Economic Regulation of Transport Bill: DoT response & deliberations; National Road Traffic A/B: public hearings planning

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10 February 2021
Chairperson: Mr M Zwane (ANC)
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Meeting Summary

Video: Portfolio Committee on Transport

The start of public hearings on the National Road Traffic Amendment Bill was set provisionally for 10 March 2021. More than 7000 submissions had been received, including over 100 submissions from stakeholders who requested to make oral presentations to the Committee.

The Committee received the Department of Transport responses to questions and concerns about the Economic Regulation of Transport Bill that had been raised the previous week. The responses addressed the structural, financial, human resources and legislative implications of the Bill. It corrected budget figures that had been misquoted in a previous presentation. It gave more detailed information about changes to employment as a result of consolidating transport economic regulation into a single entity and about changes to other legislation that it would necessitate.

Committee members asked for explanations of figures quoted in the presentation including: remuneration of board members, projected decline in margins and increase in efficiency of state-owned enterprises and the decrease in transport costs, accounting classification of projected savings, Single Transport Economic Regulator (STER) budget at various stages during the transition. Members expressed concern about potential job losses and called for staff from the repealed entities to be absorbed into STER.

The Committee continued its clause-by-clause deliberations on the Bill from the previous week.

Chapter 4: Establishment of Institutions, Part C: Administrative matters concerning Regulator and Council
The Committee discussed its involvement in making regulations and the finances of the Regulator and Council, expressed concern that the Bill did not make the financing of the Council sufficiently clear. The Committee confirmed its decision to include clauses modelled on the Broadcasting Act to provide for Parliament’s involvement in the STER board appointment.

Chapter 5: Enforcement of Act, Part A: Powers in Support of Investigation
The Committee expressed grave doubts about the broad powers granted to an inspector / investigator. The Bill seemed to be attempting to establish a law enforcement agency within the Regulator. Members were not convinced about the appropriateness of STER inspectors having the powers of peace officers. They asked about obligation to answer an inspector truthfully and expressed concern about the cost of engaging outside consultants for investigations.

Meeting report

The Chairperson accepted apologies from Minister of Transport and Deputy Minister. He invited the Department to respond to general concerns raised in the 2 and 3 February 2021 deliberations by the Committee on the Economic Regulation of Transport Bill.

Department of Transport (DoT) response about Economic Regulation of Transport Bill
Mr Moeketsi Sikhudo, Project Manager, Single Transport Economic Regulator, DoT, addressed the structural, financial, human resources and legislative implications of the ERT Bill. The Bill would establish a single transport economic regulator (the Regulator) in three phases, using the Ports Regulator of South Africa (PRSA) as a nucleus and thereafter incorporating the economic regulation of rail, air and road transport sectors in turn. It was informed by the National Development Plan, Transport White Paper and the Medium Term Strategic Framework.

DoT’s financial modelling indicated that the Regulator was expected to add R3.5bn to the national fiscus. The budget figures questioned by Members, on which the estimated savings of the Regulator relative to existing separate regulators had been based, had been revised based on the existing regulators’ Annual Reports. DoT still estimated an average saving of more than R170m per year.

Mr Sikhudo acknowledged the Committee’s concerns about the loss of jobs. STER would employ 78 people at the outset, growing to 134 once it was fully staffed. He outlined the anticipated STER budget by economic classification and compared the employment provided by the existing separate regulators with the employment STER would provide, according to number of employees and remuneration. He looked at the transfer of employees from the existing separate regulators to STER, noting that the detailed work that would reveal precise numbers had not yet been done.

Mr Sikhudo discussed the powers of the Regulator and some examples of consequential amendments that the Bill would require to the National Ports Act, Airports Company Act and the National Land Transport Act, noting that it would not affect the substantive law governing these sectors. During the transition, existing tariffs would remain in place and employment at the PRSA would not be affected. He outlined the procedures for processing complaints against regulated entities and the review of the Regulator’s decisions.

Mr L Mangcu (ANC) said that the presentation by DoT raised more questions than answers. He asked how the projected reduction of total remuneration of board members from over R3.5m to R495 000 had been calculated, given that the boards of the separate regulators would remain intact. He asked if his impression that phase 1 had begun already was correct. The Chief Executive Officer would be paid at salary level 16. What did this mean in real terms? Was it equivalent to a Director-General?

Mr L McDonald (ANC) calculated that 84 jobs would be lost. This fact should not be sugar-coated. He was worried because the country was in a difficult economic situation and the economic situation of these people was not known. An effort should be made to absorb them somehow. The financial modelling had been done in 2017-18 and wondered if the modelling could be repeated to take the effect of COVID-19 into account, given the severe impact it has had on the transport sector. The financial information was still misleading such as the fact that the Cross-Border Road Traffic Agency (C-BRTA) had made a profit of R181m in 2019. Was the Regulator really going to save money as DoT claimed?

Mr C Hunsinger (DA) welcomed the extra information provided by DoT. He asked for clarity on an apparent inconsistency between slides 6 and 28 of the presentation. These slides appeared to give a different list of entities regulated. He asked how the numbers for the projected 5% decline in margins, 1% increase in efficiency of state-owned enterprises (SOEs) and 5% decrease in transport costs had been calculated. He asked under which column in the accounting statement the R170m projected savings per year would be reflected – would it be goods and services or salaries? What were the projected job losses per phase? Did DoT foresee that the Regulator would incorporate an inspectorate? This would be fairly easy to implement at ports of entry but very difficult for road transport. A solution to the problem of determining which decision would prevail if a complaint was brought simultaneously to the Regulator and the Competition Commission (CC) had not been provided. There needed to be a legal mechanism for determining priority of their decisions.

Ms N Nolutshungu (EFF) asked what percentage of the Regulator’s projected budget would be for salaries. Of the existing separate regulators, C-BRTA had by far the largest budget but it would be incorporated into the Regulator only in the third phase, which implied that the budget during the first two phases would be larger than what DoT presented. She shared Mr Hunsinger’s concerns about from where the savings would come. Transport was a strategic industry and Chapter 2 of the Bill seemed to indicate an intention to privatise the rail sector. Why not explore decentralisation of rail operations to local government instead?

Mr K Sithole (IFP) asked for the basis for the projected decline in margins and increase in efficiency of SOEs and the decrease in transport costs. Under scope of application, it states that all entities will continue to be regulated, he asked for the impact and the financial efficiency of that scope of application.

Mr P Mey (FF+) noted that the Regulator was intended to “reduce processes.” Did this mean that it would reduce the amount of red tape in the transport industry?

Mr M Chabangu (EFF) wondered how regulations would be implemented for the taxi industry. He asked why the Minister alone had the power to appoint the board and called for the involvement of at least two Members of the Portfolio Committee on Transport.

Mr T Mabhena (DA) called for the Department to prepare and present a report on human resources implications. It was not enough just to say that DoT would look into it.

Mr Sikhudo replied that the presentation had indicated with an asterisk the people who were employed by the Department to support various existing entities and who would be considered for migration to the Regulator. They would continue their work and migrate to be under one house. He confirmed that a level 16 salary was equivalent to the salary of a Director-General. The reduction in the total remuneration of board members was based on the reduced number of board members in STER. He acknowledged the employment concern that 84 jobs would be lost over the full transition. He committed that DoT would look at the human resources plan to see if there was a way to absorb these employees. Employment reduction should be the last resort in the migration. The first prize would be if another job could be found for every one of them.

He undertook to return to the Committee with detailed information on the calculation of the project changes to SOE margins, efficiency and transport costs. He acknowledged that DoT’s analysis had not taken C-BRTA’s profits into account. The analysis had been confined to costs only. He explained that slide 6 listed the regulatory entities whose functions would be taken over by the Regulator, whereas slide 28 listed the regulated entities.

He admitted that an analysis of exactly the type of projected cost savings on an accounting statement had not been done yet but it would not be difficult to do. The Regulator would employ compliance officers to ensure that its regulations were followed but he would not call it an "inspectorate" as this might introduce confusion about its powers with respect to the Road Traffic Management Corporation (RTMC). The role of these officers could be discussed. Critically, the Bill would reduce the amount of red tape by consolidating regulation; for example, the economic regulation of Transnet currently involved four different entities. Under STER, it would only need to engage with a single office that would have shared information. The question of the regulation of the taxi industry would be answered better by the officials dealing with this, but the long-term strategy was to develop guidelines that would apply to the taxi industry.

He recalled that the Portfolio Committee’s involvement in the appointment of the board had been discussed. DoT’s position was to ensure the independence of the Regulator by means of its processes and systems. He drew attention to the presentation where it was indicated that salaries would amount to R75m once the transition was complete. He did not completely agree with the observation that the C-BRTA would continue to require its existing budget in the first two phases but added that the issue could be raised with National Treasury. He stressed that it was not the intention of the Bill to privatise the rail sector. The soon-to-be-released rail policy would determine government’s policy on rail access. Chapter 2 of the Bill only provided a framework for access to rail infrastructure.

Clause-by-clause deliberations on Bill
The Committee continued its clause-by-clause deliberations on the Bill from the previous week.

Chapter 4: Establishment of Institutions Part C: Administrative matters of Regulator and Council
Adv Alma Nel, Committee Content Advisor, recalled that Mr McDonald had raised a concern about the unspecified “other fees” referred to in Clause 50(1)(c) that might be payable to the Regulator. She drew attention to Clause 50(2) which stated that the finances of both the Regulator and the Council were governed by the Public Finance Management Act (PFMA), and asked DoT to confirm if they would be Schedule 3A institutions. Some of the public submissions had called for the formula to determine tariffs to be included in the Bill. Clause 52 did not state explicitly that the Minister’s determination of Council and STER board remuneration must be according to National Treasury regulations although it did mention the Minister of Finance. Was this a new standard clause?

Mr Sikhudo confirmed that the intention of the Bill was for both the Regulator and the Council to be Schedule 3 institutions. Clause 50 to 52 were somewhat open-ended. Details such as the formula for determining annual fees would be specified through regulations. This did not mean that DoT would determine fees unilaterally; there would be consultation with stakeholders.

Adv Adam Masombuka, DoT Chief Director: Legal Services, confirmed that both the Regulator and Council would be subject to the PFMA.

Mr Theo Hercules, State Law Advisor, confirmed that Clause 52 was standard for regulatory bodies and had been accepted by Parliament in the past.

On the Minister’s power to make regulations in Clause 54, Adv Nel recalled that the Committee had requested that Parliament should be involved in making regulations. Clause 54 was a standard clause and the Minister of Transport generally did consult with Parliament and it was a public process. Moreover, including it as an explicit requirement could be cumbersome in the case of urgent and/or minor administrative regulations.

Mr Sithole requested clarity on the use of both “may” and "must" in Clause 54(1).

Mr Sikhudo replied that after the previous week’s deliberations, it had been agreed that “may” should be removed from this clause as it was mandatory for the Minister to make regulations

Mr Hercules explained that both “may” and “must” were used in this clause because it referred to various matters in the Bill. He suggested that the clause could be rewritten using the words “required” and “permitted” instead if the Committee preferred.

Mr Mangcu said Clause 53(2) suggested that the Bill essentially intended to establish two separate entities, the Regulator and the Council. He was concerned about the status of the Council as a juristic person outside the public service as the Bill contained little information about its finances.

Mr Sikhudo confirmed that Mr Mangcu’s interpretation was accurate. The Regulator was the main focus of the Bill. The remuneration of the Council would be aligned to National Treasury regulations and guidelines. The relative prominence of the Regulator and the Council was expected to be similar to the Competition Commission and the Competition Tribunal.

Mr Mangcu accepted the intent of the Bill and the institutional arrangements but was still concerned that the cost of running the Council was hidden from Parliament.

Mr Sikhudo replied that the Council remuneration was reflected in the Bill but agreed that it could be made clearer.

The Chairperson asked the legal advisors to comment on the Portfolio Committee’s involvement in the appointment of the board, as had been discussed in the previous meeting.

Adv Nel asked the legal advisors to comment on amending Clause 54 to explicitly involve Parliament in making regulations.

Mr Hercules noted that Clause 54(2) did require the Minister of Transport to publish proposed regulations for comment for at least 30 days. Parliament could be involved at this stage.

The Chairperson stressed that the Committee had decided the week before that the Bill should explicitly provide for Parliament’s involvement in the board appointment and wanted a legal opinion on this matter.

Mr Hunsinger added that the justification for Parliament's involvement was to ensure that the Regulator maintained a certain degree of independence from the Ministry, similar to the way the Broadcasting Act provided for the South African Broadcasting Corporation (SABC) board appointment.

Adv Masombuka recalled that the question of Parliament’s involvement in making regulations had arisen during deliberations on the National Land Transport Amendment Bill and he did not see any problem in adding a sub-clause to Clause 54 to make its involvement explicit.

Mr Hunsinger insisted that the Committee was demanding was explicit provision for Parliament’s participation in the appointment of the board and Council. The Committee was instructing the legal advisors to draft clauses to this effect. The responses received were not adequate.

The Chairperson confirmed that the Committee was simply asking for a legal opinion on the decision it had taken.

Adv Nel asked for confirmation that the Committee was seeking involvement in both the STER board and the Council appointment.

Mr McDonald confirmed that this was what the Committee intended.

Mr Mangcu recalled that the original decision had been about the STER board only but he fully endorsed the inclusion of the Council. The wording should follow the Broadcasting Act model.

Chapter 5: Enforcement of Act, Part A: Powers in Support of Investigation
Adv Nel noted that Clause 55 allowed the CEO to appoint inspectors, who had the powers of a peace officer as defined in the Criminal Procedure Act, and investigators. The public submissions had included concerns about the powers of inspectors and investigators. Also Clause 56 on subpoenas had raised some questions about the Promotion of Access to Information Act (PAIA).

Mr Mangcu said that Members should apply their minds very carefully to this part of the Bill because it sought to establish a quasi-law enforcement agency within the Regulator. This was particularly relevant in light of reports of a so-called “rogue unit” at the South African Revenue Service. While DoT had claimed that the Regulator would not include an inspectorate, Clause 55(1) provided for the appointment of inspectors. The Bill should make explicit the mechanism through which inspectors were granted the powers of a peace officer. He was concerned about the breadth of the CEO's power to appoint and contract investigators in Clause 55(3), and that these investigators would not be employees of the Regulator. In general, he was not convinced that an economic regulator required inspectors with the powers of peace officers. Clauses 57 and 58 only just fell short of giving inspectors the right of arrest. The procedure for inspectors and investigators to refer cases to the National Prosecuting Authority (NPA) or the South African Police Service (SAPS) needed to be clarified.

Mr Sithole was apprehensive about Clause 55(3). How long could the appointment of an investigator last? He asked for clarification of the use of “must” and “may” in Clause 55(1) and drew attention to an apparent contradiction in Clause 56(4) between the obligation to answer an inspector/investigator questions truthfully and the right not to answer a self-incriminating question.

The Chairperson noted that the right to remain silent was a constitutional right.

Mr McDonald was concerned about this part of the Bill. Was it appointing a regulator or a law enforcement agency? These clauses suggested the latter. A peace officer appointed in terms of the Criminal Procedure Act had the right to arrest people. The Regulator was intended to deal with economic matters such as tariffs and prices. Did these clauses not grant the Regulator excessive and inappropriate powers? Should not criminal matters be referred immediately to SAPS or the Special Investigating Unit (SIU)?

Ms Nolutshungu observed that Clause 55(3) gave the CEO the power to appoint consultants. DoT had claimed that the Regulator would save money, but no mention had been made about consultants. Government entities were supposed to either build capacity or use existing state capacity in preference to engaging consultants. This would be an additional expense that would end up raising the cost of the Regulator above what DoT had claimed.

Mr Hunsinger objected to the inclusion of law enforcement powers within the Regulator. The spirit of the Bill was to stimulate business and job creation through economic regulation. The Regulator should be separated from prosecution processes. It could not contain its own police force, judge and correctional services.

Ms Thiloshini Gangen, Parliamentary Legal Advisor, noted that the Criminal Procedure Act did provide for a Minister to appoint peace officers. She agreed that some of the clauses under discussion might be too open-ended and need to be tightened up.

Mr Mangcu replied that the legality of these provisions in the Bill was not being questioned. The issue was whether peace officers should be able to be appointed within the Regulator.

The Chairperson said that although the establishment of the Regulator was intended to reduce costs this should not come at the expense of losing jobs. 84 people stood to lose their jobs and yet the Bill contemplated the appointment of outside consultants to perform functions for which there was already capacity. Did this make sense? DoT should employ the staff it required and engage law enforcement agencies when required.

Mr Sikhudo replied that the Bill is a game changer and the drafting of the Bill had been informed by international benchmarking and in response to the state of the transport sector in South Africa. He acknowledged that some of the clauses were new and had not been tested and agreed that this part of the Bill needed to be very closely examined. However, it was demonstrably necessary that the Regulator should have the power to access information from regulated entities if withheld. This was necessary as there have been practical examples of this. This was the intent and focus of these clauses. He suggested that if the Bill had made no provision for the enforcement of regulations, there would be claims that the Regulator was toothless. He agreed that the Bill was focused on economic regulation, but if a complaint was received it had to be investigated. The Regulator would not appoint peace officers but rather grant the powers of peace officers to an investigator. He read out the Criminal Procedure Act definition: " 'peace officer' includes any magistrate, justice, police official, correctional official as defined in section 1 of the Correctional Services Act and, in relation to any area, offence, class of offence or power referred to in a notice issued under section 334(1), any person who is a peace officer under that section". He noted Members’ comments about preserving jobs and the use of consultants but added that all institutions outsourced work that required critical and important capacity. He confirmed that the usage of “may” and “must” in Clause 55(1) were correct. Where it refers to "must", a person has to be officially empowered to enter premises - it cannot be just any STER official.

The Chairperson said that there are concerns in clauses 55 to 59. The Department recognised some of the concerns as genuine. The Committee will not make decisions on these and the Department can provide further information about these clauses. The Committee would continue Bill deliberations at the next meeting.

National Road Traffic Amendment Bill [B7–2020]: public hearings planning
Ms Valerie Carelse, Committee Secretary, presented a draft programme for public hearings on the National Road Traffic Amendment Bill. The start of the hearings was set provisionally for 10 March 2021. More than 7000 submissions had been received, including more than 100 substantive submissions from stakeholders who requested to make oral submissions to the Committee.

Mr Mangcu observed that the demographics of the submissions received indicated that the call for submissions had not been circulated widely enough.

Ms Carelse replied that a radio campaign had been run by Parliamentary Communication Services, according to the Committee’s request, but it had been limited by budget. She requested permission to include a few late submissions.

Mr McDonald supported the inclusion of the late submissions but did not think it was acceptable for the Committee to be told that there was not enough money for it to do its work.

Mr Hunsinger supported the inclusion of the late submissions.

Ms Carelse recalled that the Committee had requested a meeting with the Minister of Transport on road accident statistics and other matters. This was provisionally scheduled for 19 February 2021.

The Committee adopted minutes of the 2 February 2021 meeting.

Mr McDonald requested that the minutes of 3 February 2021 be revised to clarify that the Committee had made a decision to involve Parliament in the STER board appointment.

The Chairperson thanked the Committee for the spirit in which they had engaged with the Bill.

The meeting was adjourned.


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