TransportBRRR

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON TRANSPORT, DATED 8 NOVEMBER 2017

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

  1. INTRODUCTION

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 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 and Annual Performance Plans (APPs) 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 of Transport 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. The focus will be on highlighting the key achievements made, as well as challenges encountered during the 2013/14, 2014/15, 2015/16 and 2016/17 financial years, as reported in the Department’s and entities’ 2013/14, 2014/15, 2015/16 and 2016/17 Annual Reports and APPs. 

1.3     METHODOLOGY

The Committee engaged with the Department and its entities on 10, 17, 24 and 31 October 2017, as well as on 7 November 2017 on their performance and audit outcomes for the period under review.

The Committee met with the following entities:

  1. Railway Safety Regulator (RSR)
  2. South African National Roads Agency Limited (SANRAL)
  3. Road Accident Fund (RAF)
  4. Airports Company South Africa (ACSA)
  5. Cross-Border Road Transport Agency (C-BRTA)
  6. Road Traffic Infringement Agency (RTIA)
  7. Road Traffic Management Corporation (RTMC)

The Committee did not meet with the following entities due to the non-tabling of their annual reports at the required dates:

  1. Passenger Rail Agency of South Africa (PRASA)
  2. South African Maritime Safety Authority (SAMSA)
  3. Air Traffic and Navigation Services (ATNS)

The report details the analysis of the 2013/14, 2014/15, 2015/16 and 2016/17 Annual Reports and Financial Statements, strategic objectives, budget allocation and financial performance and the recommendations made by the Portfolio Committee on Transport.

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

  • The 2016 State of the Nation Address (SONA);
  • The Department of Transport’s Strategic and APPs for 2013/14, 2014/15, 2015/16 and 2016/17;
  • The Department of Transport’s Annual Report and Financial Statement for 2013/14, 2014/15, 2015/16 and 2016/17;
  • The Strategic Plans and the APPs of the entities that fall under the Department of Transport, as well as their Annual Reports and Financial Statements for 2013/14, 2014/15, 2015/16 and 2016/17;
  • Quarterly reports of the Department;
  • The report of the Auditor-General of South Africa on the audit outcomes of the Department and its entities;
  • National Treasury 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 of Transport (hereinafter referred to as “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 2016/17

2.1.1 Strategic Priorities of Government

In discharging its mandate, the Department is guided by; inter alia, the NDP, the Medium-Term Strategic Framework (MTSF) (2014-2019), the Presidential Infrastructure Coordinating Commission (PICC), the National Infrastructure Plan (NIP), as well as the 2016 State of the Nation Address (SONA). In his 2015 SONA, President Zuma unveiled a Nine-Point Plan for economic recovery and growth in South Africa. The objectives of the Nine-Point Plan pertaining to transport infrastructure are to:

  • Improve access to economic opportunities and social space;
  • Advance economic development;
  • Improve movement of goods;
  • Ensure greater mobility of people and goods; and
  • Promote regional integration.

The transport sector, owing to its intensive use of infrastructure, is an important component of the economy and a common partner in stimulating development. This is even more so in a global economy where economic opportunities are increasingly related to the mobility of people, goods and information. A direct correlation between the quantity and quality of transport infrastructure and the level of economic development is apparent. High-density transport infrastructure and highly connected networks are commonly associated with high levels of development.

When transport systems are efficient, they provide economic and social opportunities with benefits that result in a positive multiplier effect such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have negative economic impact such as reduced or missed opportunities and a lower quality of life.

Transport infrastructure and services are key to economic development, job creation and social transformation. The challenges confronting the sector include, but not limited to, poor urban and rural public transport, ageing rolling stock, reliance on foreign vessels, poor air transport connectivity on the African continent, inadequate private sector participation, deteriorating provincial roads, as well as the port tariffs structure.

The NDP offers a long-term perspective. It defines a desired destination and identifies the roles different sectors of society need to play in reaching that goal. The Nine-Point Plan therefore seeks to give meaning to the objectives and aspirations of the NDP. In line with the MTSF and in aligning its programmes with the NDP, the Department has undertaken to oversee the manufacturing of a rolling stock factory in Ekurhuleni, which will ensure that more than 65% of the trains used in the country are built locally. 

In addition, the Department has undertaken to upgrade the R573 Moloto Road that will, in turn, improve access to economic opportunities and social space, as well as address the road safety challenges affecting the Gauteng, Mpumalanga and Limpopo commuters. The Department will also roll out Integrated Public Transport Networks (IPTNs) in 13 municipalities. Moreover, it will renegotiate and improve air services agreements on the continent to facilitate the mobility of people and goods, as part of the Youmoussoukro Decision. The focus will also be on reforming port tariffs structure with a view to promoting beneficiation.

Some strategic priorities of Government encompass supporting the local ship building industry, improving the ship register and enhancing cargo volumes to ensure serve as a catalyst for the Oceans Economy. Finally yet importantly, provincial roads will be maintained and a contribution will be made towards the development of a private sector participation framework, as well as the infrastructure funding framework.

The 2016 SONA issued a clarion call for “radical economic transformation” and the realisation of the tenets of the NDP with a view to turning the current economic situation around or boosting economic growth. Arguably, one of the necessary conditions for boosting economic growth is investment in transport infrastructure. Indeed, the PICC underscores transport infrastructure maintenance and expansion, among others, as the pillars for social and economic development.

The Department has undertaken to finalise and implement the Public Transport Plan. Its key features will include the prioritisation of investments in the right public transport areas.  Investment in public transport and transport infrastructure in rural areas also remains a priority in the medium-term. Indeed, the NDP envisions an economy that is inclusive, equitable and fast growing. To attain this end, the NDP points to the need to grow employment, support productivity and efficiency gains and move towards greater equality. It then proposes more affordable and efficient infrastructure provision linked to higher levels of public investment.

During the Budget Vote 2016 reporting timeframe, the Committee noted that a perusal of the Department’s budget allocation for 2016/17 reveals that it would have strived to give credence to the objectives of the NDP, MTSF, the PICC and the SONA. This was evidenced by massive investments in the Road Transport, Rail Transport and Public Transport programmes. It stood to reason that the Department’s focus would be, inter alia, on maintaining road infrastructure, upgrading rail infrastructure and services, as well as enhancing public transport.

 

Government’s MTSF underscores that, while South Africa has a relatively good national economic infrastructure, the challenge is to maintain and expand it to address the needs of a growing economy. Current investment levels are insufficient and maintenance programmes are lagging. Given Government’s limited finances, private funding will need to be sourced for some of these investments and policy planning and decision-making will require trade-offs between competing national goals. Government needs to not only better coordinate collaborative investments by businesses, provincial and local government into key infrastructure projects. More importantly, it is also expected to shape its institutional, policy and regulatory environment in order to enable investment, realise the desired efficiencies, improve infrastructure delivery and contribute to economic growth and employment creation.

 

In the MTSF 2014-19, the NDP has set a growth target of 5% by 2019. To achieve this, the transport sector will embark on various interventions to increase its contribution to economic growth. This will be realised through the private sector partnerships and collaborations in order to unlock obstacles to investment for infrastructure development, maintenance and expansion.

 

The upgrading of the N3 Corridor and the reduction in logistics have been identified as national priorities by the PICC. The Strategic Infrastructure Programme (SIP) 2 deals with the Durban-Free State-Gauteng Logistics and Industrial Corridor. The road network system into the port is indeed a critical part of the logistics chain and vital to ensure the seamless flow of freight. The N3 route forms the backbone of the logistics corridor between Gauteng and KwaZulu-Natal via the Free State. In support of the priorities set by the PICC, the route is integral to achieving these goals.

 

While striving for excellence and integration of sustained transport services, the Department and the broader transport sector are crucial role players in the achievement of the NDP. This has been entrenched in the Minister’s Delivery Agreement with the President. 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 outcomes:

Table 1: Minister’s Delivery Agreement with the President

Outcome Number

Sub-Outcome Number

4: Decent employment through inclusive economic growth.

 

1: Productive investment is effectively crowded in through the Infrastructure Build Programme.

  • Ensure monitoring of off-takes by end users on the Infrastructure Programme.

6: An efficient, competitive and responsive economic infrastructure.

 

1: Regulation, funding and investment improved.

  • Establish a Single Transport Economic Regulator (STER).
  • Develop a Private Sector Participation (PSP) Framework for ports and freight rail, removing barriers to entry for private investment and operations within the context of Cabinet-approved policy and with an analysis of the implication of tariffs.

3: Maintenance, strategic expansion, operational efficiency, capacity and competitiveness of logistics transport infrastructure ensured.

  • Improve national transport planning to develop long-term plans for transport that synchronise with spatial planning and align infrastructure investment activities of provincial and local government that clearly communicate the State’s transport vision to the private sector.
  • Ensure development and approval of the Integrated Transport Plan.
  • Develop and implement approved plan and improve market share of containers on rail versus road to ensure that road freight is moved to rail.
  • Improve and preserve national, provincial and local road infrastructure.
  • Strengthen road traffic management.
  • Improve public transport.
  • Strengthen institutional arrangements for public transport.

 

6: Coordination, planning, integration and monitoring implementation of SIPs in the NIP.

  • SIP 1: Unlocking the Northern Mineral Belt.
  • SIP 3: South Eastern Node and Corridor Development.
  • SIP 4: Unlocking economic opportunities in North West Province.
  • SIP 7: Integrated Urban Space and Public Transport Programme.

7: Comprehensive rural development and land reform.

5: Increased access to quality infrastructure and functional services, particularly in education, healthcare and public transport in rural areas.

  • Improve transport infrastructure and public transport in rural areas.
  • Access Road Development Plan for improving rural road infrastructure implemented.
  • District municipalities implementing IPTN Strategy.

10: Protect and enhance environmental assets and natural resources.

2: An effective climate change mitigation and adaptation response.

  • Develop strategic policy and regulatory frameworks and programmes to promote a low-carbon economy.
  • Green Transport Strategy and implementation of Plan formulated and completed.

(Source: Department of Transport, (2016a) Annual Performance Plan 2015/16, Pretoria, Department of Transport), adapted.

 

2.1.2 Strategic Priorities of the Department

The strategic outcomes over the medium term are: 

 

Strategic Outcome-oriented Goal 1: Efficient and integrated infrastructure network and operations that serve as a catalyst for social and economic development 

Develop and implement policies and promulgate Acts 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 definitive drive of these interventions is to improve the efficiency, capacity and competitiveness of transport operations in all modes. 

 

Strategic Outcome-oriented Goal 2: A transport sector that is safe and secure 

Develop and implement policies and strategies that seek to reduce accidents and incidents in the road, rail, aviation and maritime environment. 

Amongst others, the Department will speed up the implementation of road safety interventions by reviewing some of the legislative interventions that are geared at addressing the shortcomings of road safety that result in accidents and road fatalities. This will include, inter alia, reviewing the National Road Traffic Act, by providing for the regulation of driving schools, dealing with driving of motor vehicles whilst under the influence of alcohol and reviewing the current speed limits. 

 

Strategic Outcome-oriented Goal 3: Improved rural access, infrastructure and mobility 

Increase mobility and access in rural space by improving transport infrastructure and implementing integrated transport services. 

 

Strategic Outcome-oriented Goal 4: Improved public transport services 

Provide integrated public transport solutions through development and implementation of legislation, policies, strategies and regulations. The definitive drive of these solutions is to ensure safe, secure, reliable, cost-effective and sustainable public transport services. 

 

Strategic Outcome-oriented Goal 5: Increased contribution to job creation 

Create an enabling environment for employment opportunities in the transport sector through the implementation of labour-intensive interventions and off-takes of ancillary support programmes. 

 

Strategic Outcome-oriented Goal 6: Increase contribution of transport to environmental protection 

Develop and implement policies that aim to mitigate climate change and adaptation responses through reduction of greenhouse gas (GHG) emission, aviation noise and pollution at sea. 

 

Strategic Outcome-oriented Goal 7: Effective and efficient management and support  

Improve departmental performance by strengthening internal support functions and ensuring good governance controls.

 

2.1.2.1 Challenges

The following challenges were experienced by the Department during the year under review:

 

2.1.2.1.1 Administration

The budget for compensation of employees was cut and the National Treasury placed a moratorium on the filling of non-critical posts that were vacant as at 31 July 2015. 

 

2.1.2.1.2 Integrated Transport Planning 

Cabinet proposed that the Department should consult the PICC on the National Transport Master Plan 2050 (NATMAP 2050). The NATMAP 2050 was submitted to the PICC Secretariat, which recommended that further work should be done with their task team, which was concluded. The meeting with the PICC Management Committee could not take place to finalise the NATMAP 2050 in the financial year. 

 

The Department could not finalise the development of the Harrismith Hub Framework, but developed a Feasibility Study and an Options Analysis for the Harrismith Hub. The Free State Department of Roads, Police and Transport also developed feasibility studies. The Options Analysis and Value Assessment Reports, developed in collaboration with Free State Department of Roads, Police and Transport will be tabled as the basis of the overarching Harrismith Hub Framework. 

 

2.1.2.1.3 Road Transport 

The Department had not finalised the Road Accident Benefit Scheme (RABS), which was intended to review the compensation model of victims of road accidents as currently dealt with in terms of the Road Accident Fund Act. The scheme was to ensure that the payments of damages arising out of motor vehicle accidents are affordable to the State. The proposal was to ensure that there is no longer payment of huge lump sums for those damages. The amount will be standardised payments for all the victims of road crashes. 

 

2.1.2.1.4 Civil Aviation 

There were lengthy consultative processes with industry and role players in terms of the National Airports Development Plan (NADP), National Civil Aviation Policy (NACP), the Airport Company and Air Traffic Navigation Services (ATNS) Amendment Bills and the Civil Aviation Amendment Bill, which delayed the achievement of the set targets. 

 

While the maintenance and expansion of key transport infrastructure is undoubtedly pivotal, the Department equally needs to attend to the following challenges:

 

  • Improving the level of integration of transport infrastructure network and operations (local, regional and continental);
  • Decreasing accidents and incidents (and fatalities) across all transport modes;
  • Improving infrastructure, access and mobility in rural and peri-urban areas;
  • Ensuring reliability, affordability, accessibility, efficiency, effectiveness and safety of public transport;
  • Regulating GHG emissions, noise and general pollution generated by the transport sector; and
  • Developing a sector-wide funding model for all infrastructure projects.

 

2.1.2.2 Achievements

The following were recognised achievements by the Department during the year under review:

 

2.1.2.2.1 Administration 

A total of 56 interns were exposed to different training interventions in line with their personal development plans during the period under review. 

 

The Transport Sector Gender Empowerment Policy was developed and presented to Executive Committee (EXCO) of the Department during the period under review. The Policy was subsequently approved by the Minister of Transport in March 2017.

 

2.1.2.2.2 Integrated Transport Planning 

Priority pilot projects were identified and profiled for implementation and a draft implementation plan was developed for identified priority projects as targeted during the period under review. 

 

The review of the White Paper on the National Transport Policy finalised and the Policy was submitted to Cabinet during the period under review.

 

The Draft Road Freight Strategy was reviewed and submitted to Cabinet as targeted during the period under review. 

 

The Draft Regional Transport Integration Market Access Strategy was developed and presented to EXCO during the period under review. 

 

The Draft Harrismith Hub Framework Implementation Plan was developed and submitted to Cabinet during period under review. 

 

The Green Transport Strategy was finalised and submitted to Cabinet as targeted during the period under review

 

2.1.2.2.3 Rail Transport 

Consultations were conducted with SANRAL, Transnet and Provinces on the White Paper on the National Rail Policy during the period under review.  

 

The draft branchline model for Private Sector Participation (PSP) developed as targeted and presented to the the Department EXCO. 

 

Rail sector priority areas needing economic regulations were analysed, a regulatory review and analysis was conducted and draft economic regulations developed successfully during the period under review. 

 

Stakeholder consultations were conducted on the Draft National Railway Safety Regulator Amendment Bill and the Bill was subsequently submitted to Cabinet as targeted during the period under review. 

 

Stakeholder consultations were conducted on the National Railway Safety Strategy during the period under review. 

 

A legislative review and analysis was conducted and the Draft National Rail Bill developed as targeted during the period under review.

 

2.1.2.2.4 Road Transport 

The Draft Green Paper on the Roads Policy submitted to Cabinet.  

 

Oversight and monitoring of approved Provincial Road Maintenance Grant (PRMG) projects was conducted through site visits and quarterly bilateral consultations. 

 

The Draft Access Road Development Plan (ARDP) was developed and consultations on the draft ARDP were conducted in all provinces as targeted during the period under review. 

 

The Administrative Adjudication of Road Traffic Offences (AARTO) Amendment Bill was submitted to Parliament and is currently undergoing parliamentary processes. 

 

The RABS Bill submitted to Cabinet as targeted during the 2016/17 financial year. 

 

The Road Safety Strategy was submitted to Cabinet and subsequently approved during the periods under review. 

 

The Inception Report for the Review of Founding Legislations of Road Entities successfully developed as targeted. 

 

A total of 546 Active Dangerous Goods Operators (DGOs) was inspected as targeted over the four quarters. 

 

A total of 414 Active Driving Licence Testing Centres (DLTCs) was inspected as targeted over the four quarters. 

 

A total of 510 Active Vehicle Testing Centres (VTCs) was inspected as targeted over the four quarters. 

 

2.1.2.2.5 Civil Aviation 

Implementation of the regulations for the phasing out of the Chapter 2 Aircraft was monitored as targeted during the period under review. 

 

The NCAP was submitted to Cabinet as targeted during the period under review. 

 

The Air services arrangements were reviewed with nine (9) States during the period under review. 

 

The NADP was submitted to Cabinet as targeted during the period under review. 

 

The Amendment Bill for the Rationalisation of the Air Services Licencing Act and the International Air Services Act was developed and consultations with the State Attorney were conducted as targeted for the financial year. 

 

The Civil Aviation Amendment Bill was submitted to Cabinet during the period under review. 

The ATNS was recommended as the national service provider for the provision of Medium Earth Orbit Search and Rescue (MEOSAR) ground segment services. 

 

The Airports Company and ATNS Amendment Bills were submitted to Cabinet as targeted during the period under review. 

 

2.1.2.2.6 Maritime Transport 

The Draft Maritime Transport Policy was submitted to Cabinet during the period under review. 

 

The Inland Waterway Strategy was submitted to Cabinet during the period under review. 

 

The Draft Merchant Shipping Bill (2016) was developed as targeted during the period under review.

 

The (mock) audit process was completed and the report finalised. Implementation of the International Maritime Organisation (IMO) Convention continues to be monitored on a continuous basis. 

The Department’s Marine Manufacturing Delivery Unit was established as targeted during the period under review.

 

The Project Plan for the 2020 IMO World Maritime Day Parallel Event was developed as targeted during the financial year.

 

2.1.2.2.7 Public Transport 

The Rural Transport Strategy was submitted to Cabinet during the period under review. 

 

The Draft IPTN plan was developed in one (1) district municipality as targeted during the period under review. 

 

Stakeholder consultations were conducted on the Draft Taxi Recapitalisation Review Report and the Report was subsequently submitted to Cabinet as targeted during the period under review. 

 

Stakeholder consultations were conducted on the draft Integrated Public Transport Turnaround Plan during the period under review and the Plan was subsequently submitted to Cabinet as targeted. 

 

The Draft Public Transport Safety Improvement Plan was developed and presented to the Department EXCO during the period under review. 

 

Mid-year budget, expenditure and performance assessments were conducted on municipalities in respect of IPTNs. Bilateral progress meetings and site visits for universal access design were conducted with municipalities in respect of IPTNs.  

 

The National Land Transport Amendment Bill was submitted to Parliament during the period under review and currently undergoing Parliamentary processes. 

 

2.1.2.3 Significant events and projects for the year

2.1.2.3.1 Road Transport 

Provincial consultation workshops were held at all provinces during the development process of the Draft Green Paper: Roads Policy. 

 

2.1.2.3.2 Maritime Transport

The Department, in collaboration with stakeholders in the Maritime Sector, hosted the World Maritime Day on 23 September 2015. This event took place in KwaZulu-Natal, at Richards Bay.

 

2.1.2.3.3 Women in Transport Summit 

A summit on Women in Transport was held from 20 to 22 August 2015. 

 

2.1.2.3.4 NATMAP 2050 

A broad stakeholder consultation on the review of NATMAP 2050 was held on 30 October 2015.

 

  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)

Programme

2013/14

2014/15

Final Appropriation

Actual Expenditure

Expenditure Percentage

Final Appropriation

Actual Expenditure

Expenditure Percentage

Administration

333 440

315 578

95%

390 889

377 489

97%

Integrated Transport Planning

74 913

66 373

89%

74 974

74 974

100%

Rail Transport

11 232 843

11 232 840

100%

15 035 507

15 035 507

100%

Road Transport

19 897 209

20 665 564

104%

21 810 020

22 202 862

102%

Civil Aviation

245 515

148 602

61%

160 966

160 966

100%

Maritime Transport

103 557

102 271

99%

101 742

99 623

98%

Public Transport

10 514 190

10 505 616

100%

11 196 571

11 195 677

100%

Total

42 401 667

43 036 844

101%

48 770 669

49 147 098

101%

(Source: Department of Transport 2014 and 2015)

 

The budget allocation for the Department in 2014/15 equalled 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 S’hamba Sonke: 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

  •  
  1.  

Programme 1: Administration

Transfers to Higher Education Institutions

3 281

Programme 4: Road Transport

Transfer to Road Traffic Infringements Agency (RTIA)

3 825

Programme 5: Civil Aviation

Review of the National Airports Development Plan

  1.  
  •  

7 771

(Source: Department of Transport (2015))

 

3.2     2014/15, 2015/16 AND 2016/17

 

Table 4: Appropriation Statement for 2016/17

Programme

 

2016/17

2015/16

2014/15

Final Appropriation

R’000

Actual Expenditure

R’000

Over/Under Expenditure

R’000

Final Appropriation

R’000

Actual Expenditure

R’000

Over/Under Expenditure

R’000

Final Appropriation

R’000

Actual Expenditure

R’000

Over/Under Expenditure

R’000

Programme 1: Administration

365 182

365 136

46

422 169

420 824

1 345

390 889

377489

13 400

Programme 2: Integrated Transport Planning

77 054

77 054

-

88 764

88 762

2

74 974

74 974

-

Programme 3: Rail Transport

18 993 457

18 992 005

1 452

18 310 610

18 305 274

5 336

15 035 507

15 035 507

-

Programme 4: Road Transport

24 878 466

25 055 434

(176 968)

23 164 889

22 889 198

275 691

21 810 020

22 202 862

(392 842)

Programme 5: Civil Aviation Transport

258 267

210 427

47 840

150 383

145 284

5 099

160 966

160 966

-

Programme 6: Maritime Transport

156 386

153 561

2 825

143 674

142 874

800

101 742

99 623

2 119

Programme 7: Public Transport

11 557 042

11 550 042

7 000

11 334 588

11 328 571

6 017

11 196 571

11 195 677

894

Direct Charge Against the Revenue Fund

3 821

3 821

-

 

 

 

 

 

 

Total

56 289 675

56 407 480

(117 805)

53 615 077

53 320 787

294 290

48 770 669

49 147 098

(376 429)

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

 

The budget allocation for the Department for 2016/17 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.

 

3.2.1 Programme 1: Administration

Of the R365.2 million that had been allocated to the Administration programme, the Department spent R365.1 million or 99.9% under the programme, translating into an under-expenditure of R46 000. The programme underspent by R21.7 million on the Compensation of Employees and by R7.5 million on Goods and Services against its adjusted budget. The under-expenditure was shifted across programmes, mainly to reduce the over-expenditure in the Road Transport programme.

 

3.2.2 Programme 2: Integrated Transport Planning

The budget allocation for the Integrated Transport Planning programme was R77.1 million and the Department spent 100% of the budget in the programme. The Department in this programme underspent by R1.9 million against the adjusted budget due to savings on the Harrismith Hub project that was taken over by the province. The savings were shifted across Programmes to reduce the over-expenditure in the Road Transport programme.

 

3.2.3 Programme 3: Rail Transport

Of approximately R19 billion that had been allocated to the Department under the Rail Transport programme, it reported under-expenditure of R1.5 million by the end of 2016/17. The programme underspent by R1.7 million on the Compensation of Employees and by R1.9 million on Goods and Services against its adjusted budget. A rollover R1.5 million was requested for the Interim Rail Economic Regulator project and the under-expenditure, as well as savings were shifted to cover over-expenditure in other programmes.

 

3.2.4 Programme 4: Road Transport

By the end of 2016/17, the Road Transport programme had spent R25.1 billion against R24.9 billion that had been allocated to it, indicating an over-expenditure of approximately R177 million. The programme overspent on Goods and Services by R230.3 million owing to expenditure on the electronic National Traffic Information System (eNaTIS). Funds were shifted across programmes to reduce the over-expenditure of the programme.

 

3.2.5 Programme 5: Civil Aviation Transport

The budget allocation for the programme stood at R258.3 million. By the end of the reporting period, the Department had spent R210.4 million, translating into an under-expenditure of R47.8 million. The programme underspent by R43.5 million on Goods and Services, mainly as a result of funds of R47.8 million that had been earmarked for the upgrade of a satellite tracking system that were not spent.

 

The Department in this programme also underspent by R2.3 million on the Compensation of Employees. Funds were shifted across programmes to cover over-expenditure on projects, mainly Watch Keeping Services. The under-expenditure on Compensation of Employees was shifted to the Road Transport programme to reduce the over-expenditure in that programme.  The remaining under-expenditure of the programme reflects the balance of unspent earmarked funds.

 

3.2.6 Programme 6: Maritime Transport

Of the R156.4 million that had been allocated to the Maritime Transport programme, the Department had spent R153.6 million by the end of the period under review, indicating an under-expenditure of R2.8 million. However, the programme overspent on Goods and Services by R15.6 million, mainly due to additional expenditure on the Oil Pollution project and incurred a loss of R22.1 million owing to the write-off of a debt to SAMSA.

 

The shortfalls were covered by the shifting of funds across programmes. The remaining under-expenditure of the programme reflects the balance of unspent earmarked funds.

 

3.2.7 Programme 7: Public Transport

The budget allocation for the programme by the end of the period under review was R11.6 billion, with the programme underspending by R7 million. The programme underspent on a number of projects, mainly:

 

•      The Review of the Taxi Recapitalisation Model (R51.4 million);

•      The Implementation of IPTN Plans in District Municipalities (R27 million);

•      Technical Oversight and Support (R9.1 million); and

•      The Shova Kalula bicycle project (R6.4 million).

 

A total of R98.3 million was shifted to other programmes to cover over-expenditure, mainly in the Road Transport and Maritime Transport programmes. The remaining under-expenditure of the programme reflects the balance of unspent earmarked funds for the accommodation for the National Public Transport Regulator.

 

 

3.3     VIREMENTS 2016/17

Table 3: Summary of Virements

Programme

Compensation of Employees

 

 

Goods and Services

 

Dept Agencies & Accounts

Machinery & Equipment

 

Foreign Governments

 

 

Households

 

 

Total

Programme 1: Administration

(21 676)

(7 428)

 

1 493

 

 

(27 611)

Programme 2: Integrated Transport Planning

431

(3 194)

 

689

 

174

(1 900)

Programme 3: Rail Transport

(1 686)

(492)

10 000

102

 

 

7 924

Programme 4: Road Transport

35 221

43 995

 

 

 

124

79 340

Programme 5: Civil Aviation Transport

(2 219)

5 140

 

225

838

1 060

5 044

Programme 6: Maritime Transport

(3 878)

40 724

 

(457)

(838)

 

35 551

Programme 7: Public Transport

(6 193)

(92 236)

 

81

 

 

(98 348)

Total

-

(13 491)

10 000

2 133

-

1 358

-

(Source: Department of Transport, 2017).

 

Compensation of Employees: Most programmes experienced under-expenditure on Compensation of Employees, which was shifted across programmes to reduce the over-expenditure the Road Transport programme and to compensate for shortfalls in other areas.

 

Goods and Services mainly in the Administration and Public Transport programmes. Funds were shifted to the:

 

•        Road Transport programme to reduce the over-expenditure owing to eNaTIS that had not been budgeted for;

•        Maritime Transport programme to cover the additional cost of Oil Pollution and the write-off of a debt to SAMSA;

•        Rail Transport programme to increase the transfer to the Railway Safety Regulator; and

•        Civil Aviation programme to cover the over-expenditure on a number of projects.

 

Machinery and equipment was over and underspent between programmes and over-expenditure was covered by shifting funds across programmes.

 

There was overspending on Foreign Governments mainly for the African Civil Aviation Commission (AFCAC) and the International Civil Aviation Organisation (ICAO). Savings in membership fees for the International Maritime Organisation were shifted to cover the over-expenditure on ICAO and to partially cover the over-expenditure on AFCAC.

 

There was overspending on Households because more taxi were scrapped than had been budgeted for and leave pay was under budgeted for. Funds were shifted within and across programmes to cover the over-expenditure.

 

 

3.4 ROLLOVERS REQUESTED

Rollovers were requested as detailed in the table below:

 

Table 4: Rollovers

Programme

R’000

Programme 3: Rail Transport: Interim Rail Economic Regulator

1 452

Total

1 452

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

 

 

3.5 UNAUTHORISED, FRUITLESS AND WASTEFUL EXPENDITURE

 

3.5.1 Unauthorised Expenditure

The cost of eNaTIS maintenance and operations resulted in unauthorized expenditure of R1 338 165 000 which was incurred in 2013/14, 2014/15 and 2016/17. 

 

To put the eNaTIS issue in perspective, the Committee noted that in 2013/14, the Department and the RTMC concluded that the transaction fees that were utilised to fund the cost of eNaTIS maintenance and operations belong to the RTMC. The cost of eNaTIS maintenance and operations resulted in further unauthorised expenditure of R392.8 million in 2014/15. Transfer payments to the RTMC that were held back in the previous financial year to reduce the unauthorised expenditure were paid in 2014/15, increasing the unauthorised expenditure in 2014/15.

 

The cost of eNaTIS maintenance and operations resulted in unauthorised expenditure of R2.4 billion which was incurred in 2013/14 and 2014/15. No further expenditure was incurred in 2015/16 because the over-expenditure on eNaTIS could be covered by the shifting of funds across programmes and because an agreement was reached that the RTMC would carry the cost of eNaTIS from May 2015 onwards.

 

An amount of R1.2 billion was allocated to the Department in 2016/17 as a direct charge against the National Revenue Fund to offset unauthorised expenditure that was incurred during 2008/09 and 2009/10 as a result of over expenditure on bus subsidies.

 

3.5.2 Fruitless and Wasteful Expenditure

Fruitless and wasteful expenditure that was declared and not yet transferred to receivables, amounted to a total of R1 603 946 as detailed in note 27 to the annual financial statements. The expenditure included two cases related to intangible assets that had been procured in prior years but not used amounting to R845 196. In addition, there was an amount of R447 500,25 for services paid for but not delivered for which litigation was finalised and an overseas trip that was undertaken that exceeded the authorisation by R147 522,46 and was  under investigation at the time of reporting. Other fruitless and wasteful expenditure under investigation amounted to R52 181, to be written off R78 334,25 and to be recovered R 33 212,04.

 

3.5.3 Irregular Expenditure

A total of R93.8 million was declared as irregular expenditure during the period under review, of which R92.1 million pertained to prior years because a contract had been extended from 1 May 2010 for a period of five years without following procurement procedures. A propos of the reporting period, six cases totalling R1.7 million were declared as irregular. This was attributed to the work that had been done after the expiry of a contract, and an approval that had not been obtained to appoint a sole provider in two cases. In addition, no process had been followed for an event. Finally, vehicles had been rented without approval to deviate from the prescribed vehicle group and no approval had been obtained to reject a bid.

 

Ten (10) cases of irregular expenditure incurred in prior years and during the period under review amounting to R10.4 million were condoned. Of the remaining 11 cases, disciplinary proceedings were initiated in seven (7) cases. Disciplinary cases could not be initiated in two (2) cases because the irregular expenditure was identified after the responsible employees had left the employ of the Department. In one case, the responsible employees had still to be identified at the time of reporting and in the other, disciplinary steps had not yet been started.

 

3.5.4 Measures put in place

The Committee noted that the measures listed below are the same measures put in place in the Annual Report for 2014/15. 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 was requested to ensure that the measures are reviewed in order to ensure they are effective and that they are implemented appropriately.

 

Measures reported to have been put in place by the Department to prevent and/or detect irregular expenditure are as follows: 

  • Where appropriate, cases of irregular expenditure are referred to the Department’s legal services to determine whether any official can be held liable for the irregular expenditure;
  • Cases of irregular expenditure are referred to the Department’s Directorate: Investigations and Forensics for investigation when an investigation is required;
  • Relevant managers are requested to take disciplinary steps against officials who make or permit irregular expenditure;
  • The Bid Adjudication Committee will not consider condoning irregular expenditure until a legal opinion has been obtained, where applicable, and disciplinary steps were considered;
  • The contract management system monitors all payments against orders that are placed, and will detect payments that exceed the contract value;
  • The contract management system will detect any payments that are approved for processing for which no order was placed;
  • Payments for all procurements must be processed via Supply Chain Management (SCM) so that any irregular procurement can be detected before payment;
  • To prevent the occurrence of not completing the internal order and requisition forms, the SCM component does not make any approval documents or letters of acceptance available until the internal order and requisition forms are completed; and
  • Initiatives to train all officials who are involved in the approval of procurement matters will continue.

 

 

3.6 FINDINGS OF THE AUDITOR-GENERAL (AGSA)

 

During the year under review, the Department received an unqualified opinion, with findings on non-compliance with legislation, these being procurement and contract management, as well as expenditure management. In addition, the AGSA made material findings on the following:

 

3.6.1 Annual Financial Statements and Annual Report

As disclosed in note 35 to the financial statements, the corresponding figures for 31 March 2016 have been restated as a result of an error in the financial statements of the Department, and for the year ended, 31 March 2017.

 

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)(a) and (b) of the Public Finance Management Act (PFMA) (No. 1 of 1999).

 

Material amendments relating to intangible and tangible capital assets were made to the financial statements submitted for audit as reliable information only became available after submission date. The amendments were assessed and confirmed to be reasonable.

This is a repeat finding.

 

3.6.2 Procurement and Contract Management

Goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by Treasury Regulations 16A6.1.

 

3.6.3 Expenditure Management

As disclosed in Note 26 of the financial statements, irregular expenditure was incurred as a result of officials not following the prescribed procurement processes. Actions were taken by the accounting officer to investigate instances that resulted in irregular expenditure.

 

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

This is a repeat finding.

 

3.6.4 Internal Control

3.6.4.1 Financial and Performance Management

Although processes are in place to ensure compliance with legislation in the procurement and contract management environment, instances resulting in irregular and fruitless and wasteful expenditure recurred. 

 

The unauthorised expenditure incurred by the Department in the current year is due to court orders ordering the Department to settle payments with a service provider relating to the eNaTIS contract.  

 

Material amendments made to the annual financial statements related to eNaTIS assets and were as a result of information received from the appointed service provider after the financial statements submission due date.

 

3.6.5 Other Reports

3.6.5.1 Investigations

Five internal investigations are still in progress on matters related to procurement and contract management. The outcomes are expected in 2017/18 financial year. 

 

The procurement of services for the 2011 investor’s conference is being investigated by the Public Protector’s Office. The investigation is still in progress.

 

The forensic investigation into the circumstances surrounding the extensions to the Turnkey Agreement RT1194KA and approval of Change Note 47 is being undertaken by the Special Investigations Unit and the Hawks. The investigation has not yet been finalised.

 

 

  1. OVERVIEW AND ASSESSMENT OF PROGRAMME PERFORMANCE

 

 

  1.  SUMMARY OF PERFORMANCE

Table 5: Annual Performance Targets

Total targets set

53

Targets achieved

43

Targets partially achieved

10

Success rate

81.1%

Total budget spent

R56.4 billion or 102%

(Source: Department of Transport (2017)).

 

Some of the achievements by the Department during the year under review included the following:

 

  • The review of the White Paper on the National Transport Policy was finalised and the Policy was submitted to Cabinet.
  • The Draft Road Freight Strategy was reviewed and submitted to Cabinet.
  • The Draft Green Paper on the Roads Policy was submitted to Cabinet.
  • The Administrative Adjudication of Road Traffic Offences (AARTO) Amendment Bill was submitted to Parliament (and is currently before the National Council of Provinces (NCOP)).
  • The Road Safety Strategy was submitted to Cabinet and was subsequently approved.
  • The Draft ARDP was developed and consultations on the draft were conducted in all provinces.
  • The RABS Bill was submitted to Cabinet.
  • The Draft Maritime Transport Policy was submitted to Cabinet.
  • The Inland Waterway Strategy was submitted to Cabinet.
  • The Rural Transport Strategy was submitted to Cabinet.
  • Stakeholder consultations were conducted on the Draft Taxi Recapitalisation Review Report and the Report was subsequently submitted to Cabinet.

 

The challenges encountered during the year under review were as follows:

 

  • The budget for the Compensation of Employees was cut and the National Treasury placed a moratorium on the filling of posts that had been vacant as at 31 July 2015.
  • Cabinet proposed that the Department had to consult the PICC on the NATMAP 2050. The NATMAP 2050 was submitted to the PICC Secretariat that recommended that further work be done with the task team which was concluded. The meeting with the PICC Management Committee could not take place during the year under review.
  • The Department could not finalise the development of the Harrismith Hub Framework, but developed a Feasibility Study on an Options Analysis for the Harrismith Hub. The Free State Department of Roads, Police and Transport also developed feasibility studies. The Options Analysis and Value Assessment Reports, developed in collaboration with the Free State Department of Roads, Police and Transport, will be tabled as the basis for the overarching Harrismith Framework.
  • The Department reported that “lengthy consultative processes with industry and role players” in terms of the National Airports Development Plan, National Civil Aviation Policy, the Airports Company and the Air Traffic Navigation Services Amendment Bills, as well as the Civil Aviation Bill delayed the achievement of the set targets.

 

  1. Programme Performance
    1. Programme 1: Administration

Table 6: Programme 1: Administration

Total targets set

10

Targets achieved

10/10

Success rate

100%

Total budget spent

R365.1 million or approximately 100%

(Source: Department of Transport (2017)).

 

The Department achieved all the ten (10) performance targets that it had set itself under the Administration programme for the period under review.

 

  1. Programme 2: Integrated Transport Planning

Table 7: Programme 2: Integrated Transport Planning

Total targets set

7

Targets achieved

3/7

Targets partially achieved

4/7

Success rate

42.9%

Total budget spent

R77.1 million or 100%

(Source: Department of Transport (2017)).

 

While in its Annual Report the Department claims that it achieved all the performance targets it had set itself under the Integrated Transport Planning programme, the following discrepancy pertaining to three (3) of these performance targets is observed. Both in the Department’s APP, as well as in its Annual Report, these annual performance targets are stated as thus:

 

  • Road Freight Strategy submitted to Cabinet;
  • Regional Transport Integration Access Strategy for SA developed;
  • Harrismith Hub Framework Implementation Plan submitted to Cabinet; and
  • Road Tariff Determination Framework developed.

 

However, in its Annual Report, the Department reports that only the “drafts” of the aforementioned strategies and frameworks were either developed or submitted. It cannot therefore be said that these targets were fully achieved.

 

  1. Programme 3: Rail Transport

Table 8: Programme 3: Rail Transport

Total targets set

6

Targets achieved

3/6

Targets partially achieved

3/6

Success rate

50%

Total budget spent

Approximately R19 billion or approximately 100%.

(Source: Department of Transport (2017)).

 

Of the six (6) performance targets that the Department had set itself for the period under review, it achieved only three (3) or 50%. The targets that were partially achieved were:

 

  • White Paper on the National Rail Policy submitted to Cabinet

 

At the time of tabling the Annual Report, the Department asserted that “consultations” on the

White Paper on the National Rail Policy had been conducted with SANRAL, Transnet and provinces. The Annual Report makes no reference of the White Paper having been “submitted to Cabinet”.

 

  • Develop the branchline model for Private Sector Participation (PSP)

 

While the annual performance target was to have the branchline model for the PSP developed, the Department reported that a “draft” branchline model for the PSP had been developed during the period under review.

 

  • National Railway Safety Strategy submitted to Cabinet

 

Instead of having the National Railway Safety Strategy submitted to Cabinet, the Department asserted that “stakeholder consultations” had been conducted on the Strategy at the time of tabling its Annual Report.

 

 

4.2.4 Programme 4: Road Transport

 

Table 9: Programme 4: Road Transport

Total targets set

10

Targets achieved

9/10

Target partially achieved

1/10

Success rate

90%

Total budget spent

R25.1 billion or 100.7%

(Source: Department of Transport (2017)).

 

  • Draft White Paper on the Roads Policy developed

 

At the time of submitting its Annual Report, the Department reported that a “Draft Green Paper” and not a “Draft White Paper” on the Roads Policy had been “submitted to Cabinet”.

 

There was an over-achievement on the inspection of DGOs performance. While the performance target had been to have 140 DGOs inspected, the Department had inspected 546 DGOs by the end of the financial year under review.

 

4.2.5 Programme 5: Civil Aviation Transport

Table 10: Programme 5: Civil Aviation Transport

Total targets set

8

Targets achieved

8/8

Success rate

100%

Total budget spent

R210.4 million or 81.5%

(Source: Department of Transport (2017)).

 

As in 2015/16, the Department achieved all the performance targets that it had set itself under the Civil Aviation Transport programme during the period under review.

 

4.2.6 Programme 6: Maritime Transport

 

Table 11: Programme 6: Maritime Transport

Total targets set

5

Targets achieved

5/5

Success rate

100%

Total budget spent

R153.6 million or 98.1%

(Source: Department of Transport (2017)).

 

The Department achieved all five (5) annual performance targets that had been set under the Maritime Transport programme and spent 98.1% of the budget allocated to it under the programme.

 

4.2.7 Programme 7: Public Transport

Table 12: Programme 7: Maritime Transport Public Transport

Total targets set

7

Targets achieved

5/7

Targets partially achieved

2/7

Success rate

71.4%

Total budget spent

R11.6 billion or 99.9%

(Source: Department of Transport (2017)).

 

The Department reported that it had achieved all the seven (7) annual performance targets that it had set itself under the Public Transport programme. However, the phrasing of the progress made on two annual performance targets comes into question.

 

  • IPTN plan developed in one (1) district municipality

 

In its APP, the Department had undertaken to develop an IPTN plan in one (1) district municipality. Conversely, at the time of its reporting, the Department maintained that a “draft” IPTN plan had been developed in one (1) district municipality during the year under review. This therefore begs the question of whether it was the actual IPTN plan or a “draft” thereof that had been developed.

 

  • Public Transport Safety Improvement Plan developed

 

Similarly, the annual performance target had been to have Public Transport Safety Improvement Plan developed. However, in the Annual Report, the Department contended that it had the “draft Public Transport Safety Improvement Plan developed and presented to the Department EXCO”. 

 

  1. HUMAN RESOURCE MANAGEMENT

 

During the year under review, the Department had 889 posts on the approved establishment and of these, 672 had been filled. The vacancy rate stood at 24.4%.  The highest vacancy rate was in Programme 7: Public Transport that stood at 34.7%. The vacancy rates of Programme 5: Maritime Transport and Programme 4: Road Transport followed with 30.2% and 29.4% respectively.

 

 

  1. OBSERVATIONS

 

By 29 September 2017, the Annual Reports of the Department of Transport, as well as nine (9) of the entities had been tabled in Parliament. However, the AGSA did highlight that the Department had not submitted its Annual Report by the legislated date of 31 August 2017 as required. On 29 September 2017, Parliament was informed that PRASA, SANRAL and SAMSA were not tabling due to non-compliance, and that ATNS had withdrawn its report.

The Department depicts itself as “the heartbeat of South Africa’s economic growth and social development”.  It should therefore live up to this vision by ensuring that it achieves the annual performance targets that it sets itself so that South Africa can indeed become prosperous. Granted, it has managed to do so, as exemplified by its 100% achievement of performance targets in the Administration, Road, Civil Aviation Transport, as well as the Maritime Transport programmes. This level of performance should therefore be replicated in all programmes.

There was an improvement in the performance reporting of the Department due to its improved audit finding from a qualified audit with findings in 2015/16, back to an unqualified audit with findings during the period under review. The Committee was pleased to note that the RAF and RTIA improved their previous audit findings from unqualified with findings to unqualified with no material findings. The Committee was concerned with the failure by SANRAL, PRASA, SAMSA, ATNS, as well as the Driver Licence Card Account (DLCA) to submit their financial statements for audit within the required timeframe set by the AGSA, as well as the non-tabling to Parliament for consideration during the Budget Review and Recommendation process by 30 September 2017. Although it was submitted late, only SANRAL managed to table its annual report in time for it to be included in the Committee’s Budget Review and Recommendation process.

 

The Department and its entities received the following findings:

  • Unqualified Audit with no material findings (also referred to as a Clean Audit) – C-BRTA, RAF, RTIA, RTMC, Ports Regulator of South Africa (PRSA) and SACAA;
  • Unqualified with findings – the Department, SANRAL, RSR, and ACSA;
  • Failure to submit and findings still outstanding – PRASA, SAMSA, ATNS, and DLCA.

 

Key areas of material non-compliance remain the failure to prevent irregular and fruitless and wasteful expenditure, asset management, non-compliance with legislation and regulations, 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 stability of management at the Department continue to pose significant challenges regarding the operations of the Department 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 state-owned enterprises (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. Of the 25 SOEs that the AGSA reports on, only five (5) received clean audit opinions in 2016-17, and the audits of six (6) were still outstanding. 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 3 years and the Committee continues to request that the Minister ensure a greater level of oversight over its entities.

 

The AGSA found that, out of all the SOEs audited, political leadership was also inconsistent – at some SOEs there was a high level of involvement, while at others the required decision-making and policy direction were not adequate. The number of SOEs nationally with irregular expenditure decreased slightly but the value increased significantly to R2 884 million, of which ACSA, South African Post Office (SAPO) and South African Broadcasting Corporation (SABC) were the main contributors. The reason for this was the increased weakening of SCM at SOEs – although SCM policies were in place. The AGSA found that officials were not familiar with the policies and the procurement processes they should follow, and in some cases, circumvented the processes.

 

The AGSA concerns with regard to government spending also extend to the financial health of auditees and, in particular, the national and provincial departments. Furthermore, a going concern uncertainty existed at 15 of the public entities (excluding SOEs) in 2016-17 – a slight increase since 2013-14 and 2015-16.

 

By 31 August 2017, twenty-six (26) audits (6%) had not been completed – an increase from the 13 audits that had not been completed at the same time last year. The main reasons for this were the late or non-submission of financial statements and outstanding information. Nine (9) of the audits were outstanding as a result of public entities in the SAA group and some in the transport and public enterprises portfolio attempting to resolve their going concern status.

 

The trend of contestations to AGSA audit findings continued and intensified in 2016-17 and led to the delay of some audits. It is acceptable for auditees to question and challenge the outcome of audits, based on evidence and solid accounting interpretations or legal grounds.

 

Irregular expenditure nationally had increased by 55% since the previous year to R45.6 billion. The amount could be even higher, as it does not include the irregular expenditure of the auditees where the audits are still ongoing – PRASA where the irregular expenditure last year was almost R14 billion. As also reported last year, procurement by implementing agents was often the reason for the irregular expenditure, while grant money was used at six (6) of the top ten (10) contributors. This links back to AGSA concerns about the monitoring of projects funded by grants and the risks associated with using implementing agents. 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 addition, in its engagements with the Department going forward will continue its own monitoring and oversight over projects funded by grants transferred from the Department budget allocation.

 

The irregular expenditure does not necessarily represent wastage or means that fraud was committed – this needs to be confirmed through investigations to be done by the accounting officer or accounting authority – 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 is poor. The year-end balance of irregular expenditure nationally that had accumulated over many years and had not been dealt with (through recovery, condonement or write-off) was R81 billion. The significant increase can be attributed overall to continued weaknesses in SCM. The most common findings for the past four 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. In 2015/16, the AGSA reported non-compliance with the regulations at 20 auditees and committed to increase its audit focus on this important government initiative. In 2016/17, the AGSA identified non-compliance at 39 auditees (43% of those where this area was audited) – these auditees demonstrated a lack of understanding and awareness of the requirements and even a disregard for them, which could result in government not achieving the objectives of this initiative. The Committee highlighted the need for the Department, as well as its entities to adhere to the Preferential Procurement Regulations throughout their engagements.

 

Fruitless and wasteful expenditure nationally was 6% lower than in the previous year at R1 023 million. Unauthorised expenditure has steadily decreased since 2013/14 but increased by 93% from the previous year to R1 467 million. Most auditees have the required policies and processes to ensure that transgressions and fraud are identified and acted upon, but chose not to use it – a clear indicator of a lack of commitment to accountability. Of the 99 auditees the AGSA audited where there were allegations of financial and SCM misconduct and fraud, a third did not investigate the allegations and at 32% investigations took longer than three months. The SCM findings that the AGSA reported to management in 2015/16 for investigation were not attended to at a third of the auditees where the AGSA had reported it. Just over 20% investigated only some of the findings. 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 the 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.

 

With specific focus on the entities which appeared before the Committee, the following observations were made:

  • ACSA
    • During the reporting period, ACSA had set itself 17 performance targets and of these, 13 or 76.5% were achieved, while four (4) or 23.5% were not achieved;
    • Although revenue increased to R8.6 billion, up from R8.3 billion in 2016, driven by increased passenger numbers and the delayed Permission Decision tariff, the Committee was particularly concerned that during the reporting period, ACSA incurred irregular expenditure to the tune of R602.5 million, up from R446.3 million in 2015/16. While ACSA had disclosed that irregular expenditure for 2015/16 comprised incidents of contravening the SCM policy and the Preferential Procurement Policy Framework Act (No. 5 of 2000) (PPPFA) and regulations, it did  not state the root causes of irregular expenditure for 2016/17;
    • The Company incurred fruitless and wasteful expenditure amounting to R36.9 million, up from R5.7 million in 2015/16. The fruitless and wasteful expenditure identified during the period under review pertained to the following reported incidents:
      • Non-compliance with National Treasury cost-containment measures, namely:
        • Interest on provisional payment; and
        • Financial misconduct;
  • In 2015/16, fruitless and wasteful expenditure had been attributed to the following reported incidents:
    • Losses in relation to cancelled tenders;
    • Interest on provisional payment; and
    • Financial misconduct;
  • Both in 2015/16 and 2016/17, fruitless and wasteful expenditure was attributable to “interest on provisional payment” and “financial misconduct”;
  • The Committee, through its engagements with the entity, raised concerns regarding the increase in security and crime related activity within airport precinct and against persons directly leaving from the airports as well as the impact this has had on the reputation of ACSA and the country. The Committee noted that this matter is currently receiving attention and that there is collaboration between ACSA, the Department, as well as the Security Cluster in order to develop a jointly executed security action plan; and
  • While ACSA should be commended for achieving an unqualified audit opinion during the year under review, it should attend to the findings made by the AGSA.

 

  • C-BRTA
    • The year 2016/17 also had its share of regulatory-related and financial challenges. The issuance of passenger operations permit for the Free State/Kingdom of Lesotho corridor remained a regulatory challenge. Dating back to 1999, the “impasse” continues to affect and impede normal passenger cross-border movements on the Republic of South Africa/Kingdom of Lesotho route;
    • The Minister of Transport established a National Ministerial Task Team (NMTT) that is entrusted with developing a lasting solution to the “impasse”. At the time of tabling its Annual Report, the C-BRTA reported that the “matter has since been presented to the Southern African Development Community (SADC) Secretariat which is aiding with the facilitation of developing a lasting solution in line with the SADC Protocol on Transport, Communications and Meteorology”. The Committee noted that this Task Team has managed to conclude a draft joint agreement between the Ministers, which remains subject to approval;
    • The Committee raised a 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;
    • The Agency remained in a state of “technical insolvency” that resulted from losing the Constitutional Court matter in 2015. To respond to the situation, a Turnaround Plan was developed with a number of initiatives intended to stabilise the financial sustainability of the Agency in the short- and long-term. The implementation of the Turnaround Plan commenced in the First Quarter of 2016/17 and was monitored on a quarterly basis to ensure sustainable funding of the operations of the C-BRTA, whilst servicing the obligations to cross-border operators;
    • During the reporting period, the C-BRTA had set itself 20 performance targets and of these, thirteen (13) or 65% were achieved, while seven (7) or 35% were not achieved; and
    • During the reporting period, the C-BRTA received an unqualified audit opinion with no matters of emphasis. While the C-BRTA should be commended for achieving an unqualified audit opinion, it should put more effort into ensuring that it achieves the annual performance targets it sets itself.

 

  • RAF
    • The financial strain on the RAF was tough during the year under review. On average, the Fund was R9 billion in arrears per month, with settled claims that could not be paid owing to the insufficient cash to pay these claims. The Fund’s financial challenges deteriorated under these circumstances with bank accounts being attached by the sheriff. However, the RAF communicated to all its stakeholders what the challenges were;
    • During the year under review, the RAF had set itself 30 performance targets. Of these, twenty-eight (28) or 93.3% were achieved, while only two (2) or 6.7% were not achieved. Likewise, in 2015/16, the Fund had set itself 30 performance targets and of these, twenty-seven (27) or 90% were achieved and three (3) or 10% were not achieved;
    • During the period under review, the RAF received an unqualified audit opinion with no findings. The RAF should be commended for receiving an unqualified audit opinion. The Fund should therefore be supported 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; and
    • Notwithstanding the financial challenges that have beset the RAF for decades, there is hope that the RABS Bill that is currently before Parliament will usher in possible major positive amendments to the current unreasonable, inequitable, unaffordable and unstainable dispensation.

 

  • RSR
    • During the reporting period, the RSR had set itself 27 performance targets and of these, twenty-four (24) or 88.9% were achieved, while three (3) or 11.1% were not achieved; and
    • In 2016/17, the RSR received an unqualified audit opinion with a material finding. While the RSR should be commended for having received an unqualified audit opinion, it should ensure that it attends to the repeat finding raised by the AGSA.

 

  • RTIA
    • The dispute that the Agency had with SAPO over the payment issues continued to be a thorn in the progress of the work of RTIA. The damage caused by this impasse was evidenced by the dipping of revenue, from the unprecedented figure of R458 million in 2015/16 to R346.3 million in 2016/17;
    • The year under review saw the Agency experiencing tremendous challenges with a significant reduction in the collection of revenue. This was occasioned by a significant drop in the volume of electronically generated infringement notices issued by the Issuing Authorities (IAs) for the period under review. Compared to the previous financial year, the volume of all notices dropped from 5 515 529 (in excess of 5 million) in 2015/16 to 2 016 233 (just above 2 million) in 2016/17, translating into a drop of 63.4%;
    • The Agency faced capacity constraints in its business and operational environment, particularly concerning the levels of human capital capacitation. This is brought about by the strategic positioning of timing the levels of capacitation and aligning it to the envisaged national rollout. Whilst that is the position, the need to capacitate the Agency with critical staff continued to be implemented so that the core functions related to efficient service delivery could be attained;
    • During the reporting period, RTIA had set itself 15 performance targets and of these, nine (9) or 60% were achieved, while five (5) or 33.3% were not achieved and one (1) or 6.7% was “struck-off by National Treasury”; and
    • During the year under review, RTIA received an unqualified audit opinion, with no findings. While RTIA should be commended for having received an unqualified audit opinion with no findings, it should put more effort into ensuring that it achieves all the annual performance targets it sets itself.

 

  • RTMC
    • The court battle over the eNaTIS which was managed by a private firm, Tasima, on behalf of government was concluded on 26 November 2016 when the Constitutional Court pronounced on the matter. In line with the Shareholders Committee resolution that the RTMC should gear itself for the management of the system, the RTMC was able to take over the management of the system in April 2017 subsequent to further court battles that the entity had had with Tasima;
    • During the reporting period, the Corporation had set itself 29 annual performance targets and of these, twenty three (23) or 79.3% were achieved, while six (6) or 20.7% were not achieved; and
    • During the period under review, the RTMC received an unqualified audit opinion with no findings. While the RTMC should be commended for having achieved an unqualified audit opinion, it should put more effort into ensuring that it achieves the annual performance targets it sets itself.

 

  • SANRAL
    • During the reporting period, SANRAL had set itself 37 performance targets and of these, thirty-two (32) or 86.5% were achieved, while five (5) or 13.5% were not achieved; and
    • During the reporting period, SANRAL received an unqualified audit opinion. While SANRAL should be commended for having received an unqualified audit opinion, it should attend to the findings made by the AGSA. In addition, the Agency should ensure that it achieves all the annual performance targets that it sets itself.

 

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

 

6.1     SIGNIFICANT EMPHASIS OF MATTERS

 

With regard to the Department, the corresponding figures for 31 March 2016 have been restated as a result of an error in the financial statements of the Department, and for the year ended, 31 March 2017, and irregular expenditure was incurred as a result of officials not following the prescribed procurement processes. Actions were taken by the accounting officer to investigate instances that had resulted in irregular expenditure.

 

With regard to SANRAL, there was a restatement of corresponding figures as a result of errors in the financial statements of the entity. There were also material impairments of R3.75 billion as a result of a decrease in the estimated future cash flows relating to trade and other receivables. A total of R3.61 billion of this impairment relates to the impairment of e-toll debtors. SANRAL also incurred irregular expenditure of R424.9 million that was due to non-compliance with prescribed procurement processes, and incurred fruitless and wasteful expenditure to the amount of R15 million due to additional costs incurred on a project that was cancelled as the approval process for the project had not been followed.

 

With regard to the RTMC, emphasis was placed on the significant subsequent events which resulted in transfer of functions that took effect in April 2017:

  • Transfer of eNaTIS from the Department of Transport and Tasima - RTMC took full control and effected the transfer of same on 5 April 2017; 
  • Transfer of the Boekenhoutkloof Traffic College from the Gauteng Department of Community Safety to the RTMC effective 1 April 2017; and
  • Transfer of the Road Transport Inspectorate from C-BRTA.

The related financial and performance information will only be recognised in the 2017-18 financial year because RTMC only gained control over these functions as from April 2017.

 

With regard to the RSR, irregular expenditure of R2 679 467 was incurred as a result of non-compliance with SCM processes, and unauthorised travel.

 

With regard to C-BRTA, the entity is the defendant in a litigation matter pertaining to the 2014 Permit tariffs Regulations.  The entity is opposing the application for the setting aside of these Regulations. The ultimate outcome of the matter cannot presently be determined and no provision for any liability that may result has been made in the financial statements. Events after the reporting date which are important to note, is that on 1 April 2017 the Agency transferred its Law Enforcement Division (Road Transport Inspectorate) to RTMC in April 2017.

 

Concerning ACSA, the corresponding figures for 31 March 2016 and 31 March 2015 have been restated as a result of the errors discovered during the 2016/17 financial year, as well as irregular expenditure which was disclosed as incurred in the current year has increased significantly compared to the amount disclosed in the prior year.

 

 

6.2     MATERIAL MISSTATEMENTS

 

With regard to the Department, 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)(a) and (b) of the PFMA.  Material amendments relating to intangible and tangible capital assets were made to the financial statements submitted for audit as reliable information only became available after submission date. The amendments were assessed and confirmed to be reasonable. 

 

With regard to ACSA, the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 55(1)(b) of the PFMA, as well as section 29(1) of the Companies Act (No. 71 of 2008). Material misstatements of non-current assets and disclosure items had been identified by the auditors in the submitted financial statements, but were subsequently corrected which resulted in the financial statements receiving an unqualified audit opinion. The accounting officer of the ACSA should exercise effective oversight over the implementation of action plans to address prior year audit findings and also perform detailed reviews of the financial statements.

 

With regard to SANRAL, the annual statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 55(1)(b) of the (PFMA, as well as section 29(1) of the Companies Act (No. 71 of 2008). Material misstatements of non-current assets, current assets, revenue and disclosure items that had been identified by the auditors in the submitted financial statements, were subsequently corrected and the supporting records were provided which resulted in the financial statements receiving an unqualified audit opinion. The accounting authority of SANRAL should exercise effective oversight over the implementation of action plans to address prior year audit findings and also perform detailed reviews of the financial statements.  Consequence management should be enforced in the entity and the accounting authority should oversee the implementation of the consequence management in the entity.

 

The Committee noted the material misstatements to financial statements at the Department, as well as at the entities indicated above. Root causes were again identified as key officials lacking appropriate competencies and slow responses by management. The Committee further noted that the root causes for material misstatement at the Department were identified by AGSA as a lack of consequence for poor performance and transgressions and vacancies in key positions.

 

6.3 PROCUREMENT AND CONTRACT MANAGEMENT

 

With regard to the Department, Goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by Treasury Regulations 16A6.1.

 

  • With regard to ACSA:
  • The AGSA was unable to obtain sufficient appropriate audit evidence that all contracts had been awarded, as per legislation, because information relating to one contract awarded could not be provided for audit purposes;
  • Goods, works or service had not been procured through a procurement process which was fair, equitable, transparent and competitive, as required by section 51(1)(a)(iii) of the PFMA;
  • The preferential point system was not applied in the procurement of some goods and services above R30 000, as required by section 2(a) of the PPPFA;
  • Contracts were awarded to and quotations accepted from bidders based on preferential points that had not been allocated and calculated in accordance with the requirements of the PPPFA and its regulations;
  • Contracts were awarded to and quotations accepted from bidders that had not scored the highest points in the evaluation process, as required by section 2(1)(f) of the PPPFA and Preferential Procurement regulations;
  • Contracts were awarded and quotations accepted from bidders based on functionality criteria that were stipulated and differed from those that had been stipulated in the original invitation for bidding and quotation, in contravention of the Preferential Procurement Regulation 4; and
  • Construction contracts were awarded to contractors that had not been registered with the Construction Industry Development Board (CIDB) and did not qualify for the contract in accordance with section 18(1) of the CIDB Act and CIDB Regulations 17 and 25(7A).

 

  • With regard to SANRAL:
  • Contracts and quotations were awarded to some suppliers whose tax matters had not been declared by the South African Revenue Service (SARS) to be in order, as required by Treasury Regulation 16A.1(d) and the Preferential Procurement Regulations;
  • Goods and services of a transaction value above R500 000 were not always procured through a competitive bidding process, as required by Treasury Regulations 16A6.1. Some deviations were approved by the accounting authority even though it was not impractical to invite competitive bids, in contravention of Treasury Regulation 16A6.4; and
  • Contracts were awarded to bidders based on preferential points that were not always calculated in accordance with the requirements of the PPPFA and its Regulations. For some contracts awarded in prior years, the price points were allocated using the benchmarking instrument whose exemption had not been obtained from the Minister of Finance.

    

6.4 PREDETERMINED OBJECTIVES

 

In general, the AGSA commented on the majority of the Annual Reports that there were some concerns regarding the over- or underachievement of set targets. Management in the Department, as well as the entities should ensure that it is possible to validate the processes and systems that produce the indicator to enable them to produce the required evidence 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 noted that lack of specific set targets by entities, a lack of verifiable evidence on performance, as well as a lack of consequences for poor performance and transgressions were the root causes for the findings at the Department and certain identified entities.

 

With regard to ACSA and its audited Objective 5: Contribute to increase traffic through the airports we operate, the AGSA was unable to obtain sufficient appropriate audit evidence to validate the existence of systems and processes that enable reliable reporting of actual service delivery against the indicator, as required by the Framework for managing programme performance information. This was due to ACSA not being able to obtain the actual annual number of passengers to be used in the index calculation and also using estimates which cannot be verified. The AGSA was unable to validate the existence of systems and processes by alternative means.

 

 

6.5    COMPLIANCE WITH LEGISLATION

 

As a general observation, the Committee repeats its proposal from last year in that the Department and its entities should ensure that management formulates compliance checklists that detail the compliance requirements for each requirement, and these checklists should be reviewed throughout the procurement process. Members of the relevant committee and the chairperson should satisfy themselves that all service providers that are recommended for award have all the required documentation in terms of laws and regulations. The list of recommended bidders should be accompanied by a signed checklist confirming the completeness of required documents. 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. Recurring non-compliance should be investigated and appropriate action taken against transgressors. Furthermore, management should establish their own policies and procedures, aligned to the Framework for Managing Performance Information and the PFMA, to ensure that performance reporting requirements are properly processed by the Department.

 

With regard to the Department, 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)(a) and (b) of the PFMA.  Material amendments relating to intangible and tangible capital assets were made to the financial statements submitted for audit as reliable information only became available after submission date. The amendments were assessed and confirmed to be reasonable. Goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by Treasury Regulations 16A6.1. Effective steps were not taken to prevent unauthorised, irregular and fruitless and wasteful expenditure as required by section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1.

 

With regard to ACSA, the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by section 55(1) (b) of the PFMA and section 29(1)(a) of the Companies Act. Material misstatements of non-current assets and disclosure items were identified by the auditors in the submitted financial statements but were subsequently corrected which resulted in the financial statements receiving an unqualified audit opinion. The AGSA was unable to obtain sufficient appropriate audit evidence that all contracts were awarded as per legislation because information relating to one contract awarded could not be provided for audit purpose. Goods, works or service were not procured through a procurement process which is fair, equitable, transparent and competitive, as required by section 51(1) (a) (iii) of the PFMA. The preferential point system was not applied in some procurement of goods and services above R30 000, as required by section 2(a) of the PPPFA. Contracts were awarded to and quotations accepted from bidders based on preferential points that were not allocated and calculated in accordance with the requirements of the PPPFA and its regulations. Contracts were awarded to and quotations accepted from bidders that had not scored the highest points in the evaluation process, as required by section 2(1)(f) of PPPFA and Preferential procurement regulations. Contracts were awarded to and quotations accepted from bidders based on functionality criteria that were not stipulated and differed from those stipulated in the original invitation for bidding and quotations, in contravention of Preferential Procurement Regulation 4.  Construction contracts were awarded to contractors that were not registered with the CIDB and did not qualify for the contract in accordance with section 18(1) of the CIDB Act and CIDB regulations 17 and 25(7A). Effective steps were not taken to prevent irregular expenditure and fruitless and wasteful expenditure, as required by section 51(1) (b) (ii) of the PFMA.

 

With regard to the RSR, effective steps were not taken to prevent irregular and fruitless and wasteful expenditure, as required by section 51(1)(b)(ii) of the PFMA.

 

With regard to SANRAL, 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 55(1)(a) and (b) of the PFMA and section 29(1)(a) of the Companies Act. Material misstatements of non-current assets, current assets, revenue and disclosure items identified by the auditors in the submitted financial statements were corrected and the supporting records were provided subsequently, resulting in the financial statements receiving an unqualified audit opinion. Contracts and quotations were awarded to some suppliers whose tax matters had not been declared by SARS to be in order as required by treasury regulation 16A9.1(d) and the Preferential Procurement Regulations. Goods and services of a transaction value above R500 000 were not always procured through a competitive bidding process, as required by treasury regulations 16A6.1. Some deviations were approved by the accounting authority even though it was not impractical to invite competitive bids, in contravention of treasury regulation 16A6.4. Contracts were awarded to bidders based on preference points that were not always calculated in accordance with the requirements of the PPPFA and its regulations. For some contracts awarded in prior years, the price points were allocated using the benchmarking instrument whose exemption was not obtained from the Minister of Finance. Effective steps were not taken to prevent irregular expenditure of R424,9 million as disclosed in note 40 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was as a result of additional expenditure in respect of contracts that were identified as irregular in previous years. The Agency disposed of an immovable property of a value exceeding R2 million without obtaining the prescribed approvals from the executive authority as required by section 26(t) of the South African National Roads Agency Limited and National Roads Act (No. 7 of 1998).

 

6.6 INTERNAL CONTROL DEFICIENCIES

 

With regard to the Department, during the year under review, the Department had 889 posts on the approved establishment and of these, 672 had been filled. The vacancy rate stood at 24.4%.  The highest vacancy rate was in Programme 7: Public Transport that stood at 34.7%. The vacancy rates of Programme 5: Maritime Transport and Programme 4: Road Transport followed with 30.2% and 29.4% respectively. The Committee remains concerned about the amount of money spent on consultants instead of the Department working towards filling critical posts and reducing the vacancy rate.

 

With regard to ACSA,   there has been slow response in implementing the commitments made in the prior year to address the internal control deficiencies in the areas of financial and performance reporting and compliance. An effective action plan was not developed and implemented to ensure that the repeat findings and related internal control deficiencies are addressed. The financial statements contained misstatements which resulted in material adjustments being made pertaining to property, plant and equipment, Investment property, trade and other payables, trade and other receivables, Revenue, Expenditure, capital commitments, prior period error adjustments, related party disclosure, fruitless and wasteful expenditure and irregular expenditure disclosure .This was mainly due to financial statements submitted for audit that were not accurate and complete as a result deficiencies in the review process.

 

With regard to the RSR, the entity was advised to implement proper record-keeping in a timely manner, to ensure that complete, relevant and accurate information is accessible and available to support performance reporting and to review and monitor compliance with applicable laws and regulations. During the year under review, the RSR had 302 posts on its establishment and of these, 201 were filled. The vacancy rate stood at 33%, an improvement from the vacancy rate during the 2014/15 year under review where the rate stood at 64%. The highest vacancy rate was in the Operational Intelligence and Planning Department that stood at 53%, followed by the Chief Operations Officer Department whose vacancy rate was 63%.

 

With regard to SANRAL, there was a slow response by senior management in addressing the significant deficiencies noted over its oversight pertaining to 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 complied by management, the plan was ineffective in timeously addressing the reported control deficiencies as an appropriate level of management did not monitor the status of addressing the findings and did not ensure that the lack of progress was escalated for further intervention.

 

The Committee requested the Department to ensure that, within the Department as well as its entities (especially with reference to Board appointments as well as Senior Management Posts) all funded and critical vacancies are filled as soon as is possible and also requested that the Department and its entities report back to the Committee regarding their plans to reduce the vacancy rate and ensure retention policies are in place.

 

The Committee further noted the lack of effective controls to ensure compliance with internal policies with regard to SCM and the AGSA’s findings in this regard for the Department and the affected entities. The Committee noted that the main root causes of these findings were key officials lacking the appropriate competencies, as well as a need to implement and apply an appropriate checklist for the compliance to all SCM policies and legislation.

 

 

6.7     FINANCIAL HEALTH OF ENTITIES

 

The financial health of various entities, as well as their abilities to execute their mandates, is in part affected by delays in the processing of legislation and regulations by the Department. The Committee continues to reiterate as a repeat observation, that the Department should work with an increased sense of urgency in finalising the required legislation and regulations in order to improve the performance of its entities.

 

With regard to the C-BRTA, the net current liability position and net liability position realised.  Debtors impairment provision as a percentage of accounts receivable amounts to 60%. The AGSA drew attention to Note 29 in the financial statements, which indicates that the entity’s total liabilities exceeded its total assets by R189 061 552. As stated in Note 29, these events or conditions, along with other matters as set forth in Note 25, indicate that a material uncertainty exists that may cast significant doubt on the  entity’s ability to continue as a going concern. In light of the Agency having lost the Constitutional Court matter in 2015 that compelled it to refund some Cross-Border Road Transport Operators a portion of their permit fees from the permit revenue collected between April 2011 and November 2013, the balance of its liabilities exceed assets. The Agency is a public entity created by an Act of Parliament (Cross-Border Road Transport Act (No. 4 of 1998) as amended) with a sole mandate of providing cooperative and coordinated advice, regulation, facilitation and law enforcement in respect of cross-border road transport by the private and public sectors. Further, the Agency has developed a plan to ensure that it remains a going concern and has engaged in cost containment measures and taken measures to conserve generated cash to refund Cross-Border Road Transport Operators who claim refunds following the Constitutional Court judgement (against the Agency) of 2015. After a review of the current financial position, the Accounting Authority is satisfied that the Agency has access to adequate resources to continue in operational existence for the foreseeable future despite the constrained financial position prevailing currently as a result of the judgement. The refunds have been on-going, and the Accounting Authority believes that the financial position is sustainable.

 

With regard to the PRSA, National Treasury’s Instruction Note 03 of 2015/16, regarding over expenditure by public entities, has made it increasingly difficult for entities to spend reserves and thus the Regulator may find itself with a going concern problem. Measures were put in place during the Medium-Term Expenditure Framework (MTEF) budget process to request further baseline funding to the Regulator in order to ensure continued sustainability.

 

With regard to the RAF, the creditors payment period is 185 days, it realised a net deficit for the year, and a net current liability position and net liability position was realised.  Creditors of the RAF as a percentage of cash and cash equivalents exceeds 2 000% and net cash flow from operating activities were negative. The AGSA indicated that there was uncertainty as to whether the entity would be able to fund its future obligations. The RAF recorded a net deficit for the 2016/17 financial year of R34.74 billion (2015/16: R34.96 billion). This was largely due to an increase in the claims provision of R36.1 billion (2015/16: R33.9 billion). Efforts to reduce the number of outstanding claims resulted in higher claims expenditure (cash portion), as well as a decrease in the accrual for claims requested but not yet paid at the time of reporting as a result of cash constraints, together with an increase in the claims provision. These totalled R65.95 billion (2015/16: R66.27 billion) and far exceeded the revenue received from fuel levies of R33.23 billion (2015/16: R33.11 billion). Cash and cash equivalents decreased from R2.04 billion at the end of the previous financial year, to R1.65 billion, mainly due to a high level of claims payouts towards financial year-end, bearing in mind that the actual levy receipt for a month takes place approximately one week before the end of a month. The RAF remains severely under-capitalised with liabilities exceeding assets by R179.9 billion (2015/16: R145.3 billion). The only assets of substance, other than cash, are land and buildings worth R95 million. Organisations similar to the RAF elsewhere in the world have, as part of their major assets, investments that cover in excess of 100% of the full outstanding liability. The liquidity ratio of the RAF is 0.05:1 (current ratio: 0.25:1). It entails that the RAF has only 5 cents (current ratio: 25 cents) worth of assets for every R1 of its liabilities, which puts into sharp perspective just how unsustainable the current compensation system is. The RAF does therefore not have sufficient cash or near cash assets to cover its short-term liabilities.

 

With regard to SANRAL, the AGSA drew attention to note 45 to the financial statements, which indicates that the entity’s cash requirements for the next 12 months relating to toll operations is dependent on its ability to successfully raise further funding through auctions and private placements and that the board of directors has requested the Shareholder to address the impact of the poor collection rate on the Gauteng Freeway Improvement Project (e-tolls) with Cabinet to ensure the sustainability of SANRAL. As stated in note 45, these events or conditions, along with other matters as set forth in note 45, indicate that a material uncertainty exists that may cast significant doubt on the public entity’s ability to continue as a going concern.          

 

6.8     INVESTIGATIONS

 

The Committee stated its concern regarding the long delays in the finalisation of investigations within the transport portfolio which are still before the Public Protector.

 

The AGSA pointed out that from the Department and its entities that had been audited at the time of presenting to the Committee, six (6) auditees incurred irregular expenditure in 2015/16 (2014/15: Seven) and the instances were investigated. Five (5) auditees incurred fruitless and wasteful expenditure in 2015/16 (2014/15: Six) and the instances were investigated. One (1) auditee incurred unauthorised expenditure in 2014/15 and the instance was investigated (R Nil in 2015/16).

 

With regard to the Department, five (5) internal investigations are still in progress on matters related to procurement and contract management. The outcomes are expected in 2017/18 financial year. The procurement of services for the 2011 investor’s conference is being investigated by the Public Protector’s Office. The investigation is still in progress. The forensic investigation into the circumstances surrounding the extensions to the Turnkey Agreement RT1194KA and approval of Change Note 47 is being undertaken by the Special Investigations Unit and the Hawks. The investigation has not yet been finalised.

 

With regard to the C-BRTA, an independent consultant was investigating an allegation of fraudulent and corrupt practices and activities relating to the issuing of Cross-Border permits at the request of the entity.  The entity is still in the process of reviewing the findings identified. 

 

With regard to the RAF, at the date of this report, investigations are being carried out by the Public Protector.  The investigations are related to processing of certain claims and are in still in progress.  The impact, if any, on the financial statements of the RAF can only be determined once the investigations have been concluded.

 

With regard to the RSR, at the date of this report, an investigation is being carried out by the Public Protector. The investigation was still in progress. The impact, if any, on the financial statements of the RSR can only be determined once the investigation has been concluded.

 

With regard to RTIA, at the date of this report, the Public Protector was carrying out an investigation. The impact, if any, on the financial statements of the Agency can only be determined once the investigation has been concluded. Also, at the date of this report, an external firm had also been appointed by the accounting authority to investigate a service provider on procurement services.

 

With regard to RTMC, at the date of this report an investigation was being carried out by the Public Protector.  The investigation relates to allegations made to the Public Protector’s office by a third party and was still in progress at the date of this report.  The impact, if any, on the RTMC’s financial statements can only be determined once the investigation has been concluded.

 

With regard to SANRAL, an investigation into the allegations of maladministration and irregular procurement processes relating to the Gauteng e-toll was being conducted by the Public Protector in terms of section 182 of the Constitution of the Republic of South Africa, 1996. The investigation has been ongoing since 2012. The Directorate for Priority Crime Investigation was investigating offences that had perpetrated on SANRAL by various construction companies. The investigation has been ongoing since 2013.

 

The Committee requested that the Department brief the Committee on the state of affairs of the investigations relating to the Department as well as its entities that were underway at the time of reporting.

 

6.9     POLICY AND IMPLEMENTATION CONCERNS

 

Through its engagements with the Department and its entities, the Committee has noted with concern that although policy regarding the transport portfolio resides with the Department of Transport, the implementation thereof by some SOEs resides within the Department of Public Enterprises. This causes difficulty in the effective operations of the entities reporting to the Department of Transport, e.g. concerns raised regarding the implementation of the Ports Regulator of South Africa functions within the sphere of operations managed by the Ports Authority of South Africa; as well as concerns regarding the rental of railway infrastructure from Transnet by PRASA.

 

 

7.       RECOMMENDATIONS

 

7.1 OBSERVATIONS AND RECOMMENDATIONS FROM THE BUDGET VOTE REPORT 2017

7.1.1 The Committee made the following observations:

7.1.1.1        Budget allocation for Shosholoza Meyl

The Committee noted the budget allocation of R151.4 million toward Shosholoza Meyl given that for a long time it had an unfunded mandate. The Committee further noted the concerns raised by PRASA regarding the effect of the asset split between PRASA and Transnet on the running of the Mainline Passenger Service.

 

7.1.1.2        Skewed allocation of subsidies

The Committee noted the skewed subsidisation of the various modes of public transport, the perceived skewed subsidisation between rail transport modes, as well as the glaring differences in allocations for public transport to various municipalities. The Committee further noted that the minibus taxi industry remains unsubsidised despite the volumes of passengers which it transports on a daily basis. The Committee was of the view that the subsidisation model should allow for the inclusion of all of the public transport modes and that there should be a move towards ensuring that the model leans towards the subsidisation of the user or passenger instead of the operator.

 

7.1.1.3 PRMG

The Committee noted the R10 billion budget allocation for PRMG. The Committee further noted that poor road conditions are a significant contributor to the costs of moving people and goods within South Africa, and that there therefore is an imperative to improve national, provincial and municipal road networks.

 

7.1.1.4        PTNG

The Committee noted that R6.2 billion was allocated for the PTNG implementation in 13 cities for 2017/18.  The Committee further noted with concern that there is a perception that the Bus Rapid Transport (BRT) systems are being implemented in cities to replace existing public transport services which is leading to conflict in these municipalities that, in turn, negatively affect public transport users. There also appears to be differences in implementation of these networks, as well as difference in the allocation of grant funds to the various municipalities.

 

7.1.1.5 Use of Consultants

The Committee noted the marked decrease in the budget allocation for consultants in the Public Transport programme from R236 million in 2016/17 to R211.7 million in 2017/18, translating into a decrease of 10.3%. However, it is noted that this programme has the highest budget allocation for the use of consultants. The Committee further noted that despite a welcomed decrease in the spend on consultants as indicated above, the budget for the use of consultants in the Department and its entities still remains too high.

 

7.1.1.6        National Road Safety Strategy

The Committee noted the review of the National Road Safety Strategy by the Department which is aimed at providing overall direction on the implementation of all road safety programmes, by ensuring alignment and integration across the wide range of specific interventions that are undertaken in the reduction of rod crashes and fatalities.

 

7.1.1.7 Financial Health of Entities

During discussions, the following observations were made regarding the going concern of the following entities:

7.1.1.7.1          The C-BRTA’s and SAMSA’s total liabilities exceeded their total assets. These conditions, along with other matters, indicate the existence of a material uncertainty that may cast significant doubt on the entities’ ability to operate as a going concern.

7.1.1.7.2          The RAF has claims liability of R170 billion which keeps increasing. The RAF continued to be unable to pay all settled claims when payment falls due. A large creditors book in excess of R8 billion is maintained over and above all monies paid daily. Cash management strategies enabled continued operation at the fund, but the fund is unable to process all claim payments. During February 2017, the Fund faced operational disruption due to the attachment of the RAF’s bank account and the attachment, removal and sale of the RAF’s assets is a continued daily reality.

7.1.1.7.3          Low collection on the Gauteng Freeway Improvement Project (GFIP) e-toll has resulted in postponement of capital projects on the toll portfolio at SANRAL.  The negative outlook on credit rating has resulted in bond auctions being cancelled, placing further strain on funding ability. The delays in implementation of critical projects was regarded as a loss of opportunity.

The following entity raised concerns regarding budget shortfalls:

7.1.1.7.4          The PRSA, faced budgetary constraints which impacted negatively on its ability to expand its mandate.  A new funding model was required to capacitate the Regulator and implement programmes successfully and sustainably.  The PRSA furthermore indicated that there is a need to amend the National Ports Act (No 12 of 2005), however, the Department does not indicate in the APP or the revised Strategic Plan that there are any such plans to amend the legislation. The Department does indicate that they will work towards developing the Ports Economic Participation Framework (PEPFRA), which would lay a firm legal basis for the effective implementation of the relevant provisions of the Ports Act.

 

7.1.1.8        Legislation Challenges

The Committee noted that delays in the review of old legislation, the processing of new legislation and the full implementation of amended legislation, negatively affects the Department and its entities in the achievement of targets, in the financial wellbeing of entities, as well as the increased budget spent on projects linked to pending legislation.

The Committee noted the following listed legislative work in the Department’s presentation:

  • National Rail Bill
  • National Railway Safety Regulator Amendment Bill
  • RABS Bill
  • Airports Company and ATNS Amendment Bills
  • Air services licensing framework and Amendment Bill
  • Civil Aviation Amendment Bill
  • Overhaul of the Merchant Shipping Act (1957)
  • Land Transport Amendment Act

 

 

7.1.2 The Committee recommended that the Minister ensure:

7.1.2.1        Budget allocation for Shosholoza Meyl

The Department ensures that the budget allocation for Shosholoza Meyl is commensurate with its mandate. The Department should further facilitate engagements between PRASA and Transnet in order to find a solution to the concerns raised regarding the rentals and services charged by Transnet for the use of infrastructure required by PRASA for the smooth running of the Shosholoza Meyl services.

 

7.1.2.2        Skewed allocation of subsidies

The Department should make a presentation to the Committee which indicates what methodology is used to determine the allocation of public transport subsidies, what rationale is followed in the differentiation between subsidisation of the different public transport modes and the different allocations to municipalities, as well as why some modes of public transport are excluded from being subsidised.

 

7.1.2.3        PRMG

The Department regularly monitors and evaluate the implementation of the PRMG with a view to ascertaining whether the Grant is used for its intended purpose and whether the Department receives value for money. The Department should further do quarterly presentations to the Committee on the manner in which it monitors the implementation of this grant and whether the projects budgeted for under this grant, since 2014 to date, have been successfully finalised and whether these can be regarded as having delivered value for the money spent.

 

7.1.2.4        National Road Safety Strategy

Given the persistent carnage on the country’s roads, the Department should continuously monitor whether the road safety programmes or strategies implemented by the RTMC and RTIA are yielding positive results.

The Department provides the Committee with a comprehensive briefing on the National Road Safety Strategy, once approved by Cabinet.

The Department should urgently finalise the strategy so that the carnage on the country’s roads is arrested.

 

7.1.2.5        Use of Consultants

The Department should indicate what these consultants are used for, whether the services rendered by them provide good value for money and whether the consultants transferred skills to the employees of the Department. The Department should further indicate what steps are being taken by it and its entities to further reduce the use of and spending of budget on consultants.

 

7.1.2.6        PTNG

The Department should brief Parliament on the progress made on the implementation of BRT systems in the 13 cities, specifically to ascertain whether there is alignment between the budget spent, the progress made, as well as the quality of the work done and services rendered once implemented. The Department should further include a presentation on the proposed use of a single or integrated ticketing system for the public transport network, as well as the integration of public transport modes through suitable facilities as part of a public transport network.

 

7.1.2.7        Legislation Challenges

In line with the target to develop an inception report for the review of Founding Legislations of Transport Public Entities, the Department should prioritise the processing of urgent legislation, as well as brief Parliament on the progress made on the review of old and outdated pieces of legislation which affect its entities (for example PRASA, SAMSA and the PRSA) and the plans to introduce new legislation which will recall these old Acts or affect amendments thereto. The Department should further report on its oversight over the entities to ensure that budget is not prematurely being spent on proposed legislative provisions which have not yet been accepted and processed by Parliament.

 

7.2 OBSERVATIONS AND RECOMMENDATIONS FROM THE STRATEGIC PLAN AND APP REPORT 2017

7.2.1 The Committee made the following observations:

The Committee commended the Department on the improvement in targets and indicators set by it through consultations with the AGSA. It further noted the following observations regarding the revised Strategic Plans and the 2017/18 APPs of the Department and its public entities:

 

7.2.1.1        Consultations with stakeholders

The Department did not indicate the stakeholders that it plans to consult during the First Quarter with a view to developing the status report on the transport sector socio-economic empowerment programmes for Gender, Disability, Youth and Children (GDYC).

 

7.2.1.2        NATMAP 2050

The Department plans the roll-out of 10 prioritised NATMAP 2050 pilot projects.

 

7.2.1.3        S’hamba Sonke

The Committee noted the targets set by the Department for the overall implementation of the S’hamba Sonke programme, monitored in line with the PRMG budget.

 

The Committee noted the perception that some provincial departments no longer allocate funds towards the maintenance of their roads but would rather merely rely on the funds coming from the allocated PRMG.

 

7.2.1.4        Skewed allocation of subsidies

The Committee noted the skewed subsidisation of the various modes of public transport, the perceived skewed subsidisation between rail transport modes, as well as  the glaring differences in allocations for public transport to various municipalities. The Committee further noted that the minibus taxi industry remains unsubsidised despite the volumes of passengers that it transports on a daily basis. The Committee was of the view that the subsidisation model should allow for the inclusion of all of the public transport modes and that there should be a move towards ensuring that the model leans towards the subsidisation of the user or passenger instead of the operator.

 

7.2.1.5        Matters raised by the AGSA

The Committee noted with concern that the AGSA found that, in a review of the past 3 years in audit outcomes, there has been a regression in the area of reliable performance reporting in the Department. Annual performance plans of PRASA, RSR, SAMSA and SANRAL also contained targets that were not specific, time bound and verifiable. Achievements reported by PRASA, RSR, RTIA and SAMSA were either incorrect or not supported by appropriate sufficient evidence to confirm the accuracy and reliability thereof.

The Committee was of the view that these issues must be addressed by the Department through oversight over its entities.

 

7.2.1.6                  Consequence Management

The Committee noted with concern the apparent lack of consequence management by the Department and its entities. The Committee was of the view that the Department should improve its consequence management, as well as its oversight over its entities.

 

7.2.2 The Committee recommended that the Minister ensure:

7.2.2.1        Consultations with stakeholders

The Department provides the Committee, prior to the presentation on the First Quarter performance, with information on the stakeholders that it plans to consult in each of the targets where they have indicated that stakeholder consultation is to take place. It should further indicate the criteria that will be used to select these stakeholders and indicate whether the criteria took cognisance of the rural/urban divide.

 

The Department should, for all targets regarding the consultation with stakeholders, wherever it intends to or is required to consult with stakeholders, either identify the applicable grouping or category of stakeholders or state the specific stakeholders where the target allows for this.

 

       7.2.2.2        NATMAP 2050

The Department gives a comprehensive briefing to the Committee on the NATMAP 2050 including the pilot projects.

 

7.2.2.3        S’hamba Sonke

The Department regularly monitors and evaluates the implementation of the PRMG with a view to ascertaining whether the Grant is used for its intended purpose and whether the Department receives value for money. The Department should further do quarterly presentations to the Committee on the manner in which it monitors the implementation of this grant, as well as the programme targets set for the 2017/18 financial year.

 

The Department should provide the Committee with a comprehensive progress report on the implementation of the S’hamba Sonke Programme stretching from 2014 to date, indicating whether the projects budgeted for under this programme have been successfully finalised, with a view to enabling the Committee to conduct oversight over these areas so that it can ascertain, inter alia, whether there is value for money.

 

7.2.2.4        The National Road Safety Strategy

Given the persistent carnage on the country’s roads, the Department should continuously monitor whether the road safety programmes or strategies implemented by the RTMC and RTIA are yielding positive results.

 

The Department provides the Committee with a comprehensive briefing on the National Road Safety Strategy, once approved by Cabinet.

 

7.2.2.5        Human Resources

The Department should continue engagements with National Treasury in order to ensure that all critical vacant posts are filled with suitably skilled employees.

 

7.2.2.6        Skewed Public Transport Subsidies

The Department should make a presentation to the Committee which indicates what methodology is used to determine the allocation of public transport subsidies, what rationale is followed in the differentiation between subsidisation of the different public transport modes and the different allocations to municipalities, as well as why some modes of public transport are excluded from being subsidised.

 

The Department should also ensure that a presentation is done to the Committee on the BRT Report from Municipalities currently implementing such systems or in the process of planning to implement such a system.

 

7.2.2.7        Moloto Corridor

The Department, along with SANRAL and PRASA, should provide the Committee with a comprehensive progress report on the 2017/18 implementation of the Moloto Corridor Project (both Road and Rail), followed by regular quarterly reports on the projects going forward, with a view to enabling the Committee to conduct oversight over this project so that it can ascertain, inter alia, whether there is value for money.

 

The Department should provide the Committee with a progress report specifically on the Moloto Rail Project, indicating the status of the Memorandum of Understanding with China, including the viability study report findings, as well as progress reports on the Environmental Impact Assessment Reports required for the project.

 

7.2.2.8        Remedial action based on matters raised by the AGSA

The Department should determine the cause of the regression in the area of reliable performance reporting of itself, as well as the identified entities. The Committee, in light of the AGSA’s remarks, recommends that the Department should insure closer co-operation with the Department, its entities and the AGSA in order to address these concerns prior to the final audit of the Annual Report, and make a presentation to the Committee on the strategy proposed to implement remedial action that will address these issues.

 

7.2.2.9        Prioritisation of Consequence Management

The Department should present an oversight plan to the Committee that it will implement over the entities to ensure that consequence management is implemented. It should further present on consequence management which it will be implementing internally on a quarterly basis.

 

7.3 RECOMMENDATIONS MADE BY THE AGSA FOR THE BUDGETARY REVIEW AND RECOMMENDATION REPORT FOR THE 2016/17 FINANCIAL YEAR

 

In its follow-up on commitments and proposed recommendations by honouring the commitments made by the executive authority, the status of the following key commitments made by the Minister was evaluated and identified as being in progress:

  • To monitor and evaluate all deliverables on the key programmes;  
  • Request regular feedback from Transport on key issues  impacting  entities in the portfolio; 
  • Enhance performance and consequence management; 
  • Contract management over all entities in the portfolio; 
  • Management of vacancies; and 
  • Implementation of the action plan to address the prior year audit findings.

The following key focus areas were identified by the AGSA for the Committee to probe in review of the Annual Reports and in finalising the approval of the budget of the transport portfolio:

  • Performance reporting:
    • The Department and its entities should provide reasons for non-achievement of targets;
    • The Department and its entities should indicate what was the programme’s budget used for if targets were not achieved; and
    • The Department and its entities should indicate what plans they have to improve performance against predetermined targets going forward. 
  • Compliance:
    • The Department and its entities should indicate what plans they have to reduce the extent of irregular and fruitless and wasteful expenditure; and
    • The Department and its entities should indicate whether consequence management is in place for staff who permit the occurrence of irregular and fruitless and wasteful expenditure and recovery mechanisms. 
  • General:
    • The Department and its entities should monitor vacancies for key positions in the portfolio; and
    • With regard to procurement, the Department and its entities should ensure full compliance with applicable legislation and testing the market prior to contract extensions. 

As has been indicated in previous budget reports, the following recommendations remain applicable to the current year under review:

 

  1. Regular monitoring of the action plans to ensure that the identified deficiencies are addressed to avoid repeat findings and continued non-compliance. The Committee should request management to provide feedback on the implementation and progress and of the action plan during quarterly reporting.
  2. Regular assessments of the status of internal controls, especially regarding financial statement and performance reporting preparation and filling of key vacant posts to ensure stability of management, must be undertaken by management to address deficiencies as and when they arise. The Committee should request management to provide quarterly feedback on status of key controls.
  3. The accounting officers/authorities should intensify their focus on ensuring that transgressors are held accountable and that action is taken, as required by the PFMA.  Action taken against repeat transgressors should be done so in a timely manner, in order to eliminate repeat findings. List of action taken must be provided quarterly to the Committee for follow-up.
  4. Processes should be established to ensure that invitation for competitive bids are advertised in at least the Government tender bulletin, as this is a cheaper medium and is accessible to a majority of potential bidders.
  5. Management should put systems and processes in place to monitor compliance with SCM regulations to ensure that interest is disclosed by all staff members.
  6. Management should formulate compliance checklists that detail the compliance requirements for each requirement, and these checklists should be reviewed throughout the procurement process.
  7. The Department, RSR, ACSA and SANRAL should explain why repeat findings have not been addressed fully/effectively.
  8. Management should ensure that the Treasury Regulations are complied with. Requests for quotations should be done timeously to ensure a fair, equitable procurement process.
  9. Management should exercise oversight responsibility over financial and performance reporting, as well as compliance and related internal controls.
  10. Latest developments regarding all investigations listed above need to be reported on by the Department and the relevant identified entities.
  11. The following measures should be put in place to create an environment that is conducive to compliance with legislation:
    1. Key commitments made to implement the AGSA’s recommendations to address the root causes should be promptly implemented;
    2. Control processes should be adhered to at all times when procuring goods and services;
    3. Proper record keeping should be implemented for information supporting compliance and procurement process; and
    4. Consequence management for staff members who fail to comply with applicable legislation should be implemented.
  12. Management should address document management system. In addition, it should attend to financial and performance reporting discipline, as well as compliance management.
  13. Management should exercise oversight responsibility pertaining to financial and performance reporting, as well as compliance and related internal controls.
  14. Management should implement effective Human Relations management to ensure that adequate and sufficiently skilled resources are in place and that performance is monitored.
  15. Management should establish and communicate policies and procedures to enable and support the understanding and execution of internal control objectives, processes and responsibilities.

 

7.4 THE COMMITTEE RECOMMENDATIONS FOR THE 2016/17 FINANCIAL YEAR BUDGETARY REVIEW AND RECOMMENDATION REPORT

 

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

 

7.4.1    The advertising and filling of critical vacant posts should be prioritised in the Department and the affected entities. This has been a repeated recommendation over numerous years and the Department, with its entities, must present a workable plan/strategy that will allow for the filling of vacancies, whether this be through urgent consultation with National Treasury or through skills assessments or both.

7.4.2    The Department should strengthen its oversight over the entities and report on progress made to remedy all matters raised by the AGSA in its audit reports of the Department and the entities. This will in turn allow for an improvement in the performance of the transport portfolio as highlighted under areas of concern as contained in the AGSA 2016/17 Consolidated General Report on National and Provincial Audit Outcomes.

7.4.3    Effective steps should be implemented to prevent irregular expenditure. Officials who caused the Department or its entities to incur irregular, fruitless and wasteful expenditure should be subjected to the appropriate measures provided for in terms of sections 81 to 86 of the PFMA. These sections define financial misconduct and lays down the procedures for disciplining public officials guilty of financial misconduct. It also includes provisions for criminal prosecution in cases of gross financial misconduct. The Department should also ensure that proper record-keeping be implemented for information supporting compliance and procurement process and implement consequence management for staff members who fail to comply with applicable legislation.

7.4.4    The Department and entities should capacitate their Finance and SCM departments with appropriately skilled and competent personnel to prepare credible financial statements. Furthermore, management should ensure that information used to prepare financial statements are accurate and reliable. Staff should be retrained and reskilled to ensure that they comply with legislation.

7.4.5    Control processes should be adhered to in the SCM processes. The Department should establish a task team to identify and address the inefficiencies in the SCM process in the Department, as well as its entities. There should be consequences for poor performance and failure to comply with applicable legislation.

7.4.6    The AGSA’s recommendations which address identified root causes should be implemented.

7.4.7    The Department should develop funding plans to ensure the financial sustainability of the entities 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 C-BRTA, RAF, PRSA and SANRAL (possible inclusion of PRASA, SAMSA and ATNS will be determined once their annual reports have been audited) as there was uncertainty as to whether the entities would be able to fund their future obligations.

7.4.8    The Department should report back to the Committee on a quarterly basis on its monitoring, tracking and engagement with its provincial and municipal counterparts on the implementation of the PRMG and other 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 as an extension of the two-way Key Performance Indicator (KPI).

7.4.9 The Department and its entities should ensure that the targets set in their Strategic Plans and APPs going forward adhere to the AGSA’s Specific, Measurable, Achievable, Realistic and Timely (SMART) principles.

7.4.10 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.

7.4.11 The Department should develop an alternative investment attraction plan in order to make better use of Public-Private Partnerships and 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, as well as their provincial and municipal counterparts.

7.4.12 The Department should ensure that all Board vacancies of entities are filled as a matter of urgency in order to allow the entities to operate and report effectively, as well as within the parameters of the applicable legislation.

7.4.13 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, especially as the entities of PRASA, SAMSA and ATNS have in the past had numerous repeat findings issued by the AGSA. 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. It is recommended that the Committee be given an opportunity to submit a supplementary report on these late received annual reports.

7.4.14 The C-BRTA should report to the Committee regarding the draft joint agreement towards resolving the impasse regarding the cross-border movements on the Republic of South Africa/Kingdom of Lesotho route.

7.4.15 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.

7.4.16 ACSA should report to the Committee regarding the progress and implementation of the jointly executed security action plan.

 

8.        SUMMARY OF REPORTING REQUESTS

 

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

 

Reporting matter

Action required

Timeframe

The Department should submit an Action Plan to address the findings of the AGSA, as well as the implementation of the recommendations made by the Committee in this report

Written plan from the Department of Transport

15 December 2017

The Department should submit a comprehensive briefing on progress made on the Taxi Recapitalisation Programme and the Review thereof

Written briefing from the Department of Transport

15 December 2017

The Department should submit quarterly reports on investigations underway in the Department and all the entities

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on the achievement of job creation targets in the Department and all the entities

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on pending litigation, as well as settlements reached and judgments for and against the Department and all the entities

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on human resource management (retentions, secondments, transfers, retirements, training and skills transfers, resignations and dismissals), as well as report on progress in disciplinary matters (including suspensions) in the Department and all the entities

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on the Shova Kalula project

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on the progress of projects linked with the following grants:

  • PTOG
  • PRMG
  • PTNG
  • Rural Road Asset Management Systems Grant (RRAMS)
  • Coal Haulage Grant
  • Disaster Management Grant

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on progress regarding the Moloto Corridor Project and how this affects both the Road and Rail Programmes

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

The Department should submit quarterly reports on strategies to address the financial health status of:

  • C-BRTA
  • RAF
  • PRSA
  • SANRAL

Written plans from the Department of Transport and:

 

  • C-BRTA
  • RAF
  • PRSA
  • SANRAL

Quarterly reports within 60 days of the adoption of this report by the National Assembly.

The Department with the C-BRTA should submit quarterly progress reports on progress regarding:

  • the implementation of the 1996 SADC Protocol on Transport, Communications and Meteorology.
  • the resolution of the impasse regarding the cross-border movements on the Republic of South Africa/Kingdom of Lesotho route.

Written plan from the Department of Transport

Quarterly reports within 60 days of the adoption of this report by the National Assembly

 

9.        CONCLUSION

 

The Committee would 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.

 

10.        APPRECIATION

 

The Committee would like to acknowledge the Department and entities for presentations made on their Annual Reports and Financial Statements. 

 

The Committee applauds the achievements by the C-BRTA, RAF, RTIA, RTMC, PRSA and SACAA 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

Abbreviation/Acronym

Meaning

AARTO

Administrative Adjudication of Road Traffic Offences

ACSA

Airports Company South Africa

AFCAC

African Civil Aviation Commission

AGSA

Auditor-General of South Africa

APP

Annual Performance Plan

ARDP

Draft Access Road Development Plan

ATNS

Air Traffic Navigation Services

BARSA

Board of Airlines Representatives of South Africa

BRT

Bus Rapid Transport

C-BRTA

Cross-Border Road Transport Agency

CIDB

Construction Industry Development Board

DGOs

Dangerous Goods Operators

DLCA

Driving Licence Card Account

DLTC

Driving Licence Testing Centres

eNaTIS

Electronic National Traffic Information System

EXCO

Executive Committee

FMPPI

Framework for Managing Programme Performance Information

GFIP

Gauteng Freeway Improvement Project

GHG

Greenhouse Gas

GDYC

Gender, Disability, Youth and Children

ICAO

International Civil Aviation Organisation

IMO

International Maritime Organisation

IPTNs

Integrated Public Transport Networks

KPI

Key Performance Indicator

MEOSAR

Medium Earth Orbit Search and Rescue 

MTEF

Medium-Term Expenditure Framework

MTSF

Medium-Term Strategic Framework (2014-19)

NADP

National Airports Development Plan

NATMAP 2050

National Transport Master Plan 2050

NCAP

National Civil Aviation Policy

NCOP

National Council of Provinces

NDP

National Development Plan

NIP

National Infrastructure Plan

NMTT

National Ministerial Task Team

PEPFRA

Ports Economic Participation Framework

PFMA

Public Finance Management Act

PICC

Presidential Infrastructure Coordinating Commission

PPPFA

Preferential Procurement Policy Framework Act

PRASA

Passenger Rail Agency of South Africa

PRSA

Ports Regulator of South Africa

PRMG

Provincial Roads Maintenance Grant

PSP

Private Sector Participation

PTNG

Public Transport Network Grant

PTOG

Public Transport Operations Grant

RABS

Road Accident Benefit Scheme

RAF

Road Accident Fund

RSR

Railway Safety Regulator

RTIA

Road Traffic Infringements Agency

RTMC

Road Traffic Management Corporation

SABC

South African Broadcasting Corporation

SACAA

South Africa Civil Aviation Authority

SADC

Southern African Development Community

SAMSA

South African Maritime Safety Authority

SANRAL

South African National Roads Agency Limited

SARS

South African Revenue Service

SCM

Supply Chain Management

SIP

Strategic Infrastructure Programme

SMART

Specific, Measurable, Achievable, Realistic and Timely

SOEs

State-owned Enterprises

SONA

State of the Nation Address

STER

Single Transport Economic Regulator

VTC

Vehicle Testing Centres