Department of Transport on its 2012 Budget

Meeting report

Introductory Remarks
The Chairperson welcomed members of the Committee and the Department of Transport. The Chairperson directed that the Department focus its presentation on the budget as the strategic plan had been covered at the meeting on 13 March 2012.

Briefing by the Department of Transport
Mr Dan Pretorius, Acting Chief Financial Officer; Department of Transport (DOT) made the presentation, which covered amendments to budget allocations and details of budget allocations, per programme and per major allocation; roads, provincial roads grants; rail, public transport infrastructure and systems; bus, departmental agencies and accounts; other transfers and goods and services.
One of the amendments to the budget allocations was the compensation of employees through improvements in their conditions of service, projected at R6,1m for 2012/13, R6,8m for 2013/14 and R7,6m for 2014/15. Transfer payments were projected at R261,5m for 2012/13, R 292,2m for 2013/14 and R4 327,2 m for 2014/15, which included R4 000 for Passenger Rail Agency South Africa (PRASA) rolling stock.  
Conditional grants were projected at R358,8 m for 2012/13, R219,3m for 2013/14 and R77,2m for 2014/15. Conditional grants for public transport Infrastructure and information systems, rural road asset management and public transport operations would be cut for this period, informed by municipal spending.
The provincial roads maintenance grant would be funded at a level of R414,2m for 2012/13, R281,2m for 2013/14 and R198m for 2014/15.  Budgets for goods and services had been cut by Treasury, and shifted across programmes to facilitate restructuring.

The total budget for DOT programmes was R38,8bn for 2012/13, R41,7bn for 2013/14 and R48bn for 2014/15. The programmes receiving the most funding for this period would be road transport (45.7% of the budget allocation) and rail transport (26.3%).   (Please refer to the presentation for funding to other programmes.)
The breakdown for external allocations included:
Roads and roads grants - R17,7bn in 12/13, R18,9bn in 13/14 and R19,9bn in 14/15;
Rail - R10,2bn in 12/13, R11bn in 13/14 and R15,7bn in 14/15;
Public Transport Infrastructure and Systems (PTIS):R4,9bn in12/13, R5,5bn in 13/14 and R5,8bn in 14/15;
Bus (Public Transport Operations Grant) - R4.3bn in 12/13, R4,5bn in 13/14 and R4,7bn in 14/15;
Taxi transfers - R511,1m in 12/13, R 539,6m in 13/14 and R572m in14/15; and
Transfer to Public Entities (excl. roads and rail) - R167,3m in 12/13, R179,4m in 13/14 and R190m in 14/15.
Amounts for other transfers were R17,1m in 12/13, R18,1m in 13/14 and R19,2m in 14/15.  Once-off transfers to the Road Accident Fund (RAF) and National Traffic Information System (eNaTIS) had been phased out from 2012/13 onwards.

The breakdown for internal allocations included:
Compensation of employees - R316,1m in12/13, R333,4m in 13/14 and R353,8m in14/15;
Goods and services (excl. eNatis) - R 531,9m in 12/13, R542,5m in 13/14 and R 572.3 billion in 14/15; and
Capital budget for the Department - R4,3m in 12/13, R4,5m in 13/14 and R4,8m in 14/15.
A new provincial roads grant had been included in the DOT budget from 2011/12. In addition the Gautrain budget had been phased out and funding to PRASA increased.
Some of the other transfers to departmental agencies included:
The Railway Safety Regulator - R39,3m in 12/13, R41,5m in 13/14 and R44m in 14/15;
Road Traffic Management Corporation - R82,4m in 12/13, R86,9m in 13/14 and R92m in 14/15;
South African Civil Aviation Authority - R16m in 12/13, R16,9m in 13/14 and R17,9m in 14/15;
Ports Regulator - R15m in 12/13; R15,9m in 13/14 and R16,8m in 14/15);
Taxi scrapping and SANTACO - R511,5m in 12/13, R539,6m in 13/14 and R572m in 14/15; and
Universities - R9,6m in 12/13, R10,6m in 13/14 and R10,7m in 14/15.  (Refer to presentation for entire funding list to agencies).

Discussion
Ms M Themba (ANC, Mpumalanga) asked the Department to explain how long it would take to scrap taxis. The plan had been on the table for a long time.

Mr George Mahlalela, Director-General of the DOT, replied that this was a seven-year contract which had started in 2006. The contract would expire at the end of the next financial year, which was basically 2014.

Ms Themba asked when the Gautrain concept would be spread to other areas such as Mpumalanga. When would the Muloto road be finalised?

Mr Mahlalela replied that last year the Department had reported that there was a stand-off between Treasury and DOT on the Muloto road. This had now been resolved and the Department had decided to do an option analysis to finalise the feasibility. In a week or two the tender would be out to source people to prepare the final report. This would be presented to Cabinet for approval. This was an important project and had been included in the Presidential Infrastructure Coordination Commission.

Ms Themba asked how the Department monitored money transferred to municipalities. Were there any reports given?

Mr Mahlalela replied that in terms of quality assessment and monitoring, the Department had a team that started last September. The team was collecting the reports and these were received on a monthly basis. The Department knew which areas were under-performing in terms of quality and the necessary interventions had been made. This was work in progress, as there were about 200 projects in the country.

Mr H Groenewald (DA; North West) pointed out that the Department was part of the e-tolling negotiations. How could the Department allow a situation where the administration of the project was more than the cost? How could a responsible Department allow this to happen?

Mr Mahlalela replied that the matter was currently in the courts and as such was sub judice.  The Department did not agree that the administration cost was higher than the construction cost, because the actual construction of 185 km was R 20 billion, of which R 6.5 billion was for the collection system. There would be additional operational expenses of R 5 billion, so the total for administration was really around R11bn.  Effectively, R14bn had been spent on actual construction, and not on the collection system. What people confused in the debate was that the project was unique in the sense that it combined both construction and maintenance.  This was not how roads had been budgeted for in the past, as the budgets had been only for construction. This had resulted in problems, as there had been no maintenance linked to construction. The R 20 billion included the maintenance cost.

Mr Groenewald observed that the taxi scrapping programme had had cut-off dates many years ago. It had to stop at some point. Why was it going on and on?

Mr Mahlalela replied that when the programme started it was calculated that there were 120, 000 taxis and R7,5 billion would be required to scrap all taxis. What had happened was that only 39, 000 had been scrapped to date. This was because Treasury had not released the total of R7,5 billion, so the 39, 000 scrapped was based on what Treasury had allocated annually. The other problem was that owners were struggling to source the rest of the money through banks to top up on the R63, 000 per taxi scrapped for the purchase of a new vehicle.  Banks were charging high rates. As such there was not much enthusiasm for the recapitalisation programme.

Mr Groenewald stated that there were millions of Rands down the drain as a result of the Gautrain tunnel.  With the water problem in the tunnel, the life span which was thought to be 100 years was now feared to have been reduced to 20 years.

Mr Mahlalela replied that Gautrain was a provincial agency and as such did not report to DOT. DOT was briefed as part of the broader management committee for Gautrain. The latest information, as of last week, was that the water leakage problems had been resolved. In the next few months, this leg of the route would be operational. As per the agreements with the operators, there were penalties, as this bordered on non-performance. It was an oversight on the side of the engineers.

Mr Groenewald pointed out that the rapid transport system was a good thing. How many other places would benefit and what was the cost.

Mr Dan Pretorius, Acting Chief Financial Officer; DOT, replied that of the 12 cities, two had implemented the rapid transport systems. The Department was assisting other cities to implement the system and all had operational plans in place.

Mr Groenewald asked how many jobs would be created from the projects in various places.

Mr Pretorius replied that the Department would provide information in writing on the number of jobs.

Mr Groenewald pointed out that after the 2010 World Cup, the buses bought in Port Elizabeth were rusting without being used.

Mr Mahlalela replied that the Department had taken a decision with the city and the province at the time - as had been done in Johannesburg - that since the buses would be operating on the same routes as taxis, the taxi industry needed to be empowered. The taxi industry needed to be assisted to form a company to take over the buses. The delay in Port Elizabeth was a result of trying to get the taxi association to agree to form a legal entity. Unfortunately, when dealing with the taxi industry towards the end of the negotiation process, if agreement was not reached the chairperson was removed and replaced by a new one who would then say, let’s start from scratch. That had been the problem. The city had not been aggressive enough in resolving the matter. DOT had now provided a team to assist them.

Mr Groenewald asked what the inputs were from the transport side into the National Development Plan. How would jobs be created?
Mr Mahlalela replied that the Department was part of the National Development Plan process. DOT had had a series of workshops and the final document which would be coming out contained important input on key infrastructural projects by the Department.

Ms Themba asked if the Department had budgeted for SANTACO.

Mr Mahlalela replied that the Department subsidised the operational costs of SANTACO and some of the projects, such as the training academy launched last year.

Ms Themba asked who was responsible for the confusion with regard to scholar transport.

Mr Mahlalela replied that scholar transport was a provincial function. DOT had been having engagements with the Education Department to have one scholar transport policy which could support provinces. The process had been completed and what was being done currently was to resolve some outstanding issues with the Education Department. One thing that was delaying the scholar transport policy was that the Department wanted to resolve the issue of who was responsible for scholar transport. Was it the  Transport or Education department? This process had taken almost two years. It had now been resolved that where scholar transport should be located should be decided by the provincial executive.

The Chairperson asked for the Department’s proposals on the Public Transport Infrastructure and Systems (PTIS), as those that had been highlighted in the presentation were National Treasury proposals. Was the Department presenting old information, as most places considered were World Cup host cities?

Mr Mahlalela replied that the allocations for PTIS were joint allocations. It was not Treasury alone. In order for the DOT to allocate to municipalities they needed to have finalised their operational and infrastructure plans. The municipalities that had been listed in the presentation had completed their operational and infrastructure plans

The Chairperson stated that the Department should give a breakdown when presenting, by province and by municipality.

Mr Mahlalela replied that the Department would provide a report listing all the projects that had been funded last year and this year. The progress on these projects would be provided.

The Chairperson observed that a lot of money was being spent on universities. What was this money for? Were universities not under the Department of Education?

Mr Mahlalela replied that the Department had a training programme where young people who were doing graduate courses related to transport were supported through universities. The universities were supported to absorb those students. All key universities in South Africa were part of this project.

The meeting was adjourned.