TRANSPORT 2019BRRR

4. BUDGETARY REVIEW AND RECOMMENDATION REPORT (BRRR) OF THE PORTFOLIO COMMITTEE ON TRANSPORT, DATED 22 OCTOBER 2019

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

1. INTRODUCTION

The period under review took place against the backdrop of the initial phase of the implementation of the National Development Plan (NDP) (2014-2019). As part of its contribution to the NDP, the transport sector had to identify interventions aimed at accelerating service delivery, increasing sector job opportunities, rural development and skills development. Key priorities in this regard included investments in public transport, maintenance of roads and rail investments. These had a direct bearing on the Government’s drive to respond to the challenges of poverty, unemployment and inequality.

1.1     Mandate of the Committee

The prime mandate of the Committee is governed by the Constitution of the Republic of South Africa, 1996 (“the Constitution”), 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 (NA) 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 Plans, Annual Performance Plans (APPs) and the Annual Reports 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 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 and its 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 within the year under review. As this is the last BRRR emanating from work done and overseen during the 5th Parliament term, the focus will be on highlighting the key achievements made, as well as challenges encountered during the 2013/14, 2014/15, 2015/16, 2016/17, 2017/18 and 2018/19 financial years, as reported in the Department’s and entities’ 2013/14, 2014/15, 2015/16, 2016/17, 2017/18 and 2018/19 Annual Reports and APPs. 

1.3     Methodology

The Committee engaged with the Auditor-General of South Africa (AGSA) on its audit findings of the Department and its entities, as well as engaged with the Department and its selected entities on 8, 9 and 10 October 2019 on their performance and audit outcomes for the period under review.

The Committee selected to meet the following entities:

1. Railway Safety Regulator (RSR);
2. South African National Roads Agency Limited (SANRAL);
3. Road Accident Fund (RAF);
4. Cross-Border Road Transport Agency (C-BRTA);
5. South African Maritime Safety Authority (SAMSA).

The Committee programmed to meet with SAMSA, however, the entity failed to table their Annual Report in time and the meeting with them was therefore cancelled. The reasons provided for the failure to table the report on time to Parliament were read out by the Minister to the Committee on 10 October 2019 but has to date not been tabled. Despite this, the AGSA did report on the audit outcomes and the report will refer to the presentation by the AGSA on this.

1. Passenger Rail Agency of South Africa (PRASA) as well as:

6.1 Intersite; and

6.2 Autopax;

1. Ports Regulator of South Africa (PRSA);
2. South African Civil Aviation Authority (SACAA); and
3. Airports Company South Africa (ACSA).

The following entities were not programmed or called to meet with the Committee, however, their Annual Reports and/or financial statements were tabled on time and were taken into account for purposes of the report:

1. Road Traffic Management Corporation (RTMC);
2. Air Traffic and Navigation Services (ATNS); and
3. Road Traffic Infringement Agency (RTIA).

The Committee did not meet with the following entity, trading entity and organisations due to the non-tabling of their Annual Reports within the prescribed period:

1. SAMSA;
2. Driving Licence Card Account (DLCA);
3. South African Search and Rescue Organisation (SASAR) including the National Sea Rescue Institute (NSRI).

The BRRR details the analysis of the 2013/14, 2014/15, 2015/16, 2016/17, 2017/18 and 2018/19 Annual Reports and Financial Statements, strategic objectives, budget allocation and financial performance and the recommendations made by the Committee.

The BRRR is based on information accessed through:

• The 2018 State of the Nation Address (SONA);
• The Department’s Strategic Plan and APPs for 2013/14, 2014/15, 2015/16, 2016/17, 2017/18 and 2018/19;
• The Department’s Annual Report and Financial Statement for 2013/14, 2014/15, 2015/16, 2016/17,2017/18 and 2018/19;
• The Strategic Plans and the APPs/Corporate Plans of the entities that fall under the Department, as well as their Annual Reports and Financial Statements for 2013/14, 2014/15, 2015/16, 2016/17,2017/18 and 2018/19;
• Quarterly reports of the Department;
• The report of the AGSA on the audit outcomes of the Department and its entities;
• NT Section 32 Reports;
• The NDP; and
• Oversight visits by the Committee during the period under review.

1. MANDATE OF THE DEPARTMENT OF TRANSPORT

The Department is mandated with maximising the contribution of transport to the economic and social development goals of society providing safe, reliable, effective and efficient fully integrated transport systems that best meet the needs of passenger and freight users. To attain this objective, the Department is entrusted with the provision of transport infrastructure and services in a manner that is efficient and affordable to consumers and the economy, while ensuring safety and security in all transport modes.

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

•           Programme 1: Administration;

•           Programme 2: Integrated Transport Planning;

•           Programme 3: Rail Transport;

•           Programme 4: Road Transport;

•           Programme 5: Civil Aviation;

•           Programme 6: Maritime Transport; and

•           Programme 7: 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.

2.1     Strategic overview 2018/19

2.1.1  Strategic priorities of government

To execute its mandate, the Department is guided by Government’s commitments as set out in, inter alia, NDP 2030, the New Growth Path Framework, the Presidential Infrastructure Coordinating Commission (PICC), the Medium-Term Strategic Framework (MTSF) 2014-2019, as well as the SONA policy directives. The Department has focused on improving mobility and access to social and economic activities, maintaining the national and provincial road networks with a view to responding to Government’s strategic objectives. In addition, emphasis has been on improving public transport for rail and road commuters. These activities contribute to the realisation of Outcome 6 (An efficient, competitive, and responsive economic infrastructure network) of Government’s 2014-19 MTSF.[1]

The NDP has identified economic transformation as a catalyst for accelerated economic growth and job creation. In response to the NDP, the Department has committed itself to:[2]

• Demonstrating accelerated speed in delivery of services and operations;
• Putting together reflection on stakeholder engagement and buy-in;
• Laying more emphasis on shared growth initiatives;
• Reprioritising optimum resource allocation, distribution and usage;
• Supporting diversification of trade patterns;
• Supporting industrialisation beneficiation; and
• Prioritising capacitating of designated groups with socio-economic skills.

As part of the 2014-19 MTSF and in aligning its programmes to the NDP, the Department oversees the PRASA project with Gibela Rail Transport Consortium train manufacturing plant where they are Manufacturing 600 X’trapolis Mega trains for PRASA/Metrorail over 10 years in Ekurhuleni. This will ensure that over 65% of trains used in the country are built locally.[3] In addition, the Department has undertaken to upgrade the R573 Moloto Road in order to improve access to economic opportunities and social space, as well as address the road safety challenges.[4] It is anticipated that the upgrade of the Moloto Road will create approximately 10 000 job opportunities, while the rolling stock jobs are estimated at 65 000.[5]

For its part, the 2018 SONA underscored the need to invest in infrastructure. It also placed emphasis on local procurement as regards the rail rolling stock programme (rail modernisation programme). In addition, reference was made to speeding up the implementation of road maintenance.[6] Finally, SONA 2018 committed Government to changing the way boards of state-owned entities (SOEs) are appointed so that only people with expertise, experience and integrity serve in these vital positions.[7]

Whilst striving for excellence and integration of sustained transport services, the Department and broader transport sector are crucial role players in the achievement of the NDP. In July 2014, Cabinet adopted the MTSF, which continues to be used as the comprehensive five-year implementation plan for the NDP 2030 vision. The MTSF also serves as a mechanism through which all plans of Government institutions across the three spheres of Government are aligned to the NDP. This has been entrenched in the Ministers’ Delivery Agreement with the President of the Republic of South Africa. The Strategic Plan is thus aligned with this agreement in order to ensure that all deliverables are budgeted for and fully implemented.

Of significance to the Minister and the Department are the following key outcomes:

(Table 1: Ministers’ Delivery Agreement with the President of the Republic of South Africa – information obtained from the Annual Performance Plan 2018/19 p. 14 – 16 – The Annual Report of the Department for 2018/19 did not contain this agreement as was done in the past)

2.1.2  Strategic Priorities of the Department

In the 2018/19 financial year, the Department performed its work in line with the following strategic outcome-oriented goals:[8]

• Efficient and integrated infrastructure network and operations that serve as a catalyst for social and economic development
  • To achieve this goal, the Department developed policies and promulgated legislation that are set to drive investments for the maintenance and strategic expansion of the transport infrastructure network; and support the development of transport asset management systems in rural and provincial authorities. The drive of these interventions was to improve the efficiency, capacity and competitiveness of all modes of transport.
• A transport sector that is safe and secure
  • The Department continued to promote and ensure implementation of policy interventions and strategies that sought to reduce accidents and incidents in the road, rail, aviation and maritime environments.
• Improved rural access, infrastructure and mobility
  • Through the scholar transport and non-motorized transport interventions, the Department aimed to increase mobility and rural access in rural district municipalities.
• Improved public transport services
  • The Department ensured an effective, efficient, affordable and accessible public transport system in urban and rural areas through the development and implementation of integrated public transport networks, establishment and strengthening of regulatory entities, refurbishment and acquisition of new rail rolling stock and upgrading priority passenger rail corridors.
• Increased contribution to job creation
  • Implementation of the Broad-Based Black Economic Empowerment (B-BBEE) and commissioning of labour-intensive projects by the Department increased the creation of jobs in the sector.
• Increase contribution of transport to environmental protection
  • Reduction of green-house gas emissions through the use of more energy efficient modes of freight and passenger transport and promoting the use of cleaner fuels ensured that the impact of the sector on climate change was minimised.
• Effective and efficient management and support.

2.1.3  Challenges experienced in 2018/19

The following were reported in the Annual Report as challenges experienced by the Department during the year under review:

2.1.3.1 Programme 1: Administration

Regarding University Funding, there were delays in submission of invoices, which resulted in under-expenditure of R1 426 000.

The Department was unable to deliver of the Compulsory Induction Programme due to unavailability of training materials from the National School of Government.

2.1.3.2 Programme 2: Integrated Transport Planning

None. [9]

2.1.3.3 Programme 3: Rail Transport

Although the Department is pleased that the journey to redress years of underinvestment in passenger rail infrastructure and trains has commenced, PRASA has unfortunately not yet reached a stage where customer needs and expectations are satisfactorily met. The deployment of new trains and infrastructure improvement has started in Gauteng and is being rolled out to other regions.

PRASA has since its formation in 2009 encountered various challenges, the biggest being the inherited infrastructure and trains transferred from its predecessor, the South African Railway Commuter Corporation. Following three decades of underinvestment, these assets were old and outdated. Even though Government was able to secure the required capital injection to modernise PRASA’s rail system (Rolling stock and infrastructure), PRASA has struggled to attract/secure adequate expertise to undertake such an enormous modernisation programme.

The roll out of new trains is merely one of the elements of the modernisation programme and should begin to transform passenger rail travel to a point where it is underpinned by:

• Modern, safe and reliable trains for commuters;
• Faster trains which will increase capacity on the network;
• Improved overall safety of the trains and reduced energy cost; and
• Improved predictable service to the passengers.

Challenges were experienced in the development of the National Rail Bill. The Bill as part of the strategic process was dependent on the finalisation and approval of both the White Paper on the National Rail Policy and the Transport Economic Regulator.

2.1.3.4 Programme 4: Road Transport

Due to the delays in filling of vacancies, specifically where staff with procurement experience and skills was required, the procurement of some services for various projects was delayed. In addition, existing staff have to continuously work long hours and fill the void to work on the day-to-day tasks, especially with Monitoring and Oversight responsibilities.

2.1.3.5 Programme 5: Civil Aviation

Regarding Bilateral Affairs:

• Cancellation of consultation meetings by foreign authorities due to circumstances beyond control;
• Poor or lack of response to proposals to hold air services consultations; and
• Synchronising diaries of the political heads in order to sign Bilateral Air Services Agreements that are ready.

2.1.3.6 Programme 6: Maritime Transport

There was slow progress in the implementation of the Marine Transport Manufacturing Projects under Operation Phakisa ocean economy as a result of changes within Transnet and the Transnet National Ports Authority (TNPA).

The Department also received negative audit findings on the SAMSA compliance with the Standards of Training, Certification and Watchkeeping for Seafarers Convention, this may result in damage to South Africa’s international reputation as a maritime nation.

2.1.3.7 Programme 7: Public Transport

Regarding the National Land Transport Amendment Bill, the report indicates that it was still in Parliament since April 2016 and it is envisaged to be approved in the 2019/ 20 financial year.

The Programme saw a prolonged procurement processes, particularly in relation to the Revised Taxi Recapitalisation Programme (RTRP), which led to underspending on the allocated budget.

There were also low expenditure trends in municipalities due to supply chain and procurement weaknesses and poorly capacitated and performing municipalities.

2.1.3.8 Key policy developments and legislative changes

• Administrative Adjudication of Road Traffic Offences (AARTO) Amendment Bill

The AARTO Bill:

• seeks to introduce electronic method of service in addition to existing methods of service (personal and registered);
• seeks to introduce demerits points;
• repeals the issuance of warrants by the Registrar and seeks to prohibit an infringer who infringer who does not comply with an enforcement order from being issued with a driving license, professional driving permit or license disc, in respect of a motor vehicle registered in the name of an infringer, until such enforcement order has been complied with or has been revoked.

At the end of the reporting year the Bill awaited assent into law by the State President. It was assented to during the 2019/20 financial year.

• Road Accident Benefit Scheme (RABS) Bill

The RABS Bill seeks to:

• establish a scheme that operates on a “no fault” basis;
• establish the Administrator of the scheme;
• set up an appeals process for victims who are not satisfied as part of eliminating complex and expensive legal processes;
• establish simple and accessible procedures for claimants and for the expeditious resolution of disputes;
• provide for a comprehensive scheme that provides for victims’ healthcare services, income support benefits, family support benefits and funeral support benefits.

The Bill was before the National Assembly upon the rising of the 5th Parliament and the hope is that it will be revived by the 6th Parliament for further processing.

• National Road Safety Strategy (NRSS)

The Department, together with its roads entities, remained unflinchingly driven to work persistently and consistently hard towards the reduction of fatalities on the roads. The Department spent time with its entities to compile a plan of action (365-Day Road Safety Plan) to be implemented through provinces, and in line with the National Road Safety Strategy. The Plan consists of well-coordinated and integrated road safety initiatives, interventions and Ministerial special road safety programmes. Special consultations with the provinces were conducted in order to ensure that all spheres of government were part of the drive. Furthermore, working with communities in implementing the Plan was primary to the Department for the success of the Plan, for it is the conviction of the Department that “road safety is what you do with the community, not what you do for the community”.

As part of compiling the Plan, the Department embarked on a collective exercise of paying close attention to many aspects such as findings of different researches done on road safety, vehicle population, studying the latest statistics and the trends as well as conducting an environmental scan, which further revealed certain behavioural patterns by road users. The Plan was, therefore, informed by various factors drawn out of the exercise and it spelled out the necessary actions to be taken in order to be deliberate in addressing the contributory factors.

Some of the pertinent areas of concern that the plan sought to address include amongst others, learner safety, public driver attitude, cycling safety, pedestrian safety, and passenger safety. Throughout the year, the Department worked continuously to combat road carnage by working with all sectors of stakeholders.

2.1.4  Achievements identified in 2018/19

The following were reported in the Annual Report as achievements by the Department during the year under review:

2.1.4.1 Programme 1: Administration

• Human Resources Development and Performance Management and Development System (PMDS)
  • Skills Programmes: A total of 553 employees including 74 interns were trained in line with the Workplace Skills Plan with 673 training interventions. Budget spent: R4 814 222.67;
  • Bursaries: 156 bursaries (4 PhDs) are being managed of which 56 bursars have been awarded during the 2018/19 financial year, 25 bursars completed their qualifications of which seven were Masters degrees. Budget spent: R2 758 439.83;
  • Internship Programme: 52 plus 22 (for Municipalities) interns have been appointed (8% of staff establishment) of which four have already been appointed within and outside of the Department. 48 interns are currently on board within the Department. Budget spent: R2 310 080;
  • Learnership Programme: Public Administration Learnership for 15 employees is in progress. Awaiting remediation results for completion;
  • University Programme: 12 Memorandums of Understanding (MOUs) are being managed including one new MOU with University of Witwatersrand (WITS) for Aeronautical Engineering – the Department is introducing a new model for 2019/20 hence a need to renew all the MOUs. A total of 953 students were enrolled for 2018 academic year and 187 graduated. Budget spent: R11 789 000;
  • Career Outreach Programme: 14 career outreach programmes were conducted to date against a set target of 10 sessions. A total of 6 233 learners were reached across provinces.

• Performance Management and Development System (PMDS)
  • Compliance in the submission of Performance Agreements:

- Employees at salary level 12 and below: 541 of 547 submitted = 99%;

- Senior Management Service (SMS) members: 101 of 103 submitted = 98%.

• Submission of Half-Yearly Performance Reviews:

- Employees at salary level 12 and below: 522 of 547 submitted = 95%;

- SMS members: 92 of 103 submitted = 89%.

• Payment of performance incentives for 2017/18:

- Performance incentives for all the qualifying employees at salary level 1 to 14 were successfully paid before the Department of Public Service and Administration (DPSA) timelines i.e. 31 December 2018 for employees at salary level 12 and below and 31 January for SMS members respectively;

- Annual Monitoring Report on implementation of the Risk Management Strategy was developed.

• Risk Management
  • Annual Monitoring Report on implementation of the Risk Management Strategy was developed.

2.1.4.2 Programme 2: Integrated Transport Planning

The Revised White Paper on the National Transport Policy was submitted to the Minister for Consideration on the 26 March 2019.

Public awareness campaigns on the Green Transport Strategy were held in nine provinces.

2.1.4.3 Programme 3: Rail Transport

On the 25th October 2018, the Gibela Local Train Factory, located at Dunnottar Park, Ekurhuleni, was officially launched by the President of the Republic of South Africa. In December 2018, the first major milestone was reached with the delivery of the first locally manufactured train to PRASA. The construction of the main car-body shell building and training centre was completed in January 2018 and all manufacturing activities commenced in January 2018.

The local manufacturing of new trains is a catalyst for transformation of Metrorail services and public transport as a whole. It is the beginning of the rollout of PRASA’s Rolling Stock Fleet Renewal Programme that will result in the manufacture of approximately 7 224 new trains over a period of 20 years.

Whilst the urgent challenge to improve passenger services remains primary, the local manufacturing of these trains has also been designed to achieve a number of key Government objectives such as the delivery of quality services to citizens, revitalization of South Africa’s rail engineering industry through local manufacturing and ensuring local content (65% minimum local content is set) as part of Government’s Industrial Policy Action Plan (IPAP), employment creation and skills development as well as B-BBEE.

Central to this programme of procuring new rolling stock is:

• The creation of 8 088 direct jobs throughout the supply chain, with the Local Factory targeting a creation of 1 500 jobs. This is based on a target to achieve a minimum of 65% local content on the new trains. The Local Factory will further have 99% South Africans employed, with a target of employing 85% historically disadvantaged South Africans and a minimum of 25% females. By February 2019, Gibela had employed a total of 875 employees across various categories, for both manufacture and maintenance activities.

• A training centre has been established to enable skills development and quality train manufacturing. In addition, the training programme entails the provision of bursaries for Universities, Technical and Vocational Education and Training (TVET) colleges, internships, learnerships and apprenticeships. To date, 3 069 individuals have been up-skilled including artisans, trade workers, engineers, engineering technologists, professional engineers, technologists, designers and other staff. By the end of this programme, 19 257 individuals would have undergone training in various and relevant technical fields.

The Railway Safety Bill was presented to Cabinet in February 2018 and was approved for Public comments. The Branch conducted provincial stakeholder consultations between February and March 2018. The Bill was presented to the National Economic Development and Labour Council (NEDLAC) in line with the requirements set by Cabinet. The Bill was approved after numerous engagements and a NEDLAC report was submitted to the Minister of Transport for the Bill to be submitted to Cabinet for approval.

The Interim Rail Economic Regulatory Capacity Ministerial Task Team (MTT) was established in terms of a MOU between the Minister of Transport and the Minister of Public Enterprises. The MTT was appointed to assist with strategic guidance and recommendations to the Ministers on guidelines, frameworks, institutional arrangements and capacity requirements relating to rail economic regulation.

• In terms of the MTT’s approved Work-plan, a priority project was on International Benchmarking of Rail Network Access and Pricing. A workshop was held on 22 October 2018, which was attended by the Department, Department of Public Enterprises (DPE), NT, PRASA and Transnet to discuss current rail access and pricing arrangements. The intention of the workshop was to engage with the rail entities for the purposes of articulating their overall perception and approach on the thematic areas relating to rail economic regulation. This process will assist in understanding the current challenges faced by the two entities concerning rail network and access and the development of the ideal regulatory structure and instruments for the rail sector;
• Another focus of the MTT was on capacity building relating to economic regulation. In conjunction with the University of Johannesburg, a short course on economic regulation was developed. The purpose of the course was to empower officials thereby developing a nucleus of skills and capacity related to economic regulation. The course took place during February 2019 and was attended by 19 officials from the Department, DPE and NT.

2.1.4.4 Programme 4: Road Transport

Road Regulation

• National Road Traffic Amendment Bill submitted to the Department’s Executive Committee (EXCO) and the Committee of Transport Officials (COTO);
• Developed the Inception report on the Review of Entities Legislation and Mandates;
• Completed the Terms of Reference for the Review of Entities Legislation;
• The AARTO Bill was approved by the NA and awaiting Presidential Assent;
• The RABS Bill was tabled in Parliament for further processing.

2.1.4.5 Programme 5: Civil Aviation

Bilateral Affairs

• Air Transport Strategy 2019-2024 has been approved for submission to Cabinet.
• To date, South Africa has deregulated air services with 39 out of the 55 African States. A total of 26 countries have declared their Solemn Commitment to the implementation of the Yamoussoukro Decision (YD) in support of the creation of the Single African Air Transport Market (SAATM). The YD and SAATM, of which South Africa is a signatory, provides for the full liberalisation of market access between African states, free exercise of traffic rights, elimination of restrictions on ownership and full liberalisation of frequencies, fares and capacities.

Policy and Regulation

• The Civil Aviation Amendment Bill was approved by Cabinet and submitted to Parliament, and The Southern African Development Communities Safety Organization Charter was also approved by Cabinet and submitted to Parliament.

2.1.4.6 Programme 6: Maritime Transport

The Maritime transport Branch was able to achieve the following during the year under review:

• Draft strategies and legislation approved by Forum of South African Directors-General (FOSAD) Clusters

- Merchant Shipping Bill;

- Maritime Transport Sector Development Council Bill;

- Oil Pollution Preparedness, Response and Cooperation Bill;

- Maritime Transport Strategy 2030; and

- Inland Waters Strategy.

• The following Business Plan projects were achieved:

- Request for Proposals for the Emergency Tug Vessel Building Project published;

- South African Maritime Business Forum established; and

- Inaugural Maritime Transport Industry Dialogue event held.

2.1.4.7 Programme 7: Public Transport

• Transport Appeal Tribunal (TAT) Amendment Bill was approved by FOSAD and submitted to Minister on 27 February 2019 for tabling in Cabinet;
• Integrated Public Transport Networks (IPTN) funded and monitored in 13 cities (Ekurhuleni, Mbombela, Nelson Mandela Bay, Johannesburg, Cape Town, George, Durban (eThekwini), Polokwane, Msunduzi, Mangaung, Rustenburg, Buffalo City and Tshwane) as at the end of March 2019;
• Developed the draft detailed IPTN plans for two district municipalities, Vhembe and Nkangala District Municipalities;
• The RTRP was approved by Cabinet and implementation has commenced;
• A joint project between the Department and the Departments of Basic Education as well as Planning, Monitoring and Evaluation was undertaken and an Improvement Plan developed.

2.1.5  Significant events and projects for the year

The following were reported in the Annual Report as significant events and projects by the Department during the year under review:

2.1.5.1 Programme 1: Administration

• Entering into a new partnership with WITS for training of the Aeronautical Engineers. A new MOU was signed by the two parties;
• A new qualification on Road Safety at Diploma level was developed in collaboration with RTMC and was being rolled out from August 2018;
• In terms of women empowerment, five female employees i.e. three SMS members of which one is a disabled and two Middle Managers completed the International Executive Development Programme and International Leadership Development Programme sponsored by the Transport Education and Training Authority (TETA).

2.1.5.2 Programme 2: Integrated Transport Planning

None.

2.1.5.3 Programme 3: Rail Transport

• The Railway Safety Bill seeks to repeal the National Railway Safety Regulator Act, 2002. The Act established the Railway Safety Regulator to oversee and promote safe railway operations by an enabling regulatory framework;
• The Bill seeks to place emphasis and focus on railway safety and to recognise operators’ role in managing and implementing safety measures with the RSR promoting safety and ensuring compliance;
• The International Benchmarking of Rail Network Access and Pricing project aimed to conduct a desktop review of international best practices in access and pricing regimes in rail economic regulation and identifying jurisdictions that may be of interest and applicable to the South African environment.

2.1.5.4 Programme 4: Road Transport

• Submitted the draft Roads Policy to Cabinet;
• Monitored the overall implementation of the S’hamba Sonke Programme (SSP) in line with the Provincial Road Maintenance Grant (PRMG) budget;
• Monitored implementation of the 2016-2030 National Road Safety Strategy;
• Conducted stakeholder consultations on the draft Anti-Fraud and Corruption Strategy;
• Increased road safety community-based involvement in public education and awareness programmes.

2.1.5.5 Programme 5: Civil Aviation

The International Civil Aviation Day (ICAD) is one of the flagship projects whose commemoration is championed by the Department annually. During the financial year under review, it was hosted in Mpumalanga Province at the old Nelspruit airport and its festivities spread over two days: 07 - 08 December 2018. The highlights of the first day included the career expo that was supported by 13 organisations and it reached out to a total of 876 leaners from 68 schools invited from across the educational districts of the host province. The educators who accompanied the learners benefited from TETA facilitated educator’s workshop. Its outcome was to empower educators assist the learners in making informed decisions when choosing subjects to lead them to careers in aviation.

The highlights of the second day included observing ICAD through a formal programme. This was graced by political principals from local, district, provincial and national spheres of government. Whilst selected dignitaries offered messages of support, the Minister of Transport delivered a keynote address. In addition, the Minister of Transport launched the ATNS 3D Mobile Truck simulator. The day ended with an air show open to the public at no cost.

2.1.5.6 Programme 6: Maritime Transport

• Maritime Transport Strategy 2030

The implementation of the Comprehensive Maritime Transport Policy has resulted in the approval by the Directors-General of the Economic Cluster (DGEC) approving the draft Maritime Transport Strategy 2030.

• Overhauling of the Merchant Shipping Act

The work on the overhauling of the 1951 Merchant Shipping Act progressed with the approval by Directors-General clusters of the draft Merchant Shipping Bill, 2019.

• Maritime Transport Sector Development Council (MTSDC)

Progress towards the establishment of this council gained traction with the approval by the DGEC of the Maritime Transport Sector Maritime Development Council Bill. The Bill was to be presented in Cabinet once constituted after the May 8 Elections.

• Maritime International Relations and Cooperation Committee (MARETEC)

The Committee was established as according to the Comprehensive Maritime Transport Policy to coordinate all maritime international engagements.

• Coordination of the Operation Phakisa Delivery Unit

The Branch continued coordinating the work of the Delivery Unit and finalised all the audits as per Quarter targets and reviewed the three Foot-Plan of the Marine Manufacturing Delivery Unit.

• 2020 World Maritime Day Parallel Event.

Progress was made in the constitution of the Steering Committee and the establishment of work-streams and their terms of reference. The work-streams have continued to progress with this work.

2.1.5.7 Programme 7: Public Transport

IPTN operations were launched in two more cities, Polokwane and eThekwini.

1. OVERVIEW AND ASSESSMENT OF FINANCIAL PERFORMANCE

3.1     2013/14 and 2014/15

Table 2: Overview and Assessment of Financial Performance (2013/14 & 2014/15)

(Source: Department of Transport Annual Report 2014/2015)

The budget allocation for the Department in the 2014/15 financial year was R48.7 billion. Transfers and subsidies accounted for R47.8 billion and of this amount, the Department had transferred R14 billion or 29.4% at the end of the First Quarter. Another R3.3 billion or 16.4% had been transferred to the municipalities and provinces, the majority of which was for the PRMG or SSP: Roads Maintenance (R1.6 billion or 20% of the R7.9 billion)) and the Public Transport Operations Grant (PTOG), totalling R1.3 billion or 25.9% of the R4.8 billion.

Rollovers were requested as detailed in the table below:

Table 3: Rollovers 2014/15

(Source: Department of Transport Annual Report 2014/15 (2015))

3.2     2015/16 and 2016/17

Table 4: Appropriation Statement for 2016/17

(Department of Transport, (2016b) Vote 35: Annual Report 2015/16 Financial Year and 2017Vote 35: Annual Report 2016/17 Financial Year).

The budget allocation for the Department for the 2016/17 financial year stood at R56.3 billion. Of this amount, the Department had spent R56.4 billion by the end of the financial year, indicating an over-expenditure of R117.8 million. The biggest over-expenditure, to the tune of about R177 million, was in the Road Transport programme.

Transfers and subsidies accounted for R52.3 billion and of this amount, the Department had transferred R13.9 billion or 26.6%, mainly to public corporations and private enterprises by the end of the First Quarter for 2015/16. The Department had an available budget of R1.2 billion for operations. By the end of the Second Quarter, the Department had transferred R26.6 billion or 50.7% of its total available budget. These transfers and subsidies were mainly to PRASA, SANRAL, and to the provinces for the PRMG and the PTOG. By the end of the Third Quarter, the Department had transferred R38.8 billion or 73.8% of its total budget, mainly to PRASA, SANRAL, provinces for the PRMG and the PTOG respectively, and to the municipalities for the Public Transport Network Grant (PTNG). A total of 98% of expenditure by the end of the Third Quarter had been under transfers and subsidies, as well as payments for financial assets, with the remaining 2% having been spent on departmental operations. By the end of the Fourth Quarter of 2015/16, the Department had transferred R52.2 billion or 99.4%. These transfers had been made to public entities, provinces, municipalities, international organisations and households. Transfers to provinces and municipalities to the end of the Fourth Quarter of 2015/16 stood at 98.7% of the available appropriation. This was attributed to the withholding of the final tranche payment of the PRMG to KwaZulu-Natal for not complying with the conditions set out in terms of the Division of Revenue Act. The Department had transferred 100% of the PTOG and 100% of the PTNG to municipalities. What follows below is an analysis of how the Department spent its budget allocation per Quarter during the period under review.

Rollovers were requested as detailed in the table below:

Table 5: Rollovers 2016/17

(Source: Department of Transport, (2017)).

3.3      2017/18

Table 6: Appropriation Statement for 2017/18

(Source: Department of Transport Annual Report 2017/18 (2018)).

In the 2017/18 financial year, the budget allocation for the Department stood at R59.8 billion and of this amount, the Department had spent R54.7 billion or 91.4% by the end of the financial year, translating into an under-expenditure of R5.1 billion or 8.6%. The biggest under-expenditure was in the Rail Transport programme. Of the R19.3 billion that had been allocated to this programme, the Department had spent R14.5 billion or 75.1% by the end of the reporting period, indicating an under-expenditure of R4.8 billion or 24.9%.

Rollovers were requested as detailed in the table below:

Table 7: Rollovers

(Source: Department of Transport Annual Report 2017/18 (2018)).

3.4     2018/19

Table 8: Appropriation Statement for 2018/19

(Source: Department of Transport Annual Report for 2018/19 (2019b).

For the 2018/19 financial year, the Department had received a budget of R59.8 billion and of this amount, it spent R59.2 billion by the end of the financial year, that is 98.9% of the available budget, up from R54.7 billion or 91.4% of the R59.8 billion it had spent by the same time in 2017/18. The Department underspent a total amount of R645.1 million, translating into an under-expenditure of 1.1%. The biggest under-expenditure was in the Public Transport programme. Of the R13 billion that had been allocated to this programme, the Department had spent R12.5 billion or 96.2% by the end of the reporting period, indicating an under-expenditure of R500 million or 3.8%. The Compensation of Employees was underspent in all programmes due to posts that could not be filled.[10]

3.4.1  Programme 1: Administration

By the end of the 2018/19 financial year, the Administration programme had spent R379.8 million or 87.5% of the R434.1 million that had been allocated to it, translating into an under-expenditure of R54.3 million or 12.5%. The programme underspent R20.2 million on the Compensation of Employees owing to posts that could not be filled.

In terms of economic classification, Goods and Services were underspent by R32.3 million mainly owing to invoices that had not been received for Office Accommodation (R13.6 million). There was under-expenditure in the Management sub-programme (R8.6 million), Corporate Services sub-programme (R3.5 million) and Ministry sub-programme (R1.5 million) after a total of R13.3 million had been shifted to the Ministry sub-programme to cover expenditure on travelling, as well as venues and facilities.[11]

Savings of R1.3 million were realised on Other Transfers to Households because less leave gratuities were paid than had been budgeted for. Funds to the tune of R3.1 million were shifted within the programme from Goods and Services to cover over-expenditure on Payments for Capital Assets.[12]

3.4.2  Programme 2: Integrated transport planning

The budget allocation for the Integrated Transport Planning programme stood at R89.9 million and of this amount, the programme had spent R71.4 million or 79.3% by the end of the reporting period, translating into an under-expenditure of R18.6 million or 20.7%. The programme underspent R4 million on the Compensation of Employees owing to the posts that could not be filled. In addition, it underspent on Goods and Services by R14.6 million due to non- or slow spending on the following projects:[13]

• National Transport Planning Databank because of delays in procurement;
• Review of the National Road Freight Strategy;
• Corridor Freight Development that had been advertised late;
• Black Economic Empowerment (BEE) Charter Council owing to delays in the appointment of Council members; and
• Procedures, Computations and Recouping of Overloading Cost on South African Roads and National Transport Planning Forum due to a cancelled contract.

The Committee noted that, despite the indication regarding no challenges for this programme as reported by the Department per their tabled Annual Report p.27, the Department presented contrary information during the engagement with the Committee. In this programme the Department failed to meet all the set targets and they also indicated in their presentation that a notable challenge to the programme was the delays in processing the STER Bill.

3.4.3  Programme 3: Rail transport

For 2018/19, the budget allocation for the Rail Transport programme stood at R15.887 billion and of this amount, the programme had spent R15.873 billion or 99.9% by the end of the period under review. The programme underspent R13.6 million or 0.1%. The programme underspent R0.8 million on the Compensation of Employees due to the posts that could not be filled. Moreover, it “saved” R0.9 million and underspent R11.9 million on Goods and Services because:[14]

• Work on the White Paper for Rail Transport had been “done in-house”;
• No expenditure had been incurred on the Review of the Branch Line Strategy and a Study on the Integration of Commuter Transport; and
• The Establishment of a Rail Economic Regulator had been underspent.

3.4.4  Programme 4: Road transport

Of the R30 098 760 billion that had been allocated to the Road Transport programme for 2018/19, the Department spent R30 067 108 billion or 99.9%, translating into an under-expenditure of R31.7 million or 0.1%. The programme underspent R15.3 million on the Compensation of Employees due to posts that could not be filled. The programme underspent on Goods and Services by R15.9 million because “no or insignificant expenditure was incurred on” the following projects:[15]

• Programme Development for S’hamba Sonke;
• Automated Profile Measurements;
• Capacitate Standard Audits against National Standards; and
• Road Transport Legislative Review.

There was under-expenditure on the Decade for Road Safety. In addition, the Road Transport programme underspent R410 000 on the Payment for Capital Assets because less equipment and furniture had been procured owing to vacancies.[16]

3.4.5  Programme 5: Civil aviation transport

By the end of 2018/19, the Department had spent R167.7 million or 92% against R182.3 million that had been allocated to it during the reporting period, indicating an under-expenditure of R14.5 million or 8%. The Civil Aviation Transport programme underspent R10.8 million on the Compensation of Employees due to posts that could not be filled. “Savings” of R2.7 million were realised because the following projects had been “managed in-house”:[17]

• Implementation of the National Aviation Development Plan;
• White Paper on Civil Aviation;
• Airlift Strategy; and
• National Aviation Transformation Strategy.

3.4.6  Programme 6: Maritime transport

For the 2018/19 financial year, the Maritime Transport programme had received R129.1 million and of this amount, it spent R123 993 million or 96%, indicating an under-expenditure of R5.1 million or 4%. It is worth noting that there is an improvement on the under-expenditure in this programme compared to 2017/18, when of the R128.4 million that had been allocated to it, it had spent R109.3 million or 85.1%, translating into an under-expenditure of R19.1 million or 14.9%.

The Maritime Transport programme underspent R1.9 million on the Compensation of Employees due to the vacancies that could not be filled. Moreover, the Maritime Transport programme underspent R2.2 million after R9.1 million had been shifted from the Public Transport programme to cover over-expenditure on the Oil Pollution Prevention project.[18] The under-expenditure was mainly because no expenditure had been incurred on the International Maritime Organisation (IMO) World Maritime Day Parallel Event. Savings of R1 million were realised on Transfers to Foreign Governments and International Organisations thanks to the fact that less membership fees were paid to the IMO than had been budgeted for.[19]

3.4.7  Programme 7: Public transport

By the end of the reporting period, the programme had spent R12.5 billion or 96.2% of the R13 billion that had been allocated to it, translating into an under-expenditure of R500 million or 3.8%. However, compared to the previous financial year (2017/18), the Public Transport programme regressed in 2018/19 because by the end of 2017/18, it had spent R12.3 billion or 98% of the R12.5 billion that had been allocated to it, indicating an under-expenditure R248.3 million or 2%.[20]

The Public Transport programme underspent R3.5 million on the Compensation of Employees owing to the posts that could not be filled. In addition, the programme underspent R149.2 million on Goods and Services and the breakdown in this regard was as follows:[21]

• Taxi Scrapping project had expired in September 2018 and could only be re-started at the end of the financial year (R34.8 million);
• Funds amounting to R30 million for the administration of conditional grants to municipalities had not been spent;
• No expenditure had been incurred on the Shova Kalula bicycle project (R20.3 million);
• Technical Oversight and Support for Public Transport (R7.1 million);
• Empowerment of Small Bus Operators (R6 million);
• Moloto Bus Contract Design (R5 million);
• National Technical Requirements (R2 million);
• The upgrade of the National Land Transport Information System (R15 million); and
• Little expenditure had been incurred for accommodation and infrastructure of the National Public Transport Regulator (R9.7 million).

Regarding the Shova Kalula bicycle project, The Committee noted that the Department indicated that there had been no expenditure incurred on this project during the year under review, yet during their presentation to the Committee the Department reported that it had spent R10.4 million on the Shova Kalula bicycle project in 2018 and did not spend on the project in 2019.

The Department reported that “a range of other projects had been underspent” in the Public Transport programme and that savings of R5.5 million were realised on operational expenditure.[22] Moreover, the programme underspent R341.8 million on Transfers to Households due to the slow rate at which taxis had been scrapped and because the Taxi Scrapping project could not proceed from October 2018 to March 2019 because of “delays in the adjudication of the new contract”.[23]

3.5     Virements 2018/19

Table 9: Summary of Virements[24]

 (Source: Department of Transport, (2019b).

An amount of R13.2 million was shifted from Goods and Services in the Public Transport programme to Goods and Services in the Administration programme to cover expenditure on Venues and Facilities of the Ministry (R4 million), to Goods and Services in the Maritime Transport programme to cover over-expenditure in the Maritime Transport programme of R9.1 million on its contract for oil pollution prevention and to Households in the Maritime Transport programme (R57 000) to cover donations made of R10 000 and over-expenditure on leave gratuities of R47 000.

3.6     Rollovers requested 2018/19

Rollovers were requested as detailed in the table below:

Table 10: Rollovers

(Source: Department of Transport, (2019b).

3.7     Unauthorised, fruitless and wasteful expenditure 2018/19

3.7.1  Unauthorised expenditure

The cost of the electronic National Traffic Information system (eNaTIS) maintenance and operations resulted in unauthorised expenditure of R1.3 billion that had been incurred in 2013/14, 2014/15 and 2016/17. Unauthorised expenditure of R980 375 was incurred in the current financial year as expenditure that had been incurred, but not in accordance with the vote of the programme: Road Transport.[25]

3.7.2  Fruitless and wasteful expenditure

56 new cases of fruitless and wasteful expenditure concerning “no shows” and one case of value added tax that had been overcharged were declared during the period under review, of which 25 cases amounting to R37 000 were transferred to debt.

31 cases to the tune of R81 000 were to be transferred as debt and one case amounting to R1 000 was under investigation at the time of reporting. Seven cases amounting to R929 000 were resolved and a further 48 cases amounting to R58 000 from the previous financial year were transferred to debt.[26]

53 cases of fruitless and wasteful expenditure remained at the end of the financial year amounting to R151 000. Of these cases, 42 will be transferred to debt (R91 000), nine cases were identified to be written off (R9 000), one case is under investigation (R1 000) and one case must still be investigated (R50 000).

3.7.3  Irregular expenditure

During the reporting period, 11 cases of irregular expenditure amounting to R107.2 million were declared, with two of these to the tune of R97.3 million. Two cases amounting to R646 000 were condoned and one case of R296 000 was transferred to debt.

Irregular expenditure for 16 cases to the tune of R746.1 million remained at the end of the financial year. Of these cases, National Treasury was requested to condone four that amounted to R638.5 million.[27] At the time of tabling its Annual Report, the Department contended that a disciplinary hearing was underway pertaining to one case amounting to R42 million. The Department further asserted that eight cases totalling R64.6 million were to be considered by the Bid Adjudication Committee (BAC). One case of R0.9 million had been recommended to the BAC to condone, while two cases totalling R0.1 million were under investigation.[28] Two cases amounting to R1.677 million were “still under determination”.[29]

3.7.4  Measures put in place

The Committee noted that the measures listed below (as taken from the Annual Reports of the Department) are identical to the measures put in place in the Annual Reports for 2014/15, 2016/17, 2017/18 and 2018/19. The Committee further noted that the Department had still incurred irregular expenditure in the current period under review, which would indicate that the measures were either insufficient or ineffective or that the Department had not implemented these measures appropriately.

The Department has therefore not improved or reviewed these measures as requested by the Committee specifically during the 2018 BRRR.

Table 11: Measures put in place to prevent and/or detect irregular expenditure 2016/17, 2017/18 and 2018/19

3.8     Findings of the AGSA for the 2018/19 Financial Year

During the period under review, the Department received an unqualified audit opinion with findings. The AGSA, however, made the following findings: [30]

3.8.1  Restatement of corresponding figures

The corresponding figures for 31 March 2018 were restated as a result of errors in the financial statements of the department, and for the year ended, 31 March 2019.  The restatement of figures is a repeat finding.

3.8.2 Irregular expenditure

The Department incurred irregular expenditure as a result of officials not always following the prescribed procurement processes.

The AGSA found that the Department had not taken effective and appropriate steps were not taken to prevent irregular expenditure amounting to R107 175 000, as disclosed in note 26 to the annual financial statements, as required by section 38(1)(c)(ii) of the Public Finance Management Act (PFMA) (No. 1 of 1990) and treasury regulation 9.1.1.

With regard to the failure to take effective steps to prevent this irregular expenditure, this is a repeat finding.

3.8.3 Annual financial Statements and Annual Performance Report

The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records as required by section 40(1)(b) of the PFMA. [31] The non-compliance to the PFMA is a repeat finding.

A material misstatement of the commitments disclosure note identified by the auditors in the submitted financial statement was corrected, resulting in the financial statements receiving an unqualified opinion.

3.8.4 Procurement and contract management

Bid documentation for the procurement of commodities designated for local content and production did not stipulate the minimum threshold for local production and content, as required by the 2017 Preferential Procurement Regulation 8(2).[32]

Commodities designated for local content and production were procured from suppliers who had not submitted a declaration on local production and content, as required by the 2017 Preferential Procurement Regulation.

3.8.5  Leadership

The AGSA found that the leadership of the Department had been slow in exercising its oversight responsibilities to address the deficiencies regarding financial reporting, compliance and related internal controls.[33] This is a repeat finding.

3.8.6 Financial and performance management

Material amendments made to the annual financial statements related to commitments that were misstated as management did not prepare accurate and complete supporting schedules for commitments, thereby affecting the accuracy of the amount disclosed in the annual financial statements.

Management did not adequately review and monitor compliance with the PFMA and Treasury Regulations to ensure compliance with procurement processes and to prevent incurring irregular expenditure.

3.8.7  Investigations

The AGSA found that two investigations were still in progress on matters related to procurement and contract management. The outcomes were expected in the 2019/20 financial year.[34]

At the date of this report, there are five investigations underway by law enforcement agencies, one by the Special Investigating Unit and four by the Public Protector. The impact, if any, on the financial statements of the Department can only be determined once the investigations are concluded.

1. OVERVIEW AND ASSESSMENT OF PROGRAMME PERFORMANCE

4.1     Summary of performance

Table 12: Overall Annual Performance Targets

(Source: Department of Transport (2019b).

During the period under review, the Department had set itself 31 annual performance targets and of these, it achieved 26, translating into an achievement rate of 83.9%.[35] It spent R59.2 billion or 98.9% of the R59.8 billion that had been allocated to it 2018/19. The Department did not achieve five annual performance targets, indicating an under-achievement rate of 16.1%. In contrast to 2017/18, the success rate for the Department regressed in 2018/19. In that financial year (2017/18), the Department had set itself 37 annual performance targets and of these, it achieved 34 by the end of the reporting period, translating into an achievement rate of 91.9%.[36]

Some of the achievements by the Department during the period under review were the following:[37]

• A total of 553 employees, including interns, were trained in line with the Workplace Skills Plan, with 673 training interventions. In this regard, the Department spent R4.8 million.[38]
• On 25 October 2018, President Ramaphosa officially launched the local train factory at Dunnottar, Ekurhuleni, in Gauteng. In December 2018, the first major milestone was reached with the delivery of the first locally manufactured train to PRASA. The construction of the Gibela car-body shell building and training centre was completed in January 2018 and all manufacturing activities commenced in January 2018.[39]

The local manufacturing of new trains is a catalyst for the transformation of Metrorail services and public transport as a whole. It is the commencement of the rollout of PRASA’s Rolling Stock Fleet Renewal Programme that will result in the manufacture of approximately 7 224 new trains over a period of 20 years.

Whilst the urgent challenge to improve passenger services remains primary, the local manufacturing of these trains has also been designed to attain a number of key Government objectives. These include the delivery of quality services to citizens, the revitalisation of South Africa’s engineering industry through local manufacturing and ensuring local content (65% minimum local content is set), as part of Government’s IPAP.

Other Government objectives that this programme seeks to achieve are employment creation, skills development, as well as the B-BBEE:

• The National Road Traffic Amendment Bill was submitted to the Department’s EXCO and COTO.
• The Air Transport Strategy 2019-2024 was approved for submission to Cabinet.
• The draft of the Maritime Transport Strategy 2030 was approved by the FOSAD Clusters.
• The IPTNs were funded and monitored in the 13 cities (Ekurhuleni, Mbombela, Nelson Mandela Bay, Johannesburg, Cape Town, George, Durban, Polokwane, Msunduzi, Mangaung, Rustenburg, Buffalo City and Tshwane).

However, the Department encountered certain challenges:

• Since its formation in 2009, PRASA has encountered various challenges, the biggest being the inherited infrastructure and trains transferred from its predecessor, the South African Railway Commuter Corporation. Subsequent to three decades of underinvestment, these assets were old and outdated. Even though Government was able to secure the required capital injection to modernise PRASA’s rail system (rolling stock and infrastructure), PRASA has struggled to attract or secure adequate expertise to undertake such an enormous modernisation programme.[40]

Although the Department has been pleased that the journey to redress years of underinvestment in passenger rail infrastructure and trains has commenced, unfortunately, PRASA has not yet reached a stage where customer needs and expectations are satisfactorily met.[41] The deployment of new trains and infrastructure improvement has started in Gauteng and is being rolled out to other regions.

This is merely one of the elements of the modernisation programme and should begin to transform passenger rail to a point where it is underpinned by:[42]

• Modern, safe and reliable trains for commuters;
• Faster trains that will increase capacity on the network;
• Improved overall safety of the trains and reduced energy cost; and
• Improved predictable service to the passengers.

Challenges were experienced in the development of the National Rail Bill. The Bill, as part of the strategic process, hinged on the finalisation and approval of both the White Paper on the National Rail Policy and the Transport Economic Regulator.[43]

There was slow progress on the implementation of the Marine Transport Manufacturing projects under Operation Phakisa ocean economy owing to changes within Transnet and the TNPA.[44]

Prolonged procurement processes, particularly regarding the RTRP, led to underspending on the allocated budget.

4.2     Programme performance

4.2.1  Programme 1: Administration

Table 13: Programme 1: Administration: Annual Performance Targets

(Source: Department of Transport (2019b).

The Department had set itself five annual performance targets under the Administration programme and all of which (100%) were achieved. The Administration programme had performed in a similar fashion in 2017/18. For the 2018/19 financial year, the Department spent R379.8 million or 87.5% of the R434.1 million that had been allocated to this programme.

4.2.2  Programme 2: Integrated transport planning

Table 14: Programme 2: Integrated Transport Planning: Annual Performance Targets

(Source: Department of Transport (2019b).

During the period under review, there were four annual performance targets under the Integrated Transport programme and three or 75% were achieved, while one was not achieved.

The Department spent R71.4 million or 79.3% of the budget allocation for the programme. The annual performance target that was not achieved was:[45]

• STER Bill submitted to Parliament

The reason provided by the Department for its inability to meet this target was “extensive stakeholder consultations prolonged by the complex process of finalising the Bill”.[46] The main cause for “prolonged consultations” was, in, turn, attributed to “the lack of consensus on critical areas in the Bill”. To break the impasse, the Department had undertaken to continue “consultations with key stakeholders to provide clarity and direction on the STER Bill”.[47]

4.2.3  Programme 3: Rail transport

Table 15: Programme 3: Rail Transport: Annual Performance Targets

(Source: Department of Transport (2019b).

Of the four annual performance targets that the Department had set itself under the Rail Transport programme, it achieved three or 75%, while one was not achieved. The Department spent R15 873 693 billion or 99.9% of R15 887 279 billion in the Rail Transport programme.

The target that was not achieved was:[48]

• National Rail Bill submitted to Cabinet

At the time of reporting, the Department maintained that it could not achieve this annual performance target because “further investigation [was] required on institutional arrangements, market structure and private sector participation for the rail industry”.[49] As a corrective measure, the Department stated that it would continue “engagements with the Department of Public Enterprises and National Treasury”.[50]

4.2.4  Programme 4: Road transport

Table 16: Programme 4: Road Transport: Annual Performance Targets

(Source: Department of Transport (2019b).

During the reporting period, the Department had set itself six annual performance targets under the Road Transport programme and all of which (100%) were achieved. The Department spent R30 067 108 billion or 99.9% of the R30 098 760 billion that had been allocated to the Road Transport programme.

4.2.5  Programme 5: Civil aviation transport

Table 17: Programme 5: Civil Aviation Transport: Annual Performance Targets

(Source: Department of Transport (2019b).

Under the Civil Aviation Transport programme, the Department had set itself five annual performance targets and of these, it achieved two or 40%, while three or 60% were not achieved.  This was a regression from 2017/18 because in that financial year, the Department had similarly set itself five annual performance targets and all of which (or 100%) had been achieved by the end of the reporting period.[51] The Department spent R167.7 million or 92% of R182.3 million that had been allocated to this programme. The annual performance targets that were not achieved were:[52]

• Draft regulations for Airports Company Act submitted to the Minister for approval

• The Department maintained that the target could not be achieved due to “the non-finalisation of the Bill Amendment process”.[53] As a corrective measure, the Department reported that at the time of reporting, the Amendment Bill was “undergoing parliamentary approval process”. It further averred that the “finalisation of regulations will be prioritised once the Amendment process is finalised”.[54]

• Draft regulations for the ATNS Act submitted to the Minister for approval

• Likewise, the reason given by the Department for not achieving this annual performance target was that the regulations could not be developed “due to the non-finalisation of the Bill Amendment process”.[55] As its corrective measure, the Department contended in the same way that the Amendment Bill was “undergoing parliamentary approval process”. In addition, it stated that the “finalisation of regulations will be prioritised once the Amendment process is finalised”.[56]

• ATNS Bill submitted to Cabinet

• The Department attributed its inability to achieve this target to “prolonged consultations on a complex process; a change of scope from a legislative amendment to repealing and rationalization of two existing legislations into one”.[57] At the time of reporting, the Department asserted that “the process [had] been duly refocussed and consultations [had] commenced”. In addition, it stated that “the medium term [had] been amended to ensure that the Bill is finalised and submitted to Cabinet and Parliament within the MTEF (Medium-Term Expenditure Framework)”.[58]

4.2.6  Programme 6: Maritime transport

Table 18: Programme 6: Maritime Transport: Annual Performance Targets

(Source: Department of Transport (2019b).

During the period under review, the Department had set itself three annual performance targets and all of which (100%) were achieved. By the end of the financial year, the Department had spent R123 993 million or 96% of the R129.1 million that had been allocated to it.

4.2.7  Programme 7: Public transport

Table 19: Programme 7: Public Transport: Annual Performance Targets

(Source: Department of Transport (2019b).

The Department had set itself four annual performance targets under the Public Transport programme and all of which (100%) were achieved. The Department had spent R12.5 billion or 96.2% of the R13 billion that had been allocated to the Public Transport programme.

5.       HUMAN RESOURCE MANAGEMENT

During the year under review, the Department had 878 posts on the approved establishment and of these, 645 had been filled. The vacancy rate stood at 26.5%.[59] The highest vacancy rate was in Programme 6: Maritime Transport that stood at 37.5%. The vacancy rates of Programme 4: Road Transport, as well as Programme 5: Civil Aviation Transport followed, with 36% and 33.3% respectively.

6.       SUMMARY OF 2018 REPORTING REQUESTS

During the 2018 BRRR, the Committee requested additional matters for the Department to report on. This year, unlike in the 2017/18 Annual Report, the Department did not report in their tabled Annual Report on progress in addressing the recommendations made by the Committee or the additional reporting requests as indicated below. The Committee, however, noted that during the course of engagements throughout the year, the Department did address some of these issues.

Table 20: Additional Reporting Requests from the 2018 BRRR by the Committee

7.       OBSERVATIONS

7.1 Tabling and Reasons for delays or non-tabling of Annual Reports

By 30 September 2019, the Annual Reports of the Department, as well as eight of the entities had been tabled in Parliament.

By 8 October 2019, PRASA and its subsidiaries tabled their reports with letters indicating reasons for the late tabling thereof listed as follows:

“I hereby wish to inform you the Passenger Rail Agency will be tabled late because 2018/2019 Annual Financial Statements and Performance Report were concluded by the Auditor-General on the 25th September 2019.

The AGM concluded the adoption of the Annual report on the 26th September 2019 and the Auditor-General requested three days to read and finalise report before the tabling to the Parliament.

The report only reached the Ministry Office on the 30th September end of business which was late in terms of submission according to the letter dated 30th August 2019 guidelines of submission by the Speaker of the National Assembly which was circulated to all the entities.

In accordance with section 65(1) of the Public Finance Management Act, (Act 1 of 1999) wish to respectfully submit the following Annual Reports of the Prasa and its subsidiary the Intersite and entities for the financial year 2018/2019 for tabling in Parliament.”

“I regret to inform you that AutoPax, a subsidiary of PRASA Limited, has a delay in tabling of the Financial Statements and Performance Report.

The Auditor-General of South Africa has confirmed being satisfied with the Annual Financial Statements for tabling in Parliament in the week of 06 October 2019. “

On 4 and 10 October 2019 respectively, Parliament was informed that the DLCA (through a tabled letter from the Minister) and SAMSA (through the verbal communication thereof by the Minister in the Committee meeting) were not tabling and listed the following reasons and proposed timeframe for tabling:

DLCA –

“I hereby wish to inform you that the Driving Licence Card Account (DLCA) will not be able to table its 2018-19 Annual Report, financial statements, and audit report as required by section 65 of the Public Finance Management Act No. l of 1999 (PFMA).

The non-compliance is due to administrative delays at an organizational level emanating from labour impasse that delayed the finalisation of the Annual report.

The AGSA has confirmed that the DLCA's 2018/19 Annual report and financial statements were audited and approved for printing, it is therefore envisaged that the Annual report will be submitted before the end of October 2019.”

SAMSA –

The Minister in his opening comments to the Committee on 10 October 2019 indicated that the Annual Report of SAMSA was outstanding as the entity was unable to process the report through their Annual General Meeting (AGM) as neither the Minister nor Deputy-Minister were available to attend the AGM. He further indicated that the AGSA had audited the financial statements of the entity but that the report was not yet submitted to the Ministry for sign off due to the inability to adopt the report at the AGM.

There has been no explanation provided for the non-tabling by SASAR or NSRI, although it is noted that these organisations are not listed as entities of the Department.

The DLCA and SAMSA 2018/19 Annual Reports remain outstanding at the time of completing the report.

7.2 Opinions expressed by the AGSA: Audit Outcomes for the Transport Portfolio

7.2.1 Summary of AGSA findings for the Department specifically

During the period under review, the Department received an unqualified audit opinion. However, with regard to only the Department, the Committee noted that the AGSA made findings on the following:

7.2.1.1 Annual Financial Statements and Annual Performance Report

The AGSA found that the financial statements submitted for auditing had not been prepared in accordance with the prescribed financial reporting framework, as required by section 40(1)(a) of the PFMA.

A material misstatement of the commitments disclosure note identified by the auditors in the financial statements was corrected, resulting in the financial statements receiving an unqualified audit opinion.

7.2.1.2 Procurement and Contract Management

Bid documentation for the procurement of commodities designated for local content and production did not stipulate the minimum threshold for local production and content, as required by the 2017 Preferential Procurement Regulation 8(2).

Commodities designated for local content and production were procured from suppliers who had not submitted a declaration on local production and content, as required by the 2017 Preferential Procurement Regulation.

7.2.1.3 Expenditure Management

The AGSA found that the Department had not taken effective and appropriate steps to prevent irregular expenditure amounting to R1.2 million, as required by section 38(1)(c)(ii) of the PFMA and NT Regulation 9.1.1.

7.2.1.4 Leadership

The AGSA found that the leadership of the Department had been slow in exercising its oversight responsibilities to address the deficiencies regarding financial reporting, compliance and related internal controls.

7.2.1.5 Financial and Performance Management

Material amendments made to the annual financial statements pertained to commitments that were misstated as management had not prepared accurate and complete schedules for commitments, thereby affecting the accuracy of the amount disclosed in the annual financial statements.

Management did not adequately review and monitor compliance with the PFMA and NT Regulations to ensure compliance with procurement processes to prevent incurring irregular expenditure.

7.2.1.6 Investigations

The AGSA found that two investigations were still in progress on matters related to procurement and contract management. The outcomes were expected in 2019/20 financial year.

7.2.2 AGSA findings for the entire transport portfolio

The committee noted the following views expressed by the AGSA regarding the audit outcomes of the Transport Portfolio:

• Regression:
  • The audit outcomes of the portfolio have regressed over the five-year period from 29% of unqualified audit opinion with no findings in 2014/15 to 21% in 2018/19. Some of the auditees have inconsistent audit outcomes.
  • PRASA regressed from a qualified audit opinion from the prior year to a disclaimer due to significant material misstatements in the financial statements and limitation of scope imposed.

• Consistent:
  • SAMSA remained the same with qualified audit opinion as they could not address significant findings from the prior year.
  • We commend C-BRTA for retaining its unqualified audit opinion with no findings for the past four years.

• Improvement:
  • ATNS improved from a qualified opinion in the prior year to unqualified audit opinion with findings.
  • RTMC and RTIA also improved their audit outcomes from unqualified with findings to unqualified with no findings.

• Concerns:
  • Financial statement preparation remains a concern in the portfolio as material adjustments were effected to annual financial statements submitted for audit at ACSA, ATNS, DLCA, The Department, RSR, SANRAL and PRASA.
  • Forty-three per cent (43%) achieved unqualified opinions only because they corrected all misstatements identified during the audit.
  • Fourteen per cent (14%) was not able to achieve credible financial reporting (SAMSA and PRASA).
  • SAMSA qualification areas
    • Irregular expenditure
    • Commitments
    • Receivables
    • Payables
    • Property, plant and equipment.
  • PRASA disclaimer areas
    • Property, plant and equipment
    • Unspent conditional grants
    • Accumulated surplus
    • Capital subsidy and grants amortised, subsidy received in advance, operational subsidy
    • Fare revenue (comparative), Commitments
    • Risk management, Irregular and fruitless and wasteful expenditure
    • Cash flow statement, statement of comparison of budget and actual amounts.
  • 21% of the portfolio had no material findings only because they corrected all misstatements identified during the audit.
  • 29% of the portfolio had material findings that resulted in a qualification or disclaimer conclusion, these were PRASA, ATNS and RAF.
  • Stagnation in Reliable reporting of achievements at 71% for The Department, CBRTA, RTMC, DLCA, RSR, PR, RTIA, SAMSA, SACAA and ACSA.
  • Reduction in performance at 85% for Usefulness of performance indicators and targets for The Department, CBRTA, RTMC, DLCA, RSR, PR, RTIA, SAMSA, SACAA, RAF, ACSA and SANRAL.
  • The AGSA expressed the following top five non-compliance areas under the findings on compliance with key legislation:
    • Procurement and contract management non-compliance at The Department, RSR, SACAA, DLCA, SAMSA, Ports Regulator, ACSA, SANRAL and PRASA
    • Material misstatements in submitted financial statements at The Department, RSR, ATNS, DLCA, SAMSA, ACSA, SANRAL and PRASA
    • Lack of prevention of unauthorised, irregular and fruitless and wasteful expenditure at The Department, RSR, ATNS, SAMSA, ACSA, SANRAL and PRASA
    • Lack of consequence management at ATNS, SAMSA, ACSA, SANRAL and PRASA
    • Poor revenue management at SAMSA.
    • The AGSA made the following remarks regarding the Financial health of the Department entities:
      • Material uncertainty exists whether 14% of auditees can continue to operate in future for RAF and SANRAL
      • Regarding Revenue management, the inability to collect monies owed and the resultant impairment of receivables due to amount owed being irrecoverable for RAF, The Department, DLCA, RTMC, SAMSA, RTIA, ACSA and SANRAL.
      • Regarding Asset and liability management there was a deficit for the year – this was, however, not as a result of an over-spending of the auditee’s operating expenditure budget. Measures must be implemented to address this situation to ensure sustainable service delivery and financial viability for RAF, RTIA and PRASA.
      • Current liabilities exceeding current assets indicating liquidity issues, which means that they will not be able to pay their creditors as payments become due for RAF and SANRAL.
      • Regarding the Net liability position, the AGSA indicated that this highlights a possible risk that the auditee cannot continue its operations at the desired levels, which may lead to an interruption or breakdown to service delivery for RAF.
      • Regarding Cash management, the AGSA indicated the following:
        • Negative cash balance - possible cash flow constraints resulting in a higher risk in the event of financial setbacks and the ability of the auditee to meet its obligations to provide basic services and its financial commitments will be compromised for the Department.
        • Negative operating cash flows - may result in questions about the auditee’s financial viability and its ability to continue operating optimally at its current capacity as a going concern for RAF and RTIA expenditure.

• The AGSA indicated that the Department incurred unauthorised expenditure of R980 375 in the current financial year as expenditure that was incurred but not in accordance with the vote of the programme (Road Transport) and that no unauthorised expenditure was incurred in 2017-18.
• The AGSA indicated that with regard to the previous year unauthorised expenditure reported for investigation, there was no investigation required for the unauthorised expenditure of R177 million incurred in 2016-17 as it related to maintenance cost of the eNaTIS system that had to be paid as per court order and there was no unauthorised expenditure incurred in 2017-18.
• The AGSA indicated that there was an increase in fruitless and wasteful expenditure from R86.6 million in 2017-18 to R136.1 million in 2018-19 and that ACSA was the biggest contributor to fruitless and wasteful expenditure amounting to R63.2 million identified in the current year related to interest and penalties on revised tax liability resulting from a SARS audits.  Fruitless and wasteful expenditure for ACSA increased with R60.7 million from the prior year.
• Regarding Irregular Expenditure, the AGSA indicated that it had decreased with R1,1 billion from the prior year.
• PRASA, SANRAL and ACSA were the main contributors to irregular expenditure:
  • PRASA (R3 037 million) – Competitive bidding not followed (R1 740 million), procurement not in accordance with Preferential Procurement Policy Framework Act and SCM policy (R773 million), contract price exceeded (R167 million), payment without contract (R118 million) and other non-compliance with SCM prescripts (R239 million).
  • SANRAL (R419 million) – Procurement without a competitive bidding process (R309.2 million), non-compliance with other procurement process requirements (R103.5 million) and non-compliance with legislation on contracts (R6.5 million).
  • ACSA (R264 million) – Non-compliance with Construction Industry Development Board requirements (R37.5 million), non-compliance with Preferential Procurement Policy Framework Act (R216.5 million) and non-compliance with National Treasury requirements (R10 million).
  • R783.3 million represents non-compliance in 2018-19.
  • R11.1 million is expenditure relating to prior year non-compliance identified in the current year.
  • The AGSA indicated the following regarding the regression in SCM compliance:
    • During the year under review only 7% of the portfolio had no findings.
    • The AGSA remained of the view that all SCM findings should be investigated.
    • The most common findings on supply chain management were:
      • Not able to audit procurement of R112.3 million due to missing or incomplete information.
      • Uncompetitive and unfair procurement processes at 69% of auditees.
      • Local content minimum threshold for local production not adhered to by three auditees.

• With regard to allegations of financial and/or fraud and SCM misconduct (at six auditees) the following was indicated:
  • ACSA – Allegations were not investigated (2017-18)
  • The Department and PRASA – Investigations of allegations took longer than three months (2018-19).
  • DLCA – Investigations of allegations took longer than three months (2017-18)
  • PRASA – Allegations were not properly investigated (2017-18).

• The AGSA indicated the following regarding the implementation of expanded mandate (Public Audit Act amendments):
  • Commencement date of the amendments was proclaimed by the president as 1 April 2019.
  • For the Audits of 2018/19 it will be implemented as follows based on the audit outcomes of PRASA:
    • Type of material irregularity is a material non-compliance (which would be reported in the audit report) that resulted in (or is likely to result in) a material financial loss.
    • PRASA was selected for the phased-in implementation based on the following selection criteria:
      • Latest audit outcome not clean or unqualified with findings – except if there was a material finding on prevention or follow-up of irregular expenditure.
      • High irregular expenditure over the last three years.
      • Sufficient coverage across spheres of government and provinces.
      • Material irregularities identified (PRASA):
        • Unfair procurement process for the purchase of locomotives.
        • Competitive bidding process not followed in the award relating to:

•Provision of bus services in the Western Cape.

•Provision of surveillance services (drones).

•Provision of security services:

• Investigation to be initiated – To be followed up in 2019-20 audit.

• Unfair procurement process followed in the appointment of signalling contractors and Unfair award for the control of vegetation:
  • Investigation to be initiated – To be followed up in 2019-20 audit.
  • Competitive bidding process not followed in appointment of general overhaul and upgrade contractors:
  • Investigation by the Special Investigations Unit – To be followed up in 2019-20 audit.

• Uncompetitive process followed in the award relating to:

•Supply and delivery of signalling equipment.

•Repair and replacement of signalling equipment:

• Investigation to be initiated – To be followed up in 2019-20 audit.

• Recommendations:
  • Appropriate action should be taken to ensure the second phase of the investigation is concluded.
  • Effective and appropriate disciplinary steps should be taken against employees found to be responsible.
• The AGSA indicated the following regarding the instability and/or vacancies in key positions:
  • Instability and vacancies in key positions (including Executive level) has contributed to the regression of audit outcomes
  • Instability at executive management level at PRASA including, among others the position of Group Chief Executive Officer, Group Chief Financial Officer, Chief Information Officer and Information Security Officer that were filled in an acting capacity for 2018/19. The position of Group Chief Financial Officer was filled from 01 September 2019. This has continued to impact the entity negatively and had contributed to the significant deficiencies in the financial management, performance reporting and compliance monitoring processes
  • Instability at executive management level at ACSA and RAF including the position of the Chief Executive Officer (CEO) and Chief Finance Officer (CFO) that are vacant and have been filled on an acting capacity
  • The Board/accounting authority at RAF was appointed on an interim basis and the appointment was not done in accordance with the RAF Act. This has created the instability in leadership to provide effective oversight over the entity.
  • At SAMSA, the CEO position is vacant since May 2017 and the CFO was appointed during the year
  • At DLCA, there is an acting head of entity, the incumbent changed during the year. There was uncertainty about the entity being taken back to the Department or remaining as is, hence no positions were filled.   The CFO and Head of risk positions are still vacant
  • At the Department, the Director-General (DG) position was filled by acting incumbents since 26 July 2016.  The new DG was only appointed on 1 August 2019. There are a number of acting Deputy Directors-General (DDGs).

7.3 Committee Observations following the engagement with the AGSA

The AGSA indicated that the transport portfolio had regressed in performance and this was evident in the Department for the second year having received an unqualified opinion with findings, which also contained a number of repeat findings; the regression in audit opinion from unqualified with no material findings (clean audit) to an opinion of unqualified with findings of the entities SACAA and the PRSA.

The Department and its entities received the following findings:

• Unqualified Audit with no material findings (also referred to as a Clean Audit) – C-BRTA, RTIA, and RTMC;
• Unqualified with findings – the Department, DLCA, SACAA, SANRAL, ACSA, PRSA, RSR, RAF and ATNS;
• Qualified with findings – SAMSA and Intersite;
• Disclaimer – PRASA and Autopax;
• Failure to submit and findings still outstanding – SASAR and NSRI.

The Committee was pleased to note that the C-BRTA had been able to retain their unqualified audits with no material findings (clean audit) despite the challenges they face.

The Committee welcomed the improved audit findings from unqualified with material findings to unqualified with no material findings (clean audit) from RTMC and RTIA. The Committee further welcomed the improved audit finding of ATNS from a qualified audit to an unqualified audit with material findings, however, the Committee was of the view that this is still not a favourable outcome and the entity needs to do more to improve on its audit findings.

The Committee expressed concern over the audit outcome of SAMSA as being a qualified audit for the third year in a row, as well as the fact that the entity failed to table its Annual Report to Parliament for consideration.

Of utmost concern to the Committee was the regression of PRASA from a qualified audit to a disclaimer, as well as the poor performance of its subsidiaries Intersite of a qualified opinion and Autopax of a disclaimer opinion.

Although the achievement of prerequisite performance targets is to be applauded, the Committee was of the view that there was insufficient linkages between the meeting of targets and an actual or tangible improvement in service delivery to the people of South Africa. For this reason, the Committee requested that the Department and its entities move towards the development of key performance targets that would have tangible and measurable results that show actual and/or improved service delivery to all transport stakeholders.

SACAA is commended for being an entity of the Department which managed to achieve all of its targets for the financial year in question and for doing so for the 5th consecutive year. PRSA, RSR and RTIA were also commended for managing to achieve 100% of their targets for the reporting year.

The Committee was pleased to note that the Department and all their entities were able to submit their financial statements for audit within the required timeframe set by the AGSA, however, it was noted with concern that the Department still fails to ensure that all of its entities table their reports to Parliament for consideration during the BRRR process by the end of September each year.

For the 3rd consecutive year, the Committee notes a failure by the Department to ensure that all of its entities table their reports on time and that the Committee was once more unable to engage and perform its oversight function fully over three entities who failed to table within the BRRR process. Although the Annual Reports of these entities could not be engaged on, the Committee did raise this with the Minister in its engagement with the Department on 10 October 2019 and the Committee noted the comments by the AGSA on the audit outcomes of the DLCA and SAMSA.

The AGSA, however, made no mention of Audit Outcomes for SASAR and NSRI and the Committee therefore had no information to consider for this BRRR (SASAR and NSRI are not generally regarded as entities of the Department even though it and the NSRI receive funds from the Department and the NSRI has in the past submitted Financial Statements to the Committee).

The top five areas of material non-compliance remain the failure to prevent unauthorised, irregular and fruitless and wasteful expenditure, insufficient revenue management, lack of consequence management, non-compliance with legislation and regulations when it comes to procurement and contract management, as well as material misstatements to financial statements submitted for audit.

From the presentations and engagements, the Committee noted those areas where improvements were evident, however, concluded that the Department and its entities had not been able to clear repeat findings through implementing all recommendations and corrective measures by the AGSA and the Committee as made since the start of the current term.

The Department will need to focus more attention on ensuring that action plans are implemented to address prior year audit findings and that sustainable solutions are implemented to prevent a recurrence of findings in the area of compliance with key applicable legislation and financial reporting. Vacancies and instability of management at the Department, as well as its entities continue to pose significant challenges regarding operations and the creation of a control environment to ensure that basic financial, performance reporting and compliance with laws and regulations are enforced.

The accountability for Government spending at SOEs is an area receiving attention in the public, as Government funds and guarantees are being used to sustain some of the SOEs. The audit outcomes of SOEs continued to regress – most often as a result of inadequate controls, monitoring and oversight. Instability at Board and executive level played a role in the outcomes of SOEs, and the Department and its entities were not spared this. The level of oversight by the Department over the entities reporting to it remained a concern for the Committee throughout all budget reviews over the past five years and the Committee welcomes the new branch within the Department to ensure it improves a greater level of oversight over its entities.

The Committee, in its oversight over the Department, has continued to request the Minister to ensure that proper monitoring and oversight is performed over all grant allocation projects in order to see to it that the actual performance targets achieved through transfers translate into actual service delivery on the ground and value for money.

The irregular expenditure does not necessarily represent wastage or means that fraud was committed – this needs to be confirmed through investigations to be conducted by the accounting officer (also referred to as the CEO) or accounting authority (Board) – but losses could already have arisen or may still arise if follow-up investigations are not undertaken. The track record of auditees in dealing with irregular expenditure and ensuring that there is accountability remains poor. The significant increase can be attributed overall to continued weaknesses in the SCM directorates in the application of SCM policy and National Treasury Regulations in this regard. The most common findings for the past five years related to deviations from the prescribed procurement processes. Three written quotations or competitive bids were not invited to enable the selection of a supplier based on a competitive and fair process. Although such deviations are allowed, the AGSA found that it had often not been approved; or, if approved, the deviation was not reasonable or justified. This points to the inappropriate use of management discretion in the procurement process. In some instances, the accounting officers used their discretion to appoint targeted suppliers without justifiable reasons – thereby failing to ensure compliance with legislation.

The Preferential Procurement Regulations make provision for the promotion of local production and content. These regulations are aimed at supporting socio-economic transformation. The Committee highlighted the need for the Department, as well as its entities to adhere to the Preferential Procurement Regulations throughout their engagements, as well as working towards the achievement of radical economic transformation in their respective fields of operation.

The AGSA is of the opinion that as long as the political leadership, senior management and officials do not make accountability for transgressions a priority, irregular, unauthorised and fruitless and wasteful expenditure, as well as fraud and misconduct will continue. An environment that is weak on consequence management is prone to corruption and fraud, and the country cannot allow money intended to serve the people to be lost.

The Committee continues to impress upon the Department and its entities that all investigations must be finalised within a reasonable timeframe and that all contraventions of legislation and regulations must be acted upon through disciplinary action. In instances where employees may have resigned, the Committee requested that the Department and its entities must not stop there, but should continue with steps to retrieve losses from those employees and, where appropriate, follow the procedures laid out in the PFMA for possible criminal prosecution.

7.4 Committee Observations with specific reference to entities

With specific focus on the entities that appeared before the Committee, the following extracts show concerns noted from the Annual Reports and observations that were made:

7.4.1 ACSA

The overall audit outcome of ACSA has remained stagnant compared to the prior years. The entity received a financially unqualified audit opinion with material findings in compliance with legislation and met 82% of set Key Performance Indicator (KPI) targets.

ACSA’s financial performance was weakened by traffic volumes not increasing as projected, as a result of attrition of previously dominant airlines and time taken to replace that capacity. A knock-on effect of this shift in the entity’s customer market was that non-aeronautical revenue – which is directly related to traffic volumes through airports – did not increase as had been planned. Finally, ACSA was unable to reconstitute its retail and car hire tenant base due to ongoing litigation.

Total revenues for the year increased by 5.5% to R7.1 billion. Aeronautical revenue for the year grew by 6.3% to R3.8 billion, (2018: R3.6 billion), with lower growth attributed to lower airport charges. Non-aeronautical revenue grew by 4.6% to R3.3 billion (2018: R3.2 billion), largely reflecting a weak domestic economy and a difficult operating environment for their retail, car rental, advertising and property rental activities. The entity’s non-aeronautical revenue accounted for 47% of total revenue, compared to 47% in 2018 and 48% in 2017. This compares favourably with the global picture of modern airport operations, which sees an even split of revenue stream.

The current tariff promulgation, which allows for a 5.8% increase in airport charges in 2018/19 with no further increases until 2021, applies until 31 March 2021. ACSA continuously engages in the review of the economic regulatory framework with stakeholders to provide clarity and certainty on tariff decisions going forward, including through an appeals mechanism included in the Airports Company Amendment Bill.

The Group remained within a primarily refurbishment and replacement cycle during the year and thus capital expenditure was in line with depreciation. Cash and short-term investments decreased on the back of the repayment of the AIR01 bond in March 2019 to the amount of R2 billion that, in turn, reduced the total liabilities to R9.4 billion (2017/18: R11.6 billion).

The Committee voiced its concern over the marked increase in expenditure on security costs at the entity. The Group experienced significant cost pressures with respect to security costs, a R158 million increase compared to the prior year across all airports, as a result of regulatory amendments which increased the scope of security services for land-side security. Other security-related scope increases were also introduced due to heightened security measures, additional deployment at access gates and remote sites, as well as K9 services. Additional bad debt to the amount of R93 million has been provided for in terms of the entity’s new accounting treatment regarding primarily airline customer non-payment of arrears. Airline customers are placed on a cash-basis when certain levels of arrears are reached.

The Committee voiced concerns regarding the progress of investments into concessions by ACSA. The Group made no further equity injections into its concessions. A cautionary was issued in February 2019 following an offer for the 10% equity stake in Mumbai International Airport Private Limited. The Guarulhos International Airport concession reduced its negative impact on profitability by 72% for the period to December 2018, while the exchange rate strengthened further to enhance the Group’s balance sheet.

7.4.2 SACAA

Although the entity achieved a 100% of its targets, it regressed in its audit outcome from an unqualified audit with no findings to an unqualified audit with findings.

SACAA reported a net operating surplus of R2.1 million for the period ending 31 March 2019, against a budgeted surplus of R1.2 million. This has resulted in a positive variance of R0.9 million. The entity is a self-funded public entity that relies on a combination of revenue streams to fulfil its mandate and business operations. The revenue streams consist of mainly the Passenger Safety Charge (PSC), User Fees, Fuel Levy, as well as a grant earmarked for the investigation of aircraft accidents and incidents. Over 75.7% of the SACAA’s total revenue is derived from the PSC, and hence the organisation pays attention to industry developments that may have an impact on passenger movements and related numbers. The Committee noted that in February 2019, the Minister of Transport, with the concurrence of the Minister of Finance, approved an annual increase of 5.3% on the PSC for 2019; bringing the amount to R24.86 per ticket. The amended regulations were published in the Government Gazette and became effective from 1 May 2019.

A review of the 2018/19 financial year figures indicates that the PSC accounts for 75.7% of total revenue, User Fees 14.2%, Fuel Levy 3.6%, the grant from the Department was 3.1%, and Other Income 3.4%. These percentages are fairly constant when compared to previous years. As the PSC is the biggest contributor to the revenue, the passenger numbers will have a major impact on financial performance, and these numbers are closely monitored on a monthly basis.

The Committee questioned whether the entity still required the grant from the Department.

7.4.3 PRSA

The entity achieved 100% of its targets, however, it regressed in its audit outcome moving from an unqualified audit with no findings (clean audit) to an unqualified audit with findings.

The Ports Regulator has answered to President Ramaphosa’s call to reduce port and other administered prices in the economy, in approving a decrease in Port Authority tariffs of - 6,27% for the 2019/20 financial year, as announced at their press conference on 30 November 2018. Mindful of the country’s slowing economic growth over the tariff period, coupled with the need for investment in the country’s port infrastructure, the Regulator opted to add R539 million to the Excessive Tariff Increase Margin Credit to ensure that overall average tariffs in the outer two years of the period under review and beyond, remain close to the inflation target band, bringing the balance in this important savings facility to over R3,15 billion.

The Committee raised concerns regarding the need for the country to have tariff pricing that would put us on a more equal competitive footing with worldwide port tariffs.

The entity, in support of economic development, indicated that the Port Tariff Incentive which was developed in the previous year continued. Whilst no award was made in this respect, The Port Tariff Incentive continues to serve as a mechanism by which cross-subsidies within the port tariff structure may be implemented, quantified, as well as be fair and in the public interest. A reduction in tariff, if justified and approved, will be granted through the amendment of a specific tariff line.  The performance incentive system, published as part of the current tariff methodology, called Weighted Efficiency Gains on Operations, allows the TNPA as a regulator of operators, to gain or lose up to 5% profit for up to 10% increase or decline (respectively) on year-on-year performance for a basket of measurable indicators. The 2019/20 tariff process will herald the first time in which a Weighted Efficiency Gains on Operations award/disincentive will be determined under this important programme and Port Consultative Committees across the country have played a key role in the consultations in this regard.

The Committee is concerned that the Regulator has no Board and the tariffs that were due to be set in November 2019 may not materialise. The absence of the Board also meant that the Tribunal of the Regulator could not convene.

The Committee also noted the continued dependence of the Regulator on the finalisation by the Department of the STER Bill which has been delayed for a number of years.

7.4.4 C-BRTA

During the reporting period, the Agency achieved 12 out of 13 targets that were set for 2018/19 financial year, constituting a performance level of 92.31%.

The Committee noted that the Agency’s financial sustainability remains a key challenge as the Agency funds its operations through one primary stream being revenue generated from issuance of permits to South African operators. The financial constraints faced by the entity has impacted on its ability to achieve all of its targets for the year under review. The permit tariffs were last increased in 2014 and the permit tariff regulations were currently under litigation. The non-adjustment of the permit tariffs on an annual basis may create a situation where the Agency is unable to raise adequate revenue to fund its operations. The draft permit tariff regulations were gazetted for public comments in March 2018 and comments received are being considered by the Agency and the Department before finalising the permit tariff regulations for promulgation and implementation. The non-promulgation of the 2018 Permit Tariff Regulations remained a threat to the Agency’s financial sustainability in the year under review.

Cost containment measures were instituted to afford the Agency a fighting chance against an eminent financial disaster which negatively affected some of the planned organisational targets. The target for the implementation of prioritised interventions, as per the Enterprise Architecture Roadmap, was not achieved for the year as projects had to be reprioritised. There was also uncertainty in the Agency due to the litigation of the 2014 Permit Tariff Regulations that was pending for the major part of the financial year. The matter was subsequently concluded in favour of the Agency in February 2019.

On the regulatory side, the Committee once more noted concerns relating to the challenge on issuance of passenger permits for RSA/Kingdom of Lesotho route. The said impasse started in 1999 and has since been a challenge that affects and impedes normal passenger cross-border movements on the RSA/Kingdom of Lesotho route. The Minister of Transport established a National Ministerial Task Team tasked with the responsibility of developing a lasting solution to the impasse and its work is still in progress.

The Committee voiced its concerns that the Board of the Agency had four vacancies as at the end of March 2019, as was thus not constituted in line with the provisions of the Cross-Border Road Transport Act (No. 4 of 1998). The vacancies on the Board negatively affect the composition of the Regulatory Committee, which is a quasi-judicial structure established in terms of the Cross-Border Road Transport Act. The recruitment of Board members is the purview of the Minister of Transport and the matter has been accordingly escalated to the Minister and the Department. The term of office of the current Board expired at the end of April 2019 and has been extended for a period not exceeding six months.

A total revenue of R399.163 million was recorded for the period ending 31 March 2019, of which R194.801 million is permit revenue. It was noted with concern that the permit revenue was below target by 13% (R28.985 million), and down by 9% (R18.798 million) on the same period last year. Included in the revenue of R399.163 million is an amount of R162 million of unclaimed refunds which was written back as the claims had prescribed during the year. Penalty income increased from R29.974 million in the previous financial year to R41.644 million. Although the penalty revenue has increased, revenue received is utilised to service the agency principal relationship with the RTMC and therefore does not relieve the financial burden to the Agency. The judgement handed down by the Gauteng High Court on 28 February 2019, which dismissed the application by the Central African Road Services challenging the authority of the Minister to promulgate the 2014 Permit Tariff Regulations, was a positive development. The court judgement upheld the validity of the regulations thus enabling the Agency to review tariffs on an annual basis.

Financial variances were noted for the following reasons: The budget was based on the permit tariff increase which did not materialise as anticipated. The permit tariffs will be increased by 4.7% in the next financial year. During the year, the Agency applied the Prescription Act on claims previously recognised as provision, which resulted in recognition of revenue in terms of the Standards of Generally Recognised Accounting Practise 23. This revenue was not budgeted for as it was not anticipated. Interest income was 21% more than budgeted, which was mainly due to more cash reserves being invested in call and fixed deposits due to cost cutting measures and delays in projects. Fines were not budgeted for in respect of the financial year under review. This was due to the unanticipated reorganisation of the law enforcement function during the last financial year after the budget had been finalised. Following the tariff increase not having been published, only critical positions were filled in the 2018/19 financial year. This expenditure was more than budgeted for.

Although savings were realised due to cost saving measures that had been implemented during the year in light of the delays in effecting the permit tariff increases, the impact of the provision for doubtful debts resulted in operating costs being more than budgeted for. The delay in implementing certain projects resulted in certain capital projects not implemented timely resulting in a lower depreciable amount. An administration fee due to the RTMC was not budgeted for in respect of the financial year under review. This was due to the unanticipated reorganisation of law enforcement function during the last financial year after the budget had been finalised.

The Committee once more stressed its concern regarding the failure by SADC countries to fully implement the 1996 SADC Protocol on Transport, Communications and Meteorology (the Protocol) and bilateral agreements in regard to road transport which negatively impacts the seamless movement of cross-border road transport and significantly contributes to the challenges faced by the cross-border industry as a whole. The full implementation of the Protocol in regard to road transport, and bilateral agreements would lead to efficient cross-border transport regulation and transportation and, in turn, culminate in reduction of challenges facing the sector. The Committee proposed that the issue be raised at the next meeting of the Committee of Ministers.

7.4.5 RAF

It was noted that during the financial year, the former Minister of Transport appointed an interim Board comprised of 11 members for the RAF, two of whom were members of the previous Board to ensure continuity.

Despite the persistent challenges with regard to the financing of the Fund and the changing legislative environment, the RAF maintained the view that it was making steady progress in meeting its strategic targets outlined in the APP.

During the financial year under review, the entity received increased fuel levy contributions amounting to an additional R6 billion to its coffers. During the 2019/20 Budget speech in February 2019, an additional 5 c/l for the RAF Fuel Levy was announced by the Minister of Finance, effective from 1 April 2019. This increases the fuel levy to 198 c/l and is estimated to add an additional R800 million to the Fund’s income in the 2019/20 financial year. While the financial assistance provided for in the Budget is welcomed and appreciated, given the tough economic climate and the competing priorities for government’s resources, the Committee noted that this increase remains insufficient to match the RAF’s R272 billion actuarial claims liability.

During the year under review the Committee noted that the RAF achieved 77% of the targets contained in the APP. This was lower than the 91% achieved in 2017/18. In response to this concern the RAF impressed that the performance should be viewed against the Fund’s determination to set stretched targets in terms of its 2015-2020 Strategic Plan and the challenges faced in attracting medical experts to register on the RAF’s Panel of Medical Experts.

The year saw a sharp increase in new claims registered and reached a peak of 328 173 new claims, which is 56 240 more than in the previous financial year. New personal claims grew by 12.4% and supplier claims increased by 13%. In the view of the RAF, this increase can be attributed to the improved access to the RAF’s services and the higher visibility achieved during their outreach initiatives.

A total of 229 534 claims were finalised, which represents an increase of 13% compared to the number of finalised claims in the previous financial year. The Fund paid an amount of R40 billion in claims – which is R6 billion more than in the preceding year. An amount of R11.2 billion in claims was finalised but could not be paid out due to cash constraints. However, the entity indicated that these payments will be honoured in the next financial year through the monthly income received via the RAF Fuel Levy. During the year under review the RAF finalised an average of 869 claims[60] each working day. The average loss-of-earnings claims increased in value by 11% to R767 506 while the average in general damages claims increased by 8% to R462 130.

The Committee indicated a concern regarding the high amount of budget spent on legal and other cost payments. The mutual average value of legal and other cost payments was R192 748, with the RAF share accounting for 20% and the plaintiff share for 80%. The Fund’s position is that it would prefer it if this money was increasingly spent taking care of claimants and paying for rehabilitation and other post-crash responses. The Committee indicated that there is a need to consider the possibility of capping the amounts that can be charged as legal fees in these cases or improving the ability of victims/claimants to access the direct claims process.

Outstanding claims increased by 26% to 309 710 at the close of the financial year. This is due to an increased number of registrations as well as claims finalised caused by the high growth of new claims registered. This was also influenced by an increase of 25% in the number of open and reopened claims, totalling 234 244, where compensation has not been paid as well as 75 466 outstanding legal claims. Reopened claims decreased by 31%, which points to the fact that claims are not being classified as ‘finalised’ prematurely.

The Committee observed that RAF continues to experience financial challenges, which in turn increases the backlog in finalising claims received. The financial health status of the entity remains a risk to the fiscus and intervention is required. The claims process continues to be regarded as cumbersome and that it still takes far too long to finalise claims and pay awards out to victims or claimants. The view was expressed that, while it was noted that the entity and the Department was working towards the finalisation of the RABS Bill during the year under review (and waiting for the finalisation of the process which started in Parliament on the Bill but was stalled due to the rising of the 5th Parliament), alternative options may have to be considered, such as the possibility of amending the Road Accident Fund Act in a manner that could assist the fund to decrease its claims liability.

7.4.6 RSR

The Committee noted that during the reporting period, the RSR had set itself 16 annual performance targets and it achieved 100% of them.[61] Conversely, in 2017/18, the entity had set itself 18 annual performance targets and of these, it achieved 13 or 72.2%.[62]

The final Safety Management System (SmS) and Safety Management System Report (SMSR) Determination was published on 18 May 2018 through a government gazette; this established the legal requirements for the SmS and SMSR. An updated Safety Permit Application Guide aligned to the SmS and SMSR Determination was also communicated to the operators by the RSR. The Guide includes a Safety Permit Conformity Assessment Methodology tool that clarifies the requirements contained in the SMSR Determination and must be used by operators to demonstrate compliance with the requirements contained in the SMSR Determination. The Regulator regarded this as a major accomplishment. Based on occurrences in the rail industry over the past year, it is clear that the communication of safety critical messages between safety critical grades is not standardised within organisations or across the industry, which increase interoperability risks between different operators. It is for this reason that the RSR embarked on a process to develop a verbal safety-critical communication protocol for railway operations. The protocol seeks to clarify what verbal safety-critical communication is; provide the procedure for using it and ensure safe and seamless railway operations. The Determination on Verbal Safety Critical Communication is to be used as a tool to mitigate the risks associated with verbal communication in the railway operations in South Africa and will be published as a regulatory tool by 31 March 2020.

The 2018/19 financial year has been a turbulent year for the railway industry. Equally, the RSR was confronted with its own set of challenges. Not only has the RSR undergone major restructuring, including an overhaul of its business model, to strengthen the organisation’s regional operations by focusing on core functions, it also had to make, what it regards as tough and unpopular decisions, to ensure that operators put safety at the centre of their rail operations as was evident in the resulting court matter between the regulator and PRASA during the year under review. In this regard, the Committee urged the RSR, rail operators and the Department to ensure that the safety of the passengers on the rail system remains the focus of their daily operations and that the Regulator should be supported in instances where a need arises for it to take steps, which the operators may regard as “tough or unpopular”, in order to ensure that passenger safety remains the primary aim.

Their Annual Report showed that the Board of the RSR had approved a financial recovery plan, which outlined various measures aimed at ensuring a more efficient, productive and sustainable organisation. The RSR implemented the plan knowing fully well that it would be an arduous task.

Among the measures adopted in the financial recovery plan were the revision of the organisational structure, introduction of voluntary severance packages, non-renewal of fixed-term contracts and the cancellation of irregular contracts. A process to redesign the organisational structure was embarked on; and after an exhaustive process of consultation, the Board approved the structure that was communicated to all staff on 19 December 2018.

7.4.7 SANRAL

The entity indicated that contracts to the value of R5.2 million were awarded to black-owned companies, while white-owned entities secured projects valued at R3.3 million. This represented a strengthening of participation by black contractors in the construction and maintenance of national roads, as the proportion of contracts awarded to them increased to 71% (from 64% in 2017/18) and the share of value to 61% (from 53% in the previous financial year).[63] The presence of black women among emerging construction contractors was particularly encouraging, with 25% of total contract value secured by companies owned by black women.[64]

The drive for the empowerment of black-owned small, medium and micro enterprises (SMMEs) was sustained during the period under review, with 72% of contracts and 83% of the value of work accruing to black-owned SMMEs. The relevant figures for 2017/18 were 59% and 77% respectively.[65]

The entity allocated the highest amount to date – to the tune of R25 million – to bursaries for staff members and university students studying engineering and delated fields, as well as scholarships for high school leaners performing well in maths and science. This programme is geared towards improving racial and gender equity in the sector.

The Committee noted that SANRAL had experienced some challenges during the year under review due to some projects having been affected by community unrest or disputes over the project implementation or road designs. Despite these challenges, it was noted that SANRAL managed to award contracts for several major projects, including:[66]

• The strengthening of the R511 between Brits and Beestekraal in North West. This R172 million contract was awarded to NZK Footprint Engineering. The commencement date was January 2019 and the completion is scheduled for July 2020;
• The construction of the cable-stayed bridge across the Msikaba River on the green fields section on the N2 Wild Coast in the Eastern Cape. This challenging 36-month engineering project – the 580-m bridge will be the second longest main span bridge in Africa – was awarded to the Moto/Concor Joint Venture. Valued at R1.9 billion, the project is scheduled to be completed in January 2022;
• The design review and supervision contract for an upgrade of the N11 from the Newcastle industrial area through to Madadeni, east of Ladysmith in KwaZulu-Natal. The upgrade will improve road alignment, making it more direct and will double the capacity of the road to a dual carriageway of freeway standard. The estimated construction cost is R531 million and the consultant is BVI Consulting Engineers Western Cape;
• Construction of pedestrian facilities on the N2 between Umlaas Canal and Wandsbeck Road in eThekwini, KwaZulu-Natal. The project seeks to eliminate hazardous use of the road shoulder by large numbers of pedestrians and provide safer crossing facilities. It is valued at R29.4 million and was awarded to GNS Civils;
• The location and prospecting for new sources of road building materials located within 50 km of national roads in KwaZulu-Natal. Valued at R22.6 million, the contract has been awarded to FDKL Engineering Consultants.

The Committee noted that the overloading of heavy vehicles remains a major problem on South African roads and takes a toll in terms of damage to roads and risks to road safety and noted that SANRAL has set up weighbridges on national routes across the country and works with local law enforcement authorities to impose penalties for overloading. In 2018/19, approximately 7.2 million vehicles were screened using weigh-in-motion devices at weighbridges. A total of 1.86 million that had been possibly been overloaded were directed for weighing on the static scale and 25% of these were found to be overloaded. Approximately 7% of drivers of overloaded vehicles were charged.[67] At Bakwena weighbridges, fines to the value of R7 million were imposed during the year under review and fines totalling R2.4 million were collected. At Trans African Concessions weighbridges, fines to the tune of R8.7 million were imposed and an amount of R672 000 in fines was collected. Two traffic control centres on the N3 concession route reported imposing fines to the value of R5.1 million and collecting R1.9 million.[68]

As part of SANRAL’s engineering for road safety initiative, the entity embarked on the major overhaul of the infamous Moloto Road by installing traffic calming features, closing of illegal access routes, proper fencing and new pedestrian walkways.[69]

The Agency experienced continued financial pressure on the toll portfolio due to the sustained under-collection of the Gauteng Freeway Improvement Project’s (GFIP) e-toll fees. An amount of R5.8 billion was transferred to the toll portfolio to offset the shortfall due to the non-payment of tolls by many users of Gauteng freeways.[70] The Committee noted in its engagements with the Minister that the newly undertaken GFIP/e-toll discussions were in the process of being finalised and that a pronouncement on proposals were due by the end of October 2019.

The entity’s investment in road development, improvement and maintenance for the year was R12.7 million, 19% lower than the preceding year.[71] Though this reduction was partly planned to due to constrained income, it was also affected by tender delays attributable to the combined effect of supply chain reforms initiated by NT and the introduction of the Preferential Procurement Policy Framework Act in 2017, as well as project interruptions owing to financial difficulties of contractors.

The Committee noted that significant delays were experienced on the following road projects:[72]

• The completion of the Polokwane and Musina ring road projects were delayed owing to Basil Read experiencing cash flow problems and applying in June for voluntary business rescue;
• There was slow progress on the N1 upgrade between Holfontein Interchange and Kroonstad. Penalties were imposed in May 2008 at a rate of R30 000 a day;

During the reporting period, SANRAL had set itself 37 annual performance targets and of these, 29 or 78.4% were achieved, while eight or 21.6% were not achieved.

The Committee noted the following findings from the AGSA audit and impressed upon SANRAL that these matters had to be addressed. Irregular expenditure to the tune of R419.2 million was incurred due to non-compliance with prescribed procurement prescripts.[73] In 2017/18, irregular expenditure incurred by the entity stood at R347 million and this was again owing to non-compliance with procurement prescripts.[74]

Effective and appropriate steps were not taken to prevent irregular expenditure amounting to R419.2 million, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by expenditure not approved by duly delegated authority.[75]

Effective steps were not taken to prevent fruitless and wasteful expenditure to the tune of R2.7 million, as required by section 51(1)(b)(ii) of the PFMA. The majority of the fruitless and wasteful expenditure was caused by interest charged as a result of non-payment of invoices within due dates.

The AGSA found that some of the contracts had been awarded to bidders based on evaluation criteria that differed from those stipulated in the original invitation for bidding in contravention of Treasury Regulations 16A6.3(a).

Some of the goods and services of a transaction value above R500 000 were procured without inviting competitive bids and a deviation had not been approved by NT, as required by paragraph 8 of the NT instruction note 3 of 2016/17. In addition, the approval of the procurement was not authorised by the accounting authority, as required by section 56 of the PFMA. This non-compliance was identified in the procurement process for the administrative building.[76]

The AGSA was unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against officials who had incurred irregular expenditure, as required by section 51(1)(e)(iii) of the PFMA. This was owing to proper and complete records that had not been maintained as evidence to support investigations into irregular expenditure.[77]

The AGSA found that there was a slow response by senior management to address previously reported deficiencies pertaining to oversight regarding the financial reporting process, including detailed reviews of the financial reports by delegated officials, compliance and related internal controls. Although an action plan to address audit findings had been completed by management, it was ineffective in timeously addressing the reported control deficiencies. This stemmed from the fact that an appropriate level of management and governance structures did not adequately monitor the status of addressing the findings and did not ensure that the lack of progress was escalated for further intervention.[78] It should be underscored that the AGSA had made the similar finding in this regard in 2017/18.[79]

7.4.8 PRASA

The Board of Control presented the Annual Report fully aware of the massive challenges faced by the Agency during the 2018/19 financial year, pertaining to the following:

• Adherence to good corporate governance and ensuring organisational and leadership stability;
• Arresting the decline in the business performance, particularly the Rail business;
• Ensuring the availability, reliability, predictable and safe commuter and passenger service;
• Resolving organisational inefficiencies in the manner in which it deploys and manages its resources;
• Addressing and fixing massive irregularities as reported by the Public Protector, the AGSA, and NT; and
• Dealing with a declining stakeholder confidence and a high rate of customer dissatisfaction against the service PRASA provided during this period.

The Annual Report confirms that PRASA still faces a massive cash shortfall on its operational expenditure budget, which has accumulated over several years, caused by rising operational costs, declining revenues, and a stagnant operational subsidy. Whilst the Board ensured that management implemented strict cost containment measures over the years by curbing and cutting costs where absolutely necessary, this has not yet improved the Group’s financial position. This is as a result of operating costs increasing at a rate higher than own revenue generated and subsidy. Total revenue was at R13.7 billion at the end of the financial year, compared to total expenses which stood at R15.5 billion. The subsidy has been increasing by inflation while own revenue has been on the decline due to the lack of maintenance, vandalism and theft of assets and the open nature of the rail system.

The Committee expressed its concern over the poor performance by the entity with specific concerns regarding passenger safety and the reliability of the services provided by PRASA. It noted that this poor performance is also reflected in fare revenue collected for year ending 31 March 2019. Both commuter and long distance passenger rail and bus services failed to meet the revenue target of R2.9 billion. The total fare revenue collected for the 2018/19 period amounted to R1.5 billion – a 15.9% below budget.

The current state of the business and the organisation’s failure to deliver on its primary mandate, to ensure that rail ultimately becomes the backbone of public transport and the mode of choice, now informs PRASA’s Get-On-Track Turnaround Plan for execution during the 2019/20 financial year.

During the 2019/20 financial year, the Minister set up a War Room which focuses on giving life to the PRASA Get-On-Track Rescue Plan through improving service performance for both the commuter and passenger service. The entire organisation has been mobilised around the three work streams:- (i) Service Recovery, (ii) Safety Management, and (iii) Accelerated Capital Programme, that aims to ensure:

• Improving On-time Performance;
• Reducing train cancellations;
• Ensuring reliability of infrastructure and assets;
• Ensuring safety of passengers, public and staff;
• Protecting infrastructure and assets; and
• Fast-tracking the modernisation programme.

The Committee noted with concern that PRASA received an even poorer audit outcome of a disclaimer for the reporting year. With its subsidiary Autopax also receiving a disclaimer and Intersite receiving a qualified audit.

Noting the instabilities in the filling of vacancies in the entity, as well as the continued need to extend the interim board appointment periods, one could not have had expected much improvement in target achievement or audit findings for the past three consecutive years. The achievement in the reporting year in question of merely 26% of the pre-determined objectives for the PRASA Group is unacceptable and the entity should work towards ensuring that it achieves all its set targets.

With regard to Intersite, for the 2018/19 financial year, Intersite’s financial results reflect a loss of R18.1 million whilst for the prior financial year; the entity reflected a profit of R6.7 million. This loss has come about due mainly to the cancellation of the retainer that was previously approved by the Shareholder that the company had also budgeted to receive during 2018/19. The 2018/19 financial year was meant to be the last period that Intersite is to receive a retainer from the PRASA Group as going forward the entity strategised to generate revenues from direct investments in property or real estate developments and optic fibre commercialization and thereby become financially self-sustaining.

The Committee noted that following key impediments to performance for Intersite since its inception to date including the following:

• Intersite has an unfunded mandate and this has been the case since its inception;
• Intersite doesn’t get capital budget allocation from PRASA and this has been the case since its inception;
• Intersite is unable to borrow funds from Financial Institutions due to restrictions placed on PRASA and the fact that PRASA is a schedule 3 B entity in terms of the PFMA;
• Assets that were supposed to have been transferred from PRASA to Intersite for commercialization purposes have not been transferred from inception to date. These include amongst others the select PRASA stations and landholdings; the managed property portfolio; the renewable energy program, and the advertising portfolio;
• Convoluted roles between the mandate of Intersite and the mandate of other PRASA divisions which over the years has resulted in inward focus and unhealthy internal competition.

As part of the PRASA Turnaround Strategy, the PRASA Group Governance Committee, at its February 2019 seating, recommended that PRASA Corporate Real Estate Solutions (“PRASA CRES”) a division of PRASA and Intersite, a PRASA subsidiary, be consolidated into a single entity. Amongst some of the issues that the consolidation would help address are the following:

• The strategic re-alignment and positioning of the secondary mandate;
• Strategic repositioning of the PRASA property portfolio;
• Rationalization of similar functions; and
• Addressing overlapping mandates and roles.

In this regard, a Steering Committee comprising Intersite and PRASA CRES Executive Management has been set up and has already produced a preliminary consolidation report for consideration by the PRASA Group Exco, the Group Board Governance Committee and the Group Board itself. The consolidation report has put three options on the table as to how the consolidation of these two entities can be undertaken, namely:

• Consolidate into a division: Consolidate the two entities into a division and close the subsidiary;
• Consolidate into a subsidiary: Consolidate the two entities into a subsidiary and do away with the division; and
• Consolidate into a division but retain an investment vehicle: A hybrid model that entails the consolidation of the relevant functions into a division but with a wholly owned investment vehicle (Intersite) being retained for specific investments transactions and structuring purposes.

A final decision as to which option is the preferred one by the PRASA Group Board is still pending. Once that decision is made, that will allow for the Steering Committee to start with the engagement process with all relevant stakeholders in order to get their inputs as a prelude to implementation. In the interim, the two entities continue to operate as business as usual and with each entity implementing its approved Strategic Objectives, Business Plan, APP and Budgets. The Committee was of the view that this process had to be finalised urgently in order to provide stability on these two subsidiaries.

With regard to Autopax, the Committee noted with concern that the subsidiary has an interim Board and acting CEO and is clearly in dire financial straights. An ongoing investigation into allegations relating to human resource management and procurement processes is being conducted by the Public Protector, in terms of section 182 of the Constitution of the Republic of South Africa. There is also an ongoing investigation into allegations relating to the contravention of the Competition Act of South Africa, 1998 (Act No. 89 of 1998) being conducted by the Competition Commission. The Committee also noted that the board of directors of Autopax has not taken a resolution to commence with business rescue proceedings and did not deliver a written notice to each affected person setting out the criteria referred to in section 128(1)(f) of the Companies Act of South Africa, 2008 (Act No. 71 of 2008) (Companies Act) as well as its reason for not adopting a resolution to begin business rescue proceedings while the company is financially distressed, as prescribed by section 129(1) and 129(7) of the Companies Act.

The Committee noted that Autopax not only has an ageing fleet of buses and pending reports on ongoing investigations, but it also was found to have a lack of corporate governance and fraught with financial mismanagement. With no viable plan to turn performance around for the subsidiary, the Committee was concerned regarding the viability to continue its operations.

The following entities did not make presentations to the Committee during this BRRR process due to time constraints, as well as late or non-tabling of annual reports.

7.4.9 ATNS

In the period under review, billable movements reduced by 2.6% compared to the 2017/18 financial year. In addition, operational challenges, as well as fleet and schedule optimisation by airlines in the market has resulted in schedule and capacity reductions which have negatively impacted our financial performance.

The financial year under review was challenging for ATNS, with performance lagging during the first half of the year. In addition, movement in the leadership structures and internal governance issues played an adverse role. However, ATNS recorded improved performance during the second half of the year. From a safety perspective, ATNS performed well compared to the previous year. Its safety ratio is used to measure the number of safety events attributed to its operations per 100 000 movements. During the reporting year, the entity recorded an improvement in the safety ratio of 3.84 per 100 000 (2018: 5.19 per 100 000).

From a financial perspective, ATNS total revenue increased by 4.7% to R1.7 billion (2018: R1.6 billion), primarily driven by the 7.5% tariff increase, leading to an increased tariff revenue of R1.4 billion. While total revenue increased, billable movements decreased by 2.6% (2018: 0.43% increase), mainly due to the operating context. Although numerous cost containment initiatives helped to contain spending, the entity’s net operating expenses increased by 8.2% to R1.4 billion (2018: R1.3 billion). The increase is largely due to increased staff costs, telecommunication expenses, corporate social investment projects and the impact of the fluctuating foreign exchange rates on its repairs and maintenance, as well as contract maintenance costs. Capital expenditure was R252 million (2018: R305 million) mainly due to fewer projects carried out during the year under review. ATNS’s balance sheet remained strong with a liquidity ratio of 4.61:1 (2018: 4.33:1) and its gearing is at 0.3% (2018: 0.5%). This puts ATNS in a better position to raise funding for imminent capital expenditure.

7.4.10 RTIA

Due to time constraints the entity was not called to brief the Committee during this BRRR process.

The Agency achieved 100% of the its targets for the year under review. This is an increase in performance of 12.5% year-on-year, compared to the 2017/18 period achievement of 87.5% targets. This comes at a time where the Agency did not have a Board after the term of the previous Board and its sub-committees expired on 31 July 2018. The Ministry of Transport has since been working to appoint a new Board to the Agency. Whilst such attempts were underway; the Registrar, as the Accounting Officer had to assume the automatic role of the Accounting Authority, as provided by section 49(2)(b) of the PFMA. This automatic legislative arrangement was a duty confirmed at the previous AGM which was held on 10 September 2018.

Although the Committee did not meet with RTIA for the BRRR process, it felt that there was a need to raise its concerns that the indication of a 100% achievement of KPIs was not a true reflection of the impact felt on the lives of road users by the work performed by the Agency when one considers the numbers of fatalities still experienced on our roads. There was also a concern regarding the measurable outcomes of the prayer day events hosted and paid for by the Agency.

The Agency’s stakeholder consultation programme continued and the final consultations with the Committee, as well as the Select Committee on Business Development culminated in the implementation and the finalisation of the voting mandates for the AARTO Amendment Bill in the different provinces, as well as at the NA and National Council of Provinces (NCOP) level, where the Amendment Bill received positive votes from 8 provinces at both levels, except for the Western Cape Province which voted against the Amendment Bill in both instances. This process was finalised with positive votes at the NA, which meant that the Agency and the Department had completed the legislative education project which commenced in 2017. The Agency subsequently finalised the concept and model of AARTO Legislative Education, wherein it is planning to embark on massive educational drive of all key stakeholders on the tenets of the AARTO legislation as soon as the President of the Republic signs the Amendment Bill into law.

The most critical of the challenges which confronted the Agency was the forfeiture of its surplus of R117 million at the time where it requires all the liquidity it can amass in order to spearhead the AARTO Rollout processes. Still on the issues of liquidity, the Agency further experienced challenges in achieving its revenue collection targets and this was caused by a series of stand-offs between the Issuing Authorities and South African Post Office (SAPO), which impacted on the service of notices. Whilst this situation had a negative financial impact as mentioned earlier; the further concern is that such non-issuance of infringement notices created uncertainties in the law enforcement environment because no sooner do infringers get to know of such impasses than they continue with their unabated trends of reckless behaviour.

7.4.11 RTMC

Due to time constraints the entity was not called to brief the Committee during this BRRR process.

RTMC achieved 96% of the targets set out in its APP for 2018/19. Only one target was not achieved and a plan of action has been put in place to ensure that it is achieved. To position the RTMC as a responsible corporate citizen, the Board approved the Environmental Sustainability Strategy. The Strategy seeks to advocate for environmental sustainability, reduce greenhouse gas emissions, promote the use of technologies, drive good governance and promote responsible consumption. The Board also approved seven state of road safety reports. These reports confirmed that fatalities had declined by 8% this financial year. However, more interventions need to be put in place in provinces, particularly those that contributed the highest number of fatalities such as KwaZulu-Natal, Gauteng, Eastern Cape, Limpopo and Mpumalanga.

An analysis of road safety statistics over the past three years demonstrates how RTMC has begun to turn the corner. Evidence shows that road fatalities are beginning to decline. Over the past three years, deaths on South Africa’s roads have been reduced from 14 071 in 2016 to 12 921 in 2018. The entity acknowledges that it will not meet the United Nation Decade of Action goal to reduce road fatalities by 50% by 2020, with the year 2010 as the baseline. It is common cause that a decline in road crashes is preceded by a period of relative stability, this is where they find their performance at this stage of the period of the decade. RTMC is, however, confident they have made progress. The road fatalities per 10 000 registered vehicles have decreased from 16.04 in 2010 to 11.47 in 2018. This has been achieved against the backdrop of a phenomenal increase in the number of vehicles in the country over the same period. The numbers of registered vehicles increased from 9.8 million to 12.4 million in the corresponding period.

The Committee observed that sight must not be lost of the concerns raised above under the C-BRTA discussion and how C-BRTA was affected by monies due to the RTMC. From various engagements with the Committee and the entities, it became evident that there was also a need to ensure compliance to MOUs and ensure an improved working relationship between the C-BRTA and RTMC law enforcement units as well as the correlation between the RTMC and the RTIA in the achievement of their targets towards reducing road fatalities.

7.4.12 DLCA (notes per AGSA input)

The trading entity failed to table its Annual Report in time for the Committee to consider its performance during this BRRR cycle and it received an unqualified opinion with material findings.

Financial statement preparation remains a concern in the transport portfolio as material adjustments were effected to annual financial statements submitted for audit at DLCA.

Non-compliance areas highlighted by the AGSA for the entity were identified as procurement and contract management, and material misstatements in submitted financial statements.

Areas of concern in internal control were identified as insufficient proper record keeping, and review and monitoring of compliance.

Regarding revenue management, the AGSA indicated that the entity showed an inability to collect monies owed and the resultant impairment of receivables due to amount owed being irrecoverable.

In terms of fraud and lack of consequence management at the entity, the AGSA found that investigations of allegations took longer than three months (2017/18).

At the DLCA, there is an acting head of entity, the incumbent changed during the year under review. There was uncertainty about the entity being taken back to the Department or remaining as is, hence no positions were filled.  The CFO and Head of risk positions are still vacant.

During a recent oversight visit by the Committee to the entity, the Acting Head of the Entity indicated that there is a material risk related to the card production machine which will no longer be able to be serviced.  The service provider for the production machine will stop maintaining it due to the machine having aged. Bearing in mind the machine has been in use since 1998. The decision is based on newer technology and unavailability of spare parts. This was the only machine of its kind in the country and a new card format is being considered which will require a new type of production machine as well.

7.4.13 SAMSA (notes per AGSA input)

SAMSA remained the same with qualified audit opinion as they could not address significant findings from the prior year.

The AGSA identified the SAMSA qualification areas as:

• Irregular expenditure;
• Commitments;
• Receivables;
• Payables;
• Property, plant and equipment.

Non-compliance areas in the entity were identified and indicated as:

• Procurement and contract management;
• Material misstatements in submitted financial statements;
• Prevention of unauthorised, irregular and fruitless and wasteful expenditure;
• Consequence management;
• Revenue management.

Areas of concern were identified as:

• Leadership was not effective;
• Improper record keeping;
• Ineffective risk management.

Areas that requires intervention is:

• Review and monitoring of compliance;
• Ineffective daily and monthly controls.

Senior management provides limited or no assurance.

Under revenue management, the AGSA found that the entity had an inability to collect monies owed and the resultant impairment of receivables due to amount owed being irrecoverable.

The AGSA found that the entity failed to investigate previous year fruitless and wasteful expenditure that had been reported for investigation, as well as previous year irregular expenditure reported for investigation.

At SAMSA, the CEO position is vacant since May 2017 and the CFO was appointed during the year.

The entity was scheduled to meet with the Committee but failed to table its Annual Report in time for consideration or inclusion into this report.

8.       RECOMMENDATIONS

8.1     Observations and recommendations from the Budget Vote Report 2019

8.1.1  The Committee made the following observations:

8.1.1.1        General

The Committee noted that there were some errors in the tabled APP for 2019/20 which the Department undertook to correct. Furthermore, there was a concern that a number of targets contained in the APP had no target delivery dates or finalisation dates and that some dates indicated under new targets for the Maritime Transport Programme had been pointed out by the Department as being incorrect.

8.1.1.2        Use of consultants

The overall allocation to compensation of employees increases from R496.7 million in 2018/19 to R534.7 million in 2019/20. This year, expenditure on consultants (business and advisory services) is set to increase from R266.2 million to R463.8 million (which, shockingly, is almost equal to the overall allocation to compensation of employees for the previous budget cycle), indicating an above-inflation increase of 65.6 percent.

The exponential increase for consultants (business and advisory services) is linked to changes in the Integrated Transport Planning and Public Transport programmes. Conversely, funding for the use of consultants in the Maritime Transport programme declines from R17.0 million in 2018/19 to R9.7 million in 2019/20 (a decrease of 45.8 percent in real terms).

The Committee was adamant that the Department cannot continue spending this much of the budget on consultants, especially while government is required to work towards a reduction in the wage bill, a reduction in the use of consultants and a drive towards ensuring that internal capacity of the Department and its entities is strengthened.

8.1.1.3        Public Transport Network Grant (PTNG)

The budget allocation for the PTNG increased from R6.3 billion in 2018/19 to R6.5 billion in 2019/20.   The Committee noted that the implementation and/or rollout of these projects differ in each municipality despite past targets having been for operations to begin in nine cities by the end of 2018/19 whereas the actual progress indicated in the APP of 2019/20 was that only six had begun operations (one of which is a pilot of a small scale service). The Committee further raised concerns regarding the progress on the planned targets for roll-out of the IPTNs in the municipalities when such progress is compared to the billions of allocated funds already spent on the projects.

It was noted that the Department had issued an instruction to scale down plans and big ticket infrastructure in these projects, but to rather optimise modal technologies based on realistic demand volumes. Designed projects or earlier plans in smaller cities have been amended to focus mostly on supplying new vehicles, few stations and shelters/stops and other related infrastructure such as depots.

It was noted that the Department will be working on a Regional Integration Strategy as a new indicator in the APP for 2019/20 and that this is targeted to be submitted to Cabinet by March 2022.

8.1.1.4        Provincial Road Maintenance Grant (PRMG)

The Committee observed that the budget allocation for the PRMG: roads maintenance component increased from R10.3 billion in 2018/19 to R10.6 billion in 2019/20. The PRMG: Disaster relief component decreased from R210.0 million in 2018/19 to R206.2 million in 2019/20. The PRMG: Mpumalanga coal haulage roads maintenance component increased significantly from R501.1 million in 2018/19 to R526.2 million in 2019/20.

During its presentation, the Department indicated that a trend had emerged over the past few years whereby some Provinces would decrease their allocation of provincial funds to road projects in years where the PRMG grant transferred from the Department had an increased allocation. The Committee noted its concern of such practices and indicated that this must come to an end as there should be guidelines by which the Department would support grant allocation increases based on reciprocated commitments in funding and spending capacity from the provinces for these road maintenance projects.

8.1.1.5        Moloto Road upgrade and Moloto Development Corridor

For SANRAL, R3.3 billion is allocated over the medium term for the upgrade of the R573 (Moloto Road).

The Committee noted the decrease in the budget allocation from R1.8 billion in 2018/19 to R1.7 billion in 2019/20 for the Moloto Road upgrade. The Committee noted that there has been progress regarding the R573 Moloto Road that connects the three provinces of Gauteng, Mpumalanga and Limpopo. During the year under review, the relevant Provincial Departments for Mpumalanga and Limpopo provinces had transferred their sections of the road to SANRAL, while the relevant Department in the Gauteng province had not yet done so. The Committee, however, was pleased to be informed by the Minister on 10 October 2019 that Gauteng had finally signed and agreed to transfer the remaining section of the Moloto Road to SANRAL and the full extent of the planned work could commence. The Committee was, however, concerned about the slow progress of this originally planned five-year upgrade project and also noted that the rail portion of the Development Corridor project has slowed despite the PRASA Corporate Plan of 2018/19 indicating that for 2018/19 the entity will target to finalise funding with the Department and NT by the Second Quarter. It was further noted with concern that neither the budget allocation nor the Department’s APP for 2019/20 makes any mention of the Moloto (Rail) Development Corridor.

The Department indicated to the Committee that fiscal constraints were affecting the rail portion of the Moloto Corridor project and that the focus had been shifted to prioritise the R573 Moloto Road project. Treasury had not allocated funds to the rail project due to affordability concerns and there had been discussions that this project may have to move to the PICC. In this regard, the Department indicated that the Minister of Transport and the Minister of Finance will be meeting to discuss this issue.

During the 2018/19 budget briefing, the Department indicated that it has concluded a review and assessment of the Putco Moloto subsidised bus services contract, which included a detailed census to determine current demand. The outcome of this review and whether or not a new contract would be introduced to replace the current one based on the outcome of the passenger census and the current demand had not been presented to the Committee yet.

8.1.1.6        Non-toll road network

The budget allocation for the non-toll network increased (more than doubled) from R5.1 billion in 2018/19 to R12.3 billion in 2019/20. During the previous year, the Department had to ensure that SANRAL does not default on payments related to the GFIP and therefore had to shift/transfer funds in order to do so. This year, the funding allocation to the GFIP project has been significantly reduced and allowed for the increase in budget to the non-toll road network.

The Committee noted that the following non-toll road projects were planned for the MTEF 2019 – 2022:

• N12 Johannesburg to Klerksdorp
• N2 Richards Bay to Ermelo
• N2 Botrivier to Port Elizabeth
• N12 Benoni to Witbank
• R72/N2 Port Elizabeth to East London
• R300 Cape Town Ring Road.

8.1.1.7        Vacancies and Acting Positions

The Committee noted that the end of term for members of boards at various entities are near, that some boards were not fully constituted which may affect their performance and reporting, that some advertisements were already published for filling these vacancies, and that PRASA still had an interim board.

The Committee highlighted a serious concern regarding the Ports Regulator’s expenditure that is expected to increase at an average annual rate of 10.2 percent, from R31.1 million in 2018/19 to R41.7 million in 2021/22, mainly driven by two additional personnel to its economic regulation programme. The Committee was of the view that it is concerning that such a massive increase is intended to only be used for two additional personnel.

It was further noted that numerous vacancies also still exist in the Department and in the executive of its entities, which led to an increase in the reliance on acting placements and could have contributed to further instability in the Department and entities. This remains a concern to the Committee as these issues have been highlighted over several years by the Committee, as well as the AGSA.  

In this regard, the Committee wanted to highlight that the recommendations made by the AGSA for the Budget Review of 2017/18 as expressed in the Annual Report(s) of 2017/18 indicated that the root causes for entities with negative outcomes were:

• Key management posts are vacant or filled with staff in acting positions, which contributes to lack of accountability;
• The governance structures in some of the entities are not fully constituted which results in ineffective oversight;
• Where an action plan had been put in place, it was not monitored at the appropriate level and the lack of progress was not escalated for further intervention by senior management;
• There is a slow response in addressing ongoing deficiencies with compliance to laws and regulations and lack of consequence management in respect of staff that do not perform their allocated responsibilities; and
• Some entities lack the discipline of ensuring that internal controls to ensure that accurate and complete financial reporting and compliance to laws and regulation are adhered to.

The Department reported on progress in filling board vacancies, as well as senior management vacancies in the Department. The Committee was concerned that the Department could not indicate a timeframe by when these vacancies will be filled.

8.1.1.8        Scholar Transport

The Committee noted the increase in budget allocation to the Rural and Scholar Transport sub-programme under Programme 7. However, the Committee also noted the emphasis in the Budget Review documents, under the headline of Portfolio Committee on Basic Education, that together with relevant authorities, the Department should fast track the implementation of plans to allocate ring-fenced funds for learner transport. The NT is part of the task team on this issue. The ring-fencing can only happen once a policy decision is taken on whether the function lies with the Department of Basic Education or the Department.

Furthermore, under the heading of Scholar Transport, it was indicated that government conducted a study on the delivery of scholar transport services during 2018. A steering committee with members from the Department of Basic Education; the Department; the Department of Planning, Monitoring and Evaluation; and NT has been established to take this work forward. The report revealed several data gaps and inconsistencies in the way services are delivered and reported on in different provinces, making it difficult to establish a common national approach to improving the service. Two work streams were indicated to be established during 2019. The first will deal with the data gaps and attempt to determine whether the function should be led by the transport or basic education sector. The second work stream will deal with the costing of the service and will provide input during 2020.

The Committee raised concerns regarding the challenges faced by rural learners in obtaining access to scholar transport. Furthermore, concerns were raised regarding the modes or types of transport provided to learners which are not suitable or safe for the transportation of learners and often leads to overloading and contraventions of road traffic laws.

Concerns were also raised regarding the lack of uniformity in scholar transport provision in the various provinces and challenges faced in the management, financing, implementation and oversight over scholar transport.

8.1.1.9        SANRAL funding concerns as well as impact of GFIP thereon

The Committee continues to raise concerns regarding the going concern status of SANRAL due to poor collection on GFIP e-toll project. The Committee also noted the massive decrease in funding to the SANRAL: GFIP from R6.3 billion in 2018/19 to R550.5 million in 2019/20.

The Committee was hopeful that delays would be minimised in implementation of critical projects which were in the past delayed due to toll resistance. The Committee also noted delays in various SANRAL projects due to contractors withdrawing from some sites because of local community protest regarding these projects. The Committee indicated that the Department should ensure that projects rolled out in communities make use of the skills within that community and that SANRAL and provincial departments responsible for roads and transport matters implement an Inter-Governmental Relations Strategy to assist in resolving these issues.

The Committee was optimistic about the possible progress in rolling out the possible R128 billion investment in road infrastructure projects which includes:

• N1-N2 Winelands Project
• N2 Wild Coast Highway Project
• N2 Durban South to North Project
• N3 Gauteng Durban Corridor Project/Van Reenen Development Project (formerly indicated as the De Beers Pass project)
• N3 Pietermaritzburg to Durban Project.

The Committee was concerned that one of the key focus areas indicated by SANRAL for 2018/19 was the cooperation with the Department on developing a fresh Toll Roads Policy and that this has not yet been finalised.

8.1.1.10      PRASA Modernisation project

The Committee noted a significant increase in budget to PRASA Capital from R91.9 million in 2018/19 to R600 million in 2019/20, as well as the PRASA: Rolling Stock Fleet Renewal budget going from R4.7 billion in 2018/19 to R5.8 billion in 2019/20.

The Committee expressed the hope that the current interim board will not allow the allocated funds to PRASA Capital to lie idle again as in previous years but that this will be wisely spent where services are in most dire need.

The Committee was of the view that until and unless the current service and safety concerns are adequately addressed, the modernisation project will not be able to progress as more budget has to be spent on refurbishment of vandalised and outdated coaches and infrastructure to ensure services are able to run.

The Committee noted with concern that the performance in and expenditure of budget of R2.4 billion for the station modernisation programme runs the risk of being delayed due to the cancellation by NT of all station modernisation contracts.

The Committee was adamant that the signalling system and telecommunication upgrades projects were of utmost importance to prevent a repeat of the rail collisions experience during the last two years.

8.1.1.11      Taxi Recapitalisation Project (TRP)

The Committee noted the targeted implementation of the recommendations of the TRP by March 2020. However, the revised policy has to date not been presented to the Committee. The revision and implementation of the policy therefore appears to be delayed and the targets set for implementation of the project have failed to be accurate in recent years due to a reduced uptake thereof by the industry. The current project has no termination date which creates no urgency for compliance or uptake of the project.

Furthermore, the Committee is concerned that the Department may not be utilising the data it has from the operating licence and permit databases to identify and contact owners of vehicles that may be qualifying for scrapping. The Committee indicated that the value allocated for pay out to the industry in terms of the project is perceived as insufficient by the industry to warrant an uptake in the project and hopes were expressed that the reviewed project will remedy this, as well as the need to ensure a taxi (maintenance) services value chain exists.

The Committee also noted the recent Public Protector Report 37 of 2018/19 on the Illegal Conversion of Toyota Quantum Panel Vans into Mini Bus Taxis and that the findings might impact this programme. (The Committee must still consider this report and table its own report in the House).

8.1.1.12      Funding Models and Turn-around Strategies of Entities

The Committee is concerned that the funding models and/or turn-around strategies of the entities are not being processed or implemented as a matter of urgency (or that there appears to be new strategies submitted every six months), which, if left to continue as is, will lead to financial ruin of these entities and a lack of service delivery to citizens.

8.1.1.13      Legislative Programme impact on Entities

The Committee noted that a review was planned of the founding legislation of road entities by March 2020. It further noted that the Civil Aviation Amendment Bill that was tabled in November 2018 may need to be revived by the 6th Parliament, as well as the RABS Bill and National Land Transport Act Amendment Bill that were not finalised during the tenure of the 5th Parliament.

The Committee also indicated its anticipation for the tabling of the long-awaited STER Bill and noted the progress reported by the Department on this.

The Committee noted that there is a need to receive a full and comprehensive list of legislation that is proposed which would include the current status of progress on these matters.

From the Department’s amended Strategic Plan (presented in 2018/19), the Committee also noted that in the current 2019/20 financial year, the Department intended to bring the Merchant Shipping Bill to Parliament, as well as the TAT Amendment Bill. The Committee also noted that during the next financial year, the Department intended to meet the following targets:

• Submitting the draft Maritime Transport Sector Development Council Bill to Cabinet by March 2020;
• Developing the Railway Safety Bill for submission to Cabinet by March 2020;
• Submitting the draft National Road Traffic Amendment Bill to Cabinet by March 2020;
• Submission of the Transport Appeal Tribunal Amendment Bill to Cabinet by March 2020;
• Submitting the STER Bill to Parliament by March 2020;
• Submitting the Air Services Licencing Amendment Bill and International Air Services Amendment Bill to Cabinet by March 2021;
• Implementation of the National Rail Act by 2020/21;
• Implementation of the Railway Safety Act by 2020/21;
• Draft Bill for Founding Legislations of Road Entities to Parliament by 2020/21; and
• Developing the South African Maritime and Aeronautical Search and Rescue Amendment Bill for submission to Cabinet by March 2021.

The Committee continues to urge the Department to plan for the tabling of legislation to Parliament early enough in the five-year planning cycle to prevent the lapsing of bills and the rush to process these in the outer years of the Parliament cycle.

8.1.1.14      Optimal use of revenue generating streams of entities

The Committee noted that some entities, such as ACSA and PRASA, that have access to property do not make optimal use of possible advertising revenue or retail revenue generating streams.

8.1.1.15      Road Safety Programmes

The Committee noted the reported decrease in the 2019 Easter Holiday Road Death statistics, even though this year the holiday fell outside of the school holiday time period and that may have affected the statistics. The Committee noted the implementation of road safety programmes by various road transport entities.

8.1.1.16      Increased Promotion Required of Universal Access

The Committee noted the Department’s commitment in the medium term, to continuing with the planning and construction of universally accessible IPTNs and Bus Rapid Transit (BRT) systems in identified local and metropolitan municipalities.

However, universal access is the goal of enabling all citizens to reach every destination served by their public street and pathway system and is not limited to access by persons using automobiles. Travel by bicycle, walking, or wheelchair to every destination is accommodated in order to achieve transportation equity, maximize independence, and improve community liveability. Wherever possible, the Committee continues to urge that the Department ensures the promotion of the need to have road and transport facilities designed to allow safe travel by young, old, and disabled persons who may have diminished perceptual or ambulatory abilities. By using design to maximize the percentage of the population who can travel independently, it becomes much more affordable for society to provide paratransit services to the remainder with special needs.

The Committee, therefore, was of the view that the Public Transport, Road and Rail Programmes do not make sufficient provision for the promotion of universal access as the 2018/19 APP appeared to only focus on the IPTN rollout with such service considerations and that this type of access may be further constrained with scaling down of IPTN infrastructure with regard to stations or stops, as well as the suspension of some rail station modernisation contracts.

8.1.2  The Committee recommended that the Minister ensure:

8.1.2.1        General

The Department correct all errors and inconsistencies or contradictions pointed out in their tabled APP for 2019/20.

8.1.2.2        Use of consultants

The use of consultants is monitored by the Department, and that the Department ascertains whether the services rendered provided good value for money. In addition, the Department should indicate whether the consultants transfer relevant skills to the employees of the Department. The Department must furthermore brief the Committee on all consultants used with reference to their scope of work and the expenditure linked to these appointments within 30 days of the adoption of this report by the House.

8.1.2.3        Public Transport Network Grant (PTNG)

The Department monitors the spending of the funds by the 13 IPTN/BRT implementing cities and ensures that the funds are spent as per the Division of Revue Act to warrant that value for money is achieved and services are delivered to the citizens. Quarterly reports on progress should be delivered to the Committee, as well as indications on whether or not any of the cities stands a real chance of having their funding allocation stopped due to a lack of progress.

8.1.2.4        Provincial Roads Maintenance Grant (PRMG):  Road maintenance component

The Department monitor the expenditure of the Roads maintenance component of the PRMG and briefs Parliament quarterly on progress, as well as the breakdown of the 2019/20 budget allocation per province.

8.1.2.5        Moloto Road upgrade and Development Corridor

The Department deliver quarterly updates to the Committee on the progress made regarding the Moloto Road upgrade and Moloto Development Corridor (Rail) programme.

8.1.2.6        Non-toll road network

The Department ensure that the budget allocation for the SANRAL road maintenance programme respond to the challenges of unemployment, poverty alleviation and inequality.

8.1.2.7        Vacancies and Acting Positions

That the appointments are made with due consideration of gender parity principles for all critical vacancies that need to be filled in Senior Management, as well as throughout all levels of the Department, executive of the entities, as well as board vacancies.

That Board members of entities are appointed without delay so that the entities are able to discharge their legislative mandates optimally. The Minister is also requested to report to the Committee on this matter, as well as the Department’s plan for ensuring future Board member vacancies are filled timeously within 30 days of the adoption of this report by the House. Furthermore, that the Minister ensure that all other vacancies in senior management in the Department and the executive in the entities are filled and reported on to the Committee within 60 days of the adoption of this report by the House.

8.1.2.8        Scholar Transport

Once the work-streams have determined the best suited department for the project, that the Scholar Transport Policy and regulation thereof is rolled out uniformly and monitored by the relevant department.

Until such determination is finalised, the Department must ensure that one set of regulations is set out and implemented nationally on scholar transport norms and standards, which must be done through regular meetings with and cooperation with the Department of Basic Education. The Department should also hold regular engagements with Provincial Departments with which the function resides to assist in improving scholar transport, as well as report back to the Committee on progress on a quarterly basis.

8.1.2.9        SANRAL funding concerns, as well as impact of GFIP thereon

That SANRAL is assisted with formulating a suitable funding model that could aid in resolving the impact on its finances from the rollout of the GFIP project, as well as manage current project stoppages related to the general objections on all toll projects by finalising the development of a fresh Toll Roads Policy. The Minister also needs to address the going concern issues raised for SANRAL by arranging meetings between the entity, the Department, as well as NT.

SANRAL should also be assisted with support towards the achievement of its Strategic Objective to foster cooperative working relationships with all spheres of Government and the SADC member countries through the possible expanding of its scope towards becoming a road agency for the SADC as this could help support the development of infrastructure in the region, as well as economic integration.

The Department is to report to the Committee on a quarterly basis regarding the above recommendations.

8.1.2.10      PRASA Modernisation project

That PRASA improves their current services and safety through the rollout of the turnaround strategy in a manner that would allow for the entity to focus further on the modernisation project. The entity should also indicate progress towards the devolution of authority to regions for effective management and rail operations through quarterly reports on the above to the Committee. PRASA should ensure that quarterly briefings are presented to the Committee regarding updates and progress on its rolling stock fleet renewal programme, the refurbishment of coaches, as well as the upgrading of signalling systems.

8.1.2.11      Taxi Recapitalisation Project

That the revision of the policy is finalised as soon as possible and ensure that value chain aspects are covered in the revised project model. That targets for the project are set more accurately in order to reduce the over-reliance on underspent funds from this project to cover over expenditure in others. The Department must present the reviewed policy to the Committee within 90 days of the adoption of this report by the House.

8.1.2.12      Funding Models and Turn-around Strategies of Entities

That all entities with turn-around strategies and new funding models are given the required assistance, guidance and oversight required in order to implement these strategies and models that would allow them to be self-funding and reduce the increasing reliance on the national fiscus in the pursuit of service delivery. The Minister also needs to address the going concern issues raised for entities by arranging meetings between the entities, the Department, as well as the NT.

The Department is to report to the Committee on a quarterly basis regarding the above recommendations.

8.1.2.13      Legislative Programme impact on Entities

That the Department and its entities ensure that their planning for legislation to be submitted to Parliament for processing is done in such a manner that would allow for the thorough processing thereof during the Parliament Cycle and not to rush submissions in the outer years of the MTSF.

The Department is requested to submit a full and comprehensive list of legislation that is proposed which would include the current status of progress on these matters within 60 days from the adoption of the report by the House.

8.1.2.14      Optimal use of revenue generating streams of entities

That entities with ownership of property which could serve as a source of additional revenue through advertising or retail rentals, ensure that all spaces are used optimally in order to increase revenue generated by the entities towards self-reliance.

8.1.2.15      Road Safety Programmes

That the Department ensure that there is synergy pertaining to the implementation of the road safety programmes by the various entities so that the programmes can complement each other in achieving a reduction in the carnage on the roads, as well as ensuring that budgets for these programmes are optimally allocated and not duplicated.

8.1.2.16      Increased Promotion Required of Universal Access

That the Department and its entities increase the implementation of projects and/or programmes aimed at increasing Universal Access to all modes of public transport and for all transport and road infrastructure.

8.2     Observations and recommendations from the Strategic Plan and APP Report 2019

The Budget Vote debate of the Department took place on 9 July 2019. Due to the fact that the Department and entities tabled their APPs on 2 July 2019 and the limited timeframe within which to engage on these between tabling and the Vote, the Committee, therefore, was not able to receive briefings on the APPs of the Department’s entities prior to the Budget Vote Debate. Accordingly, the Committee engaged on the APP and Budget Allocations for 2019/20 with the Department on 3 July 2019 and undertook to schedule presentations by the Department’s entities on a later date in order to receive briefings on their amended and/or new Strategic Plans, and (specifically for the entities) 2019/20 Corporate Plans or APPs.

The Committee subsequently met with the entities of the Department, including the NSRI, from 27 August 2019 to 10 September 2019 on their 2019/20 Budgets, APPs and Corporate Plans.

The Committee has not finalised its 2019 Report on these matters, however, the matters raised during their engagements with the entities on their plans for the 2019/20 financial year were taken into consideration and raised during the engagements with the entities and the Department for purposes of completing the BRRR.

8.3 Recommendations made by the AGSA for the Budgetary Review and Recommendation Report for the 2018/19 financial year

The role of the AGSA is to reflect on the audit work performed to assist the Committee in its oversight role of assessing the performance of the entities taking into consideration the objective of the Committee to produce a BRRR.

The AGSA recommends the following to the Department and its entities:

• Permanent boards in entities with a mix of appropriate skills and competencies should be appointed (repeat recommendation);
• Executive management positions should be filled with appropriately skilled and experienced personnel (repeat recommendation);
• Develop and implement action plans to address audit findings (repeat recommendation); and
• Implementation of a culture of consequence management (repeat recommendation).

The AGSA recommends the following to Committee:

• Monitoring and regular follow-up with the executive authority and the accounting officer/authority on:
  • Appointment of permanent boards and audit committees to ensure that they are fully constituted with members with the appropriate skills and experience for effective governance and oversight over the entities;
  • Management of vacancies to ensure stability of leadership; and
  • Progress on action plans put in place by the entities to address undesirable audit outcomes.
  • The culture of consequence management should be enforced in the portfolio.

8.4     The Committee recommendations for the 2018/19 financial year Budgetary Review and Recommendation Report

The Committee recommends that the Minister, through the Department, should ensure the following:

8.4.1 Recommendations specific to the Department and of General Application to entities

8.4.1.1 Due to the observation that the Department indicated the exact same measures to address AGSA findings as it had in previous year, the Committee implores the Minister to ensure that stronger measures are put in place to address the audit findings effectively and that they are implemented in a manner that will ensure that the Department improves its audit outcome for the 2019/20 financial year. In relation to this recommendation, it is imperative that the Department strengthen its oversight over the entities and report on progress made to remedy all matters raised by the AGSA;

8.4.1.2 The advertising and filling of board, CEO, as well as senior management vacancies, as indicated in the paragraphs above, should be prioritised in the Department and the affected entities. In order to achieve the SONA 2018 commitment made by Government to changing the way boards of SOEs are appointed, the positions filled should be with people who have the relevant expertise, experience and integrity to serve in these vital positions. This will allow the Department as well as the entities to operate and report effectively, and do so within the parameters of applicable legislation. The Department, with its entities, must report on current efforts underway to finalise the filling of posts and ensure that it presents an implementable strategy to address future vacancies;

8.4.1.3 The Department must implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself. The Department should ensure that the targets set in their Strategic Plans and APPs going forward adhere to the AGSA’s SMART principles and ensure that sufficient records are available to prove that those targets had been met. Management in the Department should ensure that it is possible to validate the processes and systems that produce the indicator to enable them to produce the required evidence (through improved record keeping) supporting their reported performance. Conversely, they should adhere to the requirements of the Framework for Managing Programme Performance Information (FMPPI) to ensure that all indicators are well defined and verifiable and that all targets are specific and measurable i.e. the nature and required level of performance is clearly specified and measurable. The Committee also requested that the Department and its entities move towards the development of key performance targets that would have tangible and measurable results that show actual and/or improved service delivery to all transport stakeholders;

8.4.1.4 Effective steps should be implemented to prevent irregular expenditure. Some of these highlighted by the Committee are:

8.4.1.4.1 Officials who caused the Department or its entities to incur irregular, fruitless and wasteful expenditure should be subjected to disciplinary procedures, and where applicable implement the appropriate measures provided for in terms of sections 81 to 86 of the PFMA.

Section 81(1) stipulates that: “an accounting officer for a department or a constitution institution commits an act of financial misconduct if that accounting officer wilfully or negligently-

(a) fails to comply with a requirement of section 38, 39, 40, 41 or 42 or

(b) makes or permits an unauthorised expenditure, an irregular expenditure or a fruitless and wasteful expenditure”.

In addition, section 81(2) states that: “an official of a department, a trading entity or a constitutional institution to whom a power or duty is assigned in terms of section 44 commits an act of financial misconduct if that official wilfully or negligently fails to exercise that power or perform that duty”.

For its part, section 86(1) of the PFMA states that: “an accounting officer is guilty of an offence and liable on conviction to a fine, or to imprisonment for a period not exceeding five years, if that accounting officer wilfully or in a grossly negligent way fails to comply with a provision of section 38, 39 or 40”.

In addition, section 86(2) of the PFMA maintains that: “an accounting authority is guilty of an offence and liable on conviction to a fine, or to imprisonment for a period not exceeding five years, if that accounting authority wilfully or in a grossly negligent way fails to comply with a provision of section 50, 51 or 55”.  

Finally, section 86(3) of the PFMA stipulates that: “any person, other than a person mentioned in section 66(2) or (3), who purports to borrow money or to issue a guarantee, indemnity or security for or on behalf of a department, public entity or constitutional institution, or who enters into any other contract which purports to bind a department, public entity or constitutional institution to any future financial commitment, is guilty of an offence and liable on conviction to a fine or imprisonment for a period not exceeding five years”.

The act also includes provisions for criminal prosecution in cases of gross financial misconduct;

8.4.1.4.2 The Department and its entities must at all times ensure that proper record-keeping is implemented for information supporting compliance and procurement processes and implement consequence management for staff members who fail to comply with applicable legislation in this regard; and

8.4.1.4.3 Having noted that the Department had a Loss Control Committee/Division to deal with and ensure the rooting out of irregular expenditure, the Department must present quarterly reports on the progress made by this Committee/Division to ensure that the Department does not incur irregular expenditure going forward;

8.4.1.5 The Committee requests the following with regard to compliance with the provisions of the PFMA:

8.4.1.5.1 The Department should capacitate its Finance and SCM directorates/departments/branches with appropriately skilled and competent personnel to prepare credible financial statements;

8.4.1.5.2 The executive authorities, accounting authorities, accounting officers and senior management should ensure that information used to prepare financial statements are accurate and reliable; and

8.4.1.5.3 The Department must ensure that all officials responsible for reporting in terms of the PFMA are reskilled by ensuring they receive training on compliance with the PFMA, ensure that these staff members undergo refresher courses on the applicable NT Regulations that are implemented from time to time, and receive training on compliance with the King Report on Corporate Governance IV;

8.4.1.6 Control processes should be adhered to in the SCM processes. Some of these highlighted by the Committee are:

8.4.1.6.1 The Department should identify and address the inefficiencies in the SCM process in the Department, and assist its entities to do the same where needed. There should be consequences for poor performance and failure to comply with applicable legislation;

8.4.1.6.2 Members of the relevant bid evaluation committee and the CFO should satisfy themselves that all service providers that are recommended for award have all the required documentation in terms of legislation. The list of recommended bidders should be accompanied by a signed checklist confirming the completeness of required documents;

8.4.1.6.3 Management should properly plan the acquisition of goods and services and exercise sufficient oversight and monitoring of controls to ensure that compliance with SCM policy is achieved;

8.4.1.6.4 Recurring non-compliance should be investigated and appropriate action taken against transgressors;

8.4.1.6.5 Furthermore, management should ensure that their own policies and procedures are aligned to the Framework for Managing Performance Information and the PFMA, to ensure that performance reporting requirements are properly processed by the Department;

8.4.1.7 The Department should report back to the Committee on a quarterly basis regarding the projects to which grant funds are allocated and transferred to. This report must cover its monitoring, tracking and engagement with its provincial and municipal counterparts on the implementation of the PRMG and other applicable grants to ensure that money is used for its intended purpose, to ensure that there is value for money spent and to prevent a future need for roll-overs;

8.4.1.8 The Department should ensure that the budget allocation for projects is strengthened and realistic in order to reduce the high amounts of funds being transferred under Virements;

8.4.1.9 The Department should develop an alternative investment attraction plan in order to make better use of Public-Private Partnerships and the promotion of Private Sector Participation in the funding options for various infrastructure projects, such as the Moloto Corridor Project and other major infrastructure projects planned by the Department;

8.4.1.10 The Committee takes a dim view of the non-compliance and the lack of tabling of Annual Reports in terms of the sections 8 and 65 of the PFMA. The outstanding Annual Reports that are yet to be tabled before this Committee are of a serious concern. The Department should ensure, and assist well in time where it is able to, that all Annual Reports are submitted within the legislated timeframes for the AGSA, as well as tabling in time before Parliament. The outstanding reports should be presented to the Committee as soon as they are tabled and referred to the Committee. The Committee would work towards submitting a supplementary report on the late received annual reports, should they be tabled in time to do so;

8.4.1.11 The Department must ensure progress from the Rail War Room initiative is made on improving rail operations and deliver quarterly reports on the above to the Committee;

8.4.1.12 The Department must address the issues once again raised regarding the Financial Health for RAF, SANRAL, DLCA, RTMC, SAMSA, RTIA, ACSA, PRASA and its subsidiaries and ensure that a comprehensive plan is submitted to the Committee by January 2019. This must be followed up by quarterly reports on the financial health of all of its entities;

8.4.2 Entity Specific Recommendations

The Committee recommends that the Minister, through the Department, should ensure the following is done with specific reference to the following entities:

8.4.2.1 ACSA

8.4.2.1.1 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.1.2 The entity must ensure that it improves its Financial Statement preparation;

8.4.2.2 ATNS

8.4.2.2.1 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.2.2 The entity must ensure that it improves its Financial Statement preparation;

8.4.2.3 C-BRTA

8.4.2.3.1 The C-BRTA must, on a quarterly basis, report to the Committee regarding the steps taken in resolving the impasse regarding the cross-border movements on the RSA/Kingdom of Lesotho route;

8.4.2.3.2 The C-BRTA should report to the Committee regarding the continued engagements on the implementation of the 1996 SADC Protocol on Transport, Communications and Meteorology;

8.4.2.3.3 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity. Should the funding model and legislative impediments regarding regulation by the C-BRTA not be corrected, the entity will also face liquidity concerns;

8.4.2.3.4 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.4 DLCA

8.4.2.4.1 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.4.2 The entity must submit quarterly reports to the Committee on progress made regarding the application for approval to move to a new card format and the acquisition/procurement of a new card manufacturing machine. Should there be a failure to obtain these approvals, the entity must immediately inform the Committee of steps taken to limit service disruptions to card applicants in the event that the current machine is no longer serviced and if it becomes inoperable;

8.4.2.5 PRASA

8.4.2.5.1 General

8.4.2.5.1.1 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity and its subsidiaries (especially Autopax given its dire financial position). Should the funding model and legislative impediments regarding regulation by the PRASA not be corrected, the entity will also face liquidity concerns;

8.4.2.5.1.2 The below-than-acceptable performance requires special interventions and a rescue plan that will ensure that, in the next financial year, PRASA, focuses on the following:

8.4.2.5.1.2.1 Arresting the current decline in business performance;

8.4.2.5.1.2.2 Focusing on reliability, availability, predictability of the service that is safe and secure and improves customer service satisfaction;

8.4.2.5.1.2.3 Fixing a misaligned and fragmented organisational structure and drive efficiencies and effectiveness in the deployment of resources;

8.4.2.5.1.2.4 Bringing organisational stability and strict governance; and

8.4.2.5.1.2.5 Fast tracking the modernisation programme to improve passenger rail travel experience;

8.4.2.5.1.3 That PRASA improves their current services and safety through the rollout of the current turnaround strategy and the entity should co-operate with the Department to ensure progress from the War Room initiative is made on improving rail operations. The Department must deliver quarterly reports on the above to the Committee;

8.4.2.5.1.4 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.5.1.5 The entity must ensure that it improves its Financial Statement preparation;

8.4.2.5.2 Intersite

8.4.2.5.2.1 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.5.2.1 The entity must ensure that it improves its Financial Statement preparation;

8.4.2.5.3 Autopax

8.4.2.5.3.1 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.5.3.2 The entity must provide the Committee with quarterly progress reports on the investigations ongoing as reported by the AGSA;

8.4.2.5.3.3 The entity must ensure that it improves its Financial Statement preparation and that it works with PRASA and the Department to find a viable solution to improve its finances;

8.4.2.6 PRSA

8.4.2.6.1 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity. Should the funding model and legislative impediments regarding regulation by the PRSA not be corrected, the entity will also face liquidity concerns;

8.4.2.7 RAF

8.4.2.7.1 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity and should provide the Committee with quarterly updates on strategies to improve the financial health status and reduction of instances where the liabilities exceed total assets of the RAF as there was uncertainty as to whether the entity would be able to fund their future obligations. Updates should also be provided on the notable concerns regarding liquidity remaining for RAF;

8.4.2.7.2 The RAF should be supported by the Department and stakeholders in discharging its mandate of efficiently and effectively providing compulsory social insurance cover for to all users of South African roads; rehabilitate and compensate people injured owing to the negligent driving of motor vehicles;

8.4.2.7.3 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.8 RSR

8.4.2.8.1 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity. Should the funding model and legislative impediments regarding regulation by the RSR not be corrected, the entity will also face liquidity concerns;

8.4.2.8.2 The entity must ensure that it improves its Financial Statement preparation;

8.4.2.9 RTIA

8.4.2.9.1 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity. Should the funding model and legislative impediments regarding regulation by RTIA not be corrected, the entity will also face liquidity concerns;

8.4.2.10 RTMC

8.4.2.10.1 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.10.2 The entity must remedy its inability to collect monies owed and resolve the resultant impairment of receivables due to amount owed being irrecoverable;

8.4.2.11 SACAA

8.4.2.11.1 The entity must urgently address its non-compliance to procurement and contract management policies and legislation;

8.4.2.12 SAMSA

8.4.2.12.1 The entity must ensure that it adopts its Annual Report in order for the Minister to table it urgently;

8.4.2.12.2 The entity must urgently address the findings that led to its qualified audit as identified by the AGSA;

8.4.2.13 SANRAL

8.4.2.13.1 The entity should co-operate with the Department to develop funding plans to ensure the financial sustainability of the entity and should provide the Committee with quarterly updates on strategies to improve the financial health status and reduction of instances where the liabilities exceed total assets of SANRAL as there was uncertainty as to whether the entity would be able to fund their future obligations. Updates should also be provided on the notable concerns regarding liquidity remaining for SANRAL;

8.4.2.13.2 With regard to SANRAL, the Ministry must urgently seek to achieve finality regarding the GFIP funding model;

8.4.2.13.3 The entity should ensure its targets meet the SMART principles and ensure that sufficient records are available to prove that those targets had been met. The entity must also implement sufficient measures to ensure that it achieves all the annual performance targets that it sets itself, as well as develop and implement effective action plans in response to the findings of the AGSA;

8.4.2.13.4 The entity must ensure that it improves its Financial Statement preparation;

8.4.3 Committee recommendations applicable to all entities

As the following recommendations have general application to all entities of the Department and for the sake of limiting repetition, the Committee recommends that the Minister, through the Department, should ensure the following:

8.4.3.1 When vacancies in entities arise in critical posts (CEO, CFO, COO, CPO), those appointments should be expedited so that consequence management can be implemented against officials who incur or permit irregular expenditure, as well as fruitless and wasteful expenditure;

8.4.3.2 The Committee requests the following with regard to compliance with the provisions of the PFMA:

8.4.3.2.1 The entities should capacitate their Finance and SCM directorates/departments/branches with appropriately skilled and competent personnel to prepare credible financial statements;

8.4.3.2.2 The executive authorities, accounting authorities, accounting officers and senior management should ensure that information used to prepare financial statements are accurate and reliable; and

8.4.3.2.3 The entities must ensure that all officials responsible for reporting in terms of the PFMA are reskilled by ensuring they receive training on compliance with the PFMA, ensure that these staff members undergo refresher courses on the applicable NT Regulations that are implemented from time to time, and receive training on compliance with the King Report on Corporate Governance IV;

8.4.3.3 Control processes should be adhered to in the SCM processes. Some of these highlighted by the Committee are:

8.4.3.3.1 The entities should identify and address the inefficiencies in the SCM process in the entity. There should be consequences for poor performance and failure to comply with applicable legislation;

8.4.3.3.2 Members of the relevant board/bid evaluation committee and the chairperson should satisfy themselves that all service providers that are recommended for award have all the required documentation in terms of legislation. The list of recommended bidders should be accompanied by a signed checklist confirming the completeness of required documents;

8.4.3.3.3 Management should properly plan the acquisition of goods and services and exercise sufficient oversight and monitoring of controls to ensure that compliance with SCM policy is achieved;

8.4.3.3.4 Recurring non-compliance should be investigated and appropriate action taken against transgressors;

8.4.3.3.5 Furthermore, management should ensure their own policies and procedures are aligned to the Framework for Managing Performance Information and the PFMA, to ensure that performance reporting requirements are properly processed by the entity;

8.4.3.4 The entities must each submit a comprehensive action plan to address any and all of the AGSA’s findings and recommendations to the Committee, followed by quarterly progress reports;

8.4.4 Committee recommendations to the Minister of Finance

The Committee recommends that the Minister of Finance, through NT, should ensure the following:

8.4.4.1 Assist the Department of Transport and its entities in strengthening their SCM policies and compliance thereto as well as compliance to PFMA provisions and Treasury Regulations;

8.4.4.2 Assist the Department with the finalisation of the feasibility study regarding the Moloto Rail Corridor (following the statement by the Minister in his July 2019 Budget Speech that the finalisation of the feasibility study would be prioritised);

8.4.4.3 Assist the Department to address the liquidity and funding concerns raised by the AGSA specifically for RAF, SANRAL, PRASA, RTIA, PRSA and C-BRTA;

9.        SUMMARY OF REPORTING REQUESTS

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

Table 21: 2019 Summary of Reporting Requests

10.     CONCLUSION

The Committee would, through its oversight and engagements with the Department and its entities, ensure that the AGSA’s recommendations are implemented by the Department and its entities. The Committee would further request regular feedback from the Department on key issues impacting entities as identified through the oversight process performed by the Committee, as well as the Department’s own internal oversight directorate over the entities.

11.        APPRECIATION

The Committee would like to acknowledge the Minister, the Deputy Minister, the Department officials, as well as Board Members and officials of the entities for presentations made and engagements on their Annual Reports and Financial Statements. 

The Committee applauds the achievements by the C-BRTA, RTIA and RTMC in receiving Unqualified Audit opinions with no material findings.

The Committee would also like to extend a note of appreciation to its support staff during the year under review and in the compilation and capturing of the Committee reports.

Report to be considered.

Attached – Annexure A: List of abbreviations/acronyms

ANNEXURE A: LIST OF ABBREVIATIONS/ACRONYMS

[1]Department of Transport (2017), p. 15.

[2]Ibid.

[3]Department of Transport (2017), p. 15.

[4]Department of Transport (2017), p. 7.

[5]Ibid.

[6] Ramaphosa (2018).

[7]Ibid.

[8]Department of Transport (2019a), pp. 48-50.

[9] The Committee noted that, despite the indication here by the Department per their tabled Annual Report p.27 that there were no challenges experienced in this programme during the year under review, the Department presented contrary information during the engagement with the Committee. In this programme the Department failed to meet all the set targets and they also indicated in their presentation that a notable challenge to the programme was the delays in processing the STER Bill.

[10] Department of Transport (2019b), p. 35.

[11]Department of Transport (2019b), p. 305.

[12]Ibid.

[13]Department of Transport (2019b), p. 305.

[14]Department of Transport (2019b), p. 306.

[15]Department of Transport (2019b), p. 306.

[16]Ibid.

[17]Department of Transport (2019b), p. 306.

[18]Department of Transport (2019b), p. 307.

[19]Ibid.

[20]Department of Transport (2018), ibid.

[21]Department of Transport (2019b), p. 307.

[22]Ibid.

[23]Ibid.

[24]Department of Transport (2019), p. 38.

[25]Department of Transport (2019b), p. 39.

[26]Department of Transport (2019b), p. 40.

[27]Department of Transport (2019b), p. 40.

[28]Ibid.

[29]Op cit.

[30]Department of Transport (2019b), pp.239-241.

[31]Department of Transport (2019), p. 241.

[32]Ibid.

[33]Ibid.

[34]Department of Transport (2019b), p; 241.

[35]Department of Transport (2019b), pp. 75-112.

[36]Department of Transport (2018).

[37]Ibid.

[38]Department of Transport (2019b), p. 21.

[39]Department of Transport (2019b), p. 23.

[40]Department of Transport (2019b), p. 27.

[41]Ibid.

[42]Department of Transport (2019b), p. 27.

[43]Department of Transport (2019b), p. 28.

[44]Ibid.

[45] Department of Transport (2019b), p. 82.

[46]Ibid.

[47]Department of Transport (2019b), p. 82.

[48]Department of Transport (2019b), p. 87.

[49]Ibid.

[50]Ibid.

[51]Department of Transport (2018).

[52]Department of Transport (2019b), p. 98.

[53]Ibid.

[54]Ibid.

[55]Ibid.

[56]Ibid.

[57]Department of Transport (2019b), pp. 98-99.

[58]Department of Transport (2019b), pp. 98-99.

[59]Department of Transport (2019b), p. 199.

[60] 229 534 claims finalised based on 22 working days per month.

[61]Railway Safety Regulator (2019), pp. 36-45.

[62]Railway Safety Regulator (2018), pp. 32-39.

[63]South African National Roads Agency Limited (2019a), p. 50.

[64]South African National Roads Agency Limited (2019a), p. 50.

[65]South African National Roads Agency Limited (2019a), p. 70.

[66]South African National Roads Agency Limited (2019a), p. 31.

[67] South African National Roads Agency Limited (2019a), p. 48.

[68]Ibid.

[69]South African National Roads Agency Limited (2019a), p. 76.

[70]South African National Roads Agency Limited (2019a), p. 13

[71]Ibid.

[72]South African National Roads Agency Limited (2019a), p. 37.

[73]South African National Roads Agency Limited (2019b), p. 41.

[74]South African National Roads Agency Limited (2018), p. 38.

[75]South African National Roads Agency Limited (2019b), p. 43.

[76]Ibid..

[77]Ibid.

[78] South African National Roads Agency Limited (2019b), p. 44.

[79]South African National Roads Agency Limited (2018), p. 41.