Airports Company SA and Road Traffic Management Corporation: Budget briefings

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
17 May 2005
AIRPORTS COMPANY SA AND ROAD TRAFFIC MANAGEMENT CORPORATION: BUDGET BRIEFINGS

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Airports Company South Africa budget briefing (email [email protected])
Road Traffic Management Corporation budget PowerPoint presentation

SUMMARY
The Airports Company South Africa (ACSA) provided an overview of their objectives and projected plans for the future. They reported on growth in the industry and the need to accommodate the improved business. They also provided an outline of ACSA’s five-year plan. This took into account goals for improving infrastructure and accommodating airline demand. The latter increases were attributed to the growing economy, cheaper airline carriers and the tourist boom. Mention was also made of the expected traffic for the 2010 World Cup tournament. Plans for expansion and expenditures were then related about the major international airports (Johannesburg, Durban and Cape Town).

The Committee asked questions on the effects of airport expansion with regards to security and transportation options; the placement of local entrepreneurs in airport facilities; energy alternatives to oil, and ticket pricing.

The Road Traffic Management Corporation (RTMC) gave a PowerPoint presentation on its budget for the 2005 financial year, and explained more on its interim structures and functions. The Committee asked questions of clarity and about how the RTMC would become financially self-sustainable.

Airports Company South Africa briefing
The Airports Company South Africa Managing Director, Ms Monhla Hlahla, began the presentation by discussing the improvements made in the aviation industry. With the upcoming World Cup in 2010 and the future introduction of the A380 aircraft, she discussed plans for improved infrastructure.

Mr Brooks Mparutsa, Executive Director of ACSA, then provided an overview of ACSA’s five-year plan. He outlined the company’s key objectives of meeting expenditures, focusing on the relationship with the shareholders, and meeting short-term financial targets. He discussed the increased focus on automation and technology and the need for capacity management. Mr Mparutsa then focused on the projected expenditures. Plans were currently being made for smaller airports.

A key focus was also on Maputo connections, although this issue was currently being worked on by government departments. Projections were made for expansion and improvements at the major international airports. This included the development of a central terminal building and international pier at Johannesburg International, and a new domestic terminal and multi-story parkade in Cape Town. Ms Hlahla then spoke regarding airline demands. She attributed growth at Durban International to the public attraction to low-cost airline carriers. She also commented on challenges to sustainability. The change in union relations was also briefly discussed.

Mr Mparutsa then spoke again regarding future project expenditures and statistical projections for growth. Approximations were given for expenditures to 2009, with an increase during the interim years for the construction of housing, stadiums, and additional airport infrastructures. With the current growth trends, ACSA was positive and looking ahead to 2010.

Discussion
Mr A Ainslie (ANC) enquired about the cost of tickets. Over the years, there had been a decrease in travel costs for passengers, but an increase in additional ticket charges. Were these charges becoming excessive? He then asked about how these additional fees related to ACSA.

Ms Hlahla stressed the importance of the public questioning where the additional taxes were going. The amount going to ACSA was small. The bulk went to levies for tourism and other charges. The money going to ACSA was being used for building new infrastructures. Ticket charges were dependent on the airlines. Mr Oliphant, ACSA Chairperson, also stated that a state regulator monitored ACSA’s role and charges.

Ms B Thomson (ANC) asked why there were such differences in airline fares. Ms Hlahla explained that no regulations exist regarding what airlines could charge. It was up to the airline to evaluate their cost structures.

Mr Ainslie questioned the additional carpark planned for Cape Town International. Creating a parking garage would "encourage more traffic". It would also add to the overcrowding and transport problems that already existed along the highway. He asked if ACSA was looking at any other alternatives.

Mr Uries, General Manager, explained that ACSA was also concerned about the amount of traffic coming to the airports. They were currently working with the city to expand roads, especially through Belleville. The parking garage was being built to accommodate the growth of the airport. Currently, the parking structures are inadequate. The city was also currently creating additional transport capacity on the M2 highway.

Mr Ainslie then asked about security at the airports. Staffmembers worked early mornings and late nights. He discussed anecdotes about lack of security and attacks on staffmembers. How was ACSA addressing these security issues?

Mr Uries stated that due to parking lot expansions, staffmembers were forced to park further from the terminal. As many worked very early and late shifts, cases of attempted attacks had increased, but they had now increased security personnel. There were now more than the previous two guards, and ACSA was working to increase the site police presence. There was currently more lighting and two guards on standby. Since these new security measures were implemented, there had been no reports of muggings. Women staff closing late and staffmembers opening at 4:30 a.m. were given escorts to their destinations. Ms Hlahla thanked the city and also noted the increase in security guarding the parking lots.

Mr Ainslie inquired again about alternative solutions to the parking garage. Building wider roads was a short-term solution. He asked if this would be sustainable in the long run, and if other solutions had been offered. Ms Hlahla stated that the city planners were looking at various modes of transport. The current priority however, was on immediate transport expansion.

Mr D Schneemann (ANC) noted that ACSA’s projections were dependent upon economic growth. He asked if such growth could be sustained.

Mr Mparutsa noted the changes to the value of the Rand over the past two years, and the stability of the economy. He pointed out a 3% growth in international passenger numbers. He partly attributed the strengthening of the Rand to an increase in the number of South Africans flying abroad. In terms of sustainability, if the health of the economy were to drop, there would be an increase in international passengers. He also argued that if a low-cost carrier exited the market, another would soon replace it. In addition, their forecasts had been on the conservative side.

Mr Schneemann noted the increased use of the South African Police at Johannesburg International. He enquired if they were cutting back on use of private security personnel.

Mr Ainslie asked about difficulties regarding co-ordination and relations with private security companies. Ms Hlahla responded that they were currently dealing with security issues. ACSA had found reliable partners in the Department of Safety and Security. They were currently working together to push forward a pilot programme at Johannesburg International that would then be implemented at Cape Town and Durban. They were training a unit that would be better orientated to meet the needs of the airport. Before there were more security personnel, but they did not completely grasp the structure of the airport. As a result, they were often just there ‘for visibility’. The new team had less people but it was more specialised, and differences could be seen. She also stressed the role of ACSA as a co-ordinator. Due to all the different sectors of the airport (customs, homeland security, etc) co-ordination and communication had to occur to ensure efficiency. Currently a Chief Security Officer was overseeing the National Security Plan and insuring that appropriate standards were being met. Mr Thompson also discussed the new logistics being rolled out. Currently the officers were being given aviator specific, specialised training so that they could better respond to the environment. The full force would be ‘rolled out’ in August/September this year.

Mr Ainslie asked if private security companies would still play a role. Ms Hlahla stated that once the police forces had completed the training, they would try to reduce the role of the private company into one that was more specialised. The goal was to ‘get more quality over quantity’.

Mr Schneemann inquired about the retail aspect of ACSA. The airports in Johannesburg, Cape Town and Durban all contained established businesses. He had also heard reports of the difficulties of emerging entrepreneurs, such as shoe-shiners, to break into these markets. How was ACSA working to bring emerging entrepreneurs into the expanding airport market?

Ms Hlahla said that ACSA worked to ensure that all partnerships were Black Economic Empowerment (BEE) operations, with a 51% shareholding minimum. Regardless of whether the brand was a leading label, the BEE shareholding was an ACSA requirement. The emerging sector was "both interesting and difficult". She discussed how often these emerging entrepreneurs were unable to afford a shop, so their goods were exported to the already existing airport businesses. It was ACSA’s policy to showcase group products that marketed the ‘best of the country’. Many of the ideas for the businesses came from people recommended to ACSA local manufacturers. The strategy was to improve sales so that these entrepreneurs would be closer to getting a shop in the airport. ACSA was always open to suggestions.

Ms N Khunou (ANC) discussed the beadworkers market in Durban. It was important that programmes prevented the exploitation of people.

The Chairperson brought up the issue of the global cost of fuel. There was insufficient reserves to meet energy needs. All South African growth sectors were sensitive to the global oil price. With the uncertainty of oil costs in 2010, he inquired about any concerns raised by the Department.

Mr Mparutsa agreed that fuel costs were a global concern, so the airline industry had to become more efficient. He discussed how the A380 aeroplane, despite carrying more passengers, used the same amount of fuel as the B747 jet. There should be increasing focus in the industry to become more fuel-efficient. Ms Hlahla stated that ACSA was also currently investigating other models for fuel efficiency, such as the one used by Hong Kong which had an alternative mechanism for purchasing fuel.

The Chairperson inquired if this was an airport as opposed to retail fuel price. Ms Hlahla said that it was. Mr Thompson, Assistant General Manager, stated that industry had manufactured a synthetic that could be mixed 50:50 with fuel. This method had been used before and could possibly be sustainable.

The Chairperson then discussed unions and their practices. He also asked about shareholders. Ms Hlahla discussed the privatisation of ACSA and difficulties of structure. Mr Oliphant discussed that they had set a target and were waiting for the Minister to finalise a date with the shareholders.

Mr Ainslie then asked if any upgrades were planned for Durban International Airport and if there were any reports on La Mercy. Ms Hlahla stated that regarding La Mercy, the goal was a win-win for everybody. She stated that they were hoping for some clarity this year and that the main issues were timing and infrastructure.

Mr Oliphant stated that studies had been done. They also needed to take into account the needs of the airlines and ACSA’s involvement surrounding negotiations. International airports received the greatest flow of traffic and smaller and regional airports were being subsidised by these larger airports. Ms Hlahla said that they must work to maintain the standards and networks of the current airports. As they thought about new airports, considerations should also be given to creating a self-sustaining system for those already in place.

Mr Ainslie stated that due to the traffic at Durban, at some point the airport must expand. He questioned if there was any room for expansion. Ms Hlahla stated that they had to consider the economics to ensure that the public was not worse off.

Ms Khunou then commented on the lack of women in ACSA and reported complaints about maternity leave. She also expressed concern regarding the working hours. Ms Hlahla stated that women at ACSA were of personal interest to her, and she would be happy to speak more about it after the presentation. Mr Uriess stated that last year ACSA had addressed all their employees in three different sessions. As a former trade unionist, he would feel bad if people were treated badly.

Mr Schneemann then asked about issues of space. Ms Hlahla noted that the concept of space was relative to advancements in technology and social hierarchy. In terms of technology, Cape Town had a long way to go. Space management was one of the challenges of the future.

Road Traffic Management Corporation briefing
Mr T Tsholefsane (Department Director: Land Transport Legislation and Regulation) gave a brief overview of the history of the RTMC. Its mission was to provide co-operative and co-ordinated strategic planning, regulation, facilitation and law enforcement in respect of road traffic matters by all spheres of government. Many changes had to be made in terms of road safety.

He moved on to highlight their objectives and functions. Mr Tsholefsane explained that the RTMC was part of the Department of Transport but had since been established as a separate entity. That meant that some functions had been carried from the Department and others had been specifically created for the RTMC. The stakeholders involved included the Departments of Transport and Health, Provincial Transport Departments, the SA Police Service.

He briefly described the interim structure of the RTMC. It was structured like a company with a Board who answered to a Shareholders Committee. He then read the business plan and the budget, and went over the cost of setting up the RTMC. The RTMC has always used the Department of Transport’s office space, but had since moved out and needed to budget for the move that was a once-off cost.

He continued to break down the budget further into different categories, such as corporate support services, information services, road traffic marketing and education, enforcement co-ordination, and research and development. He gave a summary of the budget and corrected the total budget from R149.46 million to R161.46m.

Discussion
The Chairperson asked for clarity on who the stakeholders were. Mr Tsholefsane replied that all the organisations that the RTMC interacted with.

Mr A Ainslie (ANC) enquired what road traffic marketing was. Mr Tsholefsane explained that was all communication and public awareness programmes issued from the Department, such as the Arrive Alive campaign in the past.

The Chairperson asked what the charge book is. Mr Tsholefsane explained that this informed how to charge different offences. They aimed to standardis charges for whole country.

The Chairperson wanted to know why there was no mention of fundraising programmes in the report, as the RTMC should be a public entity that raised its own funds.

Mr Tsholefane replied that the RTMC would raise funds through the ‘Netis system’. When insurance companies and other corporations did background checks through this system, the RTMC would charge an administration fee.

He said that funds should also be raised through the implementation of the Administrative Adjudication of Road Traffic Offences (AARTO) Act of 1998, thereby increasing the rate of fine collection. It was not viable for traffic officers to use speed measuring cameras to issue more fines, and that the RTMC aimed to make traffic services financially self-sustainable.

The Chairperson concluded that more co-operation was needed between local, provincial and national Departments.

The meeting was adjourned.