2014/15 Annual Report Briefing to the Portfolio Committee on Transport 15 October 2015 by Sipho G. Khumalo

Presentation Outline Mandate and Strategic Imperatives Vision and Mission Mandate and Strategic Imperatives Cross-border environment Review of Organisational Performance Progress on Strategic Projects (OCAS and MAR) Strategic Partnerships Development & Empowerment Programmes Employment Equity Financial Information Audit Outcomes 2014/15 Looking into the future Key Challenges and Intervention Areas Concluding Remarks

1. Vision, Mission and Strategic Goals The leading road transport trade facilitation Agency within the region Mission To spearhead social and economic development within the SADC region through facilitating unimpeded cross border road transport movements Strategic Outcome Oriented Goals Facilitate unimpeded flow of cross border transport movements Promote regional integration Promote safe and reliable cross-border transport Strategic positioning to enhance organizational sustainability; and Enhance organizational performance

2. Mandate & Strategic Imperatives To eliminate impediments in the flow of passengers and freight by road across regional borders To introduce regulated competition in cross-border passenger transport To liberalise market access in the cross-border freight transport To reduce operational constraints for the cross-border road transport industry To enhance and strengthen the capacity of public sector; and To build industry partnerships and to empower the cross-border road transport industry. Established in terms of C-BRT Act No. 4 of 1998

3. Key cross-border routes and border-posts The South African cross border environment There are 52 land border posts between South Africa and neighbouring countries; Of the 52 borders 19 are designated commercial border posts; There are 4 border posts that carry over 70% of the traffic (commercial vehicles and freight) namely Beitbridge, Lebombo, Maseru and Skilpadshek These border posts are located in the busiest corridors linking South Africa to the SADC region namely the North-South Corridor, Trans-Kalahari Corridor, Maputo/ N4 Corridor The Key role players at border posts are Immigration (DOHA); Customs (SARS); SAPS (Border Police), Agriculture, Forestry and Fisheries Port Health State Security Agency

ORGANISATIONAL PERFORMANCE

Performance targets Number of indicators % Obtained 4. Review of Organisational Performance Performance targets Number of indicators % Obtained Performance targets fully achieved 9 of 13 100% and above 69% of the targets set were achieved, representing an overall performance improvement of 4% from the previous financial year

5. Notable Strategic Achievements (since 2010) Item Intervention Status 1 Developing strategic partnerships with passenger transport stakeholders 2 Clarified and obtained consensus on the mandate 3 Eliminated governance lapses at Board level 4 Obtained and maintained an unqualified audit opinion for three years in a row; and cleaned the image of the Agency 5 Developing and implemented a sound funding model 6 Introduced an organizational structure supportive of and consistent with the mandate 7 Recruiting suitably qualified personnel 8 Organizational culture and values 9 Developing leadership cohesion at all levels 10 Inculcating a performance driven culture More work still needs to be done to establish a solid working relationship with the Freight Transport industry. We welcome the addition of people with experience in freight transport in the board, and will be relying on their guidance in an effort aimed at establishing a solid relationship with the freight transport players in the cross-border environment. Minister, the Agency works very well with the Road Transport branch to which we report, however, there are still unresolved issues pertaining to the Integrated Planning branch, whose work continues to duplicate and remains undistinguishable from the mandate of the C-BRTA as sanctioned by an Act of Parliament! The C-BRTA was established in 1998, it has been existence for 17 years. In that period, it has mastered only three unqualified audit opinions. These were achieved in the three previous financial years: 2012/13; 2013/14; 2014/15. Not so long ago, we were the joke, laughing stock of the transport family. Today, at least one CEO is doing a Masters thesis on the turnaround of the C-BRTA, as an example of how to salvage an entity that had gone to the dogs! All others stand in awe, when reflecting on the achievements of this entity. Today, unlike the C-BRTA of the past, we have Executives that can be trusted to represent us and our work, in any platform where we may be called to represent the C-BRTA. We may not all be experts on all matters pertaining to international transport and its dynamics, but we all know enough about our mandate to be able to navigate ourselves through any terrain. We still have work to do in terms of strengthening our organisational culture and values. In terms of enhancing organisational cohesion and obtaining unity of purpose between executive leadership and the Board, and within the Board itself. A performance culture will only be achieved once all of us, at all leadership levels are singing from the same hymn book, and projecting the same unambiguous message to all our stakeholders. Strategic leadership and counsel from the Board is of paramount importance.

6. Notable Operational Achievements (in 2014) Key achievements: Developed and piloted the first Market Access Regulatory (MAR) scientific tool, in public passenger transportation within the country; Established Business Cooperatives that attracted 38 women and 12 youth into the C-BRTA led project to create opportunities in cross-border road transport business; Adopted a “smart law” approach to law enforcement; Signed an important MoU with South African Revenue Services; Concluded a feasibility study for the Operator Compliance Accreditation Scheme (OCAS) with the outcomes demonstrating the industry’s desire for a risk-based and government regulated scheme;

Year-on-year movement 7. Review of Organisational Performance (4) Work Activity 2013/14 2014/15 Difference % Movement Year-on-year movement Vehicle Inspections 211,789 220,273 8,484 4% Prosecutions 29,411 24,984 (4,427) (15%) Compliance Rate 81% 89% 8% Prosecutions and Compliance Rate targets were not in the APP…

Permits issued in 2013/14 and 2014/15 8. Review of Organisational Performance (5) Permits issued in 2013/14 and 2014/15 MODE 2013/14 2014/15 Buses 2 781 2 234 Freight 63 935 62 647 Taxi 11 062 11 633 Tourist 2 246 2 370 TOTAL 80 024 78 884

9. Progress on Strategic Projects (1) CHANGING GEARS STRATEGIC PROJECT PROJECT OBJECTIVE PROGRESS TO DATE FUTURE PLANS Operator Compliance Accreditation Scheme (OCAS) Accreditation of cross-border operators based on their risk profiles to reduce transit delays Further benchmarking at BRICS countries Identifying the OCAS system requirements On-going technical stakeholder engagements Draft Design Framework of OCAS governance approved by Regulatory Committee Development of business rules and standards completed Feasibility study conducted Strategic stakeholder engagements with the regional stakeholders to formally adopt OCAS at a regional level Development of the OCAS Information Technology platform

10. Progress on Strategic Projects (2) CHANGING GEARS STRATEGIC PROJECT PROJECT OBJECTIVE PROGRESS TO DATE FUTURE PLANS Market Access Regulation (MAR) Scientific determination of supply and demand within cross-border corridors. Draft Market Access Regulation Model finalised; and The MAR Model has been expanded to cater for six (6) major cross border routes and is scheduled has been completed. Strategic stakeholder engagements with the regional stakeholders for the purposes of piloting and refining the MAR model; and Conduct a pilot on three main corridors.

11. Strategic Partnership Developed REGIONAL SADC Secretariat, Joint Committees, Joint Route Management Groups (JRMGs) PROVINCIAL Transport MECs, HODs (Provincial Transport Departments) NATIONAL Participation in BMA, Inter-Agency Clearing Forum (IACF), DHA, SARS; National Intelligence Coordinating Committee (NICOC), National Joint Operational and Intelligence Structure (NATJOINTS); LOCAL LEVEL Metros and Municipalities; Internally Driven Labour Consultative Forum (strategic partnership with the dominant union, POPCRU), Route Committees, Operator Forums, Stakeholder Forums, Joint law Enforcement Initiatives, SMME development initiatives

12. Development & Empowerment Programmes Formal training on Road Transport Inspectorate was given to 21 youth from which 20 were formally absorbed as road transport inspectors, eleven of which were females In terms of C-BRTA employment equity, females represent 51% of the workforce and males 49% A total of 50% of Executive Managers is made up of female employees A total of 35% of the organisation is made of employees less than 35 years of age and people with disabilities constitute 0.8% The Minister of Transport led an engagement at Malelane with 60 girl-learners (in grades 10 and 11) on various career prospects in transport

FINANCIAL OVERVIEW

13. Financial Performance 2014/15 2013/14 Restated 2014/2015 REVENUE Permit Income R42,34m R166,79m Penalty Income R35,05m R34,57m Other Income R1,16m R0,45m Interest Received R5,98m R5,53m EXPENSES Employee Costs R118,19m R131,99m Operating Expenses R69,14m R72,93m Operator Refunds R264,39m - SURPLUS / (DEFICIT) (R367,19m) R2,42m - Permit revenue for the 2013/14 had to be restated to discount for the revenue earned using the 2011 Permit tariff regulations which were rendered invalid by the Constitutional Court The reported deficit for 2013/14 is R367 million, restated from the R46 million that was reported in the previous financial year (Impact of the Constitutional Court judgment). Permit tariffs for 2014/15 financial year based on 2014 Permit Tariff Regulations applicable since the 8th May 2014 – if the 2014 were not promulgated, the Agency was going to a record a deficit for the year!

ASSETS LIABILITIES 14. Financial Position 2014/15 2013/14 2014/15 CURRENT ASSETS Receivables R3,91m R3,17m Cash and Cash Equivalents R120,31m R109,01 NON-CURRENT ASSETS Property, Plant and Equipment R7,97m R9,53m Intangible Assets R1,67m R1,19m TOTAL ASSETS R133,86m R122,90m 2013/14 Restated 2014/15 CURRENT LIABILITIES Lease obligations R0,52m R0,09m Payables R376,14m R364,11m Provision R13,74m R12,74m NON-CURRENT LIABILITIES Retirement benefit obligations R1,56m R1,64 TOTAL LIABILITIES R391,96m R378,58m ACCUMULATED DEFICIT R258,09m R255,68M Payables include the amount of R318 payable to the operators as refund. Also included in the payables is the amount of R23 million relating to refunds to the operators for the period 15th August to 19th November 2013. Only about R12 million refunded as at the reporting date. The Accumulated deficit of R255 million directly relate to the outcome of the litigation on the 2011 Permit Tarriffs

15 Irregular, Fruitless & Wasteful Expenditure 2012/13 2013/14 2014/15 Fruitless and Wasteful Expenditure R11, 689 R2,224 - Irregular Expenditure R920, 010 R827, 753 534,938 No fruitless & wasteful expenditure during the year under review An amount of R77, 679 from the total expenditure relate to lease contract for office premises entered into in the previous financial years. These lease contracts were terminated during the year. Part of the irregular expenditure relates to transactions processed on the company’s credit card between August 2009 to November 2013.

AUDIT OUTCOMES

QUALIFIED AUDIT UNQUALIFIED AUDIT 16. Audit Outcomes (1) The Agency attained its third consecutive unqualified audit opinion since establishment 17 years ago 2012/13; 2013/14; and 2014/15 2010/11 and 2011/2012 2013/14 Auditor-General South Africa opinion – unqualified audit opinion for the third year QUALIFIED AUDIT UNQUALIFIED AUDIT

17. Audit Outcomes (2) Audit Opinion Emphasis of matter Unqualified audit opinion No material audit adjustments to the annual financial statements Emphasis of matter Going concern : Liabilities of the Agency are in excess of the assets by R255,677,223 It indicates a material uncertainty that may cast significant doubt on the Agency’s ability to continue as a going concern The Agency may be unable to discharge its liabilities in the normal course of operations Restatement of corresponding figures Corresponding figures for 31 March 2014 were restated due to the adjusting event dictated by the court judgement handed down by the Constitutional Court on 12 May 2015 and a fair value adjustment relating to a previous court decision The liabilities of the Agency are in excess of the assets by R255,677,223

18. Audit Outcomes (3) Conclusion on pre-determined objectives There were no material findings that were found on the usefulness and reliability of reported performance information Compliance with legislation Internal Control Internal Control deficiency resulting to non-compliance with legislation regarding expenditure management

LOOKING INTO THE FUTURE: 2015/16 & BEYOND

19. Key Challenges & Intervention Areas Need for a more sustainable mechanism for funding our operations; Resolution of the Lesotho/Free State Cross-Border passenger transport issue. The National Ministerial Task Team on the impasse has developed a Program of Action which has the Minister, MEC of Police, Roads and Transport in the Free State, and Portfolio Committee on Transport’s support; C-BRTA’s limited mandate - challenge to successfully influence facilitation of unimpeded flow of transport within the region; Provision for dealing with overloaded cross-border vehicles (below 3.5 tons) and use of bus trailers for the transportation of goods; and Disharmony in passenger transport legislation – The DoT is reviewing all road transport legislations, including the C-BRT Act and the NLTA. Normatively speaking, the law enforcement function should not be funded on the basis of the ‘user-pay principle’ in terms of which all the C-BRTA operations are funded. Minister, we really have no short-term escape mechanism but to play by the rule-book. We need to obtain the buy-in of Free State that cross-border operations cannot be stopped until we have a different legal regime that provides for such as stoppage. Pressure is mounting from both our Lesotho counterparts and legitimate holders of cross-border permits that are demanding for the issuance of cross-border permits. With every day passing, our excuses are being rendered unsustainable. Need for the Minister and the Department to make a final determination on the true status of the C-BRTA. The appears to be an inherent internal contradiction in the manner in which the C-BRTA is viewed by different parts of the DoT. This is creating untold havoc and unpredictability in our engagement with our stakeholders. We also need to review the mandate of the C-BRTA to ensure that its mandate is adequate in responding to today’s challenges, especially in the promotion of road safety and in ensuring that only suitably qualified vehicles from our neighbouring countries are allowed to traverse through our trade corridors, and thus drastically reduce the amount of accidents that may be resulting from unroadworthy vehicles that originate from our neighbouring countries.

20. Looking into the future Initiating individual SADC country profiles and counter restrictive strategies for each of these countries; Up-skilling and mentoring the cooperatives for prospective cross-border business uptake; Introducing the youth and women to the freight industry opportunities across the border; Developing a structured, systematic approach for attending to reported operator constraints; Rolling out smarter policing and smarter avenues of enforcement on cross-border road transport legislation; Developing a business case on the need for an integrated passenger transport regulatory framework; and Looking at financial sustainability options with the view to increase baseline revenue by 20% annually. Developing a State of the Cross-Border Road Transport Operations Report has been initiated and will be enhanced over the next five years

21. Concluding Remarks The Agency is poised to support the National Development Plan by championing objectives articulated in Chapter 3 (Gaining Global Market Share & S.A. as an integral part of regional growth); Chapter 4 (Regulation and Transport); and Chapter 7 (Positioning S.A. in the globalizing world) of the NDP; The C-BRTA is geared towards implementing the “Operator Value -Orientated Strategy”; and All future plans are aligned to the Medium Term Strategic Framework (MTSF) 2014-2019 objectives.