Local Government Budget & Expenditure Review: 2003/04-2009/10:Departments of Transport & Minerals & Energy

NCOP Finance

12 November 2008
Chairperson: Mr T Ralane (ANC, Free State)
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Meeting Summary

The Departments of Transport and Minerals and Energy presented their comments on the Local Government Budget and Expenditure Review, covering 2003 to 2010. The Department of Transport (DoT) noted that there was poor coordination between this and other sectors, which was being addressed by institutional arrangements, which were explained. There were concerns around the number of vehicles on the road, overloading and breaches of road safety regulations, and it was noted that the current condition of roads was unacceptable, necessitating better scheduling. One of the problems was that some municipalities were not coping, that there was no clear picture of consolidated spending, and there were skills shortages and lack of funds. The Department briefly outlined the changes planned by Metrorail and taxi services. National Treasury indicated that it was necessary to attend to reclassification of roads, that the maintenance budget was too low to allow for economic growth, that the provincial grants for traffic were not being properly spent and that the municipal infrastructure grant was supposed to address backlogs, Members asked about the continued closure of Chapman’s Peak Drive in the Western Cape and expressed their concerns about safety on the roads, whether traffic officers were visible, which would help discourage offences, the condition of secondary roads, the increase in the Municipal Infrastructure Grant seen against the lack of spending of the funds, the need for departments to cooperate and the apparent lack of progress in getting the information on expenditure. They also addressed the reasons for non spending, and the slow processes in getting work done.

The Department of Minerals and Energy concentrated, in its report, on the electricity industry, noting that generation challenges were being addressed through different programmes. Other challenges were described as the increasing cost per connection in deep rural areas, growing informal settlements, capacity to implement the programmes, municipalities’ failure to invest in maintenance and the turnaround times. Free Basic Electricity still experienced challenges in roll out. Lack of capacity was being addressed by funded programmes, and it was hoped to achieve a synergy between demand and supply by 2014. Members asked why budgets were not aligned to needs, whether mining of low-grade coal might increase generation capacity, why funds were not released and proper planning done as these were multi-year plans, and why the deep rural areas appeared to have been sidelined in favour of the metros. National Treasury commented that it would be addressing some of the issues raised, and that obtaining socio-economic profiles of municipalities would be fundamental. National Treasury commented favourably on some of the achievements of this Department, but had to address rural areas. Treasury did not support the idea of aligning all financial year ends, and the reasons were given. Some of the problems could be addressed through proper and timeous planning.

Meeting report

Local government Budget and Expenditure review 2003/04-2009/10
Department of Transport (DoT) report
Ms Angeline Nchabeleng, Acting Deputy-Director General, Department of Transport, presented her Department’s comments on the Local Government Budget and Expenditure Review. She said there was poor coordination between the Department of Transport (DoT) and other sectors, which undermined efficiency of roads and public transport functions.

Several institutional arrangements had addressed this finding, such as the establishment of a Roads Coordinating Body, the National Transport Master Plan coordination structure, the Committee of Transport Officials, the Transport Sector Coordination Forum and the Host City Transport Technical Task Team.

The effect of economic growth had resulted in an increase in the number of vehicles on the roads. This increase, the overloading of vehicles, and breaches of road safety regulations were problematic. The DoT supported the National Maintenance Strategy by the Department of Public Works (DPW). The current condition of roads was unacceptable. A visual Condition Survey would assist in the scheduling of maintenance works.

She noted that the provinces were to assist weaker municipalities. The DoT had an Overload Control Strategy and the Road Traffic Management Corporation (RTMC) had developed a strategy to deal with road safety, regulations and management. She noted that in respect of expenditure on roads and maintenance, there was no clear consolidated picture available. Budgets for secondary roads infrastructure were to decrease. Ms Nchabeleng said lower order municipalities lacked mechanisms to monitor and disaggregate expenditure on maintenance activities. An acute skills shortage and lack of funds was part of the problem.

With regard to developments in the public transport systems, she noted that findings had shown that the minibus taxi service was not subsidised and that many taxis were old and a danger on the road. An estimated 1.3 million citizens used trains daily. Metrorail intended opening new lines while improving existing ones. Metrorail would be adding 1066 coaches to the rail system. Road based public transport subsidy schemes were being transformed, through the Rapid Bus Transport system. This would operate in central business districts and in townships. The taxi recapitalisation programme and taxi scrappings were under way.

Mr M Robertsen (ANC, Eastern Cape) asked whether the Department had any information on the continued closure of Chapman’s Peak Drive in the Western Cape, as he could not get hold of the provincial head of transport.

Mr D Botha (ANC) said he was concerned about the safety on roads. He felt that visibility of traffic officers on the road made a difference to whether people would abide by speed limits. He had particularly noticed this in Kwazulu Natal. He expressed concern that secondary roads were neglected and in a bad state of repair. He asked whether this would be addressed post-2010.

Mr Thabiso Malahleha, Director for Infrastructure, Department of Transport, said there was a need for a good facilitating structure to improve roads outside the strategy network. The financing systems worked on reprioritising roads according to a ranking system, whereby the road importance would be assessed according to three critical priorities. He said there was a national/provincial/local forum, which included municipalities, and there was also recognition of the fact that certain stronger municipalities could help weaker municipalities. The continued closure of Chapman’s Peak Drive was a provincial and internal issue. Infrastructure funding could not occur until the necessary national road audit was completed.

Ms Nchabeleng said roads development in the areas outside those that were directly affected by 2010 would have to be brought into alignment through the various transport bodies.

Mr Sello Mashaba, Deputy Director, National Treasury, said that there was presently ongoing development of a grant, which would take full effect in April 2009. In the meantime R9 million would be made available in the current year for administration purposes.

Mr Jan Hattingh, Chief Director: Provincial Budget Analysis, National Treasury, said he wished to stress to the DoT that the reclassification of roads had to be concluded as soon as possible, in order to qualify for allocations in the new budget. He had noticed that on aggregate, maintenance was accounting for only 5.5% to 6% of the budget, based on a total budget of more than R170 billion. Such a low percentage for maintenance was not acceptable, especially since according to best practices elsewhere this figure should be closer to 12% to 14% of budget in order that economic growth take place. He said the InterGovernmental Review (IGR) budget framework should be used as starting point to obtain information needed for planning.

Mr Mashaba said that it was his task to monitor the allocation of conditional grants. The Public Transport Infrastructure and Systems (PTIS) grant had shown the lowest rate of spending among all the grants, at only 50%. Engagement with all relevant departments was necessary to resolve this longstanding issue, which had been delayed by the Memorandums of Understanding (MOU) not being signed in time. The Municipal Infrastructure Grant (MIG) was meant to address backlogs in the sector.

The Chairperson said the MIG was a consolidation of all sorts of municipal grants. He noted it had increased from R1 million to R4 or R5 million. It was ironic that municipalities continued to plead poverty while such grants were not being utilised.

Ms Nchabeleng said the reclassification process was under way and would be finalised within the month.

Mr Malahleha said that the maintenance issues stemmed from long ago and related to the categorisation of roads according to their purpose, economic role and function. This was really a political issue.

The Chairperson said that he did not like to see a reluctance between departments to cooperate and that the classification of roads was more likely a technical issue rather than a political one. He commented that, according to page 133 of the National Treasury report, no progress seemed to have been made regarding the lack of clarity in information regarding the expenditure on roads infrastructure and maintenance. The report also indicated a 5% growth in Metrorail in Cape Town and Johannesburg, but did not show similar figures in other areas. He asked what measures were in place for the maintenance of roads that had simply been washed away. He commented that the closure of Chapman’s Peak Drive was an ongoing and still unresolved problem.

The Chairperson then also referred to page 139 of the National Treasury Report, which spoke to the PTIS grant. This grant had been not been spent fully from the beginning. He asked why this was the case.

Mr Mashaba said the problem had been one of gazetting, but that there would be an improvement in allocation in the current year.

Mr Hattingh said the Medium Term Expenditure Framework (MTEF) for the Department of Public Works had seen a radical improvement, and a further new grant to the amount of R4 billion would be made available, which would allow the DoT to provide for substantial job creation.

Ms N Ntwanambi (ANC, Western Cape) said before the new dispensation, road maintenance had been done regularly by the municipalities, who had graders and tractors available. Currently it was taking a year just for the work to be tendered and given to a contractor.

The Chairperson agreed this was not a labour-intensive method of working.

Department of Minerals and Energy (DME) Report
Mr Mohau Nketsi, Acting Senior Manager: Electrification Planning, Department of Minerals and Energy said that most points in the report spoke to the electricity industry. The generation challenges, to meet current demands, were being addressed through different programmes. Current challenges were the increasing cost per connection in deep rural areas, informal settlements and capacity to implement the programme. He noted that municipalities were not investing in maintenance of infrastructure and were therefore not able to carry further connections. This slowed down the pace of electrification.

Bulk infrastructure remained a challenge in deep rural areas, where turnaround times were too long due to Environmental Impact Assessment (EIA) approval and long lead times.

He reported that the Free Basic Electricity programme was still experiencing challenges in roll out within municipalities. The Energy Efficiency and Demand Side Programme had been launched to address the lack of capacity. R180 million had been allocated during the budget adjustment for the metros. More money would be allocated over the MTEF to address the situation. It was envisioned that by 2014 there would be a smooth relationship between demand and supply of electricity.

Finally he presented various ways of improving and supporting implementation. These included improvements on the current mechanism through engagement at project level, assisting municipalities in planning (perhaps using retired engineers), training and mentorship to increase cqapacity, programme, as opposed to individual project funding, to achieve a more coordinated approach and funding allocations based on need.

Mr Robertsen asked why there was a problem with budgets not being aligned to needs on the ground, and what could be done about the ongoing objection to the overlapping of financial years.
He asked whether the mining of low-grade coal was not an option to increase generation capacity.

The Chairperson said these projects were usually multi-year plans and therefore there was no excuse of having to gazette them in time, nor was there an excuse for not releasing the funds in time.

Ms Ntwanambi said the deep rural areas needed electricity urgently.

Mr Nketsi said the challenge in deep rural areas was the cost per connection. Currently the metros were the major consumers.

The Chairperson said he could not understand how the deep rural areas could not be catered for since they were not great consumers of electricity.

Mr Robertsen agreed that it seemed as if the deep rural areas were being sacrificed for supplying the metros.

Mr Nketsi said the two areas of demand were driven by two completely separate programmes.

Mr Hattingh said he was in agreement with most of the points raised. He said the report had to be restricted to twenty pages per chapter and therefore certain aspects were placed in other chapters. He said his team at National Treasury would have to address the question of why the budget was not aligned to needs on the ground. The socio economic profiles of municipalities would be a fundamental aid in overcoming that challenge. He said most metros had this information but some municipalities did not have the necessary consensus numbers. He said it was clear there were two sectors in electrification; the metros and deep rural areas. The DME had done extremely well in achieving 80% electrification. The next 20% would prove to be very challenging and costly, as reaching the deep rural areas meant having to cover vast distances. He did not support the idea of aligning all the financial year ends as there were currently effectively only nine months between June to February, to plan and sign off a budget. This time would only be reduced if financial years were to be brought into alignment. However, the budgets had to be approved by the Auditor General. Alignment of financial years would mean that all budgets would have to be approved at the same time. This was also impossible as the Auditor General already struggled with volumes. Having said that, he then stated that this was not necessarily an insurmountable problem, as it could be overcome if planning was done in good time. He said the R180 million that had been allocated to the metros to improve generation capacity was to keep cost pressures down in these areas of high economic growth.

The meeting was adjourned.


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