Appropriation Bill: Department of Transport Briefing; with Minister

Meeting report

Briefing by the Department of Transport on the 2023 Appropriation Bill

Adv J Mlawua, Director-General (DG), and Mr Makoto Mtlala, Chief Financial Officer (CFO), DoT, led the presentation on the Department’s preliminary spending outcomes at the end of the 2022/23 financial year; including measures put in place to prevent possible over- or under-expenditure.

The presentation highlighted the following:

- All service delivery implications on the proposed allocation reduction for the Department, from the 2022/23 adjusted allocation of R95.1 billion to a proposed allocation of R79.6 billion in 2023/24; furthermore, it appraised the Committee on how the Department plans to use the proposed allocation of R79.6 bullion in a manner that is effective, efficient, and economical.

- How the Department plans to speedily facilitate the rehabilitation and maintenance of the National and Provincial road network through the proposed allocations on the Bill;

- Service delivery implications and impact of the proposed allocation reductions in key subprograms that are critical to the safety of their respective sectors over the MTEF (medium-term expenditure framework);

- An overview of the Department’s contribution to the South African Economic Reconstruction and Recovery Plan, Broad-Based Black Economic Empowerment and localisation of goods and services;

- Overview of any legal impediments to the Department achieving economic transformation proposals.

The Department’s preliminary spending outcomes as of the end of the 2022/23 financial year, including measures put in place to prevent possible over/under expenditure:

- The Department projected an underspending by the end of the 2022/23 financial year on the compensation of employees, goods and services, and some transfers.

- The set target for Compensation of Employees was to fill fifty (50) posts; the Department filled 84 posts.

- Some posts are filled through internal promotions, compounded by recorded resignations, retirements and transfers out of the Department thus contributing to the underspending on compensation of employees.
- Goods and services underspend due to delayed procurement on some projects which could not be finalised by the end of the financial year. Other projects were done in-house and have performed as targeted while some projects will be deferred to the coming financial year.

- The underspending on transfers and subsidies was mainly due to less than anticipated expenditure to the Road Traffic Infringements Agency (RTIA) for the Administrative Adjudication of Road Traffic Offences (AARTO) roll-out due to the court judgement as well as less intake on the taxi recapitalisation which is demand driven.

Measures put in place to prevent over/under-expenditure:

- Compensation of employees: the Department will fast-track filling vacant funded posts. The progress on filling vacant posts is reported to the Executive Management Committee of the Department and the Audit Committee.

- Goods and services: The procurement plan has target dates for bid specification, bid award, contract commencement, and contract expiry. The Department will ensure that target dates as set in the procurement plan are achieved by ensuring that monthly. The programme managers provide progress on the target dates as set in the procurement plan.

- Transfers and subsidies: The transfers are made as per the approved payment schedule and when all the conditions of the transfers are met. The Department will ensure the transfers are done as per the approved Division of Revenue Bill payment scheduler.

- Entities: The Department utilises Shareholder Compacts and Annual Performance Agreements, Corporate Plans and Strategic Plans to oversee and monitor the entities. Quarterly Financial and Performance Reports submitted to the Minister for feedback and review.

- PFMA checklist: The checklist has been put in place as one of the preventative measures. The Department prepares acknowledgement letters after receiving quarterly reports and feedback letters on the performance of the entities.

- Further, Transport Legislative Policies are in place to guide implementation. South African Inter-Governmental (I-GR) Framework Act (2005) to guide integrated planning and coordination between the three spheres of government.

Service Delivery Implications on the Proposed Allocation Reduction for the Department

The Department’s budget has been reduced by an average annual growth of 0.3 per cent over the medium term. This is due to:

- Once-off special allocation of R23.7 billion in 2022/23 as a partial solution to the Gauteng freeway improvement project not generating enough toll revenue to service the debt raised for its construction.

- However, there was an increase in the Department's baseline allocation of a total amount of R16.6 billion over the medium term, mainly in the Road Transport programme under the provincial roads maintenance grant, to provide for the maintenance and rehabilitation of the provincial road network to prolong its lifespan.

- Part of the allocation is specifically earmarked for road refurbishment, disaster relief and the construction of bridges in rural areas as well as to the South African National Roads Agency Ltd (SANRAL) for the non-toll portfolio network.

Rehabilitation and Maintenance of the National and Provincial Road Network through the Proposed Allocations on the Bill

- The road maintenance component of the provincial roads maintenance grant provides funds to maintain the provincial road network and prolong its life span.

- R52 billion is allocated to the grant over the medium term through the road transport programme.

- R10.9 billion is earmarked for refurbishment and rural bridges components of the grant provide for road refurbishment efforts and the construction of 96 rural bridges.

- Provinces are expected to use funds from the grant to rehabilitate 9 893 lane kilometres, reseal 13 122 lane kilometres; gravel 19 355 kilometres, and blacktop‐patch 6.5 million square kilometres.

- An amount of R60 million continues to be prioritised for the standardisation and expansion of the road central data repository over the medium term.

Reductions in Key Subprograms that are critical to the Safety of their Respective Sectors over the MTEF:

- The sub-programme has decreased by an average annual growth of 4.1 percent, due to a once-off special allocation of R23.7 billion in 2022/23, as a partial solution to the Gauteng freeway improvement project not generating enough toll revenue to service the debt raised for its construction.

- The sub-programme decreased by an average annual growth of 7.6 percent mainly because of a once-off court settlement in the 2021/22 financial year in the matter of Ndorum Joint venture to refurbish Mthatha Airport.

- The sub-programme decreased by an average annual growth of 5.4 percent the Maritime Infrastructure and Industry Development sub-programme.

- The rural scholar sub-programme decreased at an average annual growth of 0.1 percent, as the Department could not finalise the procurement process due to the National Treasury directive to suspend advertisements of tenders following the ConCourt ruling on the preferential procurement regulations in the 2021/22 financial year.

South African Economic Reconstruction and Recovery Plan

- Regarding Airports Company South Africa (ACSA), black businesses contributed 42% of commercial revenue (Annual Report 2022) and job opportunities supported were 17 130.

- More than 51% black owned EMEs (1032) and QSEs (221) were awarded the Road Asset Infrastructure Management contract.

- Regarding their fleet renewal strategy, R376b has been allocated to black empowerment over the 20 years.

Localisation of Goods and Services

- The Department implemented a Preferential Procurement Policy aligned with the new Preferential Procurement Regulations of 2022.

- Currently, the Department’s goals focus on promoting preference for black designated groups as defined by the B-BBEE Act, with special emphasis on Black women ownership, to align with government’s decision to promote women empowerment and gender equality.

- Regarding local production and content, the Department included the requirements for all current and previous projects within the designated sectors listed by DTIC and regulated through National Treasury practice notes.

[See the attached presentation for further details]

Discussion

The Chairperson thanked the Department for the presentation.

Mr O Mathafa (ANC) referred to the total budget allocation and increased the baseline by R16.6 billion for the medium term. Is the allocation sufficient to implement all the programmes, execute the mandate, and assist the funding and performance turnaround of PRASA and Transnet? Which programmes are mostly affected by the shortfalls?

Regarding the underspending of certain programmes, he requested the DoT to guide which programmes are affected and how they would be resolved. How is the fast track of vacancies affected? Is there a plan in place to ensure the fast track of critical vacancies and high-impact service delivery posts which requires prioritisation? If yes, are there any timeframes?

He noted the impact of accruals by the new budget and that this is often underreported and downplayed. How would allocations be affected in the Appropriations Bill?

He welcomed the identified programmes, particularly the maintenance of roads, as presented in slide 16. He asked for an update on the project.

Politically, there are funds allocated for national and provincial roads. Mr Mathafa referred to the example of Tshwane, where there is a lack of maintenance in townships, particularly the inner roads. He asked how the imbalance of maintenance could be mitigated.

His constituency in Centurion is a mixture of semi-rural and affluence. In the affluent areas, there is a road called John Voster Road. Since 2016, the road has been fixed approximately five times. Whereas in the nearby township of OlievenHoutBosch, there is no maintenance. The municipality does not care and is not interested in providing services.

While the conversation is at the national level, constituencies would raise these concerns. Mr Mathafa asked whether the Department would consider hiring pothole hunters instead of expecting residents to utilise an online app. The benefits of utilising the pothole hunters would be employment and regular onsite monitoring. Identification of potholes should follow the EPW approach.

He asked for an update on the assessment of creditors and the payments of creditors within 30 days, as required by law.

On the issue of empowerment of youth, women, and persons with disabilities, he asked what percentage of the budget is allocated and spent to ensure that these groups are actively participating in the DoT’s activities.

Mr Z Mlenzana (ANC) congratulated the DoT for the newly appointed team, and encouraged the effective implementation of the DoT’s mandate. He called for prioritising employment opportunities on the timelines and cash flow allocated for the road rehabilitation in the Eastern Cape, particularly the R66. He asked the DoT to provide an overview of the beneficiaries of the road rehabilitation project.

He referred to a recent oversight visit to PRASA and Transnet and the concerns about the lack of cordial relationships between the entities. He asked the Department to guide him on mitigation and redress measures. He suggested that there should be a merger of the entities.

Ms T Tobias (ANC) expressed her confidence in the capability of the Ministry and Department.

She noted concerns for a problematic road in Heilbron, Kroonstad and Matatiele, which often results in tyre bursts and punctures of vehicles on the road. On behalf of her constituents, she asked the DoT to urgently fix the road, as it is a very dangerous road to travel day and night-time.

She agreed that the road recovery plans involving private and small businesses would improve employment opportunities specifically for youth and contribute to the overall reconstruction plan.

Rural road management is not up to standard, and there is a need to pave rural roads. She requested an update on how many roads are paved in South Africa.

Mr X Qayiso (ANC) asked about the timeframe for the removal of trucks from the national and main roads, as there is substantial damage caused by trucks. It is a longstanding request from the public. He called for the fast-tracking of alternative transport means such as rail transport.

Ms N Ntlangwini (EFF) referred to the R64 billion transferred to PRASA. What are the immediate financial and operational challenges? How would the transferred funds be utilised to address the challenges?

She asked the Minister to advise on measures to prevent the runway in the Eastern Cape from being a private runway and crime hub.

The Chairperson said that the regulation of transport services is dependent on the actual receipt of the services by residents. Provincial governments and municipalities play a critical role in this regard. The custodian of transport is the Minister of Transport.

He asked for an update on the financial and practical measures to address the vandalism of infrastructure and losses caused by load shedding.

He asked the DG to elaborate on the IPMG and underspending in this context. He added that localisation is essential as far as the PRE is concerned. He asked for an overview of localisation initiatives implemented by the Department.

On the road rehabilitation grant, which roads benefitted, and which roads would benefit? He also asked what projects benefitted from the public roads network grant in the current year and MTSF.

He assured the DoT that sufficient time would be allocated for the Department’s responses. The Department would be allowed time to prepare responses for the next meeting.

The underspending created delays in procurement. What are the completely analysed reasons and measures for the delays?

DoT’s Responses

Adv Mlawua responded that the Department would utilise the budget allocated despite reductions. The PRASA financial issue and post-Covid-19 challenges are a crisis. The budget plan submitted by PRASA would be analysed.

Particularly for South Africa, ACSA is critical for the aviation landing system and international aviation space. A properly allocated budget is important to ensure effective services.

On the political question of inner roads, he said that the responsibility of national roads resides with the national government and SANRAL. When you come to provinces, it generally belongs to the purview of the provincial government.

Local roads are affected by the gaps in the budget. Maintenance must be also prioritised here.

The timeline from road to rail is included in the MTF and at least 10 percent of the cargo must be shifted from road to rail. This requires a functional rail sector. The rail network is missing in several spaces and requires maintenance, especially in critical routes.

The National Rail Policy was passed to facilitate an open rail network, revitalise the network, and engage with the stakeholders.

Transnet and PRASA’s debts were resolved at the end of March 2023. Treasury implemented concerted discussions and resolutions. PRASA is required to present a business plan and turnaround strategy.

Mr Mokonyama Mathabatha, DDG: Public Transport, DoT, responded that IPTM would roll out ten projects, and three would be suspended. As part of the national government intervention led by the Treasury, it is hoped that the expenditure would be improved. Stage one would be operational in the coming months.

On the issue of the performance of the grants, an investigation was launched through the Minister’s directive, and it is in its final stages. Once processed, the findings would be communicated.

The DoT developed a policy and plan for scholar transport. A monitoring structure is in place, headed by an official from DBE.

For non-performing operators, the responsibility lies with the contract management. The DoT intervenes when required.

The DoT appointed an expert team to resolve to underspend of municipalities. Measures include withholding funds until underspending is resolved by 30 June 2023. On the issue of beneficiaries of the pilot programme, the number totals ten.

On whether the funding is sufficient – it is generally not sufficient. Transformation requires regulated competition. However, the current funding does not allow provinces to enter the next stage.

Mr Chris Hlabisa, DDG: Road Transport, DoT, said the B5 form is a substantial project. He asked the Chairperson to guide him on the specific information required in the next seven days.

On the question of the PRMG, he emphasised that the road maintenance and upgrades are specifically for the provincial roads. It does not extend to provincial streets, as it would then enter irregular expenditure. He recommended engaging with the local government to earmark funds.

He said that the planning of road networks is critical. On 28 February 2023, the DoT facilitated a workshop with municipalities on road networks and data planning.

The challenges are a lack of technical capacity at a local level for network planning and development. MOUs with SANRAL were recommended. Thus, the DoT focused on the transfer of skills rather than budgets.

On Ms Tobias’ concerns about the R56, he responded that it relates to SANRAL’s tenders which did not produce results. The DoT would provide a detailed submission on the issue.

There was substantial work conducted on the Moloto corridor. SANRAL was provided with the approval to continue the work, and road safety was improved.

Part of the PRMG funds should be allocated to creating job opportunities targets, to improve performance measures. Further inputs would be consolidated into a report.

Further questions

Ms Tobias noted concerns about the lack of priority provided to local authorities. The grants should be utilised for what it is intended for.

She said that the ANC national government should be held accountable for the local government’s performance. The national government has a role to play in ensuring that the latter succeeds and that the funds are implemented.

It should not only be based on advice but also on radical transformation and effective performance monitoring. The government is synchronised as one, as much as there is provincial governance.

Mr Mtlala responded accruals of the financial statements are included as invoices. For example, DIRCO officials provide invoices after international travel. The officials may only invoice after the year-end, which is reflected as an accrual and as an accounted commitment.

On the 30 days of payment, he said the process was completed in March 2023. The system did not function from October 2022 to February 2023. Hence, the delayed completion.  

The delayed procurement is affected by the submission of terms of reference, often changed by the branches. In some cases, it is an administrative challenge, and in other cases, it is a legal challenge.

Adv Mlawua responded to the Chairperson's concerns about localisation. The DoT included the requirements for all current and previous projects within the designated sectors listed by DTIC and regulated through National Treasury practice notes.

He said that the DoT would assess the implications of load shedding on its services.

Minister of Transport, Ms Sindi Chikunga, said that the Department would provide further information on the roads that benefit from the PRMG Grant at the next meeting. She appreciated the positive feedback from the Committee. The DoT is committed to implementing effective and timely services.

On the issue raised by Mr Mlenzana, she said that the President would deal with the location of Transnet because it forms part of the configuration of government. Until such time, the entities remain under the control of DPE.

She stated that 21 percent of South Africa’s roads are paved. The rest are gravel roads with the majority thereof being provincial roads. Most provincial roads are approximately 266 000 km. From this amount, approximately 41 000 km are paved. 

Provincial roads are important, as they connect towns to towns and towns to heritage sites. The PRMG does not consider gravel roads despite their prevalence and importance.

She responded to Mr Mathafa’s query on whether the budget was sufficient. The R79 million budget for the current fiscal year is only sufficient for road networks. Thus, the DoT must balance expenditures.

There are firstly practical issues such as assessing which provinces require more infrastructure. Secondly, there are constitutional issues such as the cooperation with road municipal authorities. The DoT prioritised the municipal road networks and the closure of potholes within 14 days.

Private sector partnerships are essential as mining companies play an important role in the maintenance of roads utilised by trucks. Insurance companies are affected by the occurrence of accidents and potholes damage.

The Department and SANRAL also prioritised joint provincial skills training and capacity building of municipal authorities.

Internationally, South Africa is number 10 in terms of the longest roads and number 19 in terms of paved roads. The DoT’s priority is addressing the fixing of potholes.

The Minister’s response was interrupted by a connectivity challenge. The Chairperson allowed Members to provide further inputs while awaiting the resumption of the Minister’s online connection.

Mr N Kwankwa (UDM) questioned whether a satisfactory response was provided to Mr Mlenzana’s question on the issues of delays between the PRASA and Transnet. He asked for clarification and concrete steps on the matter. On the outstanding debt, it should be a matter of a book entry, as it is between two government departments.

Adv Mlawua apologised that he answered the question too highly. His response was interrupted as the Minister was able to reconnect to the meeting at this juncture.

Mr Kwankwa asked the DG to clarify what he meant by stating that he answered the question too highly.

Adv Mlawua said that his response may have been very skimpy on the details. He excluded two issues, namely the debts which were facilitated and settled. PRASA and Transnet signed historical agreements, as entities and for the use of their network. Transnet owns the network, and it passed on the user chart to PRASA. The debt arose from this transaction. To respond to the question, what work is being done, honestly, not much work was done.

The Department is ensuring cordial working arrangements between the two entities. The DoT noted that the entities were unhappy with the agreements and the debts being raised. In future, the situation may be resolved if the entities come on one page.

On the RJ4 question raised by Ms Tobias, he said that the DoT would engage with the province and relevant municipality. The specific responsibility lies with the Free State Government.

On the rail infrastructure vandalism, the vandalism increased during the Covid-19 lockdown. The solutions proposed are the assessment of damage thus far and the cost of the recovery for PRASA. Policing and protection measures will incur additional costs for PRASA. Walls would be constructed to prevent vandalism.

The Minister responded to Ms Ntlangwini’s concern that there is no private runway at the Bisho Airport. The airport and infrastructure are owned by the Eastern Cape Government. The provincial government planned the revitalisation of the airport including cargo points.

Foreign companies may invest in airport infrastructure. Similarly, South Africa may invest in international airports and has done so in Brazil and India.

She assured the Committee of the Department’s commitment to respond in detail to the concerns raised by the members.

The Chairperson called on the Department to resolve the internal procurement issues. The pending feedback from the Committee would be provided within two weeks. He asked for the retrieval of the spreadsheet for the follow-up.

He requested that the DG provides an outline of the underspending grants at the next meeting.

He agreed with the Minister’s statement that the management of the transport portfolio must be conducted within the ambit of the law, the imperative of the Constitution, and cooperative governance.

The Chairperson thanked the participants for their attendance and engagement.

The meeting was adjourned.