Cross Border Road Transport Agency performance report & Legal Succession To the South African Transport Services Amendment Bill [B43-2008]: Deliberations

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Transport

16 June 2008
Chairperson: Mr J Cronin (ANC)
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Meeting Summary

The Cross Border Road Transport Agency (CBRTA) briefed the Committee on its recent performance, noting that it had undertaken a turn around strategy that aimed to turn it into a sustaining and self-funding entity. There had been buy-in and commitment from the Board and employees. New Board Committees were in place. The figures for employment equity and staff training were presented. There had been attempts to increase the revenue, which took the form of conversion of permits to a 12 month duration, restructuring of the permit fees, intensification of the law enforcement operations and facilitation to closely monitor operator behaviour. The financial overview showed a deficit for the year of R1.8 million and an accumulated deficit of R5.8 million. The balance sheets were also tabled. The Auditor General had issued a qualified report in the last year, because of questions around the appointment of the Board, the permit income and management of debtors. There were also matters of emphasis on completeness of income, journal entries and the viability of the entity as a going concern. These had been corrected in August 2007. Members asked for details of the problems in relation to Lesotho and the free flow of passenger movement, noting that taxi associations in the two countries were not communicating with each other. The issue around the incorrect constitution of the Board and the consequent invalidity of its decisions was also addressed. Members asked why the Agency had not taken proactive steps to discuss matters with the Auditor General to try to avert the qualified report, and asked what had actually been done. Members also requested a written report on what had been done in respect of the IT outsourcing and the contracts around this, with a follow up also in August. The question of the incorrect reflection of creditors as debtors was also addressed, as also the dismissal of the former CEO.

Members then received a briefing from the Department of Transport on the Legal Succession To the South African Transport Services Amendment Bill. It was noted that there had been rectification of matters highlighted in earlier meetings. It was important to cater for continuation of medical aid for those Transnet employees who were to be transferred to the new entity. The problems around the new Section 25A had been addressed. The Committee would be finalising the Bill at a later meeting.

Meeting report

Presentation by the Cross Border Road Transport Agency (CBRTA)
Mr George Mabuza, Chief Operations Officer, CBRTA, said that the mandate of the CBRTA was to regulate, facilitate, to undertake law enforcement and provide advice to the minister in respect of cross-border road transport by the public and private sectors. The Agency had recently had a turn around strategy that aimed to turn it into a sustaining entity which was self-funding.

The commitment of the Board was to be among the top three of the Department of Transport (DoT) agencies. The Board Committees had been set up to support the turn around strategy. There had been employee buy-in and commitment. The Board Committees were detailed and explained.

Tables in respect of employment equity were presented, and the different categories of training for staff were outlined, which included training in law enforcement, human resources finance, administrative and management programmes. Employee wellness dealt with issues around HIV and Aids, personal finance and study assistance.

Mr Mabuza noted that there had been attempts to increase the revenue, which took the form of conversion of permits to a 12 month duration, restructuring of the permit fees, intensification of the law enforcement operations and facilitation to closely monitor operator behaviour.

The financial overview was then tabled. This showed revenue of R32.1 million as against expenditure of R34 million, resulting in a deficit for the year of R1.8 million and an accumulated deficit of R5.8 million. The balance sheets were also tabled (see attached presentation for details). Mr Mabuza noted that there had been a qualified report from the Auditor General (AG) because of questions around the appointment of the Board, the permit income and management of debtors. There were also matters of emphasis on completeness
of income, journal entries and the viability of the entity as a going concern. These had been corrected in August 2007.

Mr Mabuza stressed that the
restructuring of permits from three months to twelve months had helped in revenue collection.

Discussion
The Chairperson asked Mr Mabuza to explain the moratorium on Lesotho.

Mr Mabuza replied that the problem had now been escalated to the DoT, he added that this had occurred as the result of a meeting between them two months ago. Lesotho had elevated the problem to Southern African Customs Union (SACU) and demanded that the DoT deal with the issue. He noted that Lesotho did not feel that its sovereignty had been respected by referring the handing of the matter to the CBRTA.

The Chairperson asked what was happening between South Africa and Lesotho.

Mr Mabuza responded that the free flow of passenger movement between South Africa and Lesotho was not happening as smoothly as between other Southern African Development Community (SADC) countries, as Lesotho did not have taxi associations that communicated with their South African counterparts. He added that if Lesotho could attend to this, then the problem could be solved.

The Chairperson added that a South African taxi association would get a permit if it had a business plan and agreement with its foreign counterpart. However in Lesotho the government was in control of all ranks.

Mr Mabuza agreed and added that this frustrated South African operators, as they had to make agreements with individuals. When Lesotho operators came into South Africa they did not have agreements with any associations and did not drop off passengers at specific points.

The Chairperson replied that maybe Lesotho had a point and the government should be in charge of the situation, rather than taxi associations.

Mr Mabuza added that because the board committee was not properly constituted, its decisions had been deemed null and void. However, the Minister rectified this by making the Board an advisory body and ratifying their decisions himself.

Mr B Mashile (ANC) stated that this was how they got legal recognition of the Board’s decisions.

Dr M Sefularo (ANC) asked how the Minister could have approved decisions that were effectively contingent upon each other.

The Chairperson agreed that the whole situation complicated matters, but that this was the only way that the problem could have been resolved.

Mr Mashile questioned why the CBRTA had not pre-empted the Auditor- General, and sought legal advice on the problems that gave rise to the qualified report.

The Chairperson agreed, but added that these issues could also have been dealt with through interaction with the Auditor General’s office. He added that the first qualification, the failure of the Minister to publish the Board Committee’s names in the Government Gazette, could not be blamed upon the CBRTA. The issue was the way in which it was remedied. He highlighted the qualification on permit income. On a similar theme he asked about the IT and administration problems facing the CBRTA,

Mr Mabuza replied that the CBRTA IT system was outsourced and that a lot of control around the management of the system lay with the service provider. However the service providers were brought in after the Auditor General’s report and told that their contract would have to be renegotiated to allow the CBRTA greater ownership.

The Chairperson added that this was all good and well, but it seemed that the matter was dragging on as an ongoing issue. He asked what actually had been done.

Mr Mabuza replied that the CBRTA had recalled the contract and that this process was ongoing.

The Chairperson replied that he was not unduly worried and asked how long the contracts were valid for.

Mr Mabuza replied that he was not sure, but he added that CBRTA was evaluating whether the current system was still relevant.

Mr O Mogale (ANC) stated that the current system had been in place for 11 years, and he asked why then the CBRTA had continued with this system since it clearly was not working. Mr Mogale added that although the term “turn around strategy” had been used in the presentation, it appeared that nothing had actually been started.

Mr Mabuza replied that the turn around strategy was focused on many aspects of the CBRTA, and that once an increase in law enforcement had been addressed, permit numbers would increase. He added that the CBRTA system was very important and he had no doubts that after so many years of operation the system had become outdated. However, the new CEO, who had joined in 2008, would be able to evaluate this.

The Chairperson added that he did not think there was a conflict around this issue.

Mr Mogale asked what the lifespan of the service provider contracts was. He requested a timeframe on this.

The Chairperson added that he wanted a written memorandum on the status of the contract, and another follow up providing a status update in the first week of August.

The Chairperson referred to the listing of certain debtors who should actually be considered creditors.

Mr Mabuza replied that some service providers paid one lump sum for their permits ahead of time in order to necessitate only one financial transaction. This was the reason for the discrepancy.

The Chairperson asked if anything could be done to speed up the receiving of fine money from the courts.

Mr Mabuza replied that this stemmed from a bigger issue with the courts at large, and he stressed that CBRTA was trying to create a better working relationship with the courts. He and the CEO would shortly be visiting the relevant parties in Pretoria to discuss this.

Mr Mashile asked if the issue raised about journal entries was receiving attention.

Mr Mabuza replied that it was.

The Chairperson noted that the CBRTA was managing to deal more effectively with their debts, but asked about the late submission of their financial statements.

Mr Mabuza replied that these were submitted in time, but that the accounting authority did not act in time.

Mr B Mashile (ANC) asked about the allegation that the financial statements were submitted in time.

Mr Mabuza replied that the board committee had submitted the statements, but that the Board was not recognised as the accounting authority by the Auditor General.

Mr Mogale added this reflected that internal processes were very lax.

Mr Mabuza added that it was not easy to function in an organisation that was lacking in many systems. He stated that people needed to be appointed to the correct places to ensure all sectors functioned optimally.

The Chairperson asked why the previous CEO was dismissed.

Mr Mabuza replied that this was due to his non-disclosure of the negative reasons as to why he had left his previous employments in a Sector Education and Training Authority. He had in fact been dismissed with no payout.

The Chairperson reminded the CBRTA to submit the requested memoranda.

Legal Succession to the South African Transport Services Amendment Bill: Further deliberations
Mr Kuben Pillay, Deputy Director General: Public Transport, DoT, stated that errors in the Bill as highlighted in previous meetings had now been rectified.

An issue was raised by the Department of Public Enterprises (DPE) on the tabling of the amendment as with regard to the Transmed medical aid situation. During the process of the ongoing transaction between the South African Rail Commuter Corporation (SARCC) and Transnet, there should be medical aid continuity for transferred employees. He said that care must be taken to address this issue.

He added that the issue of the new Section 25A had also been addressed.

The Chairperson asked if the State Law Advisor was satisfied.

Mr Gideon Hoon, State Law Advisor, Office of the Chief State Law Adviser, replied that he was.

Mr M Moss (ANC) asked if he could be given a figure of the debts that would be inherited by the former South African Rail Commuter Corporation (SARCC) (to be renamed the Passenger Rail Agency) from Transnet.

Mr Pillay replied that Shosholoza-Meyl had a shortfall of R734 million, and that in light of that figure, the shortfall projected for 2009/2010 was R735 million. The issue here was National Treasury’s allocation of funding.

Mr Mashile added that in terms of the proposed new Section 25A, these losses would be transferred to South African Rail Commuter Corporation.

Mr Pillay summarised the proposed amendments (see attached document).

The Chairperson stated that the Committee’s job was to facilitate the process for transfer of the passenger section of Transnet to the SARCC. The Transmed issue merely allowed transferred employees to retain their medical aid benefits.

The meeting was adjourned.

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