Mpumalanga Transport Campaign Steering Committee briefing

Meeting report

Chairperson’s opening remarks

The Chairperson welcomed everyone to the Committee meeting. The purpose of the meeting was to hear briefings by ArcelorMittal (AMSA) and the Mpumalanga Transport Campaign Steering Committee (TCSC), who had asked to meet with the Committee regarding the service that had been provided by Putco -- the main bus operator in Mpumalanga.

There had been an apology from Ms D Carter (COPE).

Briefing by ArcellorMittal 

Mr Themba Nkosi, General Manager, Human Resources, ArcelorMittal South Africa (AMSA) said AMSA was the largest steel producer on the African continent, with a capacity of 6.5 million tonnes of liquid steel per annum and an annual steel production of 5 million tonnes of liquid steel for flats and long products. It had 87 years of technical expertise and alignment with international best practices, which had forged the organisation into a modern, well equipped and competitive supplier of high quality products to the domestic and global markets. The company was involved in shipments into the domestic market, Africa Overland (Botswana, Malawi, Zimbabwe, Zambia, Mozambique, and Namibia) and exports.

ArcelorMittal was the biggest local steel employer, with over 14 800 direct employees. It was part of the AM Group, the largest steel producer in the world, employing 232 000 people worldwide and with an industrial presence in 27 countries and business activities in 60 countries. The group was leader in all major global markets, including automotive, construction, household appliances and packaging, with leading research and development (R&D) and technology. Through this association, AMSA had access to world-class R&D, best industrial and management processes and procurement knowledge, and international markets leverage to ensure the company remained at the cutting edge of the international steel industry. AMSA was visible in Vanderbijlpark and Vereeniging, both located in the Gauteng province, and Saldanha in the Western Cape. The cokes and chemicals factories were located in Newcastle, Pretoria and Vanderbijlpark, while the Newcastle factory in KwaZulu-Natal. 

South African crude steel production had been in a decline in terms of production since 2009 but there had been a major increase in production ahead of the 2010 FIFA World Cup, due to an increasing demand for the construction of roads, stadiums and other infrastructure. South Africa’s total consumption of steel had contracted by 9% in 2014, from 5.4 million tons (mt) to 4.9 mt, mainly due to strikes. AMSA sales into the domestic market had decreased by 3% with flat dropping by 10% and long reducing by 4%. AMSA’s market share had been estimated at about 62%. SA had been experienced increasing imports of primary and finished steel products from 2012, currently declining from 18% to around 15% due to the weakened rand and replacement initiatives.

The AMSA was regarded as an economic growth engine as it created about R26 billion added value in 2014, representing almost 1% of direct Gross Domestic Product (GDP), with R0.9 billion contributed to the fiscus in various taxes and rates. Over 13 500 people were directly employed as a result of AMSA’s operations, and 68% of new recruits employed locally were from communities within the plants’ locations. AMSA indirectly supported nearly 10% of SA GDP and nearly 1 million jobs. About 71% of AMSA steel was used in key industrial sectors, which together accounted for 17% of GDP and 1.6 million jobs.

Mr Franck Wandji, Manager: Market Development, Strategy Sales and Marketing, took the Committee through the challenges experienced by AMSA over the past four years. These included:

• AMSA experienced a continuous drop in volumes due to market movements;
• There was a decrease and cyclical effects in market consumption since the World Cup events, but a market which could regain its dynamism with the Strategic Infrastructure Projects (SIPs);
• Increased competition and imports;
• AMSA had to contend with the margin-shrinking effects of rising inputs costs;
• Coking coal: cost/ton had increased by 92% over the past two years;
• Electricity: an increase of 153% in the tariff over the past five years and 118% in costs, even though AMSA’s production and energy consumption had decreased significantly;
• Natural gas: cost had increased effectively by 105% since 2008, even though AMSA was being more energy efficient;
• Freight: costs had escalated by 61% in the last five years without a commensurate increase in productivity;
• Manpower: despite the economic crisis and the manufacturing sector shedding close to a million jobs, AMSA had maintained employment and absorbed the increase in manpower costs (without commensurate productivity) above economic growth and above inflation. On a R/ton basis, manpower had increased by over 30% since 2008.

AMSA’s ambition was to increase its production level to capacity, ensure maximum local service and customer satisfaction, decrease costs, improve manufacturing capability, environment management and reliability, strengthen government relations and compliance, and support infrastructure programs (SIPs)

Mr Wandji concluded by highlighting that AMSA was the main user of transport infrastructure for its raw materials and finished products. With its position and expertise, it was well placed to facilitate steel supply through the interaction with private/public stakeholders participating in projects. The entity was also mandated to support the local industry, thereby facilitating the beneficiation of iron ore. The R&D in the entity enabled to it partner with its customers for innovation, and its footprint supported job creation and economic growth. The entity would focus on cooperating to protect the local market from unfair competition.  AMSA had good experience in infrastructure projects, and was well positioned to enable the downstream and construction sectors. 

Discussion

Mr M Mabika (NFP) asked about the strategy that had been used by AMSA to keep the existing jobs, despite the general decline in production. What were the reasons for the increase in the imports of steel into South Africa? Was this not related to AMSA’s prices? How much was ArcelorMittal exporting to other countries?   

Mr C Hunsinger (DA) said the presentation had been insightful and had given the Committee a broad perspective over everything. What was the load ratio between rail and road? He wanted to know about the production escalation that had been foreseen by the entity, and whether the company would prefer to use road or rail as a form of transportation. What were the frequencies in terms of getting to places and collecting from places? How would the entity stimulate the rest of the value chain with other types of companies, as AMSA was seen as the catalyst for job creation and poverty reduction? How was the manufacturing plant located in terms of the surrounding areas?   

Mr G Radebe (ANC) wanted to know the reason why the company was not complying with the Black Economic Empowerment (BEE) requirements, as this was crucial legalisation that had been supported in the National Development Plan (NDP). The trucks that were used by AMSA were sometimes damaging the roads -- this was mostly the case in Mpumalanga. What were the plans in place to “meet the government halfway” in ensuring that roads were not damaged by these trucks, as this had contributed to fatal accidents in the area? The presentation had highlighted that 70% of the recruits were employed locally, within a plant’s location. What plans were in place to ensure that there was a skills transfer, so that there could be sustainability and continuity within those areas? It was concerning that there was little beneficiation in areas like Vanderbijl Park, as communities in those areas still remained poor.  

Mr M Sibande (ANC) indicated that he was disappointed that out of nine provinces, AMSA only had two offices in KwaZulu-Natal and Gauteng. What was the specific social responsibility of the entity in other provinces? What were the programmes in place for other areas? It was the responsibility of the company, not the Portfolio Committee, to ensure that the company marketed itself, as this had the potential to stimulate overall production. The issue of the market was also critically important, to ensure that company remained competitive locally. What was the relationship between AMSA and Transnet? How often was the company interacting with Transnet in order to be assisted with budgets and proposals? It was important for the Committee to know whether the company was complying with tax regulations.

The Chairperson mentioned that there was a general challenge in the country, from the university to the company level, where research and development (R&D) was mainly focused “in house” and sometimes products did not even reach the general public in order to uplift the standards of the communities. It was both disappointing and embarrassing that the board of AMSA was male-dominated, with only two females, as this assumed that women had no capability to work at AMSA. The country was buying expensive coal tar in order to build and upgrade the road infrastructure. She assumed that coal tar was one of the commodities that the country was importing. What was the reason for the difficulty in accessing coal tar in the country, as this could potentially contribute to the overall improvement of road infrastructure in South Africa?

Mr Nkosi responded that he had not anticipated to some of the questions that had been posed by the Members, but he would try to respond to the best of his ability. The company had had a decent retention rate in the past three years, especially in the area of critical skills, such as technicians, but since 2009 the company had been losing a lot of young engineers due to the depression of the markets. The company had the capability to attract young engineers, but difficulty in retaining them, and it was often costly to train the new recruits.

AMSA was involved in high school education. For example, in Sedibeng, just outside Sebokeng, there was a science centre, where 2 000 children had been taken and given accelerated tuition in mathematics, physical science and English. The entity had been acknowledged by the district Education Department in Sedibeng as having made a remarkable contribution to the 7% improvement in mathematics and physical science results in 2013. There were similar programmes in Saldahna and Newcastle, where students from grade 10-12 are enrolled into universities and the company assists about 200 students to be involved in careers like engineering, and commercial and technical training. The company had already built a school in Mamelodi with capacity for 1 300 children, and there was also the same programme in Mthatha, Chris Hani Park, where the company had donated a “green building” school.  

Mr Nkosi said that the entity was currently involved in various housing projects, especially the removal of the old asbestos roofs and putting on new sheeting in areas around Bophelong. The target was 4 000 houses, and to date about 2 600 houses had been renovated. He promised that the Committee would be provided with more information regarding social responsibility.

AMSA was transporting about 13 million tonnes of raw materials to its plant, but 95% of the finished products were transported by road because of the difficulty in using rail. There had been serious discussions with the Member of the Executive Council (MEC) for Transport in Gauteng regarding this issue and the possibility of building a logistic hub in the Vaal so as to divert traffic from the N3 so that traffic could go via the N1. It was willing to donate land for this project.

Mr Nkosi said the country had moved away from transporting goods by rail, to road. It was high time for South Africa to consider emphasising rail so as to alleviate traffic volumes on the roads, to preserve the quality of the roads and reduce road fatalities. The company was looking to work with Transnet Freight Rail (TFR) in-bound logistics in terms of improving their general performance. The AMSA was doing a lot of work with TFR and there was now a “nerve-centre” where they could track the various trains in terms of performance and possible delays so as to improve the service, and there were engagements with the different levels of management at Transnet.

If the country were to prioritise the exportation of iron ore at Export Parity Price (EPP) this could potentially contribute R9.2 billion to the fiscus, and the exportation of coal could only be R3 billion. AMSA added about R20 billion to iron ore though beneficiation, and was playing a critical role in beneficiation, creating 3.4 million jobs.

Mr Nkosi said that the only way that the entity could maximise beneficiation was through industrial policy, as steel did not attract any import duties. There had been engagement with the Department of Trade and Industry (dti) on how to maximise local content in most of the projects, as the price of steel was determined by the commodity market. In the last three years, the entity had noticed that the price of commodity input materials had been rising and it could not absorb the corresponding selling price, as the steel price in the commodity market did not follow the boom of the raw materials. Interestingly, it had been a lot easier and quicker to track down the corresponding selling price when steel, coal and iron ore had gone down.

The current infrastructure of AMSA, from a rail perspective, only supported exports, not internal players from a beneficiation point of view. The challenge for BEE was to create a lot of small players that could participate in the sector, as the entity had been supporting the Qualifying Small Enterprises (QSEs) with almost R3.1 billion, from R2.3 billion in 2014. There had been a concerted effort to have incubation hubs and give business to female-owned companies, but the issue still remained -- that of the materials being imported -- and there had been a discussion around local substitution for the import of pipes.    

Mr Wandji said that the last time the entity had met with Transnet was last week, and they were engaging on a weekly basis. The reason for the imports of steel was related to the main challenges of pricing, specification and logistics. AMSA sets up prices according to international levels, and it was crucially important to remain competitive locally.

AMSA was competing against unfair competition, as in the case of China, where the cost of labour was extremely low, raw material costs were also very low and the shipping of iron ore to Saldhana or Newcastle was more expensive than shipping it to China. This was a very competitive environment. The Chinese companies usually sold their raw materials at a loss because they were subsidised by the government, and South African companies were not. There were discussions in place around the issue of pricing and the whole industry infrastructure, and the company was willing to ensure that the industry was competitive locally.

Mr Wandji said that South Africa had experienced massive transformation, and there was a need to learn to produce steel differently. The company could attract some of the skills and knowledge it had, although some projects had to be specified according to global standards, and when a product was not available locally, the only solution was to import it. AMSA needed to interact with other industries during specification, so as to set the global standard locally.

Mr Sibande pleaded with the entity to rectify its board, as it was male-dominated. The Committee was following its responsibility and the call from the ruling party on the constitution of the structure of the board.  

Briefing by Mpumalanga Transport Campaign Steering Committee (TCSC)

Mr Rodney Mashaba, Chairperson, Mpumalanga Commuters Organisation (MCO), said that the Thembisile Hani and Dr JS Moroka local municipalities, and Moutse were economically depressed areas. People here relied mainly on Pretoria for work. They commuted daily to and from work. The main mode of transport was buses, followed by taxis. The road used was the notorious Moloto R573 road. The road spanned about 200 to 250 km (return trip) to and from Pretoria. The carnage on that road was well documented, and the main bus operator was Putco. The Putco buses had been operating in the area since time immemorial. Over the years, there had been numerous complaints relating to the standard of service provided by this company -- from buses that were not roadworthy, to inadequate or poor service. Many commuters had lost their lives due to accidents involving these buses and up until today, the situation had remained unchanged.

The commuters found themselves with no alternative but to endure these conditions, given the fact that the company operated with impunity and with no reprieve for the commuters. The only alternative was taxis, which were expensive, because this sector was unsubsidised. The views of the TCSC were quite clear -- that the contract of Putco needed to be reviewed and scrapped to allow a more competitive environment for other operators. The government needed to use its subsidy to empower local operators, thus helping to stimulate economic activity within the local transport industry, and a comprehensive transport model must be developed.

Mr Mashaba said that the Moloto Road fell under three provincial administrations, Gauteng, Mpumalanga and Limpopo. This had proved to be a challenge when it came to road maintenance. According to the study conducted by South African National Road Limited (SANRAL), the volume of traffic on this road was comparable to that of the N1. This had meant that the road needed to be expanded. The Mpumulanga TCSC was expressing the hope to the Portfolio Committee that it would act to ensure an investigation into this project, as it was a matter of long-standing expectation from the communities of former KwaNdebele areas in Mpumalanga, and Moutse in Limpopo.

Discussion

Mr T Mulaudzi (EFF) welcomed the presentation by the Mpumalanga TCSC, and indicated that it sounded bitter towards the local and provincial governments, and more specifically, towards the Putco Company. The Portfolio Committee had already been briefed regarding the developments in the Moloto Corridor, and was pleased with the progress that had already taken place. He wondered whether the Mpumalanga TCSC had already consulted the other structures of government -- municipality and provincial government -- before coming to Parliament. He suspected that the campaign might have been politically motivated, rather than raising genuine issues. There was no promise that the Portfolio Committee could help in ensuring that the contract of Putco Company should not be renewed by 31 March 2015.     

Ms S Boshielo (ANC) said that the Mpumalanga TCSC had come to the right place, but the only thing that the Portfolio Committee could do was to direct them on the way forward. The government had committed itself that there would be progress in the Moloto Corridor, as this was an important project to prevent road fatalities and reduce the traffic volume. It was important for the Department of Transport (DOT) to be proactive in informing the general public, so that people could be aware of current developments in the project before even resorting to coming to Parliament. The R1.7 billion to be injected into the Moloto Corridor would surely make a difference in the overall improvement in road infrastructure for the project. She reiterated that the Committee appreciated the frustrations of the Mpumalanga TCSC, and needed to find ways to accept and deal with the challenges raised by the general public.

Mr Sibande reiterated that the Mpumalanga TCSC should not be shy to come and address the Committee about their frustrations. He pleaded with the group to be patient with the progress in Moloto Corridor, as this was a huge project that was likely to take some time before it was completed. The TCSC needed to be aware that there were guidelines on the functioning of the legislation, and the expiry and renewal of the contract with Putco would also be a process where all the other avenues needed to be followed. The Committee could not just take a decision on the matter. The TCSC needed to ensure that the issue of burning of libraries, clinics and the Putco buses was avoided at all costs, as this was destroying the essential services that were being provided by the government.

Mr L Ramatlakane (ANC) thanked the delegates that had made the presentation to the Committee, and said that they were welcome in Parliament. The Mpumalanga TSCS had indicated that they had met the Committee representatives and stakeholder representatives from the DOT, and said that the presentation was not in any way politically motivated or intended to discredit the government. The group had mentioned that they wanted to be kept abreast about the challenges that were being experienced in the Moloto Corridor. It was quite clear that they had been raising genuine concerns, especially around the unsafeness of Putco buses, as they had contributed to fatal accidents and had poor maintenance. The Committee needed to condemn the situation where the public transport providers were providing sub-standard transport and treating passengers in an inhumane manner. However, it was also important for the group to be able to find a replacement by another mode of public transport before calling for the scrapping of the Putco contract, as failure to do so could backfire on the Group.

The Chairperson also urged the Mpumalanga TCSC to look at the various modes of transport that could potentially commute people to work, as some people might suffer due to the unavailability of Putco buses. It was unacceptable to have a situation where the promise to improve the standard of Putco buses was made ten years ago without any visible progress or improvement. The chopping and changing of Ministers was a big challenge in the country, as it affected the consistency of projects to be executed. The Minister of Transport, Ms Dipou Peters, had indicated that there was indeed progress in the Moloto Corridor, and the project had already been handed over to the Passenger Rail Agency of South Africa (PRASA).

The Chairperson said that PRASA and the South African National Roads Agency Limited (SANRAL) had already mentioned that the key challenge in the project was on securing the land where rail was going to be built, as there were villages and farms within the radius where the rail and road would be expanded. The Moloto Corridor would use a modern form of train, similar to the Gautrain, and this required a huge investment. She was pleased that the DOT had been interacting with the group, and what now needed to happen was for the group to communicate with the commuters and the general public regarding any information that had been provided by the Department. It was disappointing that the TCSC had not mentioned anything regarding the interaction with the board of directors of Putco. She suggested that the group could approach the Members of Parliament who were located in Mpumalanga, including Mr Mulaudzi and Mr Radebe, for further assistance.

Mr Mathabatha Mokonyana, Deputy Director-General of Public Transport, DOT, confirmed that the group had indeed been having interactions with the Department regarding issues that had been raised, and there had been an acknowledgment that there was gap in communication from both sides. The issue had been raised by the group ten years ago. The Moloto Corridor was at an advanced stage and would take some time to be implemented and operationalised. Currently, the main focus of the Department had been on occupying the road space and improving the infrastructure. The Department had been monitoring the services of Putco buses, but the issue of the contract was between the operator and the provinces. The Department was currently reviewing the whole contract of Putco by the end of March, the purpose of which was to scrutinise the quality of the service that had been offered by Putco to the general public. The law enforcement entity had already declared that more than 20% of Putco buses had been removed from the road.

Mr Mokonyana said the Department had noted that the contract of Putco was unaffordable, as the rate per kilometre tariff was extremely expensive, and unaffordable to poor commuters. The issue of labour conditions had also been raised as a major concern, but this had been directed to the Commission for Conciliation, Mediation and Arbitration (CCMA). All these problems pointed to the shortage of funding for public transport. The Department was planning to create a system where it would be able to cost the public transport contract properly. It had to be an integrated public transport contract, and also solve the issue of under-funding of public transport.

Mr Mokonyana emphasised that it was important to point it out that the government had decided that every public transport contract that was still at the planning stage must include an integrated public transport system. The Moloto corridor had already been transferred to PRASA and the planning and feasibility had been confirmed. The main focus was now on the economic viability, the alignment of the rail and the proper costing. The Department had noted the comments from the Members, and he confirmed that the Road Accident Fund (RAF) was involved whenever there had been an accident. From the legislation point of view, the Department had been mandated to set up minimum requirements for the standard of public transport operations, and the South African National Taxi Council (SANTACO) and NTS had a code of conduct that had been developed by the government focusing on drivers’ behaviour on the road. He supported the idea that the TCSC needed to work together so as to address the issue as a collective.    

Mr Chris Hlabisa, Deputy Director-General (DDG), DoT, said most of the issues that had been raised by the Mpumalanga TCSC had already been covered by the Members. It was useful to have the RAF on the road, so that those who had been injured in any form of accident on the road could be assisted with post-crash care, trauma counselling and other forms of assistance. This campaign would be elevated and escalated to all communities under the leadership of the Committee. The government had increased the budget to be injected into the Moloto Corridor from R1.1 million to R1.7 billion, so as to alleviate the bottlenecks and pressure on the Moloto Road. The Minister was currently meeting with two provinces -- Mpumalanga and Gauteng -- that still needed to finalise some administrative issues. There had been meaningful action taken to alleviate fatal accidents in the area.

The Chairperson said it was the responsibility of the Committee to direct the provincial Members of Parliament in those two provinces, so as to pressure their Member of the Executive Council (MEC) to do the right thing and finalise some of the administrative issues that had been indicated. 

Mr Zwelakhe Mayaba, Chief Strategy Officer (CSO), PRASA, said the entity had already completed the establishment of a project implementation office, as requested by the Minister, and there had been interactions regarding progress that had been made. The Treasury application had been submitted to the National Treasury (NT), as this was a project that had been investigated in any form of Public-Private Partnership (PPP) and entailed steps that had to be followed and implemented in this mega project.

Ms Leah Masango, Chairperson of Mpumalanga Commuters Organisation (MCO), said that although she was not familiar with the programme of the Committee, she was impressed with the level of engagement and the progress that had taken place in the Moloto Corridor. She indicated that the Mpumalanga TCSC had already exhausted its efforts with the spheres of government involved, and the reason for the frustration was the lack of political will by the DoT.  She expressed disappointment that some of the Members should even question the credibility of the group, assuming that their grievances were politically motivated, as the problem regarding Putco buses had been in existence for a very long time. There should more communication and interaction between the Department and the group, as this was one of the problems that had culminated in the group reaching the national level. The issue of the quality of service by Putco needed to be addressed, as it had contributed to the escalating fatal accidents in and around Mpumalanga.

Mr Sam Masango, Chairperson, Steering Committee, appreciated the positive inputs by the Members and the Department. The fact that the group had decided to approach the Committee was not in any way intended to undermine the other structures of government. The group had taken it upon itself to approach the Committee to raise the issue of black people who had been dying on roads in Mpumalanga due to poor road infrastructure. The Group did not hate the Putco company, but was urging the DoT to provide people with better public transport in Mpumalanga, like in other provinces. The Group was only asking for the political will to significantly improve the quality of transport that was provided to the people in Mpumalanga, as they were being treated in an undignified manner.

Mr Masango indicated that the group had been very polite in its approach and was not resorting to a radical approach, like the burning of libraries, clinics and Putco buses. He assumed that maybe the fact that government members did not have families commuting by Putco buses had contributed to the delays. After 21 years of democracy, the people of Mpumalanga could not be forced to see the only bus operator functioning in a monopolistic manner.

The Chairperson indicated that the Department had managed to brief the Committee regarding new developments and the challenges experienced in the Moloto Corridor. The Committee would do a follow-up with the DoT on the delays in administrative issues in Mpumalanga and Gauteng. The Committee needed to interact with the board of directors of Putco, especially on the issues that had been raised by the Mpumalanga TCSC. She said that the Committee had the political power to decide on whether Putco buses should continue or discontinue, but would engage only on the technical and legislative policy matters. This was why there would be an engagement with the directors of Putco. She asked the group to send the Committee a draft charter by interacting with the commuters in Mpumalanga on what should be included in the charter, and collate the issues in three months.                    

Adoption of minutes

The Chairperson requested the Members to adopt the minutes of 24 February 2015 and 3 March 2015

Mr Ramatlakane moved the adoption of the minutes of 24 February and Ms Boshielo seconded.

The minutes were adopted.

Mr Radebe moved the adoption of the minutes of 3 March and Mr Mulaudzi seconded.

The minutes were adopted.

The meeting was adjourned.