Question NW730 to the Minister of Transport

Reply:

AIRPORTS COMPANY SOUTH AFRICA (ACSA)

ACSA is actively implementing transformative measures aligned with the strategic direction of diversifying revenue streams and bolster control over airport operations.

These interventions are strategically crafted to improve safety, security, and overall operational efficiency, reducing reliance on outsourcing while reinforcing the user-pay principle. Over the Corporate Plan window stretching to a 3-year period, these initiatives are poised to reshape the Company's operating landscape, fostering equitable partnerships, and driving inclusive growth.

One key intervention involves the rationalisation and reconfiguration of the fuel supply business and operating model. This aims to mitigate risks associated with disruptions and enhance control, ensuring universal access to fuel for all airport users. The strategy also includes aligning charges with the economic value derived from fuel infrastructure, fostering fairness, and mutual benefit.

On ground handling, the Company has initiated phase one of its planned interventions, providing incumbents with five years licence to operate across its airport platforms and grant self-handling permits to local airline operators. The subsequent phase will entail a transition to insourcing, with continuous monitoring of market conditions and performance alignment with the Company’s efficiency metrics.

While asset monetisation was prioritised during the height of the COVID-19 pandemic for fundraising, it has been deprioritised in the upcoming Corporate Plan window. The Company now shifts focus to strategies that enhance operational control, revenue, and overall sustainability.

Efforts in coordinating for implementation of aerotropolis and airport cities development is aimed to position ACSA's airports as nuclei for attracting investment. Strengthened collaboration with Metropolitan and local governments and key partners, leveraging special economic zones at airport locations, and integrating these zones into long-term planning and this is anticipated to facilitate the implementation of aerotropolis and airport cities.

In response to audit findings, significant actions have been undertaken to address key areas of concern. This includes investment property valuation, where ACSA reviewed the methodology and assumptions to be consistent with the industry norms and IFRS. Subsequently, a valuation process was initiated with focus on accurate assessment through valid leases.

Additionally, ACSA is working to conclude matters relating to deferred tax liability by end of the current financial year, and detailed analysis of the tax asset register is underway for closeout of the matter. Also, the adjustments made to financial statements reflecting reduction in cash and cash equivalents were completed before finalization of FY2022/23 Annual Financial Statements.

ACSA also closed on the finding relating to determination of VAT apportionment with voluntary disclosure and payment to SARS in February 2024 and is awaiting further feedback from SARS.

To enhance controls and reconciliation deficiencies in the parking system, the company has addressed the challenges with assistance from insurers and implementation of an automated solution which was completed by end of September 2023.

ACSA’s irregular expenditure register has 283 items with a cumulative amount of R 251 784 561. The company’s Loss Control Function has removed R 10 975 691 based on incorrectly classification of irregular expenditure and has submitted matters worth R 57 647 379 to the National Treasury for condonation. ACSA has prioritised items already under determination and those exceeding R 1 million, which constitute 77% of the total amount. The entity is expediting the enhancement of key functions to accelerate the resolution of identified irregularities.

ACSA has also addressed matters relating to IT Access Control and Third Party Management and it is going through internal approval process. This includes capacitation of the company’s Information Technology division to implement cyber security controls, implement secure settings on systems and enforce compliance with policies.

In the current financial year, the company has prioritized and the process of resourcing and strengthening the Supply Chain Management (SCM) function to effectively support the operationalization of Innovate, Grow, and Sustain strategy over the next five years. This is expected to be completed by the end of first quarter of financial year 2024/25.

This plays a pivotal role in significantly reducing irregularities and project delays while simultaneously fostering the development of small businesses, enhancing local capacity, and promoting industrialization. The optimization of the ACSA’s supply chain processes is expected to contribute significantly to the overall capex execution pace and broader socio-economic objectives for both ACSA and South Africa.

ACSA has developed the Anti-Corruption Management Plan (ACMP) with an aim of complying with the PFMA and Treasury Regulations obligation of ensuring that the Accounting Authority implements controls that ensure that fraud and corruption risk assessment is conducted regularly to identify emerging fraud and corruption risks. A risk management strategy which includes an Anti-Corruption Management Plan is used to direct Compliance and Ethics effort and priority, and to determine the skills required of managers and staff to improve controls and to manage these risks. The risk management strategy is clearly communicated to all officials to ensure that it is incorporated throughout the business of ACSA.

The company continues to encourage managers to identify and address internal control weaknesses, and regular training is conducted as a mitigation strategy.

ACSA has developed procedures and processes to deal with liability and recovery of losses or damages suffered as a result of a fraudulent or corrupt acts committed by an employee or non-employee and they continue to be implemented. Where necessary, criminal prosecution has been instituted against those found to have breached the policies in line with the Prevention and Combating of Corrupt Activities Act, 2004 (Act No. 12 of 2004).

3.2 SOUTH AFRICAN MARITIME SAFETY AUTHORITY (SAMSA)

SAMSA has put together a Corporate Performance Improvement / Mitigation Plan to address the issue of non-performance. The following key elements have been put in place to ensure the turnaround of corporate performance.

SAMSA has developed a Corporate Performance Improvement / Mitigation Plan which the SAMSA Executive management will monitor and report on, on a monthly basis.

The SAMSA Risk Committee has been tasked on behalf of the Board to check the progress of the Corporate Performance Improvement / Mitigation Plan. To ensure that risk is managed, the recruitment process to appoint a Senior Manager: Risk is at an advanced stage.

An audit finding tracking register is kept and updated with the status of the implementation of the AGSA’s recommendations. In terms of the SCM related findings, an SCM compliance specialist has been appointed, and internal controls are being strengthened. A Senior Manager: SCM was also recently appointed, which will improve the efficiency of the SCM department.

With regards to going concern, the entity had implemented robust cost containment measures during the past 3 years, which has resulted in cost savings against budget, and has reduced the risk of the entity not being able to continue as a going concern. The Board is in the process of addressing the financial challenges facing SAMSA.

SAMSA has also reviewed its Corporate Strategy and Annual Performance Plan (Key Performance Indicators) for the next financial period to ensure that all the important key priorities are captured and aligned with the capacity in resources, within SAMSA controls and the new 2025-29 Medium Term Strategy Framework.

SAMSA is in the process of filling all critical and senior management vacant positions. The CFO is starting on the 1st of April 2024 and the CEO recruitment process is at an advanced stage, all critical (technical and senior management) positions have been advertised or in the process of being advertised to ensure that SAMSA is better resourced to deal with corporate performance.

3.3 ROAD TRAFIC INFRINGEMENT AGENCY (RTIA)

The Agency has conducted an audit review with AGSA in November 2023;

An audit action plan was developed and is being implemented with the view to address the root causes of underperformance;

An interim audit is being conducted by AGSA on qualified items (AARTO Assets and Liabilities);

The automation of the environment, including synchronizing Finance, HR and SCM processes to avoid fruitless and wasteful expenditure, as well as irregular expenditure;

The organisational structure has been reviewed in order to capacitate the Agency with appropriate skills;

Policies and standard operating procedures have been reviewed in order to strengthen control measures across the organisation; and

To address the going concern, the Agency has established new payment channels, reviewed the funding model, implemented the alternative revenue sources, and has intensified efforts for revenue collection.

3.4 ROAD TRAFFIC MANAGEMENT COOPERATION (RTMC)

The Road Traffic Management Corporation continuously strives to improve its performance, for the year under review we strive to attain 100% of our set objectives which will be an improvement from the 95% APP attainment for the past two (2) financial years.

The Corporation remains a going concern and the AGSA has not raised any concerns regarding this matter. Management reports the entity’s financial position to the Board through its Sub-Committees.

The Corporation monitors the implementation of not only AGSA findings but those of Internal Audit as well. Management tables quarterly reports to apprise those charged with governance i.e Audit and Risk Committee and the Board on progress made in addressing internal control deficiencies.

3.5 ROAD ACCIDENT FUND (RAF)

The Road Accident Fund has indeed improved on its operational performance and financial resilience since the implementation of the 2020-25 strategic plan. During the 2019/20 financial year, the RAF had to contend with the fact that administrative costs had shot up to R17 billion, with just over R10 billion spent on legal costs. The short-term liability had increased to R16.2 billion and was projected to peak at R52 billion for the period ending 31 March 2023 if no change was affected.

As reported in the RAF 2022/23 annual report, the RAF not only improved its performance on predetermined objectives to 91%, but it also saw the reduction in its short-term liability to R9.3 billion. In addition, the RAF managed to achieve its target of 75% reduction in legal costs by 2025. In this regard, just over R20 billion in legal costs have been saved since the implementation of the strategy.

Notwithstanding these improvements, significant risks to the sustainability of RAF remain. The RAF has not received a fuel levy adjustment for three consecutive financial years. And with the further extension of diesel rebates to more industries and increase in electric vehicles, it presents risks to the future revenue outlook.

It is therefore critical that the RAF legislative amendments are finalised and signed into law if these improvements are to be sustained. Key to the legislative amendments is the payment in annuities and refining the benefits offered.

3.6 THE SOUTH AFRICAN NATIONAL RAOD AGENCY LIMITED (SANRAL)

SANRAL’s going concern is linked with the e-toll resolution. There were cash injections from National Treasury to assist with settling bonds when they become due. SANRAL will be able to settle the 07 December 2024 bond of about R5,6 billion. AGSA continues to raise the issue of going concern until such time the e-toll is resolved.

The entity has introduced an audit response plan (which management prepares stating how the AGSA findings will be addressed) and audit war room. The audit war room deals with all aspects of audits – The evidence and plans for addressing AGSA and Internal Audit findings is reviewed by the audit war room (Manned by independent audit firm) to ensure that the evidence shows appropriate corrective actions have been implemented.

3.7 PASSENGER RAIL AGENCY OF SOUTH AFRICA (PRASA)

 

PRASA has a comprehensive multiyear audit action plan that details how it will deal with the aspects that have been raised by the Auditor General. The first year of this action plan has seen PRASA move from a disclaimer to a qualified opinion during the 2022/23 financial year. PRASA is making further steps in line with its plan to address issues highlighted by the AG and expects to see further improvements in the 2023/24 audit.

The following entities received a clean audit for 2022/23 financial year:

3.8 RAILWAY SAFETY REGULATOR

3.9 SOUTH AFRICAN CIVIL AVIATION AUTHORITY (SACAA)

3.10 PORTS REGULATOR OF SOUTH AFRICA (PRSA)

3.11 CROSS-BOARDER ROAD TRANSPORT AGENCY (C-BRTA)