Department of Transport Annual Report 2005/06: briefing

PORTFOLIO COMMITTEE ON TRANSPORT
18 October 2006
DEPARTMENT OF TRANSPORT ANNUAL REPORT 2005/06: BRIEFING

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Department of Transport’s Annual Report 2006 (available at www.transport.gov.za)
Annual Report of the Department of Transport 2006 presentation

SUMMARY

The presentation by the Department described its achievements, key policy developments, transfer payments, oversight report and audit report. The most notable points in the presentation were the high number of vacancies in the Department and under spending of R331 million.

The Committee was concerned about the overpayment of fees received from testing centres. They did not understand why there was still a problem in an area which should just be a simple accounting matter. The Committee was also concerned generally with the achievement of targets that the Department had set itself. They wondered whether the targets would be met. The Committee questioned whether the Department, and the entities within the Department, had the capacity to fulfill their mandates, transferred or otherwise. Finally, the Committee was particularly worried about the Taxi Recapitalisation Project and its progress.

MINUTES

Chairperson’s introduction

The Chair said that before the presentation he would like to table a draft letter he had drawn up on behalf of the Committee about the progress of the Gautrain project following a visit by the Committee to the project site. They had looked at the Park Station facility and noticed that disability access was insufficient. They had met with We Care, an organisation of Centurion business people who had raised some concerns. The Gautrain would be going straight through the Centurion business district and would include a viaduct which would be seven stories high in some places. We Care was concerned that business properties would be devalued. They were also concerned about the sinkhole problems in the area. This could lead to a huge increase in the cost of the project. They suggested a different alignment of the Gautrain which could connect up with an existing Metrorail line from Thembisa. This would make the Gautrain line 900m longer, but it is a route with fewer inclines. It is also not along a sinkhole area and would have the advantage of promoting interconnectivity between mass transport and the Gautrain. He asked the Committee whether they were happy with the letter and whether they would support it.

Mr S Farrow (DA) indicated he would like the letter to acknowledge that We Care did not only represent 10 businessmen, but around 800 ratepayers.

Mr S Mshudulu (ANC) said that it was government policy that communities be given enough time to respond to proposed projects in order to verify the authenticity of their objections. He agreed with the letter.

Mr Farrow said that the interconnectivity was important and that including Metrorail and the South African Rail Commuter Corporation in the process was paramount in ensuring that this was achieved.

Ms N Khunou (ANC) said that she was concerned that there were no public hearings about the Gautrain project. She agreed that the letter was in order.

The Chair said that the community had been consulted on the initial plans, but that the plans had then been changed drastically without consultation. He suggested they focus on the merits of the argument rather than issues of process and representivity.

Annual Report of the Department of Transport
Ms M Mpofu (Director General) said that the presentation would mirror the structure of the annual report. She said that some information in the presentation related to the next financial year (after 31 March 2006), but that when this occurred they would be informed.

The Chair said that questions of clarity should be asked during the presentation and substantive questions should be asked later.

Ms Mpofu began by describing the achievements of the Department, including developing reliable indicators for transport with Statistics South Africa, shipping agreements with other countries, the establishment of the Road Traffic Management Corporation (RTMC) and the revitalisation of rail transport. Some key policy developments were the review of the Non-Motorised Transport Implementation Plan, work on Micro Freight Transportation issues, the Road Infrastructure Strategic Programme, the transfer of some provincial roads to the South African National Roads Agency (SANRAL) and approval of vehicle safety regulations for the taxi industry.

Mr Farrow asked what the template for fast tracking the Yamoussoukro Decision was, as he was not familiar with it.

Ms Mpofu explained that the decision had been taken in the context of the African Union and the template dealt with removing some of the constraints present in order to implement the decision. She continued with the presentation and said that a little over R9 billion in transfer payments were made. She described briefly how the Department had achieved their set targets for 2005/6, because some of the information in the section overlapped with the overall achievements of the Department. The oversight report reflected the number of vacancies in the Department. Ms Mpofu explained that the number of vacancies seemed high because filling those vacancies was not a high priority for that financial year as the Department underwent restructuring. The audit report related instances of fruitless and wasteful expenditure and irregular expenditure. The people responsible for fruitless and wasteful expenditure were being investigated and the cases of irregular expenditure were being submitted for ex post facto approval from the State Tender Board.

Mr O Mogale (ANC) asked for an explanation of the term ‘ex post facto approval.’

Ms Mpofu explained that it meant that approval was applied for after the event had occurred. So, if procedures were not followed to obtain approval, approval could sometimes be given after the event, to endorse that there is no significant loss. She continued to say that there had been an overpayment to the Department of R963 094 from local testing centres.

The Chair asked for clarification of this issue. He did not understand why there was this over recovery. Was the full picture over many years not being represented, was it in fact an under recovery of funds?

Ms Mpofu said that the problem was that the function of managing the testing centres lay with the Members of Executive Council (MECs) of provinces and not with the Department.

Mr D Pretorius (Chief Financial Officer) explained that there was an average lag of six months between receiving receipts of fees and receiving the actual fees because the relevant regulation had been repealed.

The Chair asked him to explain the repeal of the regulation.

Mr Pretorius said that the regulation was repealed, meaning that the testing centres no longer had to pay over the 3% levy. That was in July 2004. Some of the overpayment can be accounted for by late payments.

The Chair said that the fluctuations in fees indicated a serious set of reporting problems that should be a simple case of accounting for money. It showed a lack of transparency.

Mr Pretorius said that some of this was because in many cases they did not know where money was coming from exactly. Provinces sometimes did not indicate which testing centres the money came from or what time period it covered.

Mr Mshudulu suggested that they gather all provincial offices to address this issue because of the backlog of driver’s licenses. He said that this backlog impacted negatively on economic development as graduates who needed licenses for employment could not get them because of the delays.

Ms Mpofu continued the presentation by identifying internal control weaknesses, such as removing ex-employees from the payroll. The financial overview listed a total budget of R10 billion and under expenditure of R321 million. The majority of this under spending was due to the delays in the Taxi Recapitalisation Process (TRP).

Discussion
The Chair suggested the Committee organise their questions in categories.

Mr Farrow asked what the process of compiling the report had been. He said that reports should preferably be comparable across years. He said that in previous reports which were linked to strategic planning, there were clear deliverables connected to timeframes. For instance, normal administrative functions such as the transfer of funds should not be listed under achievements. Also, he felt the performance of entities reporting to the Director General should be reported to the Committee as an amount of money transferred to an entity told the Committee very little.

The Chair added that covering all the entities was a difficult, time consuming task. He said that part of his question should be answered by the Committee, not the Department.

Mr Farrow clarified that he would like to know that money being transferred by the Department was being allocated to the right entities and spent wisely.

The Chair commended the Department on a more detailed report, especially related to staff issues. He berated the Department on the proliferation of grammatical errors in the report, indicating a rushed job and a lack of editing.

Ms Mpofu said that government was in a transitional period when it comes to the structuring of annual reports and some of the issues around certain information being contained in inappropriate sections were because of this. She said it was important to take the entire report into account when assessing it, for instance, the information on each entity’s performance is found later on in the report. Hopefully these issues would be resolved once the transitional period for reporting was over.

Mr Farrow apologised if he was incorrect in his criticism, but he was just using an analogy. A transfer of funds is not an achievement; it is a function that is contained in the budget.

The Chair said he thought Mr Farrow was wrong in saying that he was wrong. He had a valid point to say that it was wrong for the Department to list as an achievement that it had done what it was meant to do anyway.

Ms Khunou asked about the target of distributing one million bicycles to scholars by 2010. She asked how they planned to do this when they had only distributed 12 000 of these and under spent on the project by R2 million.

Mr Mshudulu asked if the bicycle project was working together with local municipalities in order to ensure that infrastructure, such as pavements, was present to ensure the safety of cyclists.

Ms Mpofu answered that the target of one million bicycles had been set quite recently in order to focus their efforts on the project and promoting non-motorised transport. Initially it was meant to be a partnership with the private sector, with private companies donating the bicycles. With the restructuring of the project as a government project, they are in a position to achieve the ambitious target. The challenges of the project are identifying needy scholars, establishing bicycle repair programmes in schools and trying to ensure that parents do not take bicycles from children.

The Chair said it was good that they were not just handing out bikes, but trying to integrate and support the project with maintenance projects. He added that maybe if parents needed the bikes more, they should be allowed to keep them, if that was the mobility problem. He asked if they were integrating the project with municipal infrastructure and Integrated Transport Plans (ITPs).

Ms Mpofu said they were looking at those issues and working on a comprehensive project. The bicycle project is also not the only project that aims to promote Non-Motorised Transport (NMT). A conference was being held in November to promote NMT.

The Chair added that they liked the total of one million, but he hoped just handing out the bicycles would not become the totality of the project.

Mr Mogale asked why, if the project was aimed at schoolchildren, it was targeting November, when schools were going to close. Would it not be better to do this in January at the beginning of the school year?

Ms Mpofu replied that the general conference for promoting NMT was in November; the bicycle project was ongoing.

Mr Mshudulu asked if the Department had guidelines for its entities to implement the changes required by the performance indicator framework.

Mr Mshudulu asked what was being done to address the administrative inefficiency in the Road Accident Fund (RAF) to solve claims backlogs.

Ms Mpofu replied that they had received a presentation from the RAF outlining a turnaround strategy to deal with the administrative inefficiencies; it was on its way to improving delivery.

Mr Mshudulu asked about the Cross Border Road Transport Agency (CBRTA) and how the Department was working together with other Departments to address cross border prosecutions.

Ms Mpofu replied that the CBRTA relates to international borders, not boundaries.

The Chair said that the question was still valid, how did the Department intend to deal with enforcement of fines between jurisdictions? How were they going to get provincial municipalities and courts to work together?

Ms Mpofu replied that the Law Enforcement Technical Committee had been established to deal with integrating enforcement across, not only jurisdictions, but also different authorities and spheres of government. This was also why the Road Traffic Management Corporation (RTMC) was established, to create the network in which this can happen.

Mr Mshudulu said that the railway lines were a result of industrial revolution. He asked if the Department had the cooperation of industry in the revival of rail transport.

Ms Mpofu replied that they had done a lot of work to ensure the participation of industry. The project to revive the railways began with a consultative process with those who would be affected and those who generate business. In addition to this the development of the Transport Master Plan will pull all of this together inter-modally.

Mr Farrow asked how the RAF was progressing in terms of development of regulations, such as the definition of serious injury and capping issues.

Ms N Msoumi (Deputy Director General: Transport Regulation) replied that the RAF regulations had been published on 30 June 2006 and the comments received on the regulations were extremely varied. Most people were not supportive of their definition of serious injury or the capping issue. A team had been established to determine what parts of the regulations needed to be redrafted or excluded. They have redrafted the second set of regulations and it will soon be ready for comment. The Social Cluster has established a definition of serious injury and they are trying to reconcile their definition with the Social Cluster’s definition.

Mr Farrow expressed his concern that the RTMC did not have the capacity to deal with the mandates that had been transferred to it, such as driver’s licenses.

Mr J Makokoane (Chief Operating Officer) answered that the RTMC had only started to operate in October 2005. He then began to list in great detail the functions that the RTMC was supposed to fulfil.

The Chair stopped Mr Makokoane and said that he was not answering the question. He said that the RTMC had not yet submitted its annual report and asked why the RTMC was not functioning according to the Department, was it a lack of funding, an institutional issue or due to poor appointments in the past? He said that the organisation’s newness was not an excuse.

Mr Farrow emphasised that it was an important issue to the Committee.

Ms Mpofu said the RTMC was on track and it was difficult for her to account for what had happened within the organisation before her term of office. The important issue was that the RTMC had been established and it was starting to work. The RTMC is in charge of many functions that are not ideally located within a government department; the organisation is better equipped to deal with them. One of the reasons that the organisation was facing challenges was because of concurrence. There were difficulties getting the overall structure to operate on a provincial level. They were not questioning the commitment of the provinces, but saying that structurally, it was difficult to implement concurrently. However, the RTMC was not responsible for solving all the traffic problems experienced by the country, and it should not be expected to.

The Chair said they did not want the Department to divest themselves of key road safety responsibilities, for instance with interfacing with the judiciary, as only 4% of prosecutable cases reach the courts.

Mr Farrow asked again if the RTMC had the capacity to deal with the transferred mandates. He asked if employees were being transferred along with mandates and if not, how were they ensuring that there were enough people to cope with the extra responsibilities.

Ms Msoumi agreed that there were capacity challenges, but that many of the extra responsibilities were required so that the RTMC can function properly. She also said that the function would be transferred with the relevant capacity.

Mr Farrow asked about the capital expenditure backlog, in particular the Khayelitsha Rail Extension which had been in the budget for a long time without any work being done on it.

Mr K Pillay (Acting Deputy Director General: Public Transport) said that the final details for the extension were being finalised and it should be operational by 2008.

Mr Farrow asked for more information about the National Freight Logistics Strategy (NFLS) and whether there was any development on the road to rail debate.

Ms Mpofu said the NFLS included developing several corridors. These included the Gauteng-Durban corridor, the Harrismith hub, the Dube Trade Port in Durban and the Gauteng-Maputo corridor. Generally they are driven by a corridor approach. Even though the NFLS is freight driven, it was also important that the corridors are used by other kinds of transport. In order to revitalise rail freight they are gradually discouraging road freight and increasing rail freight capacity. But sometimes road transport is preferable as there is no rail infrastructure. Ultimately the NFLS is very clear on how they are going to promote rail freight transport.

Mr Farrow asked for information on the Dube Port.

The Chair said they would acquire the information through the proper channels.

Mr Farrow asked for some detail on the Extended Public Works Programme (EPWP).

Mr Makokoane said that there was a dedicated EPWP audit team and a project aimed at improving performance of the EPWP.

Mr Farrow asked about the transfer of 3000km of provincial roads to SANRAL and whether they had the capacity to deal with this extra task.

Mr Makokoane said the SANRAL transfers related to the decision to create an integrated transport network for 2010. The transfers would help to achieve the overall objectives of the country, economic growth and development. The reason they were transferred was that the roads were not coping with the increased loads that increased economic development was encouraging. The provinces did not have the funds to maintain the roads so they were transferred in order to include them in the comprehensive transport strategy. Funds to SANRAL had been tripled in order to cope with the transferred roads.

Mr Mogale raised concern about the quality of the N12 from Warrington to Klerksdorp. He said the road was dangerous even though it was always being fixed. He asked if repairs were being quality controlled.

Mr Mshudulu said that the quality of the road from Mafekeng to Taung was also bad and posed a danger.

The Chair asked Mr Makokoane not to deal with the issue of specific roads, but to answer the general issues.

Mr Makokoane said that since 2001 they had used a quality index ranging from very good to very poor and that they aimed to have a minimum of 10% of roads rated from poor to very poor. With the road transfers that 10% has increased because more roads need to be fixed. The section of the N12 in question was only transferred last year and emergency repairs need to be carried out before the overall quality of the road can be improved.

Mr M Swathe (DA) asked about the supposed R200 billion in repair backlogs that had been reported by the media.

Mr Makokoane said that the total value of the roads was only R60 billion, so the R200 billion backlog was impossible.

Mr Farrow asked if there had been any innovative ideas that had come out of the reports on public transport relating to the taxi scrapping process. He added that it was clear that the target of 10 000 taxis scrapped by December was not going to be achieved since the process had not yet begun.

Ms Mpofu said that significant progress had been made on the TRP and it was now on track. In one week the first scrapping would take place. There were currently 6000 operators who wanted to exit the taxi industry and who were accepting the R50 000 from the government. Since scrapping one taxi would take only four minutes, she was sure that they would be able to reach the target. The regulations for the new taxi vehicles were also on track and nearly ready to be released.

Ms Khunou asked if they were not creating 6000 people who the government would now have to support. She was also concerned that only the SANTACO (South African National Taxi Council) leadership would benefit from the TRP, what was the Department going to do to assist those who would be unemployed? She asked how the Department ensured that SANTACO disseminated the information they were required to, to its members.

Ms Mpofu answered that they were dealing with assisting the exitors generally. They had drafted a Black Economic Empowerment charter for transport and some of it related specifically to the taxi industry. It required the broader involvement of marginalised groups, such as women. Money was given to SANTACO so that it would disseminate information through countrywide road shows.

The Chair said he thought the responsibility for communication lay with the Department as SANTACO may have other motives for informing or not informing members and non-members.

Ms Mpofu said they understood the complexities of the industry, but that they were obliged to support SANTACO as a democratic organisation and they could only operate within the existing framework.

The Chair suggested that they needed to operate outside of their framework. The Department needed to inform operators outside of SANTACO’s reach.

Mr Mogale asked which company had been awarded the tender for the new taxis.

The Chair said it was unfair to ask who had been awarded the tender. And that it was not really a tender, but market regulations that any manufacturer could comply with.

Mr B Pule (ACDP) asked what percentage of taxi owners the 6000 represented.

Mr Mogale asked for a provincial breakdown of the 6000 operators willing to exit the industry.

The Chair also wanted a profile on the 6000 exitors, since he had heard that less than 100 of them came from Gauteng, when over half of the taxi industry was in Gauteng. He added that the difficult part was going to be getting those who did not want to exit the industry to exit. Also in some cases the industry was recapitalising itself, so why should the government spend money on something that was happening. He asked about the sustainability of the project.

Ms Mpofu said that they could provide the profile for the 6000, but she did not have it with her. She said that they were assessing route viability in order to establish what support routes needed. They were trying to incorporate taxi and bus routes. This would take care of one aspect of support government can provide. Another aspect of support would be to establish what challenges operators faced in order to assist them. She added that the Department had no intention of increasing the scrapping allowance as this would only push up the price of a new taxi.

Mr Mogale said that SANTACO was given a lot of money from government: R7 million last year, R10.6 million this year, as well as an additional R2 million. He asked if the Department monitored SANTACO’s spending. He suggested that SANTACO should raise money from its members.

Ms Mpofu said that the amounts allocated to SANTACO were budgeted for, not additional amounts. The money was utilised for projects that are clearly described to the Department and it was all accounted for. She agreed that eventually, SANTACO should be self-sufficient, but that for now, government had a responsibility to stabilise and support the industry.

Mr Mogale asked why only 98% of applications to convert permits to operating licenses had been processed.

Ms Mpofu said at the close of the financial year, 78% had been processed and the figure was currently at 98%. She added that the 2% were mainly from Gauteng, where the route designation process and requirements to convert were stricter and took a little longer.

Mr Swathe asked when the appointments to the boards of public entities would be completed. He asked if board members would get performance bonuses as the performance agreement had not been agreed upon.

Ms Msoumi said that board members were appointed every three years and they had all already been appointed. Board members do not get performance bonuses necessarily, only those who are part of executive management would get them and their entities do not have executive boards.

Mr Swathe asked if the 5000 traffic officers that had been trained had been deployed.

Mr Makokoane said that they had not yet completed their training and would be deployed as soon as they did.

Mr Mshudulu said that ITPs should be part of the Integrated Development Programmes (IDPs). He said that most IDPs did not have enough information on transport plans.

Mr Mshudulu asked about the model tender contract document and for more information about bus tenders.

The Chair asked the Director General to focus on the ITP issue and said that it would be nice if the next annual report contained some kind of audit on the ITPs; both qualitatively and quantitatively.

Ms Khunou said some municipalities had a lack of capacity, so in some cases, an ITP is drafted in Gauteng for Bloemfontein, when nothing is known about Bloemfontein.

Mr Makokoane said ITPs were supposed to inform the transport sector’s input into the IDP. The Department had received 95% of the ITPs which vary greatly in quality. They have been audited and feedback was given to the provinces. Complex ITPs in the metros are being given careful attention. Regulations on ITPs were going to be passed to prescribe the level of detail that municipalities had to include according to their size.

The Chair asked about the number of vacancies in the Department. He acknowledged that posts should not be filled for the sake of it, but vacancies were still a problem.

Mr Farrow added that under spending was an indictment of under capacity and said that large amounts of money were spent on advertising posts that were not filled.

Ms Mpofu said that the principal reason for under expenditure was the taxi recapitalisation project and that she had dealt with that. She said again that the vacancies were due to the restructuring process that the Department had undergone. She said that even if all posts were filled it would be insufficient to solve the country’s transport problems. The Department of Public Service and Administration had been asked to assess what capacity would be needed to improve transport significantly. She added that next year’s report would be linked to the strategic plan and then real results would be seen.

Mr Farrow asked if the organogram approved by Cabinet would be the final structure of the Department.

Ms Mpofu said that everything expected of the Department would never be achieved by the organogram and that in order for it to deliver on key programmes, more changes would be necessary.

The Chair said the Auditor General’s qualified report was mainly about the credit card licensing issue and asked that the Department elaborate on the issue

Mr Farrow asked for clarity on the credit card tender. The Department indicated that the tender would be reviewed before handing over to the RTMC.

Ms Mpofu said that the financial statements had been audited and were about to be concluded. The Department could not do anything until the report had been produced.

The Chair said there was a history of inaction prior to the Director General’s time.

Ms Mpofu said they had agreed with the Auditor General that there would be separate accounts for Prodiba and for the Department; however, at the last minute this was changed, causing a delay. This was not the fault of the Department. They would act as soon as they got the report.

The Chair asked the Department to explain the audit Committee report which said that the audit committee failed to comply with its responsibilities due to a lack of participation from management.

Ms Mpofu said the audit committee had found an internal weakness in the internal audit function of the Department and they were working on clarifying what would be required to change this. They had been trying to fix those weaknesses and had taken corrective action and in some cases already implemented solutions. She added that some of the responsibilities given to programme managers needed to be given to financial mangers because the financial aspects of programmes need to be focused on.

Mr Farrow asked about the driver’s license fees. He said it should be a simple procedure that should be easy.

Ms Msoumi said the issue of the driver’s license fees had already been dealt with.

Mr Mogale asked why the R3.1 million was not written off if the R20.8 million was written off.

Ms Msoumi said in order to have an amount written off you have to know how much needs to be written off and they do not know how much it is exactly. That is why there has been a delay, because due process has to be followed.

Mr Farrow asked if the Director General was involved in the audit committee.

Ms Mpofu said it was not useful for her to sit in on audit committee meetings and listen to accountants argue. She said it was better for her to sit in on the last part of the meeting and have the committee give her their recommendations.

M Mogale asked whether the Department was intended to have 11 learnerships and if the learnerships were intended to be only within the Department or within its public entities too.

Mr Makokoane said that learnership and internship programmes went together hand in glove. He said the Department wants to ensure that those in training should be employable afterwards.

Mr Farrow asked why the Passenger Charter was only linked to buses since it seemed that everyone who used public transport should have a charter relating to their safety.

The Chair closed the meeting and apologised that everyone’s questions could not be answered due to time constraints.