The Portfolio Committee on Transport was able to hold three public hearings on the Annual Report of the National Department of Transport and several entities reporting under the department – the South African Maritime Safety Agency (SAMSA), the Air Traffic Navigation Services (ATNS), the Railway Safety Regulator (RSR), Airports Company of South Africa (ACSA), the Civil Aviation Authority (CAA), and South African National Roads Agency Limited (SANRAL). Owing to constraints of time the Committee was unable to hold hearings on all entities falling under the Transport budget. The Committee accordingly made a strategic selection. The hearings were held in Parliament between the 12^th October and 2nd November 2005.

The Committee notes with concern that the Road Accident Fund, the Cross Border Road Traffic Agency and the Road Traffic Management Corporation had not submitted their 2005 Annual Reports as of 31 October 2005.

The 2005 Annual Report of the DoT reflects ongoing progress in the restructuring of the department to more effectively respond to its diverse responsibilities. The Committee believes that this restructuring should enable the department to devote more focused attention to areas that had previously been relatively neglected – including maritime and aviation policy.

There are high vacancy levels within the department at senior management levels. This is partly related to new posts associated with the restructuring noted above. However, the Committee expresses some concern at the vacancy levels, and at a relatively high rate of turn-over at the senior staff level.

For the first time in several years the department received a qualified audit opinion from the Auditor General. There are several important matters that the Auditor General’s report raises, including:

• ongoing uncertainty regarding the contract for the production of the credit card format licences. The Auditor General is awaiting the results of an investigation into this matter, and the Committee will also be tracking progress in this respect.
• instances of fruitless and wasteful expenditure, irregular expenditure and unauthorized expenditure. Officials from the department assured the Committee that each of these specific cases had been addressed and remedies applied.

In the Committee’s view, the most important issue raised by the Auditor General is that memoranda of understanding between the department and the public entities under its control are not regularly updated and some were last revised in 1994. In most instances, performance contracts had also not been concluded. The Committee agrees with the Auditor General that these instruments can play an important role in effective governance and oversight of these entities. The Committee is aware that subsequent to the time-period addressed in the 2005 Annual Report, the department has taken active steps to up-date and enhance memoranda of understanding and performance contracts with all relevant entities. The Committee will be monitoring progress in this regard.

The Committee raised concerns that there was under-expenditure in certain priority areas, including on Arrive Alive, the implementation of the National Land Transport Transitional Act, and overloading controls.

The ATNS has performed consistently well over several years, and the 2005 Annual Report accurately reflects continued achievements. The Auditor General’s report is qualified, but the Committee is satisfied that this relates to a relatively minor technicality regarding the asset register of the ATNS. We are also satisfied that this has now been corrected, and no actual asset losses have been incurred.

SAMSA has experienced some leadership instability over recent years. The committee is concerned that SAMSA seems to lack a clear sense of its mandate focus. The Director General of the DoT confirmed this.

Part of this lack of clear strategic focus is reflected in the fact that SAMSA has a large assets to liability ratio. The DoT is insisting that SAMSA develops a proper budget to spend its surplus or forfeit it. The Committee supports this approach.

The Committee believes that these issues relate directly to the concern raised by the Auditor General regarding the need for the DoT to more regularly update its memoranda of understanding and performance contracts with entities such as SAMSA.

ACSA is another entity that has been performing well over several years, embarking on major infrastructural projects and generating significant surpluses out of its airport activities. ACSA plans to embark on further major airport upgrades and renovations with a likely significant impact on job creation and SMME development, ahead of the 2010 World Cup. To maximize its work in this area ACSA hopes to borrow at a 30% gearing ratio, instead of at its current 6,7% gearing which means its capital expenditure borrowings are more expensive than they might be. The Committee agrees that an appropriate regulatory framework in this regard for ACSA should be considered.

The Committee notes that the company’s dividends have increased by 29% to R295-million for the year under consideration. While this is a welcome development, given the fact that the government is the majority share-holder the Committee is concerned that ACSA’s legal status means that it is not subject to the oversight of the Auditor General. The Committee suggests that measures be developed to improve public scrutiny of ACSA finances.

The ownership profile of ACSA is another issue that requires further attention. The private sector share owned by Aeroporti di Roma has been sold back to ACSA and the projected employee share-holding has never been implemented. Further discussion and policy-development in this regard needs to occur.

For the period covered by the 2005 reporting year, the RSR was an embryonic entity. In July 2004 there was a CEO and only two full-time staff and three secondments. Given its very recent establishment there was not much to report for the year under review. Nevertheless the Committee deliberately invited the RSR senior management to the public hearings in order to establish whether there was any real progress. The Committee was relatively satisfied that indeed some progress is being made. A State of Safety Report is being compiled, and the RSR is now receiving occurrence reports. 134 Safety Permits have been issued to rail operators and a further 50 will be issued in the near future. The RSR concedes that it has very weak enforcement capacity.

The Committee notes that there are still no organized labour and Department of Minerals and Energy representatives on the board of the RSR as required by legislation.

The Auditor General has raised several matters relating to unutilized funds, budgeting, the leave system and the non-performance of the RSR’s audit committee. The Committee will be monitoring these issues.

The CAA continues to provide a high-level of technical capacity in aircraft inspection and accident and incident recording and investigation.

The Auditor General has queried a R60million investment with Old Mutual and Momentum Group Limited, and particularly commissions paid of R2,5 million in the absence of a clear investment policy. There is also a forensic audit under-way in regard to office accommodation. The Committee will monitor developments in this regard. Once again, the Committee believes that a more effective Memorandum of Understanding between the CAA and the DoT could help to improve governance in regard to issues of this kind.

The CAA raised with the Committee a concern that the aviation sector in South Africa required a champion to broaden participation and awareness of the sector amongst a wider section of South Africa’s population, and there was no real clarity as to where this championing function should be centrally vested. The Committee accepts the point, and will be raising the matter with the DoT.

In the assessment of the Committee, SANRAL has proved to be a very dynamic promoter of road construction and maintenance. Largely as a result of this and of its professional and technical capacities SANRAL’s road coverage has increasingly moved beyond its original national routes mandate. It was reported to the Committee that SANRAL’s road coverage is now set to double from its original mandate, often as a result of agreements with different provinces. The Committee believes that this is probably a positive development. It is, however, occurring without a clear agency agreement in place on funding. This latter now becomes an important matter for greater clarity and policy development, especially as many of the roads now being taken over by SANRAL require major rehabilitation. Ongoing funding of SANRAL’s activities should also take into account the significant escalation in the price of bituminous products, which are directly related to the international oil price.

The Auditor General has qualified his report of SANRAL, raising questions in regard to the land asset register and the absence of quarterly audits. The Committee will monitor these issues.

Noting improvements in the number of timeous Annual Report submissions of the various transport entities, the Committee urges the DoT to ensure a hundred percent compliance in future years.

The Committee had inadequate time to deal with all of the reporting entities and we were compelled to make a strategic selection. The September 30 deadline for Annual Report submissions also means that the Committee’s own oversight and recommendations come too late for a more effective contribution to government’s budget development cycle. We recommend an earlier deadline for Annual Report submissions, and more adequate time in Parliament for public hearings on these reports.

Chairperson: PC on Transport