Five entities from the Department of Transport briefed the Committee on their annual performance plans, budgets and strategic plans. The entities were the Airports Company of South Africa (ACSA), Air Traffic and Navigation Services (ATNS), the South African Civil Aviation Authority (SACAA), the South African National Roads Agency Limited (SANRAL) and the South African Maritime Safety Authority (SAMSA).
ACSA said it aspired to be the most sought after partner in the world for the provision of airport management services. Significant key performance indicators included the provision of technical assistance to neighbouring African countries, transformation in compliance with the broad-based black economic empowerment (B-BEEE) codes, as well as the employment survey. There were several projects planned for the major airports such as Cape Town International Airport and O R Tambo International Airport. The Committee was told that three of South Africa’s airports were ranked in the top 35 in the world.
Concerns were raised in connection with transformation and the amount of acting positions at the entity. Furthermore, there was a lack of financial information and a high level of irregular expenditure. The report was not detailed enough for some Members, as the percentages expressed required clarification.
The ATNS presentation indicated that one of its achievements was the provision of technical assistance and collaboration with other countries in Africa and the rest of the world. However, concern was raised at the irregular expenditure and the qualified audit which it had received. Improved representation of women, youth and people with disabilities in the organisation was an ongoing target. Community development was also an important consideration. Aircraft flying in unregulated spaces posed a threat. There was a need for South Africa to improve surveillance when flying across the continent.
The chairperson lauded SACAA’s clean audit record, but there was concern at the lack of transformation among those in technical positions, such as pilots. Another challenge was the operating cost percentages. Errors in some of the figures in the presentation were pointed out. Youths and women needed to be attracted to the aviation industry to speed up transformation.
SANRAL was commended for its standing as the heartbeat of local socio-economic issues. Unfortunately, its budget had been cut by R2.1 billion, which was detrimental to its progress. Importantly, Horizon 2030 was the framework through which they would proceed for the next 12 years. It was commended for achieving most of its targets. Transformation would be promoted through the development of black small, medium and micro enterprises (SMMEs) and through the involvement of public liaison committees (PLCs). Some of the areas of concern included the stoning of cars on public roads around Durban, roads which needed urgent repair, and the budget cut which was detrimental to progress. Members asked about progress on the Moloto road. Public compliance with E-tolls still remained a challenge.
SAMSA indicated that issues with the board had disrupted the organisation. However, there had been an improvement from the previous year. The use of percentages in the presentation was again a problem for Members. However, it was clarified that this was the result of a protocol document which was necessary for alignment by the Auditor General. The Deputy Minister commended SAMSA on its improvement from previous years. It had been in turmoil over the last few years because of board issues, and the current board had done well to achieve a turnaround.
Airports Company South Africa (ACSA): Corporate Plan 2019 to 2021
Mr Bongani Maseko, Chief Executive Officer (CEO): ACSA, said ACSA’s mandate was to develop and manage world-class airport businesses for the benefit of all stakeholders. Its vision was to be a world-leading airport business. By 2025, it aspired to be the most sought-after partner in the world for the provision of airport management services.
ACSA operated South Africa’s nine previously state-owned airports. These were O.R Tambo International Airport, Cape Town International Airport, King Shaka International Airport, Port Elizabeth International Airport, East London Airport, George Airport, the Bram Fischer International Airport, Kimberly Airport and Upington International Airport. It had a minority stake concession in Mumbai, India, and Sao Paulo, Brazil. Technical services had been provided to Ghana to build a new international terminal. Agreements had been signed and concluded with Namibia and Cameroon. Work may be done in Kenya and an MOU had been agreed with Liberia.
Mr Maseko described ACSA’s strategic objectives and goals. These were to create shareholder value in which targets have been outlined for the next three financial years; to increase its reputation through demonstrated business excellence; to increase stakeholder satisfaction through effective partnerships; to improve passenger experience through demonstrated operational excellence; to contribute to an increase in traffic through the airports that ACSA operated -- it wanted to entrench O.R Tambo as the hub of southern Africa -- and key to this was the performance of South African Airways (SAA), with which ACSA would be working closely; and to generate realised non-core income through the concessions in Mumbai and Brazil, and technical services being provided in other countries.
By 2025, non-aeronautical revenue should make up 55% of ACSA’s income, compared to the current objective of 48%. Based on the new broad-based black economic empowerment (B-BBEE) codes that had not been gazetted, ACSA had committed to achieving and maintaining a level 3 rating. To grow black business within its operational spend, the target for the next financial year was 51%, growing to 55% within the next two years. Women and youth-owned business were included in this target. By 2019, ACSA planned to create 29 382 job opportunities, and when its capital expenditure began to ramp up in earnest, growth was expected to reach 60 227 by 2021.
In promoting employment equity, there were specific targets set by the Department of Labour. However, ACSA hoped to achieve a target of 92.4% for their employment equity programmes. An employee satisfaction survey had been conducted which asked employees about their economic and social needs and whether ACSA was an employer of choice. ACSA had set a target of 3.3 out of five, and hoped that this would grow to 3.5 within the next two years.
To provide services to non-ACSA airports in South Africa, it was currently in discussions with the Polokwane airport and were hoping to conclude an agreement with the Umtata and Pietermaritzburg airports.
ACSA would be looking at how well it could improve connectivity to the nine airports. For example, it would look at flights from Cape Town to George, Durban or Port Elizabeth. This involved working with its airline partners, as well as regional airlines such as SA Express and Kulula, to improve connectivity.
Lastly, to reduce environmental impact, it would like to improve its carbon accreditation level from level 1 to a level 2. Ultimately, it wanted a carbon neutral accreditation level.
ACSA’s socio-economic objectives were focused on a drive to improve transformation in order to contribute towards South Africa’s democracy. There were three goals:
- The social goal was to assist people living below the poverty line and to assist them with economic growth.
- The moral goal was to promote equality and to contribute towards correcting the imbalances of the past.
- The economic goal was to align ACSA’s business to reflect the demographics of South Africa towards economic equality.
ACSA’s objectives were firstly to design and implement socio-economic activities that would empower communities to ultimately lead better lives. This was largely for communities located around airports and rural areas. Secondly, it aimed to create equal opportunities that were reflective of fairness, transparency, an economically active population and the elimination of unfair discrimination. Thirdly, it would develop small, medium and large size businesses with a broad objective of changing the face of businesses at ACSA to an industry that was reflective of the South African demographics. ACSA would like the people with whom they transacted to be reflective of the demographics.
ACSA had contributed R9.5 billion to SA’s economy in the 2017 financial year, supporting 14 950 jobs and providing R2.8 billion in income to the work force. There were some entrepreneurial initiatives with youth, information technology (IT) initiatives, and some learner internships and apprenticeships. This list would grow as the company continued to develop.
Mr Maseko gave details of ACSA’s capital expenditure (capex) programmes for the next three years. It would be building rapid exit taxi ways on the main departure runway at O.R Tambo International Airport (ORTIA). A remote apron stand, which was a parking bay for aircraft, would be built. The western precinct would be commercialised to enhance ACSA’s non-aeronautical initiative. Phase 1 of ACSA’s midfield cargo development would begin within the next three years.
At Cape Town International Airport, ACSA would be building a new realigned runway which would cost R4.5 billion, and the new domestic arrivals terminal would be completed. This project would eliminate what was known as the “long walk to freedom,” and they hoped to shorten the distance dramatically by this domestic arrival upgrade. The international terminal would also be developed. Cape Town International Airport was the fastest growing airport for international traffic in the country. This was followed by King Shaka International Airport and O.R Tambo International Airport.
ACSA would be building a taxiway extension at King Shaka International Airport, and there would be remote apron stands. There would also be an expansion to the international departure and arrival terminals.
Mr Dirk Kunz, Acting Chief Financial Officer (CFO) said that in the 2017 financial year, ACSA earned R9 billion in revenue, but the corporate plan now expected R7 bn for 2018. The key factor was the result of an accumulation of deductions in aeronautical charges, caused by the delay in regulatory decisions. There was a forecast of continuing growth over the three-year period and an improvement in metrics and returns, but not at the level that was wanted. It was important to note that in ACSA’s aeronautical revenue line, there was a R87 charge for domestic passengers at Cape Town and Johannesburg which came to ACSA.
The projected revenue increase was on the back of continued traffic volume growth. The forecast was for continued growth in each of the categories -- domestic, regional and international -- for the next three years. On the international landing side, there was an anomaly for 2019, due to unscheduled traffic. This was a very low revenue contributor.
ACSA was moving into a new infrastructure investment cycle. The last time this had happened was in 2011. Thus, there would be an increase in its capex programme. Some of the major projects included the Cape Town runway re-alignment (R4.5 bn over three years), Midfield cargo (R1.4 bn) and Midfield development fees (R820 m). The programme would ramp up from R1 bn a year. It was a refurbishment/replacement type of programme. The capex budget amounted to R10.8 bn from 2019 to 2021. The effects of this programme would be seen in the future.
ACSA had received an unqualified audit opinion from the Auditor General. The findings of the report were currently being addressed. There had been three key findings. These were related to the management of fixed assets, the impact of accounting capacity on financial statements, and irregular expenditure in the area of supply chain management (SCM). There were several issues found with tenders, and ACSA’s response would be to conduct proactive audits of large tenders. It would introduce new policies, procedures and business process to address some of the challenges. Many of the expenditure irregularities occurred due to lost documents, and this was currently being addressed.
Mr Maseko referred to the key challenges and opportunities which were being addressed by ACSA and its major shareholders, which included the government and the Public Investment Corporation (PIC). There were currently board vacancies due to retirements, and a process was under way awaiting Ministerial approval. The economic regulatory framework was uncertain and was currently being addressed with the Department of Transport. Amendments were expected this financial year to the Airports Company Act. This was largely to address the returns; the weighted average cost of capital was sitting around 10.5% to 11% whereas the returns in the financials were sitting at almost half of that. The Airports Company Act allowed for ACSA to earn a return above its weighted average cost of capital. There was a major concern around transparency regarding how the tariffs were arrived at, which was at the purview of the regulating committee. ACSA’s non-aeronautical revenues were sitting at 48% of their total revenue and their aeronautical income was at 52%. ACSA was too reliant on its aeronautical charges as a source of revenue.
There was advocacy for a single African air transport market, earlier this year an additional 23 countries signed the Open Sky’s Africa agreement, which would hopefully mean increased connectivity in Africa. This may possibly reduce fares on the African continent. Currently, aeronautical charges were still huge and the hope was that this would reduce aeronautical charges, and that this may consequently lead to job creation. Anther opportunity had arisen where local governments were accelerating Aerotropolis establishments within their respective provincial and local governments. There was also proactive engagement on multi-modal transport solutions in tourism. Attempts were being made through the Department of Home Affairs (DHA) to innovate effective passport processing. A challenge in this regard related to funding. ACSA aimed to proactively grow tourism, as travel and tourism in 2016 contributed to 9.3% of gross domestic product (GDP), which amounted to R406 bn.
Mr Deon Cloete, General Manager: Cape Town International Airport, said that there had been collaboration with various stakeholders, and since 2015 the forum/initiative had contributed to 13 new international routes and 11 expanded routes. These expanded routes had contributed to growth by 20% in terms of airspace. However, it had added increased pressure on their facilities and services. New frequencies and services had given Cape Town International Airport an additional 1.5 million seats. Through some of the loading, there had been collaboration in KwaZulu-Natal and Gauteng to emulate Cape Town’s success. SA Tourism was a key player in the structure. The private sector had come in and supportedthese initiatives. Since the initiative started, there had not been a single international route lost.
The strategy was aimed at long term sustainable value creation by strengthening its reputation and continuing to build win-win partnerships with stakeholders, and by continuously improving the passenger experience. It was important to move towards a digitized business, and to identifying and secure new business opportunities inside and outside South Africa. Managing and developing a high-performance team was crucial, as ACSA recognised its employees as its most prized asset. Accelerating sustainability and transformation programmes was crucial to inclusivity. Key to the success of South Africa’s airports was reducing its environmental impact.
Ms Kate Matlo, ACSA board member, said Vision 2025 had been emphasised as it declared the aspiration of the company to be the most sought-after partner in the world for the provision of sustainable airport management solutions by 2025. Transformation was a priority in support of the government’s National Development Plan (NDP) 2030, and socio-economic transformation was key to this goal. The approach to transformation included significant steps in the development of seven distinct sector strategies. The sector strategies were formulated through a consultative process in the areas of information technology, construction, property retail, advertising, car rentals and ground handling.
ACSA continued to contribute to the socio-economic development of South Africa by investing in community projects around the country. These projects were aimed at alleviating poverty and empowering youth, women and people with disability. A documentary video of these projects had been compiled. ACSA’s achievements included the fact that South Africa’s airports competed with the best in the world in terms of the Sky Tracks and Airport Council International (ACI) awards. ACSA was proud of the international recognition received when its CEO was elected the chairperson of the ACI world governing body in October 2017.
Ms Sindiswe Chikunga, Deputy Minister: Department of Transport addressed the issue of vacancies. She said that the Minister was in the process of filling those vacancies so that the board could function. There were three South African airports in the top 35 in the world, which was a good achievement. The Department of Transport had directed ACSA to help O.R Tambo International Airport to improve its ranking.
Air Traffic and Navigation Services (ATNS): Corporate Plan 2018/19 to 2020/21
Mr Thabani Mthiyane, CEO: ATNS, said the organisation was incorporated in 1993 in terms of the ATNS Company Act, Act 45 of 1993, which mandated it to provide air traffic management solutions and associated services on behalf of the state in accordance with International Civil Aviation Organisation (ICAO) standards, recommended practice, as well as the South African regulations and technical standards. Its vision was to be the preferred supplier of air traffic management solutions and associated services to the African continent and selected international markets.
ATNS was an information communication technology (ICT) business. The bulk of its focus was on technology operations, ICT operations and air traffic services, which was backed up by ICT technology. It operated at the nine ACSA airports and had staff stationed at airports such as Lanseria, Pietermaritzburg and Bisho, where services were provided on a contractual basis. It also provided operations to the rest of the continent. This was done mainly in the communications environment and information sharing, which was considered the bloodline of aviation.
In 2002, ATNS had embarked on providing a communication network which initially covered the Southern African Development Community (SADC) and later north-east Africa, looking into Yemen and Saudi Arabia. Interconnectivity existed on the west coast, and was run mainly by the Agency for Aerial Navigation Safety in Africa and Madagascar (ASECNA) in Dakar, Senegal which provided the safe operations of air traffic management on the continent. This was fundamental for the country as well the company, as the bulk of the traffic that comes through South Africa has to come over the states above the border of South Africa. It was important that the routes coming into South Africa were safe.
The main revenue for ATNS was the tariff revenue received in South Africa. The other services which supplemented its revenue included billing, documentation and training.
There were six strategy imperatives:
- To deliver continuous improvements of safety performance.
- To become a transformative organisation that invests in its people.
- To provide efficient air traffic management solutions and associated services that meet the needs and expectations of the air traffic management (ATM) community.
- To maintain long-term financial stability.
- To play a leading role in the deployment of air traffic management in Africa and selected international markets.
- To deploy and use leading technologies to the benefit of the ATM community.
Its business strategy was to focus on the needs and expectations of the ATM community, primarily in South Africa, with a greater emphasis on the rest of Africa and other selected global markets. It supported all government initiatives in aviation, such as the Yamoussoukro Decision, as well as the African Union (AU) 2063 agenda. The positioning of South Africa at the bottom line of the continent meant that it had a social and economic interest -- flights that arrived or departed from South Africa had to do so safely
ATNS focused on three areas -- business intelligence, market excellence and relationship management – to determine how its strategy was driven. Business intelligence depended on an understanding of the global market and technological developments. Market excellence referred to excelling at obtaining, retaining and utilising specialist resources to provide quality service in order to make South Africa competitive. Relationship management referred to the process of partnering with relevant bodies such as the government to ensure that ATNS achieved what was targeted.
Every year, high priority critical issues were brought forward. These were the areas that needed to be sorted out as soon as possible, as they could present a hindrance. There were currently five issues. The first issue was to develop a safety climate that would drive a coherent, enterprise-wide safety culture. The second was to deliver a performing strategic supply chain in response to a changing market, including an enterprise and supplier development plan. The third was to deploy an enabling ICT environment, while fourthly it needed to create effective and efficient implementation of its capex programme. Fifthly, operational efficiency enhancement across the business was required. The core programmes were the action plan to deal with the critical issues.
ATNS had three specific plans which contributed towards the government’s nine-point plan. Plan 1 was to resolve the energy challenge through energy efficiency programmes, training academies and control centres. Its Plan 7 referred to unlocking the potential of small, medium and micro enterprises (SMMEs), while Plan 8 referred to state reform and boosting the role of state-owned companies, ICT infrastructure and broadband roll-out, and transport infrastructure. This was necessary to support the goals aligned with the government and the Department of Transport.
90% of revenue came from tariffs. What the regulator promulgated with the tariffs that ATNS would be using had a big impact on operations. The margin in the aviation business for the airlines was sitting at around 2%, if not less. It was also a function of the price of fuel, or specifically oil. This had had a huge impact on some of the airlines that were start-ups, and who had attempted to enter the market with little success. The reality was that the services ATNS provides needed support and required money, and the money had to come from the tariffs. ATNS was submitting proposals for the tariffs, which had not been finalised. This would determine what ATNS could deliver on its mandate, and resources were limited.
If one looked at traffic movement growth, this stood at 2.29% for 2018/19, and was projected to be 2.21% and 2.18% over the following two years, which was relatively low compared to the Middle East and India. In South Africa, ATNS was projecting that there would be one million departures or landings. Tariff revenue was based on the number of aircrafts. Tariff revenue was expected to grow by an average of 4.8% over the three-year period as a result of increases in the tariff and traffic movements. It was important to note that the timeous planning of infrastructure was important
Operating costs as a percentage of revenue were important to note. In the year that just ended in March 2018, they were at 92%, and were projected to be 94% in 2019 and 2020, and 93% in 2021. This suggested that ATNS could work with a 6% margin, but this was difficult to work with. Currently ATNS was sustainable, but the picture was saying that more standard measures needed to be implemented. ATNS was coming to the end of an agreement with the union. Later this year, negotiations would take place for a new agreement. This would be fundamental to how the projections look. 70% of ATNS’s operating costs were staff and related costs. This was not unusual for a business like this, but it needed to be managed carefully.
ATNS’s revenue for the current financial year, was expected to reach R1.498 bn, with operating expenses at R1.402 bn. After depreciation and tax, net profit would be R87 million – a decline from previous years. This had been done consciously, as there were certain expenses that had needed to be deferred so that profits could be achieved. The figures were reasonable for the business to be sustainable. Furthermore, there was still revenue on reserve which could be tapped into. Revenue was expected to grow to R1.591 bn and R1.723 bn over the following two years, but net profit would decline to R77.7 million and R61 million respectively. The company was healthy and value was being added. The assets were growing.
ATNS would continue to deploy assets and capital. With every R10 million spent, jobs were created either directly or indirectly, and the creation of jobs was its contribution to investing back into society. In its supply chain management, there was a focus on empowerment. The bulk of its infrastructure -- communications, navigations and surveillance systems -- came from overseas, but other services which could be acquired locally were purchased here.
ATNS had received a qualified audit. This had been a shock, as it was the first time this had happened. The main factors picked up involved the assets and irregular expenditure. The plan to resolve the audit findings involving the assets was a physical verification and valuation of the assets, and monthly reconciliations. In irregular expenditure, a problem had been the use of credit cards, which was not allowed by Treasury, so the cards had been withdrawn and an application for exemption had been made. This was to adhere to SCM policies. In terms of consequence management, ATNS had to take disciplinary action in accordance with the PMFA, which had resulted in a number of cases. This was to ensure the same issues did not recur. The internal audit unit had also been strengthened.
In the area of governance, there were two non-executive members of the board -- Adv Edwin Mphahlele (Chairman) and Mr Daniel Mwamza (Chairman of the Audit and Risk) -- and Mr Mthiyane, who was the CEO. ATNS was limping behind in the areas of statutory committees of audit and risk. There were no members for a social and ethics statutory committee. The Minister and Deputy Minister of Transport were currently trying to resolve this, as the company would run better with more board members.
Regarding financial sustainability, there was an over reliance on tariffs (90%) and the traffic growth was not sufficient to sustain the business. This was why other markets had to be looked at. Risk needed to be managed and mitigated, and one of the ways of doing this was to ring-fence all operations, which had resulted in the board approving the creation of a subsidiary. ATNS was aware that creating a subsidiary was contradicting government’s push to consolidate state-owned enterprises. This was a work in progress.
The Deputy Minister of Transport, Ms Sindisiwe Chikunga, said that the Minister of Transport was concerned about the committees of the ATNS board, and that they were in the process of addressing this issue.
South African Civil Aviation Authority (SACAA): Annual Performance Plan 2018/19
Mr Smunda Mokoena, interim SACAA Board member, said the Authority’s mandate was predicated on two instruments -- the Civil Aviation Act of 2009 and the Chicago Convention on International Aviation. South Africa was party to the Chicago Convention and was thus bound.
The ICAO listed eight critical safety elements in running an aviation system, and it was necessary to have all eight when being assessed. The first five elements address the establishment, and involved legislation, authority programmes and regulations, personnel qualifications and training and guidance, tools and information. The remaining three addressed how implementation occurred, which could involve surveillance obligations, for example.
SACCAs vision was to be ranked among the top 10 civil aviation authorities by 2020. Its mission was to regulate civil aviation safety and security in support of the sustainable development of the aviation industry. Its brand promise was to keep its passengers safe. Its strategic goals were to regulate the aviation industry effectively and efficiently, increase access to regulatory services, secure financial sustainability, effective stakeholder management and regional cooperation, customer service excellence, to drive organisational systems and innovation, enhance human capital and accelerate transformation.
Mr Mongezi India, Audit and Risk Committee, who chairs the aviation security Committee of the board, discussed the SACAA strategy and its alignment with national imperatives -- the NDP, DoT outcomes and the State of the Nation Address (SONA) 2018. With regard to the DoT outcomes, it would contribute to an efficient and integrated transport infrastructure network for social and economic development. Importantly, in respect of SONA, by enhancing human capacity and accelerating transformation, SACAA would be supporting SMEs, black industrialists and supporting local product procurement, and supporting women and youth enterprises. Job creation was central to its strategy. Furthermore, it would increase the national footprint of regulatory services, secure financial sustainability and drive organisational system innovation. Effective stakeholder management and regional cooperation was key, as well as implementing paid youth employment.
He said it was important to note that five years ago, SACAA had had 33 audit findings but as of today there were only 3 findings. The findings had been that it had submitted its procurement plan to the National Treasury after the due date, its investment in Recreation Aviation Administration South Africa. (RAASA) had not been disclosed in its separate financial statements, and computer expenses had been incorrectly classified as intangible assets. The status of all three findings was that they had been resolved. It was noted that both the lack of information system security and a loss of critical and scarce skills had a high inherent risk rating.
SACAA At A Glance: Personal licenses
Ms Poppy Khoza, Director of Civil Aviation, discussed the technical skills within SACAA, and said there were still transformation issues with regard to pilots and aircraft maintenance engineers, where Africans made up 6%, Coloureds 1%, Whites 92% and Indians 2%. This did not present a good picture. There were factors being considered to address these transformational issues, as they were related to technical skills.
There had been an increase in the number of aircraft registered. In 2016/17, there were 12 954 aircraft registered, and this had risen to 13 381 aircraft registered in 2017/18.
SACAA’s annual targets for 2018/19 had been approved by the Minister of Transport and duly approved by Parliament. There were 11 targets, and the objective was to achieve a step-change in regulating aviation safety and security effectively and efficiently.
The ICAO had audited SACAA in the previous financial year in May. There had been few safety concerns, but ICAO had raised some findings. SACAA had to implement a corrective action plan sent to the Department of Transport and filed with ICAO. A peer assessment Universal Security Audit Programme (USAP) Corrective Action Plan (CAP) for Exco approval would be developed. South Africa gets audited twice by ICAO in respect of aviation safety and security. In the next financial year, it would be auditing South Africa again on Aviation security. SACAA had started with its preparations, in which a mock audit had been suggested. This would be done by the regional office of ICAO.
There would be implementation of 90% of phase 1 of the examination project plan. Examinations would occur for pilots and maintenance engineers. SACAA would like to extend examinations to other technical services such as air traffic controllers, to ensure quality. It wanted to develop a business case for RPAS (Remotely Piloted Aircraft Systems) operating monitoring systems, commonly known as drones. A system was necessary to prevent any eventuality which could undermine South Africa’s safety record. It would develop an improved aviation personnel licensing approach and submit it to EXCO for approval. There would be implementation of the cross-functional accident reduction plan (C-FARP) to reduce accidents in the private flying environment, and implementation of Phase 1 of the approved safety and security data analysis projects. Lastly, SACAA wanted to achieve 95% of its aviation security infrastructure and safety operations’ oversight activities.
The second organisational goal was to increase access to regulatory services. SACAA wanted to implement Phase 1 of the decentralisation business case recommendations. A business case had been approved by the executive committee. Durban had been identified as one of the offices which would be opened in the future. This needed to be expanded to other provinces, which would allow increased accessibility.
To secure financial sustainability, the objectives were to diversify and expand sources of revenue and establish a culture of prudent financial management. The targets were to develop an annual funding model project plan, and to revise and implement an annual cost containment plan as per National Treasury instructions and submit it to the Directorate for Civil Aviation (DCA). SACAA would implement 90% of the stakeholder management plan (SMP), and would develop a regional cooperation and strategy plan, and seek board approval. There was a requirement from ICAO that when an entity achieved 80% of ICAO thresholds, they had to give assistance to neighbouring countries.
Another organisational goal was customer service excellence. The target was to review and implement 90% of Phase 2 of the change management programme. This was necessary due to complaints regarding service, so SACAA had elevated this target. The goal to drive organisational systems and innovation would involve achieving integrated ICT systems. This would be done through completing the Enterprise Business Service (EBS) progress reports quarterly to EXCO. This was due for completion in September 2018 to improve oversight capability. There was also a move to develop an EXCO-approved electronic records and document management system business case, as SACAA had many records. Lastly, to enhance human capital and accelerate transformation, the objective was to drive a performance culture. In accelerating transformation, SACAA would review and implement 75% of the Phase 1 B-BBEE transformation plan aligned to the transport sector codes.
Mr Mokoena addressed the organisational structure of SACAA, and pointed out that there were four areas where there was dual reporting. The first was the board secretary, the CEO administratively, the board functionally, and the Chief Audit Executive. In these areas, South Africa had a very high level of corporate governance, which was well governed by the King 4 report. The next two were the DCA reporting to the board and the Minister of Transport on regulatory and governance matters. Fourthly, there was the accident and incident investigation division.
Ms Khoza said SACAA was a transformed organisation. 65% of the technically skilled personnel were Africans, 3.9% were coloured, 10.36% were Indian and 19.92% were white. It had closed the financial year with 37 vacancies and was sitting with a delicate situation due to scarce resources, and having to compete with the industry. There was a division that had an attrition rate higher than the rest -- aviation safety operations. This was because the pilots or engineers who were recruited often had to do administrative work which they did not want to do. The variance had changed because of the low-cost air carriers. SACAA had become a training ground for the industry, and people were leaving after training. However, there was work being done to change this through the human resources Committee of the board.
Mr Asruf Seedat, CFO, said that in the 2016/17 financial year, SACAA had recorded a surplus of R63.965 million. In the 2017/18 year, it had budgeted to finish with a surplus of R20.018 million, although the current indication was that this would come out at close to R40 million. In terms of the PFMA, SACAA was aware that it could not budget for a surplus or deficit, but it had engaged with National Treasury and this had been approved. For the 2018/19 financial year, SACAA budgeted for revenue to grow by 9%. More than 72% of revenue came from passenger safety charges, and the rest from user fees and fuel levies. The total revenue was R719.680 m. Staff-related costs were R536.832 m and non-staff-related costs were R198.621 m. About 75% of its total expenditure was staff-related. It was budgeting for a deficit of R15 773 m.
SACAA had been conservative on passenger safety charges and numbers. It had budgeted to grow passenger safety numbers by 2.5%. Growth over the last two years had been 6%, but was currently 4.8%. Every 1% increase in passenger numbers added about R8 to R10 million to the bottom line. The reason for budgeting for a deficit was because there were two major capital expenditure items. Firstly, there was the enterprise business system that had been alluded to earlier, which would be implemented on the technical side and would come into use in the 2018/19 financial year. Because of this, maintenance contracts and depreciation would kick in. SACAA had not recovered this from users through of tariffs, but hopefully they would catch up in the two outer years. SACAA had a strong financial position. The medium term expenditure framework (MTEF) period for March 2019 showed total assets of R542.505 million, of which non-current assets were R298.735 million and current assets were R243.77 million.
Ms Khoza referred to SACAA’s key achievements. It had contributed to the development of the draft national aviation transformation strategy, which had been led by the Department of Transport to address industry transformation. Secondly, it had participated fully in the joint aviation awareness programme (JAAP). To create career awareness, there had been school visits which had targeted 221 schools in all nine provinces, with a focus on rural areas. SACAA had a bursary internship programme. Notably, there were six students in the Aeronautical Engineering Bursary Programme, 12 students in the Cadet Pilot Training Programme and 11 students in the Aircraft Mechanical Engineering Apprenticeship programme. Furthermore, there was one student in the Industrial Engineering programme and 24 interns. In regard to preferential procurement, SACAA would support women-owned companies, the HDI Women’s Procurement Participation Plan, and there would be a working relationship with the South African Network for Women in Transport (SANWIT) in order to assist in supply chain training.
The ICAO USOAP CMA audit had taken took place in May 2017. The audit scope had excluded aerodromes and ground aids (AGA) and air navigation systems (ANS). The final ICAO audit report of 18 October 2017 had stated an effective implementation (EI) of 86.72%. The off-site validation of ANS and AGA had taken place in November and December of 2017, and the off-site validation report of 11 January 2018 had stated an EI of 87.37%. South Africa’s EI was currently stated as 87.39% in the ICAO secure portal and because of the above performance, South Africa was ranked number 1 in Africa and 31st globally.
The SACAA had achieved an audited 100% performance record against set targets for the last three financial years. Good governance was entrenched, and it had received an unqualified audit opinion for many years. It had received the Auditor General’s (AG’s) clean audit award for five consecutive years.
Although there had been a 48% a reduction in general aviation accidents compared to four years, more was needed to be done. The C-FARP needed to be implemented. However, there had been a nil fatality rate in scheduled commercial operations.
SACAA was assisting some of the neighbouring countries on the continent such as Lesotho, Namibia and Gabon, by giving them technical assistance. A strategy would be developed to ensure regional cooperation.
The lack of transformation was the aviation industry’s Achilles heel. This was evident, as white males constituted 90% of airline transport licence holders. High training fees were a barrier to entry. The National Civil Aviation transformation strategy, which was being championed by the Department of Transport, could be a game-changer which would facilitate a co-ordinated approach to aviation transformation.
There were flagship projects coming up, such as the Africa Regional Event at the Cape Town Convention Centre on 19-20 June 2018. SACAA would be hosting the ICAO Global Gender Summit 2018 between 8-10 August 2018, as well as the October Transport Month Aviation Indaba in October 2018. During October, there would be a Nelson Mandela Air Show as well as the National Civil Aviation Industry Awards.
Mr Mokoena concluded by saying that SACAA was a solid going concern, backed by a remarkable operational performance as evidenced by the country’s ICAO ranking. It had demonstrated a consistent financial performance over the past five years and was continuing the same trend. There was always a strong commitment to corporate governance and legislative compliance. Its commitment towards skills development within the region ensured increased levels of safety and security not just locally, but also for those around us. Radical economic transformation through the implementation of programmes in support of youth, women and SMME development was encouraged. There was emphasis on improved customer care, and communication and stakeholder management was encouraged. Finally, cost containment in line with National Treasury instructions would continue to be upheld.
Ms Chikunga, Deputy Minister of Transport, said that she approved of a mock audit, as the implication was huge. ICAO next year would have an elective assembly in Canada. She wanted South Africa to remain a part of the ICAO Council. South Africa had performed very well in 2016 and had been sixth out of 36 countries in terms of performance. There had been no commercial aircraft crashes, and SACAA’s ranking as number 1 in Africa was a proud achievement. The Minister of Transport had prioritised a commitment to sorting out the board.
South African National Roads Agency Limited (SANRAL): Annual Performance Plan 2018/19-2020/21
The Chairperson commented that SANRAL was the heartbeat of socio-economic issues.
Mr Skhumbuzo Macozoma, CEO: SANRAL, introduced the Agency’s presentation by emphasising that its budget had been cut by R2.1 billion. It was responsible for the country’s proclaimed national road network, including the toll and non-toll networks. It had to maintain, upgrade, operate, rehabilitate and fund national roads, to levy tolls to service toll roads and advise the Minister on road related matters.
Addressing the key focus areas for 2018/19, he said Horizon 2030 would govern SANRAL’s work for the next 12 years. It would prioritise asset management systems for the timely maintenance of national roads, and maintain good co-operative relationships with relevant government departments, provincial and municipal authorities. Transformation was key both internally and within the construction industry. A fresh transformation policy would be one of the first things implemented from Horizon 2030. Internally, three new regional managers – two black and one coloured -- had been appointed two weeks ago.
There was a significant risk regarding to the resolution of e-tolling in Gauteng, in which SANRAL would look to political leadership. There would be ongoing communication and stakeholder management efforts. SANRAL had been attempting to work with communities on what they should do. Horizon 2030 would allow for business development and partnerships to generate income for SANRAL. There would be a development of a fresh toll roads policy by the Department of Transport, with a new policy context. This policy would be subject to consultation with South Africans. From a Horizon 2030 perspective, public funds would not be enough for SANRAL to be sustainable.
The most important strategic risk was the going-concern status of SANRAL due to poor collections on Gauteng Freeway Improvement Project (GFIP) e-toll project. The scenario had been submitted with options. The Minister of Transport, the Deputy Minister and National Treasury would be working on the issue. SANRAL was unable to get the capital they needed due to a variety of reasons, but because there was a general anti-e-toll sentiment in the country, it was very difficult to move forward owing to the uncertainty. There was a perspective that none of the provinces would accept any more toll projects in their jurisdiction. R128 billion worth of projects could not move forward. In the next decade, the fiscus would not be able to move these projects forward. South Africans would have to engage with one another. A new toll context was necessary for change.
Law enforcement continued to be inadequate, notably in respect of overloading by hauliers and compliance in relation to electronic tolling, with particular reference to Gauteng. Horizon 2030 had elevated road safety. There was an opportunity to apply technology and collaboration with regard to innovation, to support law enforcement. There was insufficient high-level planning, and co-ordination between inter-modal transport and the three spheres of government was necessary. There was a serious problem with delays in project-related approvals from authorising departments and provinces.
In line with the NDP, SANRAL would support eliminating income poverty through community development programmes, and projects involving SMME development. Horizon 2030 indicated that all projects should have a community development element which would include participation and training. The office in the Eastern Cape was doing good work in developing SMMEs. To reduce inequality, SANRAL would develop its human capital to improve skills through a variety of ways, such as internships and bursaries. The community development programmes would help improve access to national roads. Job creation through projects in capex and maintenance would occur.
There was a big challenge in increasing the public component of GDP spending on infrastructure. SANRAL’s contribution was through its investment in non-toll and toll roads. In the year that ended in 2017/18, SANRAL had contributed almost R20 billion to the market, and hoped that over the medium term, that the figure would improve. There had been a significant contribution towards the improvement of public infrastructure investment in South Africa. In upgrading the Durban-Gauteng freight corridor, the Van Reenen Development Project – where investigations were under way -- was intended to improve mobility and safety in the Van Reenen area of the Free State on the M3. The M3 area between Pietermaritzburg and Durban was being improved, and the N2 Wild Coast would be completed by the end of 2021. It was time for implementation. The Mtentu Bridge project had started in January 2018. By the end of this year, the second bridge would begin to be built.
To help in resolving the energy challenge, SANRAL was striving to make sure that projects were carried out energy-efficiently and with a responsible and sustainable environmental practice. Horizon 2030 was pushing strongly for pursuing “smart” roads, where there were opportunities to generate energy. It was necessary to provide infrastructure to sectors such as agriculture, and to encourage private sector investment. SMME empowerment would be facilitated through community development projects, access roads and pedestrian bridges. Opportunities were being created through participation in SANRAL construction projects. As a state-owned company (SOC), SANRAL would continue to develop excellent and smart infrastructure. Tests would be conducted in the future on what infrastructure suited driverless cars.
SANRAL’s network had been growing since 1998. It had started at 6 700 km, but as of March 2018, it stood at 22 203 km. This was the full SANRAL network, out of the total 750 000 km of roads In South Africa. However, the increasing pavement age was a worrying trend. 76% of the paved network was older than the original 20-year design life, resulting in a high risk for accelerated deterioration under poor preventative maintenance regime, as with most of the provinces. A challenge was the lack of money for preserving infrastructure. Looking at the budget SANRAL needed versus what they had been allocated for all roads in South Africa, there was a backlog of R197 billion.
With Horizon 2030, 10 new objectives would be introduced in the APPs for 2018/19 to 2020/21. Its strategic objectives were to:
- Manage the national road network effectively and efficiently
- Provide safe roads
- Carry out Government’s targeted programmes
- Co-operative working relationships with all spheres of government and the SADC member countries
- Maintain good governance practice
- Maintain financial sustainability
- Pursue research, innovation and best practice
- Safeguard SANRAL’s reputation
- Pursue and maintain environmental sustainability and best practice.
In providing safe roads, there were projects dealing with hazardous pedestrian locations. There was a programme with the Department of Education in which SANRAL developed road safety information for school learners. There would be an implementation of empowerment through awards of contracts, job creation, SMME development and human capital development. SANRAL was prioritising cooperative working relationships with all spheres of government and SADC countries for better road user experience. There would be maintenance of good governance practice through the prevention of fraud and corruption – the fraud hotline was quite busy, and SANRAL was notified about things that were untoward. It was committed to pursue research, innovation and best practice. Safeguarding SANRAL’s reputation was important as many people had been dissatisfied with SANRAL since 2010 because of a lack of consultation in projects. There have been over 34 consultations in terms of Horizon 2030, briefing people over projects and transformation. Media relations had improved. SANRAL was committed to pursuing and maintaining environmental sustainability and best practice.
At the end March 2018, there had been engagements with 1 659 SMMEs, of which 59.4% were black-owned. SANRAL wanted to push this number above 80%, as they had been at this level a few years ago. There had been a split of the number of full time employment opportunities that had been created among the different designated groups across the projects that had been run. The total jobs that had been created were 13 715. There was training as well, where 57.1% of the trainees were women, which was a good achievement.
Some of the highlights of SANRAL’s transformation policy included sub-contracting through the Project Liaison Committee’s (PLC’s) projects. It was an intervention that sought to make sure SANRAL created a platform at the community level at which projects could be engaged with. In those PLCs, it had been agreed how labour would be sourced and which SMMEs would be involved. SANRAL was promoting joint ventures to be implemented through a revised supply chain policy. It would continue to create opportunities for black businesses, whether they be big or small. SANRAL
Routine road maintenance (RRM) was being revised due to complaints. Black businesses had not been able to progress in this area. SANRAL would allocate more space in this regard. Comprehensive Toll Road Operations and Maintenance (CTROM) contracts which came from the private sector, were eight-year contracts. This had been reviewed again, as SANRAL wanted competition in the markets. The term would be reduced from eight to six years. SANRAL would be insisting on joint ventures so that existing operators could train black operators so that competition could ensue.
There was a new employment equity plan involving scholarships or bursaries from 2018 to 2020 which would be the basis for skills development. There was a technical excellence academy in Port Elizabeth which helped engineers to register as professionals.
SANRAL’s budget structure for the next three years indicated it had suffered a R2.1 billion cut, of which R2 bn was in the current financial year. SANRAL had done its best to maintain the focus on maintaining its roads instead of building new ones. It would continue to do this, as roads must be preserved. The budget that was allocated to capital works projects over the medium term -- strengthening, improvements and new facilities – had gone down. This was worrying, as this meant that SANRAL could not expand or build new roads. There was a hope that the economy would improve, and there would be discussions with the National Treasury to improve the budget allocations.
Because of the uncertainty over tolls, a lot of the toll capital projects had had to be pushed out, to the value of R128 billion. As a result, many toll projects would not be able to be implemented. SANRAL might move slower in the last decade then in its first decade if it could not get funding to deliver on infrastructure.
The RRM kilometres had been increased from 21 403 km per year to 22 213 due to network growth, and SANRAL had to maintain the entire network. The resurfaced length target had been increased from 900km to 1 200 km for 2018/19 and 2019/20, and to 1 600 km and 1 750km for 2020/21 respectively, due to additional projects planned. The road strengthening, improvement and new capex length had been reduced from 500 km for 2018/19, to 400 km due to various factors which included delays in awarding of consultant tenders for design, thereby causing a backlog in the roll out of projects. Targets for 2019/20 were 375 km and 425 km for 2020/21. The RRM project expenditure performed by black-owned SMMEs and contractors had changed, increasing from 60% to 67.5%, and thereafter to 70% and 72.5%. Non-RRM project expenditure performed by black-owned SMMEs and contractors would grow over the medium term. The increase would first be to 35%, and then over the three years it would be sitting at 42.5%. This was a good development. The anticipated job creation targets would go down. This would have a negative impact.
Mr Roshan Morar, Chairperson of SANRAL’s board, concluded the presentation by stating that while SANRAL was working under constrained circumstances, it had been able to adapt, revise and focus its targets and gaols. Funding was the biggest constant challenge and concern. SANRAL was happy with what it had achieved.
South Africa Maritime Safety Authority (SAMSA): 2015-20 Strategic Plan & 2018-19 APP
Mr Sobantu Tilayi, Chief Operating Officer (COO): SAMSA, said its legislated objectives were to ensure the safety of life and property at sea, to prevent and combat pollution of the marine environment by ships, and to promote the Republic’s maritime interests. It fulfilled its mandate by executing/administering the legislative instruments which included the Merchant Shipping Act, the South African Maritime Safety Authority Act, and the South African Maritime Safety Authority Levies Act. Its vision was to be the authority championing South Africa’s global maritime ambitions.
The Public Finance Management Act (PMFA) appointed the Minister of Transport as the Executive Authority for SAMSA and the only shareholder in SAMSA on behalf of the South African government. The Accounting Authority, which was represented by the SAMSA board of directors, reported to the Minister. The CEO was the Accounting Officer who managed SAMSA under the strategic guidance of the board of directors.
In 2015/2016, SAMSA had been running at a deficit. However, in 2016/17 it had managed to improve its finances and increase its revenue, which grew nominally to R379 million. This was because SAMSA had managed its expenditure and could show a surplus of around R60 million. That surplus had grown provisionally to about R90 million. It was important to show that improvement, as SAMSA was nominally growing the size of its workforce from 286 to 302.
A steady growth had occurred in the seafarer registry. SAMSA managed a fleet of vessels from the Department of Agriculture, Forestry and Fisheries (DAFF) which included patrol and research vessels.. There was an agreement with DAFF, which provided employment for seafarers who were not employed in international shipping. There was up to 25 people, and SAMSAs aim was help them to find jobs to reduce this number.
SAMSA had received a qualified audit last year. The AG had stated that SAMSA was not cooperating and had issues with its performance information and some lapses in internal controls. There had been no internal auditing function for half of the year that was reviewed. An audit recovery plan had been put in place. A plan had been developed for each finding. It was crucial for SAMSA to demonstrate that corrective action had taken place. Disciplinary action had been implemented -- for example, SAMSA’s former acting CFO was undergoing internal disciplinary action.
The Portfolio Committee on Transport had given SAMSA an instruction to make its APP leaner, neater and more effective. This had been tried, but it was going to be a process which would take another two to three years. It had been asked to develop maritime safety awareness programmes and extend those to inland provinces. There have been engagements with the Department of Transport to ensure that SAMSA knew where the new campaigns would be. This year’s Maritime Day would be at one of the inland provinces.
SAMSA’s strategic objectives were to improve the level of organisational capability to ensure that the internal systems and controls continued to grow. In terms of the safety imperative as a national priority, the objective was to reduce the incidence of marine casualties in South African waters over the period, and in this regard, SAMSA would launch a maritime safety report. SAMSA was an entity charged with governing the safety of ocean, and the objective here was to strengthen that governance, including matters linked to environmental protection. Regarding radical economic transformation, and a skilled and capable workforce to support an inclusive growth plan, SAMSA’s objective was to improve the quality of South Africa’s maritime education and training system. It also wanted to campaign for an increased number of merchant vessels on the ships’ register, as this correlated to an increase in employment and participation.
SAMSA had a board which was just about quorate. There were two vaccines which would be addressed by the Deputy Minister. There was a vacancy for the CEO.
The organisational capability development programme had a R286 million budget. This number included SAMSA’s service-oriented organisation, and the organisation’s salaries came from this. R26 million had been allocated to the service delivery excellence programme, which comprised of campaigning, and ensuring that systems and customer services were in place. Maritime operations had had R5.2 million allocated to it, while the maritime governance enhancement had been allocated R4.8 million. SAMSA was financially healthy.
The APP’s key performance indicators include the organisation’s financial sustainability, the audit findings which would be addressed, and the percentage system uptime for SAMSA’s ICT systems. To reduce the incidence of preventable marine casualties in South African waters over the period form 2015 to 2020, this would be done by ship inspections -- port state inspections (ships that were not flagged in South Africa) and flag state inspections (ships registered in South Africa). It was also intended to increase the number of merchant vessels on the SA ships’ register from zero to ten by 2020, and to improve the quality of South Africa’s Maritime Education and Training (MET) system by 2020.
Mr Tilayi referred to SAMSA’s maritime enforcement resources, and said the entire capacity to respond to incidents lay outside its control, including the emergency tug, pollution control vessels and helicopter capabilities. This remained a huge constraint on the effectiveness of SAMSA’s maritime safety and pollution capacity. Historically, there had been an under-funding of sea watch and response operations. Furthermore, there was a lack of technical skills capacity which impacted the industry, and SAMSA was reliant on the seafarer pipeline for technical skills.
There was an outdated and slow ratification of legislation, notably, the delayed implementation of tariff adjustments. When the National Treasury approved SAMSA’s tariffs last year, it was stated that it would need a funding model. The funding model had required several processes for the tariff adjustment to occur by 1 April 2018, and would cost R2 million every month the tariff was not adjusted. SAMSA was delayed in this regard.
The marine environmental protection Committee of the International Maritime Organisation (IMO) had stated that climate change would catch up with South Africa. SAMSA needed to create a plan to deal with commodities with high emissions, and had asked IMO to be given space to deal with these issues.
The Marine Pollution (Preparedness, Response and Cooperation) Bill would assist once it was passed into law. Other mitigating initiatives included the implementation of the SAMSA funding model, ratification of outdated legislation by the Executive Authority, and the transfer of the SA Agulhas from the SAMSA books, as per the Operation Phakisa initiative. SAMSA depended on government regarding the board announcements.
Mr M de Freitas (DA) said that there seemed to be a “tug of war” with one of the members of ACSA, who was also on the board of SANRAL. The end of the tenure of this board member had caused unhappiness. He wondered whether the Deputy Minister of Transport could talk about this, as this had resulted in great concern. He did not understand how ACSA’s slide which addressed transformation helped to further its objective mandate, and suggested that ACSA should stick to what it normally did. He was glad that the CEO had spoken about commercialisation. Airports run by ACSA had not maximised and used their space effectively for commercial purposes, and this would result in increased revenue. On the other hand, international airports used their space effectively whilst not losing their visual aesthetics. He commented that Cape Town International Airport did not have travellators where there were long corridors in certain places. In airports in Switzerland, for example, those corridors were used for people who were arriving and for last-minute shuttles. Dissatisfaction had been shown at how unprofessional taxis were operating outside these corridors. Cape Town International Airport needed a travellator, as many old people could not walk long distances. There were concerns about the CEO of ACSA regarding allegations which spoke to its reputation. He asked whether this boded well for ACSA. How was ACSA contributing to traffic, because it did not control traffic, but rather infrastructure? How could this be an objective of ACSA? Lastly, was ACSA working with SAA only, or was it working with all airlines?
Turning to the SACAA presentation, he asked what the diversification of revenue would be. Where there had been reference to the licence statistics, what was being done to change the demographics? It had been mentioned that there were career awareness programmes, but this was not enough especially for people who did not know about aviation. There needed to be deeper analysis and more aggressive campaigning. How did rising geopolitics tensions affect South Africa and SACAA? How did struggling low cost airlines affect SACAA? He understood that working in this industry was expensive, but what was being done to help the poor? The high vacancy rate needed explaining. What more was being done to help with technical skills like engineering?
With regard to the SANRAL presentation, the CEO had spoken about the e-tolls and had said the same thing to the Committee last year. Could the Deputy Minister of Transport give the Committee any update when it came to e-tolls?
Mr T Mpanza (ANC) said that the ACSA presentation had been inspiring. He thanked the Deputy Minister for addressing the question of the board, as this was an issue in terms of governance and accountability. He asked if the board was having meetings with a quorum, or whether the board’s decisions could be litigated? The Ministry had to fast track the appointment of board members. It had been expected that the Committee would hear about vacancies in senior management and critical posts. Had these posts been filled? Most people were in acting positions. Did this impact on the performance of ACSA? Did it have sufficient budget to execute its plans and if not, did this impact on ACSA? Was the bureaucracy in ACSA stable? What was the position of staff stability, and the role of the unions in their relationship with management? On black business’s share of its purchases, what was the breakdown in terms of the youth in the black category, and how were they represented? Were women and people with disabilities represented? He fully supported the issue of transformation, as this was a non-negotiable aspect of South African society. Regarding senior management, how was transformation faring in terms of women, youth and people with disabilities? The majority of pilots were white and senior in terms of age. Youth and women needed to be attracted to these positions, and he asked whether there was a plan for this. On security in areas around airports, there were examples of people being followed home from O.R Tambo International Airport. What was the long-term strategy for this and how was this working? He appreciated the work being done in communities, and asked about their structure, who represented them and how were they being identified.
The SACAA presentation had impressed him with regard to the teamwork. This entity had contributed to transformation of the previously disadvantaged communities. The offering of bursaries was encouraging. However, one worry was that the operating budget was taking a big percentage of the entity as far as staff was concerned, and stood at 74%. The previous year it had been 72%. The total operating budget amounted to 94%, with only 6% left for capital projects. It was becoming a trend which was not good. There must be ways of trying to reduce this if one did not meet the benchmark that was stipulated for government entities. Above 70% was too high. This was an issue that had to be looked at, because SACAA may resort to borrowing for its capital projects.
He said SANRAL had not spoken about a security strategy to safeguard and protect the road infrastructure. In KwaZulu-Natal, the bridges were becoming a huge risk to motorists. People were throwing stones and there had been some fatalities. Security had been placed in some of these places. What was the long-term strategy? How could community members be taught ownership, through the community awareness and education programmes, to protect the road network as this was their infrastructure? SANRAL did not have a robust and radical program to drive this. The road safety education was good. Was SANRAL working with the Road Traffic Management Corporation (RTMC), as their mandate was road safety?
He requested that SAMSA reword the annual targets in relation to the percentages. As it stood, it did not look good.
Mr C Hunsinger (DA) said that amongst the state-owned entities (SOEs), ACSA had contributed to irregular spending in previous years. In 2015/16, the figure had been R446.3 million, and then in 2016/17 it had increased to R602.5 million. There had been repeat findings. The AG had reported that the financial reporting framework was not in accordance with the prescribed format. There was a slow response in implementing the commitments to address internal control deficiencies. Financials, with respect to financial performance, reporting and compliance, were a concern. The Ag had made remarks about officials who were not familiar with policies and procurement processes. He recognised that ACSA had alluded to this, but this was on the surface. There was a lack of corrections in the key performance indicators (KPIs). He imagined that this issue so serious that ACSA would be challenge itself in using them in specific key performance areas and key performance indicators. More specifically, the AG had remarked that in some cases there was intentional circumvention of procurement processes in SCM policies, with serious financial misconduct and misstatements. He had been hoping to see performance indicators where the corrections were, and where the strategy would try to address this.
More information was needed on the progress and specifics of the initiative of setting up a joint security action plan. The increase in security and crime-related activities should be a concern. Consequently, where was this being taken up in terms of working with other law enforcement agencies to maintain ACSA’s reputation? This was important for South Africa’s reputation in tourism. He asked if the percentage indicator on the delivery return on equity suggested that there would be a 5.1% return on equity. If this was the case, he did not understand the detailed representation of this in the quarters, which would seem to indicate that one could not achieve that on average for the whole year. The quarters should reflect what was proposed as the final average for the year. Regarding the assessment of airport operational services and interactions, there was a difference between what ACSA were presenting here and what was said in the annual/strategic report.
The key performance indicator concerning creating job opportunities indicated a figure of 29 382 for the whole year. However, inn the detailed report in quarters this added up to a total of 73 454, with quarter 4 reflecting the same as what was indicated for the whole year. Which was the right value? He pointed out confusion arising from the quarterly and annual figures involving the employee satisfaction survey and the leadership culture index. He also why “growing regional airport departing capacity” was shown as zero, and why there were differences in the carbon accreditation levels. He was disappointed that there were no financials. It was not a detailed report, but he was encouraged by the graphs which indicated a nice trend.
The ATNS continued to be a concerning entity with this Portfolio Committee. He wanted the reasons for ATNS not submitting financial statements before 20 September 2017. Why had they been withdrawn after being submitted late? There were concerns over outstanding findings and a track record of non-compliance. What measures were being undertaken as strategic objectives to get rid of repeat findings in relation to the changing of systems and procedures? He had taken note of the fact that the ATNS amendment act had been moved from the 2017/18 financial year to the 2018/19 financial year. How would this postponement influence ATNS’s financial objectives through the implementation of the regulations? The core programme involving a governance model to align regulations to non-regulated business was not in the APP. Was it related to the rescue-sharing model in the APP, and if so, how did this relate to the governance model?
There had been talk of establishing a supply chain management methodology in the organisation. However, in the APP there was talk of implementation -- would establishment take place before the implementation, or was this other way around? How did this relate to the APPs? It had been indicated that ATNS was entering into a borrowing and loan agreement, which was expressed in the projected budget for 2018/19. However, in the year following that, there was a doubling of this intention from R89m to R194m. Current liabilities were projected to increase from R43.5 million by two and half times to R108 m in 2018/19. ATNS’s current salaries and related costs made up 52% of its tariff revenue. In 2020/21, it mades up 72%. Thus, there had been an increase in tariff revenue of 70%. He asked if this was the reason for wanting to borrow money. Cash generated from operations were budgeted for the next financial year to drop by half to R211 million, and the year after that it was even more. This did not make any financial management sense. Could this decline be explained?
The SACAA presentation had included annual targets, but no indicators. It would be nice to have a column with indicators. He acknowledged, however, that a breakdown was given in the APP.
Regarding the SANRAL presentation, he said that on 29 September 2017, the Committee had received notice that it would not be receiving SANRAL’s annual financial statement. This had put severe pressure on the Committee. What had been the constraints and reasons for this, as there had been enough time for this to be done? There were material impairments of R 3.75 billion in debtors, and he asked if SANRAL could reflect on this. What was the reason for the irregular expenditure of R242.9 million due to non-compliance? Which measures did SANRAL employ to make sure that this would go in the other direction, since these seemed to be repeat findings according to the AG’s report. There was also some wasteful expenditure of R15 million due to costs relating to approval processes that were not followed. Due to the negative credit rating, bond auctions had been cancelled, and there had been reference to that in the AG’s report. This meant there was a severe gap in income and revenue. What other options and measures had SANRAL considered? On a more practical note, could SANRAL give feedback on how the Moloto Road project was going from a financial perspective? From time to time, the Committee got feedback from the Department of Transport in which there seemed to be under-expenditure. This was a concern. There seemed to be a lot of pressure for there to be progress on the Moloto Road project. If money had been allocated, any under-expenditure on this project had to be justified with firm reasons. He had received images of a road in the Trompsburg area on the N1, which was a significant traffic risk. What was going here?
The AG’s report on SAMSA had indicated concerns that were specifically related to information not being supported by approved evidence to confirm the accuracy and reliability elements. SAMSA had failed to table its financial report in time before 30 September 2017 to the Committee, which had jeopardised the process considerably. Why was SAMSA not able to submit this report in the prescribed legislative period? In regard to the numerous repeat findings, what measures had been built into the KPIs and into SAMSA’s processes to make sure that the Committee could see a turnaround? Gven that SAMSA’s strategy alignment matrix was a very significant document in respect of its developmental process, from an ad hoc management of style to a capacitated leadership style, more of these elements should be incorporated into the KPI objectives and framework. He missed the important alignment to the APP, and had an issue with the annual performance plans in relation to percentages.
Where 100% of audit findings were reported to have been addressed, as per SAMSA’s audit corrective action plan that had been presented, this should have had more detail. If this had already been achieved, what was the point of going on -- in the layout presented, SAMSA had indicated it wanted to achieve 100% in the next quarters. This created an impression which reflected on the Department from which this was generated, and this was not what SAMSA wanted.
SAMSA was aiming for 95% of ICT systems’ uptime being achieved. Why was this not 100%? There were issues in using percentages in target setting. Surely one could describe this. There were several references to “100%,” but what did they all mean? Where it referred to the percentage of ships found to be polluting that had been successfully held accountable for pollution, was the 100% target in each quarter based on the previous quarter? Would it be for the specific month? Or would it be for the court cases completed, or the ruling of the court? How should the Committee consider this for oversight, going forward?
SAMSA had addressed the need to register ships. Which ships were these? “Milestone” seemed to be a copy and paste word. This was too vague. It raised queries and asked for bigger understanding. Did it refer to the 3 711 ships mentioned in the organisational dashboard? It could not be the same ships under our own flags. If SAMSA achieved 100% in the first quarter, was this repeated or the whole register written in the second and subsequent quarters?
The Chairperson asked whether the formation of and ATNS subsidiary could be explained. There were movements which were paid for and others which were not. Was there a strategy to deal with this? How did one ensure the poor did not subsidise the rich? She complemented the ATNS on its monitoring performance, but needed assistance in understanding the operating costs percentage.
She applauded SACAA for their clean audit records for many years.
She wondered whether there was a possibility that SANRAL could assist the municipalities in dealing with challenges. Had research been done which would allow it to use less expensive methods of road maintenance and construction, which would help them deal with the budget cuts? Were there any policy matters that needed political intervention, such as the toll matters? This was also a warning for legislators so that legislation could be changed for SANRAL’s benefit, whether it be for maintenance or infrastructure.
Turning to the SAMSA presentation, she asked about climate change and its impact on sea life. Do it have a strategy especially in accordance with what was required by the IMO? How was SAMSA working with the Department of Environmental Affairs? It was the custodian of life in the sea for South Africa. In terms of Operation Phakisa, what had been indicated was that there would be ships on the register under the public South African freight -- was progress being made in this regard? There had been five ships, and then some had been withdrawn. This was a drawback. She was aware of the work being done with universities in human development. Was SAMSA partnering with other entities and the private sector?
Lastly, SAMSA had indicated that there were challenges with marine enforcement. What needed to happen to enforce legislation? How did one make sure that SAMSA could collaborate with those who enforced? She was happy that SAMSA was working with the DAFF. The Committee had indicated that it needed to develop an understanding with the SA National Defence Force (SANDF) for disasters at sea, for example. How far was progress with the Minister of Transport in ratifying SAMSAs funding model?
Ms S Xego (ANC) referred to ACSA’s KPIs on the creation of job opportunities, which amounted to 29 382. How would ACSA report progress? In supporting black entrepreneurship, it had included women in business. On the issue of women, how would its progress be measured? What was its baseline? She appreciated the information on airport rankings, but was worried about King Shaka International Airport, which was in an isolated space in Durban. Were there any development plans for it? Were there any plans to deal with land grabs near the Cape Town airport? Regarding the huge development that had been mentioned, what was being done to improve working relations with key partners such as the Department of Public Enterprises to improve the services and airlines?
She said there was something that had contributed to ATNS getting a qualified audit opinion, and there must be measures to prevent this. The governance structure had two executives and no female executives, which must be corrected. She was curious as to why there had not been a plane crash except for the instance of a private jet, and wanted to know who led the investigation, and what could be shared with the Committee. Was the irregular use of credit cards happening for the first time, or had it just not been picked up before?
Mr M Sibande (ANC) said there was a concern about ACSA having too many acting positions. Vacancies must be looked at generally, and not just board vacancies, as this affected staff morale. ACSA had set itself 17 performance targets, of which 76.5% had been achieved. Why had the rest not been achieved? ACSA had contributed to irregular spending, where an increase had been seen from 2015/16 to 2016/17. The problem which contributed to this was contravening the SCM policy and the Preferential Procurement Policy Framework Act No 5 of 2000. The fundamental issue was that ACSA was not complying with the policies and rules. ACSA never told the Committee the root cause of the problem of irregular expenditure, as a solution could have been found. The 2015/16 irregular expenditure amounted to financial misconduct. He asked whether anyone had been brought to account for this misconduct. He was impressed with growing the capacity of ACSA in giving technical assistance to other countries, but how was ACSA going to manage to provide foreign assistance when it was failing locally?
With reference to access and mobility, the rural airports did not have the necessary infrastructure which related to security. There were challenges at Lanseria Airport in respect of aircraft landing. Had ACSA made plans regarding audits for private aircraft landing strips? In terms of non-compliance, had ACSA thought about protective measures, such as risk management? If the structure of internal audits was functioning well, there would be no challenge of financial misconduct, which meant that structures were not there. What was the status of transformation in ACSA’s sector? He asked ACSA to give him more details on the growth plans for O R Tambo International Airport.
Turning to the ATNS presentation, he said that the major issue was about non-compliance, which had contributed to the failure to prevent irregular expenditure and asset management challenges. There was the issue of failing to submit its financial report on time. Did ATNS lack the capacity to deal with these matters? The fact that assets could not be physically verified was a serious concern. He was unsure whether ATNS had an internal audit unit. There was concern regarding the situation in the Democratic Republic of Congo. Why was work being done there? Why did ATNS invest where they would have a loss?. There was no stability in the entity. All the issues in the corporate strategic risk dashboard were non-compliance related.
He congratulated SACAA on their achievements. Regarding the alignment with national imperatives, he asked how many jobs went to youths. On the issue of transformation, one had to look at why aviation did not attract individuals and consequently why there were so many white males. Most individuals at school were fighting for “fees must fall,” but there were high training fees which was a barrier. There should be a strategy for transformation. There must be a proposal so the Committee could do checks and balances. There were still significant challenges.
He was happy that the Moloto Road had been spoken about in the SANRAL presentation. Progress was very important. SANRAL had set itself 37 performance targets, but only 32 had been achieved. Why were the rest not achieved? There had been irregular expenditure as a result of officials not following the prescribed procurement processes. What was happening with this? Most of the entities were facing the challenge of payments through the supply management chain – was SANRAL being paid in time? In most of the provinces, there was land owned by SANRAL -- had it finalised the total audit of its own land?
Some of the matters raised in the SAMSA presentation involving key strategic challenges such as maritime enforcement resources, were not good. He asked why the challenges had remained the same from last year, as they should have been attended to. The issue of vacancies was a concern, and there were too many acting positions due to infighting. The issues of B-BBEE and Operation Phakisa were a concern. He said there was a need to encourage the youth, as South Africa was running short of cadets. Transformation was very slow.
Mr G Radebe (ANC) said the SACAA presentation’s personal licence statistics were sketchy, and by his calculations they were not correct. For example, 92% of white people were said to have licences, but in his statistics, it was 89%. The percentages were a concern -- it was difficult to see which was the correct one. It would be appreciated if the Members of the Portfolio Committee were invited to these conventions and summits so that they could get more information.
In the SANRAL presentation, the total figure for trainees was wrong, and this had to be corrected as this was a public document. He had been driving in the North West Province, and the roads had been terrible. When he was driving in Johannesburg, there was a part of the road on the N17 which had been damaged since October/November last year. Why had this not been sorted out, when toll rates were being increased?
The Deputy Minister of Transport stated that it was important to mention that the Minister of Transport had the right to appoint members of the board. This was done through a process that was approved by Cabinet. Thereafter, the chairperson was appointed. The chairperson could be any member of the board except the CEO. Infighting within the board of ACSA was a concern, nevertheless it could not affect board appointments, as this rested with the Minister. In terms of legislation, there was a minimum of three members and maximum of 12. There was a difference between quorum itself and the maximum number members. The Minister was committed to appointing board members.
Mr Maseko said that they believed that transformation was a mandate for every entity in order redress the inequalities of the past. He recognised that there was a commercial part of the business. For example, there was a R4.5 billion tender coming out, and the usual suspects should not respond to that tender all the time. On the question of commercialisation, there was currently a review of the commercial portfolio under the COO’s office.
ACSA contributed to increased traffic, and although it was recognised that airlines increased traffic, it was how effectively ACSA worked with the airlines to increase that traffic that was crucial. ACSA was working with Wesgro in the Western Cape to attract more airlines. It was speaking to SAA insofar as it related to maintaining the hub status of O R Tambo International Airport. Crucially, ACSA worked with all airlines whether they be domestic or international.
Regarding critical staff, he assumed the reference was being made to the executive committee, in which there were currently two vacancies. The Committee should be mindful that there must be sensitivity towards gender imbalances regarding recruitment. Recently, the Chief Information Officer resigned and an appointment was under way. In terms of transformation, gender issues were taken seriously.
ACSA was a self-funding entity and did not rely on government. There were sufficient funds to fund the three-year corporate plan and beyond.
On the issue of staff stability, there had been an employee satisfaction survey. This had been done so that there would be no critical issues that concerned staff from a leadership and staff level viewpoint.
Regarding the 51% black business representation in respect of women, people with disabilities and youth, he acknowledged that figures were not available in the presentation, but they could be sent to the Committee at a later stage.
With regard to management representation, ACSA’s shareholder had challenged them to have an equal number of men and women in executive positions. There were currently more men than women, but ACSA was attempting to recruit more African women.
The question of pilots should be referred to SAA, as ACSA did not attract pilots.
On the issue of security, the Minister of Safety and Security had started an initiative with security agencies and the police which tracked the follow-me-home incidents. There had been significant progress. There was a hope that under the new Minister of Safety and Security, that progress would continue.
Involving local communities was done largely through the metros. There was a sense of proper involvement by the communities, and work was being done with community-based organisations in the metros where ACSA operated. There were issues raised about the KPIs in terms of job creation and carbon accreditation.
The reason there had been no financials was because ACSA attended two meetings with the Committee per year, first to present its APP and secondly to present its financials once they had been audited by the AG.
Job creation had not been broken down into the various categories, but this could be done if the Committee wanted it.
Regarding a breakdown of non-ACSA airports, ACSA did not impose itself and went to these airports only if assistance neededto be provided. Some of these airports were provincially owned or owned by municipalities. So far, Polokwane had approached ACSA. Umtata had also made an approach, but an agreement had not been signed. Umtata had not been physically handed over to ACSA. In some instances, there was resistance to ACSA providing services where there was an expectation that ACSA would manage the airport.
The Cape Town International Airport renaming would be dealt with by the Minister of Transport.
On the question of land grabs around East London, this had been dealt with more effectively in Cape Town than East London and Port Elizabeth. ACSA had been able to relocate informal settlements. It would relocate 2 500 informal residents. Currently, 500 had been relocated and there was a plan to relocate the rest. There was a plan for East London and Port Elizabeth.
ACSA’s plan was to contribute to the centenary of Nelson Mandela and Mama Sisulu. These were initiatives led by the Department of Transport, and ACSA contributed to this. Each entity must contribute in some way. For Nelson Mandela, ACSA would work with the Nelson Mandela Foundation. The Department was the lead department that would coordinate all the entities for Nelson Mandela and Mama Sisulu’s centenary.
With regard to the KPIs that had not been achieved, ACSA did not have the reasons from the last financial year. However, reasons could be furnished at a later stage.
On the issue of flights cancelled, SAA had cancelled several flights. It had profitably challenges, so it had reduced many flights. If there was a gap, either British Airways (BA) or other airlines would fill that gap. Regarding flights being turned back from Lanseria, this was a non-ACSA airport and so they could not account for it. The civil aviation authority would be the right entity to pronounce on private airstrips and how they were managed.
The status of transformation was monitored on a quarterly basis, and would be discussed.
There was a detailed five-year infrastructure programme for all ACSAs airports which could be made available. They had presented a corporate plan which took place over a three-year period, which covered only the main infrastructure. The request to circulate the slide on youth employment would be done.
Mr Cloete responded to the question of long corridors at arrivals, and acknowledged that this had been part of their plans. One of the projects that had been listed was the domestic arrivals project, and was the first project that would be happening. The reason the corridor had been created was to cover some ground where there was open space. That open space would be part of the new terminal and the old terminal fell outside of the new setup. This was much closer, and there would be no need for travellators. In addition to this, they had created a short cut. If one had no luggage, one would not have to go the baggage room.
Mr Kunz said that irregular expenditure was a concern. The root cause of non-conformance in ACSA’s business was related to the structure of its supply chain management (SCM) organisation, which had created problems in supporting the business with SCM policy compliance and legislation. Another challenge was the appropriateness of ACSA’s own policies and procedures to give effect to compliance with procurement regulations and legislation. To rectify this would involve system changes, and this would take time. ACSA had reconfigured its SCM to a different function so that it would appropriately align and assist the business with compliance. This was combined with a new policy and procedural framework which would assist with compliance improvement. Most of the revenue expenditure that was reported related to non-compliance with internal policies and procedures and in some cases, this had led to non-compliance with legislation. Regarding the return on equity and all the KPIs referred to, accumulation occurred through the quarters.
Ms Bongiwe Mbomvu, Group Executive: Governance and Assurance, said that ACSA had adopted a key form report last year. There was a proper risk management framework and standards. ACSA had developed strategic and operational risk registers, where risk was identified and managed. There was a risk cost analysis in which risk was mitigated. Quarterly feedback was provided at an executive level.
Adv Mphahlele stated that there had been a meeting between the executive authority and the Minister of Transport. Directives from the presidency had stated that ATNS must focus on an integration strategy with SADC. This had to occur especially with regard to infrastructure development. ATNS had signed an agreement with ASECNA to work in the rest of the continent. If ATNS did not work in the risky areas, there may be some problems.
There had been a discussion with the Department of Transport and the shareholder regarding the formation of a subsidiary. There were risks involved. This issue would be revisited at a later stage, but ATNS should rather continue with the international division of the organisation. This would still help to continue ATNS’s operations.
On cross-subsidisation, the previous position had been that aircraft which weighed above 2 700 kg were charged. Now the limit was 5 000 kg. This was a problem, because when ATNS rendered services to the aviation industry, it was rendered to those who paid and those who did not. Sometimes these individuals were rich owners of jet aircraft. Thus, rich individuals sometimes did not pay if their aircraft did not weigh much. There would most likely be a fee avoidance scheme. However, there was a move to return the benchmark to 2 700 kg so that everyone could be charged.
He said that private planes and airlines were not regulated well not enough. This could make this industry prone to white collar crime because of under-regulation.
Regarding non-compliance with policies, there was a regulatory framework, as well as the PFMA, the Companies Act and the Treasury regulations. Where there had been a decision by the board, the provisions of these acts were compulsory. Therefore, consequence management had been implemented. The company secretary had been found wanting and a disciplinary proceeding had been launched.
Mr Mthiyane said that cross-subsidisation had always been challenge. Studies from the early 2000s showed that the effort to recover the costs was too much compared to the actual money received from the aircraft. Because they were charged by weight, the smaller the aircraft the less money was paid. Some of the aircraft flew in uncontrolled air space, which added to the problem.
Most of the accidents and fatalities in South Africa were in general aviation. Accidents were decreasing, but they usually involved small aircraft in an unregulated environment. As much as they were being regulated by the Civil Aviation Authority, certain things were still done. His opinion was that this started from the training schools. The Civil Aviation Authority were the right people to ask on the question of who the culprits were. Concerns arose when they entered controlled air space, where there were usually big numbers. For example, an Emirates flight to Mauritius could carry over 650 passengers. In terms of infrastructure, sometimes a person or pilot could wander into the controlled air space because they were lost. As an air traffic controller, one had to be able guide them so that they did not crash. For this to happen, one needed specific resources which were financed separately. Expensive equipment may be necessary in this example. It had been suggested that there should be be a study on this subject, as what applied in the past would no longer apply.
The tariffs which were being promulgated and ended up being signed by the executive authority were actually negotiated by ATNS, the airlines and ACSA.
On the issue of compliance, there was an internal audit function at ATNS. The challenge with audits was that there were three levels. The first assurance started with line management. By the time it got to the board, it had gone through a number of levels. These assurance levels were relied on. What was apparent was that there had been a colleague who had been supplying misleading information.
ATNS did not know why it had received a qualified audit,. Currently, Ms Mahamba had been tasked with strengthening this area. The skills were not available in-house at ATNS. There were no financial implications regarding work on the continent, in that a resource-sharing model was being used. Spare capacity was being used to generate income in the business. There had been one instance where financial institutions had been asked for finance to deploy a satellite network. The recovery mechanisms had been working very well since 2002.
ATNS wanted to emphasise safety on South Africa airlines. There was a need to encourage people to come to South Africa to do business. The question was how to reduce the cost of doing business in South Africa There were roughly more than 10 airlines leaving Europe for South Africa. These aircraft fly over the DRC airspace where there was no surveillance, and relied on other aircraft for safety. Safety was paramount in this regard. The safety standard was 10 nautical miles, while on the African continent it was 20 nautical miles. There was project implemented called Red Puppet, which looked at the routes coming from Europe to South Africa. The satellite network had been deployed for safety reasons.
ATNS was still working very hard in terms of recruiting women, particularly in executive and board positions. Empowerment was a national issue.
The irregular expenditure on the credit cards had been responded to.
The late submissions had been based on what had been indicated. Initially it had been a huge shock. It did not make sense. He wanted to have a dialogue with the auditors and ask what was going wrong. Attempts had been made to negotiate with the National Treasury.
The Deputy Minister referred to the question of aircraft crashes, and said this was the responsibility of the SACAA. There had to be proof beyond any doubt that anyone who was investigating a crash must be independent. In other countries, one could have this responsibility located under ACSA, for example. South Africa’s aircraft crash record must be maintained.
Mr Mokoena responded to the question of rising geopolitical tensions, saying that ordinarily when one analysed to come up with a strategy, one had to look at a variety of remote and external factors. For example, when the President of the United States of America had declared that airlines coming from certain Gulf countries must not allow laptop computers inside the cabin of the aircraft, this would affect the aviation business.
The diversification of revenue had to do with over-reliance on passenger safety charges. This was over 70%, and was sensitive to developments in the world. The diversification base had to be broad and insensitive to certain fluctuations.
Mr India, on the question of attracting youth, said that at the last board meeting it had been concluded that there needed to be events and public spaces for recruitment.
Mr Seedat said that SACAA was currently relying on passenger safety charges as its source of revenue. SACAA benchmarked against other regulators in the world to see how their funding models worked in terms of the “user pay” principle. In that exercise, a number of activities had been identified where SACAA charged no revenue. Potential ways of generating a further 2% to 3% in revenue had been identified. However, based on the exercise, safety passenger charges would still generate the most income. It was an ongoing process to find other sources to reduce passenger safety charges to 65%.
On the issue of personnel costs consuming 72% of the budget, the nature of this industry was that more than 60% of the staff were technical and needed to do inspections and audits. This was not a capital-intensive organisation, so SACAA did not have huge capital expenditure. The HR costs were managed so that they did not grow out of proportion. One of the ICAO findings had been that there needed to be more inspectors from a technical perspective. There were resources based on SACAA’s strong financial position which could be used if necessary.
Ms Khoza said that as the national aviation transformation strategy of the Department of Transport was implemented, a lot of issues would be resolved. There were many schools that were training pilots, but none of them were developmental. There was a consideration of an aviation academy so that transformation could occur.
The high vacancy rate -- 37 out of a total of 509 -- it was mainly because of the critical skills that SACAA had to compete for with the industry. Once training was completed, individuals often left SACAA. There would be a more robust strategy to deal with retention. Performing with the vacancies was a delicate balancing act, in that SACAA sometimes had to resort to temporary resources. Sometimes recruitment was on a contractual basis, such as pilots who had retired, so SACAA could deliver on its mandate. Management had become creative in this regard. Recruitment occurred on a monthly basis. So far there had not been a negative impact on resources due to this.
She said the Committee would be invited to the summits.
The Deputy Minister of Transport said that the issue of transforming the industry was a huge concern. Ms Khoza was correct, as most of the pilot training schools were privately owned. SACAA could consider many options, as universities and colleges were prepared to take its pilots.
Mr Morar supported the Chairperson’s suggestion for changes in the legislation.
He assured Members that SANRAL had fully complied with the provisions of the PFMA in investigating every instance of irregular expenditure. If action needed to be taken, it would take it. There had been no fraud or corruption. Many of the instances were a matter of interpretation between the AG, SANRAL and the National Treasury. It had taken a long time, and during the financial reporting period, when there was a conclusion, SANRAL would either stop or continue with an action depending on whether they were right or wrong.
SANRAL was happy to provide information on the ring road.
It had taken full ownership of its asset register, which had been updated. The asset verification was 100% complete. It was an outsourced function.
Deputy Minister Chikunga acknowledged that funding for road infrastructure was poor in South Africa. This had to be resolved, and the answer would lie in collaboration with various entities and departments. This was not just about roads, but also bridges and so forth. The Minister of Transport was expected to provide answers. The budget cut for SANRAL was a serious concern. This was a consequence of various factors, such as population growth. There was a challenge with e-tolls. People were expected to comply with the e-toll requirements in Gauteng, as this counted as road infrastructure. The Department of Transport was looking into the matter.
The Moloto corridor had three phases. SANRAL was responsible for the road. PRASA was responsible for the rail. The public transport branch was responsible for the last phase. One had to keep in mind that there were three phases and three different SOCs responsible for its development. There would be a reduced number of accidents. All the SOCs involved in the road sector had a responsibility and role to play in road accidents. On the Easter weekend, most of the accidents had happened on national roads. Co-ordination between various stakeholders was critical in this regard, to avoid road fatalities.
Ms Inge Mulder, CFO, said the delayed submission of financial statements had been the result of not concluding on the guarantee. SANRAL could not conclude the financial statements until the guarantee had been signed off by the Minister of Transport, in concurrence with the Minister of Finance. If SANRAL had submitted them to the Auditor General without the Minister’s signature, it would have resulted in a qualified audit. SANRAL had therefore asked the Minister to give permission to delay the submission.
The impairment charge referred mainly to the debtors on the e-toll who were over three years in arrears. That portion of the debt would be impaired. Impairment did not mean writing the debt off -- it just indicated that there was a lower possibility of SANRAL collecting it.
The irregular expenditure for that financial year had been a huge reduction from the prior year, and had come down from more than R1 billion. There were still a few non-compliance issues which were being addressed. A couple of experts had been appointed in the area of SCM, which was expanding rapidly and new regulations were coming out on a regular basis. A lot of measures had been put in place. The fruitless and wasteful expenditure had been for interest and legal fees paid on the Winelands project, which had been cancelled.
Even though the bond auctions had been cancelled, SANRAL had raised funds through other private sources and interim measures. It had delayed a number of projects for the year due to funding issues. In the budget presented, its budget for the toll roads and the capex and operations expenditure was much less than in the past.
On the question of how SANRAL performed in respect of paying suppliers within 30 days, she said there was a note in the financial statements where this was addressed. SANRAL’s payments were being made within 33 days, so it was very close to being spot on target for paying everyone within this period.
Mr Macozoma referred to the Moloto road, and said there were a lot of issues regarding stakeholder involvement in Limpopo and Mpumalanga. SANRAL had set up public liaison committees (PLCs), and had agreed on representation of the different stakeholders on those committees. It was working much better. The projects were under way. The big delay on Mpumalanga had been five months. This section was important because it was an extensive part, as it dealt with the quality of the road. The team was working much better and this problem had subsided as the stakeholders on the ground were helping.
In Mpumalanga, there may have been a misunderstanding as to whether the initial project was the only project. It had started with roundabouts to improve traffic flow and safety. The substantive projects of improving and expanding the road network would come over the medium term. There were bigger sections of work to come which would benefit more people. The main challenge was the Gauteng portion. SANRAL was helping the Gauteng province to complete with designs for the roads. Parliament had instructed Gauteng to hand over the road to SANRAL, but Gauteng had declined and maintained ownership of the road. However, Gauteng had insufficient funds for the road, so this matter needed to be resolved.
Regarding a security plan to safeguard road infrastructure, the way SANRAL managed the 22 000 km of roads was that each and every kilometer was allocated to a specific routine road maintenance contractor, who had the responsibility of making sure that all the necessary work, protection of infrastructure and the upkeep of the road was done from a maintenance perspective. From time to time, if SANRAL needed to do improvement work, then a separate contractor would be appointed. This was the mechanism through which infrastructure security took place.
Regarding the incidents of stones being thrown at vehicles in Durban, this was a criminal activity and SANRAL’s responsibilities did not extend to law enforcement. It had engaged with the city of Durban and the communities to deal with this problem, which had resulted in the deployment of security and law enforcement. If SANRAL had to fence off all the bridges, they would lose money that would otherwise have gone into infrastructure, so this was not practical. The solution was to get people to understand and participate in programmes to manage and protect their assets.
Through the 14-point plan, SANRAL had established PLCs. All the routine road maintenance contractors had PLCs where communities sat, and in rural areas there were traditional leaders. This was a good platform for SANRAL to give information to communities on how to take ownership of road infrastructure. PLCs became its ambassadors in this regard. Another example was what was being done in schools, and the partnership with the Department of Education.
He acknowledged that more work would be done with other agencies in transport.
SANRAL had no intention of being law enforcement officers. Its role would be in the area of innovation and technology deployment.
The land portfolio was ongoing work for as long SANRAL kept taking transfer of roads from the provinces. There was a team that was assisting SANRAL in managing the land portfolio. On a regular basis, if there were improvements to SANRAL’s road network that had to be done, these were sent to the Minister for approval so that it could get the right coordinates of the roads. If there were portions of land that it felt it would not be needing in future for road purposes, it carried out a process of deposing of these assets with the permission of the Minister. With Horizon 2030, SANRAL had concluded that where it was practical or possible for it to strengthen an asset, it should invest in it to generate income. This would be done, as it served other SOCs very well in terms of using their land portfolio for income.
On the question of whether SANRAL could assist municipalities that struggled with capacity for road network management, Horizon 2030 emphasised the point that SANRAL should look for these partnerships. The Act empowered it to do work for municipalities on an agency basis, and it needed to find a way of making its assistance sustainable.
SANRAL wanted people to send their young engineers to their technical academy so they could register as professional engineers.
Mr Louw Kannemeyer, Engineering Executive, said that it was important to clarify that the N12 overall did not fall under SANRAL’s jurisdiction. There were parts of Klerksdorp and Potchefstroom that were not SANRAL’s responsibility. The whole portion in Gauteng did fall under its jurisdiction. Although a portion of the road was on the N12 route, it did not imply it was under SANRAL’s jurisdiction. In and around Klerksdorp was not under SANRAL’ss jurisdiction -- it stopped a certain distance before and after, where it would tie in with the future ring road around the town.
If damage did occur on a SANRAL road, there was a full process which was followed in terms of verifying and compensating members of the public. With regard to the N17, he wanted more detail to be able to respond.
Mr Malahleha said two KPIs for quarter 3 had not been achieved. Firstly, the percentage of RRM project expenditure performed by black-owned SMMEs and contractors had a target of 65%, and SANRAL had achieved 64.8%. When the quarterly report was submitted, SANRAL had indicated that they could not get enough BEE compliant contractors. Hopefully, by quarter 4, the target of 65% would be reached. Secondly, SANRAL was meant to make sure that the overheads were not more than 10% of its total budget allocation. The figure had been 10%, so this had been flagged as a KPI which could not be achieved.
The Deputy Minister said that she believed SAMSA had turned the corner. Today, the Committee was talking about an SOC which had a surplus, which was different from the past. However, there were issues with the board. SAMSA had appointed a CFO who had resigned. This vacancy had not been filled for a long time. The issue of whistle-blowing when individuals were appointed was a serious concern. The Minister of Transport would most likely resolve these issues. There had been a serious abuse of whistle-blowing and investigations.
The SAMSA Act stated that the acting CEO could only remain in an acting role for 12 months. This was an issue which needed to be resolved. She commended the current members of the board for their leadership.
SAMSA had asked the acting Director General to give a submission to the Department’s office to request an increase in the targets. This could be taken to the Minister of Transport for discussion with the Minister of Finance.
A plan needed to be developed for South Africa to progress and remain with the IMO. There was a vacancy for the vice-chair of the Council at the IMO. Africa had received support, but only insofar as it advanced a female candidate. Kenya was the only country with a female candidate, but it had no interest and so South Africa could be in a position to challenge. The Minister of Transport agrees with this.
Mr Tilayi said that the Department of Performance Monitoring and Evaluation had come out with a whole set of regulations that governed how information should be managed. There were protocols that needed to be followed. Responding to Mr Hunsinger, he said there was something called the indicator protocol sheet. When an annual performance plan was put together, one dealt with the indicators and then had a document which was not attached. The indicator protocol sheet was the long-term interpretation on how everything should be measured, and this was presented to the Auditor General. This was basis the AG used to audit SAMSA. So ordinarily, if there was a problem, by the time AG picked up an issue with the indicator protocol sheet, one would not have a finding.
On the issues raised by the Chairperson, he responded that SAMSA had adopted a strong intergovernmental approach. The ministry had coordinated SAMSA well.
There were quite a few of matters in respect of climate change. SAMSA needed a strategy in terms of IMO requirements. This strategy had to be informed by the outputs of the member states. Under the leadership of the Department, SAMSA had a committee. There was a process which had to be managed to yield results. SAMSA managed what shipping did to pollution. There had been discussions on ocean acidification and the quality of sea water. SAMSA depended on the Department of Environmental Affairs and would be working closely with the Council for Scientific and Industrial Research (CSIR). The CSIR received a lot of data through buoys. The effect on the quality of water was an environmental affairs matter. The weather services provided weather information and, for example, they advised SAMSA on when the weather was degenerating. These weather reports were issued to passing ships
To deal with Operation Phakisa, the maritime transport policy that had come through had helped to unlock a few issues. There was quite a lot of work that needed to be done. SAMSA was sorting out the legislative areas to drive the industry. It had collaborated a great deal with National Treasury because ships responded to how expensive or cheap it was to use one’s country. Generally, to compete one needed to give tax incentives and rebates. Since 2014, Treasury had been giving SAMSA one instrument after another. In the budget speech this year, there had been issues on shipping. The bulk of the work had been done with coastal shipping, which was a problem. SAMSA had said it could not move until there was a transport policy.
There were a few partnerships with other countries based on employment. For example, SAMSA holds on to seafarers who do not get international employment. SAMSA was in partnerships with various companies from Norway, Canada and Hong Kong, and could produce the seafarers on demand. There may come a point where the demand might exceed supply. SAMSA would continually look for partnerships.
SAMSA had communicated with the Defence Force regarding agreements, but it seemed that they had their own challenges, so SAMSA had to make a contingency plan for the capacity it did not have. When SAMSA was doing road shows for the funding model, it had said to the industry that the capacity needed to be paid for by the industry. This was the basis of a discussion that SAMSA would be having. The board had instructed it to hold an industry workshop on maritime risk assessment, because it needed to take stock on risk cover. Jointly, SAMSA could have a plan that had been canvassed with industry and stakeholders. It would report back on this.
The 3 711 number referred to seafarers, not ships.
When SAMSA came to the Committee last time, it had not been pleased with the late submission of the report. The AG had given it a disclaimed audit which SAMSA had not been happy with, and had decided to be late and correct certain issues. This had caused problems of it being late and in respect of governance. These challenges were not new. SAMSA had chosen to keep them until they were dealt with entirely. Those elements that were not funded were put in the funding model. To alleviate funding from the Department, it was likely that SAMSA would look to the market.
The filling of vacancies had been dealt with. There was only one vacancy, which was the CEO.
SAMSA needed to issue a state of the maritime industry report, which had to be baselined. This would be issued later in the year. The report would be done with the support of the Department of Transport.
Mr Mervin Burton, a member of the board and the audit committee, dealt with the issue of the late report and issues of governance. SAMSA had inherited a number of issues when he came on board in 2015. The acting CFO had been holding everything close to his chest. A new CFO had been brought in, but he was going through a disciplinary inquiry. SAMSA had discovered that there were numerous issues involving supply chain management which were not being divulged at audit or finance committee level. The Chief Procurement Officer (CPO) had left right at the end of the financial year. This had been a difficult situation. An interim CFO had been brought in. There had been an improvement, but there were still many of issues to be resolved.
The meeting was adjourned.
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