1. PRESENTATION TO THE TRANSPORT PORTFOLIO COMMITTEE BUS SUBSIDY BUDGET SHORTFALL 2008/09
03 FEBRUARY 2009 1

2. CONTENTS CURRENT CONTRACTUAL OBLIGATIONS SUBSIDY DISTRIBUTION
SUBSIDY BUDGET ALLOCATION
SHORTFALL PER PROVINCE
INTERVENTION MECHANISMS
CONCLUSION
IMPLEMENTATION 2

3. Current Contractual Obligations
Competitive tendering introduced in 1997
Current Contract Regime
Interim Contract – ticket based
Tender Contract – kilometre based
Negotiated Contract – kilometre based 3

4. National Budget - Subsidy Distribution – 2008/09
LIMPOPO
Fleet Size
Passengers
Current Subsidy
611 R
National Budget - Subsidy Distribution – 2008/09
MPUMALANGA
Fleet Size
Passengers
Current Subsidy
442 R
NORTH WEST
Fleet Size
Passengers
Current Subsidy
673 R
GAUTENG
Fleet Size
Passengers
Current Subsidy
2 113 R
FREESTATE
Fleet Size
Passengers
Current Subsidy
264 R
KWA-ZULU NATAL
Fleet Size
Passengers
Current Subsidy
1 644 R
NORTHERN CAPE
Fleet Size
Passengers
Current Subsidy 51 R
EASTERN CAPE
Fleet Size
Passengers
Current Subsidy
364 R
WESTERN CAPE
Fleet Size
Passengers
Current Subsidy
957 R 4

5. SUBSIDY DISTRIBUTION
Tendered/Negotiated Contracts vs Interim Contracts
Tender/Negotiated
Interim Contracts
No. of Contracts
No of Buses
% Subsidy 31 82
4 800
3 300
34%
66%
Total Subsidy Split between Provinces for all Contracts
Gauteng 40%
Free State 4%
Limpopo5%
Northern Cape 1%
Kwa-Zulu Natal 18%
Mpumalanga 10%
Eastern Cape 4%
Western Cape 17%
North West 1% 5

6. SUBSIDY BUDGET ALLOCATION
Department annually motivated increases for bus subsidy baseline allocation since 1997/98
This was to provide for restructuring of public transport and to cater for growth in the current subsidised services
No increases granted to the baseline until 2009/10 6

7. SUBSIDY BUDGET ALLOCATION
Annual subsidy allocation was solely inflation related up to 2009/10 and made no provision for service improvement
No funding to cater for increases in demand for public transport 7

8. SUBSIDY BUDGET ALLOCATION
For the period 2004/05 – 2007/08 the average year on year subsidy baseline increase was 5.5%
During the same period escalation (capital, labour & fuel costs) on contracts averaged between 10 to 12%
Passenger growth for the same period averaged 10% 8

9. Subsidy Allocation – 2005/06 MTEF Request 3 908 040 000
MTEF Allocation
Adjustment Request
Adjustment Allocation
Actual Expenditure
Accumulated Shortfall 9

10. Subsidy Allocation – 2006/07 MTEF Request 4 028 523 000
MTEF Allocation
Adjustment Request
Adjustment Allocation
Actual Expenditure
Accumulated Shortfall 10

11. Subsidy Allocation – 2007/08 MTEF Request 3 553 431 000
MTEF Allocation
Adjustment Request
Adjustment Allocation
Actual Expenditure
Accumulated Shortfall 11

12. Subsidy Allocation – 2008/09 MTEF Request 3 635 997 000
MTEF Allocation
Adjustment Request
Adjustment Allocation
Projected Expenditure
Accumulative Projected Shortfall 12

13. SHORTFALL PER PROVINCE13
SHORTFALL PER PROVINCE
PROVINCE
Shortfall/Dec-March
Shortfall/Month
Dec actual
Shortfall Dec - Feb
EASTERN CAPE
41,392,865.35
10,348,216.34
8,961,729.00
29,658,162
FREE STATE
55,763,904.85
13,940,976.21
11,801,739.77
39,683,692
GAUTENG
502,645,151.46
125,661,287.87
94,738,704.16
346,061,280
KWAZULU NATAL
238,933,754.55
59,733,438.64
52,713,304.00
172,180,181
MPUMALANGA
131,779,844.74
32,944,961.18
25,757,026.30
91,646,949
NORTHERN CAPE
8,406,897.40
2,101,724.35
1,746,965.78
5,950,414
LIMPOPO
58,694,323.45
14,673,580.86
11,234,544.07
40,581,706
NORTH WEST
13,052,255.33
3,263,063.83
3,085,203.14
9,611,331
WESTERN CAPE
210,595,625.05
52,648,906.26
43,097,421.10
148,395,234
TOTAL
1,261,264,622.16
315,316,155.54
253,136,637.32
883,768,948

14. SHORT TERM INTERVENTIONS - 2008/09
Provincial Departments of Transport in collaboration with Provincial Treasuries to explore virements to increase bus subsidy budgets
Provincial Treasuries to consider funding shortfalls through their Provincial Revenue Funds
National Treasury will as far as possible make fund available from the National Revenue Fund
Options 2 & 3 will result in Unauthorised Expenditure
DOT to pursue the following through Parliament:
Special Adjustments Budget
Approval of unauthorised expenditure 14

15. Interventions and Mechanisms for achieving change 2009/10 and beyond……………
Bus Subsidy Funding - Conditional Grant in DORA
Critical conditions:
Interim contracts to be converted to negotiated (kilometre based) contracts by September 2009
Alignment with IRPTN`
Finalise integrated road based networks
Develop KPI’s
Identify key role-players who are to be part of the operating entity
Engage with all parties to establish operating entity
Implement depots and vehicles if so decided
Recruit/develop admin capacity to manage the contracts
Contracting authorities will have to:
Change in compensation method – based on fixed kilometre
KPI’s
New national monitoring model
Fare levels as set by the authority
Fleet replacements to be based on requirements of the contracting authority
Contracting authority may purchase existing assets (eg depots) and contract compliant vehicles
Operators will have to accept: 15

16. Intervention Conditions
Operators that accept will sign an negotiated contract that includes:
KPI’s
Provision that the operator will be provided with an opportunity to be party to a new integrated contract regime for some or all of the services within the contract area
Operators that do not accept will continue on month-to-month basis and their contracts will be terminated as and when required  16

17. Conclusion
Subsidy levels have been insufficient since 2005/06 to halt the declining levels of service
Current levels of subsidy are unable to meet the escalation in costs and the growth in demand
Bus operators will not recapitalise their fleets due to the continued uncertainty of government policy regarding the contract system
In order to improve operational and financial efficiency a more focussed approach to determining service priorities will need to be developed 17

18. Conclusion
The method of contracting road based public transport services has to change to better reflect the complexities of the network by eliminating the costly duplication of services between modes
Metropolitan and other large towns must have full control of their public transport services and this is achieved by ensuring all services are scheduled, monitored and managed
Alignment between the current public transport services and the introduction of the IRPTN is critical 18

19. IMPLEMENTATION PLAN
Phased implementation in co-operation with Provinces
Negotiated performance based contracts for route operations
Formalisation of unscheduled Interim Contract services
Define operating areas that will not be served
Implementation of supporting infrastructure
Continued enforcement and monitoring of all contracted Public Transport Operations 19

20. Thank You Dankie Enkosi20