1. Department of Transport Standing Committee on Appropriations Expenditure 2008/09 12 August 2009 10h00 Committee Room 2, Upper Ground Floor 90 Plein Street, Parliament, Cape Town 1

2. Contents 2 Introduction Adjusted Budget for 2008/09 Summary of expenditure per Programme for 2008/09 Under expenditure per Programme per economic classification Requests for roll over to 2009/10 Summary of under / (over) expenditure in 2008/09 Reasons for under spending

3. 3 According to the letter from the Committee the Department under spent its budget for 2008/09 by R57,9 million (5,6%) less than the adjusted budget The correct figures are: The Department over spent its budget by R345,8 million (1,4% of the total adjusted budget) Current expenditure was under spent by R37,4 million (0,15% of the total adjusted budget) Current expenditure (only compensation of employees plus goods and services) was under spent by R51,5 million (0,21% of the total adjusted budget) Introduction

4. 4 Actual expenditure against budget: (high level economic classification) Introduction (continued) Economic classification Final Appropriation Actual Expenditure Variance Under / (Over) spent Variance as % of total appropriation R'000 % Current payments1,041,1041,003,72937,3750.15% Transfer payments23,445,55523,829,263(383,708)(1.57%) Capital expenditure6,1815,6525290.00% Total24,492,84024,838,644(345,804)(1.41%)

5. 5 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 230,190(17,670)(16,671)195,849182,63213,21793.3% Goods and services 814,20414,38016,671845,255806,96338,29295.5% Financial transactions in assets and liabilities 000014,134(14,134) Transfer payments 23,444,952603023,445,55523,829,263(383,708)101.6% Machinery & equipment 3,4942,68706,1815,65252991.4% TOTAL24,492,84000 24,838,644(345,804)101.4% Summary of expenditure per economic classification: Introduction (continued)

6. 6 Funds rolled over from the previous year:37,276 Arrive alive campaign5,000 Women and gender audit project764 Aligning the transport sector charter with the code of good practice497 Oil pollution prevention8,270 Developing of the national airport development plan6,945 Guidelines standards and monitoring for integrated transport planning1,800 Restructuring of the Road Accident Fund14,000 Unforeseeable and unavoidable expenditure:2,235,473 Disaster management grant for road, bridges and storm water damage due to floods1,035,473 Road Accident fund to address liquidity constraints to provide for the payment of claims1,200,000 Adjustments due to significant and unforeseeable economic and financial events:1,711,563 Road Accident Fund1,300,000 Higher than budgeted wage increases for the department46,014 Higher than budgeted wage increases for PRASA (Passenger Rail Agency of S.A)46,014 Bus subsidies154,535 Self financing expenditure for the maintenance and development of the eNaTIS system165,000 Total of Adjusted Budget3,984,312 Adjusted Budget for 2008/09 R’000

7. 7 Summary of expenditure per Programme Programme Adjusted Appropriation Virement after Adjusted Budget Final Appro- priation Actual Expenditure VarianceExpenditure as % of final appropriation R'000 % 1Administration245,165(9,200)235,965235,90164100.0% 2Transport Policy and Economic Regulation 47,211(3,775)43,43632,64810,78875.2% 3Transport Regulation and Accident and Incident Investigation 432,56334,171466,734466,7331100.0% 4Integrated Planning and Inter-Sphere Co- Ordination 8,767,012(1,995)8,765,0178,297,733467,28494.7% 5Transport Logistics and Corridor Development 35,076(2,801)32,27522,19310,08268.8% 6Public Transport12,277,229(2,000)12,275,22913,120,209(844,980)106.9% 7Public Entity Oversight and Border Operations and Control 2,688,584(14,400)2,674,1842,663,22710,95799.6% TOTAL24,492,8400 24,838,644(345,804)101.4%

8. 8 Under expenditure per Programme per economic classification Progr. 1234567 TOTAL R’000 Econo- mic classifi- cation Admini- stration Transport Policy and Economic Regula- tion Transport Regulation and Accident and Incident Investigation Integrated Planning and Inter- Sphere Co- Ordination Transport Logistics and Corridor Develop- ment Public Transport Public Entity Oversight and Border Operations and Control Compen- sation of employees (21)1,2854,43331,8343,9641,71913,217 Goods and services 6409,2793,079(120)8,2079,1898,01838,292** Financial transac- tions in assets and liabilities (341)0(7,614)(6,177)(2)00(14,134) Transfers & subsidies (99)6214473,243** Rollover request 1(858,138)1,209(383,708) Capital assets (115)1628933542511529 TOTAL6410,7881467,28410,082(844,980)10,957(345,804)

9. 9 Expenditure per economic classification as % of budget

10. 10 Expenditure per economic classification against budget R’000

11. 11 DetailsProgR’000Sub-TotalR’000 PTIS - PRASA for 2010 Soccer Would Cup4210,000Under exp. on transfers P4: RK 473,243 PTIS – Allocation to Tshwane stopped to be re-allocated4250,169 SANRAL – Amount short paid413,100473,269 Study on the social economic impact of road accidents21,963 Under expenditure on Goods and Services for the Department: RK 38,292 Contribution of civil aviation to the South African Economy2919 Social economic benefit of roads to the South African Economy2794 Social exclusion study2300 World Cup research2220 Feasibility Study for developing a Transport Data Act2487 Project Management Office for 201066,000 Turnaround strategy for the Operating License Boards611,800 Bus Contract Model64,900 Electronic Performance Management System(EPMS)72,500 Road Accident Fund No-Fault Policy71,200 Road Accident Fund Legal Cost76,00037,083 Total request for roll over510,352 511,535 Total under expenditure excluding bus subsidies R510,9 million of which R510,4 million requested as rollovers Requests for roll over to 2009/10 Rollover request Relevant under expenditure

12. 12 DetailsR million Compensation of Employees13.2 Losses: Injuries in a motor vehicle accident, Irregular and fruitless & wasteful expenditure(14.1) Goods and Services:38.3 - Saving on the development of policies delayed9.3 - Delays in projects: Air Freight Strategy, Branch line strategy, Road Freight Strategy, National Freight Databank Update and Freight Movement Optimisation Plan 8.2 - Late appointment of a service provider for the 2010 intercity bus fleet project5.0 - Under spending on bus contract model4.2 - Development of Road Accident Fund Amendment Act and no fault policy6.6 Other net under expenditure on goods and services5.0 Transfers:(383.7) - Bus subsidies(856.7) - Passenger Rail Agency of South Africa210.0 - City of Tshwane250.2 - South African National Roads Agency13.0 - Other transfers(0.2) Machinery and equipment0.5 Total net over expenditure(345.8) Summary of under / (over) expenditure in 2008/09

13. 13 Compensation of employees Goods and services Transfer payments Reasons for under spending

14. Compensation of employees DetailsR’000 Original budget196,176 Additional allocation on Adjusted Budget: Higher than budgeted wage increases for the department 46,014 Total allocated242,190 Less: Shifted to other priorities(46,341) Final appropriation195,849 Actual expenditure182,632 Under expenditure13,217 14

15. 15 DateFunded postsFilled postsVacant postsVacancy rate June 200867747020730,6% December 200867051215823,6% April 2009671610619,1% June 2009671629426,3% Compensation of employees (continued)

16. 16 Moratorium placed on filling of posts – if all “funded” posts are filled, the Department will over spend on compensation of employees: Refer once off additional funds allocated on the Adjusted Budget for 2008/09 for higher than budgeted wage increases for the Department of R46 million. If not sustained, moratorium on filling of posts will have to be maintained Compensation of employees (continued)

17. 17 Measures that were introduced to reduce the vacancy rate: Concurrent headhunting with normal recruitment process was implemented Retention Strategy was approved on 2008/06/11 and is currently being implemented (Counter offer targets women, people with disabilities, rewarding of above average performance, people development and capacity building, empowerment of managers on Labour relations matters) Appointment of second appointable candidates who are women or people with disabilities Office Administrator posts were advertised as standard vacancies Approval was granted to access & advertise identified posts on Job Access to accelerate the appointment of persons with disability Compensation of employees (continued)

18. 18 Branch Managers were given quotas to meet on people with disability and women at SMS levels The pro forma submission for the filling of posts has been improved to include Branch EE status updates SMS Members will be assessed in terms of meeting the EE targets under the People Management and Empowerment CMC which carries a weighting of 20% Tender to appoint a pool of recruitment agencies to assist the Department with headhunting of suitable candidates when normal recruitment process is unsuccessful HR Interventions to assist the fast tracking of the filling of the posts, signing of Performance Agreements, Performance assessment process Contract employees were employed to fill posts and perform functions related to vacant posts until the posts could be permanently filled Compensation of employees (continued)

19. 19 Goods and services Details of under expenditure Under spent R’000 P1: Most savings shifted to cover losses in P3640 P2: Delays in the development of policies due to additional consultations needed, cancellation of bids and disagreements with consultants on engineering models 9,279 P3: Savings shifted from other Programmes to cover losses 3,079 P4: Over spent on goods and services(120) P5: Delays in projects: Development of Air Freight Strategy, Branch line strategy, Road Freight Strategy and Freight Movement Optimisation Plan 8,207

20. 20 Goods and services (continued) Details of under expenditure Under spent R’000 P6: Late appointment of a service provider for the 2010 intercity bus fleet project management due to insufficient funds to fund all requirements 4,900 P6: Under spending on bus contract model and contract entered with provinces for the implementation of the turn around strategy for operating license boards 4,289 P7: Late claims from service providers appointed to advise on the Road Accident Fund Amendment Act and Regulations and to redraft Regulations. The advocates were paid by the Department of Justice and the amount was not yet claimed 6,600

21. 21 Details of under expenditure Under spent R’000 P7: Delay in implementation of the Electronic Performance Management System due to delays within SITA to appoint a service provider to undertake a User Specific Requirement Analysis 1,418 Total under expenditure on goods and services38,292 Goods and services (continued)

22. 22 Transfer payments Details of under (over) expenditure Under (over) spent R’000 P4: Allocated to the Passenger Rail Authority of South Africa (PRASA) for public transport infrastructure and systems and not spent because the Memorandum of Understanding between the department and PRASA was not yet signed, and because of low expenditure on the same transfer from the previous financial year 210,000 P4: Not transferred to the City of Tshwane from the Public Transport Infrastructure and Systems Grant. The payment was stopped due to consistent under expenditure by the City of Tshwane from allocations received from this grant 250,169 P4: The transfer payment to the S.A. National Roads Agency was under spent due to an administrative oversight 13,010

23. 23 Transfer payments (continued) The Division of Revenue Act places responsibilities on transferring national officers, such as: Monitoring of expenditure and performance information May transfer funds only after information required is secured Submit monthly information to Treasury The Department could not make the transfer payments to the Passenger Rail Authority of South Africa (PRASA) due to non-compliance by PRASA

24. 24 Transfer payments (continued) Details of under (over) expenditure Under (over) spent R’000 P6: Bus subsidies was over spent due to cumulative insufficient budgets (856,742) P6: Scrapping of taxis over spent due to scrapping of taxis from an advance payment from the previous financial year (1,400) P7: Under spent on Ports Regulator because the Ports Regulator did not yet have a bank account 1,209 All: Net savings on leave pay (transfers to households) 46 Net over expenditure on transfer payments(383,708)

25. BUS SUBSIDIES: CONTENTS CURRENT CONTRACTUAL OBLIGATIONS SUBSIDY DISTRIBUTION SUBSIDY BUDGET ALLOCATION SHORTFALL PER PROVINCE INTERVENTION MECHANISMS CONCLUSION IMPLEMENTATION 25

26. Current Contractual Obligations Competitive tendering introduced in 1997 Current Contract Regime Interim Contract – ticket based Tender Contract – kilometre based Negotiated Contract – kilometre based 26

27. WESTERN CAPE Fleet Size Passengers Current Subsidy 95755 945 592R 575 000 000 NORTHERN CAPE Fleet Size Passengers Current Subsidy 511 097 676 R 20 000 000 NORTH WEST Fleet Size Passengers Current Subsidy 67329 865 729R 39 000 000 EASTERN CAPE Fleet Size Passengers Current Subsidy 3646 779 724R 122 000 000 GAUTENG Fleet Size PassengersCurrent Subsidy 2 113133 898 725R1 360 000 000 FREESTATE Fleet Size Passengers Current Subsidy 26424 411 425R 147 000 000 MPUMALANGA Fleet Size Passengers Current Subsidy 44264 721 352R 359 000 000 LIMPOPO Fleet Size Passengers Current Subsidy 61174 426 988R 168 000 000 KWA-ZULU NATAL Fleet Size Passenger s Current Subsidy 1 64496 967 772R 627 000 000 National Budget - Subsidy Distribution – 2008/09 27

28. Gauteng 40% Free State 4% Limpopo5% Northern Cape 1% Kwa-Zulu Natal 18% Mpumalanga 10% Eastern Cape 4% Western Cape 17% North West 1% Total Subsidy Split between Provinces for all Contracts Tendered/Negotiated Contracts vs Interim Contracts SUBSIDY DISTRIBUTION No. of Contracts Tender/Negotiated Interim Contracts No of Buses % Subsidy 31 82 4 800 3 300 66% 34% 28

29. 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 29

30. 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 SUBSIDY BUDGET ALLOCATION 30

31.  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% SUBSIDY BUDGET ALLOCATION 31

32. MTEF Request3 908 040 000 MTEF Allocation2 278 523 000 Adjustment Request166 560 000 Adjustment Allocation19 230 000 Actual Expenditure2 383 660 000 Accumulated Shortfall85 907 000 Subsidy Allocation – 2005/06 32

33. MTEF Request4 028 523 000 MTEF Allocation2 415 235 000 Adjustment Request300 000 000 Adjustment Allocation45 100 000 Actual Expenditure2 695 573 000 Accumulated Shortfall321 145 000 Subsidy Allocation – 2006/07 33

34. MTEF Request3 553 431 000 MTEF Allocation2 535 997 000 Adjustment Request845 000 000 Adjustment Allocation300 000 000 Actual Expenditure3 109 951 000 Accumulated Shortfall595 099 000 Subsidy Allocation – 2007/08 34

35. MTEF Request3 635 997 000 MTEF Allocation2 829 596 000 Adjustment Request1 342 000 000 Adjustment Allocation154 535 000 Projected Expenditure3 576 444 000 Projected Shortfall1 187 412 000 Subsidy Allocation – 2008/09 35

36. SHORTFALL PER PROVINCE PROVINCE Shortfall/Dec- MarchShortfall/MonthDec actual Shortfall Dec - Feb EASTERN CAPE41,392,865.3510,348,216.348,961,729.00 29,658,162 FREE STATE55,763,904.8513,940,976.2111,801,739.77 39,683,692 GAUTENG502,645,151.46125,661,287.8794,738,704.16 346,061,280 KWAZULU NATAL238,933,754.5559,733,438.6452,713,304.00 172,180,181 MPUMALANGA131,779,844.7432,944,961.1825,757,026.30 91,646,949 NORTHERN CAPE8,406,897.402,101,724.351,746,965.78 5,950,414 LIMPOPO58,694,323.4514,673,580.8611,234,544.07 40,581,706 NORTH WEST13,052,255.333,263,063.833,085,203.14 9,611,331 WESTERN CAPE210,595,625.0552,648,906.2643,097,421.10 148,395,234 TOTAL1,261,264,622.16315,316,155.54253,136,637.32 883,768,948

37. 37 A Public Transport Operations Grant replaced the former bus subsidies: Subsidy levels have been insufficient since 2005/06 to halt the declining levels of service, escalation in costs and the growth in demand In order to improve operational and financial efficiency a more focused approach to determining service priorities will need to be developed Implementation Plan: Conditional Grant to Provinces introduced 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 INTERVENTION MECHANISMS

38. 38 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: 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 Interventions to achieve change 2009/10 onwards: INTERVENTION MECHANISMS (continued)

39. 39 Operators that accept will sign a negotiated contract that includes: KPI’s 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 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 Intervention conditions:   INTERVENTION MECHANISMS (continued)

40. 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 Conclusion 40

41. Conclusion (continued) 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 41

42. 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 IMPLEMENTATION PLAN 42

43. Thank You Dankie Enkosi 43

44. 44 Details of lossesRands Irregular expenditure - Supplier appointed as engineer on a project since 1993 without a contract 7,600,000 Claim against the department for injuries sustained in a vehicle accident 6,500,000 No shows and cancellations9,873 Study loan9,282 State debt5,000 Leave gratuity4,971 Travel and subsistence3,330 Tax debt1,221 Salary overpayment767 Total14,134,444 Financial transactions in assets and liabilities in 2008/09

45. 45 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 93,996-10,028-6,30077,66877,689-21100.0% Goods and services 141,5488,200-2,900146,848146,20864099.6% Financial transactions in assets and liabilities 341-341-100.0% Transfer payments 8,07820308,2818,380-99101.2% Machinery & equipment 1,5431,6253,1683,283-115103.6% TOTAL 245,1650-9,200235,965235,90164100.0% Expenditure per economic classification: Programme 1

46. 46 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 24,894-177-4,92019,79718,5121,28593.5% Goods and services 21,881-771,14522,94913,6709,27959.6% Financial transactions in assets and liabilities Transfer payments 87 256228.7% Machinery & equipment 43616760344116273.1% TOTAL 47,2110-3,77543,43632,64810,78875.2% Programme 2 Expenditure per economic classification:

47. 47 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 39,777-601,70041,41736,9844,43389.3% Goods and services 381,205-26132,471413,415410,3363,07999.3% Financial transactions in assets and liabilities 7,614-7,614-100.0% Transfer payments 11,00948011,05711,0431499.9% Machinery & equipment 5722738457568989.5% TOTAL 432,563034,171466,734466,7331100.0% Programme 3 Expenditure per economic classification:

48. 48 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 32,079-7,400-3,55021,12921,1263100.0% Goods and services 98,2367,0001,555106,791106,911-120100.1% Financial transactions in assets and liabilities 6,177-6,177-100.0% Transfer payments 8,636,14310008,636,2438,163,000473,24394.5% Machinery & equipment 55430085451933560.8% TOTAL 8,767,0120-1,9958,765,0178,297,733467,28494.7% Programme 4 Expenditure per economic classification:

49. 49 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 11,242150-2,8018,5916,7571,83478.7% Goods and services 23,764-32123,44315,2368,20765.0% Financial transactions in assets and liabilities 2-20.0% Transfer payments 10 9190.0% Machinery & equipment 701612311894281.8% TOTAL 35,0760-2,80132,27522,19310,08268.8% Programme 5 Expenditure per economic classification:

50. 50 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 20,090-15019,94015,9763,96480.1% Goods and services 117,601-96-2,000115,505106,3169,18992.0% Financial transactions in assets and liabilities 000.0% Transfer payments 12,139,392150012,139,54212,997,680-858,138107.1% Machinery & equipment 14696242237597.9% TOTAL 12,277,2290-2,00012,275,22913,120,209-844,980106.9% Programme 6 Expenditure per economic classification:

51. 51 Economic classifi- cation Adjusted Appropriation Shifting of Funds VirementFinal Appro- priation Actual Expenditure Variance Under / (Over) spent Expenditure as % of final appropria- tion R'000 % Compensation of employees 8,112-5-8007,3075,5881,71976.5% Goods and services 29,969-65-13,60016,3048,2868,01850.8% Financial transactions in assets and liabilities Transfer payments 2,650,330502,650,3352,649,1261,209100.0% Machinery & equipment 173652382271195.4% TOTAL 2,688,5840-14,4002,674,1842,663,22710,95799.6% Programme 7 Expenditure per economic classification: