Mr Macozoma said that the method that was used in 2014/15 was electronic, so BEE certificates were also submitted electronically. This had been this case until the AG had directed that electronic copies alone should not suffice, and that hard copies should also be requested. The system had since changed to the demand for a hard copy as well.

Mr Kekana asked if there had been a disciplinary hearing thereafter, and what the outcome was.

Mr Macozoma emphasised that disciplinary hearings were independent of management, and were based on the evidence at hand. The question at this hearing was if there had been an intended malice with the electronic submission of BEE certificates, with the possible intention of defrauding the system. The finding had been that there was no malice involved and that the procurement itself had led to the services being delivered.

The Chairperson asked why people had been charged if it was the policy of SANRAL to accept electronic copies? What organisational policy had they contravened?

Mr Macozoma replied that the audit findings stood when SANRAL was unable to convince the AG the process followed was deemed to be correct. He added it was a bit difficult for him to answer, because he was not employed at SANRAL at the time this occurred. He asked the Acting CFO to respond, because he was at the company at that time.

Mr Dumisani Maluleke, Acting CFO, SANRAL, responded that the company felt at the time that the project managers listed were somehow culpable, because they had not followed up to demand the originals, and this would have continued if no action was taken.

The Chairperson asked what the company policy was at the time.

Mr Maluleke said that because of the volume of documents to be submitted, the company policy then was to accept electronic copies.

The Chairperson then asked on what basis the officials had been charged.

Mr Maluleke said it was to ensure that going forward, these things did not happen again.

Mr Kekana said it was a malicious complaint, and the staff had done nothing wrong. An employee, before being charged, must have violated a certain company policy.

Sustainability of accepting lowest tenders

Mr Macozoma raised the issue of sustainability, saying that since the change in the awarding of tenders had come into effect, using the lowest bidder, many of the contractors that bid for routine road maintenance were experiencing significant sustainability problems, because the tenders awarded to lowest bidders were not sustainable. There was ongoing engagement with the National Treasury (NT), and it was pleasing to report that NT were becoming amenable to SANRAL’s approach, because it was more sustainable than that of accepting the lowest bidder. Sub-contractors were confined to rates that were not sustainable in the way they executed the work on site through the lowest bid process. The general concern of construction practitioners was that because of the general nature of competitive bids, there were many cases of undercutting between suppliers, to the extent that people submitted unsustainable rates so that they could get the jobs. Things then began to fall apart almost immediately so there was this recurring trend of project failures because of the inability of contractors to continue and finish the jobs they were given.

In 2017, SANRAL had developed a draft transformation policy that had never existed in the company before. The Chairperson asked why this was so, as SANRAL was a public institution.

Mr Macozoma response was that there had been instruments previously used to drive transformation, but they had never been coordinated into a policy that could be Cabinet approved.

Mr Booi countered by asking where this policy was being debated. He reminded the CEO that this issue had led to the adjournment of a previous meeting between SANRAL and SCOPA, because they had derived their so-called policy from a university paper. He reminded him also that neither Treasury nor SANRAL could make policy. The sustainability statements could not be believed, because they were not the policy of government.  He asked if the CEO had read the PFMA, because it was very dangerous to mislead Parliament. He referred the CEO to the AG’s concerns regarding leadership. The AG had stated that there was a slow response from senior management in addressing the deficiencies noted over its oversight regarding the financial reporting process, including detailed reviews of financials. All SANRAL officials present should realise this meant non-compliance. This all pointed to deficiencies in the leadership style. What was going on at SANRAL?

Procurement and contract management

Another issue highlighted by the AG was procurement and contract management. It was pointed out that contracts were awarded to suppliers whose tax matters were not declared to SARS. The AG also lamented on the lack innovation and new thinking. This Committee was being misled by the CEO. On expenditure management, the AG had stated that effective steps were not taken to prevent irregular expenditure as disclosed in note 40 of the annual financial statement. These issues had not been addressed for years. This was why the CEO had no answers. What was happening at SANRAL? Why was there a crisis at SANRAL? As the manager of SANRAL, if the CEO could not comply, then he had to be fired. Why was the irregular expenditure growing? It was not the CEO’s money -- it was public money.

The Chairperson asked the CEO to deal with what had “killed the patient” -- in order words, what had happened in the past and not what was going to be done in future. What were the challenges that had been faced by SANRAL? The corrective measures to be taken could be believed only when a full appreciation of what had happened before was in put into context.

Ms Sindi Chikunga, Deputy Minister of Transport, said the Board of SANRAL had been brought along because they were the accounting authority, and that was perhaps why the CEO had requested the chairperson of the audit committee to give some clarity.

The Chairperson countered that the CEO dealt with the day-to-day management of the company, while the board provided strategic guidance and oversight on management. The CEO was responsible for expenditure management.

Mr Booi told the Deputy Minister that the Committee dealt with the officials, and they should be allowed to engage with the company officials when they entered this terrain. The PFMA was very clear on who to engage with. The CEO was responsible for everything in front of the Committee. 

Mr Macozoma said that with regard to irregular expenditure, the letter written to the SCOPA Chairperson in reply to the invitation to appear before the Committee should be referred to. A summary of the submission was given. It outlined the journey travelled with regards to irregular expenditure. Progress was being made to reduce it, and it was progressively going down. The issue of routine road maintenance contracts was as a result of a methodology initiated with the University of Pretoria. The practice had been stopped immediately it was deemed irregular. SANRAL projects were multi-year in nature and expenditure ran over a few years, so what was regarded as irregular were those projects initiated in 2013 and which were coming to an end. This would end the routine road maintenance contract issues.

Dr Blade Nzimande, Minister of Transport, said that the exchange between the Deputy Minister and Mr Booi left him feeling uncomfortable in SCOPA today, and about the participation of board members in the future. The letter from SCOPA was to the chairperson of the board, and not to the CEO. SCOPA had then specifically invited the CEO as the accounting officer, and the chairperson of the audit committee, to participate in the hearing. Chapter 49 of the PFMA stated that “every public entity must have an entity that must be accountable for the purposes of this Act”. In terms of the Act, the board accounted to Parliament via the Committee, amongst others. The implication of what had been said was that the main person who had come to account was the CEO.

The Chairperson agreed that the letter had been sent to the chairperson of the board, but what Mr Booi had meant was that when he was talking to the CEO, it should be left to the chairperson to redirect the question to any other person, and not for the CEO to do so.

Mr M Hlengwa (IFP) wanted to know more about the unconfirmed policies. The Acting CFO had said that in the electronic submissions, it was better. Could the Committee be clarified as to what the tender policy was at the time of submission? 

Mr Maluleke answered that only seven contracts among many were awarded without BEE certificates. It was also better to receive electronic copies, because of the volume of documents needed from suppliers.

Mr Hlengwa then surmised that since there was no policy, people had then been charged in a vacuum.

Mr Macozoma answered that there was always supply chain management (SCM) at the company which was in compliance with PFMA prescripts, so that policy was in compliance with the policy of 2005 when these issues arose. The issue at hand was an interpretation and understanding of whether electronic was equivalent to a hard copy submission.

Irregular expenditure

Mr C Ross (DA) welcomed the Minister and his Deputy, and found it encouraging that both of them could attend. He shared his concerns over the state of the financial statements. The AG had raised some concerns, and although SANRAL had an unqualified audit for four years, there had been irregular expenditure amounting to R425m in the current financial year, and R9.7b from previous years awaiting condonation.  What practical steps had been taken with regard to the condonation? Had SANRAL engaged with NT or not?

Mr Macozoma said that in each of the financial years when these irregular expenses had occurred and SANRAL had deemed it necessary to request condonation from NT, the process had been followed and submissions made to NT to request consideration and hopefully approval. As recently as last week, return correspondence was received from NT requesting further engagements on matters relating to condonation requests. The CFO would engage with NT on each of those requests. Correspondence had come from NT last week, and those documents could be submitted to the Committee if they so desired.

Mr Ross referred to the competitive bidding process, when the VAT was not included, which pushed it out of the threshold, and said this was a very serious offence. It seemed like a manipulation of intended outcomes. This was a common practice in many departments, because without the VAT one would have had an open tender process. The sanction of only a warning letter for manipulation of numbers should be re-evaluated. This was clear case of side-stepping the open tender bidding process.

Mr Macozoma said the investigation that followed when the disciplinary process was initiated, had sought to verify whether malice was intended with leaving out VAT in the tender value. No intended malice was found, so it was deemed an oversight by the affected official. The company was satisfied, and was sure there was no intended manipulation of intended outcomes. However, he welcomed the suggestion to review the process.

Fruitless and wasteful expenditure

Mr Ross asked if the projects that amounted to R15m in fruitless and wasteful expenditure had been dealt with.

Mr Macozoma said this matter involved the action against the proposed N1 and N2 winelands toll scheme in Cape Town, which the company lost in the courts.  The AG had deemed that the company should have known it would lose in court, and had ruled that the litigation expenditure was wasteful. The interest that had to be paid to the concessionaire and the lawyers’ fees made up that amount. SANRAL was of the opinion that constitutionally, it had a responsibility to pursue identified and approved projects for implementation by the government. It came out in court, though, that there were procedural steps that had been flouted, hence the loss. After the loss at the Appeal Court, it was decided not to go the Constitutional Court.

Mr T Brauteseth (DA) asked about the Pretoria University model. He confirmed it was not a bad model, and wanted to know if any proactive action had been taken by SANRAL to engage other stakeholders to pass it into law? Alternatively, had it just been abandoned since it was not declared as law? What was it with the unbundling of contracts concerning transformation, that had led to the cancellation of tenders that cost R176 000. Why were those contracts unbundled? Did the board just cancel contracts just like that? Did they understand the law of contracts?

Mr Macozoma said engagement was ongoing with NT at this point, though they could see SANRAL’s perspective. No agreement was in place yet on how the Preferential Procurement Policy Framework Act (PPFA) regulations could be amended to accommodate what was being proposed. On the unbundling of contracts, they had sought to intervene directly in the supply chain policy to ensure more acceleration of transformation initiatives at the company. This was before the transformation policy had been initiated. The board had then developed an unbundling policy that could be useful to the board itself, to test projects that could be unbundled.

Ms Lawless said the cancellation had been on the big projects. The bigger projects were broken down to accommodate more small companies, thus creating opportunities for more people.


Ms T Chiloane (ANC) latched on a comment made by the CEO, that he was not an expert on BEE. How could a CEO of a public company in SA say that? BEE was a policy of the government.

Mr Macozoma said what he had meant was that he did not sit with BEE accreditation companies who would look into the details of analysing empowerment credentials, although he was aware of the BEE Act and its processes from a procurement perspective in verifying BEE requirements. He was not professing to be a BEE expert, nor was he pleading ignorance of the Act.

The Chairperson told him to mind his language, and Ms Chiloane said that amounted to arrogance. This was a Committee of Parliament representing the people. When anyone addressed this Committee, they were also doing so to the people this Committee represented.

Ms N Khunou (ANC) congratulated the new Minister, and said that SANRAL had a problem of liquidity and lacked transformation. The CEO, in saying that he was not an expert on BEE, meant that he and this company was not interested in transformation. The Committee wanted all the reports on the legal matters that went to court, and money paid to external legal firms and internal lawyers as well. This was because this company interpreted the laws as they wished, and hardly adhered to the PFMA. The Committee wanted to know how many court cases the company had lost.  No member of staff who had done wrong had been punished by SANRAL. The accounting personnel must give account of why they had disposed of immovable property worth R2m without following due process. Which company had bought the assets and what were the compelling reasons for doing so?

Mr Macozoma said he humbled himself before the Committee, and had not meant to offend the Members. He understood the responsibility of a CEO of a state entity, and the accountability the office demanded that it account to Parliament. He asked the CFO to address the question on the disposal of land worth R2m without the approval of the Minister.

Ms Inge Mulder, CFO: SANRAL, said the requirement was that approval had to be sought from the Ministers of Transport and Finance. The only approval received had been from Finance, and not Transport. The asset had been sold at below market value. The information as to whom it had been sold, would be provided later.

The Chairperson asked why approval had not been obtained from the Minister of Transport, who was the supervising Minister of SANRAL. SANRAL was an entity of the Department of Transport. Starting at Finance and not at one’s own department did not make sense.

Ms Mulder said it had been an oversight.


Ms N Mente (EFF) wanted to direct her first question to Treasury, because it could give clarity in making sense of the deviations. Could it explain to what extent they validated the reasons given to Treasury for any deviations, expansion or variations? How did Treasury verify the validity of reasons given? When a project manager wrote to SANRAL requesting a deviation or expansion, what reasons were provided?   Was there any fact checking by any team to satisfy the office of the veracity for the said deviation? Was anyone sent from the office to check the specifications, costing and reasons?

A Treasury official answered that two things had to be stated. In any deviation, with a sole supplier, Treasury approval was not needed but the deviation had to be reported to Treasury within ten days.  In the case of a deviation for any other reason, prior approval had to be obtained from Treasury. The reasons would be assessed and if they were not justifiable, it would revert to the entity and more information would have to be provided. Treasury could also reserve the right to verify the existence of the project in question.

Mr Macozoma took the Committee through two deviations for the rehabilitation of the road R61. For these projects, the company did not need pre-approval, but just to report to NT. As a matter of policy, when a deviation was received from the provincial offices, they normally came with a submission including motivations stating why the work needed to be done. The executive for engineering would then verify and satisfy himself from the perspective of an engineer, that the work was warranted. It then went to the board’s contract committee, which also had to satisfy itself that management had followed due process in requesting a deviation. This originated from the consultant appointed on site to the regional office, who then did the initial verification on site. This was the process followed.


Ms Mente put it to the Committee that the roadworks done did not justify the amount spent. Had anyone from the office checked that it was worth the expansion that had been sought? This road was travelled every day by her, and it was not worth the amount mentioned.

Mr Macozoma speculated that the regional office would have checked. This was easily verifiable, because there were documents for all projects done by SANRAL. The project files could be verified and due diligence would have been done by the engineering department to justify the amount spent.

Ms Mente referred to another expansion granted from four to six months. Information should be furnished on which project the money was taken from to fund this project. The background provided was problematic for the Committee. Initially the contract had been for ten months, but somehow it had been reduced to six months, because whoever advised the committee sitting then had been satisfied the project could be finalised within six months, and would not require additional funding as well.

Mr Macozoma said that was normally the practice -- a consultant was appointed to do design work and the same consultant was retained for the supervision period. The project had not yet been designed when the initial appointment for design was made. When they designed, they also had to help appoint a contractor to implement the project and supervise it until it was completed. What happened here was not unique to this project, but happened in all construction projects. When the design was done and the scoping of tender for the contractor was done, and tenders received back, it was found that the projected construction would be ten months instead of the six months projected when the consultant was appointed. When the contractor had scoped the work, they had indicated they would need a ten-month period. A consultant had been appointed for a design period of five months, in addition to a supervision period of six months. However, the company needed a supervision period of ten months according to the programme, hence a request was made to NT to allow the company a supervision portion of the appointment of the consultant to cover the ten months required for the construction.

Ms Mente again asked why SANRAL was motivating for the same company (BAKWENA) to be used consistently, instead of another. This company appeared more than once, so what was so special about this company. Why use them alone instead of others?

Mr Macozoma answered that this concerned traffic control stations located along the N1/N4 platinum highway. This was a concession contract for 30 years, implemented and operated by a private sector company with a special purpose vehicle, called Bakwena. It was a toll concession from Pretoria to the Botswana border.  Because it was concession contract, it was out of the balance sheet of SANRAL for the next 30 years. SANRAL had given a lot of responsibility to this concessionaire to manage all the affairs that related to road network improvements and the management of operations for this stretch of road. Obligation was also given to them to manage traffic moving in this corridor, and they had seen the need to manage the overload facility to protect the infrastructure. Because of it being a concession contract, it made sense for the concessionaire to spend its own money to protect the infrastructure so when SANRAL got it back in 30 years, it would be in good condition. 

Mr Morar thanked the Committee for the valid comments and inputs given on some of the issues. The board wanted to reinforce that its growing concern was the sustainability of SANRAL and this was receiving serious attention. The board welcomed the new Minister and looked forward to working with him.  The transformation policy had gone through board processes and management, and consultations were ongoing with various stakeholders. Management would supply all the information requested.

Minister’s comments

The Minister thanked the Chairperson for the invitation, and surmised that it was an important induction into the Department. SANRAL came second after the Passenger Rail Agency of South Africa (PRASA) in the transport portfolio. This was an important entity, and there was still to be a briefing from the SANRAL, but this meeting had helped on how to approach the briefing.

Concern at the government level had to go beyond that to that of challenges of governance in state-owned entities. In the State of the Nation Address (SONA), the President had raised these issues and this Committee had a big role to play. Some of issues to tackle were how to ensure that board members do not get involved with operational matters. In one entity, a board member had an office and a personal assistant (PA). This unacceptable, and a governance failure. 

One issue that was of note was that policy departments were weak in supervising and ensuring proper oversight of entities. SANRAL’s dependence on government was another issue. AG reports had to be taken seriously by all departments. Also, for an entity in one department to go Treasury without informing the supervising department, was an anathema. The two ministers should ideally interact with one another. This had been a helpful meeting.

The Chairperson reminded SANRAL to send to the Committee the contractual information that was sought. All the information requested should be sent within seven days.

The meeting was adjourned.

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