Department of Transport Quarter 2 and 3 performance, with Deputy Minister

Meeting report

Opening remarks

Deputy Minister of Transport, Ms Sindisiwe Chikunga, stated that it was an honor to present the Department’s work to the Committee as expected by the Constitution. The Department was a formidable team and it was going to be able to explain how the targets were being achieved, how challenges were being overcome and what plans were put in place to ensure all targets were achieved by the fourth quarter. 

Department of Transport Quarter 02 of 2017/18

Mr Mathabatha Mokonyama, Acting DG, Department of Transport (DoT), and Mr Collins Letsoalo, Chief Financial Officer, DoT, presented the 2017/18 second quarter expenditure. The presentation focuses on the progress made with the implementation of programmes and projects for the period covering 01 July 2017 to 30 September 2017. The report focuses on the optimal performance of deliverables regarding the Medium Term Expenditure Framework (MTEF) 2017/18 to 2019/20.

The overall level of performance for the second quarter was 76%. The Department had 39 targets - 28 were achieved while nine targets were not achieved.

Concerning performance per programme, challenges were faced in Integrated Transport Planning (ITP). This branch did not achieve four of its targets and it was the only programme below 50% performance for the quarter under review.  The best performance was in Road Transport and Civil Aviation with performance of 100%.

There was an increase in performance from the first quarter to the second. Overall performance increased from 71.87% in the first quarter to 76% in the second. Although the performance level of ITP was below 50% in both quarters, it had improved from 33% in the first quarter to 43% in the second.

By the end of the second quarter, expenditure was 46%. Breakdown of expenditure per programme:

1. Administration: 47%

2. Integrated Transport Planning:  43%

3. Rail Transport: 41%

4. Road Transport: 56%

5. Civil Aviation: 55%

6. Maritime Transport: 34%

7. Public Transport: 34%

The breakdown of expenditure per economic classification:

1. Compensation of employees: 48%

2. Goods and services: 36%

3. Transfers and subsidy: 46%

4. Machinery and Equipment: 101%

5. Payment for financial assets: 0%

Department of Transport Quarter 03 of 2017/18

The presentation focused on progress made with implementation of programmes and projects for the period covering 01 October 2017 to 31 December 2017.The focus of the report is on optimal performance of deliverables concerning the MTEF 2017/18 to 2019/20. The overall level of performance for the third quarter was 70%. The Department had 37 targets - 26 were achieved while 11 targets were not achieved.

Regarding performance, Road Transport and Civil Aviation had maintained the best performance level with 100%. The performance of Maritime decreased from 75% in the second quarter to 50% in the third. The performance of Public Transport also decreased from 80% in the second quarter to 60% in the third. ITP had maintained its quarter two level of performance of 43%.

By the end of the third quarter, total departmental spending was 79%. Breakdown of expenditure per programme:   

1. Administration: 68%

2. Integrated Transport Planning:  72%

3. Rail Transport: 70%

4. Road Transport: 94%

5. Civil Aviation: 73%

6. Maritime Transport: 60%

7. Public Transport: 59%

In Administration, under-expenditure of R26 million was mainly due to filling the critical vacant post. On goods and services, the under spending was mainly due to outstanding invoices for communications (events and protocols) and expenditure will be incurred in the current financial year, the transaction advisor PPP fleet as well as other projects.

Regarding ITP, under-expenditure of R2 million is mainly due to the Corridor Freight Development Project which was stopped pending finalisation to identify the corridors and further elaborate the situational analysis, NATMAP 2050 review. Funds were shifted from the corridor freight development project to fund other projects.

Concerning Rail Transport, under-expenditure of R8 million was mainly due to slow or non-spending on most goods and services projects such as the establishment of the rail economic regulator, review of branch line strategy, alternative funding strategy and investment model, development of rail economic regulation as well as a White Paper on rail transport.

In Road Transport, “over expenditure” of R3.803 billion was mainly due to transfer payments to South African National Road Agency (SANRAL) and the Road Traffic Infringement Agency (RTIA) which were scheduled for January 2018 but erroneously paid in December 2017 - the amounts were not overspent against the budget but against the cash flow projection.

Regarding Civil Aviation, under-expenditure of R8 million was mainly due to vacancies, outstanding invoice for watch keeping services, correction factor for the Airports Company of South Africa (ACSA) Air Traffic Navigation Services (ATNS), National Airport Development Plan (NADP) implementation as well as other goods and services projects.

With Maritime Transport, under-expenditure of R22 million was mainly due to vacancies and slow spending on a feasibility study on tug boat services, lesser than anticipated spending during World Maritime Day, oil pollution prevention as well as non-spending in the following projects: boat building, repairs and skipper and development of the marina at Port St. Johns. Funds were shifted from the boat building repairs and skippers project to fund review of the merchant shipping project.

In the case of Public Transport, under-expenditure of R169 million was mainly due to slow spending of the taxi recapitalisation which is demand-driven. On goods and services, under spending was mainly due implementation of the IPTN's in district municipalities as well as the taxi recapitalisation review of the model. Funds were shifted away from the projects "Taxi Recapitalisation Review of Model" and "Implementation of IPTN's in District Municipalities” – the work was done in-house for the "Taxi Recapitalisation Review of Model” and "Implementation of IPTN's in District Municipalities". The Department's role is only the planning and implementation will be done by District Municipalities. Budget allocated to the project included part of the cost of implementation, which cannot be done by the Department. Funds were shifted to other projects. 

Breakdown of expenditure per economic classification was as follows:

-Compensation of employees: 71%

-Goods and services: 58%

-Transfers and subsidy: 79%

-Machinery and Equipment: 94%

-Payment for financial assets: 0%

Regarding the compensation of employees, under spending of R20 million was mainly due to slow filling of critical vacant posts.

In the case of goods and services, under spending of R118 million was mainly due to outstanding invoices for departmental events, namely, the Corridor Freight Development, National Airport Development Plan Implementation, S’hamba Sonke project, boat building, repairs and skippers, salvage strategy, feasibility study on the tug boat, implementation of the IPTN’s in District Municipalities as well as the taxi recapitalisation review model. Funds have been shifted to fund other projects.

Concerning transfers and subsidies, overspending by R3.705 billion was mainly due to earlier than anticipated transfer payments to SANRAL and the RTIA, scheduled for January 2018 erroneously paid in December 2017. Funds were not overspent against the budget but against the cash flow projection, as well as non-payment of membership fees to the Southern African Development Community Aviation Safety Authority relating to the 2016/17 financial year.

In the case of machinery and equipment, the overspending of R372 000 was mainly due to excess expenditure on the purchase of office equipment.

Discussion

Mr G Radebe (ANC) addressed the issue of crime against the train staff in Mamelodi. He explained that the violence was caused by train delays. Delays resulted in the accumulation of many people at the train stations.  When the train finally arrived, it was overloaded to the extent that the doors could not close.  For safety purposes, the drivers could not move the trains while the doors were open. This angered the people so much that they resorted to violence against the drivers and security guards.

He called for proper communication and effective service to the people. There was a need for proper communication between the Passenger Rail Agency of SA (PRASA) and the people.  If there was going to be a delay, the people needed to be communicated to properly and an alternative mode of transport should be made available. These measures would prevent violence and frustrations caused by train delays.  

Mr Radebe was concerned about underperformance of the ITP relative to other sections. There was nothing better about performance below 50% if other sections had performed beyond 75%.  He expressed interest in knowing who the DDG responsible for ITP was as the official needed to explain underperformance of that section.

Mr Radebe was disappointed with the filling up vacant positions. The Department had under spent a lot of money because of the slow filling up of vacant positions. He asked why there was a delay and how long it was going to take for the delay to be addressed. The Committee was no longer going to tolerate the issue of vacant positions because the Department was suffering. He then inquired about the issue of transfer payments and the possibility of under spending on PRASA. He asked for an explanation of the reasons for the under spending. There was a need for the DDG responsible for PRASA to take responsibility and ensure the problem was solved.

Mr C Hunsinger (DA) spoke about the suspension of services in Mamelodi. He explained that about ten similar incidences had happened over the past week.  Suspension of the services was triggered by the fact that train drivers were scared to offer the service. Suspension of services was necessary for the protection of train staff members as well as commuters. However, a continuous trend of incidences resulting in such extreme measures was no longer going to be tolerated. The Department needed to engage and support the importance of having a contingency plan which, in specific terms, should be an alternative form of transport. As a national organisation, PRASA was expected to have a contingency plan.  When commuters are confronted with a situation where services are suspended, they needed to immediately know through the contingency plan what the next step would be. He advised that the contingency plan should be on paper and be made available to commuters.

Mr Hunsinger inquired about the absent annual financial plan of PRASA.  The plan should have been tabled on 31 September 2017, but it remained absent. He asked what DoT was doing in response to the absence of the financial plan. He recommended the development of a PRASA Act - many issues remained un-addressable due to the lack of the PRASA Act. The Act was needed to legalise everything and ensure a firm legislative base upon which PRASA needed to execute its functions. He then commented on the fact that performance was displayed as a percentage – reports needed to provide more content. Where were the Key Performance Indicators (KPIs)?

Mr Hunsinger spoke about funds allocated specifically under Bus Rapid Transport (BRT). Financial analysis of 13 cities, to which these funds were allocated, showed that only five cities experienced a positive expenditure ability, while the other eight cities had a negative expenditure ability.  He asked if there were support structures to ensure a positive return on investment because eight cities deserved the same landing of service as the other five. There was a need for intervention due to inability to spend money on BRT. 

Mr M Sibande (ANC) asked about the mechanisms available to monitor funds transferred to entities. The expenditure report shows that a huge sum of money was given to some of the entities. For example, PRASA was transferred an amount of R19.2 billion. It seemed there was no risk management. He asked if there was a mechanism in place to monitor the use of such amounts of money. The core function of parliamentarians was to ensure that service delivery was taking place. He questioned why there was so much under spending in the Department. The report said money that was not utilised was transferred somewhere. He asked the Department to explain why the money was being transferred somewhere else while there were complaints that the trains were aging.  Taxi recapitalisation always appeared on the budget but there was no clarity as to what was being funded. He advised that there should be a law to cancel it.

Mr T Mpanza (ANC) was concerned about the issue of under spending in PRASA - this was painful and traumatising. The under spending was highly unacceptable and not understandable. He advised the Department to look into the matter and prioritise it. He then spoke to the issue of the operational budget, particularly in Human Resources – under spending there was not justified. The changing of Ministers had nothing to do with the filling of posts in the entity. He recommended the Department deal with the matter of filling middle-management posts.

Mr Mpanza acknowledged claims that PRASA was under siege due to cables and the syndicate which was involved. The operation taking place was highly sophisticated because an international syndicate might be involved. The Department should have been proactive a long time ago in finding ways to deal with the issue. The syndicate was now far ahead of the Department and any intervention would be intercepted and not be able to work.    

Mr Mpanza found the communication strategy terrible concerning the matter of trains. There was the need to look at community education. The community should be educated because it had civic responsibilities to look after public property. He recommended the development of a strategy of educating the community. The community needed to take ownership and show respect for the work government was doing. There was much infighting at PRASA amongst the managers. That is why there were complete chaos and anarchy in the entity. He called for the development of an intervention strategy to arrest the situation and bring everlasting stability to PRASA. He appealed to the Acting DG to take leadership. The Department should take decisive decisions and develop interventions to deal with PRASA. He assured the DG that the Committee was doing something about PRASA but it relied on the Department to work as a team.

The Chairperson found the presentation to be thin on in-depth information on the entities. She encouraged the Acting DG to go into State-Owned Companies (SOC’s), like PRASA, and find out what the exact issues were. She was concerned about the lack policy direction regarding the implementation of BRT. The implementation on BRT had left much to be desired. Each province had its own approach to implementing the policy. She called for uniformity regarding the implementation of BRT across provinces.

The Chairperson agreed with the notion that the money must be increased for taxi recapitalisation. However, she advised the Department to rather focus on value chain issues, as outlined in the National Taxi Task Team (NTTT) document of 1996. The Department should not have continued focusing on recapitalisation because the lifespan of a taxi was only 36 to 48 months which meant that recapitalisation would occur every 36 months. Dealing with value chain issues, on the other hand, would ensure the taxi industry was self-sufficient. She was concerned about the inadequate investment in Research and Development (R&D). It will be very critical to engage relevant research institutions and invite them to look into issues facing the Department. There was a problem with cars coming from the SADC region. Many vehicles in the regions produce hazardous gasses and there was a need to reduce emissions of these gases. She recommended the Department get assistance and guidance from research institutions regarding this problem.

The Chairperson found it hard to understand the role of the Department of Public Enterprises. Challenges experienced between Transnet and PRASA could have been dealt with in a better way if Transnet had been brought into the fold of the DoT. It was not right for one public entity to be generating revenue from a sister public entity. The railway tracks belonged to the Republic of South Africa and PRASA should not have been paying for using the railway. The two entities should have been assisting one another in improving and modernising the infrastructure. It was important for the Acting DG to engage with the DDG and Executive of the Department of Public Enterprises to ensure cooperation between the two entities.

Response by DoT

Mr Mokonyama explained the absence of the annual financial plan for PRASA. Section 49 (2) of the Public Finance Management Act (PFMA) required the board to be the accounting authority. However, the interim board could not perform the duties of the accounting authority because it was not properly constituted. This resulted in the delay of the finalisation of the audit. One of the major interventions the Department did was to make sure that PRASA was audited like any other State-Owned Enterprise (SOE). In December, the audit was being finalised and the Annual Report would be finalised by the end of January. There was then the issue of PRASA having to submit the Annual Report. The audit committee was due to meet on 2 March and then the Report would go to the board for the final sign off. He assured the Committee that the Department had done everything in its power to ensure PRASA complied in terms of making the annual financial plan available.

 

Mr Mokonyama highlighted that there was a gap in legislation. The glaring gap was that the shareholder was not empowered by legislation to intervene in the issues of PRASA. There was need for the provision that permitted decisive intervention by the shareholder. He suggested that the new PRASA Act should ensure oversight is not restrictive and not limited by the Company’s Act and the PFMA. PRASA was having so many challenges because it was given bad performing businesses from Transnet. Businesses such as Autopax and Shosholoza Meyl, which were not making any profit, were all handed over to PRASA. Some of the systemic and endemic challenges are there as well such as those relating to management. He acknowledged the need to engage with bus operators and ensure that in cases of emergency, they were contracted to carry the passengers. PRASA used to have contingency plans for using buses when trains were not working. However the process started getting abused from within PRASA, and resulted in the cessation of the process. There was the need for renewal of PRASA, starting with attitudes of the people working within the organisation.

Mr Mokonyama spoke about the issues on grants and transfers. The Department developed KPI’s and had monitoring mechanisms in place to ensure funds were being utilised for the intended purpose.  While some entities complied, others could not adhere to the conditions due to issues relating to capacity. He agreed that five cities were performing while the other eight underperformed. However, the cause of the issue remained unknown. National Treasury forced the Department not to allocate anything to the underperforming cities anymore until there was commitment. Unfortunately, all the eight cities were the poor ones.

Mr Mokonyama responded that there was non-uniformity in the implementation of BRT because different areas faced different challenges. The response to a challenge needs to be customised towards challenges in that area. For example, the challenges in Johannesburg are travel demand-related, such as travel time congestion, whereas in Polokwane, challenges are different. When it comes to industrial transition and how to treat taxis, the standards could be the same across all areas. However, there was the need for different solutions to respond to different challenges. This differentiated approach was going to inform the Department on how to budget and roll out monies.

Mr Mokonyama explained that most of the vacancies that appeared in the presentation had already been filled. The under spending was primarily because they were filled late in the year and not earlier. Critical positions, at the level of Chief Directors, Directors, and Deputy Directors, had already been filled. The Department could not dictate to the Minister on the issues around the DDGs, but any new Minister would be informed of the priority to fill vacant DDG positions.  

Mr Mokonyama agreed there was the need to strengthen oversight and monitoring in areas where money was sent. As a transferring authority, DoT only had a small amount of money remaining while the rest had been transferred to implementing agencies. This meant that there was a need to strengthen oversight capability and to monitor regularly. He assured the Committee that the Department was taking the issue of increasing oversight and monitoring seriously. The Department was currently taking necessary strides to ensure the oversight capability was there. Unfortunately, the process was being augmented by external assistance due to the Department’s capacity challenges. However, for every consultant appointed, the Department was required by law to do a gap analysis and give reasons why the job could not be done internally.

Mr Mokonyama spoke on the new approach concerning taxi recapitalization - the Department was going to increase both the scrapping allowance and ownership of the process by the taxi industry. Necessary steps were going to be put in place to ensure the value chain issues were dealt with, as required by the NTTT document. The Department wanted government to get out of capital subsidy and go more into operational subsidies to level the playing field. The Department was going to request proposals on diversifying the taxi industry.  Until the Department got rid of all unsafe vehicles on the road, taxi recapitalisation was going to be there for some time. The Department was increasing the money to make new vehicles more affordable, thereby, inducing vehicle owners to bring back the old scraps.

Mr Letsoalo gave a synopsis of what was going on in PRASA – the Agency had R465 million which was supposed to be used for the fencing of stationary corridors. At the end of December 2017, it had spent only R13 million. An amount of R115 million was the budget for the asset protection program but by the end of December, PRASA has not spent anything on the program. Regarding expenditure on the rolling stock component, R588 million was budgeted for but only R174 million was spent by December - chanced were the money was not going to be spent. All the programs, on which PRASA was under spending, were meant to mend PRASA and make it a sophisticated rail agency that must deliver to the people. The under spending explains the prevalence of existing problems such as train delays. Furthermore, the problem of under spending meant there was going to be no facility suitable to house and maintain the new 51 trains that were expected to arrive in the country soon. What was going to solve the problems of PRASA was not the new trains but ensuring that the operation was run more efficiently and the needs of the people were being met. A study that compared PRASA to four other operators with assets of same age revealed that, unlike PRASA, problems associated with the service delivery for other operators were minimal. Lack of funds was not the reason why PRASA had so many problems - the money was there, but it was under spent.  Problems of PRASA were going to escalate. There was a need for serious intervention in the issues of PRASA. No one man can solve the problems of the entity.

Mr Ngwako Makaepea, DoT Acting DDG: Rail Transport, said there would be three additional trains coming to the Western Cape to assist with capacity. The issue was that some of the trains running on the central line had been configured in term of running with six coaches instead of 12. The Department was going to deal with that issue and agreements were made to tap into the space that Transnet had in its store to be able to assist with the challenge. The Department had started working on a contingency plan to solve problems associated with the shortage of trains on the central line. The problem was that there longer intervals between trains. To deal with that, shuttle services would be provided in between the junction stations. This contingency plan was expected to be implemented towards the beginning of April.

Mr Makaepea spoke about development of a PRASA Act - with the current situation regarding the legislative framework, there was a need to normalise the environment. As part of the work being done on the National Rail Bill, a legislative review analysis was done which showed the legal succession Act is not a comprehensive Act. There was a need to develop the founding legislation of the Agency and there were plans in place to repeal the legal succession Act.

The Chairperson thanked the Department for the presentation. She said that the Committee, on 13 February, had decided to investigate the happenings in PRASA. The Committee had since finalised the terms of reference and there was a timetable to be followed in making sure that some of the challenges in PRASA were addressed. The problems in PRASA were not in the interest of the economy and not in the interest of social standing and social issues. An improvement in the system will increase utilisation of trains which has dwindled. 

The meeting was adjourned.