Annual Reports 2017/18
The Committee met with the SANRAL, CBRTA and SAMSA boards and executives to discuss the 2017/18 Annual Report and audit . The three each showcased the pre-determined objectives achieved and reasons for not achieving some targets. They also gave an overview of financial performance and where needed, their plan to clear the audit findings.
Members commended CBRTA for its third consecutive clean audit and noted that despite absenteeism by some board members and the lack of skills on the board, CBRTA was still doing well. It commended SANRAL for its use of technology for quality road infrastructure and noted that apart from the challenge in collecting e-tolls which was due to it not having political support, it was a sound entity.
Members asked SANRAL about e-toll contracts, its e-toll billing system, the status of specific contracts, its irregular expenditure on multiyear contracts, its use of technology and plan to clear its audit findings. The Committee applauded SANRAL for applying consequence management measures on the bonuses of staff who did not comply with supply chain management processes. It advised SANRAL to publicise its research it had led to quality road infrastructure and promised to invite it to discuss its Horizon 2030 plans.
Members asked CBRTA about the skill complement of its board and its executives; board vacancies; policy on cross border relations; status of court cases; security at the Pongola border post; women in top management position; 2014 permit fee review regulations; and the impact of absent board members on permit decisions. A proposal was made for a special Committee resolution to the Minister about the board complement.
Members asked SAMSA about it re-occurring qualified audit; about its lack of a CEO and sufficient board members; its achievement of only 69% of its pre-determined objectives; its financial management and irregular expenditure; its technical skills capability; its consequence management; status of ships that were polluting the South African waters and the tax challenges for ownership of ships by black entrepreneurs. There was great concern about the non-appointment of a CEO in the last 28 months despite the assurance of the Minister of Transport. Questions were asked about requisite skills for maritime empowerment; jobs created; SAMSA’s previous audit findings which had not been rectified. They were humbled by SAMSA board members that had worked but did not receive salaries. The Deputy Minister of Transport was asked why the CEO appointment had stalled again after the whistleblower report had been shown to be untrue.
The Deputy Minister of Transport said in 2017 the Committee was advised that the CEO would be appointed but it is still being processed in October 2018. She said the SAMSA board was focused on its job. Although SAMSA has a qualified audit it has moved from a place of deficit to surplus. SAMSA’s new board has brought change to SAMSA and the COO has been charged with the responsibility but did not have the legal authority. As Deputy Minister she accepted the blame because the COO had pushed for improvement despite the challenges. SAMSA has been going through a crises created in the past but the COO has been working hard to resolve it.
The Chairperson informed the SANRAL Board Chairperson that the Committee was willing to work with the board to ensure that SANRAL became the leader in road infrastructure development and would be pleased to receive its brief on the Horizon 2030 programme of SANRAL at a later date. Today the Committee is dealing with the Annual Reports so it can submit its Budget Review and Recommendations Report (BRRR). The Committee has engaged with Auditor-General South Africa (AGSA) on the SANRAL audit and it understands that SANRAL is held back by the present e-toll legislation. The Committee appreciated SANRAL for its good work on road infrastructure particularly its modernisation efforts in the upgrade of the Moloto Road.
South African National Roads Agency Limited (SANRAL) 2017/18 Annual Report
SANRAL board chairperson, Mr Themba Mhambi, said the new board commenced in September 2018, embarked on a learning phase and discovered that SANRAL had a management that was responsible to its mandate as evidenced by the Annual Report. According to AGSA, SANRAL has been doing well and its only challenge has been on e-tolls which is occurring because of the present legislation. SANRAL, the Ministers for Transport and Finance and the President have been addressing e-toll matters. The board discovered that before it took office the CEO had already carried out consequence management for audit areas where staff had not been compliant. The board engaged with the Chief Procurement Officer in National Treasury to obtain feedback on SANRAL expenditure as some of the past projects were not consistent with supply chain management (SCM) rules. SANRAL is holding a retreat to clear the audit queries that led to its unqualified audit with findings.
SANRAL CEO, Mr Skhumbuzo Macozoma, spoke about infrastructure and pavement conditions and said spending was R12 billion on not-toll roads and R3.6 billion on toll roads. SANRAL achieved 31 out of its 35 pre-determined targets. SANRAL carries out a lot of research with institutions of higher learning to improve technology used on roads by using nanotechnology to stabilise materials. The implementation uptake of electronic toll transactions at conventional toll plazas has increased and a technical innovation hub has been established in Cape Town. He outlined capital funds allocated to social responsibility programmes, the share of contracts, work by SMMEs and data on distribution of work opportunities by age and gender on SANRAL projects. Delay in capital projects in 2017/18 led to a slight decline in workers that received training hence that target was not met. He spoke about SANRAL human capital projects, workforce profile, scholarship programmes, its communication strategies and its corporate performance. He analysed SANRAL assets, liabilities and equities, its profit and loss statement and its cash flow.
Key audit queries were impairments and collectability of tolls, re-evaluation of road network and road structures and the going concern assessment that was challenged by e-tolls. These audit queries were corrected hence SANRAL received an unqualified opinion. The irregular expenditure classified under routine road maintenance had been carried over but has reduced over the years. SANRAL introduced consequence management in the form of reducing bonuses based on cumulative cases of irregular expenditure to stop noncompliance.
The Chairperson said the brief was informative and could be used to school university students.
Ms S Xego (ANC) appreciated SANRAL for its good road design but asked for updates on the road design in Butterworth Eastern Cape. She asked if the different races were remunerated in the same way and requested an update on walkway connections. She asked for plans to avert road damage when tyres were burnt on roads during protests. She asked about mechanisms to avoid fronting when contracts were awarded to black owned companies. She advised SANRAL to recruit more people for bursaries to ensure that the target was met and to recruit graduates of TVET colleges in its job creation drive.
Mr C Hunsinger (DA) said he had checked new road constructions and acknowledged that SANRAL built good roads. He observed that SANRAL had a track record for unqualified audit opinions with findings and expressed concerns on its liquidity. He asked what steps it was taking to clear misstatements in its financial statements. He asked for clarity on the type of liability entered into in its e-tolls agreements and for its plan to address its June rating downgrade because non-assurance of e-toll revenue, especially the Gauteng Freeway Improvement Project (GFIP), was part of what led to Moody’s downgrade of South Africa. He asked for clarity on the usefulness of its performance targets, the financial statements that were not prepared according to PFMA requirements and its bookkeeping on small procurements. He asked why investigations from 2013-2018 had not being finalised and for clarity on its statement that ‘challenges on irregular expenditure had reduced’.
Mr Macozoma welcomed the positive contributions and guidelines of the Committee.
Mr Louw Kannemeyer Director: Engineering Services at SANRAL, replied that road design in Butterworth Eastern Cape was an ongoing process. It is now undergoing public participation but would go through final alignments for land acquisitions for a ring road.
Mr Macozoma said SANRAL did not have any policy that promoted disunity in salaries based on race or gender. Annual market research is done to bring salaries on par to market related salaries. Reviews are also done based on performance. In reply to Ms Xego, he said SANRAL is reviewing its policies to align with best international practice and is looking at ways to link its walkways. It avoids protests by undertaking long term engagements before road projects start. SANRAL has project liaison committees that comprise of stakeholders to anticipate and avert this as it does not want protests to escalate and have to invite security personnel. SANRAL uses materials that are resistant to threats such as burning during protests by using the gains from nanotechnology research to get materials that are fire resistant. He said SANRAL agrees with getting a large pool for bursaries to ensure targets are met and also agrees that TVET graduates should benefit from SANRAL employment. SANRAL has maintained an unqualified audit despite its challenges on e-tolls, financial management, supply chain management (SCM) and human resources management. It is engaging with AGSA to understand how it can improve to obtain a clean audit. The matter of e-tolls has been escalated to the President and SANRAL hopes to get political direction soon. It has reviewed its human resources policies to assist with internal controls. SANRAL started audit reviews in August 2017 and has employed ten staff to assist in this unit. Also in August 2017, SANRAL started reforming its SCM processes with new bid adjudication committees with limits on regions and head office. This process has strengthened control and ensures that no single individual approves tenders. In the past the CEO approved contracts but does not have power to do so any more.
Mr Macozoma said SANRAL has a plan to address the Gauteng Freeway Improvement Project (GFIP), it has political undertones. The mandate of SANRAL allows it to continue even when people do not pay. Its plan includes criminalising non-payment or suspending licences of people that do not pay but it does not have political support. Also insurance pegs could be implemented to ensure that debtor vehicles could not get sold but the political support has not being given. Revenue collection is based on being able to prepare an invoice, keep track of the debt (invoice) and be able to present it in court if contested. In this instance the Moody’s downgrade was based on SANRAL not having political support to collect the e-tolls and the Minister is presently engaging on it. A downgrade makes one pay more. AGSA is concerned about liquidity because if SANRAL would not be able to pay, National Treasury would have to pay. SANRAL is employing more staff to engage in oversight but would give feedback on the investigations in writing. SANRAL awards contracts for multiple years but the funds are allocated in a particular year so there are two types of irregular expenditure – those from a previous year’s irregular multi-year contract and those in a particular year.
Mr Hunsinger asked for more clarity on irregular expenditure that was decreasing yearly.
Mr Macozoma explained why the irregular expenditure was decreasing yearly.
The Chairperson asked SANRAL to clarify if the irregular expenditure stemming from multi-year contracts would continue after 2017/18.
Mr Macozoma explained that the irregular expenditure would not continue after the project was completed but the amount would be the irregular expenditure for that particular year’s expenditure stemming from a previous year’s irregular multi-year contract.
Mr Macozoma replied about fronting that it worked very closely with Treasury, the Construction Industry Development Board (CIDB) and BEEE accreditation agencies to sort out companies that are compliant before awarding contracts.
Mr M De Freitas (DA) asked the CEO to confirm the options that the President had on e-tolls. He expressed concern that the solutions presented by SANRAL were punitive ones that would enrage the public and negate the positive media gains. He said the suggestions did not provide a financial plan and noted that SANRAL was issuing summons silently that could lead to negative media fall-out. The solution produced by the e-toll contract lead to spending money on overheads without getting an income. He suggested that a fuel levy would lead to revenue collection without overheads. SANRAL should consider cancelling the contract. He asked SANRAL to clarify why it did not use the services of a local company to collect e-tolls and confirm why it did not have any tender during the year. He asked SANRAL to confirm what it wanted to achieve with full colour adverts in newspapers and why it was issuing summons to debtors.
Mr M Sibande (ANC) commended SANRAL for its maintenance projects on roads. He asked SANRAL to confirm how often it embarked on oversight on its audit findings as this was why AGSA had concerns about its internal controls. He asked for more information on the job creation activities of SANRAL. He commended its communication strategy but asked SANRAL to give a brief on how its communication strategy had improved in rural areas. He asked about the transformation component of its scholarship programmes and for a status update on court cases involving SANRAL construction activities. He asked why there was a difference between roads maintained nationally and those maintained provincially as roads had good quality in some places but suddenly lacked quality in other places. He asked if SANRAL had finalised the audit of the land that belonged to it.
Mr Macozoma replied that apart from the punitive measures there are interventions that favour those that are willing to pay e-tolls. SANRAL understands the consequence of a public backlash if the punitive measures are implemented that is why it is awaiting political approval. Another funding model beyond the punitive and carrot intervention is needed to carry out SANRAL’s road maintenance projects because the funds needed to implement its road maintenance projects far exceed its budget. This is part of what is being proposed in the Horizon 2030 plan. Summons are issued to people that owe SANRAL and it remains a private correspondence. SANRAL has sought agreements with the Organisation Undoing Tax Abuse (OUTA) to take the matter to court. The contract on e-tolls ends in 2018 hence SANRAL would start a new tender process to operate the e-toll scheme soon and SANRAL must comply with PFMA rules. SANRAL appointed an Australian contractor because at that time there was no South African company that had the skills to collect e-tolls. Initially, all experts were Australians but as at 2016 only one expert remained and all others were South Africans although the intellectual property belongs to the company. South Africans companies have to prepare themselves for the tender when it is advertised. The fuel levy is not dedicated to transport or road maintenance. National Treasury apportions funds based on different criteria.
The supply chain reforms put a temporary hindrance on projects however the matter has been resolved with Treasury and the majority of tasks has been implemented. The supply chain reforms did not only affect SANRAL it affected all municipalities. The objective of advertising is to conceptualise and respond to the dictates of its mandate. Adverts inform the public that SANRAL is a National entity with projects across South Africa not only Gauteng. He said management had set-up structures to monitor internal controls and establish an internal audit team that was not in place before. There has also being a reform in the supply chain elements via a mini sub-committee on public accounts that has been established. SANRAL would send a detailed report in writing on the progress of the Moloto Road to the Committee. Its programmes in reaching out to the rural area are ‘Take SANRAL to the people’ a scholarship initiative to rural people and it has also committed resources for rural radio. SANRAL tracks the demographic profile of scholarship, bursary and internships recipients to ensure that transformation objectives of government are fulfilled. Calculation of e-tolls bills are done from an asset management perspective. Discounts are given to locals and frequent e-toll users. He explained the different categories of debtors.
Mr Kannemeyer explained that town routes did not belong to SANRAL but to the municipality hence the quality of infrastructure construction was different.
Mr Macozoma said where a national road passed through a community, SANRAL had restored road standard designs using roundabouts to reduce congestion. It has also used heat sensing technology to ensure safety on foot bridges. The SANRAL land portfolio management system captures all the land that belongs to it.
Mr Sibande asked SANRAL to confirm if OUTA was stopping debtors from paying e-tolls.
Mr A Seabi (ANC) appreciated the report but asked why other SANRAL board members were not present. He expressed concern on the e-toll billing system that gave people outrageous bills although they were infrequent e-toll users. What steps had SANRAL taken to intervene on outrageous bills. He appreciated SANRAL’s communication strategy but noted that most people were not aware that frequent e-toll users were eligible for discounts. He noted smaller companies received smaller contracts but said SANRAL should be careful of fronting. He recalled a protest over a Limpopo road construction contract because it did not support transformation objectives and did not support skill transfer. The human resources strategy did not reflect succession plans for engineering interns. He asked SANRAL to confirm the impact of 80% achievement of performance objectives on road quality.
Mr L Ramatlakane (ANC) said due to SANRAL’s good road quality its services had been recommended for use in other parts of the SADC region. It was unlikely that the user charge policy on e-tolls would be withdrawn because the resources were not available. He proposed that the Committee needed to discuss another funding model that involved additional e-toll charges for public and private users as was being done in developed countries. He appreciated SANRAL for initiating a mini committee that accounted for budgeted funds but asked for a report on how it would correct the audit findings. He agreed with the CEO that irregular expenditure needed to be cleared based on multi-year commitments. He advised SANRAL to attend to its bond and loan repayments to ensure that its image was not tarnished.
Mr T Mulaudzi (EFF) asked why SANRAL had not listened to the Xolobeni community complaints on the Wild Coast road project and why it had chosen to build bridges rather than improve the R6 corridor. He asked the CEO about SANRAL’s role in empowering cooperatives, to confirm the consequence management steps it had taking to reform non-compliance in previous and present years and how much it received from vehicle licence fees.
Mr M Shelembe (NFP) asked the CEO to clarify if SANRAL had employed consequence management on SCM non-compliance and why Mooi River roads needed to be repaired continually. He asked for assurance that its internal audit committee would be able to correct the audit findings and to project when it would get a clean audit.
The Chairperson recalled that the Committee had asked an entity the reason it had continued to pay staff bonuses when it was not performing well and the reply was that the entity “had to pay based on laws”. The Committee is pleased SANRAL is applying consequence management measures on the bonuses of staff that did not comply. She advised SANRAL to publicise its research outputs because the research was used to improve SANRAL’s service delivery on road infrastructure. She asked if it involved engineering teams from the Provinces and Municipalities in its research endeavours. The Committee was engaging with Treasury to ensure that PRASA had better funding to move transport from roads to rail to ensure that South Africa complied with climate change policies.
Mr Mhambi, SANRAL board chairperson, replied that the board followed up on the corrective measures on audit queries to check that the internal controls achieved the expected goals. The CEO started punishing staff that did not comply financially before the board commenced duty but the board might recommend the punishment of management staff involved as well. He apologised that the other board members were not available. The board noted the fronting concerns, the advice to employ TVET college graduates and to increase its scholarship pool. He accepted the point on increasing transformation points on contract awards, and the need to carry along engineering teams of Provinces and Municipalities in its research achievements.
Mr Macozoma said SANRAL had a framework for sorting out issues related to its billing systems. The billing system is not wrong but people exploit the system by cloning vehicle number plates but SANRAL has a way to clean this up when such cases are established. SANRAL would be happy to present its Horizon 2030 plan to the Committee. The preferential procurement rule is prone to different interpretations by different levels of authority. The list of SANRAL equipment would be submitted to the Committee. SANRAL is concerned about the plight of the people of Xolobeni and would address its road infrastructure challenges because the objective is to construct a road from Mpumalanga to Cape Town. SANRAL is happy to announce that in 2017/18 there was no fruitless expenditure. Vehicle licensing fees was not under the purview of SANRAL.
The Chairperson said the Committee would like to see all board members when they next met.
She informed CBRTA that the Committee’s strategic thrust was to see that it had taken action on the recommendations it had received in the 2017 Committee BRRR. She said a cross border approach needed to be taken for the Maseru border post. The Committee has engaged with AGSA and is aware of CBRTA issues but believes that it is doing well.
Cross-Border Road Transport Agency (CBRTA)
Mr Moss Ramathe, CBRTA board chairperson, invited the CEO to brief the Committee.
Mr Sipho Khumalo, CEO: CBRTA, gave an overview of CBRTA’s operating environment and said the entity had achieved 92% of its pre-determined targets which signified a 25% increase in performance compared to the previous year’s performance. The indicator not achieved was the implementation of cross border charges as an additional revenue stream. However, CBRTA had developed a business case on the levying of cross border charges but was presently engaging with its stakeholders on the business case. An analysis of the permits issued showed that bus, taxi and tourist permits increased while freight permits decreased although freight permits remained the highest number of permits issued in 2017/18. In advancing youth and women empowerment, CBRTA conducted career exhibitions, information workshops and seminars in 2017/18. He invited the CFO to brief the Committee on CBRTA financial achievements.
Mr Nchaupe Maepa, CFO: CBRTA, said the main funding stream was revenue from permits (77%) with freight permits being a major source of revenue. However, a slight decrease was observed in 2017/18 due to a marginal decrease in the number of freight permit issued. Also CBRTA had to pay administration costs for the Road Transport Inspection function to the Road Traffic Management Corporation (RTMC). CBRTA reported a technical insolvency challenge in 2017/18 because its liabilities exceeded assets by R124 million at year end. The liabilities were due to the outcome of the 2011 permit tariff litigation which resulted in a R318 million provision for operator refunds. As at 31 March 2018, R142 million had been refunded but the agency applied the provisions of the Prescription Act on 12 May 2018 in respect of the amount that provided for its potential liability in the statement of its financial position. The Prescription Act provides that the claims raised in the financial statement could be reversed on the date of application of the Act and would result in the agency being solvent. Although the contingent liabilities from the court challenge on the 2014 permit tariff regulations remain, CBRTA did not record any irregular, fruitless or wasteful expenditure in 2017/18. The agency has received clean audits for the last three financial years.
Mr Sipho Khumalo noted the risks of CBRTA were the permit tariffs that had not being revised since 2014, non-conclusion of litigation against 2014 permit tariff regulations and the improper constitution of the board.
Mr Moss Ramathe concluded by saying that the CBRTA Board had failed to provide oversight and guidance as more than 70% of meetings were a waste of resources because only one board member and the chairperson fully attended meetings. The main focus of some board members has been to frustrate the CEO hence he as the board chairperson had been tempted to resign.
The Chairperson noted from Mr Ramathe’s comments that the Committee might need to chase some board members to recover emoluments paid. Also the Committee might need to get the Minister of Transport to confirm the nomination of the remaining board members so the board could be quorate. She noted that in other entities without a board presence, there was no stability but in CBRTA, despite the challenges with board members, there is stability.
Mr Ramatlakane appreciated CBRTA for its clean audit and being able to do a good job despite the challenges. He asked for more information on the status of the conclusion of the policy document on cross border relations for the Maseru Bridge Border Post between Lesotho and Free State. Despite the timeframe given to address the weakness of the board in August 2017, the challenges were still not resolved and this questioned the acceptance of board decisions. He asked how many vacancies needed to be filled on the board. He also asked the board to clarify that the role it played in assuring that good governance principles were adhered to in CBRTA. He asked the CEO to clarify if the regulations to increase permit fees had been presented to the Minister as shareholder representative and to the DoT.
Mr Sibande commended CBRTA for receiving clean audits the last three years. He asked if other SADC countries were complying with the SADC protocol and regional agreement. He asked about the equity of women in top management positions. He asked for more information on the court cases lost and the status of security around Pongola border post in KwaZulu-Natal. He asked about the board vacancies, about the board members that attended meetings because the salary of non-functional members must be returned and what has been done about board members not attending meetings. Please clarify the problems in finalising the 2014 permit fee review and if the instrument used to calculate transit and cost delays at commercial border posts helps to arrests bottlenecks at border posts. He asked CBRTA to state the measures used to protect South African drivers from additional cross border charges.
Mr Hunsinger commended CBRTA for receiving clean audits in the last three years and noted that it took guts for the board chairperson to inform the Committee of the absenteeism of some CBRTA board members. He asked CBRTA to state the mechanism in place to make provision for litigation costs and to give its opinion on the threats to its functioning due to giving RTMC the administrative role of collecting costs for Road Transport Inspection. To what extent had the skills of the CBRTA board been audited? He asked for clarity on the allegations that some staff had been appointed without the requisite qualifications.
Ms Xego expressed concern about giving permits to bus drivers that brought illegal immigrants into South Africa and asked for CBRTA’s role in advising the Minister on giving such permits. She encouraged CBRTA to do more than 42% equity on females in senior management. The Committee had to review if board members were stopping the CEO from carrying out his duties. She expressed concern about the porous borders and asked for a clear strategy to get the agency out of technical insolvency.
Mr Ramathe said some board members were failing in their responsibility by attending meetings intermittently or attending without contributing because some do not read the documents.
CBRTA CEO, Mr Sipho Khumalo, replied that the border matters at Maseru-Free State remained unresolved, the matter is beyond technical and it is painful that operators have a permit but are not able to use it. The whole Exco has been overhauled and CBRTA is tasked with informing the new Exco of the situation. The decisions taken on permits are subject to risks because the board is not properly constituted. CBRTA is successful despite the actions of the board and it is a miracle that CBRTA is functional when the duties of the CEO are affected on a day to day basis. The frequent change in Ministers has affected the decision on the 2014 permit regulations after they had been submitted. All the SADC border partners collect cross border charges because they claimed that since South Africa collect e-tolls they are at liberty to collect charges. The challenge now is that all other SADC countries now collect tolls and this has created an unfair playing field for South African operators.
Mr Khumalo said CBRTA appreciates the Committee’s compliments on its third consecutive clean audit but there could be a reversal based on the day to day attacks on the CEO by some board members. Some of the countries sharing a border with South Africa use money as an excuse not to comply with the SADC Protocol but this is not always so. CBRTA lost some female executives in 2017/18 and so is not sitting at 50:50 equity for senior managers anymore as it was in 2016/17. The provisions of the Prescription Act as applied on 12 May 2018 placed CBRTA in a position of solvency. It is painful that even some senior officials in Mozambique are driving stolen cars that entered through the Pongola border post in KwaZulu-Natal. Although this matter falls outside CBRTA powers, it supports SAPS with information.
Mr Khumalo said two issues exist with the CBRTA board. There are vacancies on the board and there are members that are available but not competent. The 2014 tariff is still pending but would be revisited in December 2018. The cross border calculator is to enable CBRTA to assess the cost of delays on the economy. The Lesotho electronic permit has not being realised. South Africa offered its services but Lesotho has not accepted this so it is still affecting inter-border relations. Only the courts can refute the argument of the 2014 litigation and confirm that the board is properly constituted and CBRTA is competent. The 2014 permit fee regulations are needed by CBRTA and would assist in keeping it out of insolvency. The Border Management Authority is not a threat to CBRTA – it is an agency that would be responsible for border posts.
CBRTA CFO, Mr Maepa, replied that the prescription of R164 million did not occur in 2017/18. It was recorded after the balance sheet had been closed. The challenge in the performance of the cross border charges was due to the smartness of the target because it did not depend only on CBRTA but the indicator was targeted because it was important to CBRTA.
The CBRTA CEO said the allegations about job qualifications could not be established after being subjected to thorough investigation. CBRTA does not employ people that are not qualified. The role of CBRTA was to transport people that work in the mines and to transport freight used in the mines. People that came to South Africa illegally did not come through CBRTA vehicles but come through human trafficking. CBRTA is not at risk of overspending on employee compensation; its employee compensation is presently 56%.
Mr Shelembe said his question about people that came into the country illegally had been covered.
Mr Ramatlakane asked the shareholder representative to comment on the board challenges as mentioned by the board chairperson.
The Chairperson requested Dr Nkosinathi Sishi, DoT DDG: Public Entity Oversight, to respond.
The Department of Transport (DOT) representative present said he was not the line function DDG and nor was he a DOT representative on the CBRTA board so he could not answer.
Mr Ramatlakane said his response was disqualified hence he proposed a meeting with the Minister of Transport. He noted that even though the board did not form a quorum, the requisite skills were not compliant hence it was a legislation violation. He proposed that the matter could not be allowed to linger and the Committee needed to send a special resolution with the Minister. He asked CBRTA to forward a brief in writing about the board to the Committee.
The Chairperson said she had requested that Dr Nkosinathi Sishi address the Committee on the status of CBRTA board.
Mr Ramatlakane said the Committee could still go the special resolution route with the Minister.
The Chairperson asked if other Members agreed to have a special resolution sent to the Minister.
The Chairperson said the Minister had earlier indicated that the appointment date for the new CBRTA board would be 15 May 2018 but months after the scheduled appointment date, the board had not yet been appointed. The Committee would hold the Minister of Transport accountable.
Mr Sibande asked about the temporary permits issued by CBRTA and the different permits issued by Free State to enter into Lesotho.
Mr Khumalo replied that the matter of the different permits issued by CBRTA and Free State for permits to Lesotho had not yet being resolved. The resolution of this matter is not administrative. It is based on laws that need to be issued through political instruments.
The Chairperson asked the CEO how long it would take to resolve the matter. The Committee wanted Dr Nkosinathi Sishi to account about the board but since he was not available, the Committee has made a resolution as there is a risk that CBRTA could get an interdict for any of it decisions.
The Chairperson implored Mr Moss Ramathe to continue with his good work and not resign yet. The Committee takes pride that CBRTA has a clean audit despite its challenges. She advised CBRTA to continue to ensure that it had a positive impact among the SADC countries and live up to Agenda 2063 of the African Union. The Committee had taken a decision that would be actioned in its Report.
The Chairperson informed SAMSA that it was concerned that AGSA had given it a qualified audit opinion again and raised repeat findings on governance, internal controls and lack of consequence management. However SAMSA had performed well on Operation Phakisa and had trained students on the maritime curriculum. She invited SAMSA COO Mr Sobantu Tilayi to proceed.
South African Maritime Safety Authority (SAMSA) 2017/18 Annual Report
Mr Sobantu Tilayi, SAMSA COO, noted highlights were the increased revenue from R394 million in 2016/17 to R445 million in 2017/18, its increased expenditure from R332 million to R377 million due to its training of students on the Maritime curriculum and its increased surplus compared with the previous year. SAMSA had strengthened its operating systems and its technical capacity to ensure that it met its service delivery objectives. The ships on its register remained the same, there was a slight increase in the number of its seafarers and its seafarer development youth training placement on ships increased from 25 to 150.
SAMSA achieved 69% of its predetermined objectives. Its operational activities directly saved the lives of 168 people through the coordination actions of the Maritime Rescue Coordination Centre (MRCC) and the support of partner search and rescue role players. It carried out 16 853 survey activities to fulfil its Flag State obligations on vessels that fly the national flag which is meant to ascertain the seaworthiness of ships that fly South Africa’s flag. It achieved Level 5 of the BBBEE scorecard. It conducted 342 Port State inspections of eligible foreign flagged vessels visiting South Africa in accordance with the Indian Ocean Memorandum of Understanding (IOMOU) and successfully managed all the nine oil pollution incidents. SAMSA passed on 16 343 pre-arrivals notifications to the DoT Maritime Security Co-ordination Centre (MSCC) in line with the ISPS code, maintained a database with approximately 6 680 beacons and completed the implementation of an Automated Ship Register. The SAMSA board is presently operating with the chairperson, a deputy chairperson and two other members. SAMSA has achieved stability and is solvent.
He gave an overview of SAMSA key challenges and the remedial actions taken to avert the challenges
- A database on all contracts had been created to avert SCM challenges
- Steps to correct the audit queries were outlined and staff involved in non-compliance had been sacked
- There has been very slow progress in processing some of the conventions, protocols, bills and subsidiary instruments used by SAMSA
- The Sea Watch and Response communication equipment is obsolete and exposes the country to maritime trade security risks.
Other risks include lack of a substantive CEO, diminishing technical skills capacity due to aging workforce, implementation of the SAMSA funding model and the need for all ships to burn low sulphur fuels by 1 January 2020.
The Chairperson welcomed Mr Mavuso Msimang, the SAMSA board chairperson, and informed him why SAMSA had been invited by the Committee.
Mr Hunsinger expressed concerns that SAMSA’s financial management principles were at risk and its performance was even worse. He noted that AGSA’s audit queries include the fact that SAMSA did not have systems to identify and disclose increases in irregular expenditure, had no methods of keeping records, the PFMA and SAMSA Act had been contravened and this had occurred before. He expressed concerns that the board failed to exercise accounting oversight and noted that the Committee could not hold anyone accountable because the COO had acted earlier, his term had expired, SAMSA had not recruited any CEO and Mr Sobantu Tilayi was only acting as an interim CEO.
Mr De Freitas suggested that since there was no CEO SAMSA needed to go back draft a turnaround plan and return back to the Committee for engagements. He asked the board to clarify the plans to interact with the Minister for a new CEO and state its plan to turn the entity around.
The Chairperson asked members to comment on the proposal had been made to re-invite SAMSA for a presentation as the Committee Secretary worked on a tentative date.
Mr Sibande asked SAMSA to clarify how many board members and executives were supposed to be in SAMSA and where not presently in as AGSA had identified a regression in its governance. He expressed concerns on the underfunding of Sea Watch & Response operations since 2009 as it contributed to insecurity in the country. He asked for clarity on the statement that SAMSA had strengthened its operating systems when it had diminishing technical skills capacity due to aging workforce. Please clarify how there is progress in SAMSA if the ratification of legislation is outdated and slow. He asked the COO to unpack how many disciplinary cases had been resolved to the point of consequence management. He asked the COO to present the status of ships that were polluting the South African waters and clarify the challenges on ownership of ships by black entrepreneurs.
Mr Sobantu Tilayi, SAMSA COO, gave reasons to attest to the fact that although there was a regression in SAMSA performance there was a general improvement in the entity. He agreed that there were challenges in financial management but consequence management had resulted in at least five senior managers leaving the entity. The entity had experienced a movement from 64% in 2016/17 to 69% in 2017/18 in its performance. SAMSA had challenges with finance and SCM process. The supply chain executive left and a new CFO has been recruited and is monitoring matters. He gave reasons the revenue collection was inadequate. The model that DoT gave to support Maritime Rescue Coordination Centre failed but SAMSA did not report this because it had not exhausted all lines of discussion with DoT. SAMSA still needs technical crew to inspect automations. He explained how long it took to get crew trained and assured the Committee that it was developing it technical crew capacity. The correction of legislation follows a process that is ongoing. The contract register is being updated and any staff that do not comply are disciplined. There is a new requirement that ships have insurance to ensure that when ships break down in South African waters, the country would have a respite. New black investors have come in to own ships but the right to register a ship is threatened by the tax implication as these owners are still requested to pay tax due to the interpretation of Section 12Q of the Income Tax Act by SARS.
The Chairperson welcomed the Deputy Minister of Transport, Ms Sindisiwe Chikunga.
SAMSA board chairperson, Mr Mavuso Msimang, said SAMSA was an entity rising from the crisis of a CEO that created situations where board members left SAMSA. It had a structure that was top heavy at the executive level and the board has tried to prune this down. SAMSA is operating in an environment where some executives reported Mr Sobantu Tilayi to a CEO that ran away from the consequences of a forensic audit. The executives have on occasion stopped recruitments. SAMSA was also plagued by a CFO that perpetrated wrong things and was being supported by a CEO that ran away. All this is captured in the forensic report. The CEO appointment has been frustrated by people who have literarily stopped the process. The board has six slots and two had to leave because their tenure had expired. These two board members have been retained in non-board positions to assist SAMSA because it was legally possible. Some board members have sacrificed to assist SAMSA without getting paid. Mr Sobantu Tilayi is a COO. He was acting as CEO but his tenure expired and he is limited by PFMA rules to continue to act and have the powers of a CEO. The audit report of SAMSA would be better if it had competent executives.
SAMSA Company Secretary, Mr Lulu Raphadu, said the SAMSA board had done what it could do to improve the entity and it has made a recommendation for the post of CEO but the appointment of a CEO is the purview of the Minister of Transport.
Mr Seabi said he had wanted to confront the executive for the non-performance but he was consoled by the board chairperson that the financial performance of SAMSA would improve.
Mr Ramatlakane expressed concern about the non-appointment of a CEO in the last 28 months. The board chairperson should have ensured that a CEO had been appointed after so many months. He asked the board chairperson to clarify if there were other issues plaguing SAMSA. He was concerned that the audit findings had re-occurred, the audit plan to clear the audit findings had not been implemented and could lead SAMSA into bigger trouble if it occurred again. The Minister of Transport said in his June 2018 briefing said that the process to appoint a CEO was in place and would be finalised when the Committee had expressed concern about governance. If the board chairperson could not clarify this, then the Deputy Minister should be able to clarify the status of the CEO appointment. He asked if SAMSA had the requisite skills for maritime empowerment. He asked the board chairperson to clarify the statement “top heavy executive”. The Committee is concerned about the procurement process because it has negatively impacted SAMSA and it requests that SAMSA has a proper plan to arrest the challenges faced by SAMSA.
Mr M Shelembe (NFP) said parties should not become defensive when problems arise. If SAMSA had a dashboard it should have noticed that there were SCM challenges from its internal controls. SAMSA should rather go back and improve on its performance by addressing its SCM challenges. It was good that SAMSA wanted to create more jobs by 2020 but asked the COO to clarify if the 150 seafarer jobs created were permanent or temporary. He asked if the surplus it posted was due to increased tariffs or vacancies. He noted that when an entity had a lot of vacancies, it would have bad outputs.
The Chairperson remarked that AGSA had said SAMSA regressed and had qualified audit findings in 2015/16, 2016/17 and 2017/18. AGSA also said that the lack of leadership and governance affected its monitoring. The Committee must express its disappointment when SAMSA has achieved only 69% performance indicators. What were the challenges that led to a 69% performance when it was using state resources? Please note that when there are whistleblowers it shows that there are problems that must be addressed. He asked why matters raised by AGSA in previous audits had not been rectified. She said if SAMSA focused on the work at hand, the enemy within would find itself obsolete. When risk management was at risk, the outcomes would be too shocking to contemplate. She informed the Deputy Minister that when a CEO did not exist, challenges would escalate. The Committee would probably have to engage with the President because it was so humbling that the board chairperson was trying to ensure that SAMSA did not go under. In June the Minister of Transport said that the SAMSA CEO position would be filled and two members of the SAMSA board would be replaced by 30 June. The Committee had to hold the Minister accountable and would engage with the Minister on filling the SAMSA CEO and board member positions. The Committee is humbled by board members that have worked for SAMSA and did not receive salaries. She invited the board chairperson to respond.
Mr Msimang replied that in November 2016 the board completed interviews for SAMSA CEO position and recommendations were submitted to the Minister. However, the Minister received information that the person nominated was not capable. The whistleblowers said the CEO who was implicated in the forensic investigation is the most capable CEO. SAMSA encourages the importance of whistleblowers but the truth of the investigation should be established before it is taken as fact. Letters that the new CFO was not qualified was peddled by the EFF to the Minister. It is now with the President. Also whistleblowers question the qualifications of the new CFO but the qualifications of the new CFO have been confirmed. The statement “top heavy executive” was used because the board met people in superfluous positions that were not relevant. The SCM rules were flouted deliberately by a staff member who was being protected by the old CEO. The staff member was sabotaging SAMSA; it was difficult to get that staff member to leave but the staff member has left now.
Mr Ramatlakane asked the SAMSA board chairperson to clarify if the Minister of Transport had received the nomination for the CEO position to ensure that the Committee could directly engage with the Minister.
Mr Sibande asked SAMSA to clarify if it had taken consequence management steps against the staff that had contributed to fruitless expenditure. Section 38 of the PFMA gave the board powers to do so. Had SAMSA taken steps to avoid fruitless expenditure in future?
Mr Msimang replied that in November 2016 SAMSA submitted the people nominated for the CEO position to the Minister of Transport. On the day that it was supposed to be reviewed by the Minister, SAMSA received allegations that the person nominated was not competent. The allegations were investigated and the results showed that the allegations were false. The reports and recommendations were sent back to the Minister and SAMSA has been awaiting feedback since then. The CFO resigned on his own after waiting for him to respond to the allegations in the forensic investigation. A report in writing would be submitted to the Committee. Consequence management might not be 100% but governance has improved.
Mr Tilayi accepted that he was wrong in saying that the performance of SAMSA had improved despite the regression that AGSA and the Committee had insisted was the status of SAMSA. The maritime jobs created are permanent and quality jobs. The number of jobs increases per year and a Status of Marine report would be presented to the Committee in writing. The savings on compensation on employees came from roles that were not structured to SAMSA’s mandates. The tariff increase was in line with Consumer Price index. He assured the Committee that SAMSA would present its report on consequence management and its recovery plans to the Committee.
Deputy Minister of Transport, Ms Sindisiwe Chikunga, said that DoT indicated that it was in the process of appointing a CEO and in November 2016 recommendations were submitted to the Minister of Transport but at the time it was to be tabled in Cabinet, a whistleblower report was received. The whistleblower report came with a matter from 2004 that affected the appointment. The Minister of Transport withdrew the Cabinet Memo and the SAMSA board investigated. The board brought the report back and exonerated the person recommended. In 2017 the Committee was advised that the CEO would be appointed but it is still being processed in October 2018. RTMC has mentioned that whistleblower reports are important but should be taken with caution because they are internal. SAMSA has confirmed this again during this meeting. She said the SAMSA board was a board that was focused on its job. Although SAMSA has a qualified audit it has moved from a place of deficit to surplus. She confirmed that she had called the old CEO that although he was qualified, he was an absent CEO. She took the blame for not supporting the SAMSA board to fulfil its mandate. SAMSA’s new board has brought change to SAMSA and the COO has been charged with the responsibility but did not have the authority. As a Deputy Minister, she accepted the blame because the COO had pushed for improvement despite the challenges. SAMSA has been going through a crisis created in the past but the COO has been working hard to resolve it. However as the Deputy Minister, she took the blame for not empowering the COO.
The Chairperson advised the board chairperson to do better to achieve the mandate of SAMSA in its service delivery. He remarked that the Committee saw that despite not being empowered to be a CEO, the COO was trying to improve service delivery. Also the Committee sees that the Deputy Minister is prioritising the positions of CFO and CEO.
The meeting was adjourned.
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