Department of Transport Budget and Programmes

TRANSPORT PORTFOLIO COMMITTEE
22 May 2001
BUDGET PRESENTATION

Chairperson: Mr J P Cronin (ANC)

Documents handed out:
Transport Department Budget & Programme Objectives 2001/2

SUMMARY
The Committee met with the Department of Transport to go over the budget in light of the budget vote that would be taking place on the 19 June 2001. Many questions were put to the Department with the Director-General of the Department of Transport replying to many of them. The issues discussed were very broad and ranged from the general structure of the Department's expenditure to how money is spent on specific areas. Some of the topics that were broached were the the taxi industry's restructuring and re-capitalisation, subsidies in relation to all modes of transport and the infrastructure situation. Specifically, in regards to the taxi industry, the complete lack of subsidisation problem was discussed.

MINUTES
The meeting was attended by the Director-General of the Department of Transport, Mr Sipho Msikinya. The DG started the proceedings by accounting for the Department's expenditure. He said that 94% of the Department's budget is dedicated to transfer payments while the other 6% being for departmental operations and activities. The DG translated these percentages into hard numbers, saying that out of the R 4.3 billion that the Department receives, only R 276 million of this goes toward the actual administration of the Department. In regard to the programme budgets, the largest portion goes toward safety and regulation and administration gets only a very small portion.

He then discussed the Departments budget for public transport saying that 47% goes toward bus subsidies, 52% towards commuter rail and 0% going towards taxi subsidisation. The DG mentioned that the taxi industry received absolutely no subsidisation despite the fact that 60% of commuters used this mode of public transport.

The DG then said that the Department has been allowed a 4% increase in terms of operational escalation. Ordinarily, this percentage was set at 10%, revealing a 6% percent deficit. This figure meant that the Department was effectively cutting down on bus subsidies. The problem was aggravated by factors such as the increasing price of fuel.

The Director then told the Committee that the Department had been given R200 million over two years for rail infrastructure replacement. He said that this was the amount given despite the fact that the process would require R10 Billion. So this defecit also necessitates a cut in rail subsidies.

The DG then repeated that the taxi industry had received absolutely no subsidies despite the fact that 60% of commuters chose to use this mode of transport. If the taxi system was to succeed in its present form then the Department would require R8 Million "to get the process off the ground". By this, he meant that the money would be required to do basic research and did not include the establishment of any new infrastructure.

The Director then went on to discuss the Departments aims and goals for the coming year. The Department would prioritise the matters of:
· safety,
· the recapitalisation of the taxi industry,
· the administration of the Department and;
· the development of the Departments policy revue system.

The Director said that the Department would also be putting some of its resources into;
· capacity building,
· development of public transport,
· planning,
· transport safety;
· other pilot projects.

Discussion
Mr A Ainslie (ANC) said he could not find anything in the budget that showed expenditure on road safety. How much money had been spent in the name of road safety?

The DG admitted that indeed the budget did not accurately reflect the amount spent on road safety by the Department. The Department received money, in the amount of R50 million, from the Road Accident Fund (RAF), which was spent on road safety. The Director said that since the money did not come from the Administration the amount was not reflected in the budget report, a situation that was in need of remedy.

Committee members wanted to know what form or structure the Department took and how the money allocated was divided amonst the different areas of the Department.

The DG said that the structure of the Department was an inherited one. The Department was undergoing restructuring, moving away from a functional approach towards an outcomes-based structure. The current structure is a result of a restructuring attempt which took place three years ago, which created a three-tier approach. Firstly, there was Road and Safety, responsible for all matters relating to traffic safety. Secondly, there was Policy, Strategy and Implementation. This part of the Department saw to those matters such as public transport, taxi and rail as the DG had listed under the Department's priorities for the year. The third part of the department was the Urban Transport Fund (UTF) which was responsible for testing those pilot projects upon which the Department embarked. For example the UTF was responsible for the Urban Corridor project.

Mr J Slabbert (IFP) asked whether he was correct in assuming that the taxi recapitalisation was a matter to be dealt with by the Department of Trade and Industry.

The DG replied that this position was correct but that the matter was still of interest to the Department of Transport because the Department would be providing subsidies once the recapitalisation had occurred. These subsidies would include things such as the provision and upgrade of infrastructure. The DG then said it was important to examine why subsidisation would be given and to ask whether it was an economic enabler or a mechanism of poverty reduction. The Chairperson interjected here saying that surely it qualified as both and, therefore, the Department of Transport should actively lobby for the recapitalisation and subsidisation of the taxi industry.

Mr G Schneemann (ANC) said the Minister had decided that rail transport and freighting be a priority. How did the budget address the priorities of the Minister toward rail and how did the budget try to entice freight transport from road back to rail?

The DG replied that this was not an easy matter. He added that there had been a study undertaken to examine the relationship between the two. What the analysis yielded was that the problem arose in the area of external costs. The rail industry is run by the government and thus all costs can be readily determined and conditions controlled. However, he added, the road hauling industry is completely deregulated and is much harder for their costs to be accounted. Many road haulers overload their vehicles, damaging the roads at cost to the Department. Coupled with this is the fact that road tariffs do not accurately reflect true operational costs. As a result, individual motorists subsidise the use of the roads by haulers. The DG said that this position needed correction, with fines for overloading being enforced and tariffs being adjusted to reflect the situation.

Mr T Abrahams (UDM) enquired as to the policy development around freight transport. The DG said that the Department's policy towards freight transport was one of reinvestment into rail infrastructure. He added that to develop the rail infrastructure, the bulk of freight transport would have to be moved back to rail. To do this effectively, the rail transport industry would have to be rationalised. This rationalisation would include fragmentation of the industry along lines that would increase efficiency and cost-effectiveness.

Mr Abrahams asked why the bus subsidisation differed so greatly amongst provinces. The example he raised was of the Eastern Cape that received only 3.5% of total bus subsidisation.

The Director explained that the present structure of bus subsidisation was determined by political considerations. Travel subsidisation was given as a form of compensation to those who had been forcibly removed from their homes. These people now had to travel huge distances to their places of work. To alleviate this, bus subsidies were given as a form of compensation. The DG said that the difference in subsidies was a result of differences in many considerations. He also pointed out that in the Eastern Cape there existed numerous bus companies that operated without any subsidies and that this was therefore not reflected in the budget.

Mr J Slabbert (IFP) asked what steps had been taken to provide children in rural areas with transport to and from their schools. This was in light of the fact that in the past, the Department of Education gave the Department of Transport funds to provide bicycles in rural areas.

The Director said that the Department no longer received any money from the Department of Education for such purposes. The Director went on to say that a similar Bicycle Project is currently underway.

Mr Ainslie asked the Director what steps had been taken to provide additional money for road maintenance. Mr Ainslie pointed out that road maintenance required a sum of R10 Billion rand with only R6 Billion being provided.

The DG informed the Committee that the Department had indeed taken steps to secure much needed additional funds, but had little success. The DG pointed out that in the past, the budget for roads was reduced. However, the budget has recently increased with additional money being provided for both road maintenance and poverty alleviation. The DG then claimed that this money was not enough in light of the backlog that accumulated in the past. To remedy this situation the Department has embarked on certain public-private partnership ventures.

Mr Slabbert asked about the Maputo Corridor, and wanted to know whether Mozambique had paid their share of the costs involved with this road. The DG did not know the answer to this question and could therefore not answer. He did, however, say that he would make every effort to find out and inform the Committee as to the situation.

Urban renewal
Mr J Makokoane (General Manager: Corporate Services) said that the Department of Transport have identified urban renewal as an important function of the Department. He said that currently the Department has provided for urban renewal projects in Cape Town, the Greater Tswane and Durban. The Director referred to transport as the life-blood of the city and the Department has, therefore, set aside R50 million for this purpose. Similarly, the Director said that the Department has reserved R3 million for the investigation into an inter-modal facility for the Baragwanath area. The Department also has plans for a transport upgrade for Alexander and an inter-modal facility for the Gauteng area.

The Director informed that a feasibility study had proven the desirability of a direct line into Khayelitsha. To this end, the DG said he had approached the Minister as well as the Provincial administration in an effort to secure funding.

The DG again reminded the Committee of the bicycle project which had been put into practice whereby bicycles were provided particularly to children in rural areas who needed to travel distances to their school.

The DG went on to comment that the taxi industry was very dynamic and as a result appraisals of cost often lose validity over a short period of time. Until recently, the Department had not identified taxi co-ops as a relevant part of the taxi industry. The Department has realised that their budgeting was, therefore, incorrect as it did not take into account taxi co-ops.

Mr Cronin (ANC) enquired as to what these co-ops did and how they contributed to the industry. The Director told him that these institutions had been inherited and that they had been set up by "word of mouth." Also, that these institutions had no contracts providing for their existence and that there were no mechanisms providing for their continued existence. He then went on to say how a culture around these co-ops had emerged and the industry had grown to believe that these co-ops were a cornerstone of the taxi industry, that the end of the co-ops would spell the end of the taxi industry as a whole. Finally, he added that these co-ops did not contribute to the industry in any significant manner, but that they were, nevertheless, needed as they effectively controlled the industry.

The DG explained, in response to a question by Mr Slabbert (IFP), that these taxi co-ops are supposedly responsible for the controlling and provision of business activities associated with the taxi industry. These included things as obvious as repair shops and the sale of spare parts as well as the less obvious, such as fruit and vegetable stalls and refreshment stalls. However, in reality, they do not provide this service but still get the associated monetary reward.

Mr Cronin's next question was questioning why then the Department had chosen to fund these institutions. The DG said that this funding continued in light of the belief within the industry that the co-ops were a sine qua non of the whole taxi industry. He also reminded that funding these institutions was not necessarily wrong but rather what remained to be done was to get these co-ops involved in the taxi industry in a more meaningful way. Mr Cronin said this was very important as the taxi industry and associated industries offered an enormous opportunity for black economic empowerment.

The DG responded saying that they too identified real value in the existence of these taxi co-ops and the Department had indeed embarked on an effort to create working taxi co-ops. The Director said that the Department proposes to do this through the development of business plans, capacity building and organisational development.

At this point, the meeting drew to a close after Mr Cronin highlighted the most important matters that had been discussed as well as those matters which would later be discussed.