Economic Regulation of Transport Bill: DoT response to questions

Meeting report

The Chairperson acknowledged the technical difficulties that Director-General Mr Alec Moemi, was experiencing, before inviting the Department of Transport (DoT) to make its presentation.

Economic Regulation of Transport Bill: DoT response to questions
Mr Moeketsi Sikhudo, DoT Project Manager: Single Transport Economic Regulator (STER), explained that the presentation responded to questions raised by the Committee on 24 November 2020. In particular, it would look at the structure of the STER as well as its financial and structural implications. He outlined the Department’s implementation plan, which would see all existing transport economic regulation absorbed into the STER over a period of five years, starting with the Ports Regulator of South Africa (PRSA), and he described the guiding principles according to which the STER would be designed:

- The decisions of the STER should be subject to challenge through the Transport Economic Council (TEC);
- The STER should be an independent organ of state;
- The TEC should be independent of the STER;
- The functions and powers of the STER board should be separate from those of the CEO and technical staff (the “board governance” model); and
- The disruption of existing regulatory systems should be minimised.

The STER would be led by the CEO, supported by maritime, rail, aviation and road deputies as well as legal and financial/corporate offices. Once fully established, the STER would have 134 employees, of which 70% would be core and 30% support staff, and it would have a budget estimated at R120m. On the basis of its financial modelling, the DoT estimated that the establishment of the STER would see declining transport margins offset by increased efficiency and investment and decreased transport costs for state-owned enterprises (SOEs), resulting in a net economic benefit to the country of R3.5bn. The average budget of STER in the medium term was estimated at R98m, significantly lower than the aggregate of existing economic regulator budgets in the same period, which was R278m. Funding from the fiscus would be unavoidable in the short term but STER would have to be self-financing in the medium- to long-term to ensure its independence.

Questions
Mr L McDonald (ANC) noted that the date on the document submitted to the Committee was different from the one presented, although the contents were the same. He was concerned that the 2017/18 budget figures in the presentation for the Cross-Border Road Transport Agency (C-BRTA), which indicated a deficit, did not match the figures given in the C-BRTA Annual Report, which had reported a surplus of R57m.

Mr K Sithole (IFP) asked for clarity on the relationship of the ex-officio board members and the part-time TEC members. He was concerned about the large number of deputy CEOs. He requested that DoT unpack the principles according to which fees would be charged to regulated entities.

Mr C Hunsinger (DA) said that the proposed independence of the STER and TEC from the state was a very novel ambition, but wondered how it would be achieved if the Minister made the appointments to these entities. The budget figures given in the presentation did not match the actual budget figures of existing economic regulators and therefore did not prove that STER would effect a saving. He asked which of the existing regulators would be dissolved and what the job implications were for the employees of these regulators. How many staff would be transferred and how many new appointments would be made? He noted that some regulators noted in the presentation were unfamiliar to him, while others, such as the Rail Safety Regulator, were not mentioned at all. He asked DoT to clarify its suggestion that STER would effect a reduction in SOE transport costs through involvement at the procurement stage. He was in favour of a single regulator but wanted more certainty on how regulation would be done in practical terms. He questioned if the priority being given to the Bill was justified given the state of the economy and the transport sector.

Mr T Mabhena (DA) welcomed the attempt to save costs, but expressed concern about the future of the C-BRTA staff which was the largest of the existing economic regulators. Would they be absorbed into STER and if so, by what process? Would there be a completely new recruitment process for STER and the TEC or would they come from employees of existing regulators? In general, how would the terms and contracts of employees of existing regulators be handled?

Response
Mr Sikhudo said that looking at STER organisational design would address many of the Committee’s questions. The five board members would be recruited according to normal criteria. The board would play a governance role and report to the Minister of Transport. The Regulator itself, led by the CEO, would deal with operational and administrative matters and actual regulation. The TEC was like a tribunal to consider complaints and appeals against the Regulator. He recognised that the fact that the STER board members and the TEC were appointed by the Minister raised questions about their independence, but DoT foresaw them working separately. He gave an example of how PRSA operated to illustrate how regulation would be done in practice. Currently, Transnet made an application to PRSA for tariffs, which were then approved or denied by PRSA, which also enforced whatever tariffs it approved.

Mr Sikhudo explained that the CEO required six deputies to manage the four principal transport modes as well as legal and financial affairs. He could not comment on surpluses at C-BRTA, as DoT’s analysis had not gone into so much detail. Most of the figures in the presentation were projections that had been made in 2018/19, and might need to be updated although he did not expect them to change drastically. The future of staff employed by existing regulators had not been considered yet. This would be the next phase. All of the functions of existing regulators would be consolidated in STER but there would be some job losses.

Mr Sikhudo replied that SOE transport cost savings had been estimated by DoT’s financial modelling system, and the Regulator would not be involved in procurement. The reason for the absence of the Rail Safety Regulator was that STER was involved only in economic regulation. He did consider the Bill a priority, given that it had been identified by the Presidency and the DoT as a key contributor to economic recovery.

Committee business
Public hearings on the Civil Aviation Amendment Bill were scheduled for 16 and 17 February 2021. The Committee secretary reported that she had applied for the Committee to meet on 2, 3 and 10 February 2021 to deliberate on the Economic Regulation of Transport Bill. She would report to the Committee when she had been informed of the outcome. Minutes of the 24 and 25 November 2020 meetings were adopted.

Meeting adjourned.