ATC140711: Report of the Portfolio Committee on Transport on Budget Vote 37: Transport, dated 10 July 2014

REPORT OF THE PORTFOLIO COMMITTEE ON TRANSPORT ON BUDGET VOTE 37: TRANSPORT, DATED 10 JULY 2014

The Portfolio Committee of Transport, having considered Budget Vote 37: Transport reports as follows:

1. INTRODUCTION

The Portfolio Committee on Transport considered the 2014/15 budget of the Department of Transport (the Department) on 8 July 2014. This report contains a summary of the Transport budget allocation and the strategic objectives of its programmes with Committee findings and recommendations on the budget.

2. MANDATE OF THE DEPARTMENT OF TRANSPORT

The Department of Transport is tasked with providing safe, reliable, effective, efficient and fully integrated transport operations that best meet the needs of freight and passenger users. At the same time, the Department is entrusted with providing the infrastructure and services in a manner that is efficient and affordable to the individual and corporate users, as well as the whole economy. In addition, it is mandated with ensuring safety and security across all modes of transport, including non-motorised transport.

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

• Administration;

• Integrated Transport Planning;

• Rail Transport;

• Road Transport;

• Civil Aviation;

• Maritime Transport; and

• Public Transport.

In terms of the Department’s structure, it was suggested that it boded well for the creation of jobs, the development of the country’s urban and rural communities, as well as the improvement of logistics. The programmes of the Department are structured in a manner that will assist them to discharge their mandate in an effective and efficient manner . It stands to reason that no economy can thrive without developed road, rail, maritime and aviation infrastructure networks. Indeed, no economy can develop unless its transport sector plays its part in facilitating the movement of people, goods and services throughout the economy.

3. OVERVIEW OF THE 2013/14 FINANCIAL YEAR

The adjusted budget allocation for the Department in the 2013/14 financial year was R42.4 billion. Of this amount, transfers and subsidies accounted for R41.4 billion. At the end of the First Quarter for the 2013/14 financial year, the Department had transferred R8.6 billion or 20.8 percent of the total available budget for transfers. Transfers to the Provinces and Municipalities at the end of the First Quarter for 2013/14 were R3.4 billion, the majority of which was for the Provincial Roads Maintenance Grant: Roads Maintenance and Public Transport Operations Grant transfers.

At the end of the Second Quarter for 2013/14, the Department had spent 43.4 percent of the budget on Provincial and Local Governments, 28.6 percent on departmental agencies and accounts, 24.3 percent on public corporations, 1.4 percent on goods and services, 1.3 percent on households and 0.9 percent on the compensation of employees. The Department developed, inter alia, the National Transport Master Plan (NATMAP). Subsequently, NATMAP was presented to Cabinet which then resolved that there was a need for further review by the Inter-Ministerial Committee and consultations with the Presidential Infrastructure Coordinating Commission (PICC).

Up to the Third Quarter for the 2013/14 financial year, 100 percent of the budget allocation for the Provincial Road Maintenance Grant (PRMG) had been spent. Similarly, expenditure on the Public Transport Operations Grant (PTOG) and the Rural Road Asset Management Grant (RRAMG) was at 100 percent respectively. However, there was under-expenditure of R200 million in the budget allocation for the Public Transport Infrastructure and Systems Grant (PTISG). Under-expenditure in the Public Transport Networks Operations Grant (PTNOG) stood at R50 million.

In the Third Quarter, the Passenger Rail Agency of South Africa (PRASA) had completed the Bridge City Rail Project, which was subsequently launched by the Department. Under the PRMG, 40.7 km of roads had been rehabilitated in Mpumalanga. The finalisation of the National Airports Development Plan (NADP) was in progress and consultations had been held with the South African Civil Aviation Authority (SACAA) and the Eastern Cape pertaining to the Mthatha Airport. In public transport, particularly pertaining to Integrated Public Transport Networks (IPTNs), the preliminary designs were in progress at Ekurhuleni, while in Msunduzi planning had been completed and awaiting the go-ahead to start construction. The National Scholar Transport Policy had been submitted and approved by the Social Cluster in October 2013. Under the Taxi Recapitalisation Programme, the Department reported that 2 752 taxis had been scrapped during the Third Quarter.

Policy Priorities for 2014/15

In terms of the outcomes-based performance management framework adopted by Government, the Department contributes mainly to the development of an efficient, competitive and responsive economic infrastructure network (outcome 6). In addition, the National Development Plan (NDP) accentuates the necessity of sound economic infrastructure as a necessary condition for economic growth. The country’s transport infrastructure is thus a key priority. The major recommendations of the NDP are to improve public transport planning and integrate it with spatial planning.

Furthermore, the NDP underscores asset management and design institutional arrangements to ensure safe, reliable and affordable public transport. It also puts emphasis on the revitalisation of the commuter rail fleet. The capital transfers to the Passenger Rail Agency of South Africa (PRASA) will ensure that the commuter fleet is renewed over a ten-year period from 2015/16 and that the necessary complementary investments are made.

Moreover, the NDP highlights the need to focus on integrated transport systems which integrate all modes. The Public Transport Infrastructure and Public Transport Network Operations Grants therefore seek to ensure that this objective is attained and that planning is achieved in cities. The investment into the maintenance and upgrade of the provincial and national road and rail infrastructure and IPTNs within 13 cities is in line with the objectives of the NDP.

The budget allocation of the Department seeks to respond to the cardinal issues raised in the NDP. This is evidenced by R21.6 billion (44.4 percent) and R15.0 billion (30.9 percent) of the budget allocation which go to the Road Transport and Rail Transport programmes respectively and R11.3 billion (23.2 percent) that is allocated to the Public Transport programme. This augurs well for economic growth and development, especially job creation. In addition, it will stand the country in good stead for attracting investors and tourists. Besides attracting investment, improved public transport will also reduce traffic congestion and vehicle accidents.

4. BUDGET ANALYSIS

The 2013/14 budget figures stated below are based on the adjusted appropriation since the revised estimates are not published for the sub-programmes.

Table: Budget Allocations

( Source: National Treasury 2014 – Vote 37: Transport)

Of the R635.3 billion of the total appropriation by vote, the Department of Transport receives R48.7 billion in the 2014/15 financial year. This budget allocation constitutes 7.7percent of the national budget. Compared to R42.4 billion adjusted or main budget that the Department received in 2013/14, the 2014/15 budget allocation increases by 14.9 percent in nominal terms and 8.2 percent in real terms.

An amount of R47.8 billion (or 98 percent) of the Department total budget is in the form of transfers and subsidies to its entities such as the South African National Roads Agency Limited (SANRAL) and PRASA, as well as in the form of conditional grants to provinces and municipalities for public transport infrastructure.

The budget allocation for the compensation of employees increases from R344.2 million in 2013/14 to R383.4 million in the 2014/15 financial year. The average departmental expenditure on the use of consultants and professional services (business and advisory services) is set to decline from R451.6 million in 2013/14 to R312.9 million in 2014/15. This translates into a decrease of R138.7 million or 30.7 percent. In this regard, the most noticeable decrease is in the Civil Aviation programme, of which the budget for the use of consultants and professional services was R169 million in 2013/14 and currently set at R12.8 million, a decrease by 92.4 percent. However, communication-related expenditure is set to increase by 84.6 percent, from R9.3 million in 2013/14 to R60.4 million in the current financial year.

5. PROGRAMME ANALYSIS

5.1 Programme 1: Administration

The Administration programme provides leadership, strategic management and administrative support to the Department through continued refinement of organisational strategy and structure, in line with appropriate legislation and best practice. This programme has five sub-programmes:

• Ministry;

• Management;

• Corporate Services;

• Communications; and

• Office Accommodation.

For the 2014/15 financial year, the Administration programme receives an allocation of R382.9 million, compared to R362.4 million in 2013/14. This translates into an increase by 5.7 percent in nominal terms, but an actual decrease by 0.5 percent when taking into account the effects of inflation (real terms). The most noticeable increase is in the Office Accommodation sub-programme which increases from R39.8 million in 2013/14 to R46.5 million in 2014/15, indicating an increase by 16.8 percent in nominal terms and 10 percent in real terms. This can be attributed to the fact that the Administration will embark on the recruitment of additional personnel as it expands its portfolio of responsibilities and establishes a project management office.

The largest share of the programme’s overall allocation (i.e. 48.5 percent) goes to the Corporate Services sub-programme, followed by 18 percent allocated to the Management sub-programme. This allocation lends credence to the Department’s stated spending focus on the two sub-programmes over the medium term, namely, the provision of operational and administrative support to the Department.

5.2 Programme 2: Integrated Transport Planning

This programme manages and facilitates national sector planning. It also formulates policies and strategies. In addition, it coordinates regional and inter-sphere relations, including providing economic modelling and analysis of the sector. The programme comprises the following sub-programmes:

• Macro Sector Planning;

• Logistics;

• Modelling and Economic Analysis;

• Regional Integration;

• Research and Innovation; and

• Integrated Transport Planning Administration Support.

The budget allocation for the Integrated Transport Planning programme increases by 2.7 percent in nominal terms, from R79.1 million in 2013/14 to R81.2 million in the current financial year. However, the overall expenditure decreases by 3.34 percent in real terms, when taking inflation into account.

The exponential increase is in the Logistics sub-programme that increases from R11.9 million in 2013/14 to R20.8 million in 2014/15, indicating an increase by 74.8 percent in nominal terms (64.6 percent in real terms). This sub-programme is entrusted with developing and coordinating the implementation of freight logistics strategies. This is aimed at unblocking bottlenecks in the freight logistics system and related supply chains, with particular emphasis on integrating elements of the system across all modes. The proposed Durban-Free State-Gauteng Logistics and Industrial Corridor that was announced by President Zuma in his 2012 State of the Nation Address is part of this endeavour and it is equally mentioned in the NDP.

5.3 Programme 3: Rail Transport

The Rail Transport programme facilitates and coordinates the development of sustainable rail transport policies, infrastructure development strategies and economic and safety regulations. Moreover, it supports and monitors the oversight of rail public entities and the implementation of integrated rail services. Five sub-programmes fall under this programme:

• Rail Regulation;

• Rail Infrastructure and Industry Development;

• Rail Operations;

• Rail Oversight; and

• Rail Administration Support.

In 2013/14, the budget allocation for the Rail Transport programme was R11.2 billion and it increases to R15.0 billion in 2014/15, indicating an increase by 33.8 percent in nominal terms and 26 percent in real terms. The programme’s overall allocation constitutes 30.9 percent of the Department’s budget.

The Rail Oversight sub-programme receives the biggest share (99.8 percent) of the Programme’s budget allocation, which is R14.9 billion and up from R11.2 billion allocated to it in 2013/14. This sub-programme is responsible for making transfers to the Passenger Rail Agency of South Africa (PRASA) and the Railway Safety Regulator (RSR). For the 2014/15 financial year, R14.9 billion is transferred to PRASA, while R51.5 million goes to the RSR. Transfers to PRASA are for replacing the signalling systems and ageing rolling stock, as well as upgrading the rail infrastructure.

The budget allocation for the Rail Operations sub-programme declines from R7.9 million in 2013/14 to R7.1 million in the current financial year. This translates into a decrease of 10.1 percent in nominal terms and 15.4 percent when taking inflation into account.

5.4 Programme 4: Road Transport

The Road Transport programme develops and manages an integrated road infrastructure network. It is also entrusted with regulating road transport and ensuring safer roads. In addition, it oversees the road entities. The programme is divided into five sub-programmes:

• Road Regulation;

• Road Infrastructure and Industry Development;

• Road Oversight;

• Road Administration Support; and

• Road Engineering Standards.

Expenditure on the Roads Transport programme increases from R19.6 billion in the 2013/14 financial year to R21.6 billion in 2014/15, translating into an increase by 10.6 percent in nominal terms and 4.1 percent in real terms. The programme receives the largest share of the Department’s budget, that is, 44.4 percent, but declines in overall share from 46.2 percent the previous year.

The largest share of the programme’s allocation, that is 99.6 percent, goes to the Road Oversight sub-programme. This sub-programme is tasked with, inter alia, transferring funds to the South African National Roads Agency Limited (SANRAL), the Road Traffic Management Corporation (RTMC) and the Road Traffic Infringement Agency (RTIA).

In the 2014/15 financial year, an amount of R11.9 billion is transferred to SANRAL, of which R7.5 billion is allocated to the non-toll network. The SANRAL transfer also includes R3.7 billion for current payments and R665.5 million is allocated to the coal haulage network.

The allocation to the Provincial Roads Maintenance Grant (PRMG) is to the tune of R9.4 billion. Of this amount, R7.9 billion is set aside for road maintenance and R602.3 million for disaster relief. In addition, R803 million goes to coal haulage road network maintenance. This budget allocation suggests that the Department’s spending focus will be on the development of roads and road infrastructure, in line with the NDP. For their part, RTMC and RTIA are allocated R176 million and R15.3 million respectively to promote safety on the country’s roads.

5.5 Programme 5: Civil Aviation

The Civil Aviation programme is responsible for facilitating – through regulation and investigation – the development of an economically viable air transport industry that is safe, secure, environmentally friendly and compliant with international standards. Moreover, it oversees the aviation public entities. The Civil Aviation programme comprises five sub-programmes:

• Aviation Policy and Regulations;

• Aviation Economic Analysis and Industry Development;

• Aviation Safety, Security Environment and Search and Rescue;

• Aviation Oversight; and

• Aviation Administration Support.

The programme budget decreases from R243.3 million in the 2013/14 financial year to R148.3 million in 2014/15, which is a decrease by 39.1 percent in nominal terms (and 42.6 percent in real terms). The decrease is largely attributable to the fact that an additional amount to the tune of R104.8 million had been allocated to the upgrade and refurbishment of the Mthatha Airport in 2013/14 and there is no budget allocation for this purpose in 2014/15.

The allocation to the Aviation Policy and Regulations sub-programme decreases by 14.7 percent in nominal terms and 19.7 percent in real terms, down from R26.5 million in 2013/14 to 22.6 million in 2014/15. Despite the decrease in the programme’s overall budget, the budget allocation for the Aviation Economic Analysis and Industry Development sub-programme increases noticeably by 31.4 percent in nominal terms and 23.7 percent in real terms. In 2013/14, the allocation for this sub-programme was 8.6 million and it increases to R11.3 million in 2014/15.

5.6 Programme 6: Maritime Transport

The Maritime Transport programme coordinates the development of a safe, reliable and economically viable maritime transport sector through the development of policies and strategies and monitoring of the implementation plan. It also oversees the maritime public entities. Five sub-programmes fall under the Maritime Transport programme:

• Maritime Policy Development;

• Maritime Infrastructure and Industry Development;

• Implementation, Monitoring and Evaluations;

• Maritime Oversight; and

• Maritime Administration Support.

For the 2014/15 financial year, the Maritime Transport programme is allocated R110.6 million, up from R104.4 million in 2013/14. This budget allocation increases by 5.9 percent in nominal terms, but decreases by 0.2 percent in real terms.

The exponential increase is in the Maritime Administration Support sub-programme which goes up by 179.8 percent in nominal terms and 162.9 percent in real terms. The allocation in this sub-programme increases from R2.4 million in 2013/14 to R6.7 million in 2014/15. However, the largest portion of the programme’s allocation, that is 55.6 percent, is in the Implementation, Monitoring and Evaluations sub-programme which increases from R54.1 million in 2013/14 to R61.5 million in 2014/15. This indicates an increase by 13.7 percent in nominal terms and 7 percent in real terms. This allocation is intended to, among other things, implement the National Ports Act (No 12 of 2005), as well as reduce the levels of pollution and the number of accidents and incidents at sea.

5.7 Programme 7: Public Transport

The Public Transport programme is tasked with transforming land transport systems by developing norms and standards, regulations and legislation. It also develops empowerment systems within the public transport sector. Furthermore, the programme facilitates institutional planning and capacitation to guide the provision of sustainable integrated public transport networks in both urban and rural areas. Finally, it regulates national transport services and seeks to improve the management of scholar transport. The Public Transport programme comprises six sub-programmes:

• Public Transport Regulation;

• Rural and Scholar Transport;

• Public Transport Industry Development;

• Public Transport Oversight;

• Public Transport Administration Support; and

• Public Transport Network Development.

The budget allocation for the programme increases from R10.8 billion in 2013/14 to R11.3 billion in 2014/15, translating into an increase by 4.9 percent in nominal terms (but a decrease by 1.2 percent in real terms in 2014/15). The noticeable increase is in the Public Transport Network Development sub-programme which increases by 41.2 percent in nominal terms and 32.9 percent in real terms. This is in line with the Department’s endeavour to promote and improve public transport’s accessibility and reliability, as recommended in the NDP.

The programme’s budget allocation constitutes 23.2 percent of the Department’s budget, down from 25.4 percent in the 2013/14 financial year. There is marked decrease in the budget allocation for the Public Transport Administration Support sub-programme which decreases from R16 million in 2013/14 to R7.8 million in 2014/15. This indicates a decrease by 51.2 percent in nominal terms and 54.1 percent in real terms. This is attributable to the number of vacancies owing to the “organisational structure changes”.

6. OBSERVATIONS

During its deliberations the Committee noted the following:

6.1 That the Department’s Medium Term Strategic Framework responds to the NDP.

6.2 That the road infrastructure repair backlog was R149 billion and that most provincial and municipal roads were in dire need of maintenance. The Committee further noted that, while 40% of South African roads are in a very good and good condition, 60% of the road network are in poor condition and requires upgrading and rehabilitation.

6.3 That the National Scholar Transport Policy has still not been finalised by the Department.

6.4 The improper and unsafe transportation of farmworkers remains a concern for the Committee.

6.5 That the completion of the Moloto Rail Development Project was critical for public transport development.

6.6 That there is discrepancy in the allocation of public transport subsidies.

6.7 That the Department put in place outreach programmes to attract interest in the

Maritime and Civil Aviation programmes.

6.8 That the position of Director-General (DG) was not filled, as well as a number of senior positions (Deputy Directors- General) in the Department. The Committee is concerned about the impact of vacancies on service delivery.

6.9 That the Department intends submitting certain pieces of legislation for deliberation by Parliament.

6.10 That the funding model of public transport infrastructure be further explored.

6.11 That there is lack of monitoring of transfers of grants to provinces and

municipalities.

6.12 That the Taxi Recapitalisation Programme (TRP) was taking place at a snail’s pace owing to issues raised regarding the inadequacy of the taxi scrapping allowance.

7. RECOMMENDATIONS

In response to the observations, the Committee recommends that the Minister gives consideration to the following:

7.1 That the Department closely monitor and evaluate the utilisation of grants that are provided to other spheres of government for road infrastructure development and maintenance.

7.2 The Department should monitor whether Provinces and local spheres of government utilise their funding allocations for the intended purpose. The Committee further recommends the synergising of Integrated Transport Plans (ITPs) of provinces and municipalities with those of the Department.

7.3 The Department should ensure the standardisation of road infrastructure developmentacross all spheres of government.

7.4 That the Department, where possible, assess the current timeframes of the Moloto Rail Development Project and commence with the development work on this corridor.

7.5 That the Department, in its pursuit of radical transformation of the transport industry, explore the viability of a public transport passenger subsidy. The Committee further urges the Department to, in conjunction with the Department of Labour, review the conditions of employment in the taxi industry.

7.6 That the Department ensure that its performance indicators and targets in the Annual Performance Plan(APP) are specific, measurable, achievable, realistic and time-bound (SMART).

7.7 That the policy bottlenecks be resolved as a matter of urgency.

7.8 That adequate and sufficiently skilled human resources be in place in the Department and entities. The Committee further recommends that the filling of senior management positions, especially that of the Director-General, be finalised within 90 days of the adoption of this report by the National Assembly.

7.9 That the Department create awareness about the Charters for the various modes of transport.

7.10 That the Department indicate when it intends submitting the pieces of legislation to Parliament so that the Committee can plan accordingly.

7.11 That the finalisation of the development of the National Scholar Transport Policy be fast-tracked. The Committee further recommends that implementation of the Policy resides with the Department of Transport.

7.12 That the Department increase its monitoring and evaluation of transfers of grants to provinces and municipalities.

7.13 That the TRP be expedited in order for the taxi industry to be integrated with the public transport programme that is being developed.

The Committee, having considered Budget Vote 37: Transport, recommends that the House considers its report on the budget.

Report to be considered.