Budgetary Review Recommendation Report of the Portfolio Committee on Transport, Dated, 22 October 2014

The Portfolio Committee on Transport, having considered the performance and submission to National Treasury for the medium term period of the Department and its entities, reports as follows:

1.             INTRODUCTION

In his address to the Presidential Infrastructure Coordinating Commission (PICC), the President said: "At a close of our second decade of Democracy, it is clear that we need to change the gear. All South Africans need to work together in a concerted effort to improve service delivery, bolster job creation and expedite economic transformation". These words of the President resonate with the National Development Plan (NDP) that calls for Government to drive policy agenda that includes, but not limited to, a need to have a long-term National Infrastructure Plan that will change the structure of the economy, job creation and skills development.

1.1        MANDATE OF THE COMMITTEE

The prime mandate of the Committee is governed by the Constitution of the Republic in respect of its legislative and oversight responsibilities as public representatives. It is required to consider legislation referred to it and consider all matters referred to it in terms of the Constitution, the Rules of the National Assembly or resolutions of the House. It is also required to respond to matters referred to it by Government within its mandate. In addition, the Committee is entrusted with considering the budgets, Strategic and Annual Performance Plans of the Department and entities that fall within the transport portfolio.

1.2   PURPOSE OF THE BUDGETARY REVIEW AND RECOMMENDATION REPORT

Section 77(3) of the Constitution stipulates that an Act of Parliament must provide for a procedure to amend money bills before Parliament. This constitutional provision gave effect to the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009). The Act gives Parliament powers to amend money Bills and other legislative proposals submitted by the Executive whenever the Executive deems it is necessary to do so. The Act therefore makes it obligatory for Parliament to assess the Department’s budgetary needs and shortfalls against the Department’s operational efficiency and performance.

 

This review seeks to establish whether the Department of Transport and entities have achieved their aims and objectives, as set out in their Strategic Plans, as well as whether they continue to fulfil their constitutional mandates. The focus will be on highlighting the key achievements made, as well as challenges encountered during the 2012/13 and 2013/14 financial years, as reported in the Department’s and entities’ 2012/13 and 2013/14 Annual Reports and Annual Performance Plans. 

 

1.3        METHODOLOGY

The Committee engaged with the Department and its entities from 14 to 17 October 2014 on their performance and audit outcomes for the period under review. The Committee met with the following entities:

 

1.     Air Traffic and Navigation Services (ATNS)

2.     Airports Company South Africa (ACSA)

3.     Cross-Border Road Transport Agency (C- BRTA)

4.     Passenger Rail Agency of South Africa (PRASA)

5.     Ports Regulator

6.     Railway Safety Regulator (RSR)

7.     Road Accident Fund (RAF)

8.     Road Traffic Infringement Agency (RTIA)

9.     Road Traffic Management Corporation (RTMC)

10.  South African National Roads Agency Limited (SANRAL)

11.  South African Civil Aviation Authority (SACAA)

12.  South African Maritime Safety Authority (SAMSA).

 

The report details the analysis of the 2012/13 and 2013/14 Annual Reports and Financial Statements, strategic objectives, budget allocation and financial performance and the recommendations made by the Portfolio Committee on Transport.

 

The Budgetary Review and Recommendation Report is based on information accessed through:

 

 

2.  OVERVIEW OF THE KEY RELEVANT POLICY FOCUS AREAS

During the 2013/14 financial year, the Department focused on optimal performance of deliverables in terms of the Medium Term Strategic Framework (MTSF) priorities to address Government’s broad national objectives. The Department’s service delivery targets for the Medium Term Expenditure Framework (MTEF) were guided by the outcomes-based performance management approach of Government. Twelve (12) key outcomes were identified to be implemented through inter-governmental cooperation. The Department contributes to three (3) outcomes which are economic infrastructure development, creation of employment through economic growth and contribution to rural development.

 

In the development of its policies and programmes, the Department has to be directed by Government’s key policies, namely, the NDP, the PICC and, in particular, the Strategic Integrated Project (SIP 4) of the PICC, the SONA and the 2014-2019 electoral mandate. The mandate focuses on a number of priorities, but of more relevance to the transport sector is the radical economic transformation, rapid economic growth and job creation.

 

The 2013 SONA highlighted the following strategic objectives that were pertinent to the transport sector:

 

·         Shifting the transportation of coal from road to rail in Mpumalanga in order to protect the provincial roads.

·         Improving the movement of goods and economic integration through a Durban-Free State-Gauteng logistics and industrial corridor.

·         Upgrading Mthatha Airport runway and terminal and the construction of the Nkosi Dalibhunga Mandela Legacy Road and Bridge.

·         Fast-tracking of roads in the North West.

·         Integrating different modes of transport (bus, taxi and train) in Cape Town, Nelson Mandela Bay, Rustenburg, eThekwini and Tshwane.

·         Improving commuter rail network.

 

In terms of the outcomes-based performance management framework adopted by Government, the Department contributes mainly to the development of an efficient, competitive and responsive economic infrastructure network (outcome 6). To achieve this outcome, the Department has been mandated to focus on:

 

·         Maintaining road infrastructure.

·         Upgrading rail infrastructure and services.

·         Constructing and operating public transportation infrastructure.

 

These policy priorities are in line with what the National Development Plan (NDP) proposes pertaining to social and economic development. Indeed, the NDP maintains that sound economic infrastructure is a precondition for economic growth and that the country’s transport infrastructure is a necessary condition for attaining this objective.

 

The major recommendations of the NDP are to improve public transport planning and integrate it with spatial planning. It also puts emphasis on asset management and institutional arrangements to ensure safe, reliable and affordable public transport and renewal of the commuter rail fleet. In this regard, the NDP accentuates the need to focus on the Durban-Free State-Gauteng Logistics and Industrial Corridor, incentivise public transport and focus on integrating various transport modes. The need to invest massively in transport is recognised as is the need to carefully prioritise these investments.

 

Over the Medium Term Strategic Framework, the Department of Transport has undertaken to “improve access to economic opportunities, social spaces and services by bridging geographic distances affordably, reliably and safely”, as spelled out in the NDP.

 

Infrastructure development plays a critical role in the drive towards job creation and economic stimulus. It is against this PICC has identified projects aimed at rehabilitating and upgrading existing infrastructure, as well as providing new infrastructure. In this regard, 18 SIPs have been developed and approved by Cabinet and the PICC. PRASA, one of the entities reporting to the Department of Transport, has been designated as “manager” or “coordinator” for the Integrated Urban Space and Public Transport Programme, namely SIP 7.

 

 

3.        THE DEPARTMENT OF TRANSPORT

The Department of Transport (DoT) is entrusted with maximising the contribution of transport to the economic and social development goals of the country by providing fully integrated transport operations and infrastructure. The main roles of the DoT and its public entities pertaining to the transport sector are:

 

·         Policy and strategy formulation in all functional areas;

·         Substantive regulation in functional areas where the DoT has legislative competence;

·         Implementation in functional areas where the DoT has exclusive legislative competence;

·         Leadership coordination and liaison in all functional areas;

·         Monitoring, evaluation and oversight in all functional areas; and

·         Stimulating investment and development across all modes.

 

The functional and modal areas are:

·         Civil Aviation (Air Transport);

·         Rail Transport;

·         Maritime Transport;

·         Road Transport; and

·         Public Transport.

 

In an endeavour to discharge its mandate effectively and efficiently, the Department has organised itself into the following programmes:

 

·         Administration;

·         Integrated Transport Planning;

·         Rail Transport;

·         Road Transport;

·         Civil Aviation;

·         Maritime Transport; and

·         Public Transport.

 

In terms of the Department’s structure, it was suggested that it boded well for the creation of jobs, the development of the country’s urban and rural communities, as well as the improvement of logistics. It stands to reason that no economy can thrive without developed road, rail, maritime and aviation infrastructure networks. Indeed, no economy can develop unless its transport sector plays its part in facilitating the movement of people, goods and services throughout the economy.

 

 

4.   OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

 

4.1        Overview of Vote allocation and spending

 

Programme

2012/13

2013/14

Final Appropriation

Actual Expenditure

Expenditure Percentage

Final Appropriation

Actual Expenditure

Expenditure Percentage

Administration

390 899

359 589

92.0%

333 440

315 578

95%

Integrated Transport Planning

110 094

103 480

94.0%

74 913

66 373

89%

Rail Transport

10 297 633

10 286 554

99.9%

11 232 843

11 232 840

100.0%

Road Transport

18 230 705

18 229 358

100.0%

19 897 209

20 665 564

104%

Civil Aviation

520 807

411 788

79.1%

245 515

148 602

61%

Maritime Transport

137 097

124 666

90.9%

103 557

102 271

99%

Public Transport

9 959 993

9 812 787

98.5%

10 514 190

10 505 616

100%

 

39 647 228

39 328 222

99.2%

42 401 667

43 036 844

101%

 

 

4.2        FINANCIAL PERFORMANCE 2012/13

 

At the end of 2012/13, the Department’s financial state of affairs was as follows:

 

Of the R39.6 billion of the adjusted budget for 2012/13, the Department underspent by R319 million, representing an under-expenditure of 0.8%. A transfer payment from the Public Transport Infrastructure and Systems Grant (PTISG) amounting to R103.7 million was stopped due to consistent underspending by a municipality. In addition, R104.8 million was underspent against an additional amount allocated on the adjusted budget for the upgrade of the Mthatha Airport because of the timing of the expenditure. These two items made up 65% of the under-expenditure.

 

Projects amounting to R73.4 million were delayed or could not be completed. Invoices were late in the amount of R18.3 million and savings of R9.5 million were realised on goods and services and R1.9 million on capital expenditure.

 

Fewer taxis were scrapped than had been budgeted for, resulting in R5.9 million not being spent. Compensation of employees was underspent by R1.5 million due to the posts that could not be filled.

 

Programme 1: Administration

 

Invoices to the tune of R235 000 were not received from suppliers for the development of a Monitoring and Evaluation Tool. Similarly, invoices amounting to R3 million for operational plans done for the Africa Cup of Nations tournament were not received. Finally, invoices to the tune of R6 million for the Department’s contribution towards the upgrade of premises were not received.

 

Funds were committed but remained unspent for the supply and installation of a PABX system (R5.7 million), supply and installation of microphones in Board Rooms (R468 000), supply and installation of door numbers and names (R615 000), the development of a policy for the Road Accident Benefit Scheme (R6.1 million), the appointment of transaction advisors for new premises (R3.6 million) and a public-private-partnership for a new fleet management service contract (R4.8 million). Transfers to universities and technikons were underspent by R424 218 because one university discontinued its programme.

 

All of the above was requested to be rolled over to the next financial year. The programme “saved” R554 000 on the procurement of furniture and equipment because posts could not be filled.

 

Programme 2:  Integrated Transport Planning

 

The programme underspent on the development of a Transport Sector Economic Regulator (R686 000), consolidating the National Transport Databank (R2 million), completing a study on the Macro Economic Impact of Transport (R628 000), developing a Macro Planning Framework (R1.5 million), developing a Transport Greenhouse Inventory (R1 million) and developing an Energy Consumption Framework (R1.5 million).

 

R326 000 was underspent because vacant posts could not be filled. The programme also “saved” R703 000 on the procurement of furniture and equipment because posts could not be filled. A rollover of R1.5 million was requested to develop a Transport Rural Accessibility/Multi Deprivation Index for South Africa.

 

Programme 3: Rail Transport

 

The programme underspent R8 million on a feasibility study for the Moloto Corridor, which was committed and requested as a rollover. It also underspent R1.5 million set aside to develop a Service Level Agreement with PRASA to facilitate an institutional reform for rail. R638 000 intended for the development for a Rail Policy and Act was not spent. The programme “saved” R70 000 on the procurement of furniture and equipment because posts could not be filled and saved R894 000 on operational expenditure.

 

Programme 4:  Road Transport

 

The Road Transport programme underspent R485 000 because posts could not be filled. It “saved” R89 000 on the procurement of furniture and equipment as a result of vacant posts not being filled.

 

Programme 5: Civil Aviation

 

An amount of R104.8 million was underspent on the upgrade of the Mthatha Airport Runway because the timing of expenditure was miscalculated on the Adjusted Budget allocations. The programme also underspent R2.9 million on funding the Regulating Committee for determining tariffs for ACSA and ATNS. R2.2 million was underspent on the establishment of an Aviation Safety Investigation Board. A further R1.325 million was underspent on the establishment of an Appeals Committee. These amounts were requested to be rolled over to the next financial year.

 

Programme 7: Public Transport

 

The programme underspent R103.7 million on the Public Transport Infrastructure and Systems Grant as funds had not been transferred to the City of Johannesburg due to consistent under-expenditure. The programme also underspent R5.9 million because fewer taxis were scrapped than had been anticipated.

 

Funds amounting to R7 million were committed but remained unspent for developing a National Public Transport Regulator, implementing the Taxi Recapitalisation 2020 Strategy (R6 million), the oversight of Integrated Rapid Public Transport Networks (R5 million) and the development of National Land Transport Information Systems (R15 million). These funds were requested as rollovers to the next financial year.

 

In addition, R1.5 million budgeted for the development of a Scholar Transport Framework was underspent. Another R1.5 million was underspent on a Migration Plan for Scholar Transport and R1.7 million on implementing the Shova Kalula programme in provinces. 

 

 

4.2.1     REPORT OF THE AUDITOR-GENERAL (previous financial years)

 

1.     Department

 

1.1   Predetermined Objectives

The AG made the findings on these in 2009/10, 2010/11 and 2013/14.

 

1.2   Compliance with Laws and Regulations

The AG raised found that there was non-compliance with laws and regulations in 2010/11, 2011/12, 2012/13 and 2013/14.

 

2.     RTMC

In 2011/12 and 2012/13, the RTMC received an unqualified audit opinion with findings on predetermined objectives and compliance.

 

2.1 Predetermined Objectives

Issues were raised in this regard in 2009/10, 2010/11, 2011/12, 2012/13 and 2013/14.

 

2.2 Compliance with Laws and Regulations

Matters of non-compliance were identified by the AG in 2009/10, 2010/11, 2011/12, 2012/13 and 2013/14.

 

3.     C-BRTA

 

3.1 Predetermined Objectives

Issues were raised in this regard in 2009/10/ 2010/11, 2011/12 and 2013/14. Regarding 2013/14, the AG contended there was inadequate review performed on the annual performance report.

 

3.2 Compliance with Laws and Regulations

Matters of non-compliance were identified by the AG in 2009/10, 2010/11, 2011/12, 2012/13 and 2013/14.

 

4.  SAMSA

 

4.1 Predetermined Objectives

The AG made findings in this regard in 2010/11, 2011/12 and 2013/14

 

4.2 Compliance with Laws and Regulations

Matters of non-compliance were identified by the AG in 2009/10, 2010/11, 2011/12, 2012/13 and 2013/14.

 

5.        Ports Regulator

 

5.1 Compliance with Laws and Regulations

Matters of non-compliance were identified by the AG in 2009/10, 2010/11, 2011/12, 2012/13 and 2013/14.

 

6.        SANRAL

6.1 Compliance with Laws and Regulations

Matters of non-compliance were raised by the AG in this regard in 2012/13 and 2013/14.

 

7.        RSR

7.1 Compliance with Laws and Regulations

Issue of non-compliance were raised by the AG in this regard 2009/10, 2010/11, 2011/12, 2012/13 and 2013/

 

4.3        FINANCIAL PERFORMANCE 2013/14

 

For the 2013/14 financial year, the Department of Transport spent R43 billion, whilst having an available budget of R42.4 billion, meaning that it overspent by R632.1 million. The major over-expenditure to the tune of R852.2 million was on the Road Transport Programme. This was attributed to the cost of the electronic national administration traffic information system (eNaTIS) maintenance and operations that had been charged to expenditure.

 

This was done because the Department was unable to recover the revenue from vehicle licence transaction fees from the RTMC to cover this cost. Such revenue is earmarked for the purpose and the Department is entitled to it for as long as the contract for the maintenance and operation of the eNaTIS lies with the Department, This represents an issue for the Department and the failure to resolve this will result in the contravention of section 39(1)(b) of the PFMA.

 

Programme 1: Administration

During the year under review, the Administration programme was allocated R333.4 million. At the end of 31 March 2014, the programme had spent R315.6 million, representing 95% of its budget allocation.

 

An amount of R10 million was underspent on marketing and advertising. However, R5.8 million was “saved” on the lease of accommodation because the premises were not fully occupied for the year as had been budgeted for.

 

The main cost drivers were the compensation of employees owing to the fact that 50.9% of the Department’s employees are in this programme and consultants in the Communication sub-programme to assist the Department with the October Transport Month and the Arrive Alive campaigns.

 

Programme 2: Integrated Transport Planning

The Integrated Transport Planning programme received R74.9 million during the year under review. At the end of the reporting period, the programme had spent R66.4 million or 89%, indicating an under-expenditure by R8.5 million. Under-expenditure to the tune of R8.2 million was attributed to the delays and late awarding of bids in the following projects:

 

·         Greenhouse Gas Inventory (R1.3 million);

·         Transport Energy Consumption Study and Reduction Strategy (1.7 million);

·         Global competitiveness by reducing transport costs on rail and pipelines (R1 million);

·         Rural accessibility/Multi-deprivation index (R1.2 million); and

·         Impact of freight accidents in South Africa (R3 million).

 

All these projects were requested to be rolled over to the next financial year.

 

The programme underspent R0.3 million on furniture and equipment because less posts were filled than had been budgeted for.

 

Programme 3: Rail Transport

 

For the 2013/14 financial year, the budget allocation for the Rail Transport programme was R11.2 billion. At the end of the financial year, the programme had spent 100% of its budget allocation.

 

Funds were reprioritised to fund a feasibility study on the Moloto Rail Corridor and the programme ended up underspending R3 000 on projects during the year under review.

 

Programme 4: Road Transport

 

Programme 4 had been allocated R19.9 billion but had spent R20.7 billion or 104% at the time of the reporting period, translating into an over-expenditure by 4%. The programme overspent R852.2 million because the cost of maintenance and operations of the eNaTIS had been charged to the expenditure. In addition, the programme underspent R83.5 million owing to the last two tranches of transfer payments due to the RTMC which had not been paid. Finally, the programme underspent R0.4 million on furniture and equipment because less posts were filled than had been budgeted for.

 

Programme 5: Civil Aviation

 

The Civil Aviation programme had been allocated R245.5 million but had only spent R148.6 million or 61% of its budget allocation by the end of the financial year. This means that R96.9 million could not be spent. This was due to the upgrade of the Mthatha Airport runway which had been over-budgeted for.

 

Programme 6: Maritime Transport

 

During the year under review, the budget allocation was R103.6 million and at the time of reporting, R102.3 million or 99% thereof had been spent. The under-expenditure was thanks to an amount of R1.3 million on foreign membership fees which had not been claimed.

 

Programme 7: Public Transport

 

The Public Transport programme had been allocated R10.5 billion and it spent 100% of its budget allocation. However, the programme underspent R8.6 million on a number of projects due to delays and late awarding of bids. The projects in question were:

 

·         Review of Rural Transport Strategy (R0.5 million);

·         National Guiding Framework for Network Development (R0.8 million);

·         Shova Kalula Bicycle Project (R2 million);

·         Scholar Transport Policy (R0.4 million);

·         Limpopo Intervention (R0.9 million); and

·         National Land Transport Act Amendment Bill (R4 million).

 

At the end of 2012/13, the Department’s financial state of affairs was as follows:

Of the R39.3 billion of the adjusted budget for 2012/13, the Department underspent by R319 million, representing an under-expenditure of 0.8%. A transfer payment from the PTISG amounting to R103.7 million was stopped due to consistent underspending by a municipality. In addition, R104.8 million was underspent against an additional amount allocated on the adjusted budget for the upgrade of the Mthatha Airport because of the timing of the expenditure. These two items made up 65% of the under-expenditure.

 

Projects amounting to R73.4 million were delayed or could not be completed. Invoices were late in the amount of R18.3 million and savings of R9.5 million were realised on goods and services and R1.9 million on capital expenditure.

 

Fewer taxis were scrapped than had been budgeted for, resulting in R5.9 million not being spent. Compensation of employees was underspent by R1.5 million due to the posts that could not be filled.

 

5.             OVERVIEW AND ASSESSMENT OF SERVICE DELIVERY PERFORMANCE

 

5.1   A Synopsis of the Department’s Key Performance Achievements for 2013/14

 

Without giving an exhaustive list, the Department reported its achievements during the year under review as follows:

 

·         The National Household Travel Survey was concluded.

·         A final report on the study on the harmonisation of transport standards within the Southern African Development Community (SADC) had been submitted.

·         A Road Infrastructure Safety Framework was developed.

·         The maintenance and rehabilitation of provincial roads through the Provincial Roads Maintenance Grant (PRMG) continued.

·         The Airlift Strategy was completed and was reportedly “en route to Cabinet” at the time of the tabling of the Annual Report.

·         The Aviation Appeals Committee was established and was reportedly fully operational.

·         A Draft Maritime Transport Policy was completed and an internal consultative process was in “in progress” at the time of the tabling of the Annual Report.

·         Bilateral air services consultations were conducted with Niger, Mozambique and Gabon.

·         A business model for cooperatives for small bus operators was work-shopped in all provinces.

·         A study on the status of regional infrastructure had been completed.

·         Broad-Based Black Economic Empowerment (B-BBEE) verifications were “conducted in seven of the nine provinces”.

·         An Aviation Appeals Committee was established.

 

5.2        PROGRAMME PERFORMANCE: Achievement of Planned Targets (Predetermined    Annual Targets vs Actual Performance)

 

5.2.1 Programme 1: Administration

 

The programme is responsible for coordinating and providing key administrative support services to the Department in support of the Office of the Director-General (DG), Ministry, Cabinet and Parliament. The programme has four sub-programmes:

 

·         DG Administration – Support Services;

·         Strategic Planning and Cluster Coordination;

·         Internal Audit; and

·         Transport Information Systems.

 

Although the Department achieved most of its planned targets under this programme, there were challenges in the following areas:

 

o    Implementation of resolutions taken at DG’s meeting by 100%.

 

Notwithstanding the fact that the Department had set the target at 100%, there was 90% adherence thereto owing to “capacity constraints”.

 

o    26 quality audits reports (2 IT [Information Technology], 9 performance and 15 assurance audits)

 

This planned target was achieved by 50% as the Department contended at the time of tabling its Annual Report that “a total of thirteen (13) audits were conducted and reports issued”. The reason provided for the deviation was that the planned performance audits were only 4 and not 9, as per the Department’s APP.

 

o    Risk Register updated on Barnowl

 

At the time of tabling its Annual Report, the Department reported that the Barnowl system still had to be set up and installed on user desktops. It added that presentations had been made to the Risk Management and Security Committee (RS & SC) meetings for approval and buy-in from all stakeholders (internal audit and IT). Moreover, the Department maintained that the project only started in Quarter 3 due to capacity constraints within Risk Management Unit.

 

o    Completed strategy to institutionalise the eNaTIS; established necessary systems, services and supported structures; merged and integrated eNaTIS infrastructure (Data centre, Disaster recovery site, Network, Bespoke applications,) with DoT IT infrastructure and Card Production Facility infrastructure; Compile master systems architecture including DoT IT, eNaTIS and card production facility, Migrate DoT IT and CPF to eNaTIS architecture.

 

All the aforementioned planned targets were not achieved due to “reprioritisation”.

 

o    Contract Management System in use

 

At the time of tabling its Annual Report, the Department reported that monthly contract reports had been sent to the Executive, top and senior managers. However, the contract management system was not yet “operational due to lack of information and technology support”.

 

o    Assets verified once per year

 

The Department reported that the full asset count could not be carried out as the upgrading of the “Forum Building made it difficult” to do so.

 

o    Assets reconciled each month

 

Asset reconciliations were reportedly done for each Quarter but the “capacity constraints prevented monthly reconciliations”.

 

5.2.2     Programme 2: Integrated Transport Planning

 

The programme is entrusted with managing and facilitating national strategic planning for new projects. It also conducts research and formulate national transport policies, including for the cross-modal areas of logistics. In addition, the programme coordinates international and inter-sphere relations.

 

Under this programme, most of the planned targets could not be achieved:

 

o    National Transport Master Plan (NATMAP)  strategic alignment to Strategic Management Committee (SCM) directives

 

The Department indicated that Cabinet had taken a decision to review and update NATMAP 2050. It was further resolved that there had to be consultation with the PICC.

 

o    Develop long-term planning procedure policy framework recommendations

 

The project was cancelled and the Department contended that it would “be dealt with in line with the development of the Multi-Modal Transport and Coordination Act”.

 

o    Launch of the National Transport Planning Forum

 

At the time of tabling its Annual Report, the Department reported that it had revised the final draft of the Memorandum of Understanding (MoU) and had received the concept document. It further asserted that the launch had been delayed owing to “further consultations with stakeholders on the draft final concept document and MoU”.

 

o    Implement 5 hubs: Polokwane, Mafikeng, Upington Airfreight, Tshwane and Nelspruit

 

The project was “discontinued/stopped” based on the “assessment of the chief directorates [sic] performance and resources”.

 

o    Final Report on mapping and developing key corridors, sub-corridors with associated key nodal points for integration of information flow (O-D pairs) between modes, Final Report on developing and mapping out key centres of production to support key rural economic modes, continuous updating of the National Freight Databank on an annual basis, Final Report on developing rural specific indicators and targets to monitor freight performance within Integrated Development Plan (IDPs) and Integrated Transport Plans (ITPs), approval of the framework/plan on developing an integrated national inter-modal facility infrastructure framework/plan and the approval of the report identifying and developing strategic rural freight logistics infrastructure

 

All the aforementioned targets were not met because the projects had been “discontinued/stopped”. The Department reported that the decision to do so had been taken “upon assessment of the chief directorate’s performance and resources”.

 

o    Private sector participation strategy, consolidated investment plan, approval of project prioritisation model, project funding plans and approval of funding models to give technical support to Government’s SIP 2: Durban-Free State-Gauteng Logistics and Industrial Corridor

 

Although the Department reported that it had, inter alia, signed the MoU with the Development Bank of Southern Africa (DBSA) and had completed the prioritisation model, it stated that  the “Private Sector Participation Strategy could not be completed due to capacity constraints”.

 

o    Develop financial and non-financial support framework for the South African Network for Women in Transport (SANWIT), revive SANWIT nationally and organise an activity/event on women empowerment in August 2013

 

At the time of reporting, the Department maintained that the draft framework for women in transport had been developed. However, there was a “lack of financial and human resources support from the DoT provinces”.

 

5.2.3     Programme 3: Rail Transport

 

The programme is responsible for facilitating and coordinating the development of sustainable rail transport policies, rail and economic and safety regulations, infrastructure development strategies and systems that reduce costs and improve customer services. The programme also monitors and oversees RSR and PRASA. Moreover, it focuses on the implementation of integrated rail services planned through the lowest competent sphere of government.

 

One of the achievements under this programme was the overhaul and upgrading of 598 coaches during the year under review against the target of 450 coaches. This aside, the following targets could not be achieved:

 

o    Implementation of Service Level Agreement (SLA) and introduction of Regional SLAs

 

At the time of reporting, the Department stated that it had finalised the SLA, in line with the Performance Monitoring and Evaluation and was awaiting approval by PRASA and the DoT. There was, however, no reporting on the “introduction of Regional SLAs”.

 

o    Public White Paper, Promulgate Act with a view to developing a Rail Transport Policy

 

The Department reported that it had concluded and presented the Green Paper to Cabinet in November 2013 and “Cabinet resolved that further consultation” had to take place between the DoT and the Department of Public Enterprises (DPE).

 

o    Ministerial Task Team members appointed to perform the functions of the interim Rail Economic Regulator

 

The target could not be achieved owing to “delays at the DPE in signing the MoU”.

 

o    Reduction in accidents and incidents by 5%

 

The Department argued that it could not achieve the target due to a “prolonged procurement process”.

 

5.2.4     Programme 4: Road Transport

 

The programme deals with safety and security on public roads by the regulation of road traffic management and ensuring maintenance and development of an integrated road network through the development of roads-related safety standards and appropriate guidelines, including environmental and road disaster management frameworks. It also oversees that roads-based agencies implement strategic priorities of the DoT and Government and ensures that provincial road expenditure is implemented in accordance with Government.

 

The programme reported on 57 planned annual targets and there were challenges in attaining the following:

 

o    Roads blacktop patching (m² - 1 433 200)

 

The Department had set itself a target of patching the roads at 1 433 200 m². However, at the time of the tabling of its Annual Report, it reported that it had patched 997 608. 93 m² of roads. The reason for the deviation was that “a bigger target” had been “set due to the quantification of potholes”.

 

o    Rolling out of Non-Motorised Transport (NMT) infrastructure and facilities to 12 municipalities

 

The Department reported that it had supported provinces and municipalities in the planning and provision of NMT infrastructure and facilities. In this regard, it had participated in Polokwane PIURMP and the City of Johannesburg Cycling infrastructure and initiatives. The other municipalities were not covered due to “budget constraints”.

 

o    Finalise NMT Facility Guidelines

 

Only a literature review was finalised and this was attributed to the “late approval of the project hence the late appointment of a service provider”.

 

o    Finalise NMT Policy

 

At the time of reporting, a draft policy had been developed and inputs from stakeholders had been incorporated. The reason for the non-achievement of the target was the “prolonged consultations delaying progress on the project”.

 

o    Registration of the public-private partnership (PPP) funding with Treasury to have a local bicycle manufacturing plant established

 

The Department reported that it had submitted the proposal for funding based on the PPP model to Treasury and had been supported. It added that the project had “been put on hold for 2013/14 due to the unavailability of funds”.

 

o    Development of legislation to implement periodic motor vehicle testing for vehicle testing for vehicles 10 years and older every 24 months

 

The Department asserted that the incorporation of comments from stakeholder consultations had been finalised. However, the publication of the regulations had been withheld. At the time of tabling its Annual Report, the Department averred that the process was “pending review of current legislative framework to address fraud and corruption within the testing station environment”.

 

o    Amend the National Road Traffic Act incorporating safety requirements in all motor vehicles

 

The draft amendments had been reportedly made and safety requirements in all motor vehicles had been incorporated and published for comments. At the time of tabling its Annual Report, the Department reported that it was “awaiting the approval of the amendment by the Traffic Legislation Technical Committee (TLTC) for submission and approval by the Minister”.

 

o    Implementation of enabling legislation for the national roll-out of the Administrative Adjudication of Road Traffic Offences (AARTO)

 

The Department contended that consultations with NEDLAC on the draft AARTO Act and Regulation had been finalised. However, the implementation could not happen due to “prolonged stakeholder consultations”.

 

o    Develop Road Infrastructure Safety Framework

 

It was reported that a “draft framework” had been “developed” and the Department was “awaiting COTO [Committee of Transport Officials] sub-committee approval”.

 

5.2.5     Programme 5: Civil Aviation

 

The programme is tasked with facilitating the development of an economically viable transport industry that is safe, secure, efficient, environmentally friendly and compliant with international standards through regulation and investigation. It also oversees aviation public entities.

 

The following targets could not be achieved during the year under review:

 

o    Develop final draft of the Airfreight Strategy

 

The project was “stopped” due to the “unavailability of funds”. It is worth noting that the same target, though it was framed slightly different as “Developed Airfreight Strategy”, could not be achieved in 2012/13 and the explanation provided then was that “the delay is due to the lack of funding”.

 

o    Ratification of Convention on Compensation for damage caused by aircraft to third party

 

The Convention could not be ratified due to a “conflict with legal opinions and SA [South Africa’s] position on ratification”.

 

o    Fully functional Independent Aircraft Accident and Incident Investigation Body (IAAIIB)

 

The Department reported that the draft Terms of Reference for the appointment of the service provider to amend the Civil Aviation Act had been finalised. It also stated that the establishment of the IAAIIB had been delayed by the process of the amendment of the Act.

It was further contended that a signed MoU between the Director of the SACAA and the Minister of Transport on the functional independence of the SACAA – Accident and Incident Unit existed.

 

o    Formulation of National Aviation Disaster Plan

 

The Department maintained that “a general Disaster Management Plan exist [sic] for all spheres of government” and therefore there was “no need to draft a disaster management plan for aviation”.

 

5.2.6     Programme 6: Maritime Transport

The programme is entrusted with coordinating the development of a safe, reliable and viable maritime transport sector through the development of policies. It also monitors and oversees maritime public entities.

 

The following targets could not be achieved under this programme:

 

o    Quarterly Ports Coordinating Committee  (PCC) meetings at all commercial ports

 

The Department reported that the framework had not yet been developed and that the “commencement of the process [was] wholly dependent on the finalisation of the Maritime Transport Policy”.

 

o    Review of the SAMSA Act

 

It was maintained that the project had been stopped by SAMSA and that the “commencement of the project [was] wholely [sic] dependent on the finalisation of the Maritime Transport Policy”.

 

o    Study on the effectiveness of administration and services of current ship registry

 

No progress was reported in this regard.

 

o    Study on carbon footprints in South African Maritime domain

 

The Department reported that the Position Paper had not been achieved and that the Terms of Reference of the study were to be amended.

 

o    Complete business case on ship acquisition and operations

 

No progress was reported and the Department stated that the target had not been met due to “capacity constraints”.

 

o    White Paper on Maritime Policy Shipping

 

No progress was reported in this regard.

 

5.2.7     Programme 7: Public Transport

 

The programme is responsible for developing norms and standards, as well as regulations to guide the development of public transport for rural and urban passengers. It also regulates inter-provincial public transport and tourism services. Moreover, it monitors and evaluates the implementation of the Public Transport Strategy and the National Land Transport Act (No. 5 of 2009).

 

The following planned annual targets could not be achieved:

 

o    Approved process National Land Transport Act (NLTA) Amendment  Bill through Parliament

 

At the time of tabling its Annual Report, the Department contended that the Bill had been finalised with inputs from stakeholders and had been submitted for processing to SLA and NEDLAC. It attributed the delays of achieving the target to “stakeholder consultation”.

 

o    Roll-out of the National Public Transport Transformation Plan (NPTTP) in provinces

 

The Department argued that the NPTTP had to be reviewed and resubmitted to National Treasury for consideration and funding. It further stated that bidders had been invited to bid for the services of assisting the Department to conduct a status quo assessment and a scoping exercise on the current subsidised bus services in the country. This was to form part of a review of the NPTTP in determining an estimated funding requirement for overhauling the entire bus system.

 

The Department further asserted that the NPTTP had not been “funded in the financial year and had to be reviewed and costed for resubmission to National Treasury for consideration”.

 

o    7 800 taxis scrapped

 

During the year under review, 3 426 taxis were scrapped owing to “the unaffordability of new taxi vehicles”.

 

o    Approved National Scholar Transport Policy by Minister and Cabinet

 

The Department reported that the Draft Policy had been approved by the Forum of South African Directors-General (FOSAD) and Ministers and Members of the Executive Council (MinMEC). It further stipulated that the Policy had been “withdrawn from Cabinet for further consultation”.

 

5.3   REPORT OF THE AUDITOR-GENERAL (AG) 2013/14

 

The Department received an unqualified audit opinion for the eighth consecutive year. However, the AG made material findings pertaining to the following selected programmes:

 

Programme 3: Rail Transport

Usefulness of reported performance information

 

The AG found that a total of 80% of the indicators were not well-defined. In addition, the AG found that the reviews of the APP were not effective.

 

Programme 4: Road Transport

Usefulness of reported performance information

 

A total of 29% of the indicators were not well-defined. Moreover, the reviews of the APP were not effective.

 

Programme 7: Public Transport

Usefulness of reported performance information

 

A total of 26% of the indicators were not well-defined. In addition, reviews of the APP were not effective.

 

 

Compliance with Legislation

The AG found that the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 40(1) of the Public Finance Management Act (PFMA) (No. 1 of 1999).

 

Expenditure Management

·         The AG established that effective steps were not taken to prevent unauthorised, irregular, fruitless and wasteful expenditure, as required by section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1.

·         Contractual obligations and money owed by the Department were not settled within 30 days or an agreed period, as required by section 38(1)(f) of the PFMA and Treasury Regulation 8.2.3.

·         Money was spent without the approval by the Accounting Officer, as required by Treasury Regulation 8.2.1 and 8.2.2.

 

Asset and Liability Management

The Department was committed to liabilities for which money had not been appropriated, in contravention of section 38(2) of the PFMA.

 

Human Resource Management and Compensation

Management of Vacancies

 

·         Positions in senior management were vacant for more than 12 months.

·         Vacant positions in senior management were not advertised within 6 months.

 

No improvement was made in this regard as the AG had made a similar finding in 2012/13.

 

Appointment Processes

 

·         New appointee did not have the required qualifications and experience for the position.

·         The prescribed selection and approval processes were not followed for the appointment.

 

Procurement and Contract Management

·         During the year under review, an amount of R484 236 295 (41%) of irregular expenditure was incurred as a result of the contravention of Supply Chain Management (SCM) legislation.

·         A further R475 443 063 that was incurred in prior years was also identified.

 

Leadership

·         Reviews of the APP were not effective.

·         Failure by those charged with governance to exercise oversight responsibility over performance reporting and compliance with laws and regulations.

 

Similarly the AG, had found in 2013 that the accounting officer had not taken effective and appropriate steps to prevent irregular expenditure, as per the requirements of section 38(1)(c) of the PFMA. In addition, the AG had found that there had been a lack of coordination and effective leadership on a major capital project that involved different tiers of Government.

 

Financial and Performance Management

·         Management did not prepare regular, accurate and complete performance reports that were supported by reliable information.

·         Material misstatements in the financial statements submitted for audit were identified by the auditors and this was as a result of a lack of training on the new Modified Cash Standard to be applied due to the delay in the roll-out of these standards.

·         Inadequate filing system to ensure that schedules supporting the financial statements and reports are easily retrievable, when required.

·         Lack of standard operating procedures or documented system descriptions for the accurate recording of actual achievements and technical indicator descriptions for the accurate measurement, recording and monitoring of performance.

·         Inadequate controls over the processing of payments within the time frames, as required by the Treasury Regulations.

·         Failure in the operation of effectively designed controls to ensure that payment vouchers complied are duly signed off by the delegated official.

 

Human Resource Management

During the year under review, the Department had 822 posts on its establishment. Of these, 613 were filled. The vacancy rate stood at 25.42%. Conversely, in 2012/13, the Department had 775 posts on its establishment and 566 thereof had been filled. The vacancy rate stood at 26.96%. The highest vacancy rate was in the Rail Transport Programme which stood at 36.58%. This was followed by the Maritime Transport Programme and Road Transport Programme which stood at 34.09% and 31.93% respectively. The Public Transport Programme had the lowest vacancy rate at 15.58%.

 

As at 31 March 2014, the annual turnover rate within the Department was at 9.01%. Of this, the highest turnover rate comprised highly skilled production (Levels 6-8) which stood at 11.17%. The main reason for staff leaving the Department was resignation (3.8%), followed by transfer to other Public Service Departments (2.47%).

 

6.             OBSERVATIONS

 

The Committee raised the following observations in its meetings with the Department, public entities and AG:

 

6.1        Predetermined Objectives

 

The Committee noted that the performance indicators of the Department were not well defined and targets were not specific. The Committee noted that targets were not met in the Integrated Transport Planning, Civil Aviation and Rail programmes. In the 2012/13 financial year, 21 out of 31 targets were not achieved in the Integrated Transport Planning programme leading to underspending in the programme area.

 

The reported performance information was not valid, accurate and complete when compared to the source information or evidence provided. These findings had been raised with the Department and entities in previous financial years. This matter extended to entities of the Department such as the C-BRTA, RTMC and SAMSA.

 

The Committee further queried whether the Department and entities aligned their Strategic Plans and APPs with the NDP. There was a need for the Department to align these reports with the NDP.

 

6.2        Supply Chain Management

 

During its meetings with the Department and entities, the Committee noted the lack of effective controls to ensure compliance with internal policies with regard to supply SCM. The Committee was not convinced that adequate monitoring controls were in place to ensure adherence to the internal policies and procedures, as well as compliance with laws and regulations. The report of the AG noted findings in this key focus area for SAMSA, SANRAL, PRASA and the Department.

 

6.3        Human Resource Management

 

The Committee noted that the Department had a vacancy rate of 25% and that vacant posts were not advertised within 6 months after becoming vacant and these posts were not filled within 12 months. The Committee was of the opinion that the Department lacked effective HR management to ensure that adequate and sufficiently skilled resources were in place. This affected service delivery in the Department and entities. The limited staff capacity as a result of low budget at the Ports Regulator resulted in a slow pace of implementation of some programmes of the Regulator.

 

6.4        Information Technology (IT) Controls

 

The Committee noted the challenge in the Department with IT management controls and the impact thereof on confidentiality, integrity and availability of financial information. The Committee will engage with the Portfolio Committee on Public Service and Administration, as well as Performance Monitoring and Evaluation on the ICT management.

 

6.5        Material Misstatements to Financial Statement

 

The Committee noted the opinion from the AG that internal controls implemented were not effective in ensuring that the financial statements submitted for auditing were free from misstatements in the disclosure notes. There is a need for a turnaround strategy by the Department to address this finding.

 

6.6     Financial Health of Entities

 

The Committee was particularly concerned about the uncertainty that existed pertaining to whether the following entities would be able to fund their future obligations: SAMSA, C-BRTA, RAF and the Ports Regulator. Funding available to the Ports Regulator was not sufficient for it to fully discharge its mandate. Due to funding challenges, the RTIA employed new staff at a snail’s pace and it was unable to procure the relevant IT support systems. There was a need for the Department to develop a funding plan to ensure the financial sustainability of the entities.

 

6.7        Legislative Delays

 

The Committee noted the impact of delays in the processing of legislation on the Department and entities. During the interactions with entities, it became apparent that delays in the processing of legislation were negatively affecting the ability of entities to optimally fulfill their mandates. In the case of the RAF, the Committee noted that legislative delays had a material financial impact (R14 billion growth in liabilities in one year).  Amendments to the Ports Regulator Act were required in order to give the Regulator more powers and resources to execute its mandate. PRASA had a clear outlook in terms of its strategic objectives, but the Department should provide clarity in terms of policy imperatives. The delay in the implementation of the Adjudication of ARTO Act and data management remains a concern.

 

The Committee requested in its BRR interaction that the Department provide the Committee with a status report on outstanding legislation.

 

6.8        National Scholar Transport Policy

 

The Committee noted that the National Scholar Transport Policy had been withdrawn in the period under review leading to under-expenditure in the programme area. The Committee agreed that the provision of transport falls within the competence of the Department of Transport. The Committee will meet with the Department to expedite the finalisation of the policy to ensure that it is implemented without undue delay.

 

6.9        Lack of a Comprehensive National Road Safety Strategy

 

The Committee noted that there was no uniform National Road Safety Strategy applicable to the transport entities. There was a need for the Department to develop an all-encompassing and holistic Government road safety approach that would spell out the roles and responsibilities of the various DoT agencies and sister Departments in a manner that would seek to achieve complementarity and not competition.

 

6.10      Integrated Transport Planning

 

The Committee noted the absence of integrated transport planning at national, provincial and municipal levels. The Department should brief the committee on its plans to achieve transport integration.

 

6.11 Operation Phakisa

 

As the project was launched during the BRRR meetings, the Committee did not have sufficient time to engage with the Department and SAMSA on it. The Committee will therefore engage with the Department and entity on a regular basis on the maritime programme.

 

 

7.             RECOMMENDATIONS

 

The Committee recommends that the Minister ensure the following:

7.1        That adequate reviews are performed to ensure that targets are in line with the SMART principle.  Performance indicators should be clear and easy to understand and controls should be put in place to ensure that information reported by the public entities is valid, adequate and complete.

 

7.2        The Committee was concerned that recommendations on findings that had been made by the Auditor-General in previous financial years had not been implemented and therefore recommends that recommendations made by the Auditor-General be implemented. Action plans and their implementation by the Department and entities are to address the critical audit findings. The Committee reiterated during its deliberations that audit committees in the Department and public entities should monitor risks and quarterly progress. The finance departments of the Department and entities should further be capacitated with the appropriate skills to prepare credible financial statements.

 

7.3        That established controls and processes are adhered to at all times in the Department and entities when procuring goods and services. The contract management system should be implemented to allow for a full asset count. Officials in the SCM units should be adequately trained on the latest applicable prescripts. Adequate corrective measures should be put in place to address transgression of the applicable prescripts.

 

7.4        That the eNaTIS system transfer progress plan be monitored. The Committee will request regular feedback on the progress made to take over the system from the service provider.

 

7.5        The advertising and filling of vacant posts, especially key vacant posts, be prioritised in the Department and that the prescribed recruitment processes be followed at all times.  The Portfolio Committee will monitor the progress of the Department in filling key vacancies.

 

7.6   The Committee further recommends that the Minister monitor the process with regard to oversight over the public entities and would request regular feedback on key concerns at these entities.

 

7.7   That the financial sustainability of entities be prioritised. The Minister has to ensure that entities have adequate human and financial resources available to achieve predetermined objectives. The Committee will engage with National Treasury on this matter.

 

7.8    That the Strategic and APPs of the Department and entities are aligned to the NDP.

 

7.9     Legislative delays should be addressed as a matter of urgency. The Committee will

regularly request updates from the Department on outstanding legislation.

 

7.10 The Committee commends the unqualified and clean audits received by the Department and its entities, but recommends an increased focus on service delivery.

 

8.             SUMMARY OF REPORTING REQUESTS

The Committee requested additional matters for the Department to report on:

 

Reporting matter

Action required

Timeframe

 

Turnaround strategy to address AG recommendations

Plan on introduction of new  rolling stock

Written plan from PRASA

Within 90 days of the adoption of this report by the National Assembly.

Development of draft Funding Strategy

Written plan from Ports Regulator and follow-up meeting with Committee

Within 90 days of the adoption of this report by the National Assembly.

Development of draft Funding Strategy

Written plan from C-BRTA and follow-up meeting with Committee

Within 90 days of the adoption of this report by the National Assembly.

Legislation status report

Written plan from the Department of Transport

17 October 2014 (the Department provided the information as requested)

Report on Upper Airspace Management in Southern African Development Community (SADC) region

Written plan from the Department of Transport

Within 90 days of the adoption of this report by the National Assembly.

Procurement Plan for 2015/16 Financial Year

Written plan from the Department of Transport

Within 90 days of the adoption of this report by the National Assembly.

Turnaround strategy to address AG recommendations

Written plan from RTMC

Within 90 days of the adoption of this report by the National Assembly.

 

9.          CONCLUSION

As we begin the third decade of our democracy, the Committee has lessons that must be consolidated so as to deepen our oversight role, improve our systems of operation, with the objective of deepening the understanding of building a democratic society, that will participate in shaping the future together with the Committee and are able to be champions of shaping their own destiny.

 

10.             APPRECIATION

The Committee would like to acknowledge the Department and entities for presentations made on their 2013/14 Annual Reports and Financial Statements.  The Committee notes that there is room for improvement in service delivery as we move South Africa forward.

 

 

Report to be considered.