Department of Transport, SANRAL, C-BRTA & RTMC 2020/21 Annual Report, with Deputy Minister

Meeting report

In a virtual meeting, the South African National Roads Agency Limited (SANRAL), the Cross-Border Road Transport Agency (C-BRTA) and the Road Traffic Management Corporation (RTMC) briefed the Committee on their annual reports for 2020/21.

As the Committee Chairperson was running late, the acting Chairperson (Mr L Mangcu, ANC) accepted the apology of Mr Fikile Mbalula, Minister of Transport, and invited Ms Sindisiwe Chikunga, Deputy Minister of Transport to make opening remarks.

Deputy Minister (DM) Chikunga noted that there were ongoing calls to move as much freight traffic as possible from road to rail because of the wear and tear caused by heavy goods vehicles. She drew attention to SANRAL’s commitment to provide small contractors with opportunities to fulfil road maintenance contracts, developing their road construction skills. It had also awarded more than 1 000 contracts to small, medium and micro enterprises (SMMEs) to a value of R1.6bn. The C-BRTA had achieved eight out of its twelve performance targets and had been elected as the chair of the Cross-Border Road Transport Regulators Forum, which worked on harmonising transport policies with other states in the Southern African Development Community (SADC). The RTMC had achieved 57% of its performance targets, but it had been particularly hampered by COVID-19-related disruptions. It had introduced a centralised online booking system to tackle challenges in Gauteng and the Eastern Cape, which was working well.

South African National Roads Agency Limited Annual Report 2020/21

Mr Themba Mhambi, Chairperson of the board, SANRAL, introduced the delegation and asked Mr Skhumbuzo Macozoma, Chief Executive Officer (CEO), SANRAL, to deliver the presentation.

Mr Macozoma gave an overview of the condition of SANRAL’s 22 253km road network. 93% was in fair or better condition, while the remainder was in poor or very poor condition. He shared a high-level overview of SANRAL’s income and expenditure, intellectual social and human capital and concessionaire work by SMMEs, media relations and human resources. He discussed SANRAL’s corporate performance and the impact of COVID-19 on its operations. It had achieved 16 out of 20 of its revised performance targets.

Ms Inge Mulder, Chief Financial Officer (CFO), SANRAL, shared SANRAL’s statement of its financial position. Income for the year 2020/21 was significantly lower, while its cash reserves were higher because SANRAL had not been able to spend all of its grant from the National Treasury (NT). SANRAL had received an unqualified audit opinion but the Auditor-General had identified a material uncertainty in its financial sustainability which related to the e-toll impasse. R10bn out of R11.2bn in irregular expenditure from previous years had been condoned and new irregular expenditure amounted to R175m.

Discussion

Mr T Mabhena (DA) said that SANRAL’s presentation painted a glowing portrait of the state of the entity but it was disconnected from the actual state of the roads. He asked for a progress update on the transfer of portions of the R573 Moloto road between Gauteng and Mpumalanga, and what was the plan to reduce the fatalities on that road. He asked if the Department of Transport had given any indication of how it planned to address the e-toll impasse which was hurting SANRAL’s balance sheet.

Mr M Chabangu (EFF) observed that SANRAL had submitted its annual report late and had not achieved a clean audit. How did it plan to improve these situations? He said that there had been reports saying that e-tolls would be scrapped. What mechanisms would SANRAL put in place if this happened? He believed that SANRAL’s irregular expenditure was the result of deliberate corruption and said that it should present a plan of action to the committee on how it planned to deal with this.

Mr P Mey (FF+) reported that he had been travelling extensively across the Eastern Cape recently and the roads were in good condition. Potholes remained a problem but he thought it would not be difficult to solve. They should be filled when they were still small. He also wanted to know when the R62 connecting Kareedouw and the Western Cape would be completed.

Mr C Hunsinger (DA) noted that some of the roads Mr Mey had travelled on might have been maintained by provincial or municipal authorities rather than SANRAL but nevertheless his impression of SANRAL’s roads was also good. He also praised the work of regional managers and SANRAL during the recent crisis in Kwazulu-Natal. He remained concerned about the truck congestion that continued to arise at the Mooi River toll plaza, leaving the trucks vulnerable to attack. He suggested opening the plaza gates and double-charging at the other end of the toll route in order to alleviate the congestion. He asked if there had been any recent discussions about rail on the Moloto route. What might its impact be on traffic on the road? He asked if the increase in the value of SANRAL’s assets was due to revaluation or an actual addition to infrastructure. What was the reason that liabilities had decreased? Could SANRAL give an indication of the annual shrinkage [inaudible] What was the current expense column amount [inaudible].

Mr L Mangcu (ANC) asked for an update on the status of long-term contracts and agreements relating to the Gauteng Freeway Improvement Project (GFIP), and their impact on SANRAL’s balance sheet. He said that there was a slight increase in the percentage of roads in poor condition. What was the reason for this and what was SANRAL’s plan to address it? Could it be related to the shifting of funds from SANRAL’s non-toll road operations to toll road operations? He observed that provincial road authorities tended to avoid maintenance and asked whether SANRAL’s road network target of 25 000kms included roads whose management it planned to take over from provinces. He requested an update on the Mtentu bridge project on the N2, where the contractor had withdrawn as a result of community violence. Had the money lost in this affair been accounted for? He also requested an update on projects outside of South Africa’s borders, and asked what the strategic intent of certain land sales was. Were transformation criteria applied when selling land?

Ms M Ramadwa (ANC) thanked SANRAL for the repairs being done on the R524, but drew attention to potholes on the N1 between Louis Trichardt and Musina.

Mr K Sithole (IFP) asked for an update on the Moloto road programmes, as accidents continued to occur. He drew attention to potholes near Standerton. Was it the responsibility of SANRAL or Mpumalanga province? He also asked about the status of construction of a 170km road in Mpumalanga [details inaudible] which had begun in 2016 but was still not complete.

Responses

The Chairperson asked SANRAL to provide responses to Members’ questions in writing. Mr Macozoma agreed to do this.

Cross-Border Road Transport Agency Annual Report 2020/21

Ms Lerato Molebatsi, Chairperson of the board, C-BRTA, remarked that COVID-19 travel restrictions had had a negative impact on cross-border road traffic, especially passengers. She also predicted that the African Continental Free Trade Agreement (AfCFTA) would bring many opportunities for intra-Africa trade but the C-BRTA would require the support of Parliament if it was going to take these opportunities and be able to harmonise transport regulations across the Southern African region.

Mr Lwazi Mboyi, acting CEO, C-BRTA, shared an overview of the C-BRTA’s operating environment, noting that Kosi Bay was due to be declared a commercial border post, bringing the national total to 20. He predicted that there would be a shift in traffic volumes at this post. He said that as the chair of the Cross-Border Road Transport Regulators Forum, C-BRTA was working to harmonise the transport regulation environment in the SADC region. For instance, South Africa was the only country in the region that did not impose cross-border charges for road transport operators. He reported on the entity’s progress toward five-year targets and annual targets (of which it achieved eight out of twelve), noting that COVID-19 had had a significant impact on its operational efficiency and revenue from permits issued.

Ms Rebecca Hlabatau, CFO, C-BRTA, outlined the entity’s statement of its financial position, noting that a 36% increase in total assets was largely due to a 45% increase in cash and cash equivalents from a COVID-19 grant from the Department. Total revenue had decreased by 5.5% and expenditure by 15.23%, resulting in a surplus of R49m. The entity achieved its sixth consecutive clean audit.

Disucssion

Mr Mangcu requested more detail on how COVID-19 and the associated lockdown had affected the entity financially. He asked whether losses due to congestion at the Beitbridge border had been costed, and how much had the newly acquired automated numberplate recognition vehicle had cost? Why did South Africa not charge cross-border fees like other countries in the region?

Mr Chabangu congratulated the entity for achieving a clean audit and asked it to share its methods with other entities that had not achieved clean audits. He asked how many women were in leadership positions at the entity. He called on the entity to engage with the SADC on accidents involving chemical spillages. He asked for the reason for overspending on the law enforcement programme.

Responses

Mr Mboyi said that the costing of delays at Beitbridge had started but was not yet complete. The automated numberplate recognition vehicle had cost about R700 000. It was on the road, assisting with law enforcement operations across the country. C-BRTA was of the opinion that the future of law enforcement was not really a matter of boots on the ground and was therefore exploring other smart tools. The entity had made proposals and was awaiting approval from the Department of Transport and National Treasury to implement cross-border charges. He said that the leadership tried to run the entity as prudently as possible, as expected by the government and the country as a whole, and it was prepared to share its experience with other agencies. He explained that the cost of cleaning up after spillages was borne by other agencies and departments, such as the Department of Environmental Affairs. It was however a huge cost, and the cross-border charges would contribute to reducing it. These charges should not however be too much of a burden to cross-border transport operators. The percentage of women in leadership positions was 40%.

Ms Hlabatau said that the entity collected only 37% of the revenue it had budgeted for in the first month of the financial year. Collections did pick up as the lockdown was relaxed. In total about 80% of budgeted revenue had been collected.

Road Traffic Management Corporation Annual Report 2020/21

Mr Makhosini Msibi, CEO, RTMC, reported that the Corporation had achieved eight out of 14 performance targets. COVID-19 and the restrictions imposed in response could not be ruled out as one reason for non-achievement. The RTMC had received an unqualified audit opinion in 2020/21. There had been several material misstatements in the financial statements submitted for audit, but all had been rectified during the audit process. He reported on the RTMC’s performance in each of five programmes: operations, law enforcement, traffic intelligence and security, strategic services and support services. He summarised strategies to address underperformance, human resources and corporate social responsibility.

Ms Liana Moolman, CFO, RTMC, reported that the RTMC had spent 104% of its budget for 2020/21. This was a result of 24% overspending in the support services programme, which was attributed to expenditure on non-cash items such as depreciation.

Discussion

Mr Mabhena took serious issue with the suggestion made that the Corporation had missed out on a clean audit opinion as a result of “bad luck.” Luck had nothing to do with it; it was because somebody had not done their job properly. The Auditor-General had identified material misstatements in the financial reporting. It was the job of the Corporation’s audit committee, board and executives were responsible for ensuring the correctness of the financial statements. It was unacceptable to blame luck. He was also unwilling to accept COVID-19 as a generic reason for the Corporation’s failure to fill vacancies and meet other performance targets. A vacancy rate of 26% was unacceptable when the youth unemployment rate was so high. He recalled from a Committee oversight visit that the RTMC had parked vehicles in open air lots, unprotected from the elements and asked what its vehicle depreciation rate was. Was it really so difficult to arrange covered parking? Money was being wasted on vehicle depreciation.

Mr Sithole was also concerned about the high vacancy rate amid widespread unemployment.

Mr Chabangu asked what the RTMC was doing to address driving license corruption, such as officials selling licenses. He asked why it had got a qualified audit after working so well for so many years. [The audit was, in fact, unqualified, but with findings.] He asked how RTMC advertised vacancies in rural areas where the poorest of the poor lived. He asked which programmes had not achieved performance targets and why. Why had supply chain management (SCM) prescripts been violated and what was being done to prevent this in future? What was the reason for overspending in the support services programme?

Responses

Mr Zola Majavu, Chairperson of the board, RTMC, clarified that RTMC had received an unqualified and not a qualified audit. He accepted Mr Mabhena’s criticism. Luck was not the reason for the Auditor-General’s material findings. However, he defended his organisation against the charge of ineptitude. The findings related to the interpretation of Black Economic Empowerment (BEE) codes, on which there had been no fewer than four different legal opinions. RTMC had accepted the Auditor-General’s interpretation for the sake of intragovernmental harmony, even though it did not agree with it.

Mr Mabhena accepted the explanation, withdrew his remarks and apologised for any offence caused. He suggested that the Committee discuss the BEE codes with the Auditor-General if they were so controversial.

Mr Msibi agreed that the high level of unemployment in the country was unacceptable. However, the RTMC had completed a process or organisational realignment in January 2021, during the pandemic and just two months before the end of the financial year. This had made it difficult to fill vacancies before the end of the reporting period. Since then quite a few positions had been filled. The graduation of traffic officers in December 2020 had also had to be delayed, leading to an increase in vacancies. The RTMC had gone to great lengths to avoid this but the cheapest offer to accommodate trainees with the required social distance had been no less than R800m per year. He explained that the lifespan of vehicles at RTMC was six years and vehicle depreciation totalled R23m per year. This was the main reason for the overspending in the support services programme. RTMC was mitigating the negative effects of uncovered parking by using it for vehicles that were in service. He said that the Corporation was dealing decisively with corruption, but the anti-corruption unit was small, with only 27 staff. Results were also not always immediately apparent because the unit referred cases to the Directorate for Priority Crime Investigation (DPCI) and the National Prosecuting Authority (NPA), and cases could take a long time to be finalised. He said that the RTMC usually advertised vacancies in the City Press, on its website and on radio. He noted that there had been a problem with inauthentic adverts circulating. He explained that six of the performance targets that the RTMC had not achieved related to training modules that could not be taught due to lockdown.

Deputy Minister Chikunga appreciated the challenging questions the Portfolio Committee had asked and assured Members that the Department took them very seriously.

The meeting was adjourned.