Meeting Summary
National Treasury briefed the Committee on the Provincial Roads Maintenance Grant. This conditional grant, totalling R22.3 billion over the medium term expenditure framework, was instituted to ensure proper road maintenance on the over 600 000km of roads which had experienced a steady decline in quality, with an estimated 30% in poor to very poor condition. This led to increased transport costs due to vehicle repairs and to increased cost to rehabilitate the roads. The grant was created out of the old Infrastructure Grant to Provinces. The cut-off date for applications to build new roads from this grant was 01 April 2011. Exceptions would be the building of small access roads to hospitals and schools in rural areas. The grant was also to be used to repair the damage done to roads due to coal hauling operations in Mpumalanga and Gauteng as well as to implement the Road Asset Management Systems. The grant was a Schedule 4 grant (a top up grant) which meant that provinces had to supply any shortfall. As at the end of July 2011, the Provincial Roads Maintenance Grant report reflected that the Eastern Cape anticipated a budget underspend of 75.8% (R783 million) of its budget. Gauteng had not spent any money at all and the Northern Cape projected a 37% overspend of R115 million due to completing projects delayed in 2010/11. There were challenges to compliance with the Division of Revenue Act. There had been delays in S'hamba Sonke submissions to National Treasury. The Department of Transport had not yet provided first quarter performance information. Transfer payments to provinces had been made without a list of projects linked to the funds and it appeared that the Department suffered from internal capacity problems, despite R10.5 million being given to the Department for monitoring purposes.
The North West Province said its budget was split into two items - R34 million for the Expanded Public Works Programme related projects and R467.8 million for S’hamba Sonke. The first tranche of money received from Treasury was R57 million was in May and had been spent. Extra expenditure of R110 million had come from provincial sources in the form of an advance. The second tranche from Treasury was due on 19th August. R12.25 million of the R34 million allocated to the Expanded Public Works Programme had been spent by the 31 July. On the Provincial Roads Maintenance Grant projects, 12 had been completed and were on retention, seven were under construction, 16 were at the tender stage, nine at the design stage, 23 in the planning stage, with 36 emergency pot hole repair projects. Ten projects were on hold or suspended. They were trying to fill all funded vacant posts within their department. The Department had experienced high staff turnover due to members having been fired for financial misconduct.
The Western Cape reported that it had submitted its business plan on 26 April and an updated version on 26 July. The updated version included more information on the condition of bridges. On the question of job creation through the grant, the Western Cape needed to consult more with the Department of Transport to understand how job creation would be benchmarked (measured) and what types of projects would qualify as job creation, for example, if resealing was road maintenance or job creation. In addition it needed to work with the Council for Scientific Research on developing road maintenance best practices. Challenges for the provincial Department were: what the definition of an access road to schools or clinics was, the definition and distinction between rehabilitation and upgrade, and if skills development included graduate skills development. The provincial Department had problems with the frame work given by the Department of Transport on parameters like vehicles per kilometre usage, safety hot spots and road condition. It needed more asset management funding as it was not meeting all the parameters the funding was calling for. Full time equivalence and job creation targets had to be more clearly given. The balance between budget and project selection versus job creation had to be resolved. The Western Cape needed R8 billion to address the backlog in maintenance. Of the budgeted R411 million, R160 million was to fund a portion of the regional office spend thus only R251 million was available the pillars of the maintenance grant and for job creation. The province used the Network Condition Performance Measures to monitor the performance of the plan.
Members said the variance in the Eastern Cape figures between the June and July reports suggested that those concerned did not know what they were doing, that they were entering numbers into reports for the sake of it and that intervention was needed. Members said transfers to provinces without Treasury having been given a list of projects linked to the funds were like throwing money into the dark. Treasury should take the issue seriously and rather keep the money for the following year or redirect it to other programmes. Members wanted to know what was meant by a new road, a gravel road and a tar road. Why had there been no expenditure in Gauteng? What were the job creation totals for the North West and the Western Cape? Could inter-provincial priorities be incorporated into the grant? How much in damages was claimed from provinces because of badly maintained roads, for example potholes. Members were concerned with the vigorous spending of the Northern Cape and wondered whether they were perhaps re-allocating the money.
Meeting report
National Treasury. Provincial Roads Maintenance Grant. Presentation
Mr Edgar Sishi, Director: Provincial Budget Analysis, National Treasury, gave some background to the
Provincial Road Maintenance Grant (PRMG). He said there were over 600 000km of road which had experienced a steady decline in quality with an estimated 30% in poor to very poor condition which led to increased transport costs due to vehicle repairs and to increased cost to rehabilitate the roads, thus the emphasis should be on proper road maintenance created out of the old Infrastructure Grants to Provinces (IGP) and that the cut-off date for applications to build new roads from this grant was on 01 April as the focus was on the maintenance of roads (slide 2). Exceptions to this would be the building of small access roads to hospitals and schools in rural areas.
R5.2 billion had been added to the base line funds to take it to a total of R22.3 billion over the medium term framework. The grant was also to be used to repair the damage done to roads due to coal hauling operations in Mpumalanga and Gauteng as well as to implement Road Asset Management Systems (RAMS). The grant was a Schedule 4 grant (a top-up grant) which meant that provinces had to supply any shortfall (slide 2). Provinces generated around R5 billion in motor vehicle licence fees.
As at the end of June 2011, the PRMG report reflected that the Eastern Cape anticipated a budget overspend of R40 million, and that Gauteng had not spent any money at all (slide 3). The Northern Cape Province was completing projects delayed in 2010/11. There were challenges in compliance relating to the Division of Revenue Act (DORA). There had been delays in S'hamba Sonke submissions to Treasury, the Department of Transport (DOT) had not yet provided first quarter performance information in accordance with legislation, transfer payments to provinces had been made without a list of projects linked to the funds and it appeared that DOT suffered from internal capacity problems, despite R10.5 million being given to the Department for monitoring purposes. Treasury had corresponded with the Department and was in the process of setting up a meeting with it (slide 4).
An updated July report reflected dramatic swings as the Eastern Cape projected a 75.8% (R783 million) underspend of its budget (slide 5). Gauteng still had not spent any of its budget but was predicting a R5 million overspend and the Northern Cape projected a 37% overspend of R115 million.
Discussion
The Chairperson said that provinces should enter into partnerships with big business as for example with Kumba in the Northern Cape. Did Gauteng give a reason why there had been no expenditure?
Mr B Mashile (ANC, Mpumalanga) said the variance in the Eastern Cape figures suggested to him that those concerned did not know what they were doing, that they were entering numbers into reports for the sake of it and that intervention was needed. He said the transfers to the provinces without having been given a list of projects linked to the funds were like throwing money into the dark. Treasury should take the issue seriously and rather keep the money for the following year or redirect it to other programmes. He was concerned with the vigorous spending of the Northern Cape and wondered whether they were perhaps re-allocating the money.
Mr M Makhubela (COPE, Limpopo) asked when the first meeting between the Treasury and the DOT was.
Mr A Lees (DA, KwaZulu-Natal) said the grant was for R22.3 billion - could Treasury explain that the report only indicated R6.4 billion? He asked whether any province had sent in a business plan and how did Treasury know that the spending of the North West, which was claimed as being for the previous year, was indeed so, if no business plan was submitted? He said he was confused over the concept of overspending on the budget when the grant was a top-up plan and provinces would have to provide the difference.
Mr Butana Komphela, Member of the Executive Council (MEC) for Police, Roads and Transport in the Free State, said mines caused road damage in the Free State as well because the province had a large number of gold and coal mines and Treasury needed to give the Free State serious attention as well. In addition, he wanted Treasury to note the importance of the Van Reenen’s Pass which affected traffic between the coast and the hinterland. He anticipated that the Free State would be seriously overspending its budget.
Mr Sandile Mbangwa, Acting Head of Department (HOD), Department of Public Works, Roads and Transport, North West Province, said that what the Treasury had transferred to date to the North West, which was R57 million, had all been spent already. The provincial government had assisted in the payment with other projects and that there was a huge backlog of work.
Ms Sibongile Mazibuko, HOD, Department of Police, Roads and Transport, Free State, said in support of the MEC`s comments that there had been three closures of the Van Reenen's Pass this winter, which lead to the alternative roads getting heavy traffic loads accelerating their deterioration. In addition, the floods had had a big impact on the condition of rural roads.
Mr B Mnguni (ANC, Free State) asked why Gauteng was not spending.
Mr S Montsitsi (ANC, Gauteng) said provinces had their own road construction programmes through a capital grant and that the PRMG was to maintain the roads. Was the grant for use in building new roads like in the case of the Free State (i.e. after flood damage)?
The Chairperson said that there would be a follow up meeting in October
Ms Julinda Gantana, Chief Director: Intergovernmental Relations, National Treasury, said that previous budget reviews showed that provinces had not spent on maintenance, hence the focus on road maintenance in this particular grant.
In response to Mr Mashile’s question, she said that Treasury had undertaken an intervention in the Eastern Cape. In July Treasury officials had a training session with the provincial department to assist the province. Treasury was also using peer learning, where officials learned from their peers in other provinces. To date Treasury had not received the first quarter reports from the Eastern Cape so could not definitively comment. There was no reason to doubt the figures. Should further training intervention be necessary, then Treasury would do so. On the Expanded Public Works Programme (EPWP) programme, the Eastern Cape was doing very well.
In response to Mr Lees' question she said the rest of the money would be given in 2012/13 and 2013/14.
In response to Mr Montsitsi’s question she said that the money was for road maintenance work, not on what was transferred but on what was available.
On the building of new roads versus the maintenance of roads, Mr Sishi said that the maintenance of roads needed to be prioritized. In the past R5.2 billion was spent on road maintenance in the country with KwaZulu-Natal spending R2.5 billion, more than half of the total figure. No new roads could be built from this grant as from 01April apart from the exceptions mentioned earlier in the report. Treasury had not yet received the quarterly report from Gauteng province. It was not clear whether the blockage lay with the province or the Department, although he suspected it was a bit of both. He said it was the responsibility of the Department to provide a consolidated report to Treasury by 15 August. Treasury had contacted the Department a week after this date to follow it up.
On job creation, he said that KwaZulu-Natal was a good example of a good job creation Expanded Public Works Programme (EPWP).
He said it was critical to obtain the RAMS as there was a need to know road conditions and traffic density levels which could inform planning in relation to the investment required and the areas where money needed to be spent. The Eastern Cape was working hard to implement RAMS.
The Free State MEC’s assertions on coal haulage and possible overspend was noted.
Mr Sishi said that Treasury had met with the Department in May and that restructuring in the Department meant that it had capacity challenges.
Mr Mashile asked what was meant by a new road, a gravel road and a tar road.
Mr Sishi replied that it was not for National Treasury to answer that question, and that the lead department, the DOT, needed to provide clear definitions.
The Chairperson said that he would contact the Department with regard to its non-compliance.
North West Province. Department of Public Works, Roads and Transport. Presentation
Mr Mbangwa said the budget could be split into two items, R34 million for EPWP related projects and R467.8 million for S’hamba Sonke. He then outlined the budget allocation for the different districts (See attached document) over the medium term expenditure framework. The first tranche of money received from Treasury (R57 million) in May had been spent. Extra expenditure (R110 million) had come from provincial sources, in the form of an advance. The second tranche from Treasury was due on 19th August. R12.25 million of the R34 million allocated to EPWP had been spent by the 31 July.
On the PRMG projects, 12 had been completed and were on retention, seven were under construction, 16 were at the tender stage, nine at the design stage, 23 in the planning stage, with 36 emergency pot hole repair projects. Ten projects were on hold or suspended. The roads involved were rural roads not municipal roads. They were trying to fill all funded vacant posts within their department. The Department had experienced high staff turnover due to members having been fired for financial misconduct.
Western Cape. Department of Transport and Public Works. S’hamba Sonke (Provincial Roads Maintenance Grant). Presentation
Mr Carl October, Director: Road Planning, Department of Transport and Public Works, Western Cape, said that the Western Cape had submitted its business plan on 26 April and an updated version on 26 July which included information on the conditions of bridges and User Asset Manager Plans (U-AMPs). Since 2008/9 there had been no over or underspend of its budgets. On the question of job creation through the grant, he said the Western Cape needed to consult more with the Department of Transport (DOT) to understand how job creation would be benchmarked (measured) and what types of projects would qualify as job creation, for example was resealing a road maintenance or job creation. In addition it needed to work with the Council for Scientific Research ( CSIR) on developing road maintenance best practices. Challenges for the provincial department were: what the definition of an access road to schools or clinics was, the definition and distinction between rehabilitation and upgrade, and if skills development included graduate skills development. It had problems with the frame work given by DOT on parameters like vehicles per kilometre usage, safety hot spots and road condition. It needed more asset management funding as it was not meeting all the parameters the funding was calling for. He said full time equivalence and job creation targets had to be more clearly given. The balance between budget and project selection versus job creation had to be resolved. The Western Cape needed R8 billion to address the backlog in maintenance. Of the budgeted R411 million, R160 million was to fund a portion of the regional office spend thus only R251 million was available for the pillars of the maintenance grant and for job creation. The Construction Industry Development Board (CIDB) levels that the province was targeting were levels one to four; however most of the work was won by contractors at levels four to six which then sub contracted the work to level one to four companies. The province used the Network Condition Performance Measures to monitor the performance of the plan. This covered roads, pavements and gravel roads. The Road Network Information System was available on a website.
The Pavement Quality Management System and the Integrated Maintenance Management System would provide data to support maintenance planning. The business plan would be updated annually. The province had a monitoring and evaluation support unit which monitored implementation on a live link web system. Monthly and quarterly reports were submitted to the Department.
Discussion
The Chairperson said some of the slides in the presentation were unreadable and he wanted more detail in the report.
Mr October replied that it was an annex to the report sent to the DOT and he would send a copy to the Committee.
Ms Mazibuko said that the Free State had submitted its business plan to the Department. She said that the procurement systems for the province were out of date and that a tender was out to improve the system which would be in place by the end of the financial year. She acknowledged that the state of the roads in the Free State was bad and that the province was investing of its own money into the roads.
The Chairperson wanted to know the job creation totals for both the North West and the Western Cape.
Mr Makhubela asked when applications were called for to fill critical posts in the North West and for which posts.
Mr Mashile said the North West had spent 20.3% of its budget by end July, while Treasury said that it was 12%. Could the North West explain the discrepancy? How was it that non-performing contractors and suppliers being suspended? Did the supply chain process not weed out these types of contractors? He said that his understanding of rehabilitation was that it was costly maintenance of a higher magnitude but that he agreed that then definitions had to be made clear to assist in the drawing up of business plans. Had there been attempts to meet with the DOT?
Mr Lees said that South African National Roads Agency Limited (SANRAL) road traffic was being pushed onto provincial roads, whereas neighbouring provinces might have different priorities. Could inter-provincial priorities be incorporated into the grant?
Mr Mnguni asked how much damages was claimed from provinces because of badly maintained roads, for example potholes.
Mr Mbangwa said that the discrepancy in the numbers was because the provincial treasury had assisted.
Ms Thembeni Mthembu, Chief Director: Department of Public Works, Roads and Transport, North West, said that job creation figures had been submitted. She said that the province needed R2 billion per year but was stuck with the R501 million allocated.
Mr Mbangwa said that filling the vacancies had faced the challenge of providing for the Occupation Specific Dispensation (OSD) payments which were not included in the budget. He had been told to fill critical vacant posts which were funded and in the structure.
Consultants had been suspended because they had not performed. Investigations had been launched to clean the mess in the roads directorate, programme managers had been fired and a new chief financial officer (CFO) had been appointed in May. The Chief Director, a qualified engineer, was also new.
On the potholes issue, the Department had a comprehensive list of claims and the state attorney assisted. Most cases did not translate into payments.
Mr October said that 1 946 jobs had been created. R160 million went to the regional offices and maybe it should not be partially funded so that the full amount could be used for job creation, with the provinces providing for the R160 million.
He agreed on the definition of rehabilitation but that it still implied crisis management rather than periodic maintenance. He said there was a need to approach projects on a network basis which would show where investment had to be made and what strategies to employ. The province currently had a R8 million rand maintenance backlog. There was a 40% technical vacancy rate which was augmented by a graduate programme and interaction with the South African Institute of Civil Engineers (SAICE).
Mr Komphela said that the KwaZulu-Natal - Free State road was considered a priority for the province but that it was short of resources and that it was a cause for concern.
On pothole claims, he said approximately R20 million had been paid out on claims and it was escalating. There was currently one case in court which involved the loss of life.
The biggest problem was that the grant was diminishing over time and did not take into account balancing the differing incomes of provinces. The funding should be biased against the Western Cape, Gauteng and KwaZulu-Natal provinces.
Mr Sishi replied that the roads maintenance grant had in fact increased by double digit percentages, in particular the Free State allocation. He had received notification that a meeting with the DOT was scheduled for the following day. Definitions had to be decided by the Department. On sufficiency, he said that the PRMG existed within the context of an overall roads budget totalling R16 billion and that licensing raised the most money for provinces.
The meeting was adjourned.
