DRAFT REPORT ON BUDGET HEARINGS OF THE PORTFOLIO COMMITTEE ON TRANSPORT
1.1 The Portfolio Committee on Transport conducted a series of budget hearings in Parliament between the 9th March and 18th May 2005. The hearings covered the Department of Transport, as well as all of the public entities that fall under the national transport budget: the South African Rail Commuter Corporation, the South African National Roads Agency Limited, the Road Accident Fund, the Cross-Border Road Transport Agency, the South African Maritime Safety Authority, the South African Civil Aviation Authority, the Road Traffic Management Corporation, the Railway Safety Regulator, the Air Traffic and Navigation Services Company, and the Airports Company of South Africa.
1.2 In the hearings, the Committee focused on assessing whether the transport budget made adequate provision for the strategic plans of the Department and of the public entities. The hearings were also used as an opportunity to discuss the appropriateness of the major objectives of these various strategic plans.
1.3 In regard to this general approach, the Committee notes that, while the Department complied with the requirement that departmental strategic plans be tabled seven days before the relevant budget vote in the National Assembly, one week is entirely inadequate for an effective public hearings process. The Department did, indeed, provide the committee with an advance draft version of the strategic plan, and we commend them for this. Our concern is not with the Department, but with the need to improve the general approach of Parliament to the budget hearings and votes.
1.4 In the course of our hearings many matters of detail emerged, some indicating important progress, others indicating areas that require attention. The Committee will follow up on all of these matters. In this report we highlight some of the major features of the Transport Budget, and we note some significant areas of concern.
2. The National Department of Transport
2.1 The department’s budget for 2005/6 is aligned to and generally supports an important organisational restructuring underway within the department. In the previous year, the Portfolio Committee expressed some concern about the Department’s organisational design. It was not always clear why some functions belonged to one programme rather than another. The Committee believes that the strategic objectives of the Department and the alignment of departmental programmes are now significantly improved. In particular, the organisational changes, and the budget allocations to support these changes, provide greater focus to the critical area of transport regulation. Key areas of transport, which have tended to be somewhat neglected, the aviation and maritime sectors, now also receive better attention in the organisational design.
2.2 This year’s transport budget also more adequately reflects government’s overall strategic objective of leading a major infrastructural programme to lower the costs of doing business in South Africa, to address our developmental challenges, and to provide jobs. Additional allocations for passenger rail infrastructure, for instance, have been made – R500 million for the 2005 budget, with a further R100 million and R250 million envisaged for the following budgets.
2.3 The area of road traffic enforcement remains a major concern. This year’s budget sees a significantly increased allocation to the Road Traffic Management Corporation (R10,7 million), but the RTMC has failed to function thus far, and progress in the coming period will need to be monitored closely. The important Administrative Adjudication of Road Traffic Offences legislation has also still to be implemented by the Department.
2.4 Another area of significant challenge lies in meeting the Department’s objective of providing safe, affordable and efficient public transport. The Committee played an active role in helping to re-define the taxi recapitalisation programme, scaling it down from its original well-intentioned but unworkable approach. We welcome the new scaled-down policy. We also welcome the important budgetary increases provided for bus and rail subsidies – they are expected to grow (along with rail infrastructure spending) by 7,6 percent per year between 2004/5 and 2007/8. However, we note that the institutional channels through which public transport subsidies are administered still tend to militate against achieving modally integrated public transport services. The rail subsidy is administered by a national agency, the South African Rail Commuter Corporation. Bus subsidies are transferred from the National Department to provinces. Minibuses, the major mode of public transport in our country, are not operationally subsidised, although the nationally administered recapitalisation programme will be a major capital subsidy. However, these different subsidy streams tend in practice to discourage rather than foster inter-modal integration of all forms of public transport at the local level. There is also an institutional disjuncture between urban spatial planning related to IDPs (a local government competence) and public transport subsidies that tend to be driven nationally or provincially. The Committee believes that in the coming years we must move towards a much more integrated approach to the subsidisation, planning and regulation of public transport.
3. Transport-related public entities
3.1 In its budget hearings the Committee also engaged with all the public entities reporting to the Minister of Transport (as listed in 1.1 above). Many of these entities are functioning effectively in their respective areas – in particular, we note the work of the Air Traffic Navigation Services Agency, the South African National Roads Agency Limited and the Airports Company of South Africa. The Committee also noted important improvement in the reporting to Parliament of the Cross-Border Road Transport Agency. However, some of the other public entities are facing complicated challenges and/or are failing to perform adequately.
3.2 The Road Accident Fund continues to be a major concern. There has been a significant increase in revenue for the fund from the fuel levy. Revenue grew from R2,6 billion in 2001/2 to R4,5 billion in 2004/5. Despite this growth, the Fund’s expenditure has consistently outstripped revenue since 2001/2, exhausting its reserves. The underlying reasons for this trend are several and include poor management, significant levels of apparent corruption, and excessive payments to legal and medical professionals to the detriment of actual road accident claimants – itself the consequence of the often excessively litigious, fault-based system the RAF is mandated to operate. While important progress has been made in revamping management structures and in rooting out corruption, many of the problems of the Fund are of a more systemic kind. Government has accepted, in principle, the recommendations of the Road Accident Fund Commission, although affordability concerns remain. It is the view of the Committee that decisive and far-reaching decisions will have to be made about the Fund in the coming years. Piece-meal reforms, including the present RAF Amendment Bill with which the Committee is busy, may be helpful but will not get to the root of the challenges.
3.3 The Department is overseeing a process of integration of the South African Rail Commuter Corporation and Metrorail. The Committee supports this process, while appreciating that institutional integration is often a complex process. One such complexity is that the SARCC’s assets have been incorrectly valued. Generally Accepted Accounting Practice (GAAP) depreciates rail rolling stock over a 33-year period. When the SARCC was devolved out of the old SA Transport Services in 1990, for some reason the used rolling stock assets it then acquired were treated as if they, too, were new and the 33-year depreciation count started all over again. The assets of the SARCC have, therefore, been significantly over-valued, and it is for this reason that its recent audited reports have been qualified. A second major challenge facing the integration of SARCC and Metrorail lies in the funding flow. The SARCC has been operating as a public utility with a public service mandate, transferring the rail subsidy from the national budget through to the operator, Metrorail. However, Metrorail functions as a public enterprise and its estimated R950 million annual fare income is not passed back to SARCC, but on to its current parent company, Transnet. Achieving an effective integration of two public entities with somewhat different institutional mandates and cultures will need to be accomplished with the strategic priority being placed on expanded, safe and affordable rail transport as part of a wider public transport system.
3.4 The Railway Safety Regulator is a new public entity established in terms of legislation passed in 2002. The total transfers to the RSR from the Department of Transport are expected to increase by 14,1% per year over the MTEF period, from R15 million in 2004/5 to R22, 3 million in 2007/8. The Committee appreciates that the RSR is still in a formative stage, but we are concerned that the present Board does not appear to have any significant railway experience, nor are there any relevant trade union representatives. In our budgetary hearings we were also concerned that the RSR representatives did not appear to have a clear strategic plan. Progress at the RSR will need to be closely monitored over the coming period.
Mr JP Cronin Date
Chairperson: PC on Transport