Department of Transport budget & additional requests

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12 October 1999
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

12 October 1999

Documents handed out:
Negative Implications of the M.T.E.F. Allocations on Specific Main Programmes
Department of Transport Business Plan 1999-2000, Additional Requests over and above MTEF baseline for 2000/2001
Transport: Budget Planning Submission: 2000/ 2001 To 2002/ 2003 from the Department of Transport to the Department of State Expenditure
(e-mail for documents)

The committee focused on issues of budget constraints and went over the department's additional requests over and above its MTEF baseline budget. It also discussed in detail problems pertaining to taxi / bus safety including bad equipment and untrained drivers. Appeals were made to the department to hire more officials and improve traffic control enforcement.

Committee programme
The meeting began with a quick overview of the committee's upcoming schedule. A member of the ANC asked for a briefing on the taxi situation and added that the committee often received only one side of the story and needed more information because roads are being closed and constituents were starting to worry.

Budget process

The Chairperson, Mr J Cronin, stated that the budget process needed to be more transparent. Although there have been increased opportunities for Parliament to work with the department, there needs to be more understanding of budget constraints before the final budget submission period so that the committee can support the department.

Two officials from the Department of Transport: the Director General, Mr Dipak Patel and the General Manager of Corporate Support Services, Mr Jerry Makokoane gave the presentation.

Mr Patel explained the financial problems the department has. Financial planning is confined by the budget and the Medium Term Expenditure Framework cannot always plan for unforeseen problems. Since there are budget constraints, trade-offs must be made. He then went over the additional requests above the MTEF baseline for 2000/20001 which are for the following items:

1 Roads Agency: The spine road servicing the Lubombo Spatial Development Initiative in Kwazulu-Natal, formerly a provincial budget item but the province did not have the money for upkeep so the national government has taken over control.

2 SAMSA Contracts: The South African Maritime Safety Authority (SAMSA) is controlled 100% by the government and needed money for pollution prevention due to international obligations. The contract is for standby tugs to tow ships in danger of polluting and has an action plan in case of a pollution accident. The costs are higher than originally estimated because the contracts were negotiated in dollars and also due to the change in exchange rates.

3 Promote Passenger Transport Policy (Bus subsidies; Rail subsidies; Contract management).

4 Urban Transport Fund (Restructuring Transport; Building capacity in the provinces; Taxi process).

In summary:

MTEF baseline amount: R3, 868, 438, 000

Additional requests: R 458, 637, 000

Total requested R4, 327, 075, 000

Recommended by DSE R 326, 907, 000

Total minimum required R 427, 637, 000


A member of the ANC asked for more information about the Urban Transport Fund (UTF).

Mr. Patel explained the UTF had its own operating rules and that its resources can roll over from year to year.

The chairperson asked about the purchasing back of old mini-buses and if the figure for repurchasing was correct.

Mr Patel replied that it was more important to improve the manufacturing sector. The money the department is planning to spend will not be all on tender but will come in the form of VAT incentives, smart technology, and other such things. The revenue for manufacturers is estimated between R5 and 10 billion but that it was not all cash.

There was a query about what requirements must be met for the money to come from the Job Creation Fund for the Roads Agency (There is a possibility that R80m requested for the Roads Agency may be funded by this fund).

Mr. Patel replied that the project will bring in tourism and will be as labour intensive as possible and that is why it can come from the Job Creation Fund.

A question was asked about the bridge that is proposed in the Roads Agency item. Mr. Patel said there was great interest in having a direct road link between Northern KwaZulu Natal and Mozambique from Richards Bay to Ponta do Ouro which will cross close to the Swaziland border. The economic potential of the region would be promoted through improved access for commercial and tourist activity. There is a debate over whether South Africa should fund the stretch of several kilometres within Mozambique as that country would probably not be able to afford it. This link is very important, and is vital for the overall success of the SDI project.

Mr J Slabbert (IFP) commented that the department must look at ways to control drivers and the safety problems they create.

Mr Patel told the committee that the department has been organizing taxi driver training. He also said that upgrading skills is an ongoing process. With regard to improving the condition of the vehicles, they are starting to make tendered contracts with tighter requirements. He believed that the money needed for the railroads was the most important. He explained that without more money the department would only be able to do minimal maintenance and repairs and that quality and safety will start to deteriorate.

Chairman Cronin asked Mr. Patel if the control overload fund was still addressed at the provincial/local level. He also asked about the accuracy of the figure he had heard with regard to 8,000 traffic officer positions being vacant which were not being filled and asked if it was a lack of resources or a lack of budget allocation?

Mr. Patel said that overload control has not been done away with and that there is a special set of requirements from the Treasury and State Expenditure Department. Two and a half per cent of provincial roads budget is supposed to go to this fund.

In reply to the second question, he said he did not know from where the figure of 8,000 came and he was not sure how many vacancies there were although he conceded there were quite a few. He did not agreed with simply filling the vacancies for a number of reasons. He stated that there was not a single employer of the traffic officers since there are 9 provincial employers and about 650 municipal employers. The department did not want to be too hasty in filling positions for three reasons. First the department wanted to focus on the harmonization of the enforcement agencies. Secondly, it wanted to look over employment conditions so the state does not have to pay officers overtime. Finally, the educational standards of recruited traffic officers is very low (minimum requirement is a junior certificate) and the department wanted to look at how to improve the skills and have a more professional force that had general management capabilities.

An ANC committee member asked if there was a department control mechanism to ensure that taxi owners/drivers abided by the rules.

He said that the department is developing a professional driver's permit and that it involves testing of the eyes and a physical fitness test. This has already been implemented with trucking and formal bus drivers. There are plans to extend this test to include a mental capacity test but there are issues around the constitutionality of the matter. However, there are problems with government training in that once a driver has this, it is much easier to find other jobs and many drivers are leaving for higher paying jobs.

Another ANC member asked why the government was putting money into taxis which is privately owned business. He also asked what re-alignment had been done and if there were now opportunities for small entrepreneurs to operate.

Mr Patel said that the taxi services are private but that the government can work with manufacturers in order to get good deals for them to buy new buses. It will not take ownership of the taxis but will use its political muscle to improve the conditions. He also noted that although it said taxis were de-regulated in 1988, they were never really regulated and that it is difficult to add regulation to an industry that has never experienced it.

An ANC committee member asked why individuals could take driving tests in one province when they reside in another. Also, what was the department doing to address the problem of driving schools that did not adequately teach individuals how to drive.

He said that since there is open driving in South Africa, it is permissible to test in another province. The department is working hard to close down schools which do not adequately train drivers so that they can be upgraded and re-opened.

Adv Swart (DP) said that there is much frustration about poor traffic law enforcement and the public cannot accept that it is not a priority to fill the traffic officer positions.

The chair answered his question by saying that the structures themselves are inadequate to enforce road traffic law currently. If the department hastily employs individuals then it will end up with a surplus of officers. Time is needed to transform the institution. He would like to see the road traffic management come to the committee and explain why one can drive for days without seeing a traffic officer and why the laws are not being enforced.

Adv Swart (DP) wanted to voice his concern that the department was not making law enforcement a priority. He wanted to department to admit that this was a problem and that it will work to put specific things into place.

Mr Patel said that there are short term, medium term and long term goals for traffic safety. In the short term the minister will appoint a commission to look into the bus crashes and a lot of money has been put into the Arrive Alive campaign. The minister is also planning to call a summit next month with senior law enforcement officials in order to come up with a focused plan for the upcoming holiday.

For the medium term, plans will be launched to attend to repeat traffic offenders for not complying with rules. It also plans to start a point system on driver licenses that will be classless.

For the long term, road traffic management should become a controlled political structure with accountability.

The chair ended the meeting by summarizing the meeting's main points. First, the committee would like to play a more active role with the department. Second, the department would like commuter rail to gain attention. Finally, although the economic opportunities for projects like the Lubombo Spatial Development Initiative are exciting, the committee will have to look at it later since there are more pressing issues for them to deal with.

Appendix 1:

Negative Implications of the M.T.E.F. Allocations on Specific Main Programmes

The M.T.E.F. budget submission had to be reduced in certain areas to fall within the ambit of the baseline allocations of the previously approved M.T.E.F. The amounts by which the submission was reduced are as follows:


SAMSA contracts: 6, 907

Promote Passenger Transport Policy: 339, 839

Promote Transport Planning - U.T.F.: 10, 891

Lubombo Spatial Development Initiative: 101, 000

2001/ 2002

SAMSA contracts: 1, 836

Promote Passenger Transport Policy: 464, 403

Promote Transport Planning - U.T.F.: 11, 743

Lubombo Spatial Development Initiative: -

2002/ 2003

SAMSA contracts: 2, 873

Promote Passenger Transport Policy: 578, 548

Promote Transport Planning - U.T.F.: 12, 173

Lubombo Spatial Development Initiative: -

For the abovementioned activities, there are severe negative implications of the M.T.E.F. allocations. They are dealt with below. The above amounts are requested as additional allocations over and above the restricted baseline amounts. As set out in the explanation below in the case of "Promote Passenger Transport Planning, the specific request for additional funds is based on certain assumptions. Should these assumptions change, then the specific amount requested will vary.


SAMSA contracts:

To fulfill the Departments responsibility in terms of the Maritime Pollution Act no 6 of 1981, it is essential to maintain the success of oil pollution prevention operations carried out by a contracted tug service (Pentow Marine) on the high seas on behalf of the Department. (Success will be indicated by reaction times and the containment of oil spill pollution and not by the number of incidents attended to which are generally unpredictable.)

The standard of maintenance of oil pollution equipment will determine its availability and serviceability in the event of an oil spill emergency and will affect reaction times. (The effective maintenance and availability of oil pollution prevention equipment is an important performance indicator) The conduct of planned oil pollution exercises are essential to test contingency plans, reaction times and training of personnel.

In order to ensure safety of life and property at sea it is essential that funds be available. If not, the Department will not be able to fulfil its statutory functions which may lead to criticism from the puhl3c and international shipping fraternity.

Two tugboats are used to render this service. One of the tugs constantly generate income on international waters while the other tug is on standby for all pollution prevention services. The costs of the international tug are 100% denominated in US dollars while the costs of the standby tug is 50% denominated in US dollars.

Income generated by the tug boats are paid over to Revenue and does not reduce the expenditure for which the Department is responsible. The harder the international tug works, the more it costs but more income is generated. The revenue gains of having one tug generate revenue, however, far exceed the consequential increase in costs. A large portion of the increase in expenditure is therefore reflective of increased revenue to the State. The cost of this service to the Department can be reduced by curtailing or discontinuing the generation of income on international waters, but the net cost to the State will increase. The characteristics of this priority safety and pollution prevention service do not allow for it to he sensibly subjected to the M.T.E.F. restrictions.


Promote Passenger Transport Policy:

1. Bus Subsidies

The principles of the implementation of competitive tendering and the inclusion of an escalation formula in the contracts were accepted during September 1996. (Refer to Cabinet Memorandum number 14 of 1996). Since then interim contracts were entered into with bus operators previously subsidised by the Department to ultimately move towards a tendered contract system. To negotiate this move, the Department had to give certain assurances to bus operators which the Department is committed to. One of these assurances is the inclusion of an escalation formula in the tendered and interim contracts which is inflation linked, but not higher than the prevailing inflation rate.

To conclude contracts with current subsidised bus operators, an additional amount of R86 million was requested for 1997/1998 to cater for increases of bus subsidies based on the escalation clause contained in the interim contract. (Refer to Cabinet Memorandum number 1 of 1997).

Considering the above, our view is that the M.T.E.F. should make provision for this particular item. The restrictions to stay within previously determined baseline amounts were reasonable enough for 1999/2000. For 2001/2002 onwards the restriction of the M.T.E.F. allocations are clearly problematic because of the contractual inflation linked increase in bus subsidies as mentioned in the previous M.T.E.F. submission. The Department is therefore clearly at a disadvantage because of these contractual increases.

The additional increase for bus subsidies. amounting to R 47 million and R 95 million in 2001/ 2002 and 2002/2003 respectively had to be deducted from bus subsidies to bring the total budget with in the restricted baseline figure.

2. Rail Subsidies:

With regards to the rail transport. this activity entails participation in negotiating a new business agreement between SARCC and Metrorail, the development of the concessioning principle for rail commuter services, the development of concessioning documents, promoting the increased use of public transport as opposed to the private car, the subsidisation of rail commuter transport rendered in six metropolitan areas and implementation of demonstration projects on concessioning.

A large part of our population regard public transport as an essential service on the same level as housing, education and health facilities and in some cases even survival. The RDP emphasizes the importance of public transport as an instrument for improving the quality of life, and also the continued need for passenger transport subsidies in order to make public transport affordable. Access to affordable public transport play's a crucial role, particularly for the working community.

If limited funds are made available, transportation disadvantages and needs of a large part of the community will not be addressed, the promotion of public transport will be reduced which will increase the level of accidents and the burden on road provision and maintenance, the implementation of the tendered contract system will be scaled down which may lead to breach of contract with bus operators and support to the taxi industry will reduce which may lead to increased violence and low skills development.

There was a need for an additional R300 million in rail subsidies during 1998/99 to partly address the operational shortfall in subsidies for that year. The recapitalisation of the industry must also be addressed. The M.T.E.F. submission, before having reduced the amounts submitted by R 300 million. R 353 million and R 415 million respectively over the period, is based on a comprehensive approach to restructuring the funding of commuter rail service as set out in the memorandum under cover of the letter from the Minister of Transport to the Minister of Finance dated 4 June 1999 (Our ref. Nl/7/1/6). This proposal has taken a comprehensive approach to the debt liabilities of the SA Rail Commuter Corporation, the remaining R 77 million operating shortfall from 1998/9, the annual capital expenditure requirement of approximately R800 million from 1999/2000 onwards. In all, the total additional funding requirement over and above the original MTEF allocation is R1 150 million, of which only the applied for additional funding is required if the proposed medium-term approach is accepted. The proposal is aimed at capping (in real terms) the operating subsidy, and recovering an increasing proportion of operating cost from fare revenue linked to a process of ongoing internal rationalisation in commuter rail, as well as modal optimisation across the public transport system. A copy of this memorandum is attached for easy reference. To the extent that any one of the elements in this proposal is adjusted, there will be implications for the operating subsidy requirement in this budget submission. A process is currently underway between the Departments of Transport and Finance to arrive at a medium-term solution to this issue. In addition, A 4 by 4 process to discuss the funding of public transport with the Department of Finance and State Expenditure is underway.

3. Public Transport Contract Management and enforcement

The restructuring of road-based public transport in both the bus and taxi modes has presented management challenges for government in both cases, the functions for bus contract management and taxi permit enforcement are devolved functions of Provinces. The devolution of bus contract management to provinces has not been accompanied by Provincial departments making provision in budgets for the monitoring of contractual compliance by operators. Prior to devolution, the national Department of Transport made provision for contracting private contractors to do on-the-ground monitoring of service-level compliance by operators to the extent of 4% of total contract value. The Department continues in encourage and pressurise Provincial departments to provide for contract monitoring, but with the success. This situation is now that Provinces are not monitoring for value, nor are they in a position to deduct from contract payments the specified penalties for non-compliance. This could well be causing losses to the fiscus.

In respect of taxi permit enforcement, the non-availability of provincial allocations for improved enforcement has prevented government from having an effective capability to deploy targeted enforcement capability in situations where taxi violence due to over-trading by illegal operators emerges. A nominal provision of R 2 000000.00 is made for the National Department to partner with provincial and local government in emergency cases for the planning and administration of short-term, targeted high intensity enforcement.

The additional allocations requested under this item total R 60 million, R 64 million and R 69 million over the M.T.E.F. period.

Promote Transport Planning - U. T. F.

The aim of this activity is to facilitate and promote the implementation of transport planning and the creation of Transport Authorities with all metropolitan areas in terms of the National Land Transport Transition Bill and Moving South Africa, Provincial governments will be assisted to undertake the necessary transport planning in rural areas.

All major metropolitan areas will be required to produce rationalisation plans, public transport plans and integrated transport plans in terms of Moving South Africa objectives. The role of the Department is to ensure that the national norms and standards in our policy, in Moving South Africa and in legislation are adhered to in respect of the establishment of Transport Authorities and in the development of plans required.

This is a key short to medium term priority in respect of the Moving South Africa strategy as it forms the institutional, technical, political and financial basis for the restructuring of public transport service provision.

This activity did not feature in the previous budget submission and the budgeted amounts had to be reduced to fall within the ambit of the baseline allocations of the previously approved M.T.E.F.


Lubombo Spatial Development Initiative:


The construction of MR439 between Hluhluwe and the border of Mozambique at Ponta do Oura is the key infrastructural component of the Lubombo Spatial Development Initiative, as a spine road intended to:

- unlock the economic potential of the region

- improve access within north east Maputaland for local people, tourists and commercial activity

- provide a direct road link between Northern KZN and Mozambique

The Lubombo Spatial Development' Initiative is a tri-lateral initiative, involving South Africa, Swaziland and Mozambique. It incorporates the area north of Richards Bay, to Maputo, and includes the eastern areas of Swaziland. President Mandela, President Chissano and His Majesty King Mswati 111, launched the SDI in Durban on the 6th of May 1998 formally adopting the Lubombo Investor Document. In it, the development concept is outlined, as well as, the key transnational and national potential tourism and agricultural investment areas and lead projects.

To complete the construction of MR439 the two remaining sectors of the road need to be financed at a total cost of R 101 million. Funding by government is required because the project is not viable as a toll road.


A Treasury Committee Memorandum requesting funding for this project was discussed by the Treasury Committee during November 1998. The Treasury Committee did not agree to make the full amount for this road available to the Department, because the funding would be expended over a period of three financial years. The Committee, however, agreed in principle to make funds available based on the cash flow requirements of the project. This decision, however, was not minuted and therefore the funding for this project has not yet been secured.

The cash flow requirements were R 25 million, R 56 million and R 20 million for 1998/99, 1999/ 2000 and 2000/ 2001 respectively totalling the required R 101 million. The S.A. National Roads Agency Ltd. had no option but to take on the project although it has not budgeted for it, having taken over the project from the Kwa Zulu Natal Province. Should the backlog of R 81 million no be secured during 1999/2000, the total of R 101 million should be allocated as an additional allocation for 2000/2001.



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