ATC160506: Report of the Portfolio Committee on Transport on the Strategic and Annual Performance Plans of the Department of Transport and Entities, dated 4 May 2016
REPORT OF THE PORTFOLIO COMMITTEE ON TRANSPORT ON THE STRATEGIC AND ANNUAL PERFORMANCE PLANS OF THE DEPARTMENT OF TRANSPORT AND ENTITIES, DATED 4 MAY 2016
The Portfolio Committee of Transport, having considered the 2016/17 Strategic and Annual Performance Plans of the Department of Transport and its entities, reports as follows:
The Portfolio Committee on Transport considered the 2016/17 Strategic and Annual Performance Plans (APPs) of the Department of Transport (the Department) and its entities on 6, 7, 8 and 12 April 2016. This report contains a summary of the presentations made by the Department of Transport and its entities on their strategic objectives, annual performance plans and budgets for the medium term, with Committee findings and recommendations. The Committee met with the Department and the following entities to discuss their Strategic Plans, APPs and Budgets:
- Air Traffic and Navigation Services (ATNS)
- Airports Company South Africa (ACSA)
- Cross-Border Road Transport Agency (C-BRTA)
- Railway Safety Regulator (RSR)
- Ports Regulator of South Africa (PRSA)
- South African National Roads Agency Limited (SANRAL)
- Road Traffic Management Corporation (RTMC)
- Road Traffic Infringement Agency (RTIA)
- Road Accident Fund (RAF)
- Passenger Rail Agency of South Africa (PRASA)
- South African Maritime Safety Authority (SAMSA)
- South African Civil Aviation Authority (SACAA).
The Constitution of the Republic of South Africa, 1996, identifies the legislative responsibilities of different spheres of Government pertaining to airports, road traffic management and public transport. In addition, the 1996 White Paper on Transport defines the different sub-sectors in the transport sector. Broadly, these are the infrastructure and operations of rail, pipelines, roads, airports, harbours and intermodal operations of public transport and freight. The Department of Transport is responsible for the legislation and policies for all these sub-sectors.
2. Presentation by the Department of Transport
The Department of Transport’s strategic focus is to:
- improve access to economic opportunities and social space;
- advance economic development;
- ensure greater mobility of people and goods;
- promote regional integration;
- unlocking the potential of SMMEs, cooperatives, townships and rural enterprises;
- advance the aspirations of Operation Phakisa, through promoting growth of the ocean economy; and
- continue to improve rural access, infrastructure and mobility.
2.1 Key initiatives of the Department
The key initiatives of the Department over the Medium Term Strategic Framework are as follows:
2.1.1 Creation of a Unit that will ensure implementation of interventions aimed at supporting objectives of Operation Phakisa: Oceans Economy. The Department’s targets are to:
- Finalize the National Transport Maritime Policy;
- Develop a private sector participation framework;
- Support the local ship building and repairs industry;
- Revitalise the current ship registry; and
- Create a conducive policy and legislative framework.
2.1.2 Submission of the National Airports Development Plan to Cabinet. The Department’s targets are to:
- Improve accessibility for people to geographical areas, whether for personal, essential services, business or tourism reasons;
- Allow for “time critical” in- and out-bound airfreight/goods; and
- Make a location more attractive for investment by certain sectors, in particular knowledge intensive industries, such as biotechnology, pharmaceuticals, universities, and financial services.
2.1.3 Maintaining Road Infrastructure
- R573 Moloto Road is planned to be upgraded at a cost of R3.7 billion;
- SANRAL’s budget has increased by R1.4 billion over the medium term for the Gauteng Freeway Improvement Project (GFIP) and by R1.7 billion to strengthen the non-toll road network; and
- Road infrastructure damaged by disasters would be rehabilitated at a cost of R848 million over the medium term, through an additional allocation to supplement the reprioritisation in the Provincial Roads Maintenance Grant (PRMG). Overall, spending on transfers in the Road Transport programme was expected to increase to R30 billion in 2018/19.
2.1.4 Upgrading Rail Infrastructure and Services:
- Rail infrastructure is projected to be the fastest growing area of departmental spending, and the Rail Transport programme is expected to grow at an average annual rate of 5.5%;
- Transfers to the Passenger Rail Agency of South Africa (PRASA) were mainly for acquiring new trains for Metrorail, the commuter rail operator in major urban areas;
- The transfers were also for upgrading signalling systems and refurbishing coaches; and
- Over the medium term, 507 (2016/17), 522 (2017/18) and 538 (2018/19) passenger trips would be subsidised through operational subsidies.
2.1.5 Enhancing Public Transport:
- The Department’s transfers to municipalities for public transport, were expected to increase at an average annual rate of 6.6 per cent over the medium term;
- The subsidies would support a projected 180 000 weekday passenger trips on the Rea Vaya bus network in Johannesburg over the medium term, which was triple the number in 2015/16;
- 90 000 weekday passenger trips on the My Citi network in Cape Town were projected for 2018/19, which was double the number in 2015/16;
- The new allocation formula for the public transport network grant will come into effect from 2016/17. It is envisages to ensure greater equity and efficiency in the allocation of these public transport resources; and
- The Department would also review the Taxi Recapitalisation Model to improve its effectiveness and affordability.
2.1.6 Regulation and enhancement of transport safety and security: The Department’s targets are the following:
- Develop and implement the National Railway Regulator Amendment Act and National Rail Safety Strategy;
- The Administrative Adjudication of Road Traffic Offenses (AARTO) Act would be amended and rolled out in all provinces;
- The South African Civil Aviation Authority (SACAA) Act would be amended and implemented;
- The Road Safety Strategy would be finalised and submitted to Cabinet; and
- The Road Traffic Management Corporation (RTMC) has been tasked to establish the terms of reference for the harmonisation of road traffic law enforcement and the establishment of a Single Traffic Police Unit.
2.1.7 Reducing inequality and poverty alleviation: The Department’s targets are the following:
- Develop a transport sector gender empowerment policy;
- The Minister of Transport would implement a 50% target for women representation in Boards of Directors of sector entities;
- Targeted recruitment and selection will be prioritised in line with women targets;
- Centralised the Department database of all women-owned entities would be established and a skills audit would be conducted for all women-owned entities to address skills gaps; and
- As part of monitoring and evaluation, the department would compile a status report on the transport sector socio economic empowerment programmes for the designated groups.
2.2 Challenges in implementation of the APP targets
The Department raised the following challenges in implementing the APP:
- Budgetary constraints resulting in the Department’s inability to reduce the vacancy rate;
- Turnaround time in stakeholder consultations delays processes;
- Road fatalities still require vigorous interventions;
- Fraud and corruption in the sector remains a concern;
- Department oversight role over Entities needs to be strengthened;
- Integration of transport systems and services in rural areas (accessibility and mobility); and
- Reduction of inequality, particularly amongst the youth and women needs to be prioritized.
3. Presentation by the South African National Roads Agency Limited (SANRAL)
The CEO of SANRAL outlined the Strategic and Annual Performance plans of SANRAL for 2016/17. The following changes were made to the strategic plan:
- A new Strategic Objective was added, namely that SANRAL would pursue and maintain environmental sustainability and best practice;
- The target for the percentage of RRM project spend contracted to SMMEs and black owned companies and in terms of black ownership of the main contractor has been increased from 60% to 65%;
- The target for the number of SMMEs working for SANRAL has been increased from 800 to 1200 for 2016/17 and incrementally in the following years;
- The target for the number of scholarships offered has been increased from 150 to 200; and
- The Expenditure Efficiency Index target was increased from less than 7.5% to less than 10% due to reduced expenditure on toll projects given the uncertainty with regard to the ‘user-pay’ principle.
The key objectives for the year were stated as follows: (i) Update Asset Management Systems for the timely maintenance of national roads; (ii) the planned increase of national road network by incorporation of roads as requested by Provinces; (iii) forming good co-operative relationships with relevant government departments, provincial and municipal authorities with regard to sharing of asset management systems across jurisdictions; and (iv) the smooth management of e-Tolling in Gauteng. SANRAL also plans to ensure ongoing roll out of electronic lanes at current plazas for quicker flow of vehicles. An update was given of the following projects: N1-N2 Winelands Toll Road in the Western Cape, N2 Wild Coast Toll Road in the Eastern Cape and the N3 De Beers Pass crossing from the Free State to KwaZulu-Natal.
The CEO of highlighted the following challenges faced by SANRAL in executing its mandate:
- The going-concern status of SANRAL may be affected due to poor collection on the GFIP e-toll project.
- Delays in the implementation of critical projects: N1-N2 Winelands, N3 De Beers Pass. The N2 Wild Coast was expected to commence in late 2016, 15 years later than originally planned.
- SANRAL felt that there was a need for a firmly communicated message on toll road funding.
- There were shortfalls on amounts contractually paid by Government which placed an unnecessary burden on borrowings.
- Law enforcement pertaining to adherence to traffic rules were inadequate. Infringements included overloading by hauliers, compliance in relation to electronic tolling and driver and pedestrian behaviour.
- There was insufficient funding for timely upgrades and maintenance of the non-toll road network and insufficient high-level planning and co-ordination between inter-modal transport and the three spheres of Government.
- Delays in project related approvals from authorizing departments and provinces.
- SIP-4 reports received were often not consistent or verified and were delayed.
4. Presentation by the Cross-Border Road Transport Agency (C-BRTA)
The CEO of the C-BRTA outlined the Strategic and Annual Performance plans of C-BRTA for 2016/17. The following risks were highlighted and mitigation plans were proposed by the entity:
- The C-BRTA lacked financial resources to refund operators and fund business operations. The entity was negotiating settlement agreements with operators with a view of refunding them over a period of time. Cost cutting measures were put in place to generate surplus to service the liability. Other potential revenue streams were pursued for example the introduction of cross border charges.
- The C-BRTA was working with the legal team of the Department to ensure that the litigation on the 2014 Permit tariff Regulations is defended successfully. A turnaround plan was developed to ensure financial sustainability of the C-BRTA.
- The C-BRTA was participating in the Single Road Traffic Service Steering Committee.
- The C-BRTA was finalising the implementation of a financial sustainability strategy in response to the on-going discussion around the SADC liberalization agenda which might lead to the removal of permit requirements within the SADC region.
Interventions that were put in place to address non-performance were listed. These include monthly and quarterly performance and risk monitoring and development of performance recovery plans. Further interventions included the implementation of internal and external audit recommendations, implementation of individual performance agreements and prioritisation of recruitment (filling of critical positions only). The C-BRTA was doing away with discretionary expenses including travel, catering, and the use of consultants. There was a review of the Capital Expenditure Budget and an emphasis on the efficient use of internal resources.
The Agency is technically insolvent due to a provision (liability) of R318 million refundable to operators as a result of the 2011 Permit Tariff Regulations. Cost containment measures were instituted to raise surpluses to service the liability, however, this may negatively impact on service delivery. The agency may be rendered commercially insolvent if operators all submit claims for refunds. The National Ministerial Task Team has been set up to develop a lasting solution to the impasse to the regulatory challenges on the Free State/ Lesotho corridor on cross-border passenger operations.
5. Presentation by the Ports Regulator of South Africa (PRSA)
The CEO of the Ports Regulator outlined the Strategic and Annual Performance plans of the entity for 2016/17. The following initiatives in terms of its APP were highlighted, namely to reduce the cost of doing business with South Africa, and reduce the cost of export of South African manufactured products to the world, through fair and well-structured tariff methodology on which tariff determinations are based. In July 2015 the Ports Regulator published South Africa’s long term Port Tariff Strategy, which seeks to reform port infrastructure pricing over a 10 year period, bringing greater fairness, cost reflectiveness and predictability in South Africa’s port system. The Tariff Strategy maintains lower prices for highly beneficiated South African manufactured cargo in export containers as well as SA manufactured export vehicles, and will in the coming months develop further mechanisms for mineral beneficiation and other incentives in the next phase of the Tariff Strategy.
The following challenges were raised by the entity:
- The Ports Regulator could not expand its mandate due to budgetary constraints. Additional baseline funding was required to capacitate the Regulator and implement programmes successfully and sustainably.
- The Regulator lacked human resources capacity, as only 15 out of 27 organogram posts were filled. The organisational structure was too small, compared to other South African Regulators, for the entity to implement its mandate.
- There was a need to strengthen the Regulator’s powers within the Ports Act as well as enable a new self- funding model that reduces fiscal reliance. An amendment of the Ports Act was required. The Ports Regulator faced a going concern risk due to proposed changes to the regulatory architecture of the transport sector.
- The funding proposals of the entity with regard to Operation Phakisa needed to be addressed.
6. Presentation by the South African Maritime Safety Authority (SAMSA)
The CEO of the SAMSA outlined the Strategic and Annual Performance plans of the entity for 2016/17. The following strategic challenges and mitigation actions to the Strategic Plan 2016-17 were highlighted:
- The funding model that did not fit the mandate of the entity. A Financial Self Sufficiency framework has been facilitated through the Department, National Treasury and SAMSA, but the process has been slow.
- Other than the CPI adjustment of 5.1% late in 2013, the non- adjustment of tariffs since 2009 was a challenge to the entity. The consequence was a reducing revenue stream that would not enable SAMSA to deliver effectively on its mandates. A tariff adjustment for 40% was submitted to the Department and National Treasury for approval.
- SA Agulhas was a necessary trading and training platform required under the STCW regime for seafarer training and its non-availability for this purpose seriously undermines the country’s ability to create berths to meet Operation Phakisa targets. A proposal was presented to the Department and the Department of Higher Education and Training to ensure that the vessel could be financially accounted for through SAIMI.
7. Presentation by the Road Accident Fund (RAF)
The CEO of RAF outlined the Strategic and Annual Performance plans of the entity for 2016/17. The 2016-2020 Strategic Plan and the 2016/2017 APP were focused on medium-term performance and delivery, while preparing for the future with an emphasis on processing more claims in shorter time, managing cash flows strictly and ensuring good governance and management of the business. Effort would be placed on fulfilling the Strategic Plan and APP deliverables, addressing the challenges and risks, preventing the socio-economic effects of accidents and supporting the transition to the Road Accident Benefit Scheme (RABS).
The following challenges were raised in terms of its APP:
- Inadequate funding which impacted on the slow processing of claims. Writs and legal costs were increasing. In mitigation, additional funding was requested. The RAF would also apply stringent cash flow management.
- The continuation of the RAF dispensation and the delayed introduction of Road Accident Benefit Scheme impacted negatively on the RAF as liabilities were increasing, inequity persists, health benefits remain unevenly spread, and expenditure continues to be directed away from claimants. In mitigation the RAF scheme of arrangement should be winded down and support given to the Department, as required, with the RABS Bill.
8. Presentation by the Road Traffic Management Corporation (RTMC)
The CEO of the RTMC Ports Regulator outlined the 10 key delivery points for the 2016/17 APP, namely to:
- Participate in the approval and roll-out the approved national road safety strategy;
- Implement road safety programmes focused on all road users through different platforms;
- Enhance capacity by providing training and developing new curricula;
- Implement strategic led law enforcement interventions and more resilient and proactive anti-fraud and corruption interventions;
- Undertake Evaluation reports to strengthen and enhance reporting and evaluation systems across the sector;
- Publish road traffic information on a periodic basis;
- Undertake research to support data driven strategic interventions;
- Operationalise all inclusive stakeholder platforms and embark on CSR programmes;
- Create sustainable ways to fund road safety in the Country; and
- Invest in required skills and supporting ICT infrastructure to strengthen service delivery efforts.
9. Presentation by the Road Traffic Infringement Agency (RTIA)
In meeting its objectives, the Agency’s 2014 to 2019 Strategic Plan and 2016/2017 APP was geared at creating a platform for the development of comprehensive programmes aimed at rehabilitating recalcitrant road users’ behaviour.
The Registrar of RTIA stated that the entity was meant to be a self-sustaining entity, but was currently dependant on revenue collection for financing operational imperatives. The cost of service was high and core business was impacted by pending legislative changes, i.e. the legislative review of the Administrative Adjudication of Road Traffic Offences Amendment Bill. The national roll-out of AARTO was stalled. The RTIA would be focusing on the alignment of systems and capacitation of Issuing Authorities in preparation for nation-wide roll-out of AARTO.
10. Presentation by the Railway Safety Regulator (RSR)
The CEO of the RSR presented the Strategic and Annual Performance Plans for 2016/17. In addition the Committee was briefed on the RSR Regulatory Impact Assessment which provided a cost-benefit analysis of Transnet Freight Rail and PRASA occurrences over the period 2010/11 to 2014/15. The outcomes would inform the RSR Regulatory Framework development and focus on RSR interventions.
The challenges that needed to be addressed were unsecured railway reserves that were compromising assets and resulted in an increase of fatality rates within the people struck by trains category. The RSR revenue generating streams were also not explicitly mentioned in the Railway Safety Regulator Act.
11. Presentation by the Passenger Rail Agency of South Africa (PRASA)
The Acting Group CEO stated that the Corporate Plan of PRASA took into account that sustaining the current and growing the business would require a dedicated focus on the following elements of the business;
- Rolling out the train system of the future;
- Improving the financial position and containing the cost of doing business;
- Addressing operational inefficiencies and improving service deliver;
- Sweating PRASA’s non-operational and strategic assets;
- Executing a robust real estate strategy;
- Capacity development for the modernisation program;
- Securing future business expanding the current network and new services;
- Developing a viable Funding Model;
- Redefining PRASA’s Operating Model; and
- Delivering on the Brand Promise.
PRASA was technically solvent, but on the operational side it faced the risk of not being able to pay all of its operational obligations. The salary bill was 50 per cent of total expenditure, leaving the rest of the total expenditure to implement the PRASA mandate of providing high quality services. The operational subsidy grew on average by 5% a year and the fare revenue showed a decline when compared to fare revenue of R2.9 billion in the prior year. Capital investment was slow in generating additional returns, or may not generate income at all. Some capital investment required additional operational expenditure, but no additional funding/income was received for this expenditure. PRASA indicated that their operational activities were underfunded and the current income and expenditure trends required transfer from the capital grant to operational subsidy on an annual basis.
- Presentation by Airports Company South Africa (ACSA)
According to the Chairman of ACSA, the ACSA governance framework and operating model has been revised and will be operationalised 1 April 2016. The focus of ACSA was to implement the integrated transformation program, focus on business development and continuing the improvement of customer service. ACSA aimed to grow the percentage of black business as related development and operational spend as well as commercial revenue. The entity further aimed to create job opportunities.
ACSA would engage with its rating agencies to assist with understanding the impact of the country credit rating on ACSA. ACSA was committed to cost containment and aimed to reduce operational cost by R100 million in the future. The entity will be implementing a sustainable cost reduction initiative of R123 million in the implementation of the new Operating Model over the life of this Corporate Plan. The ACSA credit outlook was on a negative watch due to the unfavourable draft permission.
- Presentation by the Air Traffic and Navigation Services (ATNS)
According to the CEO of ATNS the entity aimed to build on its core programmes and critical issues, namely:
- Maintain long term financial sustainability;
- Become a transformative organisation which invests in its people;
- Deploy and use leading technologies to the benefit of the ATM community;
- Provide efficient air traffic management solutions and associated services which meet the needs and expectations of the ATM community;
- Play a leading role in the development of air traffic management in Africa and selected international markets; and
- Deliver continuous improvement in safety performance.
The entity would focus on customer service, executing of growth strategies and building of new business lines.
- Presentation by the South African Civil Aviation Authority (SACAA)
The Director of SACAA briefed the Committee on the strategic and annual performance plans for SACAA. Critical projects for 2016/17 were the following:
- Preparation for the 2017 International Civil Aviation Organisation (ICAO) audit readiness;
- Revenue enhancement and diversification of income streams in 2016/17;
- Providing input into the Department transformation process;
- Implementation of Enterprise Business Solutions (EBS); and
- Relocation to new premises.
SACAA remains financially sustainable and is pursuing additional revenue streams. The Recognition Agreement was successfully concluded with Labour in January 2016. The Regulator reviewed and contributed to the amendment of the Civil Aviation Act and the finalisation of Chapter 4 was nearing completion. Preparation for the upcoming ICAO audit in 2017 was on schedule and was being implemented in accordance with the ICAO readiness project plan. During 2016/17 emphasis would be on improved Communication and Stakeholder Management. Cost containment measures were implemented and would be further strengthened. SACAA aimed to continue contributing to economic transformation by implementing youth, women and SMME development initiatives.
The Committee made the following observations during discussions:
- The Department was commended for undertaking to invest in rural transport infrastructure, as it would discourage migration from rural to urban areas.
15.2 Inconsistencies were noted in the APP and the 2016 Budget Vote Document. A re-alignment of these documents may be required considering the amendments made to the Strategic Plan targets in the APP for 2016/17. The following inconsistencies were noted in the APP of the Department and the Budget Vote documents:
• P.52 under Upgrading Rail infrastructure and services second paragraph there was an indication of 500 million passenger trips per year, whereas the APP2015/16 indicated this as 550 million trips.
• P.53 top paragraph the grant increase growth indication of 6.5% differed from the APP2015/16 which indicated 4.3% and further differs from the Budget Vote 2016 document which indicates this as 4.5%.
• P.67 performance targets for NATMAP and the White Paper on National Transport Policy Review have been amended and adjust to be completed a year later than indicated in the APP2015/16. In the Budget Vote document at p.9 the date for NATMAP submission to Cabinet is 2017 and not 2015/16 as indicated in the APP. The stakeholder consultation which was planned for 2015/16 for the White Paper is now removed from the year planning and incorporated into 2nd quarter of the 2016/17 year breakdown as consultations.
• P.77 reference to STER in expenditure trends may have to be removed given that STER was removed from the objectives and indicators for this programme. Spending on consultants went from 48.3% in 2013/14 to 74% in 2015/16, almost doubling in 2 years.
• P.88 the target date for supporting the parliamentary process regarding the RABS differs from that in the Budget Vote p.13, here it was 2017/18 whereas the budget vote document indicates this as 2016/17.
• P.138 first paragraph the Public Transport Programme transfers to municipalities for public transport was indicated as to increase by 4.3% in the APP2015/16 whereas here it was indicated to increase by 17%. The projected estimates for weekday BRT passenger trips have also massively increased from those indicated in the APP2015/16.
• P.138 second paragraph the figure indicated as R177 million differs from the R191 indicated in the expenditure estimate table above.
15.3 The Committee observed that a budget allocation was made for the roads development of the Moloto Corridor, while no allocation was made for the Rail development on the Corridor.
15.4 Concern was expressed about the unfunded mandate of the Shosholoza Meyl carried by PRASA.
15.5 The Committee noted that the Ports Regulator would be facing budgetary constraints going forward.
15.6 The budget allocation for RTMC was inadequate to effectively combat road fatalities.
15.7 During the last five years the RTMC did not release an annual report on road fatalities.
15.8 The RTMC should be commended for reducing fatalities during the 2016 Easter holidays.
15.9 There’s a need for the RTMC to work with the manufacturing industry to ensure that safety features were incorporated in all vehicles to reduce the negative impact of accidents.
15.10 The Annual Performance Targets in the APP of RTIA did not adhere to SMART principles.
15.11 The Committee observed that the prioritisation of the AARTO Amendment Bill would assist RTIA to execute its mandate optimally.
15.12 The ATNS, ACSA and SACAA were commended for their good performance by the Committee.
15.13 The Committee noted that the Department currently had five Acting Deputy Directors -General and two on suspension which did not auger well for the stability of the Department and its optimal performance. The Committee further observed the number of vacancies in the Department and entities, and noted that the reason for this provided by the Department was that it resulted out of the austerity measures applied by a directive of National Treasury. The Committee further noted the impact it had on the ability of the Department and its entities to fulfil its mandates.
The Committee recommends that the Minister ensure:
- The Department, with SAMSA, provides a comprehensive briefing on Operation Phakisa.
- The Department ensures that there is an alignment between the amended Strategic Plan, 2016/17 APP and the 2016/17 Budget Vote.
- The Department engage with National Treasury to ensure that the key vacant positions of the five Acting Deputy Directors-General are filled.
- The Department further engage with National Treasury to ensure that funds are secured for the Rail component of the Moloto Corridor Initiative.
- The Department reviews its funding model as it relates to PRASA in order to address, among other things, the unfunded mandate of Shosholoza Meyl.
- The Department reviews the funding models of the Ports Regulator and the RTMC so that they are able to discharge their mandates optimally.
- The Department process legislative amendments without delay.
- The Department should enhance departmental oversight and engagement with its entities. The Department along with its entities should engage with National Treasury regarding those entities which face financial constraints and liquidity concerns.
Report to be considered.
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