1. Click to edit Master subtitle style 10/27/10 Presentation prepared for the Parliamentary Portfolio Committee 22 October 2010 11 CROSS-BORDER ROAD TRANSPORT AGENCY Reflecting on the 2009/10 Financial Year

2. 2 10/27/10 Presentation Outline Introducing the C-BRTA Part 1: The Mandate – Our Legislative Mandate Part 2: Analysis of the Value Chain – Value Creation in the Public Sector – The Service Delivery Value Chain of the C-BRTA Part 3: Review of Performance in the FY09/10 – The CBRTA’s Historic Strategic Challenge – Achievements and Challenges Part 4: Constraints in Performance Delivery in the FY10/11 – Overall Strategic Interventions and Funding Imperatives 22

3. 3 10/27/10 Introduction The C-BRTA was established by the Cross-border Road Transport Act 4 0f 1998 to provide for co- operative and co-ordinated provision of advice, regulation, facilitation and law enforcement in respect of cross-border road transport by the public and private sectors. 33

4. 10/27/10 Part 1: the legislated mandate of the agency 44

5. 5 10/27/10 Core Functional Areas This role is carried out through the following functions:  Regulatory - responsible for the issuing and facilitation of all cross border permits.  Law Enforcement - monitors the carriers through country-wide inspections and ensures that carriers operate within the prescribed legal parameters.  Advisory - advises the Minister of Transport and the DoT on regional road transport imperatives and challenges. This function also monitors and counteracts any restrictive measures that may be implemented by other states in the SADC region.  Facilitation - ensures that consultations and partnerships with other key role players within South Africa and SADC are fostered and maintained. 55

6. 10/27/10 Part 2: analysis of the value chain Value Creation in the Public Sector 66

7. 7 10/27/10 “The Strategic Triangle” In developing a strategy for a public sector organisation, three critical elements must be brought into coherent alignment by meeting three broad tests: – Firstly, the strategy must be substantively valuable in the sense that the organisation produces things of value to overseers, clients, and beneficiaries at low cost in terms of money and authority. – Second, it must be legitimate and politically sustainable. That is, the enterprise must be able to continually attract both authority and money from the political authorising environment to which it is ultimately accountable. – Third, it must be operationally and administratively feasible in that the authorised, valuable activities can actually be accomplished by the existing organisation with help from others who can be induced to contribute to the organisation’s goal. These tests are powerful because they identify the necessary conditions for the production of value in the public sector. 77

8. 10/27/10 Value Creation in the Public Sector 88 SubstancePolitics Strategic Thinking Operations

9. 9 10/27/10 The Service Delivery Value Chain C ompliance C ontrol C oordination C ooperation

10. 10 10/27/10 Linking Functions and the Value Chain C ompliance C ontrol C oordination C ooperation Regulation Law Enforcement Facilitation Advisory

11. 11 10/27/10 Cross-Border Road Transport Agency’s The C-BRTA Value Chain: Regulatory (Compliance) Law Enforcement (Control) Research & Advisory (Coordination) Facilitation (Cooperation) The four “C”s that define the work of the Cross-Border Road Transport Agency

12. 10/27/10 PART 3: Review of performance in the fy09/10 The C-BRTA’s Historic Strategic Challenge 1212

13. 13 10/27/10 Unrealised Value of the C-BRTA The founding assumption was that the C- BRTA would finance its operations through “selling” cross-border permits and through issuing of “penalties” to those who violate permit conditions. Experience suggests that these funding mechanisms have been inadequate in meeting operational costs and capital funding requirements of this Agency. The costs of providing a satisfactory service far outweigh revenues generated through the provision of the function, esp. in regard to law enforcement. What is clear is that due to its historic untenable financial position, this Agency has never been able to provide for more than the bare minimum in terms of responding to the strategic intent of its founders. 1313

14. 14 10/27/10 Unrealised Value of the C-BRTA (2) In essence, the C-BRTA has not been able to develop the capacity to play a strategic role in driving the agenda of harmonising road transport operations in the SADC region. It has also not been able to take up the role of championing regional integration as contemplated in Agency’s founding address of the 18th August 1998 (by Minister Mac Maharaj). The combination of these factors have had the effect of undermining the legitimacy of this Agency as a strategic resource of the Minister of Transport in addressing and resolving SADC issues. As a consequence of this failure, the C-BRTA’s capacity to lead in its area of operations has been diminished and its image severely tarnished. 1414

15. 15 10/27/10 Operational Performance – Regulatory Permits Issued 1515 73 % 144 % 5%

16. 16 10/27/10 Regulatory - Permit Types Issued in 09/10 1616

17. 17 10/27/10 Taxi Permits Issued – per Country 1717

18. 18 10/27/10 Bus Permits Issued – per Country 1818

19. 19 10/27/10 Freight Permits Issued – per Country 1919

20. 20 10/27/10 Operational Performance – Law Enforcement Activities 2020 17% prosecution rate 24% prosecution rate 6% increase in roadside inspections 50% increase prosecutions

21. 21 10/27/10 Financial Performance Revenue 2121 Permits2008/2009 R’m 2009/2010 R’m Movement % Application Fees11,712,3 5% Permit Issuing Fees26,129,1 11 % Penalty Fees8,4 12,6 50 % Total Revenue46,254,017%

22. 22 10/27/10 Summary of Key Achievements Business Process Reengineering Project – initiated in the 2009/10 Financial Year. Results emanating from this initiative have informed the refocusing of the Agency. Law Enforcement Training Manual – completed in the 2009/10 Financial Year. It has established a basis for “professionalising” the Road Transport Inspectorate function. SADC Indaba – successful regional engagement that developed an action plan for the advancement of the objectives articulated in the SADC protocol on Transport, Communication and Meteorology. Development of a scientific Regulatory Model – the process of developing a more scientific approach to the process of regulating the issuing of cross-border permits was initiated, but not completed in the year under review. 2222

23. 23 10/27/10 Report of the Auditor General: 2009 Qualified Audit Opinion It is important to revisit the Audit Report for 2009 to obtain an understanding of the audit qualification that was based on the following items: – Lack of controls, policies and procedures for the IT system that is used to issue permits; – Insufficient supporting permit application documentation; – Completeness and accuracy of Penalty Income; – Inability to match amounts recorded as Receivables for Penalty Income; – Income received in advance could not be substantiated. The number of qualifications have been reduced to one in 09/10. The qualification is based on the following:  Inability to match amounts recorded as Receivables for Penalty Income.  Completeness and accuracy of Penalty Income. Audit qualification explained

24. 10/27/10 PART 4: constraints in performance delivery 2010/11 Overall Strategic Interventions and Funding Imperatives: 2424

25. 25 10/27/10 Key Strategic Thrusts The C-BRTA is called upon to focus on improving safety, security, reliability, quality and speed in the transportation of goods and people across our borders. This Agency is expected to drive processes aimed at the realisation of regional economic integration and the harmonisation of transport systems, policies and approaches across the region. The aim of these interventions is the development of a new competitive edge for the region as a whole. 2525

26. 26 10/27/10 Costs will exceed Income during 2011 should revenue sources not be increased as an increase in permit volumes is not sustainable to carry the increasing cost base; Accumulated Surplus of R13.1m at 31 March 2010 will be depleted by 31 March 2011; The organization cannot afford the required capacity and infrastructure to execute its mandate; Law Enforcement oversight is performed at below minimum required levels. 2626 Operational Constraints

27. 27 10/27/10 Funding required to bridge operational constraints Current limited performanceOptimum Performance Below restricted law enforcement visibility Limited operations focusing on the issuing of permits Staff = 136Full execution of mandate Optimum roadside visibilityStaff = 403 2727 Funding to increase from R52m – R182m

28. 28 10/27/10 2828 Key uses of new money  Increase roadside visibility by increasing capacity and enabling infrastructure;  Improvement of internal control environment, including detection and prevention of fraud;  Replace or upgrade outdated IT permit issuing system;  Development and support of emerging cross border operators – both freight and passengers;  Provide strategic support to the Minister of Transport in his engagements with the SADC counterparts.

29. 29 10/27/10 Increase in staff capacity AreaCurrentRequirementIncrease in Staff Law Enforcement89298209 Regulatory Services174023 Facilitation and Industry Development7103 Research and Advisory594 CEO Office363 Finance9178 Corporate Services61711 Legal Services066 TOTAL136403267 2929

30. 30 10/27/10 The path to bridge the operational constraints Step 1 Re-engineering of business processes including the improvement of the internal control environment Step 2 Development of cost drivers Step 3 Development of capacity analysis to determine the human resource requirement and structure Step 4 Implementation of activity-based-costing model 3030

31. 31 10/27/10 There are two funding scenarios: 1. Scenario 1 – Combination of User-Pay & Treasury Allocation: – The cost of Roadside Inspections and Prosecution Activities (as part of Law Enforcement) are covered by means of an annual Treasury Allocation. 2. Scenario 2 – Pure User-Pay – Total law enforcement activities are covered by means of an exorbitant increase in Permit Tariffs. 3131 There are two funding scenarios: Scenario 1 – Combination of User-Pay & Treasury Allocation: The cost of Roadside Inspections and Prosecution Activities (as part of Law Enforcement) are covered by means of an annual Treasury Allocation. Scenario 2 – Pure User-Pay Total law enforcement activities are covered by means of an exorbitant increase in Permit Tariffs.

32. 32 10/27/10 Funding model: Scenario 1 Regulatory Services Co st Re co ver y Advisory and Research Facilitation and Industry Development Law Enforcement Enforcement Profiling Data Management External Activities Law Enforcement Roadside Inspections Prosecution Activities R22m R6m R8m R9m R107m R30m Permit Tariffs R45m Treasury Allocation R124m Penalty Tariffs R13m R182mR182m

33. 33 10/27/10 Funding model: Scenario 2 Regulatory Services Co st Re co ver y Advisory and Research Facilitation and Industry Development Law Enforcement R22m R6m R8m R146m PERMIT TARIFFS R169m R182mR182m PENALTY TARIFFS R13m

34. 34 10/27/10 Scenario 1: Fee tariffs to increase on average with 16% Scenario 2: Fee tariffs to increase on average with 212% 3434 Impact on Permit Tariffs

35. 35 10/27/10 Hand-outs Explaining the premise for Scenario 1 and 2 including: – Organogram – Summary of Operational Costs – Funding Roadmaps – Divisional Cost Roadmaps – Law Enforcement – Optimum Visibility Diagram – Impact on Permit Tariffs – Financial Statements (Budget Review) 3535

36. 36 10/27/10 I THANK YOU 3636 Sipho G. Khumalo 22 October 2010