Department’s National Freight Logistics Strategy, SA Institute of Civil Engineering Infrastructure Report: briefings

TRANSPORT PORTFOLIO COMMITTEE
30 May 2007
DEPARTMENT’S NATIONAL FREIGHT LOGISTICS STRATEGY, SA INSTITUTE OF CIVIL ENGINEERING INFRASTRUCTURE REPORT: BRIEFINGS

Chairperson: Mr J Cronin (ANC)

Relevant Documents:
National Freight Logistics Strategy Summary
Implementation of the South African Freight Logistics Strategy
South African Institution of Civil Engineering (SAICE) Infrastructure Report 2006
SAICA Constraints and Actions towards 2010
SAICA presentation to the Committee
SAICA: Sector and the Energys Initiative presentation

SUMMARY
The Committee was briefed on the National Freight Logistics Strategy. The NFLS was required to respond to the current challenges facing freight and had to ensue that the long term sustainability of the sub- sector was secured and was adaptable to shifts in industry and government policy. The underlying idea of the strategy was for a shift in freight transport from road to rail. Concerns were raised over the challenges that the Department faced. Members asked for detail on actual progress being made in the implementation of the strategy. The Department elaborated on specific corridor and strategic initiatives.

The South African Institution of Civil Engineering briefed the committee on its Infrastructure Report Card 2006. The report card spoke on infrastructure in South Africa in various sectors. SAICE thought the report especially relevant given the 2010 World Cup. The Committee was also given an overview of the skills situation in the civil engineering sector.

MINUTES
Department briefing: National Freight Logistics Strategy (NFLS)
The Department delegation comprised of:
Mr R Khan (Acting Deputy Director-General, Branch: Logistics and Corridor Development);
Mr M Vilana (Chief Director: Corridors, Branch: Logistics and Corridor Development);
Mr C Manyungwana (Director: Primary Networks/Eastern Corridors, Branch: Transport Logistics and Corridor Development);
Ms S Nong (Assistant Director Platform Development, Branch: Transport Logistics and Corridor Development);
Ms T Cici (Assistant Director Primary Networks, Branch: Transport Logistics and Corridor Development);
Ms M Mohale (Assistant Director Secondary Networks, Branch: Transport Logistics and Corridor Development);
Ms M Gqada (Assistant Director Secondary Networks, Branch: Transport Logistics and Corridor Development); and
Mr D Viljoen (Deputy Director: Parliamentary Services and Stakeholder Management, Ministry of Transport).

Mr Vilana presented the Committee with a summary of the NFLS. The NFLS was required to respond to the current challenges facing freight and had to ensue that the long term sustainabilty of the sub- sector was secured and was adaptable to shifts in industry and government policy. The problem was that the freight system in South Africa was fraught with inefficiencies at system and firm level. It also had structural infrastructure shortfalls and the institutional infrastructure was inappropriate. Information gaps and asymmetries abounded as the private sector was reluctant to furnish freight statistic figures. This hampered the Department’s planning process. The skills base was deficient and the regulatory framework was incapable of resolving the problems in the industry.

Mr Vilana continued that the current situation was that most modes of transport were not responsive to demand side capacity, price and level and quality of service. From a system perspective the infrastructure was ageing, there was low efficiency and low collaboration and there was a lack of integrated planning. The current situation from a SOE perspective was that the dual mandate sent out mixed signals. Historical impediments had also not been removed. Different perspectives from different government departments were problematic. In addition there was a lack of integrated planning across government. The Transport Industry felt that government was not supporting the industry and that state monopolies were protected at industry expense. Government on the other hand felt there was an over-commercialisation of some public functions and that the enforcement of existing regulations was problematic.

Mr Vilana noted that total surface transport market amounted to 900 million tons in 2003. He provided schematic breakdowns of the total between road and rail transport. It was evident from the figures that the use of road transport was greater than that of rail and that rail had been losing market share over the last decade. The Department had the monumental task of once again popularizing the use of rail by making it more efficient. The optimal situation would be that anything to be transported more than 300 km should be moved by rail.

Mr Vilana stated that the vision was to have integrated functional regulators, i.e. Economic, Safety and Environmental and Security reporting to the Minister. Operators both public and private should run on the network. In addition, the infrastructure should be funded by both public and private sector. It was foreseen that government should also have a more direct role.

Mr Vilana continued with an explanation on the governance and management issues pertaining to the strategy’s implementation. There would firstly be an IDTTL Technical Team to design and implement the freight logistics system masterplan. The technical team would report to the Director-General’s (DG’s) Economic Cluster’s Sub-Committee, which in turn would report to the Economic Cluster of Ministers. Secondly, there would be Corridor Teams to design and implement corridor strategies that implement national strategies customised to local conditions. The Corridor Teams would report to a Committee of Transport Officials (COTO) which in turn would report to the Transport MinMEC. The Transport MinMEC would report to the Economic Cluster of Ministers.

Mr Vilana also touched on the medium to long term institutional priorities as it relates to implementation. He categorised them in terms of policy, economic regulation, safety regulation, security and environmental regulation, infrastructure and operations. He did not however identify specific implementation priorities. Integrating first and second economy production supply chains, supporting BEE and SMME’s in the sector and skills development were amongst those mentioned.

Mr Manyungwana continued with a presentation on specifics over the implementation of the strategy. To lower the cost of doing business in South Africa, to promote integrated planning across spheres and stakeholders, to promote public-private partnerships, to develop corridor strategies and implement corridor initiatives were identified as some of the objectives of the strategy.

The Committee was given a schematic diagram of the key freight system corridors. Gauteng - Cape Town, Gauteng – Durban, Gauteng – Beitbridge were amongst those mentioned. Mr Manyungwana emphasised that corridor approaches should be aligned with other corridor approaches in the Southern African Region and elsewhere in Africa. The rest of the delegation made inputs on detail over specific corridor initiatives and strategic initiatives. The Durban –Gauteng, Maputo - Johannesburg, Cape Town – Beitbridge and Walvis Bay – Maputo corridor initiatives were elaborated on. Amongst the strategic initiatives identified was the revival of certain branch lines ie Kei Rail, Nkwaleni and Douglas – Belmont. The briefing was concluded with the identification of key interventions by the department and the committee. The elimination of duplications was to be looked at by the department and it was hoped that the Committee could assist in lobbying additional funding for the strategy.

Mr Khan pointed out that the majority of the team present had been trained internally. The problem was that expertise was lacking and that the Department was often forced to build capacity in-house. He also pointed out that most of the private-public partnerships that were currently in place were informal in nature.

Discussion
The Chair asked whether an interface between nodes was possible.

Mr Vilana said that a Durban Freight Plan was being developed. He added that 5-10 years down the line the situation would change drastically. Modes would begin to complement each other.

Mr G Scheemna (ANC) commented that a great deal had been said about planning. He asked how successful projects had been and that additional information on the Gauteng – Durban corridor be furnished to the committee.

Mr Scheemna was concerned about the apparent lack of co-operation between departments. He could also not understand why the private sector was reluctant to furnish the Department with statistical information. It was furthermore felt that not much had been said about border posts, specifically the Beitbridge border post.

Mr Khan responded that the aim of Spoornet was to make a profit. It would therefore not be willing to invest in projects to revitalise lines such as Nkwaleni. He explained that the private sector was reluctant to divulge information for fear of compromising its competitive position. The issue was about security of information.
Mr Khan said that the Department could possibly get capacity. The problem was that it might be vested interest capacity. It was difficult to look at everybody’s interest.

An ANC member asked for greater clarity over the transportation of dangerous goods and the permits required in doing so. She also asked what possible opportunities there were for the previously disadvantaged. It was further asked from whom complaints were mainly received.

Mr Vilana said that the issue was to make the transportation of dangerous goods less cumbersome, thus the introduction of a single permit. Previously an operator would have to file up to 40 route plans with 40 municipalities to transport dangerous goods.

Mr Khan said that most of the responses received were from the industry itself. There were complaints that subsidies and fuel rebates were given to Transnet and Spoornet but not to industry. He added that many of the complaints received had nothing to do with transport but often related to customs.

Mr S Farrow (DA) commented that the information filing process as part of a legislative process would take years. He said that for the past fifteen years it had been a regulatory requirement that if something was to be freighted by rail, a permit was required. Mr Farrow asked if the taking away of the permit requirement was not a quick fix and whether it was possibly the reason behind the bottlenecks at present. It was also asked whether bottlenecks at corridor initiatives had been looked at. Mr Farrow asked if there had been much communication by the department with businesses on the ground. He asked what needed to be done to shift freight transport from road to rail.

Mr Mshudulu commented that the issue of skills in the industry was a challenge. He said that Sector Education Training Authorities (SETAs) needed to communicate with one another. Mr Mshudulu stated that sex workers at the Harrismith hub were a problem. He referred to the lack of co-operation from businesses and asked whether the Department had engaged with Nedlac stakeholders and with South African Local Government Association (SALGA).

Mr Khan agreed that skills’ training was a problem. He said that most of the TITAS were training at operational level whereas training was needed at policy level. He noted that sex workers could not be wished away. Drivers away from home did partake from services offered and the Department had to deal with the consequences of such actions. He pointed out that there were many spin-offs from the sex trade, for example, the hijacking of drivers.

Ms N Mbombo (ANC) referred to the removal of historical impediments and asked whose responsibility it was. She also asked for clarification over the commercialisation of public functions. It was asked what timeframes were in place for the completion of the revival of railway lines.

Mr Khan referred to the issue of historical impediments said that Transnet had to still deal with deficits that had originated in the 1920’s, 1950’s and 1960’s. It was now expected to function as a quasi-commercial entity whilst still accountable to the state. Monopolies should be managed in such a way as to allow everyone to participate. He stated that the question should be asked whether a monopoly was delivering on key efficiency and not whether it had profitable returns. Information on time frames was available. He explained that information on timeframes had not been included in the presentations as the Department had to be aware of time constraints in the deliverance of its briefing.

Mr B Mashile (ANC) asked for clarity over public- private partnerships.

Mr Khan said that when public-private partnerships were to be introduced, the economic regulatory framework would have to be very clear.

The Chair asked what was happening on the Kei line. The presentation had not been clear on it. Mr Cronin said that perhaps other operators should be considered to revive unused railway lines, which Spoornet was not keen on.

Mr Vilana referred to the Kei line and said that a lease had been signed with the Eastern Cape Department of Transport. He added that the Department had also engaged with the SARC for an extention of services. Mr Vilana said that the line would become operational.

Mr Khan added that new operators would be welcome provided that they did not require operational subsidies on entering the sector.

Mr Farrow asked from a transport perspective whether there was jurisdiction over Spoornet.

The Chair said that an override would have to be legislated.

Mr Khan responded that a line could not be uplifted without the approval of the shareholder of Spoornet, i.e. the Minister of Public Enterprises. The Minister of Public Enterprises therefore made the decision.

Mr M Swathe (DA) asked whether rail would be able to cope with additional freight shift from road to rail.

Mr Khan pointed out that Spoornet’s problem lay with the handling side of its operations. Spoornet was doing well on its lineal side and could compete with road transport. The Department felt that the private sector should be allowed entry into the handling side of things.

Mr Cronin said that a great deal of freight activity was often local. What about localised economic activity? He noted that government had a vision of spatial development. The focus was on areas of growth. The Chair asked how the Department was interacting with this vision.

Mr Khan said that the department’s integrated policy unit was engaging on the process.

Presentation by the South African Institute of Civil Engineering (SAICE)
The South African Institute of Civil Engineering presented its Infrastructure Report Card for 2006, in addition to an overview of the skills situation in the civil engineering sector. SAICE was a voluntary association and members formed part of it in their individual capacity. The delegation comprised of Mr D Botha, Ms A Lawless, Mr S Amod (President 2006), Mr N McCloed (President 2007) and Mr J Samson.

Mr Amod presented the report card, which provided insight into South Africa’s current infrastructure taking into consideration the requirements for 2010 World Cup and beyond. Mr Amod emphasised that maintenance was key to infrastructure, i.e. National Infrastructure Maintenance Plan. A shortage of skills was identified in engineering. In South Africa there was one engineer for every 3200 people. Amongst blacks there was one engineer in 50 000 people whereas for whites it was one in 300. In China there was one engineer for every 120 people. In the US it was one for every 300 people.

Mr Amod said that little infrastructure attention had been given to water. South Africa was considered lucky in that in urban areas tap water was still drinkable. On sanitation and waste the situation was good enough in urban areas but as a whole the picture did not look good. He noted that there was a step improvement in urban areas on solid waste.

On the national road network, urban areas were okay but as far as sustainability was concerned it was bad. The road situation for the next 5-12 years needed to be looked at. He emphasised that municipalities were choosing what to maintain and what to leave to ruin. On the bright side airports was one of the success stories. The infrastructure of airports in SA was found to be world class. Ports, on the other hand, had infrastructure that was ageing and was unable to cope with demand. Mr Amod nevertheless said that ports infrastructure was okay for now. On rail, heavy haul lines infrastructure was fairly good whereas on freight lines it was okay. Mr Amod noted that many freight lines were allowed to run down. Passenger lines were operational but their infrastructure was less than satisfactory. Eskom’s bulk generation was in a reasonable condition. Its local distribution networks were also in good shape. Hospital infrastructure in the Limpopo was good whereas in other areas it was not. Mr Amod noted that one of the themes that came out of the study was that skills were lacking.

Ms Lawless continued with her presentation of skills within the sector. She noted it strange that students were unable to find work and industries complained about not finding people. Ms Lawless stated that in the context of 2010 World Cup civil engineering capacity in local government was only at 11%. More than 20% of local governments did not have civil engineers. The civil engineering sector seemed to have a gap. There was a lack of people between the ages of 28 to 40. People were either to young with no experience or too old pass retirement age. She noted that many people over the age of 55 had been forced to take early retirement as a result of transformation. The gaps left by the retirees could however not be filled. The concern was also that new entrants in the sector could only gain experience by work place training. The opportunities for this was however very limited. A program had been started to link young unemployed civil engineers with older retired persons on projects in local government. Payment for the retirees came from provincial government, local government and other sources.

Mr Amod continued with issues that impacted directly upon the 2010 World Cup. He noted that there was a general lack of capacity. It was suggested that improving processes could increase capacity. Mr Amod pointed out that SA had good regulations and procedures but that they were not interpreted properly. He identified municipal approval processes as another concern and said that procedural processes needed to be streamlined. Bringing in retired persons to alleviate problems and the setting up of expert groups to address issues before they became huge problems was given as suggestions.

Discussion
The Chair thanked the presenters and said that the inputs had been useful. The Committee would relate some of the issues raised to the 2010 World Cup host cities on upcoming visits.

Mr Farrow was concerned about the infrastructure expenditure of R400bn over the next three years. He noted that the skills problem was huge and that South Africa might have to import skills.

The Chair said that there was a need for a specialized 2010 expert team.

SAICE felt that the problems raised would not go away after 2010 World Cup. Challenges would be faced well beyond 2010.

Mr Cronin said that the 2010 World Cup was only an episode, but the concerns raised were more long term.

Mr Mshudulu proposed that SAICE link up with the offices of Premiers to discuss issues.

Mr Mashila asked if there were any ways in which civil engineering students could be assisted.

Ms Lawless stated that there should be dedication in the training of young persons. Guidance was what was needed.

The meeting was adjourned.