RAF & RTIA 2017/18 Annual Reports

Meeting report

Road Accident Fund (RAF): Annual Report

Ms Lindelwa Xingwana-Jabavu, Acting Chief Executive Officer (CEO), RAF, told the Committee that much was still expected from the Road Accident Fund. Significant challenges arose and each was managed in line with existing policies and procedures. Despite the challenges, RAF had succeeded in fulfilling 91% of the approved annual performance plan (APP) targets. A great effort was placed on fulfilling the strategic plan and APP deliverables, addressing the challenges and risks, and supporting the Department of Transport (DoT) transition from the RAF to the Road Accident Benefit Scheme (RABS). They were currently compiling a report on all theissues raised by the public, and the document would be forwarded to the Committee.

The RAF’s “On the Road” programme was still continuing and was also supported by the provincial offices because it was a national programme. It had started a conversation with the South African Post Office (SAPO) for a partnership, because it had a big footprint. Fraud was a risk they had to deal with. There was a forensic team that always traveled with the RAF On the Road to look at issues of fraud. The entity had discovered that fraud was not committed by the lawyers only, but by medical people and RAF employees.

She reported that the total revenue during 2017/18 financial year had increased to R37.34 billion from R33.34 billion in the previous year. The number of permanent employees had increased from 2 676 to 2 754, and this was because of the 9c/l increase in the RAF fuel levy from the beginning of the financial year. During the period under review, it had registered and settled more claims in cash than ever before and reduced turnaround times while also increasing its footprint. More than 66 000 claimants were engaged through the award-winning RAF On the Road community outreach programme and other RAF promotions and activations.

It had registered 271 933 new claims and finalised 203 493 during the 2017/18 financial period. The primary target of reducing the number of open claims had been exceeded. The number of open claims was standing at 198 285, which exceeded the target of 207 461 open claims set for the 2017/18 financial year on the back of increased registrations of new claims.

Mr Victor Songelwa, Acting Chief Financial Officer (CFO) and General Manager for Finance: RAF, said the entity had received an unqualified opinion with material findings. RAF's financial statements were presented fairly, in all material respects, as at 31 March 2018. The statements were free from material misstatements. The management letter confirmed a stable control environment. Regression was noted in performance reporting and compliance with legislation. 27 issues were raised in the management letter. 25 were of an immaterial nature, while two were of a material nature. Non-compliance with the Public Finance Management Act (PFMA) had been noted in the R337m for Project Siyenza tender completed during the 2013/14 financial year. The value of the contract was spread over the 2014 to 2017 financial years. The weakness in internal controls was listed as the root cause by the AG, and that had been already improved and corrected. On predetermined objectives, a concern was raised about the method of calculation of finalised claims. The performance information reported was adjusted to reflect the recommendations of the AG.

(Graphs and tables were shown to illustrate budget allocation and expenditure)

Road Traffic Infringement Agency (RTIA)

Adv Mncedisi Bilikwana, Company Secretary: RTIA, briefed the Committee on the governance matters of the entity. He reported that the entity had met Parliament on 10 occasions during the year on the Administrative Adjudication of Road Traffic Offences (AARTO) Amendment Bill. It engaged with eight provincial legislatures on the tabling of the Amendment Bill, with the exception of the Northern Cape legislature. Public hearings on the Bill had been held in six provinces by the end of the financial year.

Significant challenges continued regarding the interpretation of oversight and operational responsibilities. To enhance governance, the entity underwent a compulsory five-year external quality assurance audit and was found to be satisfactory. RTIA had scored highly on the King IV good governance code. The risk management framework had been updated and included strategic risks which were overseen by the board.

The internal audit unit continued to operate independently of the management and reported to African Rainbow Capital (ARC), with the AG placing reliance on its work. The fraud policy and fraud prevention plan was approved by the board. An independent anti-fraud hotline continued to operate and nothing significant was reported during the year. The term of the board expired on 31 July 2018, and the entity was awaiting the appointment of a new one.

Mr Japh Chuwe, Registrar/CEO: RTIA, took the Committee through the status of the observations the Committee made during 2016/17, and the general performance overview. He said the Agency had updated its key performance indicators (KPIs) to ensure alignment to SMART principles. The Agency had committed to continue with a high performance and to aim for 100% achievement from the 2018/19 APP. It would put more emphasis on road safety innovation and reporting on the impact of its innovations.

He said the funding model had been finalised. Subsequent to the promulgation of the Adjustments Appropriations Bill (AAB), the relevant aspects would be updated. The decline in the Agency’s revenue was directly related to the decline in infringements issued by the issuing authorities. The decline was greater for the 2017/18 period. The Agency continued to monitor and enhance its internal system of controls, and reported on compliance to the ARC and board every quarter. It was noted the surplus of the Agency was related to building adequate reserves to support the national rollout. The huge surplus was not at the expense of service delivery. The entity had continued with its stakeholder engagement processes in preparation for the rollout.

The RTIA had continued international leverages through the Monash University Accident Research Centre (MUARC) and the United Nations Road Safety Collaboration (UNRSC) and had further established relations with Swedish Transportation Agency.

Mr Chuwe added that the Agency had disbursed a total of R181m to various stakeholders. It had continued to successfully suppress numerous litigations which could have had serious implications to the Agency and key role players. It had obtained an unqualified audit opinion, and had increased revenue collection by R20m compared to the previous year. It had achieved 88% of its APP targets for the year under review. This was the seventh consecutive year that the Agency had received the highest audit opinion. The AG had reported the entity had for the year under review complied with all relevant legislation. The Agency had not incurred any fruitless expenditure during the period under review.

He said the RTIA was assisting various road traffic departments and issuing authorities to enhance effective law enforcement by monitoring adherence with road traffic law enforcement programmes, plans and targets; the provision of performance information on issuing authorities collected by means of the AARTO process; and the easy identification of infringements with a view to informing interventionist strategies and operational plans.

On human resource matters, the board had approved a new organisational structure. The Agency had prioritised the learning and development of staff. Five employees had been exposed to specialised road safety training through the MUARC and Swedish Transport Agency. An internship scheme had been implemented and 20 young graduates were provided with core skills to increase their employability. The performance management framework was implemented for the second year to track, encourage, and reward outstanding employee performance. A recognition agreement was signed with a second labour union which became the majority representative union. The key challenge remained the ability to attract representative employment equity candidates.

With regard to challenges around legislative deficiencies impeding implementation and communication and empowerment programmes, he reported that the progress of the Amendment Bill Promulgation which had been approved by the National Assembly on 5 September 2017 was now at a final stage with the National Council of Provinces (NCOP). The entity was leveraging on mass-based community outreach and empowerment programmes through the Enterprise Development (ED) and inter-faith movement. A request for Cabinet approval of the declaration of a national prayer day for road safety had been submitted. For challenges on the comprehensive coordination and stepping up of national rollout preparations, the Agency had proposed regular engagements with all stakeholders and continuation of extensive educational and communication programmes, which include electronic and print media.

Ms Palesa Moalusi, CFO: RTIA, briefed the Committee on financial information. She said the significant increase in operating expenses was due to the education and awareness campaigns. The Agency had heeded the call of the Public Protector and the shareholder to improve on education and awareness of AARTO, in line with the Agency’s core mandate. The infringement fees had increased by 17.83% from the prior period. The infringement revenue was still below expectation as a result of the non-issuance of camera-generated notices by the issuing authorities.

Current liabilities had increased significantly due to the request by National Treasury for the Agency to surrender the prior year’s surplus up to R69m. This surplus was raised as a payable due to the National Treasury should the Agency’s request to retain it be finally denied. The Agency’s cash reserves were still available to settle this debt with National Treasury should the appeal process be unsuccessful. The Agency had faced several challenges during the 2017/18 financial year. These included the diminished law enforcement activity by issuing authorities and the declining economic performance of the country which continued to put the Agency under tremendous pressure.

Despite the deficit for the year, the Agency had remained a going concern into the foreseeable future. This had been noted in the strong financial position reported last year. The Agency was in a strong solvent position, with a solvency ratio of 0.57%, meaning that the Agency’s total debt made up only 0.57% of its total assets. Stakeholder engagements continued to be the core activity in preparation for the AARTO roll-out readiness towards the successful implementation of AARTO nationwide.

Ms Moalusi pointed out that during the 2017/18 audit, the AG had raised irregular expenditure for goods procured through an approved deviation. The entity went on an approved deviation to purchase goods directly from a large wholesaler in order to eliminate commission costs and mark-ups. Savings were realised by the entity in this regard, due to discounts. The Agency had made significant strides in improving its financial management, while ensuring cost containment measures were strictly adhered to where possible.

The audit and risk committee was fully and properly constituted for the year under review. Its audit report complied with all its responsibilities in the PFMA and Treasury regulations. The audit committee report confirmed the effectiveness of the Agency’s internal controls and the assurance given to the board and shareholders about the business of the Agency and its healthy financial status. The audit committee report confirmed it had evaluated the Agency’s financial statements and had satisfied itself about the accuracy.

She concluded that the Committee’s unwavering support towards the RTIA had not gone unnoticed, and it wanted to be at the forefront of change to leverage on  game-changing information communication technology (ICT) environmental platforms and opportunities of the fourth industrial revolution (4IR) and artificial intelligence (AI) for enhanced road safety.

(Graphs and tables were shown to illustrate budget allocation and expenditure)

Discussion

Deliberations with RAF

Mr T Mpanza (ANC) asked if the RAF had a proposal to address the shortage of funds, and whether it had an anti-corruption strategy and unit in place. He wanted to know to which institutions the corrupt activities referred. What was the view of management about the RAF's bill – did it support the status quo, or was it in favour of the new dispensation? He commented that it was good to have a clean audit, but stressed it should be merged with good, quality service. He added it was good to learn that disciplinary actions were taken against transgressors, but the punishment was very light and there were no money recoveries and dismissals mentioned in the report.

Ms Xingwana-Jabavu explained they always have interactions with the National Treasury for more money, and it was keen to help the RAF to move to a new dispensation. She also indicated the APPs had a target around fraud. The RAF had got a fraud prevention policy and there was a forensic unit that reported to the chief strategic officer, the Special Investigating Unit (SIU), the Hawks, and other law enforcement agencies. 514 cases had been referred to the SA Police Service (SAPS). The RAF had a panel of attorneys and everything goes through a tender process and panel of forensic experts for work that could not be done internally.

She further indicated the entity was driven by the Department of Transport. The focus was on rehabilitation so that claimants could go back to a normal life, so it supported the new dispensation. On disciplinary actions, she said that whatever sanctions the HR unit came up with, everything was informed by labour regulations. There were instances where people had been expelled by the entity.

Mr M Sibande (ANC) commented that the report had not touched on the status quo, seeing that there were many challenges facing the entity, and the RAF board was working under difficult circumstances where information was constantly leaked. He asked what the problem was, because the AG had highlighted regression though the management had corrected some of the AG’s findings. He wanted to understand what the RAF did in circumstances where a hitchhiker got injured in an accident. Why was the bad debt written off? He asked for clarity on the R3.5 billion that was received every month and the R12 billion that was always claimed every year. He did not understand why the RAF was still owing claimants money when it was receiving R3.5 billion every month, because when the R3.5 billion was multiplied by 12, it was more than R12 billion. He wanted to know if it was possible for the Committee to have a breakdown of all people involved in fraud, because 10 people were reported to have been arrested, but there had been 11 convictions. He also asked that the Committee be provided with the location of the rehabilitation centres, because during the oversight visits there had been concerns over them.

Ms Xingwana-Jabavu explained that since the new board had been appointed, no leakage of information had been reported.

Dr Mantsotso Mathebula, Board Chairperson: RAF, confirmed that the leaks had stopped so far. As members of the board they needed to be accountable to each other and ensure things discussed by the board remained within the board. Matters had been discussed with the new board not to leak information and limit risks.

Ms Xingwana-Jabavu said when a hitchhiker got injured during an accident, one had the right to claim because one was a passenger, not a driver. She also said that R12 billion was the money for processing and paying claims for the whole year. The R3.5 billion was the grant the entity was receiving every month. Prioritised claims that had been in the queue for a long time were paid from a portion of the R3.5 billion, and this did not mean productivity stopped just because some monies were taken from the grant.

Pertaining to the breakdown of fraud cases, she explained that the 10 arrests were made during 2017/18 period, and did not go to courts. The 11 convictions have gone through the courts and the convictions were done during 2017/18, but some of the cases had started around 2015.

She said information on the rehabilitation centres would be submitted in writing. It was important to have sufficient rehabilitation centres as part of the public health. The entity had had discussions with the Health Department on what they would need in terms of rehabilitation centres.

Dr Mathebula said he was of the view that the RAF needed to collaborate with other entities to make the lives of road accident victims more comfortable. It had to ensure road accident victims were not left at a disadvantage. On the issue of convictions versus arrests, he said there were cases that were in the courts to be adjudicated. There were people who had been arrested, and the courts continued to update the entity on the progress of those cases. The RAF was reporting on convictions irrespective of whether the arrest had happened in the year under review.

Mr Songelwa explained that the bad debt was written off because the bulk of fruitless expenditure came from the sheriff’s costs and were not recoverable. He said the regression pointed out by AG was the result of the 2013 Siyenza Project. The entity had appeared to be regressing, but when the AG understood the whole story, it had given the RAF an unqualified audit.

Mr Sibande remarked their intention was to satisfy themselves with the service RAF was rendering to the people. Allegations of embezzlement of funds had been raised. The entity should convince the Committee so that it could convince other outside people. What was killing most institutions was the lack of compliance and lax internal controls. He was not happy with the explanation of the R12 billion vs the R3.5 billion. The entity should have stated the claims were fluctuating, and state things clearly.

Mr C Hunsinger (DA) commented that the RAF board was in a unique position because its responsibilities covered a broad spectrum according to the Act, unlike the other boards they normally interacted with. He found it difficult to understand why the board allowed a payment of extravagant bonuses, even if the entity had achieved an unqualified audit. He wanted to find out about the criteria that were used to justify exorbitant performance bonuses at all levels of management. More than R200m had been paid in bonuses, and he wanted to know who had come short to ensure bonuses were paid. He asked why creditors were not paid within 115 days, and how that was justified to creditors. He also asked for an explanation concerning the re-evaluation of assets that had to do with a piece of land and a building. He did not understand how the calculation was done because the land value was appreciating while the value of the building was depreciating, yet the property (building) was not in the entity's name. He asked how the entity was planning to address all the supply chain management (SCM) challenges, because a particular deal was red-flagged by National Treasury. The deal was stopped and was valued at R60m. He wanted to find out which of the two appointment processes that were followed regarding the CEO position should be noted as fruitless and irregular expenditure. He enquired if the current board was permanent or temporary, because the previous board had been dissolved in June 2018 and the new one was appointed in July. He wanted to know what the outcomes of the ICT customer satisfaction survey were and what KPIs would be expected from that research. He enquired what the breakdown was for the money received from the fuel levy for the victims of road accidents. Finally,, he wanted to know if the vacant internal audit position had been filled.

Dr Mathebula said the internal audit post had been filled and the results were noticeable already. On the appointment of the CEO, he explained a process had been followed, but it was aborted because of squabbles within the previous board. When the new board came in, it had had to re-start the process though it had not yet been concluded. Interviews had been done already. He also pointed out that they were an interim board. It had been strategic of the Minister to put in place an interim board. The interim board had the same powers as a permanent board. The interim board team did not side-step issues that had been raised. It had confronted them head on. He said they could not justify under-performance, because that would be wrong.

He said the findings of the ICT customer survey would be forwarded to the Committee, and indicated that 93% of the revenue generated from the fuel levy went to the payment of claims while the remaining 7% went to the administration of the entity.

Ms Xingwana-Jabavu explained that performance agreements were signed with employees at the beginning of the year and performance was something monitored throughout the year. The performance of the entity had been audited, hence the 91% achievement. The RAF had a performance management policy that could be shared with the Committee, and whatever was spent was in line with what was in the policy. She admitted it was difficult to pay within 30 days because of budget shortages and insufficient funds. That was why the new dispensation would ensure that creditors were paid within 30 days.

Mr Songelwa referred to the re-evaluation of properties, and explained the RAF was getting the benefit of using the building, so it qualified to be an asset according to accounting standards. The evaluation was done externally, not internally. The value of the property was dependent on the development around the piece of land or building. The external valuers had guided the RAF on this matter. He pointed out that the cancelled deal was fake news, and it had to do with chairs. The information reported in the media was incorrect. The management always discussed matters on whether it should lease or own assets. In this instance, it had opted for leasing because the sheriff always attached if the property was the RAF's. It was R66 per chair for leasing. The matter had been challenged through the Press Ombud.

Ms Xingwana-Jabavu added that these were the last remnants of leaked information which, unfortunately, had been distorted. The Committee would be given a detailed account of what had happened.

Mr M Seabi (ANC) asked what the impacts of the RAF’s engagements with the AG were. The report had said nothing about liquidity and had not talked about the impact of the entity's performance on service delivery to the broader community. He asked why no action had been taken against transgressing employees, and indicated the disciplinary process was too lenient on them.

Dr Mathebula explained they tended to have differences at the end when the AG was evaluating performance. Now, when they set targets, they sit down with the AG and indicate how these would be measured. The AG, in turn, makes its own contribution. He said they did not fear the labour court, but they had to act within the prescripts of labour law. He commented that they needed to improve on their reporting and include claims that had improved the lives of claimants. There were lots of categories of claims to be settled.

Mr Songelwa indicated they have received a legal opinion on liquidity because the entity was a going concern. The explanation was provided in the annual report.

The Chairperson remarked that the AG had said there had been very little input in terms of planning by the entities. There was little implementation of what had been planned. Not much effort had been put into planning. Some things had fallen by the wayside. The AG had stated there were challenges of appointing people with the proper skills. The entities should ensure appointments that were made had qualified people. She added indicated she had picked up that junior staff members were taught to just meet the targets so that boxes could be ticked in order to get bonuses. Consequence management did not seem to have been implemented because it was not understandable how the entity could counsel a wrongdoer, which had come with excuses that certain individuals could not be punished because they had left the entity. Even though the entity was a going concern, the RAF could go back to its glory days. Now it was difficult to differentiate between the RAF and PRASA. The RAF had two years to clean its house and be where it used to be. During the oversight visit, it was clear that people did not know that claims could expire. This meant the RAF had to improve its communication with external stakeholders and strengthen its risk and audit unit before the sun sets on them.

Deliberations with RTIA

Mr Hunsingerwanted to understand if the rollover requested during 2016/17 had been completed, seeing that there was a cash surplus during that year. There was no cash surplus for the 2017/18 financial period. What was the status of the entity in terms of recruitment and capacitating the organization? Did the entity have a plan B in place should the partnership with SAPO not work out, because the track record between AARTO and the SAPO did not point to a good relationship? He wanted to know if the uniform of traffic officers could not be standardized, because there were different types of uniforms for traffic officers.

Ms Moalusi explained that they had given reasons to National Treasury for the request for the rollover of the cash surplus. National Treasury had indicated there would be no rollover and the RTIA had asked the Department to intervene. Nothing had happened. Even today, there had been no response regarding the 2016/17 cash surplus rollover. For the 2017/18 period, a request had been made for a small cash surplus rollover. National Treasury had asked the entity to wait until the end of November, but nothing had been finalised yet.

Mr Chuwe added that they had received conditional approval for the rollover of 2016/17, but Treasury, had later added impossible conditions. Regarding recruitment, they had been careful not to have a huge staff because they did not want to employ people who would be under-utilised. Training was one of their concerns for officers involved in the AARTO process, especially for those issuing fines and the ones who were office-bound. They had undertaken training for all traffic officers. Those that had been trained throughout the years would be given refresher training, while others would be given full training, especially data capturers. The third type of training would be given at the colleges for traffic officers.

He said the relationship with SAPO was an integral part of what they would like to have. As a result, they would get into a service level agreement (SLA) with SAPO. They had come up with a strategy to ensure things were legislated to make monitoring easy and effective.

Mr Bilikwana said that SAPO was part of the value chain. If there was no compliance, SAPO would be punished. The RTIA would ensure SAPO was compliant and would keep the entity informed if there were planned strikes so that it could prepare.

Mr Bryan Chaplog, Chairperson: Audit & Risk Committee, RTIA, indicated that the matter of uniforms would be raised through the Department. It would be good if they were standardised to avoid unnecessary confusion.

Mr Seabi asked why there were three strategic objectives instead of four in the summary of audit conclusions, and sought clarity on the  budget allocation and money spent.

Ms Moalusi explained there was a difference between what was budgeted for and what was spent. She said they had spent what they had budgeted for. Another thing was on recruitment, where unions had raised objections about the organisation structure. As a result, they had had to put recruitment aside. There were various aspects that were involved in the process and many things that were supposed to have happened did not materialise. This had resulted in a lot of savings, and this included infringements that were not collected.

Mr Chuwe explained there were four strategic objectives, but there were three important ones. The AG had chosen three objectives from the four provided. Strategic objective 1 was about compliance: pushing people to comply. Strategic objective 3 was about innovations to achieve their mandates.

Mr Sibande remarked that with regard to financial and performance management, there had been non-compliance with legislation where it was impractical to provide quotations. This showed there was a challenge that needed to be addressed, especially on revenue collection. He wanted to find out how often the entity was interacting with police and what it was doing to ensure the police had the right equipment to detect the level of alcohol in the body of the arrested. Most of the time, accidents were caused by people who were drunk. The safety infrastructure was not adequate. When an accident happened, it was always alleged that the police would arrive late at the accident scene. He asked how many jobs the RTIA had created. He aslo asked the RTIA to indicate why the court case involving the Minister was taking so long to be concluded.

Mr Bilikwana said that the court case involving Mr Howard Dembovsky vs the Minister had taken four years to prepare the papers amounting to 409 pages. If Mr Dembovsky succeeded, this would collapse the entire Department. Now they had to respond, and this would happen around October next year. Regarding jobs, he indicated they were employing people indirectly through the enterprises they were setting up in all the municipalities in the country. Others were getting employed through internships and being employed directly.

Mr Chuwe said they were interacting with the law enforcement fraternity on a continuous basis, including the metro police, to voice out frustrations and come up with proposals. He pointed out they had made proposals to the Department for the establishment of a road safety Steering committee to be constituted by the Ministers of Transport, Justice, Health, etc in order to craft road safety solutions for the country. Lessons had been taken from Canada, the USA and Australia. The proposal indicated that road safety was not the sole responsibility of the Department. It further indicated road safety should be elevated to the same status given to HIV/Aids. The document suggested a probationary licence be given to a new driver. The driver should be examined on driving under different weather conditions before being issued a permanent licence, which was to the same value of that of a person who had been driving for 20 years. He proposed that improvements should be made for public transport drivers. Their services needed to be professionalised, where an experience of three to five years of driving should be considered, and then they should undergo training for getting a licence for public transport before they drove taxis and buses.

He observed that since 2016 there had been no accidents on the Moloto Road. Serious interventions had been made and there had been no major fatalities. Inter-faith leaders had been invited to pray for the reduction of fatalities on that road.

Mr Mpanza asked the entity to focus on correcting the regression that had been pointed out by the AG in the audit report. He also warned the entity to be careful when choosing the community-based organisations (CBOs), non-governmental organizations (NGOs) and non-profit organizations (NPOs), etc, because most of them had an anti-SA agenda. That would help so that the entity did not empower organisations that were against the agenda of the government.

The Chairperson commented that what was critical was to listen to the concerns of the AG and correct them. What had been published by the AG could not be re-written. Communication was critical. She commended the entity for spending the bulk of the budget on public communication. She agreed with the proposal that before a driver be given a licence, the driver should be tested throughout the four seasons of the year to learn to drive under different weather conditions. This meant the testing grounds should have water cannons, for example. This would represent a wet season and test the person under these conditions.
The meeting was adjourned.