ATC240312: Supplementary Portfolio Committee on Transport Report on the Late Tabled 2022/23 Annual Reports of Three Entities Of The Department of Transport, Dated 12 March 2024

Transport

Supplementary Portfolio Committee on Transport Report on the Late Tabled 2022/23 Annual Reports of Three Entities Of The Department of Transport, Dated 12 March 2024

 

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

1. INTRODUCTION

The period under review took place against the backdrop of the second phase of the implementation of the National Development Plan (NDP) (2019-2024). 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.

This report will be based on only those Annual Reports that were tabled after the adoption of the Committee Budgetary Review and Recommendation Report (BRRR) on 20 November 2023 (the 2023 BRRR). There were early indications from the Auditor-General of South Africa (AGSA) that there are delays in finalising the audits of the Department, the Passenger Rail Agency of South Africa (PRASA), the Railway Safety Regulator (RSR), the South African Maritime Safety Authority (SAMSA), the Road Accident Fund (RAF) and the Road Traffic Infringement Agency (RTIA), however, at the time of adoption of the BRRR the only outstanding Annual Reports were those of the PRASA, RSR, SAMSA and RTIA. On 2 October 2023, the Minister submitted a letter requesting the extension for the late tabling of the Annual Reports of the Department, PRASA, RSR, SAMSA, RTIA by the end of October and the RAF Annual Report until the finalisation of the dispute with the AGSA. The Minister of Transport (the Minister) tabled the Annual Reports of the SAMSA on 5 December 2023 (referred to the Committee on 6 December 2023), of the RTIA on 22 January 2024 (referred to the Committee on 25 January 2024) and of the PRASA on 25 January 2024 (referred to the Committee on 1 February 2024).

The Annual Report of the RSR was tabled on 6 March 2024 (referred to the Committee on 7 March 2024). Although this report was tabled before this report was adopted, the Committee was unable to programme a briefing with the RSR before adoption of the report.

As is evident in the financial statements of the entities, the sector is slowly recovering from the residual impact of the 2020 COVID-19 lockdown measures on the transport portfolio, especially on revenue collection and debt recovery. Despite this recovery, the portfolio was also impacted at various levels by the July 2021 Civil Unrests, the flood damage in various provinces in the course of 2022 and the first quarter of 2023 resulting in massive infrastructure damage, as well as the ongoing conflict since February 2022 between Russia and Ukraine which impacts various aspects such as jet fuel, stock and parts availability. The entities SAMSA and PRASA were also impacted by cyber-attacks which have become more prevalent and require the entities to closely look at their Information and Communications Technology (ICT) security systems and make the required improvements to prevent future attacks.

 

1.1       Mandate of the Committee

 

The prime mandate of the Committee is governed by the Constitution of the Republic of South Africa, 1996 (“the Constitution”), in respect of its legislative and oversight responsibilities as public representatives. It is required to consider legislation referred to it and consider all matters referred to it in terms of the Constitution, the Rules of the National Assembly (NA) or resolutions of the House. It is also required to respond to matters referred to it by Government within its mandate. In addition, the Committee is entrusted with considering the budgets, Strategic Plans, Annual Performance Plans (APPs) and the Annual Reports of the Department and entities that fall within the transport portfolio.

 

1.2       Purpose of the Supplementary 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 supplementary report seeks to establish whether the Department and its entities have achieved their aims and objectives, as set out in their Strategic Plans, as well as whether they continue to fulfil their constitutional mandates during the year under review. Reference, where needed, will be made to the key achievements made, as well as challenges encountered during the 2018/19, 2019/20, 2020/21, 2021/22 and 2022/23 financial years, as reported in the Department’s and entities’ 2018/19, 2019/20, 2020/21, 2021/22 and 2022/23 Annual Reports and APPs. The Committee was able to consider those Annual Reports that were tabled late and after the 2023 BRRR was adopted and captured its observations and recommendations applicable to the RTIA, SAMSA and PRASA in this supplementary report.  Since the RSR only tabled their report on 6 March 2024, the Committee could not engage on the Annual Report and its audit opinion before the adoption of this report and as such the report does not have detailed specific observations and recommendations for the entity.

 

1.3       Methodology

 

The Committee engaged with the AGSA on its audit findings of the outstanding Annual Reports of the entities RTIA, SAMSA and PRASA on 20 February 2024 on their performance and audit outcomes for the period under review. The Committee was also able to receive the 2022/23 Annual Report briefings from the SAMSA on 20 February 2023, from the PRASA on 27 February 2023 and the RTIA on 5 March 2023.

 

At the time of considering this report, the RSR tabled its 2022/23 Annual Report shortly before adoption of the report, therefore the Committee could not engage on it due to time constraints. The Committee voiced its dissatisfaction with the reasons provided for the failure to table all outstanding Annual Reports, especially since the indications were that these would be finalised by the end of October 2023.

 

The supplementary report details the analysis of the 2018/19, 2019/20, 2020/21, 2021/22 and 2022/23 Annual Reports and financial statements, strategic objectives, budget allocation and financial performance and the recommendations made by the Committee.

 

The supplementary report is based on information accessed through:

• The 2022 State of the Nation Address (SONA);
• The Strategic Plans and the APPs/Corporate Plans of the entities that fall under the Department, as well as their Annual Reports and financial statements for 2018/19, 2019/20, 2020/21, 2021/22 and 2022/23;
• The report of the AGSA on the audit outcomes of the entities;
• The NDP; and
• Oversight visits by the Committee during the period under review.

 

1. MANDATE OF THE DEPARTMENT OF TRANSPORT

 

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

 

The Department strives to be “the heartbeat of South Africa’s economic growth and social development”.[1] Its core values are:[2]

• Maintaining fairness and equity in all its operations;
• Striving for quality and affordable transport for all;
• Stimulating innovation in the transport sector;
• Ensuring transparency, accountability and monitoring of all operations; and
• Ensuring sustainability, financial affordability, accessibility, as well as the upholding of the Batho Pele principles.

 

In an endeavour to discharge its mandate effectively and efficiently, the Department is structured as follows:[3]

• Programme 1: Administration;
• Programme 2: Integrated Transport Planning;
• Programme 3: Rail Transport;
• Programme 4: Road Transport;
• Programme 5: Civil Aviation Transport;
• Programme 6: Maritime Transport; and
• Programme 7: Public Transport.

 

The Department’s organisational structure was approved in September 2011, and it was implemented from November 2011.[4] The structure comprises four transport modes (rail, road, civil aviation and maritime transport), as well as integrated transport planning and public transport. Support functions, particularly in the Office of the Director-General (DG), Office of the Chief Operations Officer (COO) and the Office of the Chief Financial Officer (CFO) fall under the Administration programme.

 

2.1       Strategic overview 2022/23

 

2.1.1     Strategic priorities of Government

 

Although these strategic priorities of Government have not changed since the adoption of the 2023 BRRR, they are repeated herein in order to show how the work of the RTIA, SAMSA, PRASA and RSR link up to these priorities.

 

To execute its mandate, the Department is guided by Government’s commitments as set out in, inter alia, the NDP 2030, the Medium-Term Strategic Framework (MTSF) 2019-2024, as well as the SONA policy directives.

 

The Department contributes to the realisation of the vision of improved social and economic development articulated in the NDP. Transport infrastructure and services support economic growth and development by connecting people and goods to markets. The development and maintenance of an efficient and competitive transport system is a key objective of the NDP. To this effect, the Department, in partnership with the sector public entities, provincial and local government, focuses on improving mobility and access to social and economic activities.[5]

 

In addition, the Department gives impetus to priority 1 (economic transformation and job creation) and priority 4 (spatial integration, human settlements and local government) of Government’s 2019-2024 MTSF. The table below shows a schematic illustration of the alignment between MTSF pillars, apex priorities of the 6th Administration and the strategic focus areas of the Department.

 

Table 1: Alignment between MTSF Pillars, Apex Priorities and Strategic Focus of the Department

MTSF Pillars	Apex Priorities	Department’s Strategic Focus Areas
Achieving a more capable State	Priority 1: A capable, ethical and developmental State	Improved efficiency and effectiveness of support services
	Priority 6: Social cohesion and community safety	Safety (and security) as an enabler of service delivery
	Priority 7: A better Africa and world	Building a maritime nation, elevating the oceans economy Environmental protection – Recovering and maintaining healthy natural environment
Driving a strong and inclusive economy	Priority 2: Economic transformation and job creation	Infrastructure build that stimulates economic growth and job creation
		Building a maritime nation, elevating the oceans economy
		Accelerating transformation towards greater economic participation
	Priority 5: Spatial integration, human settlements and local government	Public transport that enables social emancipation and an economy that works
Building and strengthening capabilities of South Africans	Priority 1: A capable, ethical and developmental state	Governance – Greater efficiency, effectiveness and accountability
	Priority 3: Education, skills and health	Improved efficiency and effectiveness of support services

(Source: Department of Transport (2022a))

 

As far as the 2022 SONA is concerned, it accentuated the following strategic objectives that had a bearing on the transport sector:[6]

• Rehabilitating the passenger rail network in ten (10) priority corridors;
• Using the Infrastructure Fund to invest in transport;
• Implementing the rural roads programme through using labour intensive methods to construct or upgrade 685 kilometres of rural roads over three years; and
• Introducing measures to curb the theft of scrap metal or cable on the country’s infrastructure, including trains.

 

Over the medium-term, the Department plans to give effect to these guiding policies by focusing on:[7]

• Cultivating an enabling environment for maintaining road networks;
• Facilitating integrated road-based public transport services; and
• Revitalising passenger rail services.

 

2.1.2     Strategic Outcomes and Oriented Goals of the Department

 

Although these strategic outcomes and oriented goals of the Department have not changed since the adoption of the 2023 BRRR, they are repeated herein in order to show how the work of the RTIA, SAMSA, PRASA and RSR link up to these goals of the Department.

During the period under review, the Department discharged its responsibilities with a view to attaining the following strategic objectives:[8] 

• Safety (and security) as an enabler of service delivery;
• Public transport that enables social emancipation and an economy that works;
• Infrastructure build that stimulates economic growth and job creation;
• Building a maritime nation, elevating the oceans economy;
• Accelerating transformation towards greater economic participation;
• Innovation that advances efficiencies and supports a continuous improvement model; 
• Environmental Protection – Recovering and maintaining a healthy natural environment;
• Governance – Greater efficiency, effectiveness and accountability.

 

In the 2022/23 financial year, the Department aimed to perform its work in line with the following Priority Focus Areas and Performance Outcomes:

• Department Priority Focus Area 1: SAFETY as an Enabler of Service Delivery
  • Sub-Programme: Safer Transport Systems
    • Road Transport Safety
      • Improved transport safety and security
    • Rail Transport Safety
      • Improved transport safety and security
    • Civil Aviation Safety
      • Improved transport safety and security
    • Maritime Transport Safety
      • Improved transport safety and security
    • Public Transport Safety
      • Improved transport safety and security
      • Improved public transport safety

 

• Department Priority Focus Area 2: PUBLIC TRANSPORT that Enables Social Emancipation and an Economy that Works
  • Sub-Programme: Public Transport
    • National Taxi Lekgotla Resolutions Implementation
      • Improved accessibility, quality and reliability of public transport
    • Integrated Public Transport Networks
      • Improved accessibility, quality and reliability of public transport
    • Rural and Scholar Transport
      • Improved accessibility, quality and reliability of public transport
    • Rail Transport
      • Improved accessibility, quality and reliability of public transport

 

• Department Priority Focus Area 3: INFRASTRUCTURE Build that Stimulates Economic Growth and Job Creation
  • Sub-Programme: Competitive and Accessible Markets
    • Road Transport
      • Increased access to affordable and reliable transport systems
      • Decent Jobs sustained and created
    • Rail Transport
      • Increased access to affordable and reliable transport systems
      • Decent Jobs sustained and created
    • Civil Aviation
      • Decent jobs sustained and created

 

• Department Priority Focus Area 4: Building a MARITIME Nation, Elevating the Oceans Economy
  • Sub-Programme: Competitive and Accessible Markets
    • Increased access to affordable and reliable transport systems

 

• Department Priority Focus Area 5: Accelerating TRANSFORMATION towards Greater Economic Participation
  • Sub-Programme: Competitive and Accessible Markets
    • Increased access to affordable and reliable transport systems

 

• Department Priority Focus Area 6: INNOVATION that Advances Efficiencies and Supports a Continuous Improvement Model
  • Sub-Programme: Innovation
    • Improved competitiveness through adoption of new technology

 

• Department Priority Focus Area 7: ENVIRONMENTAL PROTECTION – Recovering and Maintaining a Healthy Natural Environment
  • Sub-Programme: Reduction in Greenhouse Gas Emission and Pollution
    • Emission of Greenhouse Gases reduced
    • Pollution incidents reduced

 

• Department Priority Focus Area 8: Governance – Greater Efficiency, Effectiveness and Accountability
  • Sub-Programme: Skills Development
    • Improved sector skills and capacity
  • Sub-Programme: Functional, efficient and integrated government
    • Improved governance and strengthened control environment

 

2.1.3     Key policy developments and legislative changes

 

The following key policy developments and legislative challenges were identified by the Department[9] and updated since the adoption of the BRRR on 20 November 2023:

• Economic Regulation of Transport (ERT)

To address regulatory and capacity gaps that relate to South Africa’s need for an efficient and cost-effective transport system, in order to raise economic growth and meet its social goals, the Department is in the process of finalising the ERT Act, which will affect the establishment of a Transport Economic Regulator (TER). The Bill has been processed by the National Council of Provinces (NCOP) and the proposed amendments were agreed to by the Portfolio Committee on 20 February 2024.

 

• National Road Traffic Amendment Bill

The Bill seeks to reduce the blood alcohol limit to zero with the result that no one on the road should be operating a motor vehicle, whilst under the influence of alcohol and drugs. The Bill has been processed by the NCOP and the proposed amendments were agreed to by the Portfolio Committee on 20 February 2024.

 

• Railway Safety Bill

The Bill seeks to improve the regulatory framework regulating safety in the Republic of South Africa in order to improve safety for passenger and freight.

 

• Private Sector Participation Framework

The Framework will provide a platform for introduction and/or attraction of private operators in rail. It will also assist in the identification of areas of rail where the private sector could participate.

 

• National Learner Transport Policy Review

The Policy recognises the need to have a uniform approach to the transportation of learners and the fulfilment of the constitutional mandate of the Department to provide a safe and efficient transport. The review of the Policy will seek to, among others, ascertain if the Policy is achieving its intended outcomes.

 

2.1.3.1 Legislative challenges

 

The Department had seven (7) Bills that were processed during the year under review or still currently before Parliament and one (1) Bill was tabled in the 2023/24 financial year. These bills have been updated since the adoption of the BRRR on 20 November 2023 are listed as follows:

a) Economic Regulation of Transport Bill, 2020 [B1-2020] (The Bill has been processed by the NCOP and the proposed amendments were agreed to by the Portfolio Committee on 20 February 2024);

b) Transport Appeal Tribunal Amendment Bill, 2020 [B8-2020] (introduced 29 May 2020 and still before the Committee);

c) National Road Traffic Amendment Bill, 2020 [B7-2020] (The Bill has been processed by the NCOP and the proposed amendments were agreed to by the Portfolio Committee on 20 February 2024);

d) Railway Safety Bill, 2021 [B7-2021] (introduced 19 March 2021, debated on 24 October 2023 and transmitted to the NCOP on the same day);

e) National Land Transport Amendment Bill, 2016 [B7-2016] (introduced 15 April 2016 and referred back to Parliament by the Presidency on 9 September 2021 to address the reservations about the Bill’s constitutionality; On 7 December 2023 the NCOP passed the Bill and sent it to the President for assent);

f) Marine Pollution (Prevention of Pollution from Ships) Amendment Bill [B5-2022] (introduced 31 January 2022 and currently in the NCOP process);

g) Marine Oil Pollution (Preparedness, Response and Cooperation) Bill [B10-2022] (introduced 10 March 2022 and report finalised on 24 October 2023, debated on 14 November 2023 and transmitted to the NCOP on the same day);

h) Merchant Shipping Bill [B12-2023] (introduced 11 May 2023 and still before the Committee – although the Bill was tabled outside of the year under review, the Department intended per its Focus Area 4 to have the Bill be promulgated and assented into law by the end of the 2019-2024 five-year targets, and reported progress on this by 31 March 2023 as being “Notice of intention to introduce Merchant Shipping in Parliament has been published”. The planned target for the 2022/23 year under review linked to the Bill was to have the Bill approved for introduction to Parliament, and the reported actual achievement is that the notice to introduce was published).

 

3.         SUMMARY OF 2022 REPORTING REQUESTS

 

Although these indicated 2022 BRRR additional reporting requests have not changed since the adoption of the 2023 BRRR, they are repeated herein in order to show how they link up with the observations and recommendations listed below for the RTIA, SAMSA, PRASA and RSR link up to these goals of the Department.

 

During the 2022 BRRR, the Committee requested additional matters for the Department to report on. On page 233 of the Annual Report, the Department refers in general to the 2022 BRRR of the Committee. Unlike in 2020, the Department once again did not list these reporting requests in its Annual Report for the year under review. The Department also did not indicate how it responded to these requests in the Annual Report. The Committee noted that in the course of engagements throughout the year, the Department did address some of these issues.

 

The Committee is of the view that the Department and its entities must comply with the primary, as well as the additional reporting requests contained in its BRRR, and that the failure to do so will not be accepted. A number of these requests are repeated in this year’s additional reporting requests due to repeat findings by the AGSA, as well as the failure of the Department and its entities to ensure that all of these were reported on and resolved within the set timeframes.

 

For purposes of this supplementary report, only those additional reporting requests from the 2022 BRRR that were applicable to the RTIA, SAMSA, PRASA and RSR are listed. For the full list, please refer to the adopted 2023 BRRR.

 

Table 2: Additional Reporting Requests from the 2022 BRRR by the Committee

Reporting matter	Action required	Timeframe
The Department should submit an improved Action Plan to address the findings of the AGSA for it and its entities, as well as the implementation of the recommendations made by the Committee in this report.	Written plan from the Department.	15 January 2023
The Department should submit a comprehensive briefing on steps it will be taking to assist in stabilising its entities (including filling of vacancies, conclusion and evaluation of shareholder agreements, improving the efficiency of the shareholder representatives on the boards, closely monitoring the implementation of projects and budget expenditure, etc.).	Monthly progress written briefings from the Department.	Monthly starting with first report due on 15 January 2023
The Department should submit a comprehensive briefing on progress made on the filling of Board vacancies in entities, as well as the filling of all critical posts within the Department and its entities.	Monthly progress written briefings from the Department.	Monthly starting with first report due on 15 January 2023
The Department should submit quarterly reports on investigations underway in the Department and all the entities, with additional emphasis on the finalisation of investigations to resolve the AGSA Supply Chain Management (SCM) compliance concerns, lack of consequence management and resolution of past incurred irregular expenditure findings.	Written plan from the Department.	Quarterly reports within 30 days of the adoption of this report by the NA
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.	Quarterly reports within 30 days of the adoption of this report by the NA
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.	Quarterly reports within 30 days of the adoption of this report by the NA
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.	Quarterly reports within 30 days of the adoption of this report by the NA
The Department should submit quarterly reports on the achievement of transformation targets in the Department and all the entities.	Written plan from the Department.	Quarterly reports within 30 days of the adoption of this report by the NA
The Department should submit quarterly reports on the progress towards prevention of irregular, fruitless and wasteful expenditure for the Department and all the entities.	Written plan from the Department.	Quarterly reports within 30 days of the adoption of this report by the NA
The Department should submit a comprehensive briefing on the progress made to address and/or implement recommendations emanating from Committee Oversight Reports during the year.	Written briefing from the Department.	15 January 2023
The Department should submit quarterly reports on strategies to address the financial health status of: PRASA	Written plans from the Department of Transport and: PRASA	Quarterly reports within 30 days of the adoption of this report by the NA.
The Department, in conjunction with PRASA, should submit a comprehensive briefing on the Werksmans contract from conclusion of the contract in 2015 to the current status of work performed by the firm and include the total expenditure to date relating to the contract in question, as well as the progress on resolving the matters raised in the report.	Written briefing from the Department.	15 January 2023
The Department, together with PRASA, should submit a comprehensive briefing on: - the new Board interventions plan it intends to implement, as well as how this will address the shortages of train sets currently online and how they intend to increase ridership; - The plan in place to ensure that PRASA complies with all RSR directives; - The plan in place to phase out manual authorisation or how they will ensure that the use of manual authorisation will not lead to another train collision or derailment; - The plan to address the concerns raised regarding the asset register as well as the safety and security on the assets, infrastructure, staff and passengers.	Written briefing from the Department.	15 January 2023

 

4.         OBSERVATIONS

 

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

 

The PRASA, RTIA, RSR and SAMSA did not submit their Annual Reports in time for consideration by the Committee for inclusion in the adopted 2023 BRRR. The Annual Reports have since been tabled and considered by the Committee along with engagements thereon with the AGSA and the RTIA, SAMSA and PRASA, and the observations following those engagements are included in this supplementary report.

The Minister tabled the following reasons for the delay in tabling the following Annual Reports:

• RSR (October 2023)
  • The AGSA informed the RSR on 31 July 2023, that the AGSA is unable to submit the audit report within the prescribed timeframe, due to complexities surrounding the consideration of a finalised National Treasury Investigation report that was provided to the AGSA. This report has potential implications in terms of the RSR financial statements as well as the AGSA audit opinion thereof.
  • The RSR informed the Minister that, it is still awaiting completion of the 2022/23 regulatory audit by the AGSA and that the Annual Report will be submitted as soon as the AGSA completed the audit and issues in the management letter.
  • Parliament is notified by the Minister that she is not able to table the RSR’s 2022/23 AR by 30 September 2023 as required by section 65(1)(a) of the Public Finance Management Act (PFMA) due to the reasons outlined above. The report will be tabled as and when the audit is completed.
• RTIA (October 2023)
  • The RTIA is experiencing challenges in the finalisation of the 2022/23 audit. As a result of the extension of the period of the audit until 15 August 2023 by the AGSA. Also, further delays were as a result of discussions between AGSA and management around issues pertaining to Agency’s assets and liabilities.
  • The Audit of the 2022/23 annual financial statements was not finalised, resulting in the RTIA being unable to submit the Annual Report and financial statements for 2022/23 to the Minister as required by section 55(1)(d) of the PFMA.
  • It is against this background and in line with section 65(2)(a) of the PFMA, Department request Parliament to note the late tabling of the RTIA’s 2022/23 Annual Report.
• SAMSA (October 2023)
  • The SAMSA has experienced unforeseen challenges in the finalisation of the 2022/23 audited financial statements and Annual Report. This is mainly due to SAMSA experiencing a cyber-attack, on 16 April 2023, which impacted the entire ICT environment.
  • Due to the cyber-attack the submission of the 2022/23 audited financial statements and Annual Report to the Executive Authority and the National Treasury will be delayed. Also, it is projected that the submission of the Annual Report to Parliament will also be delayed due to SAMSA and AGSA needing additional time to finalise the 2022/23 audit.
  • It is against this background that the Department requests Parliament to note the late tabling of the Annual Report.
• PRASA (October 2023)
  • The PRASA submitted their financial statements to the AGSA for auditing on 20 July 2023 as a result of a clean-up process undertaken to address the prior year’s material findings by AGSA. The AGSA has two months to audit and sign off on the audit report after the submission of financial statements, this in this instance it would have been by 20 September 2023.
  • The AGSA is unable to submit the audit report within the prescribed timeframes due to complexities and the time required to perform the audit of previously disclaimed areas within the financial statements, in particular property plant and equipment (PPE).
  • The magnitude of PRASA’s asset base and complexity thereof: taking into consideration that PPE last received an unqualified audit opinion in 2016/17 financial year, numerous material adjustments to prior period figures as well as significant impairments processed have resulted in the AGSA not having been able to complete the audit work on this significant risk area as yet.
  • The AGSA is still auditing the AFS of PRASA and remains committed in finalising the audit report by 20 October 2023. The DoT notified Parliament that it will not be able to table PRASA’s 2022/23 AR by 30 September 2023 as required by section 65(1)(a) of the PFMA due to the reasons outlined above. The Minister will table the report as and when the audit is completed.

 

The Committee voiced its dissatisfaction with the reasons provided for the failure to timeously table the Annual Reports of PRASA, RTIA, RSR and SAMSA. The Committee is of the view that disputes between entities and the AGSA should be resolved early on during the audit year through the use of interim audits and if that fails that such disputes should be expedited and that all Annual Reports must be submitted per the legislated timeframes regardless of disputes with the AGSA. The oversight mandate of Parliament should not be stifled by litigation processes that may take years to resolve. These oversight processes are instrumental for accountability but also to empower Parliament in its budgetary allocations and consideration on issues related to legislative reform.[10]

 

The RSR 2022/23 Annual Report was tabled shortly before the adoption of this supplementary report by the Committee, therefore the Committee did not have the opportunity to receive a briefing and engage on the RSR 2022/23 Annual Report.

 

4.2 Opinions Expressed by the AGSA: Audit Outcomes for the Transport Portfolio

 

4.2.1 Summary of AGSA findings

 

The summary of AGSA findings for the Department specifically is captured in the adopted BRRR of 20 November 2023 and is therefore not repeated here. The AGSA findings for the entire Transport portfolio was captured in the adopted BRRR of 20 November 2023 and is therefore not repeated here. For purposes of this supplementary BRRR, the Committee will point out the following views expressed by the AGSA regarding the audit outcomes of the RTIA, SAMSA, PRASA and RSR:

 

4.2.1.1 Overview of Material Irregularities for the portfolio

 

On Material Irregularities (MIs), the AGSA indicated the following:

• The MI process is implemented at selected auditees audited by the AGSA that represent a significant portion of the expenditure budget and the irregular expenditure of national, provincial and local government, including state-owned entities.  The selection is also focused on auditees that are key contributors to Government priorities;
• In the 2021/22 Annual Report audits, the MI process was implemented for Airports Company South Africa (ACSA), RAF, South African National Roads Agency Limited (SANRAL) and PRASA and for the first time in 2022/23 at the Department, SAMSA and RTIA. Out of all entities identified for assessment, only PRASA was found to have had MIs issued by the AGSA;
• The AGSA gave the following updated report that for PRASA, the status of new MIs which will be reported on for the first time and that remain active in 2022/23 financial year reviews are:
  • One (1) MI identified on non-compliance resulting in potential material financial loss [Payments made for no value received - Isipingo Retail Development construction project];
  • One (1) MI identified on suspected fraud resulting in potential material financial loss [Suspected fraud relating to "Ghost" employees];
  • 8 (eight) other MIs were resolved in the year under review;
  • The AGSA reported that actions were already in progress to address 100% of these matters when the notifications were issued by the AGSA to PRASA. An estimated financial loss of R19.3 million was in the process of being recovered. There were 10 (ten) investigations instituted. Seventeen (17) responsible officials had been identified and disciplinary processes were completed and some of these officials were involved in multiple MIs. Two (2) responsible officials that were identified still have their disciplinary proceedings in progress;
  • The AGSA indicated that internal controls and processes improved to prevent recurrence of these MIs. The AGSA also reported that SCM policy and procedures had been updated to ensure compliance with all aspects of key legislation. Delegation of authority has been reviewed to ensure appropriate level of oversight. Internal and external bid committee training should take place. Probity reviews of tenders above R500 million to be done prior to award.
  • The AGSA made the following observations from the MI process:
    • Intensive focus on consequence management (relating to MIs) during the year resulted in eight (8) MIs (80%) having been resolved;
    • Appropriate actions in progress to address two (2) active MIs;
  • The AGSA reports the following regarding the two (2) active MIs:
    • Isipingo Retail Development construction project:
      • Investigation completed (PRASA’s secondment agreement with the Special Investigating Unit (SIU));
      • Arbitration proceedings to recover R19.3 million in progress;
      • Six (6) officials indicated through the investigation to be responsible – disciplinary proceedings concluded for four (4) and in progress for two (2);
    •  “Ghost” employees:
      • Preliminary internal investigation finalised in May 2023;
      • External forensic investigation underway;
      • SIU proclamation approval was pending at the time of the audit but had since been authorised by the President under Proclamation 153 of 2024;
      • Improvements in the human capital internal control environment in progress;
      • Complete overhaul of the ICT security system is underway.

 

4.2.1.2 Root Causes, Recommendations and Commitments

 

The identified AGSA root causes, recommendations and commitments for the entire portfolio have not changed since it was captured in the adopted BRRR of 20 November 2023 and is therefore not repeated here. At the time that the AGSA presented their findings to the Committee, the RSR had not tabled their Annual Report and therefore the AGSA did not present root causes, recommendations or comments linked to the RSR. The recommendations and commitments specific to each entity are also listed below under 5.2. The following are root causes specifically identified for the RTIA, SAMSA and PRASA as presented by the AGSA on 20 February 2024, as well as some input on the RSR audit received from the AGSA in writing on 11 March 2024 following the tabling of the RSR Annual Report on 6 March 2024:

 

4.2.1.2.1 RTIA

 

• The following are overall root causes:
  • Poor record-keeping to support implementation of consequence management processes;
  • Ineffective payment processes to ensure timeous payment of invoices;
  • Lack of quality processes to ensure that all financial statement items are supported by reliable records when submitted for audit purposes;
  • Lack of effective action plans to address repeat findings relating to the AARTO assets and liabilities and quality of the AFS.
• The following are key recommendations:
  • Quarterly reporting by the accounting authority to the Portfolio Committee on the implementation of the audit action plan to ensure effective monitoring and oversight.
• The overall message from the AGSA to the entity:
  • Improved controls around the management of the AARTO assets and liabilities (unallocated receipts) to ensure that all balances are supported by reliable records, especially considering the imminent national rollout of the AARTO;
  • The quality assurance processes require improvement to identify errors on the financial statements prior to submission;
  • Improved record keeping relating to steps taken against those officials who had incurred irregular expenditure.

 

4.2.1.2.2 SAMSA

 

• The following are overall root causes linked to leadership oversight responsibility:
  • Management did not exercise adequate oversight to ensure that internal controls are operating effectively to prevent non-compliance with laws and regulations relating to SCM. This is due to inadequate monitoring of internal controls when procuring goods and services;
  • Management was not fully effective in developing and monitoring the implementation of action plans to address internal control deficiencies and prevent the recurrence of audit findings. Some of the misstatements/findings identified in the current year were communicated in previous years.
• The following are key recommendations:
  • Controls to be implemented that will ensure compliance monitoring processes are effective. This will prevent the entity from having a material irregular expenditure;
  • Enhancements to the current action plans must be performed timeously and the senior management, internal audit function, together with the audit committee, must review the audit action plans regularly to ensure that root causes are properly identified, and the plan is adequate to address findings reported;
  • Management to ensure that there are effective controls in place for preparation of regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information which agrees with the financial and performance information submitted and is aligned with the standards, laws and regulations and the entity’s policies;
  • AGSA encouraged management to ensure that the process of the suspended executives is being prioritised as the cases have been open for a period which now increases the number of employees in acting positions. Finalisation of such matters and appointing a permanent CEO will ensure proper stability and continuity to the operations of the entity.
• The commitments made by the entity:
  • Management committed to include internal audit in reviewing the action plan, to ensure that it addresses the root cause of the finding/significant deficiency;
  • Management committed to develop an effective and efficient action plan to address the reported significant deficiencies/findings.
• The overall message from the AGSA to the entity and the Committee:
  • AGSA commend management for the controls and action plans implemented for financial statements as there were lesser to no repeat material findings or adjustments that were made. We further commend management for the controls and action plans implemented to ensure that the performance information reported is valid, accurate and complete. Audit of performance has shown a great improvement as it was qualified in 2020/21 to achieving a clean audit in 2022/23;
  • AGSA urge management to focus on ensuring that there are controls in place to ensure future improvements in the noncompliance findings raised in the current year. There are still significant weaknesses in the control environment that have not been addressed, leading to a number of adjustments required to achieve the above stated outcome on the financial statements. There has also been a cyber-attack which happened for the second time within the 3 years. Management should ensure that the action plans address the control environment to sustain an unqualified audit opinion in the 2023/24 financial year without having to make a number of adjustments to the submitted reports and ensuring compliance with the laws and regulations;
  • In overall SAMSA achieved 61% of their indicators (53% in 2021/22) with 39% (47% in 2021/22) of the indicators not achieved. The overall performance has improved compared to prior year however management will have to attend to the overall achievement by implementing action plans to ensure all that all indicators are achieved;
  • In the current year analysis of the information technology (IT) audit outcomes indicated that management had implemented some of the IT controls committed to in the previous cycle in order to improve the implementation and effectiveness of the designed controls. These included conducting IT risk assessment, implementing mitigating controls where there were critical IT vacancies, and establishing a cyber security incident process. However, some of the weaknesses reported in the previous audit cycle still existed. In the 2022/23 audit cycle, areas of improvement were identified on the management of firewall, processes to classify sensitive information assets, delays in the implementation of some of the IT projects, monitoring of IT service providers, filling of critical IT vacancies, skills development plans, disaster recovery testing and user access processes. These were reported to management, and we urge management to ensure that action plans are developed, implemented, and monitored to ensure that the above weaknesses are resolved.

 

4.2.1.2.3 PRASA

 

• The following are overall root causes:
  • Inadequate and insufficient controls over information security management and IT systems;
  • Asset management was not effective throughout the year;
  • Vacancies in senior management and continued capacity constraints in terms of numbers and skills in critical units;
  • Ineffective implementation and monitoring of standardised processes pertaining to contract and expenditure management;
  • Poor demand and procurement planning resulted in the inadequate development of bid specifications and lack of agility in procurement process;
  • Lack of appropriate and timely consequence management.
• The following are key recommendations to management linked to each root cause:
  • PRASA must expedite the overhaul of the IT systems and environment currently underway to address critical deficiencies in the ICT environment and to enhance cyber security to an acceptable level;
  • On asset management:
    • Urgently update the System Analysis Program (SAP) asset register with all journals passed in the 2022/23 financial year;
    • All assets to be supported by appropriate supporting documentation;
    • Physical counts and conditional assessment to be performed on a regular basis;
    • Implementation of a standardised project monitoring to report on the status/progress of infrastructure under construction;
  • On vacancies:
    • Disciplinary proceedings in instances of protracted suspensions of officials must be finalised without further delay;
    • Remaining vacant positions in senior management must urgently be filled;
    • The tasks, roles and resources required in the various divisions to ensure a properly functioning internal control environment must be clearly defined and it must be ensured that PRASA’s establishment is reflective of the capacity required;
    • Once above has been performed, positions (where vacant) must be filled with suitably skilled individuals;
    • Where consultants are used, skills must be transferred;
  • On contract and expenditure management:
    • Review policies and procedures to ensure that it contains appropriate standardised processes for daily and monthly accounting disciplines which must be adhered to;
    • Assigning of specific responsibilities to specific officials and appropriate segregation of duties;
    • Wherever possible, automated controls must be used for the verification of the accuracy and completeness of transactions;
    • Continuous monitoring to enable proactive identification of errors/irregularities and facilitation of corrective action;
  • On demand and procurement planning:
    • Bid specifications should be comprehensive, detailed and unambiguous;
    • Bid evaluation committees to include individuals with the requisite technical knowledge;
    • Expedite appointment of the Head of SCM;
    • The SCM unit to be staffed with enough appropriately skilled individuals;
  • On consequence management:
    • Timely investigation into all instances of irregular, fruitless and wasteful expenditure;
    • All investigations to be tracked and monitored by relevant levels;
    • Given the backlog, prioritisation of recent transgressions;
    • Institute an investigation into the cancellation of security contracts during late 2019 to mid 2020;
  • Cyber security and IT systems:
    • Monitor implementation of PRASA’s plan to resolve the control deficiencies in information security management and information technology systems;
  • Vacancies:
    • Monitor status of suspensions and disciplinary action (especially on senior management level);
    • Monitor vacancy level for senior management;
    • Request commitment from PRASA on creating adequate capacity (numbers and skills) in critical units, monitoring of implementation;
  • Consequence management:
    • Monitor PRASA’s progress in resolving active MIs;
    • Monitor levels of irregular, fruitless and wasteful expenditure (IFWE);
    • Obtain commitment and monitor implementation thereof on the investigation and consequence management required on IFWE;
  • Internal control deficiencies:
    • Obtain PRASA’s action plan to address remaining internal control deficiencies identified through the audit – in particular, the following areas:
      • Asset management (complete, accurate and valid SAP asset register and ability to monitor status of infrastructure construction);
      • Contract management Monitor implementation thereof;

 

• The overall message from the AGSA to the entity:
  • PRASA has made significant progress in the 2022/23 financial year in the journey towards returning affordable passenger rail transport to the citizens of the country;
  • Commitment to implementing the multi-year, root cause based, action plan has resulted in an improved audit outcome;
  • However, further intensive action will still be required in the upcoming year to successfully embed the current actions and fully turning around PRASA, requiring the support of all accountability ecosystem role-players, including the Portfolio Committee.

 

4.2.1.2.4 RSR

 

On a request sent on 6 March 2024 for further information on the RSR audit outcome, the AGSA indicated the following in writing on 11 March 2024:

• The audited amounts for RSR of irregular expenditure are R692 219 (2022-23) and R181 641 (2021-22) respectively;
• Per note 23 of the final audited financial statements the irregular expenditure was as a result of services rendered without a purchase order. It should however be noted that the disclosed irregular expenditure above does not include any expenditure in relation to the RSR’s office lease as referred to. The matter in question regarding the office lease is presently at the NT and depending on the outcome, as determined by NT, this matter could only potentially affect the financial statements of the following year (2023/24);
• The audit outcome for the 2022/23 financial year was an unqualified opinion with a material finding on compliance with legislation. This material finding relates to expenditure management, where the entity did not take effective and appropriate steps to prevent irregular expenditure;
• In terms of the internal control deficiency that resulted in the RSR not having taken effective and appropriate steps to prevent irregular expenditure, AGSA did report that this occurred as a result of inadequate review and monitoring of compliance with procurement related laws and regulations by management. Management includes the mentioned officials;
• Based on audit evidence obtained through the audit process, the reason as stipulated in note 23 of the Annual Report, namely that the employment contract of the employee who caused the irregular expenditure was terminated and hence disciplinary steps could not be taken, was confirmed. It should be noted that there was no material non-compliance detected on consequence management pertaining to irregular expenditure in the 2022/23 financial year;
• The mentioned dispute between the AGSA and RSR was resolved through the standard escalation process that applies to all AGSA auditees as articulated in the annual engagement letter that is signed between the AGSA and in this instance the accounting authority. This process stipulates that, should a contested matter remain unresolved at engagement level, it can be escalated to the relevant head of portfolio responsible for the audit and in the case where it still remains unresolved, it can be escalated to the relevant head of audit who will be the final decision-maker in terms of this process.

 

 

4.2.1.3 Reflections on Implementation of Recommendations

 

The AGSA and the Committee noted that action plans to address audit findings are developed, but not effectively implemented and not adequately monitored. Findings raised are, in most instances, recurring findings.

 

The AGSA noted positive progress on the filling of vacancies at Board level and executive management, as well as Deputy Director-General positions at the Department. This will go a long way towards enhancing governance, accountability and oversight in the portfolio. However, the SAMSA remains without a permanent appointed CEO and this post has been vacant since 2016. The same concern applies to the RSR which also remains without a permanent appointed CEO.

 

 

4.2.1.4 Irregular, Unauthorised, Fruitless and Wasteful Expenditure

 

The general highlights presented by the AGSA on irregular, unauthorised, fruitless and wasteful expenditure for the entire portfolio have not changed since it was captured in the 2023 BRRR and is therefore not repeated here. What is highlighted herein are those instances presented by the AGSA of irregular, unauthorised, fruitless and wasteful expenditure for the RTIA, SAMSA and PRASA.

 

Due to the late tabling by the RSR, the AGSA did not present on the findings for the entity on irregular, unauthorised, fruitless and wasteful expenditure. The information for the RSR below is captured from the tabled 2022/23 Annual Report as well as the written response received from the AGSA on 11 March 2024.

 

The lack of internal controls to monitor compliance has increased irregular expenditure reported in the current year. Auditees are not proactive in addressing compliance issues through preventative controls. Slow progress on implementing recommendations has also been a contributing factor in the increase of irregular expenditure.

 

4.2.1.4.1 RTIA

 

RTIA did not prevent occurrence of fruitless and wasteful expenditure of R61 778. The majority of the fruitless and wasteful expenditure was caused by penalties paid.

 

Inadequate evidence that instances of irregular expenditure have been investigated to determine if disciplinary steps need to be taken against liable officials. Sufficient appropriate audit evidence that disciplinary steps were taken against officials who had incurred irregular expenditure were not provided.

 

Annual irregular expenditure increased from R108 million in the 2021/22 financial year, to R6 million in the year under review. As at 31 March 2023, the irregular expenditure balance stood at R209 million. R4.9 million was linked to procurement processes that were not competitive and R846 000 was linked to salary increases in contravention of the AARTO Act.

 

4.2.1.4.2 SAMSA

 

Effective and appropriate steps were not taken to prevent irregular expenditure amounting to R13 306 000 (R13 238 000 with uncorrected) as disclosed in note 36 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by contract management processes not being complied with due to payments made on expired contracts.

 

The closing balance of irregular expenditure stood at R590 million which had not yet been dealt with. The reasons for this were indicated as:

1. Investigated and awaiting condonement - The Irregular Expenditure condoned relates to irregular expenditure for 2014 – 2016. National Treasury requested SAMSA to submit the irregular expenditure for condonement per year in order for them to process systematically. The request for condonement for the 2017 irregular expenditure is currently being processed by NT;

2. Investigation in progress - The investigation of the 2022/23 and previous year irregular expenditure has been completed in 2023/24. Management is considering the investigation report and will commence with the request for condonement and consequence management.

 

4.2.1.4.3 PRASA

 

During the prior year (2021/22) there was no adequate system for identifying and disclosing all IFWE and there were no satisfactory alternative procedures that we could perform to determine fair presentation thereof.

 

PRASA revisited all procurement transactions for the 2021/22 and 2022/23 financial years and thus figures disclosed are now fairly presented in the annual financial statements. PRASA did not revisit the IFWE incurred in the 2020/21 financial year and before to ensure the completeness thereof, in light of previous audit qualifications stretching as far back as the financial year ended 31 March 2017. Thus, an inconsistency was noted in the audit report pertaining to the disclosure in the Annual Report.

 

Effective and appropriate steps were not taken to prevent irregular expenditure and fruitless and wasteful expenditure. The AGSA were unable to obtain sufficient appropriate audit evidence that disciplinary steps were taken against officials who had incurred irregular expenditure and fruitless and wasteful expenditure.

 

Annual irregular expenditure increased from the previous year and stood at R3.813 million. The reported closing balance of irregular expenditure as at 31 March 2023 is R34.6 billion.

 

Annual fruitless and wasteful expenditure reduced from the previous year and stood at R179 million. This was broken down as follows:

-Interest and penalties: R94 214 437;

-Employee costs where suspensions exceeded 6 months: R36 608 645;

-Losses due to cyber security attacks: R14 847 017 (after recoveries – initial loss was R30 568 830);

-Loss due to embezzlement by employee subsequently dismissed: R21 270 492;

-IT system procured but never used: R11 867 255;

-Other: R269 154.

 

4.2.1.4.4 RSR

 

The entity indicated that, for the 2022/23 financial year, it incurred irregular expenditure totalling R692 219 (compared to that of the 2021/22 financial year of R181 641). Following the condonation of irregular expenditure of R861 784, the closing balance is R169 566. There is also an indication of irregular expenditure under assessment of R16 865 251 for the year under review, with the added footnote on page 90 of the report that this relates to the disputed audit finding for the office lease which has been escalated to the NT. Per note 23 of the final audited financial statements, the irregular expenditure for the year under review of R692 219 was as a result of services rendered without a purchase order. It should, however, be noted that the disclosed irregular expenditure for the 2022/23 financial year does not include any expenditure in relation to the RSR’s office lease as referred to. The matter in question regarding the office lease is presently at the NT and depending on the outcome, as determined by NT, this matter could only potentially affect the financial statements of the following year (2023/24).

 

The AGSA in the audit report indicated that effective and appropriate steps were not taken to prevent irregular expenditure as disclosed in note 23 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by non-compliance with supply chain related laws and regulations. Inadequate review and monitoring of compliance with procurement related laws and regulations by management resulted in non-compliance with legislation and consequently irregular expenditure was incurred. On page 141 of the Annual Report, the RSR indicates that the irregular expenditure relates to services rendered without a purchase order. The employment contract of the employee who caused the irregular expenditure was terminated and disciplinary steps could not be taken. It should be noted that there was no material non-compliance detected on consequence management pertaining to irregular expenditure in the 2022/23 financial year.

 

The entity indicated that, for the 2022/23 financial year, it had an opening and closing balance of R8 320 201 for fruitless and wasteful expenditure, which means they did not incur any such expenditure in the year under review.

 

On the delay for tabling the Annual Report of the RSR, it was noted that there was a dispute with the AGSA that had to be finalised. The mentioned dispute was resolved through the standard escalation process that applies to all AGSA auditees as articulated in the annual engagement letter that is signed between the AGSA and in this instance the accounting authority. This process stipulates that, should a contested matter remain unresolved at engagement level, it can be escalated to the relevant head of portfolio responsible for the audit and in the case where it still remains unresolved, it can be escalated to the relevant head of audit who will be the final decision-maker in terms of this process.

 

4.3 General Committee Observations following the engagement with the AGSA

 

The Committee Observations captured herein are specifically for the engagements with the AGSA linked to the late tabled 2022/23 Annual Reports for RTIA, SAMSA and PRASA. All previously indicated observations mentioned in the 20 November 2023 adopted BRRR remain in force.

 

The Department and its entities received the following findings:

• Unqualified with findings – SAMSA (same as last year but improved to no material findings), RSR (regression from previous year);
• Qualified – RTIA (same as previous two years), PRASA (first time in five years since PRASA started receiving disclaimer opinions from the 2018-19 onwards).

 

The Committee was pleased to note that the PRASA had improved on its audit findings, although a lot of work is still to be done by the entity and the Department in order for the entity to continue improving.

 

The Committee expressed concern over the failure to submit the RSR Annual Report in time for the 2023 BRRR. Considering the Annual Report as tabled on 6 March 2024, the Committee did note that for the year under review it was able to meet all of its performance targets.

 

The entities that form the focus of this supplementary report were unable to meet all of their prerequisite performance targets and the Committee urged the relevant Boards and CEOs to improve on their performance of targets. The Committee remains of the view that there remained insufficient linkages between the meeting of targets and an actual or tangible improvement in service delivery standards to all transport stakeholders. It was also important to note that the AGSA still did not audit the same number of outcomes per auditee, as in the years preceding the 2019/20 financial year. For this reason, the Committee continues to urge that the Department and its entities move towards the development of key performance targets that would have tangible and measurable results that show actual and/or improved service delivery to all transport stakeholders. Along with setting these targets, the Department and entities must ensure that they are able to track the performance of these targets with quality verified evidence. These were also aspects raised by the AGSA in its presentation to the Committee.

 

For the seventh consecutive year, the Committee notes a failure by the Department to ensure that all of its entities table their Annual Reports on time. This impacted on the Committee’s ability to engage and perform its oversight function fully over those entities that had failed to table within the BRRR process. The Committee was, however, able to consider the late tabled Annual Reports of RTIA, SAMSA and PRASA in time to finalise and adopt this supplementary report. Although the Annual Report of the RSR could not be engaged on, the Committee noted the reasons provided by the AGSA and the Minister on the delays in the finalisation or late tabling.

 

Once more, the top areas of material non-compliance remain the failure to prevent unauthorised, irregular and fruitless and wasteful expenditure, lack of consequence management, non-compliance with legislation and regulations when it comes to procurement and contract management, as well as material misstatements to financial statements submitted for audit. For the first time in several audited year, the concerns over stability in leadership within the entities was not a root cause for audit findings, however, the continued vacancy of a permanent appointed CEO for the SAMSA as well as RSR remains a concern.  Although the improved board and top management appointments were a welcomed improvement, there are still a number of entities that do have board vacancies and senior management vacancies. The Committee will continue to require regular reports from the Department on the progress in filling vacancies in the portfolio. The key root causes identified by the AGSA were that management had not implemented adequate review and monitoring controls over the preparation of financial statements, management had not implemented adequate controls to prevent non-compliance with procurement legislation and management had not been effective in developing and monitoring the implementation of action plans to address audit findings.

 

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 proposed by the AGSA and those that the Committee has made since the start of the current term.

 

The Department must 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 areas of compliance with key applicable legislation and financial reporting. There is also a need to implement consequence management, especially around SCM and greater implementation of disciplined financial reporting structures based on solid accounting and financial management knowledge. The Committee noted that entities indicated that sensitisation of staff in management level, human resources departments and SCM departments were undertaken to resolve the concerns highlighted by the AGSA for compliance as well as continued and adequate consequence management implementation to prevent repeat audit findings of this nature. However, the Committee was of the view that mere “sensitisation” of staff is not sufficient and that entities must ensure they have adequately qualified and capacitated staff appointed in these departments and that regular training is imperative to ensure improved performance with compliance requirements.

 

The level of oversight by the Department over the entities reporting to it remains a concern for the Committee and the Public Entity Oversight branch within the Department must improve its work towards achieving a greater level of oversight over its entities and ensure measures are in place to verify information received from entities that are linked to targets of the Department. Further hereto, entities are urged to improve internal audits, improve their relationship with the office of the AGSA as well as to make use of interim audits throughout the year to ensure that entities can correct issues before the end of year audit process starts. This would also assist in ensuring that entities table their financial statements to the AGSA as well as their Annual Reports to Parliament within the respective legislated timeframes.

 

The Committee noted the progress reported by the AGSA on the resolution and active progress towards the resolution of all past and current MIs identified at PRASA since 2018/19 reporting period to date. The Committee also noted that the AGSA indicated that for the 2021/22 reporting year, ACSA, RAF, SANRAL and PRASA were selected for MI implementation in the transport portfolio and for the 2022/23 reporting year, the Department, SAMSA and RTIA were phased in for MI implementation. The Committee welcomes the report from the AGSA indicating that after their assessments, only PRASA was found to have MIs and in the latest reporting year (2022/23) the entity had already started to implement steps to deal with these matters before the AGSA issued notices linked thereto (as indicated above).

 

The AGSA recommended that adequate in-year monitoring on the MIs is needed and there must be consideration of whether the accounting authority has taken the appropriate action. Although the Committee welcomes the efforts by the AGSA to direct the Department to resolve these MIs within the entities’ reported annual financial statements, it has not seen the impact of the efforts from the last four year’s interventions on PRASA to reduce instances of SCM non-compliance, as is evident from the previous year’s audit results.

 

The irregular, unauthorised, fruitless and wasteful expenditure incurred by entities remain a concern to the Committee. It is difficult to remedy SCM inefficiencies when a thorough investigation has not been completed to assist in identifying the weaknesses and inefficiencies in the system or without sufficient consequence management to deal with non-compliance with SCM policies. The track record of auditees in dealing with irregular expenditure and ensuring that there is accountability or that investigations are finalised timeously remains poor. Irregular expenditure still occurs, and it can be attributed overall to continued weaknesses in the SCM directorates in the application of SCM policy and compliance with NT Regulations in this regard. Along with the need to appoint suitably qualified and experienced staff in SCM and continued training of these employees, it was also noted that where entities make use of emergency procurement, the entities and the Department must ensure that they have the required internal procurement policies in place to deal with emergency procurement or deviations as allowed in the PFMA.

 

More frustrating is that the Committee and its predecessors recommended the need for the Department and its entities to ensure further and continued training of SCM staff in order to reduce adverse findings linked to non-compliance with procurement policy and/or procedures. The Committee remains resolute that there is a need for the entire transport portfolio to strengthen its SCM staff through training and equipping them sufficiently, as well as implementing SCM Policy reviews to strengthen the internal SCM compliance further. The entities must comply with all of their SCM policy requirements and tender requirements, since the failure to do this resulted in findings against entities, with several entities this year having been found to have used uncompetitive and unfair procurement processes, such as RTIA, SAMSA and PRASA. There is also a need to ensure that uncertainty in interpretation of terms linked to SCM, Broad-Based Black Economic Empowerment (B-BBEE) compliance and audit standards used are resolved between the AGSA and the entities (such as the RSR since the delay in tabling its Annual Report is linked to a dispute with the AGSA) to prevent future audit outcome delays or adverse findings due to differences in interpretation.

 

The Committee continues to impress upon the Department and its entities that all investigations must be finalised within a reasonable timeframe, and that all contraventions of legislation and regulations must be acted upon through disciplinary action. In instances where employees may have resigned, the Committee persists in its view 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. The Committee noted the progress in SIU declaration to investigate allegations at PRASA and will continue to monitor this.

 

The Preferential Procurement Regulations make provision for the promotion of local production and content. These regulations are aimed at supporting socio-economic transformation. The Committee, during engagements, continues to impress the need upon the Department and its entities to achieve transformation targets within the establishments themselves, as well as in their respective industries. The continued drive towards ensuring that local communities residing near project sites of entities benefit from these projects or services delivered by the entities will be monitored. The Committee also continues to highlight the need for the Department, as well as its entities, to adhere to the Preferential Procurement Regulations throughout their engagements, as well as working towards the achievement of increased local content and radical economic transformation in their respective fields of operation. There is also a dire need for the Department and its entities to ensure that the processing and payment of invoices are done within the set timeframe of 30 days as the delays in processing these payments often will result in the economic failure of small, medium and micro enterprises.

 

4.4 Committee Observations with specific reference to entities

 

In addition to the above general observations, the following extracts show concerns noted from the Annual Reports and observations that were made specifically for the RTIA, SAMSA and PRASA as the other entities were dealt with in the 20 November 2023 adopted BRRR and the RSR Annual Report information remains outstanding:

 

4.4.1 RTIA

 

The Committee noted that the entity had maintained their audit outcome to that of a qualified audit opinion. It further noted that the entity regressed in its performance and only achieved 50% of its annual targets for the year under review compared to the previous year’s performance of 57%.

 

The entity, over a number of years, had audit findings linked to its operations under the Administrative Adjudication of Road Traffic Offences (AARTO) Act. The 2022/23 financial year audit was no exception as the entity was unable to make or implement long term plans regarding its operations until the dispute linked to the Act was resolved. The Committee noted that clarity linked to the national roll-out of the AARTO Act and system was provided following the Constitutional Court judgment delivered on 12 July 2023, after the year under review ended. The Constitutional Court ruled the AARTO Act to be constitutional, to the extent that the implementation of the Act does not constitute an encroachment of the legislative development autonomy of the Municipalities. The Constitutional Court also confirmed that the electronic service, which was introduced through the AARTO Amendment Act, was constitutional because the provision was not enacted as a substitute to the registered mail and personal service, but instead it was brought in as an additional method of service. The Committee looks forward to seeing whether the entity will be able to overcome the AARTO system linked audit findings in its next reporting cycle.

 

The entity was also faced with on-going consequence management processes which initially commenced during October 2021 against the erstwhile CEO and the CFO. The processes recommended dismissal of these employees which were challenged as part of Private Arbitration as well as the Commission for Conciliation, Mediation and Arbitration (CCMA) respectively. The Board indicated that they aim to have these matters finalised by the end of the 2023/24 financial year. The stability of the entity as well as the prevention of delays in submitting financial reports within legislated timeframes are dependent on secured senior management appointments, especially for the position of the CEO and CFO. The Committee noted the appointment of a new Registrar (CEO) at the entity effective 1 March 2023 as well as an indication in the Annual Report that there was an appointment made to fill the Senior Manager Supply Chain Management. The Committee also noted that the Board approved the organisational structure, and RTIA was awaiting concurrence from the Shareholder. The Agency has allocated funds to fill crucial positions in Finance, Human Resources, Adjudications, and Back Office. It reported that these positions were filled through a combination of advertised posts and lateral transfers, ensuring that it maximises staff mobility and utilise personnel with requisite qualifications.

 

The Committee supports the view of the Board that there needs to be a concerted post-audit review meeting between the AGSA and Management, in order to have a clear understanding and meeting of minds in respect to the audit requirements, particularly as it relates to identification and processing of AARTO Assets and Liabilities as well as to ensure the effectiveness of the audit steering committee. The Committee also agrees that the Registrar supported by the rest of the Management team must effectively monitor the audit action plan to prevent repeat audit findings and quality assurance processes need to be further enhanced to ensure accurate management representation regarding the financial statements and compliance matters as is the case with regard to the performance information.

 

The year under review witnessed a decline in the collection of outstanding penalties, thereby exerting pressure on the operations of the Agency. RTIA reported that the surplus for the period continues to remain favourable due to its diligent and judicious spending practices. The Agency’s cash flow and going concern continue to exhibit favourable trends, positioning the Agency in a highly advantageous state to propel its mandate forward. The Agency has implemented cost-saving measures by reducing expenditure for certain APP targets aligned with strategic goals. These actions have been taken during the year under review in anticipation of the Constitutional Court judgment on the appeal.

 

The Committee noted that the entity reported material impairments (trade debtors) of R7 407 182 that were incurred as a result of revenues not recovered from statutory receivables. It also noted that the entity reported irregular expenditure of R5.8 million incurred as a result of proper procurement processes not having been followed.

 

Keeping in mind that one of the aims of the AARTO Act and the entity is to reduce road traffic infringements through improving driver behaviour and compliance to traffic laws, yet the RTIA relies heavily on the funds collected from fines paid based on infringement notices as its main source of income, the Committee urged the entity and Department to work on finding suitable alternative sources of income to ensure the liquidity and eventual self-sustainable nature of the entity.

 

 

4.4.2 SAMSA

 

The Committee noted that the entity had maintained their audit outcome to that of unqualified audit opinion with no material findings. It further noted that the entity only achieving 61% of its annual targets for the year under review.

 

In South Africa there were zero ship losses recorded for the third consecutive year with the maritime incidents rates also declining significantly due to continuous work to ensure that all stakeholders observe applicable maritime safety, security and pollution legislation and regulations. During the financial period under review SAMSA responded to 164 alerts and 138 lives were saved through the Maritime Rescue Co-ordination Centre, a part of the SAMSA Centre for Sea Watch and Response, which monitors the coast from a safety and security perspective and environmental issues as well as monitoring the implementation of international standards for Aids to navigation. In its endeavour to ensure that our South African waters remain safe SAMSA conducted 10,530 statutory surveys, which are surveys meant to ascertain the seaworthiness of ships that fly the South African flag. All ships are required to comply with regulations that govern the operation of the vessel including safe manning, operating, maintenance, loading, marine pollution and security. In line with its international obligations SAMSA conducted 159 Port State inspections of eligible foreign flagged vessels visiting South Africa in accordance with the Indian Ocean Memorandum of Understanding and the Abuja Memorandum of Understanding.

 

SAMSA, on behalf of the country has a responsibility to ensure that the training and certification of seafarers is in line with the International Convention of Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended (STCW Convention). As of the end of the financial year South Africa maintained its STCW White List status which provide a platform with which a country may negotiate with other countries to permit (on signing of a Memorandum of Understanding (MOU)) seafarers from that country to work on ships flying the flag of that Party. South African certificates are recognised, through these MOU’s by at least 25 Parties to the STCW Convention increasing the employability of the country’s seafarers across the globe.

 

SAMSA generated a net surplus of R38.3m. The main reason for the surplus this financial year is the continued cost containment measures implemented by the entity. SAMSA levies revenue remained under pressure, with a slight decrease in volumes compared to the previous year. The 6.16% tariff increase implemented in January 2023 assisted in improving the revenue for the year. The financial position of the entity has continued to improve, and renewed focus can now be given to operational effectiveness. The work to optimise the entity’s current revenue streams and realise new revenue generating opportunities will continue to ensure the financial sustainability of the entity.

 

At the close of the financial year under review, the Board of SAMSA consisted of four (4) non-executive directors with diverse skills and expertise. Accordingly, two vacancies existed, the Board was barely constituted but was able to discharge its mandate as per the SAMSA Act and

the PFMA. All SAMSA Board members continued to enhance their understanding of the industry and their responsibilities as Board members by enrolling on appropriate corporate governance training programmes. On the 28th of September 2023, SAMSA’s new Board was appointed by the Minister of Transport.

 

The entity does not have a permanently appointed CEO for the last seventy two (72) months and the Board had to take extra actions with its sub-committees to ensure the achievements of the entity`s strategic outcomes and delivery of services to all our stakeholders. The Committee indicated that it is imperative that the Minister, along with the Board of SAMSA ensure that the post of the CEO is filled urgently.

 

The SAMSA cash position has improved to R97.9 million compared to the 2021/22 financial year R58.6 million. This is due to the improved financial performance for the year. The Maritime Fund cash position has increased to R36.8 million compared to the 2021/22 financial year R29.7 million, while the MLRF bank account increased to R89.1 million compared to the 2021/22 financial year R71.9 million. Debtor turnover days improved to 37 days compared to the 2021/22 financial year 47 days, due to an improvement in debt collection processes, especially with regard to cash collected from SAMSA levies by Transnet National Ports Authority at the end of March 2023. The main reason for the surplus this financial year is the continued cost containment measures that were implemented by the entity. SAMSA revenue from levies remained under pressure, with a slight decrease in volumes compared to the previous year. The 6.16% tariff increase implemented in January 2023 assisted improving revenue for the year. Additional Direct User Charges revenue streams were introduced during the financial year, which also contributed to the improved performance.

 

Interruption of ICT services due to cybersecurity related incidents can be attributed to the lack of approved security procedures, lack of awareness about information security, computers hard drives not encrypted, lack of information security programme/framework, the changing nature of cyber threats and inadequate patch and vulnerability management. The Committee was of the view that it is imperative that SAMSA address their ICT security systems in order to better prevent future cyber-attacks, not only was this the cited reason for the delay in submitting the Annual Report within the legislated timeframe to Parliament, but it has not been the first time the entity suffered a disruption in operations due to cyber-attacks.

 

 

4.4.3 PRASA

 

The Committee noted the improvement in the entity’s audit opinion from a disclaimer in the previous years to that of a qualified audit opinion. The entity achieved only 59% of its performance targets. Although this was an improvement from the 19% performance in the previous reporting cycle, the Committee was of the view that the entity must work harder to achieve all of the targets which it sets itself each year.

 

The Committee noted that at the end of the 2022/23 financial year, PRASA had recovered 17 rail service lines or sections of service lines; 12 of these are operating with the new trains or electrical modular units. It was also noted that PRASA reported to have commenced an intervention to close off the commuter rail system by walling and fencing the perimeter of the rail reserve and critical infrastructure such as sub-stations, signal relay rooms and telecommunications high sites. Restoration of the vandalised signalling system is another major recovery programme that has commenced. It will increase the number of trains provided, with six lines being targeted for completion in 2023/24. These should enable PRASA to render frequent, safe and secure quality train services. Although several lines were re-opened in the Western Cape, there are still some illegal settlements on two lines in the Central Line corridor that must be relocated. Relocating illegal settlements is a complex process that involves costly legal intervention and intergovernmental coordination. At the end of the 2022/23 financial year,

two lines on the Central Line were operational, namely Langa to Cape Town via Pinelands, Langa to Bellville via Sarepta and the services beyond Langa extended to Nyanga. Reinstating services in KwaZulu-Natal following the floods of April 2022 was achieved on three lines. The roll-out of the Integrated Security Plan has been very successful, albeit at significant cost. The number of security incidents is declining, and the number of safety occurrences remains low, aided by the low level of services provided. Intensive work to enhance a safety culture in the organisation remains a focus. The Rolling Stock Fleet Renewal Programme remains one of the success stories for rejuvenation of commuter rail. At the end of the 2022/23 financial year, one-hundred-and-forty-six (146) new train sets had been delivered by this programme.

 

Following its successful application to the Companies and Intellectual Property Commission, the business rescue process for Autopax got under way. An evaluation conducted by the business rescue practitioners indicated that the company’s business plan is feasible and sustainable; however, this largely depends on shareholder funding and support. In order to support Autopax, the board approved a proposal for recapitalisation of buses, which is awaiting approval by the shareholder. The improvement of the financial performance against the 2021/22 financial year for Autopax was R161.2 million. The financial position, however, remains critical due to long outstanding debt, losses continuing and the age of the bus fleet. Most of the buses were not operational as a result of major mechanical breakdowns and repairs

delayed over a long period due to a lack of funds. The Autopax board approved a revised business model that will not only turn the company around but also ensure that it becomes financially self-sustainable over the medium to long term. The turnaround of the company focuses on revival and stabilisation of Autopax in the short term, ensuring financial sustainability, organic growth and diversification in the medium to long term. Autopax continues to operate under business rescue since 18 November 2021.

 

Mainline Passenger Services depends on repairs to Transnet’s infrastructure and reliable locomotives. Since December 2021, services have remained of poor quality, mainly due to the Transnet network. The cost of leasing locomotives was costly, and combined with low occupancy levels during the year, this resulted in services being limited to high peak periods that coincided with major holiday seasons.

 

Although recovery of some of these services are noted, the Committee was of the view that PRASA should ramp up the work towards restoring all metro passenger rail services, including the long-distance mainline passenger service to full operations as well as ensure that the required security measures are in place to prevent further vandalism and theft of PRASA infrastructure or property as well as to ensure the safety of rail commuters. Without the urgent recovery and successful operation of full-service lines, the entity will find it hard to improve its financial position which remains precarious.

From an operational expenses perspective, PRASA’s financial position remains precarious. While the agency is asset rich, it could be doing better in terms of financial resources. Operating revenues declined significantly (by 72%) between 2013/14 and 2019/20 (pre-COVID-19), and after the lockdown between April 2020 and June 2020 by 88%, due to destruction of assets. Operating revenue from fares collected by Metrorail is increasing as lines are re-opened for operations. As limited service is provided, the number of passengers remains low and therefore the fare revenue is also low. A significant increase is noticeable since October 2022, following the re-introduction of key lines in Gauteng and KwaZulu-Natal. PRASA is dependent on interests on unspent capital and revenue from Corporate Real Estate Solutions and Autopax for most of its operational revenue. With capital spending increasing as a result of lines being re-opened, interest will be affected, which will put PRASA’s operational finances on a knife-edge. A process has commenced to optimise the operating model and operations, which will improve this financial status.

 

The Committee noted that the appointment of the Group CEO was finalised which should bring stability to the executive team after a period of unacceptable instability. The Committee welcomes the appointment of executives to key positions including those of Chief Human Capital Officer, Group Company Secretary and Chief Audit Executive and looks forward to the conclusion of this process, which will lead to management efficacy.

 

While under-spending of the capital allocation was reported in previous years, the 2022/23 financial year saw an expenditure of R13.5 billion, more than the budgeted R12.5 billion. Projections are that capex funds will be fully utilised, as PRASA’s capacity has been improved.

 

The Depot Modernisation Programme has been met with severe delays mainly due to the non-award of tenders and cancellations. The challenges for this programme are tracked closely by the project team. The stoppage of work at the Springfield, Durban and Salt River depots, which was directed by a court order, has hampered progress. It is envisaged that work will resume in Quarter 2 and Quarter 3 of the 2023/24 financial year. The National Depot Fencing Programme that covers fencing and walling is aimed at improving security at Rolling Stock depots and staging yards across all regions. A feasibility study recommended the installation of an intelligent fence in PRASA staging yards and maintenance depots, incorporating closed circuit television systems with movement and vibration sensors on the fence. Six depots across the PRASA regions have improved security at these depots. Progress is monitored on a weekly basis and an acceleration plan has been put in place to ensure the projects are completed on schedule.

 

The Committee noted the report from the AGSA on the progress with the entity and the identified MIs as discussed in detail above under 4.2.1.1. Of the two (2) new MIs identified, the AGSA indicated that the entity was in the process of resolving these and that adequate steps are being taken. The AGSA continues engaging with the accounting authority and executive authority to ensure that appropriate action is being taken. Progress made by the SIU in its investigation into the “ghost” employee allegations and possible fraudulent actions linked thereto at the entity per the SIU directive will continue to be monitored by the Committee.

 

4.4.4 RSR

 

The entity tabled its Annual Report shortly before the adoption of this report, but this did not allow time for the Committee to engage on the Annual Report or receive briefings thereon from the AGSA or the RSR prior to the adoption of this supplementary report. The entity regressed in audit finding from an unqualified audit opinion without findings to that of an unqualified audit opinion with material findings. The entity reported that it met 100% of its performance targets.

 

Based on the information contained in the tabled Annual Report, the Committee noted that the entity has vacancies in top management since the entity is without permanent appointments in the posts of CEO, CFO and COO. In a footnote on page 21 of the Annual Report it is indicated that the CEO resigned on 31 March 2023.

 

The RSR reports to have actively contributed to key priorities of the government’s 6th Administration, specifically in building an ethical and capable developmental state. This has been achieved by implementing policies such as the Ethics Management Strategy and Fraud and Corruption Prevention Framework to fortify an ethical foundation within the organisation. The appointment of an Ethics Officer further solidifies the entities’ commitment to ethical governance. During the 2022/23 financial year, the RSR took strides to enhance its relations with the South African Local Government Association (SALGA). This collaboration aimed to establish SALGA as a key point of contact for municipalities regarding Rail Reserve Regulation enforcement. By working together, the RSR and SALGA aimed to ensure the effective enforcement of regulations governing railway reserves.

 

The RSR spent a total amount of R62 975 135 of which 94.32% equates to R59 401 017 was

on B-BBEE compliant suppliers, 36% which equates to R21 639 526 was spent on women-owned companies, while 17.78% which equates to R10 560 496 was spent on youth-owned companies. Out of the total 586 companies utilised, 461 (78.67 %) were Exempted Micro Enterprises, 50 (8.53%) were Qualifying Small Enterprises and the remaining 75 (12.80%) were large companies.

 

The entity indicated that, for the 2022/23 financial year, it incurred irregular expenditure totalling R692 219 (compared to that of the 2021/22 financial year of R181 641). Following the condonation of irregular expenditure of R861 784, the closing balance is R169 566. There is also an indication of irregular expenditure under assessment of R16 865 251 for the year under review, with the added footnote on page 90 of the report that this relates to the disputed audit finding for the office lease which has been escalated to the NT. Per note 23 of the final audited financial statements, the irregular expenditure for the year under review of R692 219 was as a result of services rendered without a purchase order. It should, however, be noted that the disclosed irregular expenditure for the 2022/23 financial year does not include any expenditure in relation to the RSR’s office lease as referred to. The matter in question regarding the office lease is presently at the NT and depending on the outcome, as determined by NT, this matter could only potentially affect the financial statements of the following year (2023-24).

 

The AGSA in the audit report indicated that effective and appropriate steps were not taken to prevent irregular expenditure as disclosed in note 23 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by non-compliance with supply chain related laws and regulations. Inadequate review and monitoring of compliance with procurement related laws and regulations by management resulted in non-compliance with legislation and consequently irregular expenditure was incurred. On page 141 of the Annual Report, the RSR indicates that the Irregular expenditure relates to services rendered without a purchase order. The employment contract of the employee who caused the irregular expenditure was terminated and disciplinary steps could not be taken. It should be noted that there was no material non-compliance detected on consequence management pertaining to irregular expenditure in 2022/23.

 

The entity indicated that, for the 2022/23 financial year, it had an opening and closing balance of R8 320 201 for fruitless and wasteful expenditure, which means they did not incur any such expenditure in the year under review.

 

The entity also indicated that all compliant invoices were paid within 30 days and as per the service level agreements.

 

 

 

5.         RECOMMENDATIONS

 

5.1       Recommendations made by the AGSA for the Budgetary Review and Recommendation Report for the 2022/23 financial year

 

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

 

The general recommendations made by the AGSA as captured in the 20 November 2023 adopted BRRR remains and are therefore not repeated herein. This supplementary report will focus on those recommendations made specifically for the entities RTIA, SAMSA and PRASA. Due to the late tabling of the RSR Annual Report, the AGSA was not able to present recommendations on this entity.

 

5.1.1 RTIA

The AGSA recommends that the Committee monitor and do regular follow-ups with the executive authority and accounting officer/authority to ensure that:

1. The Department and its entities strengthen the internal controls to secure the supporting documents and reconcile the reported information to the evidence available;
2. The entity submit quarterly reports on the implementation of the audit action plan;
3. The entity improve controls around management of the AARTO assets and liabilities especially considering the imminent national rollout of the AARTO;
4. The entity improve record keeping relating to consequence management against officials who are linked to the entity incurring irregular expenditure.

 

5.1.2 SAMSA

The AGSA recommends that the Committee monitor and do regular follow-ups with the executive authority and accounting officer/authority to ensure that:

1. The Department and its entities strengthen the internal controls to secure the supporting documents and reconcile the reported information to the evidence available;
2. The entity ensure that controls are implemented that will ensure compliance monitoring processes are effective as this will prevent the entity from having a material irregular expenditure;
3. The entity ensure that enhancements to the current action plans are performed timeously and the senior management, internal audit function, together with the audit committee, must review the audit action plans regularly to ensure that root causes are properly identified, and the plan is adequate to address reported findings;
4. The entity management ensure that there are effective controls in place for preparation of regular, accurate and complete financial and performance reports that are supported and evidenced by reliable information which agrees with the financial and performance information submitted and is aligned with the standards, laws and regulations and the entity’s policies;
5. The entity management is encouraged to ensure that the process of the suspended executives is prioritised as the cases have been open for a period which now increases the number of employees in acting positions. Finalisation of such matters and appointing a permanent CEO will ensure proper stability and continuity to the operations of the entity;
6. The entity ensure that an effective and efficient action plan is developed and that internal audit is included in reviewing the action plan, to ensure that it addresses the root cause of the finding/significant deficiency;
7. The entity address the ICT inefficiencies which led to a cyber-attack which happened for the second time within the 3 years. Management should ensure that the action plans address the control environment to sustain an unqualified audit opinion in the 2023/24 financial year without having to make a number of adjustments to the submitted reports and ensuring compliance with the laws and regulations.

 

5.1.3 PRASA

The AGSA recommends that the Committee monitor and do regular follow-ups with the executive authority and accounting officer/authority to ensure that:

1. The Department and its entities strengthen the internal controls to secure the supporting documents and reconcile the reported information to the evidence available;
2. The entity must expedite the overhaul of the IT systems and environment currently underway to address critical deficiencies in the ICT environment and to enhance cyber security to an acceptable level;
3. The entity must address the following concerns linked to asset management:
   1. Urgently update the SAP asset register with all journals passed in 2022-23;
   2. All assets to be supported by appropriate supporting documentation;
   3. Physical counts and conditional assessment to be performed on a regular basis;
   4. Implementation of a standardised project monitoring to report on the status/progress of infrastructure under construction;
4. The entity must address the following concerns linked to vacancies:
   1. Disciplinary proceedings in instances of protracted suspensions of officials must be finalised without further delay;
   2. Remaining vacant positions in senior management must urgently be filled;
   3. The tasks, roles and resources required in the various divisions to ensure a properly functioning internal control environment must be clearly defined and it must be ensured that PRASA’s establishment is reflective of the capacity required;
   4. Once above has been performed, positions (where vacant) must be filled with suitably skilled individuals;
   5. Where consultants are used, skills must be transferred;
5. The entity must address the following on contract and expenditure management:
   1. Review policies and procedures to ensure that it contains appropriate standardised processes for daily and monthly accounting disciplines which must be adhered to;
   2. Assigning of specific responsibilities to specific officials and appropriate segregation of duties;
   3. Wherever possible, automated controls must be used for the verification of the accuracy and completeness of transactions;
   4. Continuous monitoring to enable proactive identification of errors/irregularities and facilitation of corrective action;
6. The entity must address the following on demand and procurement planning:
   1. Bid specifications should be comprehensive, detailed and unambiguous;
   2. Bid evaluation committees to include individuals with the requisite technical knowledge;
   3. Expedite appointment of the Head of SCM;
   4. The SCM unit to be staffed with enough appropriately skilled individuals;
7. The entity must address the following on consequence management:
   1. Timely investigation into all instances of irregular, fruitless and wasteful expenditure;
   2. All investigations to be tracked and monitored by relevant levels;
   3. Given the backlog, prioritisation of recent transgressions;
   4. Institute an investigation into the cancellation of security contracts during late 2019 to mid 2020;
8. Contract management Monitor implementation thereof.

 

5.2       The Committee recommendations for the 2022/23 financial year Supplementary Report

 

All Committee recommendations as listed in the in the 20 November 2023 adopted BRRR remains and are therefore not repeated herein. The following Committee recommendations focus purely on the specific entities relevant to this supplementary report and are in addition to those listed in the adopted BRRR.

 

5.2.1 Entity Specific Recommendations

 

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

 

5.2.1.1 RTIA

 

5.2.1.1.1 The entity, through the Minister, must ensure that it adopts its next Annual Report in time in order for the Minister to table it timeously;

5.2.1.1.2 The entity, through the Minister, must ensure that those recommendations made in the 2023 BRRR applicable to all entities are complied with and reported on as required by the deadlines set in the 2023 BRRR;

5.2.1.1.3 The entity, through the Minister, must ensure that the recommendations made by the AGSA for the entity as listed above under 5.1 are complied with and report on these to the Committee on a quarterly basis.

 

5.2.1.2 SAMSA

 

5.2.1.2.1 The entity, through the Minister, must ensure that it adopts its next Annual Report in time in order for the Minister to table it timeously;

5.2.1.2.2 The entity, through the Minister, must ensure that those recommendations made in the 2023 BRRR applicable to all entities are complied with and reported on as required by the deadlines set in the 2023 BRRR;

5.2.1.2.3 The entity, through the Minister, must ensure that the recommendations made by the AGSA for the entity as listed above under 5.1 are complied with and report on these to the Committee on a quarterly basis.

 

5.2.1.3 PRASA

 

5.2.1.3.1 The entity, through the Minister, must ensure that it adopts its next Annual Report in time in order for the Minister to table it timeously;

5.2.1.3.2 The entity, through the Minister, must ensure that those recommendations made in the 2023 BRRR applicable to all entities are complied with and reported on as required by the deadlines set in the 2023 BRRR;

5.2.1.3.3 The entity, through the Minister, must ensure that the recommendations made by the AGSA for the entity as listed above under 5.1 are complied with and report on these to the Committee on a quarterly basis.

 

5.2.1.4 RSR

 

5.2.1.4.1 The entity, through the Minister, must provide adequate reasons to the Committee, by 15 April 2024 (after having failed to meet the 15 December 2023 deadline set per the 2023 BRRR), as to why the Annual Report of the entity was not tabled within the extended deadline and only tabled on 6 March 2024. In the next reporting period, the entity must ensure that it adopts its Annual Report in order for the Minister to table it timeously;

5.2.1.4.2 The entity, through the Minister, must ensure that those recommendations made in the 2023 BRRR applicable to all entities are complied with and reported on as required by the deadlines set in the 2023 BRRR.

 

6. CONCLUSION

 

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

                                                                                                                             

Report to be considered.

 

Attached:

Annexure A: List of abbreviations/acronyms

Annexure B: References

 

 

ANNEXURE A: LIST OF ABBREVIATIONS/ACRONYMS

Abbreviation/Acronym	Meaning
AARTO	Administrative Adjudication of Road Traffic Offences
ACSA	Airports Company South Africa
AGSA	Auditor-General of South Africa
APP	Annual Performance Plan
B-BBEE	Broad-Based Black Economic Empowerment
BRRR	Budget Review and Recommendations Report
CEO	Chief Executive Officer
CFO	Chief Financial Officer
CoE	Compensation of Employees
COO	Chief Operational Officer
COVID-19	The Coronavirus Disease 2019
DG	Director-General
ERT	Economic Regulation of Transport
ICT	Information and Communications Technology
IFWE	Irregular, fruitless and wasteful expenditure
IT	Information Technology
MI	Material Irregularity
MOU	Memorandum of Understanding
MTSF	Medium-Term Strategic Framework (2014-19)
NA	National Assembly
NCOP	National Council of Provinces
NDP	National Development Plan
NT	National Treasury
PFMA	Public Finance Management Act
PRASA	Passenger Rail Agency of South Africa
RAF	Road Accident Fund
RSR	Railway Safety Regulator
RTIA	Road Traffic Infringements Agency
SALGA	South African Local Government Association
SAMSA	South African Maritime Safety Authority
SANRAL	South African National Roads Agency Limited
SAP	System Analysis Program
SCM	Supply Chain Management
SIU	Special Investigations Unit
SONA	State of the Nation Address
STCW	International Convention of Standards of Training, Certification and Watchkeeping for Seafarers
TER	Transport Economic Regulator

 

 

 

ANNEXURE B: REFERENCES

 

Department of Transport (2023). Vote No. 40: Annual Report 2022/2023 Financial Year, Pretoria Department of Transport.

 

Department of Transport (2022a). Annual Performance Plan for the Financial Year 2022/23, Pretoria, Department of Transport.

 

Department of Transport (2022b). Vote No. 40: Annual Report 2021/22 Financial Year, Pretoria, Department of Transport.

 

Department of Transport (2021a). Annual Performance Plan for the Financial Year 2021/22, Pretoria, Department of Transport.

 

Department of Transport (2021b). Vote No. 40: Annual Report 2020/21 Financial Year, Pretoria, Department of Transport.

 

Department of Transport (2020). Vote No. 40: Annual Report 2019/20 Financial Year, Pretoria, Department of Transport.

 

Department of Transport (2019b). Vote No. 40: Annual Report 2018/19 Financial Year, Pretoria, Department of Transport.

 

National Treasury (2023). Estimates of National Expenditure 2023, Pretoria, National Treasury.

 

Ramaphosa, C. (2022). State of the Nation Address on 10 February, Cape Town, Parliament of South Africa.

 

 

---

[1] Department of Transport (2022a), p. 29.

[2] Ibid.

[3] Department of Transport (2022a), p. 66.

[4] Department of Transport (2022a), p. 67.

[5] Department of Transport (2022a), p. 29.

[6] Ramaphosa (2022).

[7] National Treasury (2023), pp. 880-881.

[8] Department of Transport (2022a), pp. 34-65.

[9] Department of Transport (2023) pp. 66–67.

[10] Parliament Legal Services Legal Opinion (Ref.no.: 69/2022): Impact on SCOPA re Non-Tabling of the Annual Report, Financial Statements and Audit Report of the Road Accident Fund.