South African National Roads Agency Limited: 2006/07 Annual Report briefing

SELECT COMMITTEE ON PUBLIC SERVICES
24 October 2007
SOUTH AFRICAN NATIONAL ROADS AGENCY LIMITED: 2006/07 ANNUAL REPORT BRIEFING

Chairperson: Mr R Tau (ANC, Northern Cape)

Documents handed out:
South African National Roads Agency Ltd Annual report 2007 Presentation
South African National Roads Agency Ltd (SANRAL) Annual Report 2006/07

Audio recording of meeting

SUMMARY
South African Roads Agency Limited (SANRAL)
The Committee was briefed on the Annual Report and performance of the South African Roads Agency Ltd (SANRAL). The presentation covered issues of corporate governance, noting that the risk assessment system was comprehensive. In regard to operations, it was noted that  congestion was particularly a problem in Johannesburg. SANRAL’s role was limited to safe engineering, but could not control drivers’ adherence to road rules. It worked with Arrive Alive and emergency services. A stable flow of funding remained a challenge, because of the timing of road maintenance. Furthermore, SANRAL had not managed to achieve its targets for private sector investment. It had also failed to reach the target for incorporation of provincial roads into the national road network. Expenditure targets and percentages achieved were set out. The financial performance statistics were also included.

Members asked questions on monitoring of fees collected at toll gates, road inspections, the relationship between concession holders, agencies and the National Department of Transport, and the benefits given by concession holders to the local communities. Further questions related to the repairing of potholes, the budget of SANRAL to the different provinces, and the lack of maintenance of roads in the North West, particularly the N12, whether there were district road agencies, whether there was integrated planning, and the reasons for the loss of R172 million, which were explained in the Annual Report.

MINUTES
South African Roads Agency Limited (SANRAL)
Mr Nazir Alli, CEO South African Roads Agency Limited, briefed the Committee on the Annual Report and performance of SANRAL. He firstly addressed issues of corporate governance, stating that independent assessors came in and did an assessment in areas of governance. The Enterprise Wide Risk Management system included the risk register and Internal Audit Review.

Turning to the operations of SANRAL, Mr Alli said that SANRAL noted that congestion happened mainly in Johannesburg. Vehicle travel per 1 km of road (density) had decreased because SANRAL had introduced more roads. He highlighted that SANRAL could not be responsible for drivers’ lack of adherence to road signs and all other road rules. SANRAL was responsible for ensuring safely engineered roads. It worked closely with the Arrive Alive campaign and, together with the emergency services, they had developed a strategy of how to deal with road incidents. Further focus areas were the flow of traffic nationally and the traffic trends.

Mr Alli tabled the proposed road safety strategy, which included a road safety management system (see attached presentation). Current projects towards road safety included maintenance, special safety projects, and moves towards an integrated strategy.

Mr Alli said that a stable flow of funding was important and that was still a challenge within the agency, because of the timing of maintenance of road infrastructure. Also in terms of their business plan, SANRAL had budgeted for 85% investment by the private sector, subject to obtaining all the necessary approvals from relevant authorities for planned projects, but instead the private sector only invested in 23% on SANRAL’s projects. Incorporation of provincial roads was targeted as 1 600 km of provincial roads to be incorporated into the national road network by 31 March 2007. Instead, only 604 km of provincial roads were actually incorporated in this period.

For the financial year 2006/07, the smooth travel expenditure target was set at 95% for  travel on less than 4.2 metres per km roughness,  but reached only 94%. The target for High texture exposure was 95% for travel on higher than 0.4 metre texture, although this target was exceeded, reaching 97%. The Bridge condition exposure target was 90% of travel over or under bridges,  with overall Condition Index higher than the 80% target, reaching 84%.

Mr Alli then tabled a number of graphs and tables to show the status, operating and capital expenditure on the various projects, and compared the performance to the previous year. The amount of empowerment work had risen. He also detailed the public/private partnerships and the private sector investment and showed maps of where new contracts were awarded. He detailed the  property portfolio of SANRAL. Environmental management plans were discussed. Finally he tabled the job creation through SANRAL’s operations, and detailed the gender and race statistics for the organisation.

Discussion
Mr M Mzizi (IFP) commented that the fees at the tollgates increased all the time and asked how the money collected was monitored, and what happened to the funding. He added that nothing seemed to monitor the number of cars that passed by the tollgate, and that he feared that those collecting the funds would be able to pocket the tolls. He said that his understanding was that the monies were put towards maintaining the roads. He then asked when a road inspection would take place.

Mr Alli responded that people should always ask for a receipt at a toll gate.  The monies received went to the maintenance and up-keep of roads and repayment of loans. As to the number and weight of vehicles passing through, he said that SANRAL implemented Traffic Control Centres in order to weigh vehicles. However that system was not good enough for prosecution purposes as it was a monitoring tool only, and people would simply be charged for overloads. When it came to prosecuting, SANRAL would inevitably lose out because people accumulated fines and then would go to the magistrate’s court and plead poverty. The centres were recommended to do roadworthy checks. Centres were located so as to look after a network of roads. With respect to road inspection, he said that every kilometer was covered by routine maintenance road contractors.

The Chairperson encouraged the members to ask questions relating specifically to their provinces if they so wished.
 
Mr L van Rooyen (ANC, Free State) asked what the relationship between concession holders, agencies and the National Department of Transport was. He said he asked this in the light of trying to understand services and who owned the roads. He asked further whether there was a concession holder on the N1 and also requested information of how the community benefited from concession holders.

Mr Alli responded that none of the roads in South Africa were privatized. They entered into a concession for 30 years. At the end of the concession period, the concessionary should not be able to undertake road maintenance on that stretch for five years. The roads were not privatized, but the operation over those roads was. In concession contracts, there were clauses about social responsibilities of the concessionaries. There were four concessionary roads in South Africa, including the N3, N4 Platinum Highway and N4 going East.

Mr van Rooyen asked what the acceptable period for repairing potholes was, because even though Mr Alli had said that there was period allowed for repairs, no action seemed to be taken to repair.

Mr Alli noted that the repair period of potholes depended on their size, and he requested that if members were driving and came across potholes, they should contact the number for the road agency so that they could mobilise a contractor to repair them. He said that in theory if a contractor failed to attend to repairs in a designated period there as a penalty.

Rev P Moatshe (ANC, North-West) asked what criteria were used to allocate the budget of SANRAL to the different provinces.

Rev Moatshe said that there were national roads and provincial roads and asked whether there were any municipal roads, and how these were distinguished and who maintained them.

Rev Moatshe raised concerns that there was no maintenance of roads in the North West province.

Rev Moatshe said that toll gates were increasing in number and asked who had control over when and where a tollgate should come into place. He also asked if privatisation of toll roads would be phased out and eventually become government roads.

Mr Alli said that SANRAL did not have authority to decide on toll roads as that was done under the authority of the Minister. He said the process involved writing to municipalities, and premiers of the provinces would have to be consulted.  He then explained that there was a legislative process of what constituted a national road. He said that routes were distinguished using route numbers with an ‘N’ representing a national road, and ‘P’ a provincial road. In response to the budget allocation between provinces, he said that an explanation of that would need to be very detailed and suggested that the Committee set another date to meet with SANRAL to specifically discuss this.

The Chairperson said that the roads in the North West were very bad. Trucks would leave Johannesburg and drive through Kimberly to avoid the bad roads in the North West. Now those routes ended up being congested. He said that SANRAL made a commitment to work on those roads, and specifically the N12.

Mr Alli said that the blockage in terms of work being done on that road had emanated from the Department of Mineral Affairs. He said that the first things that had to be done were an assessment, and then a separate environmental impact assessment had to be done, and that had to go to the Department of Minerals and Energy. This Department requested that SANRAL give them guarantees, which were not in line with legislation. SANRAL organised a meeting with the Department but they had cancelled it a day before the meeting. Mr Alli said that already a contractor had been contracted to start work and it was merely the delay from the Department of Minerals and Energy that was stopping the work at this stage.

The Chairperson said that he knew about SANRAL and the provincial agencies but on their visit to Gauteng, the Committee had seen a big board of “District Road Agency”. He asked if there were any legitimate district agencies in place.

Mr Alli replied that there were only three road agencies in South Africa, which included Johannesburg and Limpopo. There were no district road agencies.

The Chairperson said that the kind of work being done on the road did not take into account integrated planning. He asked whether there was any kind of integrated planning with respect to infrastructure.

Mr Alli said that one challenge that was faced was integrated planning. He said that such planning would happen at the DG’s cluster, but there was not enough, and that SANRAL needed to look into that.

The Chairperson noted that the Auditor-General had said that SANRAL had incurred a loss of R172 million, and asked what the reasons for this were, and how SANRAL planned to better its financial health.

Mr Inge Mulder, CFO,  SANRAL, referred the Members to page 108 of the report for a detailed explanation. She said that when a toll was constructed, no money would be received until the toll began to operate. The life of the toll must also be taken into account. Non-toll roads could only spend money actually received. However, in accounting terms, some of the income would be  deferred over the life of the non-toll road because the Accounting Standards said that grants of government assets must be deferred. Therefore the more that was spent on capital expenditure, the bigger that deferral became. The loss stated by the Auditor-General was in effect a book loss.

The Chairperson thanked SANRAL for the report and said that there was certainly room for improvement with respect to road maintenance and improvements.

The meeting was adjourned.