Department of Transport and RAF 2022/23 Annual Performance Plans; with Minister and Deputy Minister

Meeting report

Chairperson Mmoeimang accepted apologies from Mr M Dangor (ANC, Gauteng), Mr E Landsman (ANC, North West) and Ms B Mathevula (EFF, Limpopo), and invited the Minister of Transport, Mr Fikile Mbalula, to make opening remarks.

Minister's opening remarks
Minister Mbalula said that the previous year’s strategic plan had been revised to ensure closer alignment with the 2019-2024 Medium-Term Strategic Framework (MTSF). It had become clear that the approach to service delivery needed to change. The new approach was premised on the “Khawuleza” ethos, which called for a culture of accelerated service delivery. One example of this was in road safety, where engineering solutions delivered by the South African National Roads Agency Limited (SANRAL) would combine with co-ordinated law enforcement campaigns led by the Road Traffic Management Agency (RTMC) and other entities to pursue the goal of reducing road fatalities by 25%.

The Road Accident Fund (RAF) faced serious operational challenges, but it remained critical in supporting people whose lives had been affected by road accidents. It would now be run according to a new model that prioritised the settlement of claims and avoiding unnecessary litigation. The Department was also developing a new driving licence card and a new service delivery model for driving licence testing centres (DLTCs).

The poor condition of provincial secondary and tertiary road networks remained a concern, while the devastation caused by the recent floods in KwaZulu-Natal (KZN) had drawn attention to the need to find a more sustainable way of maintaining these networks. This year the Department would set up a project management unit that would support provinces and be a repository of expertise on road maintenance.

The Department remained on track to implement the resolutions of the 2020 taxi lekgotla, and these would find prominence in the 2022/23 annual performance plan (APP). The Department was committed to re-imagining the Taxi Recapitalisation Programme (TRP) and was looking at interventions to accelerate the formalisation of the taxi industry more generally, such as a cashless fare system and integrated ticketing. The monitoring of Public Transport Network Grants (PTNGs) had been tightened -- the national department was now able to intervene if a city or province failed to implement an executive obligation.

The infrastructure build programme remained key to economic recovery and growth. There was a new subsidy policy that would acknowledge the role of the taxi industry in the public transport system. The Department was also committed to restoring commuter rail corridors by the end of the year and would look to migrate a significant volume of cargo from road to rail.

Road Accident Fund (RAF) Annual Performance Plan 2022/23
Mr Collins Letsoalo, Chief Executive Officer (CEO), RAF, recalled that in 2019 the Fund had been plagued by ballooning actuarial liabilities amounting to R300bn and requested but not yet paid (RNYP) claims amounting to about R19.7bn, which were threatening the viability of the Fund. In the same year, R17bn of its R43bn in revenue had been spent on legal and other administrative costs due to the Fund’s strategy of settling claims through litigation by a panel of attorneys outsourced by the Fund. This strategy had been abandoned, and this was already resulting in lower legal costs.

To optimise its socio-economic impact, the RAF would have to do away with the prevailing system of lump sum payments to claimants in favour of instalments and shift priority to compensating victims instead of indemnifying wrongdoers. However, the Fund did not regard itself as responsible for compensating victims for general damages, as opposed to medical expenses, income loss, and other specific losses.

The RAF had recovered over R500m in duplicate payments from unscrupulous law firms exploiting control gaps. It reported 102 legal firms to the Legal Practice Council (LPC) but was experiencing difficulty ensuring that the LPC actually took action against these firms.

The RAF aimed to settle all claims within 120 days of receiving them, but more than 90% of the claim files in the Fund’s backlog did not contain sufficient information to make an offer to the claimant. Among other initiatives, the Fund was putting in place an Integrated Claims Management System (ICMS) to increase claims processing efficiency and consistency. It had also changed its accounting policy, although this change was the subject of a dispute with the Auditor-General of South Africa (AGSA). Overall, he was confident that the Fund had turned a corner.

Ms Bernice Potgieter, Chief Financial Officer (CFO), RAF, drew attention to the reduction in income from fuel levies expected in 2023. This would be offset by increases in investment income resulting from RAF’s asset and liability matching strategy and possibly by the proposed instalment payment system. These two factors were also expected to impact the Fund’s current assets positively. The latter would have a particularly significant effect, reducing the total cash required immediately for overdue payments from R11.8bn to R562m if it was implemented. She discussed the projected effects of paying in instalments instead of lump sums.

Discussion

Mr C Hunsinger (DA) observed that the requirement to settle a claim within 120 days was provided for in law, while the RAF had requested an extension to 180 days. What was the actual average period for settling claims? Complaints from the public had been received about waiting for extended periods to receive settlements. He asked for clarity on the aggregate of outstanding claims. Was it R30bn or R300bn? He also recalled that the RAF had invited the public to make direct claims, but it seemed that it was no longer encouraging this. What would happen to those direct claims lodged but had not yet been settled? He noted that he had received restructuring proposals for the RAF that might reduce its costs by 20-25%. Would the Fund be willing to receive these proposals? He reported that about 30 staff members at the Menlyn branch had been on paid suspension for longer than a year. What were the circumstances of these suspensions? He also questioned the idea that the RAF should be involved in road safety initiatives, as this was the responsibility of the Road Traffic Management Corporation (RTMC) and the Road Traffic Infringement Agency (RTIA).

Chairperson Mmoeimang asked when the Fund’s bid to secure legal services through the State Attorney Services would be finalised. How close was the tension between the RAF and AGSA to being resolved? Had the RAF’s new policies and strategy been subject to litigation? In particular, had there been any resistance to the dismissal of the panel of attorneys? Had there been any interaction with the LPC or the Chief Justice on this matter?

Mr T Brauteseth (DA, KwaZulu-Natal) asked whether the RAF was considering developing legislation limiting amounts claimed for certain injuries. Attorneys sometimes abused the current situation in the private sector.

Mr L McDonald (ANC) commended Mr Letsoalo for stabilising the finances of the RAF. He also reported that he had recently had an unsatisfactory experience at the RAF branch in Bloemfontein, and it had been very difficult to get into the office. He also wanted to know when the situation with AGSA would be resolved. It was unfortunate that government entities were fighting among themselves.

Ms N Nolutshungu (EFF) also commended the RAF for its work, particularly for in-sourcing certain functions. She asked what the total amount still owed to claimants was and when it would be settled. What was the CEO’s response to AGSA’s opinion that the Fund’s new accounting policy had led it to underestimate its liabilities?

Mr M Chabangu (EFF) also appreciated the work done at the RAF but asked the CEO to comment on allegations that his associates were receiving preferential treatment and when reductions in the fuel levy would be passed on to consumers at the pump.

RAF's responses

Mr Letsoalo said that section 4 of the RAF Act directed the Fund to invest in road safety research, but he acknowledged that the RAF would not be the lead agency in this area or compete with the RTMC. He recalled that the 180-day extension request pertained to the period for making payments once a claim had been settled. It had been made during a liquidity crisis caused by a system that allowed attorneys to attach the Fund’s bank accounts. Meanwhile, the average time to process a settlement was as long as five years, the total amount owed to claimants was R9.5bn and the average age of these debts was four months. He explained that the R300bn was an actuarial liability, while the amount of R30bn was the actual accounting liability. An actuarial liability applied to entities governed under the Insurance Act of 2017. Although this Act did not govern the Fund, it continued to track its actuarial liability for risk management purposes.

He said that the reason for moving away from the strategy of encouraging direct claims was that the procedure was rather complex, even for highly educated professionals. Many of the claims in the backlog were direct claims that did not include the correct supporting documentation and could therefore not be processed. The RAF recognised the backlog problem but did not think that proposals from the private sector, as Mr Hunsinger mentioned, would necessarily improve what the RAF was already doing. He was not opposed to the proposals but maintained that the RAF would be able to do better. It was trying to make the system simpler.

He confirmed that the RAF differed from the AGSA on whether it should apply International Financial Reporting Standards (IFRS). Its view was that AGSA was treating it as an insurer, whereas it was really a social benefit entity. This was not something the RAF took lightly, and since AGSA was a Chapter Nine institution, the problem could unfortunately not be dealt with through the intergovernmental relations (IGR) framework.

He said it was difficult to deal with the LPC. It demonstrated the ineffectiveness of self-regulation. Its executives might, for example, have previously been members of the RAF’s panel of attorneys, which would make it unlikely that they would investigate complaints against the panel seriously. The RAF had also engaged with the Chief Justice.

He explained that there were protocols in place for claiming medical expenses so that a person who wanted to undergo a R500 000 cosmetic surgery procedure, for example, would normally need pre-approval from the RAF before it would agree to carry the cost.

He said that the RAF was looking into rationalising its branches and suggested that Mr McDonald’s experience at Bloemfontein might have been a knock-on effect of COVID-19 disruptions. He disputed the allegations that his associates were treated preferentially. This narrative was being driven by lawyers aggrieved about removing the panel of attorneys.

Department of Transport (DoT) Annual Performance Plan 2022/23
Mr Bosa Ramantsi, Chief Director: Strategic Planning, Monitoring & Evaluation, DoT, recalled that the Department’s greatest challenges at the start of the sixth administration had been the RAF’s runaway actuarial liability, infrastructure deterioration and non-achievement at the Passenger Rail Agency of South Africa (PRASA), and the ongoing saga of the Gauteng Freeway Improvement Project (GFIP). The RAF’s new operating model was starting to bear fruit, and while PRASA was still behind expectations, there was some progress. For example, over the last two years, the rolling stock fleet renewal programme had seen 79 new trains produced at the Gibela plant, with 50% local content, and four rail corridors had been recovered. However, there was still some resistance from the people who had set up homes in the rail reserves. The Department had made recommendations that Cabinet had adopted to address the GFIP saga. When this saga was concluded, SANRAL’s finances would improve.

The deterioration of the provincial road network was another serious concern. The main problem was the over-reliance of provinces on conditional grants and their unwillingness to budget for road expenses from their equitable shares. Provinces also often did not adhere to grant conditions. The Department had held a roads indaba recently and would be able to brief the Committee on its outcomes soon. He emphasised that the ongoing economic shockwave from COVID-19 should not be overlooked. It had caused significant revenue losses and set the Department back considerably in many areas. Despite this, the DoT had generally not revised medium-term performance targets.

Mr Ramantsi discussed the Department’s 2019-2024 strategic plan in some detail in terms of eight priority focus areas:

- Safety and Security (presentation slides 15-22)
- Public Transport (presentation slides 23-31)
- Infrastructure (presentation slides 32-39)
- Maritime Transport (presentation slides 40-42)
- Transformation (presentation slides 43-44)
- Innovation (presentation slides 45-46)
- Environmental Protection (presentation slides 47-48)
- Human Resource Management and Development (presentation slides 49-52)

The presentation document included slides discussing the Department’s annual performance plan (APP) in terms of each of its seven programmes (slides 53-103) and consolidated indicators (slides 104-129). These slides were taken as read in the meeting.

Mr Makoto Matlala, Chief Financial Officer (CFO), DoT, presented the Department’s medium-term budget estimates per programme and economic classification. He drew attention to the fact that 98% of the Department’s budget went to transfers and subsidies to the provinces. He broke down the Provincial Roads Maintenance Grants (PRMGs), Public Transport Operations Grants (PTOGs) and Public Transport Network Grants (PTNGs) by province, drawing attention to amounts of R490m and R293.5m that had been allocated to disaster relief for KZN in 2022/23 and 2023/24 respectively, following the flooding in that province in April 2022.

Discussion
Ms Nolutshungu noted that the Department was restoring the Central Line branches from Langa to Bellville and from Langa to Philippi. Could the Department share time frames for this work? What recommendations had it made to Cabinet on the restoration of rail corridors? Would the new trainsets manufactured at the Gibela plant accommodate level boarding for wheelchair users? She observed that the board's term at the Cross-Border Road Transport Agency (C-BRTA) had expired in 2019, while the RTMC and the Airports Company of South Africa (ACSA) were also without board members. Why had new board members not yet been appointed at these entities? She also asked the Department to comment on media reports that the extension of the Public Utility Transport Corporation (PUTCO) subsidised service by the Gauteng Department of Roads and Transport was illegal.

Mr Chabangu asked how much progress had been made towards employing security guards for PRASA’s infrastructure and whether all stations were now functional again. Did the Department really follow the money it allocated to the provinces? The Portfolio Committee had recently done oversight in North West, Mpumalanga and KZN, and the roads there were in shameful conditions. Officials who misused funds should be placed in custody rather than just suspended. He wondered whether a recent sharp decrease in road fatalities was not perhaps a result of COVID-19-related travel restrictions.

Mr McDonald asked the Department to comment on progress towards reopening the critical eThekwini-Pietermaritzburg rail line. He criticised the DoT for using COVID-19 as an excuse for the deterioration of rail infrastructure. This had already started before the pandemic, and the real reason was that security guards had been removed. He warned that the deterioration of the road network was extremely serious and it would start hurting the economy.

He recalled that in 2019, when the Portfolio Committee had done oversight, it had been told that the licence printing machine was already on its last legs. Later, however, the flooding of a neighbouring building was offered as the reason for its breakdown. Somebody was not telling the truth. He was also sceptical of the single ticketing system being mooted for public transport in Mangaung and Rustenburg. The bus networks in those towns were not even close to running.

Mr Brauteseth recalled that the Department had been engaged in designing a new driving licence card. What was wrong with the current card design? Why was it expected to be ready only in 2025? Why could the data provided by drivers when they applied for a licence not be used to create a digital license that would be accessible through a smartphone? He also observed that some very major roads had been destroyed by the flooding in KZN and asked what money had been set aside to assist the province.

Mr Hunsinger asked for clarity on the figures of the length of SANRAL’s road network in March 2019 and December 2021 on slide 34. It did not seem correct that it would have decreased. He asked whether PRASA had short-term insurance on its infrastructure and why this was not a key performance indicator. He would have liked the storage issue for new train sets, which had been raised before, to have been a key performance indicator. He was also disappointed that the population had been given as the reason for the suspension of Umsunduzi, Mbombela and Buffalo City municipalities from the bus rapid transit programme rather than the real reason, which was that they had spent billions with nothing to show for it.

Chairperson Mmoeimang asked about the possibility of national government intervening in the maintenance of rural roads where necessary, without usurping any constitutionally defined powers of provincial and municipal spheres of government. He cited the R31 between Kuruman and Kimberley as an example of a heavily congested road by manganese-hauling trucks, which would benefit from the migration of freight transport from road to rail.

Chairperson Zwane instructed the Department to respond to the questions within seven days.

The meeting was adjourned.