Department Annual Report 2006/07; SAICE on 2010 Transport Preparedness

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07 November 2007
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

7 November 2007

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Department of Transport Annual Report 2006/07: Financial Statements
South African Institution of Civil Engineering: SA Transport System – Ready to move in 2010?


The Department of Transport continued its briefing on the Annual Report 2006/07, where issues such as under-expenditure, irregular spending, capacity limitations, the outsourcing of consultants, the reprioritization of funds, the Prodiba contract, the problems with the shift to eNaTIS, and wasteful spending were raised and discussed.

The South African Institution of Civil Engineering (SAICE) presented comment and recommendations on the transport system’s degree of preparedness for the 2010 World Cup. Tshwane, Bombela and Rustenburg were identified as host cities requiring assistance in project management and planning. SAICE suggested that the focus shift to implementation of 2010 development projects instead of mere planning, as there was limited time left.

The Chair opened the meeting by stating that he had hoped that the portfolio committee could bring the National Council Of Provinces’ (NCOP) recommendations on the General Laws Amendment of Transport Entities to the table, but parliament has barred the portfolio committee from attending to the matter until it has been debated in the NCOP on the 15 November. He noted that the committee could possibly put forward its comments on the Wednesday morning of the last week of parliamentary session, which may require a brief committee meeting on the day before. He reminded the committee that their collective commentary would have to formally go before the National Assembly (NA). However, he added that time was limited, indicating that the committee might only be able to present a brief statement for the NA if they aimed to attend to the matter before the end of the current parliamentary session. The Chair requested that Chief Financial Officer of the Department of Transport (DoT), Mr D Pretorius, begin the presentation of the annual financial report.

Department of Transport (DoT) presentation
The Chief Financial Officer, Mr Dan Pretorius, presented the financial report looking at the:
· Accounting Officer’s report;
· Auditor General’s report;
· appropriation statement;
· statement of general financial performance;
· financial position statement

Mr Pretorius reported that monthly expenditure reports were submitted throughout the year, where transfer payments were tracked throughout the year. The reports allowed DoT to reprioritise ongoing spending, ensuring flexiblity. The reprioritisation of funds was accorded to initiating awareness for October transport month, assisting provinces in the recapitalisation of taxis, establishing capacity development projects, and backing Arrive Alive projects.

Total under-expenditure for 2006/07 was R386, 4 million, which was nearly completely recovered through the adjusted budget of R386, 1 million. The biggest areas of under-spending were the scrapping of old taxis (R252, 5 million), taxi recapitalisation projects (R30, 4 million), and Rural Mobility and Access projects (R28 million). It was a primary objective of the DoT to spend the full budget in the 2007/08 year.

The Department had informed Prodiba, the contracted service provider for the provision of driver’s licence cards, of their intention to terminate the contract as one of the Prodiba shareholders had recently been found guilty of corruption However, another of the shareholders, Face Technologies (state owned), had been given permission to buy-out Kobitech (
representing Schabir Shaik 's Nkobi Holdings). In light of this development, the DoT had made a submission in August 2007 to the State Tender Board, stating that due to the shift in shareholding, the grounds for eliminating the contract with Prodiba no longer existed.

Mr Pretorius emphasized that the capacity constraints of transport sector, such as road maintenance backlogs, faults in the rail system, the inability of ports to stay abreast with the growing capacity of the economy, the poor bus subsidy system, and lack of transport authorities. To remedy these limitations, Mr Pretorius reported that the DoT were planning to shift its focus from policy formulation and oversight to honing efficient implementation of existing policies.
Mr Pretorius noted transfer payments to departmental agencies and public corporations, provinces as conditional grants (specifically to Gauteng for the Gautrain Project), bus subsidies due to fuel price increases, and municipalities under the Public Transport Infrastructure and Systems (PTIS) Grant. Other transfer payments included capital awarded to universities for civil engineering courses and ‘households’ for scrapping taxis. 

Mr Pretorius noted that the audit process had proved to be extremely difficult, as the Department was still shifting from the National Traffic Information System (NaTIS) to the Electronic National Traffic Information System (eNaTIS), an updated mechanism. It was decided with the Auditor General that there would another audit after the eNaTIS had been successfully installed, and that that evaluation would be presented to Parliament at a later stage. The Department was in the process of implementing the Auditor General’s recommendations. Issues that emerged from the Audit Report were:
· The period in which Driver’s Licence Testing Centres (DLTCs) levies were paid due to a lack of information available from DLTCs. Levies from previous years therefore had to be written off.
· The DoT did not submit all monthly reports in terms of the Division of Revenue Act
· Irregular expenditure was incurred as a result of staff not following procurement procedures. Disciplinary steps had been taken against the staff who were involved
· Travel bookings were made by Department officials without having acquired authorization. The Department had now created a Directorate for Travel Services to facilitate permissible travel arrangements.
· The Standing Committee on Public Accounts (SCOPA) resolutions could not be fully implemented due to the unfilled vacancies and the problem with DLTCs levies. The Department has made the filling of vacancies a priority.
· No internal audit reports were submitted in the year.
· General wasteful spending.
· Management of tender processes was weak. The Department stated that in future it would outsource and build contract management capacity. 

Mr Pretorius noted that the Department’s revenue increased from R235 million to R998 million, primarily as a result of a special payment from Airports Company South Africa (ACSA) which underwent capital restructuring. Once again Mr Pretorius mentioned the issue of wasteful spending when discussing financial performance. Major increases in expenditure arose from staff salary increases (R96, 8 million - R111, 1 million), advertising (R8, 1 million - R35, 9 million) and expenditure on consultants (R223, 3 million – R332, 8 million).

Mr S Mshudulu (ANC) asked how Mr Pretorius defined the term ‘irregular expenditure’.

Mr Pretorius explained that irregular expenditure was an expense that was not in accordance with any legislation. This would occur where an expense did not follow tender or procurement processes, for example, where less than three quotes were obtained prior to contracting a service provider. Irregular expenditures would not affect the immediate monthly financial statement, it would be added to the disclosure notes. The irregular expense would then be investigated, and if it was approved then it would be removed from the disclosure note.

Ms Khunou (ANC) asked for clarity on university and household transfer payments. She also asked how much was budgeted for the Integrated Rural Mobility and Access (IRMA) Project, so that she could gauge how much the Department had under-spent.

Mr Pretorius explained that the Universities of Stellenbosch, Pretoria, and Cape Town had received portions of the R10, 085 million to create and implement civil engineering courses geared towards solving South Africa’s transport problems. This was a means of ensuring the Department invested in its future. The household transfer payment was the R50 000 dividend taxi owners received for scrapping their vehicles. He reported that the reason why it was placed under the heading of ‘household’ was because the payment went to individuals, and not organizations. On the IRMA Project, the DoT had budgeted R30million and under-spent by R28 million, which was a result of administrative delays, and the lengthy process of establishing contracts.

The Chair commented that R30 million rand for the IRMA Project was a meagre amount of money that would fund only a few small projects. This gave the impression that the Department was budgeting for mere charity, and not real development. The Chair expressed his regret that neither the Director General nor the Minister were present to provide further comment on this matter. He asserted that the DoT needed to establish a coherent approach to rural mobility within the greater framework of the transport system.

Mr Lan Situma (Project Manager, DoT) agreed that more needed to be accomplished for rural transportation, especially for children attending school. The DoT had been formulating a National Transport Master Plan to be presented to Parliament next year, which would provide an inclusive analysis and strategy for the whole of South Africa’s transport system.

Mr S Farrow (DA) expressed distress over the R1, 900 million under-spent on the development of infrastructure and systems for the 2010 Soccer World Cup. He asked if there was a correlation between 2010 under-expenditure and the inability of the Department to fill vacant posts.

Mr Pretorius clarified that although there appeared to be an increase in vacancies, it was not accurate to assume that there was an increase in staff leaving. Since 2005, a large number of posts had been created within the Department.

Mr Farrow raised concern about the increased expenditure on contracting consultants. He asked the Department to rather consider spending this money on investing in internal skills development projects.

Mr Situma acknowledged that the unprecedented increase in spending on consultants was not desirable, yet he noted that there was not only a dearth of skills in the department, but also in the entire country. He added that conditional bursaries had been presented to students and that the Department was working on a staff retention plan.

The Chair conveyed his disbelief over the two-year delay of the Transport Agencies General Laws Amendment Bill. He explained that the lack of a definition for what constitutes a ‘serious injury’ was causing the Road Accident Fund to have serious backlogs. He understood that the amendment would require some debate, but he asked if there was a means for fast tracking the passing of the legislation under a shorter title.

Dr M Koorts (Deputy Director General: Public Entity Oversight) responded that the Department could not speed up the process as the matter was being taken up by the Constitutional Court. The DoT had to wait until a verdict had been reached before finalising the Bill.

Mr Farrow asked whether the Road Traffic Management Corporation (RTMC) could take up the Prodiba and Tasima contracts, considering Prodiba’s corruption conviction.

Mr Pretorius stated that because of the shift in shareholding, Prodiba’s contract should not, in his opinion, be terminated. He noted that the Department was still awaiting a decision from the State Tender Board on whether they accepted DoT’s proposal to withdraw their request for contract termination. He asserted that it would be objectionable to cancel the contract with Tasima for being merely affiliated with Prodiba. The cancellation of Tasima’s contract before it finished the termination the NaTIS system would be detrimental to the Department.

The Chair reiterated the warning of the Minister of Finance in his Medium Term Budget Policy Statement speech, that departments must cease unnecessary spending on lavish events. He cautioned the DoT on the dramatic increase in spending on October Transport Month 2006/07, noting that the event was an opportunity for mismanagement and unwise spending.

Mr Pretorius claimed that the Department was tackling wasteful spending, and that the main objective was to spend where the biggest impact on society would be made.

South African Institution of Civil Engineering (SAICE) Transport Division Presentation
Mr Jan Coetzee (Transport Division Chairperson) explained that the SAICE had held a symposium in July with the focus on how prepared the South African transport system was for the 2010 World Cup. The key questions raised in the presentation were which authority would determine whether the World Cup event was a success, and how the event would be evaluated. He reported that the South African Local Organising Committee (SALOC) had collectively completed the Initial National Transport Operational Plans (INTOP) in August 2007, which stated the main concept and guidelines for host cities.

Mr Coetzee said that most of six of the nine host cities were on track with implementing development and infrastructure plans, while the other three, Tshwane, Rustenburg and Bombela still required some guidance, as the cities were not showing as much initiative as the other six.

Mr Coetzee raised SAICE’s concerns and recommendations about progress towards 2010:
· The potential problem of non-correlative transport and security capacity for 2010. It appeared that no planned integration of transport and security policies had yet occurred.
· Increased numbers of visitors from neighbouring states might pose border capacity problems.
· There had been no mention of how taxis would be integrated into the 2010 transport system.
· The DoT had not yet made available updated and especially detailed plans, instructions and guidelines.
· There appeared to be a lack of communication amonst cities, which meant that there might be problems in soccer supporters traveling from city to city if no integration was accomplished.

SAICE recommended that contingency plans be established, and that transport test runs be executed to ensure that the system works. Mr Coetzee explained that continuity needed to be maintained between planning and implementing infrastructure, which indicated that the same service provider needed to be used throughout the process of development. In order to ensure that all projects were ready for 2010, the Committee needed to establish a cut-off date for projects, otherwise there would be unnecessary costs incurred. He urged the Committee to develop key performance indicators, which were needed in order to have some understanding of what objectives had been accomplished. The SAICE suggested that the Initial National Transport Operational Plan (INTOP) needed to be implemented immediately, and that strong team leaders appointed for the host cities that have weaker management. Further, all cities should have by that time completed implementation plans, and if they had not, there was cause for serious concern. On the matter of operational plans, resources needed to be supplied for their implementation. Finally, he advised the Committee to be shrewd in reviewing implementation plans, as it would be the taxpayers’ loss if projects remained incomplete on the due date.

The Chair apologized to Mr Coetzee as there were only a couple of minutes remaining before he had to close the meeting. He noted that the Portfolio Committee had similar concerns as SAICE regarding the 2010 World Cup and thanked Mr Pretorius for the informative presentation.

The Chair explained that the main potential weakness of the World Cup is the transport system, and this opportunity to improve South Africa’s transport capacity must not be squandered. He agreed that inter-city transport needs to be approached, as there had been limited progress in that realm. He conveyed unease over contractors continually pushing forward of completion dates, as in the case of the Gautrain project. In the case of Germany hosting the World Cup, the infrastructure had already been in place, but in the case of South Africa much is yet to be accomplished. He added that South Africans must not delude themselves by thinking that there shall be first world transport systems by 2010, as what needs to be achieved is a legacy.

He said to Mr Pretorius that the SAICE may use the Portfolio Committee as a line of communication to higher powers, and regretfully noted that there was no time for discussion as he was late for another meeting.

The meeting was adjourned.



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