National Road Agency: briefing

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
26 October 1999
NATIONAL ROAD AGENCY

Documents handed out:

SUMMARY

Mr. N. Ali, the CEO of the National Road Agency gave a briefing on the agency's current strategies for maintaining and developing South Africa's 7000km National Road Network. He focussed on the idea that thorough preventative maintainance of roads will cut costs of completely repaving roads. He also talked about the funding behind road up-keep (toll roads and cross-subsidisation and money from the government).

MINUTES
Mr. Ali started with what reform was required of the agency. First, they could not be both the referee and player, they could not be both regulator and operator, so they had to seperate those and bring in a kind of checks and balances system by having decentralised accountability and control. They also had to make sure people were taking responsibility for their actions and that they were disclosing why and how they were doing things. To this end they began to publish an annual report for public consumption.

He said that road financing is in a critical situation (which the members may not notice since they live in city areas, though the roads in rural areas are in appalling shape). The agency is looking for a balance between roads in the rural areas versus the city areas as well as looking at how roads affect job opportunities and how those opportunities could be maximised. The agency must also ensure that it is governed within a code of conduct which is agreeable to everyone. That is the reason they have registered as a company. As a government agency you have a bit more freedom and are under much less strict supervision. As a company you are very closely watched, so if anyone tried to embezzle money or suchlike "we'd be pulled in front of a judge fast...". The fact that it is registered as a public company, that the minister is the sole shareholder, and that they have a board of directors (who deal with the day-to-day governance and control) all help to raise the level of accountability of the company and the company members.

The Agency was established in April 1998 as an independent statutory company with the Minister of Transport as sole shareholder. The Minister is in charge of regulation. The Board of Directors is in charge of governance and control. The Chief Executive Officer is in charge of day-to-day management. The agency staff's job it is to procure, not to actually build.

There are over 800 Road Authorities in South Africa. The country does not have nearly enough resources to support that. There are over 450 000km of roads in South Africa (the NRA looks after about 7000 KM of that) with overall assets R135 billion. They must, both preserve the national network as well as enhance it.

Mr. Ali stressed three parts of the agency's strategic objectives: to promote Black economic empowerment, to be sensitive to the environment, and to meet the needs of customers and investors. From the operational objectives he stressed the development of Small, Medium, and Micro Enterprises (SMMEs). In the award of NRA contracts the development of human resources, job creation and and SMME development are prescribed tender elements.

With regard to funding, the NRA has moved towards public/private sector partnerships with attractive financial structuring. These projects are known as Build Operate Transfers (BOTs).

Mr. Ali said that they needed an outside source to home in and monitor the agency to make sure it was using its money in the right way. They also looked at the money they got from toll roads. Traditionally road authorities only care after toll roads, but due to the historical imbalances the NRA looks after all roads (not just the ones that pay for themselves), though they do not want to put undue burden on the state. They also get money and help from Build Operate Transfers (BOTs), Unsolicited proposals (where they receive proposals from private insitutions about things they recognize that they can do), and some other places as well. The agency is trying to identify the land register, but they will not be able to find it for a while (and this lack is being greatly sensationalised).

One source from where they are no longer getting money is the Fuel Levy. This levy was banned because the proceeds were used towards the destabilisation of South Africa's neighbors (Namibia, Angola, etc). Ali argued that the reason for this discontinuation is no longer necesary so the levy might be reinstated since there is a pretty urgent money situation, as R230 Million (almost 1/4 of their budget) was taken away for no real reason. Privatisation of roads will not help the situation as there has never been a successful private road anywhere in the world, also it is not economically viable to make the majority of roads into toll roads. Improving efficiency will also help the funding issue. By becoming an agency, they have improved efficiency and thus saved money. He also proposed that with the highway usage fee, after a certain amount of profit the managers of such roads should give the rest of this profit to the road agencies in their area.

Question and Answers
Mr. Cronin: What has been you experience as an agency?
Mr. Slabbert (IFP): What is the possibility of your taking over law enforcement on your roads? Also, with any money you have left over, lets go visit some more roads in Mocambique or something.
Mr. Cronin: There is something that has not been implemented at all; where is the visible policing of streets? Also, the advantages of an agency is that it has focus. The disadvantage is that there are lateral connections (connections between road and rail; is rail can't handle the freight, they must turn to the roads, which increases the burden on the roads and wears them down faster). Thirdly, Public safety is the public sector and it funcitons differently from the private sector, who cares about the bottom line. Also, why is cross-subsidisation completely ruled out? Especially in a country with such an incredible unevenness. Why rule it out on business reasons? What about turning each road into its own entity - compartmentalisation?

Adv. Swart (DP): Should the National Road Agency have more than 7000 KM under its jurisdiction?

Mr. Ali: About law enforcement: I don't think we should go around creating all these individual armies to police roads, we should rather look at how to make existing security forces stronger. We need better working relationships and less fragmentation, We can only appoint people to National roads, and we will end up chasing offenders off onto provincial roads, and that will be very hard on them. This should not be the NRA's issue.

There should be a focus on policing overloads. We lost R600 million last year due to road ruination by overloading. If we pay the various road authorities to police that especially then we will save money. For instance we will pay R7 Millin a year to KZN to enforce overloading laws.

Ali then stressed that South africa should have, at most, 50 Road authorities in South Africa, each allocated the same amount of road, but all different kinds of roads (rural, city, etc). There are over 200.000 KM of roads in the informal settlements and no authority has taken responisibility for these roads. Although we are no an agency, we have not lost our sense of the broader issues.

We must look at what is going by rail. As a consumer I prefer door to door service, so I prefer roads. We also need to be smarter about traffic (make High Occupancy Vehicle - HOV - lanes, for example).

When it comes to cross-subsidisation, we have no problem with that. In Japan they have a pooling system amongst all the toll roads. The original idea was to have private roads. Originally the money colected at tolls could only be used within a certain measured area of the toll plaza. This is absurd, so now wehave spread out the earnings over the whole road. The next logical step is to have it spread over any toll road. We just need a massive educational campaign to let people know where the money that they are paying at tolls is going.

Mr. Lucas (IFP): What happens to the license fee? Also, what if a person gets a license in A and then drives mostly in B and C? B and C don't get any financial benefit from this person and meanwhile they are wearing down the roads. It's unfair. And what about overloading?

Mr. Swart: The public does not know where the money they pay at tolls is going, we must tell them.

Mr. Ali: Yes, overloading is a big problem, you're right, we must do something. We must not simply penalise the driver but the company who makes him overload or drive all day and all night without sleep. It should also be their problem. The problem with the license fees and driving between privinced is a bigger problem than just us.

Mr. Cronin: Paramount to the ANC is the issue of job creation. You mostly talked about it in the SMME context, but there is a report which says that this is not the best way to think about it.

Mr. Ali: We can set people to work, but will the conditions for these people be worth it? On the Indian subcontinent I saw women breaking these stones to make gravel to throw on the roads. They have been given jobs, but have their lives been bettered? You must look at the whole picture. We are trying to find the balance, we need a more strategic look.

Mr. Cronin: Have you gotten an Auditor General's report?

Mr. Ali: We're really hoping for a performance audit on us. We're not just sitting around doing nothing, so we'd like the auditor general to tell us what we're doing wrong or right.