ACSA, Ports Regulator, SACAA, Department of Transport 2018/19 Annual Reports; with Minister

Meeting report

The Chairperson welcomed the Chief Executive Officer (CEO) Mr Mahesh Fakir and the Chief Financial Officer (CFO) Mr Thokozani Mhlongo of the PRSA respectively. The Chairperson requested the delegates not to introduce themselves as the Committee already knew them so they could get straight to the business of the day.

Briefing on the Ports Regulator of South Africa (PRSA)

Mr Mahesh Fakir, CEO, PRSA noted that in the final quarter of 2018, the PRSA reduced tariffs by -6,27% (for the years 2019-2020) in response to President Cyril Ramaphosa’s call to economic regulators to reduce port and other administered prices to reduce the cost of business in South Africa. On the backdrop of this development and the slowing of economic growth in South Africa, the PRSA found it prudent to increase the balance of the Excessive Tariff Increase Margin (ETIMC) by R539 million. In consequence, the new balance of the savings facility increased to over R3, 15 billion.

Mr Fakir informed the Committee of the other operational facilities and organisational activities designed to support economic development and reduce the cost of doing business in South Africa. These were the Port Tariff Incentive (the PTIP), the performance incentive system that was published in the Weighted Efficiency Gains on Operations (WEGO), Port Sector and Regulatory Reviews, Global Ports Pricing Comparative Study, Capacity Utilisation study for SA ports, the Ports Efficiency Benchmarking Study and the Regulators Compliance monitoring work. The Regulator’s compliance work included research on Broad-Based Black Economic Empowerment (B-BBEE) and equity of access in South African ports. The research, for example, the Baseline Equity of Access Report, provided invaluable insights on B-BBEE implementation by companies and hence serves as an important yardstick for measuring progress on transformation in the ports sector. In that context, the PRSA would continue and expand its role in monitoring transformation and B-BBEE participation of the sector amongst other activities. Mr Fakir hinted that it was through such initiatives and the dedication of Regulator members that the PRSA met all its organisational delivery targets during the reporting period. However, the SACAA obtained an “unqualified audit” with findings of irregular expenditure. About the Regulator Board, the members’ term expired upon extension on 30 November 2018. To date, PRSA does not have a Regulator Board.

Financial Performance 2018/19

Mr Thokozani Mhlongo, CFO, started by noting that at the end of the financial year under review, PRSA had a financial surplus of R2.4 million. This had to do with the fact that there were delays in the appointment of key personnel in the organisation. The delay was caused by, among other issues, the managerial gap created when members of the Regulator Board left office in November 2018. The Regulator members are an integral part of the appointment process of senior personnel in the organisation.

Mr Mhlongo proceeded to present to the Committee PRSA’s medium term expenditure framework (MTEF) budget. First, he explained that PRSA’s funding is limited to transfers from the fiscus. Despite the entity’s commendable efforts to first increase the funds through investments, he explained that it is important that the state increase its financial capacity in order to ensure and guarantee good service delivery. Secondly, Mr Mhlongo explained that over the years, PRSA has been managing to stay within its limited budget except for the year 2017/2018 when the organisation overspent due to unforeseen circumstances.

Further on expenditure, Mr Mhlongo said that 83.66 percent of its discretionary expenditure was on suppliers with a BEE rating. In this view, the PRSA met its B-BBEE target of 75 percent discretionary expenditure to be on suppliers with a BEE rating. In addition, discretionary expenditure targeted women and youth empowerment. On women empowerment, Mr Mhlongo informed the Committee that out of 22 PRSA employees, 14 were women. As a result of financial constraints, PRSA did not award any scholarships and/or bursaries as part of its youth empowerment programme. Available limited funds were used on internship programmes - 3 internships were awarded- and to support employees to further their studies.

Mr Mhlongo explained the audit outcomes for the year 2018/2019. Contrary to the past four years when PRSA received a clean audit outcomes from the Auditor General, for the reporting period the organisation obtained an unqualified audit opinion with three non-compliance findings - in procurement administration- which led to the irregular expenditure of R1.36 million. To avoid future non-compliance findings in procurement administration, Mr Mhlongo informed the Committee of the key procedural changes enforced by the PRSA, for example, the requirement that all procurement above R500 000 get approval of the National Treasury in the event that it is not possible to invite competitive bids and/or single source suppliers.

On consequence management, Mr Mhlongo said that the Independent Audit and Risk Committee Chairperson did not fulfil his statutory function in reviewing and signing off the annual financial statements and annual report. For this reason, the Executive Authority resolved to concur with the premature termination of the services of the Independent Audit and Risk Committee Chairperson. Mr Mhlongo explained that the situation with the Independent Audit and Risk Committee Chairperson exacerbated the already existing leadership crisis within the entity. Specifically, in addition to not having a Regulator Board, the organisation does not have an Audit and Risk Committee. 

Mr Mhlongo concluded by highlighting the challenges faced by PRSA in the execution of its mandate. These include financial reliance, fiscal constraints, limited staff and the leadership crisis as already explained. On financial reliance and fiscal constraints, Mr Mhlongo said that the PRSA intended to alleviate funding and financial constraints through the collection of regulatory fees from regulated entities. However, this new funding proposal requires amendments to the National Ports Act.

Discussion

Mr C Hunsinger (DA) expressed concern with the leadership crisis within PRSA. He emphasised the impact of the absence of a Regulatory Board on the Tribunal, which is a key institution within the organisation. The Tribunal handles complaints and appeals. In that context, Mr Hunnsinger asked whether Mr Fakir, as the CEO, was performing the functions of the Tribunal. He also asked whether the CEO made determinations regarding the Key Performance Indicators (KPIs) that were presented to the Committee. Overall, Mr Hunsinger wanted to know if the CEO was the oversight and whether there were checks and balances guarding such oversight.

Mr Hunsinger expressed disappointment with the state of affairs within PRSA and the fact that this was happening at a time when crucial decisions need to be taken on tariffs. He reminded the briefing delegates that the mandate of the PRSA in relation to tariffs is very clear, which is to make tariff determinations that make South Africa globally competitive. He stated that tariff determinations being made by PRSA are making South Africa less competitive in the global atmosphere and are increasing the cost of doing business. He suggested that instead of formulating strategies to gradually decrease tariffs, PRSA could just, on a once off basis, reduce the tariff prices.

Mr Hunsinger acknowledged that Mr Fakir was in a difficult situation performing both the duties of the Auditing Authority and the Executive Authority. Be that as it may, he needed to explain the irregularities in procurement administration (goods and services procured without price quotations and not inviting competitive bids) that were noted by the Auditor General (AG). In his opinion, the irregularities showed that the leadership did not exercise adequate oversight in relation to non-compliance with laws and regulations.

Mr P Mey (FF Plus) asked what the PRSA was doing to develop the two Harbours in the Eastern Cape. In his opinion, the economic value of these harbours is very important especially when perceived in the context of job creation.

Ms T Mabhena (DA) referred to page 26 of the presentation and noted that the PRSA budgeted about R16.658 million for the compensation of employees but only spent 82 percent of this amount. He asked the briefing delegates to inform the Committee whether this amount reflected the compensation of employees to date or whether it showed they were unfilled vacancies within the organisation. If they were unfilled vacancies within the organisation, the PRSA had to furnish an explanation.

About the audit outcomes, Ms Mabhena expressed disappointment that after four consecutive years of receiving clean audits, PRSA received an unqualified audit due to non-compliance with basic rules of procurement. The situation did not demand the re-training of staff members but rather the disciplinary action of the staff members involved. Ms Mabhena asked if this had been done. She also asked the briefing member states to inform the Committee of their progress regarding the action plan for the non-compliance findings.

Ms N Nolutshungu (EFF) agreed with Ms Mabhena that staff members responsible for the violation of rules of procurement needed to be disciplined. She requested the briefing delegates to inform the committee whether this was done and what the outcome of the disciplinary action taken was. Ms Nolutsungu proceeded to ask the briefing delegates to explain the decrease in employment equity statistics as shown on page 30 of the presentation and also to inform the Committee whether PRSA spent any money on consultancy.

Responses

Mr Fakir explained that in respect of the rules and regulations governing the PRSA, in situations whereby there is no Accounting Authority and Regulator Board, the CEO is only required to perform the functions of the Accounting Authority. The functions are limited to making financial and performance determinations and do not extend to the functions of the Tribunal. He explained that the functions of the Accounting Authority are overseen by an independent internal audit company.

Mr Fakir explained that the unqualified audit outcome was in part a result of the Independent Internal Audit Committee that did not perform its duties. In consequence, the services of the Independent Internal Audit were terminated and the PRSA is currently looking to appoint another Independent Internal Audit Committee to fill the vacancy.

Mr Fakir informed the Committee that the PRSA has a tariff pricing meeting coming in November 2019. He explained that it is the role of the Regulator Board to approve tariff prices and he hopes that by the time of the tariff pricing meeting a Regulator Board would have been appointed.

Mr Fakir explained to the Committee that all tariff pricing decisions are cost reflective. This means that South Africa’s tariff structure could be less competitive in the global market because some countries have inherent subsidies and cross subsidies which make their tariffs a cheaper comparative to South Africa’s. In the long run PRSA hopes to start making considerable changes to the tariff system. PRSA has in fact started making changes. The port pricing was previously characterised on ad valorem prices. This means that port pricing reflected the value of the cargo being moved and not its use. Mr Fakir told the Committee that PRSA is now moving towards cost reflective pricing of which port pricing reflects the use of the cargo being moved. He emphasised that the gradual reduction of port pricing through changes in pricing methods poses minimal risks to economic shocks in comparison to a “one big-bang” reduction. Finally, Mr Fakir informed the Committee that PRSA will be publishing a new tariff methodology and has invited the public to make comments.

Mr Fakir explained that in terms of the Commercial Ports Policy and the National Ports Acts, the PRSA’s mandate is limited to regulating pricing and accessibility to ports. This means its mandate does not expand to creating waterfronts. Mr Fakir explained to the Committee that the ports of South Africa are the nodes to the logistic chain in the country and once, over a period of time, these nodes become constricted to other activities not related to logistics then the country would need to build new ports. A result thereof would be an increase in port pricing. On that note, he pleaded with the Committee to optimise the use of ports and not use these for entertainment.

Mr Mhlongo explained in great detail the three non-compliance findings that led to an unqualified audit after three consecutive years of clean audits. First was the issue of the declaration of interest. Non-compliance in this area had to do with inconsistency in the office of the AG. In the past the AG only required a CSD form for procurement. Now the AG requires both a CSD form and an SBD form. The PRSA was not accustomed to this hence they received an unqualified audit for the year 2018/19.

Secondly the issue of non-compliance in relation to obtaining three quotes. He informed the Committee that this related to three isolated incidents where it was impossible to obtain three quotes due to there being limited suppliers of the required service.

Finally on the issue of non-compliance in relation to the procurement of goods above half a million Rands; he explained that the procurement was for a vehicle. In order to save money, especially considering PRSA’s limited funding, the entity did not initiate a tender process. This was a once off incident and PRSA has always initiated tender processes for procurements above R500 000.

Mr Mhlongo said that during the reporting period the PRSA spent less than R300 000 on consultancies on Human Resources. The PRSA also consulted with other entities in order to obtain data for research activities.

Mr Mhlongo explained that when the term of the Regulator Board members expired, the PRSA had to halt the appointment process of senior officials. The process was only resumed after Mr Fakir was appointed as the CEO and assumed the responsibilities of the Accounting Authority. For this reason, there are no longer employment vacancies within the PRSA.

In closing the Chairperson started by noting the recurrence of the issue of inconsistency in the office of the Auditor General and remarked that this was a serious issue. He moved on to assure the briefing delegates that the Committee took note of its request for a new funding model and would move to assist the organisation on this and other issues. However, he emphasised that the leadership crisis within the PRSA is concerning and likely to cause problems the following year. He asked the briefing delegates if they were transforming the industry. Mr Fakir responded that legally, the PRSA’s functions were limited to monitoring equity of access as far as transformation is concerned. However, he informed the Committee that PRSA conducted studies on B-BBEE implementation in the industry and its findings were that companies in the port sector were scoring highly on this due to factors including procurement and training. However, there is no visible change within the ports sector itself when transformation is looked at in terms of milestones. He emphasised that in terms of “ownership”, transformation is there. He requested the Committee to ensure that legislation provide a clear definition of transformation to ensure progress in this area. The Chairperson cautioned Mr Fakir not to hide behind legislation but rather to ensure that the PRSA brings transformation in South Africa. He asserted that transformation was long overdue.

The Chairperson welcomed the officials from SACAA.

The Chairman of the SACAA Board, Mr Ernest Khosa, started by introducing the SACAA delegates namely, Ms Poppy Khoza (CEO), Mr Andries Jansen Van Vuuren (Acting CFO), Mr Mongezi India (Board Member) and Ms Nivashnee Naraindath (Company Secretary).

Briefing by the South African Civil Aviation Authority (SACAA)

Ms Poppy Khoza, CEO, SACAA, informed the Committee of the mandate of the SACAA in accordance with the Civil Aviation Act. Broadly, the mandate includes controlling and regulating the civil aviation industry as well as ensuring aviation security and safety by complying with the International Civil Aviation Organisation (ICAO) Standards and Recommended Practices (SARPs). See attached presentation for ICAO Safety and Security Eight Critical Elements. Ms Khoza emphasised that South Africa is a signatory state of the UN specialised body responsible for civil aviation and as such must always comply with the ICAO SARPS. The ICAO is an agency of the UN.

Ms Khoza outlined the vision, mission and brand promise of the SACAA. She explained the SACAA values which could be summarised as GIST – Good is never good enough, Integrity, Service excellence, Teamwork and partnering. The SACAA Organisational Structure was outlined.

Ms Khoza presented SACAA’s performance summary for the year 2018/19. She showed the Committee a graph indicating that SACAA’s performance increased from 74 percent in 2011/12 to 100 percent in 2014/2015. The performance has remained at 100 percent ever since and this illustrates the outcomes of SACAA’s goal to regulate the aviation industry effectively and efficiently. In 2017 SACAA was audited by the ICAO in respect to this goal and received a finding of 84.7 percent which is higher than a global average of 65 percent. For this reason, the organisation had a corrective action plan (CAP) at the beginning of the reporting period. The plan targeted to implement 80 percent of the findings by the ICAO. At the end of the financial year SACAA surpassed the target by 4.62 percent. The ICAO performed a security audit for the year 2020 and the outcomes were still pending. However, the SACAA performed mock audits and is already engaged in a lot of work to address the potential findings.

Financial Performance 2018/19

Mr Andries Jansen Van Vuuren, Acting CFO, SACAA showed the Committee SACAA’s MTEF budget. The budget showed that SACAA started the financial year with total revenue of R704.8 million that was mostly generated from passenger safety charges and ended with a surplus of R1.4 million, which was above budget. Mr Van Vuuren also showed a graph indicating a growth in passenger numbers within a five-year period. He finished by saying that SACAA has a strong financial position with total assets of R492.686 million. He handed back the presentation to Ms Khoza.

Ms Khoza referred the Committee to a slide illustrating the top 10 strategic risks associated with SACAA’s operations. The audit outcomes for the reporting period were presented. For the year 2018/19 SACAA received an unqualified audit report with six findings including irregular expenditure. This was contrary to the six previous years when the entity received clean audits. She explained that the irregular expenditure had to with the entity’s failure to get approval from the National Treasury when expenditure exceeded the designated 15 percent threshold. Be that as it may, Ms Khoza assured the Committee that this finding and the other five findings noted by the AG have been resolved and consequence management was taken.

The accident statistics showed that there has not been an accident for over 30 years on African soil. However, there are challenges when it comes to private flying/general aviation. Accident statistics in general aviation showed an increase in accidents from 83 in 2017/18 to 86 in 2018/19. Fatal accident statistics in the same area showed an increase in accidents from 14 in 2017/18 to 15 in 2018/2019. The SACAA has a strategy to deal with this situation.

Ms Khoza said that the aircraft industry was growing. Statistics showed an increase in aircrafts from 13 386 in March 2018 to 14 005 in March 2019. Statistics also showed an increase in aviation personnel licenses. She explained that the demographics in terms of personnel licenses demonstrated minimal transformation and there was a need for vigorous action to push the agenda in the right direction.

On Human Resources Activities, Ms Khoza showed the Committee that SACAA’s employment statistics summed up to 557 staff members at the end of the reporting period. 49 percent of the staff members were women and 86 percent were blacks. Despite these statistics, Ms Khoza informed the Committee that the aviation industry was not fully transformed and SACAA would continue demonstrating efforts to achieve this. SACAA’s core programmes for transformation included career awareness, bursary and internship programmes and preferential procurement. On bursary and internship programmes, the SACAA sent five Cadets to France to do their frozen Airline Transport Pilot licences. She handed the presentation over to Ms Nivashnee Naraindath, Company Secretary, to provide a briefing on SACAA’s corporate social investment activities including the SACAA childhood and household grocery project and aviation career awareness programmmes. She briefed the Committee on the SACAA’s organisational challenges namely the amendment of the Civil Aviation Bill and the transformation of the industry.

The Chairperson of the SACAA, Mr Khosa, closed the presentation by informing the Committee that at a Conference in Canada, South Africa was elected for the position of Vice president of ICAO.

SACAA Discussion 

Mr Hunsinger commented positively on the detailed presentation by the SACAA. He asked for clarity on why the 1st goal on their key performance information was indicated as having been achieved yet the AG reported that this goal had not been properly evaluated.

Mr Hunsinger also asked for clarity on why contracts were awarded in contravention of the recognised processes as he wanted to understand how SACAA could have made a basic mistake of not applying for approval from the National Treasury especially after obtaining six consecutive clean audits in the previous years.

Finally, Mr Hunsinger asked SACAA for an update on the investigation regarding the Cyber hack that resulted in the suspension of two senior managers. He asked that the SACAA focus on the security upgrades/measures taken to ensure this would not happen again. He also asked the briefing delegates to explain how a light aircraft could land on a taxi-way at OR Tambo. He wanted to know if the departure point of the aircraft was the Free State.

Mr Mey asked why the six cadets had to train in France and not South Africa.

Mr L McDonald (ANC) congratulated SACAA for being elected as the vice president of ICAO. He proceeded to back Mr Hunsinger on the question regarding a flight that landed on a taxi-way at OR Tambo. He wanted an update on that investigation. He then referred to an incident that related to a Mango flight that was out of trim. The Pilot of aeroplane explained that the plane had been out of trim since May 2019 and a used trim motor was used to replace the broken one. Mr McDonald explained that this was in contravention of civil aviation standards and SAA was playing lottery with people’s lives. He asked the SACAA to ensure that disciplinary action is taken.

Mr McDonald commented positively on the SACAA’s B-BBE spending and training of the pilots.  He felt this was long overdue. He suggested that the SACAA invest in a simulator to be moved in schools in order to promote the aviation industry. In his view, this was the least promoted activity in South Africa. He also recommended that SACAA change its syllabus on meteorological training for pilots because many pilots in South Africa die due to lack of an understanding about grounded knowledge in meteorology.

Ms Mabhena also congratulated the SACAA on its development within the ICAO. He congratulated the SACAA for receiving high audit scores from the ICAO after having done a mock audit that showed a low outcome. He proceeded to question the SACAA’s spending on staff related costs because in his view, 72% seemed very high. She stated that the percentage compromised SACAA’s obligation to generate profit for the state. She also stated that the SACAA’s projections to increase salaries by 3% were likely to cause a labour dispute because the percentage was below the inflation rate as South Africa is a highly unionised labour environment.

Ms Mabhena asked whether the SACAA was doing anything in relation to the regulation of drones. She emphasised that it was the duty of the SACAA to advise the Committee on such matters because the amount of altitudes that drones can reach was concerning. The accessibility of such drones was also concerning.

Ms Mabhena expressed concern about the high level of attrition within the entity and asked for an explanation as to why people were leaving. She asked the SACAA to do a presentation their retention rate and accompanying strategy for improvement. On equity assessment Ms Mabhena asked for a report on people with disabilities as in accordance with the Employment Equity Policy. This was not included in the report hence suggesting the entity was not focusing on employment equity in relation to people with disabilities. This was likely to attract a fine that the entity has not budgeted for.

Ms M Ramadwa (ANC) backed Ms Mabhena’s question on the SACAA’s retention rate and strategy. She noted that the SACAA’s presentation was silent on the issue of consultancy. She stated that if the SACAA was involved in any consultancy work then the Committee needed to know how much money was spent. Finally, she asked for more information on the organisational challenges the SACAA is facing namely, the amendment of the Civil Aviation Bill and Transformation of the civil aviation industry.

Ms N Tolashe (ANC) backed Mr Hunsinger’s question on the audit outcomes. She wanted to know how a basic principle could have gone unnoticed by an entity with a history of clean audits. Also, it goes without saying that the issue of auditing is not a once-off process. On the issue of the six Cadets receiving training in France, Ms Tolashe wanted to know why the SACAA decided to partner with the French aviation schools.

Ms Tolashe asked for an explanation about whether there was a clear plan to mitigate the challenges the SACAA was facing in the area of transformation. On the issue of the amendment of the Civil Aviation Bill, she wanted to know where the problem was so that the Department of Transport can move fast in relation to this issue.

Finally, on the issue of women’s empowerment, she asked for an explanation about which schools the SACAA was targeting. She wanted to know if schools in the rural areas were receiving such empowerment.

Mr M Chabangu (EFF) asked if there was a concrete relationship between the SACAA and the state security with regard to aviation security. He proceeded to note SACAA’s accident records and commented that these were user friendly. However, he wanted to know what SACAA was doing to guarantee safety to its clients. On the issue of helicopters and other light aircraft, Mr Chabangu wanted to know if there were control regulations in place. Finally, on the issue of empowerment, he asked if SACAA intended to visit all the schools across provinces. He also asked if SACAA had a relationship with the Ministry of Basic Education.

Mr L Mangcu (ANC) expressed disappointment in the SACAA’s attitude towards the AG’s report. In his view, the SACAA was taking the issue very lightly and this was unacceptable especially given that South Africa was in a crisis in terms of corruption and finances. He said that this was due to various entities’ attitudes of taking serious issues very lightly. On the issue of the six findings of irregular expenditure, Mr Mangcu stated that according to the AG, the legislation was violated and disciplinary action towards the people responsible was critical. He asked the SACAA to illustrate to the Committee, in great detail, the six findings of irregular expenditure, how these impacted on the entity, if an investigation was undertaken, what the findings were and if there was consequence management.

On the issue of financial stability, Mr Mangcu stated that the SACAA appeared to be doing well and perhaps it was about time the entity stopped receiving financial support from the Department. On the issue of transformation, Mr Mangcu stated that this was long overdue, and it was unacceptable for the SACAA to tell the Committee that it was still developing a strategy. There should be transformation in respect to the actual core of the business, for example, technology and so forth, and not peripheral issues.

SACAA Responses

Ms Khosa explained that the SACAA was sending students to France because of entry difficulties in the South African aviation schools, high dropout rates and racism. In addition, students who graduate in South African aviation schools face employment difficulties. She explained further that the SACAA’s awareness programme in part sought to address the issue of youth accessibility and entry into civil aviation schools. There were no differences in financial costs between aviation schools in France and those in South Africa. She added that SACAA is funding students in South African schools and there are several reports of racism, as well as allegations of deliberate failing of government funded students in order to siphon funds from the government. This makes South African schools unfavourable options.

Ms Khoza explained that the misstatement noted by the AG, with regard to goal number 1 on the performance information, was related to differences of performance report figures by the SACAA and the AG. The SACAA underreported its performance and hence contradicted the AG’s report that indicated higher findings. For this reason, the performance was indicated as achieved because the misstatement was not of a substantive nature.

On the issue of irregular expenditure Ms Khosa explained that this related to contract (expenditure) management. She said that there is a licensing agreement between SACAA and Microsoft. A senior official within the SACAA wrongly declared the number of licenses used with Microsoft. A review by Microsoft showed that the SACAA had exceeded the use of the number of licenses contracted. Consequently, there was an increase in expenditure to above 15%. She confirmed that there was consequence management. In addition, she explained that the irregular expenditure related to a misinterpretation of a clause in a contract related to IT.

Ms Khosa started by saying this was an unfortunate incident. She confirmed that there was an adequate back up system in place and all information that was lost is currently being recovered.

Ms Khosa confirmed that the airline involved did depart from the Free State and was rushing a passenger that was late for an international flight. She confirmed that the SACAA initiated an investigation and the results were still pending.

Ms Khosa confirmed that the matter was under investigation and a preliminary report has been issued. She said the preliminary report showed that cannibalising of parts (removing parts from one aeroplane to fix another) is not a problem. However, she emphasised that the SACAA does not vouch for aeroplanes fixed with second-hand parts, meaning all aeroplanes implicated in cannibalising are suspended from flying.

Simulator Training

Ms Khosa confirmed that this was in the pipeline. The simulator will not be used for only training purposes but for regulatory purposes as well.

Meteorological Training

Ms Khosa stated that the syllabus was reviewed two years ago and it was in line with international standards. She emphasised that the syllabus is what contributed to a positive rating with the ICAO. She assured the Committee that their concerns with to this area will be investigated and addressed.

Ms Khosa stated that South Africa is among the first countries to promulgate legislation to regulate drones, and has become a benchmark for other states. She said that the SACAA is busy revising and improving the legislation.

High attrition rate

Ms Khosa confirmed this was true. This is because the SACAA is the only regulatory authority in the country and hence fights for resources, including human capital, with the actors in the aviation industry. For this reason, the retention of employees was proving to be quite a challenge. She confirmed that a retention strategy was in place and currently under review.

Corporate Social Investment Spending

Ms Khosa requested to make written submissions to the Committee Secretary regarding this matter.

Mr Van Vuuren told the Committee that the SACAA spent R8.6 million for consulting professional fees as disclosed in their Annual Report. He referred to the National Treasury Cost Containment Regulations to support the fact that the SACAA does not normally use consultancies. The SACAA always made sure there is a skilled professional in the company before appointing a consultancy.

Ms Khoza stated that work on the Civil Arbitration Bill has not yet been completed as this was only recently introduced in Parliament but not deliberated upon as yet. She advised the Committee that the Department of Transport (DoT) will provide clarity on this matter.

Regulation of Helicopters and other light flight aircraft

Ms Khoza informed the Committee that this falls within the area of General Aviation and there are regulations in place. The SACAA was developing regulations to have all landing strips in South Africa registered.

Inter phase with the State Security Agency and the Ministry of Basic Education

Ms Khoza explained that the SACAA inter-acts with both the State Security Agency and the Ministry of Education. The SACAA has a National Aviation Security Committee that meets on a quarterly basis and the State Security Agency is part of this. Also the Ministry of Basic Education is heavily involved in the entity’s aviation school awareness programme.

Employment Equity in respect of people with disabilities

Ms Khoza informed the Committee that they had a target to employ four people with disabilities during the reporting period. She stated SACAA employed five people and hence surpassed the annual target.

High expenditure on staff related costs

Ms Khoza explained to the Committee that the SACAA is labour intensive. Mr Van Vuuren confirmed this when he spoke of the high labour costs. He emphasised that historically, the SACAA’s labour costs has always been between 72 and 75 percent. The SACAA is budgeting for a salary increase of inflation by 1.5 percent.

Before the Chairperson closed this session Ms Tolashe remarked that Ms Khoza had not addressed her questions related to transformation but had rather further problematised this matter. She stated that the issues of racism and the deliberate failing of students in South African Aviation Schools was unacceptable and needed to be addressed urgently.

The Chairperson asked the SACAA to make written submissions with regard to the issues raised. He then urged the SACAA to use its previous reputation for clean audits to improve its performance. He also urged SACAA to practice diligent oversight since the problem with Microsoft was not picked up within the organisation but by Microsoft itself.

After Mr India made some closing remarks on behalf of the SACAA, the Chairperson ended the briefing and the Committee took a brief recess.

Department of Transport

The Chairperson welcomed the Minister of Transport, Mr Fikile Mbalula.  He noted that the Department had sent an apology for the late submission of the report.

The Minister explained to the Committee the cause of Deputy Minister’s absence. She was attending a conference at UAE.

The Minister of Transport’s Briefing

The Minister said that most entities were depleted in the 6th Administration so there was a need to ensure the appointment competent staff. The Auditor-General had awarded the Department of Transport (DoT) an unqualified audit which was a good result, but given the circumstances regarding the depletion of most entities, there was still much to be done.

All aspects of public entity oversight were due for improvement as well as the implementation of audit and intervention plans. The Department was committed to ensuring that the repeating findings were eliminated and that the findings were adequately addressed. By the end of Oct 2019 all processes should be completed. The appointment of critical posts at management level would bring stability to the Department. Management in acting positions affected decision making and this should be tackled including service delivery. 

The Minister said that the Department would attempt to alleviate the pressure on the road infrastructure and to improve efficiency in freight transportation. The Department would facilitate the amalgamation of the Transport Economic Regulation Act and establish a single transport regulator with the aim of reducing monopolies in the transport sector. The Department would also facilitate the regional integration strategy which would enhance the country’s capacity.  The Carbon emission transition plan would be developed as part of the national effort to reduce greenhouse emissions by 42%.

The Department promotes and adheres to the National Railway Safety Act and National Rail Act to be responsive to the needs of South Africans. The PRASA rail and station modernisation programme are critical in the modernisation of transport. Through this programme, the Department planned to bring out new train sets to all corridors and ensure that all stations were upgraded. Job creation with the focus on women and people with disabilities would be the priority under the programme. The Department was committed to ensure that trains would arrive on time and safety on railway stations would be improved.

The Minister emphasised the Department’s commitment to increase the enforcement of traffic laws. It plans to get traffic officers on roads 24/7 and seven days a week. The Road network would be consistently inspected and checked to ensure that roads are always in good condition.

The Department has launched a programme to drive the necessary transformation in the aviation space. Regulations on electronic devices such as drones would be reviewed to ensure the compliance of operators.  The Marine Pollution Act would be implemented.

Public transport infrastructure and maintenance would be implemented through the construction and operation of integrated public transport networks over 13 cities over the MTSF. Through this project, job creation would be a priority and preference would be given to women, youth and people with disabilities. The Department‘s target was to achieve weekday passenger trips from the current 165,000 to 500,000. The monitoring of public transport in provinces will continue and the safety regulations will be strictly applied to all of those.

Briefing by the Department of Transport (DoT) on its 2018/19 Annual Report and Financial Statements

Mr Alec Moemi, Director-General (DG), Department of Transport (DoT) presented the Committee with the Annual Report and Budget of the Department in the 2018/19 financial year.

The key focus areas for the report are on the performance of the DoT which included its non-financial and financial results, as well as the Department’s ability to deliver on policy objectives. The overall performance of the DoT was 90% which meant that it had achieved 26 out of the 29 targets.

The key achievements of programmes 1 to 7 were outlined.

The notable challenges which were to be prioritised for remedial action were:

• the lack of consensus around critical areas in the Single Transport Regulator Bill;
• an unsubmitted bill, the National Rail Bill;
• the development for Airport Company Act and ATNS Act; and
• submission of Air Service Bill

Corrective measures for each of the challenges were provided by the DG in the presentation.

He reported on the progress and current status of the Human Resource Development Initiatives and briefed the Committee on the employment of the equity statistics.

In terms of governance, the DG briefed Members about risk management, labour relations, minimising conflicts of interest, strengthening codes of conduct, internal controls and audits. He also indicated to the Committee which areas had achieved progress.

Financial Performance 2018/19

Mr Collins Letsoalo, Chief Finance Officer, DoT, presented the Annual Financial Statements of the 2018/19 financial year.

Mr Letsoalo first presented the Committee with an overview report from the Auditor-General. The Auditor opinion was unqualified.

The report of the accounting officer was provided. It covered areas of the financial results, unauthorised expenditure, fruitless and wasteful expenditure, irregular expenditure, gifts and donations received, as well as deviations and expansion.

The statement of financial performance of the entity was provided. The Department’s surplus for 2017/18 financial year was R5.4 billion, and in 2018/19 it declined to R875 million.

The expenditure breakdown for 2018/19 as well as the expenditure on major projects for 2018/19 was provided.

Key highlights of the financial position were outlined. They were:

• on unauthorised expenditure which had increased by R980,000;
• bank overdraft in 2019 compared to cash and cash equivalents of R3.7 billion in 2018;
• prepayments and advances reduced; and
• Non-current receivables.

DoT Discussion

Mr Yabo welcomed the speech and presentation. He commended the Minister’s spirit to get on with the business of fixing the Department. He was delighted to know that the Department had finally appointed the Director-General. Commenting on disciplinary processes taken against certain employees, he asked the Department to do it within the confines of Labour Relations so that there was always solid evidence against those employees. He warned against abusing the process for use punitively and for personal vendettas. Litigation costs are expensive and thus he would not want the taxpayer’s money being wasted on paying employees who had gone to court because the Department did not comply with the relevant laws and regulations. He asked the Minister to explain the four cases that he had requested for condonement. Although those cases dated back to 2014, the amount lost was R638.5 million which was a huge amount of money. He remarked that he was given the impression that when it came to recovering lost funds resulting from fraud and corruption, the Minister seemed to be chasing small fish but giving away big ones. He said the Department had earlier touched on the topic around the amount of allocated funds it could not cover. On that score, he asked how the Department was going to close the gap in the budget since E-tolls were scrapped. South Africa enjoys one of the best infrastructural road networks in the world and user-pay is a principle. He asked how the Department planned to deal with those non-compliant people who refused to pay. 

Mr Hunsinger commended the presentation. Even in his capacity as an opposition party member, he had to agree that this presentation provided the most comprehensive report that he had ever seen in the past 5 years. It provided the broad broad scope of the Department’s activities, addressed and highlighted necessary details and created confidence in the Department. On board functionality, the report indicated that for the past five years, amongst 12 entities under transport, there were 54 vacant positions on board which undermined the structure and functioning of those entities. Furthermore, 6 out of the 12 transport entities posed a huge risk to the national fiscus. He emphasised the importance of having a functional board. On the regression of 20% amongst all entities, he said that the general findings of the regression were based on incomplete information. He said it needed to be clearer. On fruitless expenditure, he commented that only 1% had been recovered, 3% was condoned, 8% was written off and 89% of those were not even dealt with. He urged the Department to do something about it. He expressed his disappointment - although he understood the necessities regarding the R3 billion rand that was supposed to be budgeted for train commuters but had gone to South African National Road Agencies (SANRAL) – about the R5.8 billion rand for ordinary road service delivery which had to go to e-tolls. He asked what type of vehicle was used for cross border transport. He asked the Minister about the current state of hysteria among some truck drivers. He requested a comprehensive list of pipeline transport legislation. On the Minister’s remark around shaping up the Department, he asked whether this would refer to reducing the catering budget which he saw as a wasteful item.

Mr McDonald said that although the road fatality rate had dropped and the injury rate had increased by 23%, he still appealed to the Department to find a solution because injuries are equally as bad. For the R520, 000 spent by the RSR against PRASA, he asked whether the dispute could be settled within the Department considering that they are two entities which fell under the Department. The litigation is a waste of money. Mr Mey said that the Department was given R 435 million for bus services, however, R282 million had been paid to Glad Africa for consulting services which had produced dismal results. He thus asked if the Minister had been to the site to conduct inspection. The company Glad Africa was the same company that had been involved in irregular expenditure in Tshwane. He enquired about the freight to railway programme and added that although it’s an ANC policy, it has not happened as yet. He asked why security at national key points is being outsourced to private companies. 

Mr Mey asked if the SANRAL had the jurisdiction to do construction work on all national roads in SA. On the R62 there was about an 80km road from Cape Town to Port Elizabeth and the SANRAL had completed about 40km of the construction work about a year ago. He had been informed that SANRAL could not finish the rest of the work because it was within the jurisdiction of the provincial government.

Mr I Seitlholo (DA) enquired about the Shova Kalula bicycle programme. He had enquired about the programme from the Minister in writing on the 2 September. He did not get to know this programme from the Department’s APP but rather he had learnt about it from Minister’s Facebook post. He asked why the programme was not included in the Department’s Annual Performance Plan. ‘What is the total budget allocation for 2019/20 financial year on this programme’? ‘How many provinces and schools benefitted from the programme every year’? ‘How many bicycles have been allocated so far’? ‘Who are the service providers for bicycles and what were the procurement processes to determine the service providers’? ‘Who was responsible for the repairs’? He asked further how the Minister was going to monitor the Rustenburg Rapid Transport (RRT) project. R98 million rand had been allocated to the project while the municipality itself reported that due to budget constraints they could not do this project. ‘How will the Minister monitor the spending of the R98 million in such a municipality’?

Mr Mabhena commented on the oversight effectiveness of ITPNs (Integrated Transport Planning). He commented further on the challenges faced by the Free State Provincial Government and Buffalo City regarding the monitoring of the ITPNs. He suggested that the Department develop a tracking mechanism for better monitoring since 95% of the Department’s expenditure is used for transfers. Mr Mabhena asked if the Department could provide a timeframe around the completion of the project. Speaking on recovering the loss of expenditure due to fraud and corruption, he said that the Department said that a bill would be tabled at the end of the year in which 11 cases involving R170 million were indicated. He enquired about the progress and if any investigations and disciplinary action had been taken regarding the R42 million loss. Commenting on the prevalence of officials in acting positions in the Department, he asked when those acting positions could be filled with permanent employees. He asked about the handling of the conditional grant that had not been spent. Speaking on the lack of consequence management, he suggested that the Department establish a division to specialise in dealing with it. Although he noted that cases had been referred to law enforcement, he criticised the Department for its lack of pro-activeness in rooting out those people. In his view, making people aware of the severe consequence is an effective way to ensure that the level of corruption and fraud would be reduced.

Ms Nolutshungu said that she was glad to hear that the Department had prioritised the tackling of PRASA for its non-compliance. She remarked that she had an impression that there was a culture in which those serving on board positions were up for the lucrative compensation. She found that the same people that were serving on the board of PRASA were also serving on the boards of Intersite Investment and AutoSpec. She asked whether those people were being paid for all three positions. She honestly did not understand why AutoSpec was still operating. Although the company was declared insolvent, people were still being paid salaries and bonuses. This was ludicrous. 

Ms Tolashe asked the Minister when the reports were going to be tabled. As members of the Committee, they were required to assess reports and financial statements. On the issues surrounding Prasa’s and Transnet’s 2017/18 reports, she recommended the department to facilitate the interactions between PRASA and Transnet. The lack of interactions between the two entities resulted in the struggling of PRASA which needed infrastructure which was owned by Transnet. The Department indicated that consultants had been hired in the Department. She asked whether the role they played was routinely tasked or in specialised skills. Do they have a skills transfer plan?

Ms Ramadwa welcomed the Minister and his indication that change was imminent in the Department. However, she appealed to the Minister to accelerate the process because it was too long overdue. The Department had been left unattended to for too long. She remarked on the meetings with members of entities under the Department for the past 3-4 days, and said that those members seemed to have gotten a bit lost in terms of the direction of their entities. The policy unit of the Department needs to review whether some of the entities are still needed because of the wasteful expenditure that had been spent on them in previous years. She emphasised the importance of being economical under the current budget constraints. She encouraged the Department to set up a test for board members to ensure that board members needed to pass the test to know where South Africa was heading. On the issue of transformation, the board does not reflect the real demographics of South Africa. In future this Committee should not welcome a board which was dominated by men. She remarked that the Minister’s presentation gave her hope that change would take place in those entities. She suggested the Department to deal with the crocodile in the Department to make examples.

On the inputs made by the DG, she said the Committee was still expecting the refill for the vacant senior management positions. Acting positions cannot be a trend forever since it affected the productivity of an organisation. She asked the Department to give a timeframe around when those positions would be filled.

Mr Chabangu started speaking in Sothu. Mr McDonald said that some members had very limited knowledge of the language and asked for a translation service. The Chairperson offered to translate. Mr Chabangu expressed his concern about the lack of action being taken against irregular and unauthorised expenditure. He said that those involved were still working and insisted that those people should be suspended and the money should be recouped. Without penalties, corruption would still be flourishing. On the issue of Early Child Support within the vicinity of international airports, he said that the Free State would not benefit as it represented the poorest of the poor and he proceeded to appeal to the Minister for it (the Free State) to get a fair share of the ‘slice of cake’. 

Mr Mangcu reminded the Committee and the Department of the massive backlog in the work accumulated over the past five years. The commitments made by the current Minister were also what the current Deputy Minister had said when she was in the same position. He wanted to see real actions not words. He called the irregular expenditure a chaotic situation. He had heard that one entity of the Department was leasing tyres. There was something fundamentally wrong with regard to safety on the roads. No less than 60 people had died on roads in the past weeks and having more traffic officers was not the solution. An intelligent solution was needed. Many officials did not want to think. He commented on the lack of accountability within the RTMC and RTAI. He asked the Department to encourage the entities under them to share and work together instead of fighting amongst each other.

The Chairperson highlighted the issue of Transnet which he called the elephant in the room. The Committee would be behind the Minister if he intended to take them on (referring to Transnet). On the E-tolls he said that people in leadership positions must be prepared to lead people correctly. On transformation in the Department, he said that there was no tangible transformation in the Department. He explained the need for the Minister to be present because Members could express themselves better.

DoT Responses

The DG assured the Committee that disciplinary processes would not be used for personal vendettas. The Department was currently reviewing all cases to ensure that all cases investigated are substantiated with merits.

On vacancies and Acting positions, the DG said that the Department was aware of the severity of the issue and the process of appointment was under way.

On the regulator, the DG said that the Department relied on Section 46 of the PMFA to operate in this environment where there was no accounting authority. The Council recognised the need to settle the tariff and a special resolution had been taken.

On irregular expenditure and under-spent expenditure, the DG said that more than half of the under-spent expenditure R66billion has been spent on rural programmes. There were many needs and areas that required funds. He reminded the Committee that the Department could make savings in some situations because there is no perfect balance in finance.

On non-financial performance, the Department had shown auditors the pre-determined objectives provided by Parliament and compared this to what the Department had achieved. On whether the Department had set enough objectives, he used an example of the unregulated taxi industry which remained an issue as the APP had also indicated. The Department worked with the taxi industry to regulate more taxis. The Department had achieved what it was mandated to do.

On the shifting of funds, the DG said that from the Department’s point of view, it certainly did not support them spending that money. In order for them to kick-start the process, the fund was definitely needed. The Minister would table a report to the Committee on the capacity requirements of the two entities. He said that there had been an improvement and even asked Members to visit. The Department had started to reclaim the corridor-to-corridor by PRASA. The rate of paying tickets had increased from 15% to 68% and there had not been a single incident on the route. Measures are in place and the turnaround would happen. Legislation would be submitted in due course.

The Department did not have the authority to freeze the account of any of the municipalities. The Department had been intervening to look at the issue. The transferring arrangements were changed which included the conditions surrounding the transfer of funds.

On the freight to railway issue, the DG explained that the Department had experienced impediments around finalising policy as well as the templates. Assessments had been done and the Department believed that the signal transport economic regulator would solve all these problems.

He said that it was possible for the SANRAL to take over all national roads but it had to be negotiated with all provinces concerned. Currently the fiscus was not in a position to inject more funds into the project. The issue is that provinces wanted to give up their roads but wanted to keep the fund. Up till now, there had been two provinces that had signed over the roads to SANRAL and the Minister was due to be in Gauteng to sign over part of the road in that province as well.

On the Shova Kalula bicycle programme, the DG said that it was included in the APP under non-motorised transport but it was not specifically mentioned.

The Department has been monitoring all the IPTs for quite a while both on financial and operational levels. The DG said that the challenges they faced were not of the Department’s making. In fact, the Department had assisted in those areas. The Department also produced a monthly report to address those challenges. 

The time frame for the 65% local content would be ready by 2032. It is currently in the conceptualisation phase. And once it has happened, the factory will become a new state-owned entity. There is an AU (African Union) resolution on it for the future trains. The PRASA had been given a booking for orders for trains and the PRASA had seen the greatest transfer of skills. Most trains will be done by South Africans in due time.

The DG said that the Department did have a committee specialised in controlling the loss of expenditure and its functions were exactly what the Member had described. The division was under the charge of the CFO who looked at who should recover the money from whom and what items were to be recovered.

On getting the big crocodiles, the DG assured the Committee that it would happen and PRASA would be the first one to experience the bite.

On AutoSpec, the DG explained that his Department’s role is to only intervene if there was failure. The Department does not see it as a long-distance carrier for passengers. It was designed only for short-distance travel. The affordable cost of AutoSpec could really help the poorest of the poor.

On the issue of consultants, the Department did indeed do a review on the number of consultants, and the Department was building a ‘new’ capacity to reduce the number consultants.

The Minister responds

The Minister commented that this session was a fair session. He expressed his confidence in his Department that it had a plan to turn things around. He commented on the running down of entities saying that it was a deliberate stunt by some people who did not have the state’s interests at heart. However, the Department had an obligation to know about the activities within those entities that they had paid money into. In his first 100 days as Minister of Transport, his priority was to bring stability to the Department. For instance, the appointment of a DG with the concurrence of a President was an example, and moving forward he would ensure that all DDG positions were occupied. He reminded Members that when he first arrived at the Department there were only 3 DDGs. In future Committee meetings, he wanted the DG to come with the DDG of each and every branch to ensure clear accountability.

On the issue of boards, the Minister said that the task was not easy. The normal procedure in the Department was that these appointments were made on the merits of the CVs that had been submitted. He expressed his concern over this procedure and emphasised the requisite skills needed for those entities under his Department. In the long term, he would look at policy issues regarding rationalisation as well as having board appointments passing through the Cabinet.

On the refilling of vacancies, he said that he cannot run PRASA with all acting positions.

On the bicycle programme, he assured members that this programme could even create jobs if harnessed properly.

The Minister did not want to answer the question around Transnet now.

The Minister acknowledged that the Gauteng Freeway Improvement Project (GFIP) was badly planned. The programme was designed for Gauteng to deal with the high level of traffic congestion. The Department was now undertaking proper consultation where key issues were being addressed. He emphasised the importance of dialogue that needed happen between government and the public. He asked for the support from the Committee and the broader society to come to realise that nothing is for free.

He expressed his dedication to ensure technological upgrades in his departments. Body cameras would be provided to improve surveillance. Although the Department had 22,000 traffic officers, a technical approach would be needed because criminals only break laws at night. That was also the time in which most of those fatalities happened. The Minister also mentioned his plan to roll out traffic officers working 24/7 as well as 7 days a week.

The Chairperson thanked the Minister and his delegation for their presentation.

Briefing by the Airports Company South Africa (ACSA)

The Chairperson of ACSA made some opening remarks and introduced the briefing delegates. He handed over the presentation to the Acting CEO, Ms Bongiwe Mbomvu to provide highlights on the presentation. Ms Mbomvu told the Committee that the presentation would show that the ACSA has sound financial performance even though this was impacted upon by lower than expected traffic volumes and non-aeronautical flows. In addition, she stated that the ACSA received an unqualified audit with findings and that the ACSA met 82 percent of its Key Performance indicators. The said ACSA did not perform well in terms of non-aeronautical revenue. Five of the South Africa’s airports were recognised for managing and reducing carbon emissions and the ACSA was expanding its technical and advisory services to countries including Ghana, Liberia and Zambia. Finally she informed the Committee that the ACSA had established a strategic partnership with the Thailand Airport Authority.

Ms Lindani Mukhufwani, Acting CFO of ACSA, took over the presentation to brief the Committee on ACSA’s financial performance. She said that there was an increase in revenue from R6.7 billion in 2017/18 to R7.1 billion during the reporting period. This was despite a sluggish economic environment. On Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA), she said that due to significant cost pressures against the ACSA’s revenues, this dropped from R3.0 billion in 2017/18 to R2.8 billion. On profit obtained during the reporting period, this decreased from R552 million in 2017/18 to R227 million due to various reasons including accounting impacts such as higher provisions for bad debt.

On the Abridged Comprehensive Income Overview, Ms Mukhudwani explained that Employee Costs increased by 16, 8 percent because ACSA had to capacitate in human resource resources in order to improve service delivery. She also indicated that Employee costs accounted to a larger percent of ACSA’s expenses, followed by utilities, security, repairs and maintenance and information systems expenses respectively. 

On the SCM governance, because of the recurring irregular expenditure, the ACSA is changing its governance strategy to decreasing efficiency and increasing compliance. The findings reported by the AG had to do with non-compliance.

Ms Mbomvu briefed the Committee on transformation at the ACSA and said that it was involved in various programmes directed at promoting education and, youth and women’s empowerment in South Africa. On key performance indicators, she stated that out of six indicators, the ACSA had not met two targets namely, job creation and non-aeronautical revenue. The issue of job creation was not a worrying factor since the ACSA will catch up on this as the year progresses. She then handed the presentation over to the Chairperson to make the closing remarks.

ACSA Discussion

Mr Mabhena enquired about the 58.9% profit decrease from 2017/18 to 2018/19 financial years and asked what was the cause of it. He asked whether analysis had happened at senior management level at ACSA; what contributions inter-continental hotels could make and about any other investments that could contribute to the profit of the company; how the decrease in profit would impact on the expansion plan of Cape Town International Airport and if the Department had any concrete plans to address recovering debt. Speaking on debt recovery, he expressed his dismay at ACSA’s inclined stance to classify some debts as unrecoverable as this was found to be unacceptable.

Mr McDonald thanked the Chair and the ACSA for the presentation. He asked the Department to explain the payment structure and the particular payment that got them grounded recently. He enquired about the progress of the negotiations on Tshwane airport and asked if there were any other airports that might need the Department’s assistance. On the decline of profit indicated in the income overview, he asked what impact the exchange rates and international transactions had on the decline. He asked ACSA to explain how it had affected the business model and thus suggested that the Committee visit the airport to perform their oversight function. He commented that the single runway at Cape Town International Airport cannot sustain the amount of tourist visits and asked when the project would begin. He highly recommended that it got off the ground soon. On Infrastructure maintenance, he reported that there were serious problems with the lifts, elevators, lights etcetera at some airports and asked when they would be repaired. He asked when the airports’ names in Port Elizabeth, Cape Town and George would be changed to reflect the new South Africa.

Mr Yabo welcomed the presentation. He recognised the positive contribution of the report. He hoped the ACSA would fervently pursue clean audits. He reminded them to be mindful of the transformative agenda. He remarked that it would be understandable to find it hard to drive real transformation in the private sector; however, he hoped that a state-owned company could be a role model for transformation in the private sector. He asked Members to reflect on the real meaning of transformation. On the 17% employees’ cost in the report, he expressed his shock at such a drastic increase and wanted to know what change in the staff component had contributed to such an increase. He wanted to know what the norms and standards on security expenditure were. He asked the ACSA what criterion was used to determine if an infrastructure needed to be maintained. He said the Committee needed a timeline for the lifespan of the infrastructure. He used an example where he had heard that the Department was repairing items that were working and this he considered to be a waste.

Mr  Hunsinger said that the Committee had been kept well informed of the performance of all the entities and was thus able to come to their own conclusions about assessment of course with the assistance of the Auditor-General’s report. The ACSA matched 4 out of 5 non-compliance areas according to the AG’s report: procurement, contract management, submitted financial statements and prevention or unauthorised and irregular expenditures. The ACSA was also on the bottom 12 entities in terms of proper record keeping, daily and monthly controls, reviews and monitoring compliance and risk management. In light of those bad audit outcomes, he sought clarity around accountability on tax management responsibilities due to a R60 million penalty from SARS. He asked ACSA to provide the Committee with the organisation’s structure on tax management. On credit loss on trade, he wanted ACSA to expand with their insights. On the issue around minority shareholders, he commented that the case had been in court for years, hence he enquired about the current state of the court case. He requested an overview of all the internal control inefficiencies and other investigations being undertaken in the ACSA. He was optimistic to hear about the appointment of a CFO and looked forward to seeing improvement in the financial outcomes in the future. He asked why the ACSA had to collaborate with other countries beyond borders as he believed South Africa had the necessary capacity. He suggested to the ACSA that there was a huge market in domestic regional tourism. He asked if ACSA could equip small airports to boost domestic travels. 

ACSA’s Responses

The ACSA made an overall remark that the issues raised by Members were also the issues that it had already identified. However, they expressed their appreciation for the inputs made by Members.  The ACSA acknowledged the lack of depth of certain aspects in the presentation and would strive to improve in the future.

On transformation, the ACSA acknowledged the need for a review on its transformation policy. The current policy focused more on social responsibilities, while real transformation should be pointing towards radical change. 

The ACSA recognised that that there was a collapse of the system within Supplier Chain Management (SCM) of the organisation. Hence, all issues around irregular expenditure were a direct result of the collapse of the system. The ACSA had taken steps to amend the mistakes as the new Chief Financial Officer had introduced a new governance operating model to reduce irregular expenditure.

On the Early Child Scholar Support system, the ACSA currently focused on Early Child Centres in informal settlements. On whether it could also go beyond areas that are not within the vicinity of the airport, the ACSA admitted that given the limited resources it could only but try.  Given that the majority of the resources that had been invested in areas within the radium of airports, it obviously had not achieved as much as it could have. However, as the amount of resources grew, the ACSA would go beyond the vicinity of airports to cover more areas. 

The ACSA explained to the Committee that Bram Fischer International Airport was not an international airport, it was a regional airport.

Mr Girish Gopal, Group Executive: Technical Services and Solutions of ACSA explained about the jet fuel energy issue. The ACSA employs two main criteria. One is the national norms and standards to ensure that fuel was of a certain quality; two was the minimum threshold of a R1 billion insurer. The ACSA did engage and work with every single entity. This had helped to facilitate the process so that they could become part of the database.

Mr Mangcu said his question was not answered.

Mr Gopal commented on the issue of transformation and said that although he did not possess the exact figures at that moment, he can assure the Committee that the ACSA did measure the percentages of the fund used to support businesses owned by blacks and women.

Ms Mukhufwani responded to questions around fruitless and wasteful expenditures, CIDB ratings, the Auditor-General’s report as well as investigations around irregular expenditure. On fruitless and wasteful expenditure she said that it resulted from penalties from the South African Revenue Services (SARS).  The SARS had recently re-audited tax years from 2011 to 2016 and reissued assessments of tax amounts owed from those audits. The ACSA was in the process of analysing the SARS’ assessments and has submitted its objections to some of those amounts. If the objection is successful, then the currently classified fruitless and wasteful expenditure would be recouped

On the Construction Industry Development Board (CIDB) rating, Ms Mukhufwani said that the ACSA had taken steps to restructure the supplier chain management process. Due to the huge amount of construction and maintenance contracts, many weaknesses were exposed. At the ACSA, a team had been formed to be familiar with the CIDB rating in order to see what had gone wrong in the SCM process. Also, HR had begun taken disciplinary action against those who had been involved in corruption and fraud.

On the compliance issue, according to AG’s report, the ACSA had complied with some recommendations in terms of the National Treasury regulations. The ACSA had embarked on a process to draft regulations that were derived from the AG’s recommendations. It also established an internal audit section with the aim to audit and detect suspicious areas to reduce irregular expenditure.

A member of the ACSA said that the supplier chain management environment was a challenging one. The ACSA had experienced fraud and corruption on a tremendous level in answer to which some employees had tended their resignations because of the newly tightened internal control measures. The ACSA had had a discussion with the Auditor-General’s office on the matter and expressed its relief that the “rotten potatoes” were leaving. She said that she was optimistic that overall performance would be better next year

On the percentages of black employees, she provided the following figures:

• key positions 100%
• senior management 87%
• professional 88.5%
• skills and technical staff 90%
• junior staff 98.4% 

So the ACSA’s overall percentage of black employees was 93%.

The Members said that the ACSA would always assist airports when they were requested to do so by those municipalities. The main objective was to share expertise in order to smoothen the running of those struggling airports. She mentioned that it was on the company’s agenda and interest to run all the airports in South Africa. The example she used was the airport in Umtata.

Ms Mukhufwani explained that the ACSA did experience some difficulty in collecting debt from SA Express. However, the airport company actively engaged with the CEO and devised a strategy to recover the outstanding debt. SA express had agreed to the new terms. She assured the Committee that the ACSA would not just leave debt as it was and it would do everything in its power to recover debt. What was provided in the slides was to show members that there was a risk that they might not be able to recover the debt. It was not to indicate the entity’s wish to write-off debts. She reminded the Committee of the ACSA’s low debt level.

She said that the ACSA recognised that there was a security challenge at the airports. The ACSA was working with police force to see what they could do to strengthen security at airports. That was why there is an increase in the cost.

Ms Mukhufwani clarified the issue of operating expenses. The ACSA was impacted upon by tariffs such as the 5.8% tariff increase in 2019 despite the decrease of 35% in revenue in the previous financial year and the 0% increase prior to that. The cost control was looked at on operating cost efficiency such as cost modules. The other issue she clarified was the property owned by the ACSA. She clarified that it was not the fault of ACSA’s portfolio but rather it was influenced by international market trends.

On the Brazil investment, although the loss has decreased, it was still an investment with a substantial loss. There was no equity injection in the 2019/20 financial year and an assessment had been made that it would be profitable in the next financial year. The economic performance of Brazil and exchange rate had an impact on this investment.

In terms of the name changes of airports, the ACSA had invited public participation regarding the name changes of the airports in Kimberly, East London, Port Elizabeth and Cape Town. The request to begin name changes came from a shareholder from the Department of Transport and what the ACSA did was to respond to that request. Recommendations had already been submitted to the Minister. In terms of Port Elizabeth International Airport, the Nelson Mandela Bay Municipality had started another process of public participation in re-naming, so the ACSA decided not to run a parallel process.

On the issue of Bram Fischer international airport, it was called ‘international’ because of the license of those airports. International flights are allowed to land in those airports. Norms and Standards guide the operations at those international airports such as having immigration ports there to check visas.

On the security staff course, the ACSA needed to increase the airport parameters due to land acquisition especially in Cape Town.  The ACSA had to introduce what was called a K9 Unit which was quite pricey. The scope for regional airports also had to be increased.

On the increasing costs for staff, the ACSA reminded Members that three new divisions had been introduced. These were the business development division, the infrastructure division, and the technical division. Those divisions did not exist three years ago. That was why there was an increase in staff costs.

On the maintenance of infrastructure, the ACSA had put together a plan to build new capacity for the infrastructure.

On replacing equipment, the ACSA said that there is a lifespan on each piece of equipment. The ACSA would review of those lifespans and then refurbish those items.

On the court case, the ACSA would be resolving it quickly by next week.

On record keeping and management in the AG’s report, the ACSA’s SCM had developed a documentation keeping method. In the past, each airport kept its own records.  The result was that there was a lack of uniformity. What ACSA did was to centralise the process to ensure uniformity in terms of the application of policies and procedures. The ACSA was also in the process of digitalising information and documentation for record keeping.

In terms of the responsibility for tax management, the ACSA does have a tax revision unit which was why it was able to raise objections to the SARS regarding the disputed amount.

The ACSA explained that it needed to partner with overseas airports because it needed to be exposed to the international world to understand what South Africa did not have. Airports can only learn and grow through international interactions.

Ms Mukhufwani said that hotel operation had generated a profit of R155 million rand through its operations. Under the investment portfolio, it included hotel investment property and land that the ACSA holds for development as well as car parking facilities.

An unidentified Member of the Committee had enquired about the recruitment process at the ACSA and the acting position for the CFO. The ACSA had replied that there was no change in terms of the recruitment procedure at ACSA. The appointment of the CFO could only be made after the appointment of the CEO. The delay of the appointment of the CEO had a bearing on the appointment of the CFO. The Department was in the process shortlisting and conducting interviews for a CEO.

The Chairperson stressed the importance and responsibilities of the officials’ present roles as politicians to provide guidance and leadership for the people. The vision of the country was to work towards a rainbow nation. On transformation he said that the department’s employment demographics do not reflect the true demographics of South Africa. 93% black employees did not mean that transformation had been achieved. He highlighted the exclusion of White South Africans.

The Chairperson asked why security was outsourced at national key points. What should happen if people come through your airports with drugs? There are nations that used their own parking and security. Why has no one mentioned this? He asked if it was the norm and if it was going to be changed. Duty free, why do we have duty free for someone not from South Africa? SA was losing revenues. Would we not be better off if we insourced staff?

The Chairperson commended the ACSA for its audit outcomes and for their improvement.

The Department said that they remained the same but had improved on reducing irregular expenditure.

The Chairperson said that this was precisely what he had said and the ACSA was on its way to achieving a clean audit. He issued a caution about the meaning of transformation because it was not only about colour but also to show people of South Africa to increase their confidence in the government. The country was creating a situation where the majority was plunged into crisis and the minority was benefiting.

He expressed his puzzlement on how the people who had felt the brunt of apartheid were now actively perpetuating the same pain on other people especially those in power. In 25 years, transformation had still not been achieved. 93% of the population were black but a balance was still needed.

The meeting was adjourned.