PRASA, SANRAL, Cross Border Road Transport Agency, Rail Safety Regulator, SA Maritime Safety Authority on their 2014/15 Annual Reports

Meeting report

Department of Transport Entities: Annual Reports 2014/15

Passenger Rail Agency of South Africa (PRASA) briefing
Dr Popo Molefe, Non-Executive Chairperson, PRASA, was honoured to share with the Committee the 2014/15 Annual Report and said that PRASA would full honour the Committee in its pursuit of effective oversight and accountability.

Mr Nathi Khena, Acting Group Chief Executive Officer, PRASA, said PRASA financial performance operational subsidy increased by 5.7%, fare revenue by 2.4%, leave income by 4,8% and other income took a drop of 26%. Expenses increased by 4.9%, which was a negative perspective, and net finance was in the negative compared to the previous financial year. PRASA had a net loss of R1.1 billion. It was challenged from a funding model. It had old infrastructure with high maintenance costs. PRASA and the shareholder had been debating an appropriate funding model, given the state of its infrastructure, and also discussing the level of passengers. At present, fare evasion by passengers was estimated as around 25% of total revenue. One of its challenges was the unfunded long distance Shosholoza Meyl train, and again, PRASA management had been engaging with the shareholder on what the appropriate level of subsidisation should be. PRASA was operating a system that was labour and capital intensive. Some of the technology still being used was commissioned as far back as 1952, with old rolling stock and high maintenance costs. He expressed his appreciation for the R59 billion investment from government.

PRASA got an unqualified audit opinion with matters of emphasis and management was working to address the issues raised, which had been ongoing for some time.

Discussion
Mr C Hunsinger (DA) was encouraged by the fact that Mr Khena knew the situation at PRASA and had plans to move forward. He asked why Shosoloza Meyl was an unfunded mandate despite the fact that it was surely a primary function of PRASA. He noted that there was no planning for loss, and in addition he pointed out that the Department did not seem to have done price hedging; he wondered if the fact that locomotive numbers had decreased from 80 to 70 while the value of the contract increased was the result of lack of planning around currency fluctuations.

Mr M De Frietas (DA) also asked why Shosholoza Meyl was an unfunded mandate. Nowhere in the world were railway companies set up to make profit, but to transport people. He asked if due diligence was done on procurement of locomotives, as the PRASA Board acted as if it was news when the situation came to light. He noted that the Committee would be interested in how the report of the Public Protector was dealt with.

Ms D Carter (COPE) asked how many routes had been cut; she noted that these included Durban-Cape Town and Simon’s Town-Hout Bay. She pointed out that people would travel the Durban to Cape Town route often. She was concerned to note repeated findings by the AG that the Board and PRASA management had not been in control. She noted that there should not be condoning of fruitless expenditure but did want to know how many disciplinary cases had already been instituted and were to be instituted.

Mr M Maswanganyi (ANC) said the report was not all gloomy and appreciated the 96% BEE procurement and bursaries offered to students. He asked for an explanation on the irregular expenditure and the amount of R19 million on penalties and interests. He asked why R91 million was spent on unsolicited proposals. He commented that government were being painted as corrupt, yet it seemed that officials were at fault. He asked if PRASA performed below average on predetermined objectives. He asked which divisions were performing well and under par. He suggested the need for a skills audit to root out ghost workers and people who misrepresent qualifications.

Mr M Sibande (ANC) asked why agreements supporting integrated transport were agreed, but not signed. He asked what was being done to replace the railway police. This report had been silent on new projects including the blue chip trains that were launched in the past few days. He asked how many projects were out to contract. He noted that the AG's main concerns continued to be problems of monitoring and evaluation. He asked the frequency of meeting between risk management, internal audit and AG.

Mr L Ramatlakane (ANC) asked what were the problems with land issues that delayed meeting of targets. The unqualified audit did indicate that some good work was being done. He noted that PRASA was working on complementary work with cutting edge technology in South Africa. The R172 billion investment was put toward the right cause. He asked for progress on deliveries on the modernisation project. He noted, in answer to an earlier question, that he thought PRASA was a section 3b company which prohibited hedging. He wanted an explanation on the irregular expenditure and asked if it was due to corruption. Finally, he wanted to know when outstanding locomotives would be delivered.

The Chairperson said the AG had been raising concerns about non-compliance with laws since 2010. The AG also raised the point that the financial statements had contained material misstatements. She agreed that accidents caused by cable theft were beyond PRASA's control. She asked how the team under the executive was supervised to ensure effective maintenance of infrastructure on rail, including autopax. She asked if any progress had been made on Moloto Rail.

Ms Zodwa Manase, Non Executive Director, PRASA, replied that indeed PRASA was not permitted to do hedging, but it should have estimated the rand/dollar rate. Lawyers were looking at how the contract was signed when the rate was already above what had been anticipated. She noted that National Treasury would only condone when spending was not authorised but was going to be spent on the same purpose – for instance, payment of rental. Irregular expenditure was now being registered on a monthly basis. PRASA was trying to avoid irregular expenditure on bigger tenders. The other main expenditure related to money from previous payments that were not registered as expenses. PRASA had appointed a probity officer to investigate irregular expenditure. Anything below R10 million was being investigated by internal audit. It was working together with the National Treasury on investigations after receiving a report from the AG.

Mr Khena replied that page 48 of the Annual Report (AR) spoke to board control meetings. There had not been strong enough accountability and there was no consequence management. Shosholoza Meyl was an unfunded mandate because those supposed to provide funding were not giving it.  PRASA had engaged DOT, which engaged with National Treasury, but it indicated there was no money. PRASA had not given up and would come again to brief the Committee on where the main stumbling block was. He reiterated that PRASA would not fulfil its mandate unless given an appropriate funding model. The shareholders and board members were promised a skills audit to the level of top management by end of October. Memorandums of Understanding (MOUs) were not signed with some municipalities because of the National Land Transport Act (NLTA) which talked of devolution, and discussions were different from one city to the next and from province to province. There was a unit in police that should be assisting to combat rail crime and PRASA had  been engaging with SAPS because the entities differed on approaches. The train contract was under investigation. Some of the locomotives performance was zero, and the Rail Safety Regulator would present on areas of risk. It was quite a complex issue in operational, legal and contractual issues. There were some level of delays expected. This emanated from management failing to do things properly in procurement. PRASA would come back to report on signaling and infrastructure.

Dr Molefe replied there was delay on water usage licence on the plant in Danota by the Department of Water and Sanitation. Here, PRASA did need some help, as it talked to the industrial strategy, localisation, skills development and localisation of the economy.

Ms Manase said that the other irregular expenditure was R2 million paid to a consultant, where the AG feels there was no value for money. There were fines and penalties for late payment. Another R7 million was paid to an employee who was dismissed not using the proper procedure, and won a suit for unfair dismissal.

Mr Khena noted that the Mamelodi community was making a lot of demands and it was a victim of political engagement. The Mayor of Tshwane had promised to resolve the issue. The Moloto issue was one that was still moving back and forward. The DoT, PRASA and National Treasury met on how it should be funded, whether Private Public Partnerships (PPP) or funded from the fiscus. It was not a case of one party taking up the matter and running with it.

Dr Molefe added that he was expecting a TA1 application (approval of funding) from National Treasury on 30 October.

The Chairperson said that the Committee was now becoming concerned. Already in 2005, then-President Mbeki had mentioned Moloto as an area of priority. It was a road with numerous deaths, and one life lost was a loss to many. Members wanted to see progress on this now; it was traumatic for Ministers to attend funerals, continuously, of those killed needlessly on the road. She asked how many more people must die before the Department were to take action?

Mr Khena replied that routes were closed because this rail corridor was not offering a frequent service to communities and there were cost coverage issues as well.

Mr Ramatlakane did not hear the issue of contractual obligations coming out clearly. The manufacturer should take responsibility of defects. He did agree that Shosoloza Meyl was unfunded. Rail was the backbone of public transport so it should not be unfunded. There was a need to schedule an extraordinary meeting with PRASA and pick up outstanding issues.

Mr Sibande said people were continuously asking when the Moloto issue was to be resolved. Numerous  case studies were done, and prayers and rituals constantly offered at accident sites. He urged that now was the time to take action; not just make seemingly good resolutions that were not implemented.  PRASA should move to prevent things from happening, rather than commissioning investigations after the fact. Members had asked if PRASA needed legislation to help it function more smoothly, but without response.

Mr Maswanganya asked if employees were getting bonuses. A directive from the Accountant General required the accounting officer to take action against any employee who was found to be involved in irregular expenditure. PRASA could not postpone taking steps as it was creating a culture of impunity. Members had been elected to safeguard public money. He asked which divisions were not performing and said all heads of divisions must be brought to Parliament to account next time.

Ms Carter asked if executive management was getting sufficient support from the Board. The Simon’s Town-Hout Bay rail line should have been up and running. She asked the amount needed to get the rail system running. The AG;s report noted that key officials lacked competency to respond appropriately, and she said that the time was right for PRASA to be sanctioned.

Dr Molefe replied most things in the AG's report were things that happened before the current board came into being. Some people were dismissed but PRASA had also lost cases in the courts and Commission for Conciliation, Mediation and Arbitration (CCMA). Some employees ended up being handsomely to go. Investigations were being done by reputable attorneys. When irregular expenditure had occurred but that still advanced the work of PRASA, condonation was sought from the Minister and National Treasury. He noted the recommendations and would provide further responses at the next meeting.
 

Rail Safety Regulator (RSR) 2014/15 Annual Report
Mr Nkululeko Poya, Chief Executive Officer, RSR, said the AG's report noted the following as areas of concern:
- material changes to financial statements
- inadequate management processes
- no formally documented process of granting users access to the system
- no back up and retention strategy
- no processes in place for independent reviews of activities of the person granting users access.

In relation to performance, he noted that in the year under review, critical safety upgrades were done, there had been drafting of new regulations, implementation of penalty regulation, a customer care centre, technical safety workshops, and technological developments, and new works were also done. From 2015 there was a proposal for mobile operational controls, and  for detailed infrastructure condition assessments in the 2017/18 year. Lack of adequate technologies had resulted in reliance on operational failure behaviours to inform safety assurance activities. Extensive knowledge regarding the wheel to rail interface was required, to understand both identified and latent risks, in order to prevent accidents and derailments. Mobile operational controls were required to harvest data on track, wheel, bogey, rolling stock conditions and interactions, in order to better understand and manage the overall rail system capacity. That also included maintenance of current infrastructure. In 2014/15, there was a 1% increase of operational occurrences, 4% increase on fatalities, including 194 fatalities recorded on people struck by trains, a 32% increase on security related incidences, but a reduction of 14% from PRASA.

Discussion
Mr Sibande asked how derailments and collisions occurred and if there was sabotage or negligence. He asked how often RSR would meet with its shareholders to minimise the problems. He asked how often it interacted with SADC counterparts and with the Cross Border Road Transport Agency (CBRTA).

Mr Hunsinger said interventions made in the past must be made again to reduce fatalities. A strategy must be put in place to avoid and minimise collisions. He asked what was planned in the goods and services budget that had not been achieved. He asked the difference between an operational and a clearance certificate. There was a lot of technical expertise in RSR, but apparently non-availability of skills in PRASA. He asked RSR to get rid of Afro 4000s and scrutinise their suitability for the SA railway system.

Ms Carter asked the nature of the working relationships between PRASA and RSR. She said people may be overpaid at RSR, and that might be the reason for the slow turnover. She was concerned with vacancies for safety inspectors and principal inspectors. She asked where the discrepancies in salaries were, of people with same qualifications in different position. She remarked that RSR should not be looking to appoint a woman or person with disability merely because of her status, but should actively be seeking to match the right skills and find the right people.

Mr Maswanganyi asked why R30 million was taken from the RSR budget. He noted that four board members sat on the ICT board, including the CEO, and this made him ask who was doing oversight. He asked if RSR was using social media to convey safety messages. RSR must teach communities on safety, in particular those around rail crossings.

Mr Ramatlakane enjoyed listening to this frank presentation. He asked if the R171 billion of PRASA modernisation was being done with the input of RSR. He agreed that RSR must help South Africa by communicating the right information to the public actively so that they were not reduced to “consuming poisonous communication” from the media. He asked if RSR was aware of where the trains would be running. He would like to see further engagement between the Committee and RSR.

Ms Carter suggested a joint engagement with PRASA and RSR during oversight visits.

The Chairperson was concerned with challenges between PRASA and Transnet on ownership of rail networks in Pretoria North, although they all fell under government. Similar experiences were seen also in the Northern Cape. She asked if RSR had understated its targets to ensure that it would meet them. She agreed that RSR must repeatedly communicate the message of safety to the people.

Mr Poya replied that communication was one of the critical areas in the 2015/16 Annual Performance Plan (APP), about rail reserves and level crossings. The investigation results must be communicated to the public in a press conference rather than just just being sent to operators and shareholders. RSR should have been involved from the beginning of the discussions on the R172 billion investment. It had now resolved that the RSR and PRASA boards should have joint meetings and RSR should be able to intervene where necessary. It had a good working relationship with the Deputy Minister and they had quarterly meetings. There was a stakeholder communication platform with PRASA and Transnet.

He noted that targets were not understated, but the board was proud of the achievements of management. He commented that the working environment was not suitable for disabled people but management was engaging with disability organizations to attract the right skills. Women also did not need to be appointed merely because they were women. He noted that salaries were benchmarked to try to avoid losing staff to Transnet and PRASA. RSR adhered to prescripts determined by the National Treasury. The CEO and board were not involved in prescription commitment and there was a tender awarding committee.

Mr Poya added that when the investment in stock began, even National Treasury was unaware of the role of RSR. On the Danota plant, it was involved from the time of tendering. It was getting more involved, especially in Transnet, and RSR was visiting China to check some of the locomotives that were being manufactured. There was no train that would be put on the rails without RSR giving its approval. The process started with submission of feasibility studies, then concept designs and detailed designs, followed by manufacturing/construction, then testing and commissioning. These processes were done at the right time and a hazard log and comments were made. RSR would not look at economic issues but safety requirements. This process took around three years. The testing and commissioning took a bit longer if the Regulator was not involved from the beginning, since it had to look from the feasibility study to manufacturing. Other professional engineers reviewed the files, and an external review panel was also involved, to check whether all the processes were followed. This was done by a multi-disciplinary team. RSR felt that it had a good working relationship, but operators were not so happy. RSR said that even if the operators were uncomfortable, the processes would allow RSR to say that it would close a line unless certain identified issues were addressed, and it would follow through on that. However, he said that RSR was reasonable and would allow extensions of time to fix problems, provided that the rectification was done within a reasonable time. RSR focused on safety and how much it would cost to fix the safety aspects was none of its business. Operators would always want to bring the costs up front, so this was one area where conflict could arise.

RSR had not issued approval to Transnet on its locomotives and Transnet was saying this was affecting the economy; but again, there was nothing in the Act that required RSR to look at the economy. It would be issuing its safety clearances purely on issues such as brake design, cab design, structural gauge, centre of gravity and weight distribution in the locomotive . There was no engineering component in the Afro 4000 that would not be looked after. RSR looked into collisions, mainline derailments, platform train interface and level crossings. These categories also had some subcategories. It limited itself to strictly what the Act allowed it to do.

He admitted that the issue of ownership of rail tracks was a problem. Through a policy directive, if possible, there should be one owner of assets, like SANRAL was for the road, under which bus operators would get licenses to ride the asset. For rail, there were two owners, and PRASA and Transnet had different standards. The lack of communication when riding on each other’s line was a problem. The issue of lack of maintenance meant that it was taking money now to show profit. In its submission to the Green Paper, RSR had advocated for one owner.

RSR did hold meetings with media houses to deepen their understanding on how the rail system worked. It was not just about simple issues like the height of trains. It was hoped that this engagement would help the media and public to understand the processes of the Regulator. Three to five days after each incident, RSR published a preliminary report and issued it to media houses. In some cases, media houses waited to publish before a body of inquiry was held. The University of Stellenbosch report was a report with its own limitations, as it did account for prevailing conditions throughout the country. A comprehensive research was funded by PRASA and Transnet at Wits University. DoT proposed a cut of R30 million to its budget, but it did not get an approval to change its budget.

Mr De Frietas asked if the Afro 4000 were approved.

Mr Poya replied that they were approved for testing, up to 3 000 hours for each locomotive. For the one in Brazil, RSR had been involved from the beginning.

South African National Roads Agency Limited (SANRAL) 2014/15 Annual Report
Mr Nazir Ali, Chief Executive Officer, SANRAL, said SANRAL had received an unqualified audit. There was uncertainty about the collection of the alternative tariff due to SANRAL from Gauteng Freeway Improvement Project (GFIP) violators. Irregular expenditure happened because contracts were awarded, from 2000 to 2013, based on statistically lowest acceptable price. This had been stopped to protect Small and Medium Enterprises (SMEs) from exploitation and providing unsustainable low prices. Since 2014, automatic awards to lowest price were considered irregular, but this audit comment was expected to continue for another three to five years because of existing contracts.

Operating expenditure on non-toll roads was broken down as follows: routine road maintenance 18  283km; periodic maintenance 659km; special maintenance 192km. The total cost was R3.6 billion. On toll roads, the expenditure related to toll operations and routine road maintenance for 1 832km, and 66km of periodic maintenance came at a cost of R1.998 billion.

Discussion
Mr Ramatlakane asked why high level planning was difficult in different spheres of government and why water licenses were difficult to get.

Mr Sibande asked if the bridge that fell in Gauteng was under SANRAL, and who was responsible for safety monitoring. He asked if cloning of number plates had had a financial impact on SANRAL. He asked why provinces were treated separately on toll roads. He asked for a breakdown of scholarships because the tendency of government agencies was in giving scholarships to those other than really needy people in rural areas.

Mr Maswangani was happy to note the unqualified audit report. However, the AG had raised concerns on contracts given to companies that did not submit their previous contracts history, or contracts awarded without a quotation, or competitive roads bidders not published in the government tender bulletin. He asked why roads had different service levels.

Ms Carter said the AG also raised concern on material misstatements in financial statements. The AG had also noted that key officials lacked appropriate competencies, and did not respond appropriately. SANRAL's irregular expenditure constituted 70% in the transport portfolio. She asked about the amount spent on advertising on SABC, ETV and DSTV. The road to Mahikeng had high toll fees, with poor road conditions. People liked toll roads than the e-toll system, because they had the chance to see the amount they were paying. She strongly recommended that people crossing roads other than at zebra crossings should be arrested, as in Taiwan.

Mr De Frietas said people liked good roads, but also needed to be consulted. Instead of airing many adverts on television, SANRAL must rather use that money for public participation. It was sad to hear the spokesperson of SANRAL saying that the Western Cape would not get upgrades in the next 20 years. He agreed with SANRAL on everything except e-tolls. South Africa could do well if it was run as well as SANRAL.

The Chairperson said SANRAL's communication was the best in the transport portfolio and suggested that Members should listen to its TV broadcasts. She noted that communication was key prior to the start of any project. She agreed that South Africa, as a unitary state, should not have different standards of roads. She asked if there was no possibility of assisting the other spheres of government. DoT must look to standardising the standards of roads in RSA. She asked how the Committee could assist SANRAL. She asked what were the problems with Gauteng government on Moloto. SANRAL must not take its eyes off the ball, and she urged it to continue its good work.

Mr Ali replied that the MinMEC needed to be restructured, for it lacked a planning component. Different things were being done in different cities because people had different solutions. A certain percentage of municipal budgets must be spent on public transport. The coordination in Strategic Infrastructure Projects (SIPs) must also happen in roads. SANRAL did not promote projects without Environmental Impact Assessments (EIAs). Penalties must be applied to departments that were slow to responding to the implementing agency causing delays. He disagreed that SANRAL officials lacked competency to respond appropriately, and said he would take up that issue with the AG. On tolls and e-tolling, people could choose to disagree, but six courts, including the Constitutional Court, had ruled in favour of SANRAL. The Winelands court ruling need to be read carefully as it also ruled in SANRAL’s favour. In Gauteng, a panel appointed by the Gauteng Premier did a survey and the results were available on its website. The survey found that SANRAL tariffs were regarded by 34% of respondents as reasonable, 24% were neutral and 37% felt them unreasonable, meaning a 4% difference. The Deputy President recommended a uniform tariff in May, and monthly caps for registered users were reduced by 50%, with 60% discount on historical debt. Occasional user tariffs were on track, and this would be implemented in phases. The blocking of licenses was a legislative process that Members would have to approve. SANRAL made it clear that non payment was a criminal offence and one person was found by the magistrate to be guilty, paid a fine and a debt of R15 000.

He noted that the horrific road safety records in SA were because no serious consideration had been paid to white collar crime. SA roads were tolled and non-tolled, with those with tolls constituted 15% of the road network, a small percentage which people were making a fuss about. Incorrect billing happened because it was still reliant on the E-Natis system. From January 2016, it would be the responsibility of the individuals to ensure details were correct. In future everyone was to get an email address so that people could not complain that a letter was lost.

SANRAL was to run refresher courses for people dealing with supply chain management (SCM) to ensure that they remained diligent and did not take their eyes off the ball.

There was a policy on road classes and what the standards should be like. The bridge that fell did not belong to SANRAL. It was an unfortunate event, and investigations were being done by the Department of Labour, whose investigations would show whether there was negligence or design fault. The Mahikeng tolls were R75 for an occasional user, but 95% discount was applicable to those who lived in the proximity, and 75% to those who lived further out but were still frequent users. He noted that improvements were taking place to that road. He disagreed that SANRAL's irregular expenditure constituted 70% in the whole transport portfolio. SANRAL had stopped using a statistical calculation in awarding of routine road maintenance, and the SMEs were already suffering.

Cross Border Road Transport Agency (CBRTA) 2014/15 Annual Report
Mr Sipho Khumalo, Chief Executive Officer, CBRTA, said 69% of targets were achieved, which was an overall 4% improvement from previous financial year. Key achievements included that CBRTA developed and piloted the first market access regulatory scientific tool in public transportation within the country. It established business cooperatives that attracted 38 women and 12 youth. It adopted a smart law approach to law enforcement. It signed an MOU with SA Revenue Services (SARS) and concluded the feasibility study for the operator licence accreditation scheme with outcomes demonstrating a desire for a risk based and government regulated scheme. No fruitless and irregular expenditure was recorded during the year under review. Even though it got an unqualified audit, liabilities of the Agency were in excess of R255 million, which indicated a significant doubt on the Agency’s ability to continue as a going concern. There was a need for a sustainable mechanism for funding its operations. There was still a need for resolution on the Lesotho border case. There was disharmony in passenger transport legislation. It was looking at initiating individual country profiles and counter restrictive strategies in each SADC country.

Discussion
The Chairperson asked about the implications of the court ruling on revenue collection. She asked if there was any progress on self-funding discussions, with the Ministry of Transport. She asked how CBRTA intended to deal with the deficit. She noted that it had been told to impose road user charges, as did other countries on South African vehicles.

Mr Sibande asked about the challenges on the Lesotho border, and suggested also that CBRTA needed to look into the situation at the smaller border posts, including the Mbuzini corridor. He urged that it should develop leadership cohesion at all levels to improve coordination. Business cooperatives must be former, from rural masses around the borders.

Mr Maswanganyi said the AG, in September, had said that entities and departments must get unqualified audits. The Committee could not pin down entities legally to what was described as a “clean audit” because this was not described in the Public Finance Management Act (PFMA) as such.  He asked what happened with the misuse of a credit card as reported in the AR. He suggested that officials who were doing well must be rewarded, as they were doing a good job, spending sleepless nights at borders and subjected to all manner of nocturnal problems. 

Mr de Frietas said the CEO must be congratulated for the good work he was doing in RSA and at CBRTA. He was appointed after a string of various other officials had been appointed, and then disappeared within months. This Annual Report was different from those presented in the previous years. He wanted to offer congratulations to him and his team.

Mr Ramatlakane said the Agency must look to the  AG's concerns around the IT governance system. Uneven transport operations from other countries must receive attention, with reciprocation imposed.

Mr Moses Scott, Non-executive Director, Audit and Risk Committee, CBRTA, replied that prior to 2010, this was not an operational entity. The credit card was not an issue, as no fraudulent activities were done using it.

Mr Khumalo said that the CBRTA had asked for a bail out from National Treasury, in vain. The Director General of the DoT was told by National Treasury to find the money within the transport portfolio budget. It had developed a strategy to look at alternative funding. The issue of reciprocity was being raised sharply as a funding imperative, although this was not being done as a matter of raising money. Everywhere in SADC, SA operators were being charged foreign road user charges, although people from other countries were not charged in South Africa, and this was in fact unfair, given the onerous processes imposed on South Africans by their counterparts in their countries. The Mandela administration had consciously decided not to charge road user charges. It may have been, at that time, that RSA recognised itself as having a bigger economy and was giving a chance to the other nations to catch up. The Minister of Transport had asked the CBRTA not to rush into imposing user charges before understanding why this situation had happened in the first place. It was not accidental, but it was a conscious, historical choice. However, the CBRTA was now in a process of understanding the charges that different countries charged and was coming up with proposals to counter this and try to balance the playing field. If operators continued to come forward in the way they were at present, the cash flow position could be manageable.

Mr Scott noted that in terms of the Constitutional Court judgment, the CBRTA owed operators R318 million and it had R109 million in its balance sheet at the end of the year. It had started reviewing the current APP to look at where the money could be found.  The funding strategy had short and long term investments. The CBRTA had commissioned research on user charges on the various countries. In the absence of funding, it was facing a challenge should all operators come forward.

Mr Khumalo appreciated comments on the unqualified audit, but said that ideally the Auditor-General should have no comment to make. The status as a going concern was a problem, but CBRTA had come closer to getting a completely clean audit.

He noted that there were other “undesignated” places that people used to enter and exit South Africa other than the Maseru and the Mozambique border posts. The 52 points were designated where at least one official government authority was stationed. Usually it would be the Department of Home Affairs, and then SARS and other entities would follow as the border became busier. CBRTA was only authorised, in terms of the Act, to monitor official border posts. The SA National Defence Force was responsible for guarding all border posts. In Lesotho, crossing an international border was not an issue, and many people would cross daily and to some extent this was tolerated as long as they returned to sleep in their home countries. CBRTA's main mandate was to look at the commercial movement of goods and people.

Mr Scott asked the Members' indulgence on the Lesotho matter, as it related to political issues that  officials could not answer.

South African Maritime Safety Authority (SAMSA) 2014/15 Annual Report

Commander Tsietsi Mokhele, Chief Executive Officer, SAMSA, said SAMSA received an unqualified audit opinion, but the comments on the entity’s going concern indicated the existence of a material uncertainty that may cast a significant future on the entity’s ability to operate. SAMSA was currently incurring significant deficits, adverse financial ratios, low bank balances and low infrastructure spending. The funding model had remained the same since 1998, despite additional mandates, and the natural evolution of the organisation and inadequate funding of existing mandates had created the uncertainty. There had been under-funding of sea watch and response operations since 2009.

SAMSA had applied to National Treasury for a tariff adjustment, and it was now acting in partnership with the Department of Trade and Industry to review its long term funding model. It had tried to develop a new finance strategy to turn around the financial situation of the organisation. The development of a clear financial strategy was meant to establish guiding principles in all financial decisions of the authority and it would continue to be re-evaluated whenever the organisation had undergone changes in its financial circumstances.

SAMSA had in this year registered a merchant vessel for the first time under the democratic government. The ship had the capacity to carry 170 000 tons of Anglo American iron ore, and three South African cadets sailed with the ship for six months, as part of their training programme. SAMSA rescued 164  people, conducted 286 port inspections, passed 13 276 activities and directly covered 131 321 South Africans through safety and awareness interventions.

Its challenges included diminishing technical skills capacity, due to the ageing workforce, outdated and slow ratification of legislation, and the absence of national maritime transport policy. It also noted obsolete communication infrastructure that exposed the country to maritime trade security risks.

The Chairperson noted that many Members had had to leave by this point and suggested that questions be submitted in writing.

The meeting was  adjourned.