Statement by the Minister of Transport regarding the performance of the Department entities and SOEs
Acting Director General, Ntate Mathabatha Mokonyama
Chief Executive Officers of Transport Entities
Officials from the Department,
Ladies and Gentlemen of the media,
The 1994 democratic breakthrough provided the ANC led government with the opportunity to pursue economic policies, which embraces inclusive economic growth, development and wealth distribution at its core in order to bridge the inexorable gap between the rich and the poor within our country.
Within this context, there exists a definite need to amplify amongst others the role of State-owned Enterprises (SOEs) as instruments for significant advancement of economic transformation within South Africa.
Therefore, SOEs are not created to maximise profits or incur losses, rather their existence is for driving the development agenda. The dual mandate of SOEs is to:
achieve a balance between the required levels of self-funding, and
undertake developmental projects that the private sector would ordinarily not.
SOEs are therefore tasked with these costly development mandates and are strategically positioned to generate the revenues sufficient to cover the costs associated with executing their respective, but interrelated, mandates.
Our developmental state through the efficient utilisation of the strength of SOEs should support and direct private sector investments to productive sectors of the economy to stimulate manufacturing as well as the promotion of entrepreneurship development programmes that will enhance the levels of deracialisation of our economy in existence. This will also facilitate the creation of new firms and industries (black industrialist in nature) as opposed to tender-dependent economic transformation.
The African National Congress, as the governing party, provides a clear policy directive with regard to the roles of our SOEs. On SOEs the Polokwane Conference resolved; – that the ANC and its government must build the capacity of the state in order to pursue the objectives of a developmental state and to ensure that whilst SOEs and DFIs remain financially viable and profitable; their primary responsibility is to support and lead in strategic government-led developmental objectives within the realm of a clearly defined public mandate of pursuing an overarching industrialisation programme.
In particular, SOEs are expected to assist the State in addressing issues of social and economic transformation and in bridging the gap between rich and poor; black and white; rural and urban and other divisions in our society.
Furthermore, the development tasks we face require that the state should maintain its strategic role in a number of key economic sectors, including through continued ownership of State Owned Enterprises (SOE’s). These sectors include the energy complex and the national transport and logistics system.
Ladies and gentlemen, If South Africa is to attain improved quality of life underpinned by a robust democracy and a just society, along with other initiatives, the State must preside over viable, efficient, effective and competitive SOEs.
It is in this spirit that the Presidential Review Committee (PRC) of SOEs was established to address the question of whether SOEs are responding appropriately to the Developmental State agenda.
The review ascertained the extent to which the State must be an active, effective and decisive owner/shareholder, playing a leadership role in providing strategic direction, creating an enabling environment, and being at the forefront of ensuring that SOEs are vibrant and execute their mandate effectively.
In its comprehensive review, the PRC has ascertained that while SOEs have an indispensable role to play in service delivery and have crucial performance and transformation potential, they are nevertheless faced with significant weaknesses and threats that might become grave impediments to their optimum contribution.
The PRC report accordingly recommended major reforms to strengthen SOEs. These reforms address matters of oversight for SOEs, establishment/ disestablishment of SOEs; strategic planning, funding, legal and regulatory policy, institutional structures, systems, capacity, as well as critical performance evaluation measures.
Ladies and gentlemen, the main trust that continues to characterise most of our SOEs is whether they respond to the State’s developmental agenda. This requires that the State be an active and decisive shareholder, that it plays a leadership role in creating an enabling environment to drive the performance of SOEs in delivering their mandate.
The Presidential Review Commission made a number of observations and findings regarding strategic, environmental, and operational considerations. Notable observations and findings are that:
South Africa has no common agenda for and understanding of SOEs.
There are also challenges with regard to balancing the tradeoffs between commercial and non-commercial objectives of SOEs.
The legislative framework for SOEs was found to be inadequate, displaying evidence of conflict and duplication.
The governance, ownership policy, and oversight systems were found to be inadequate.
The quality of the board and executives’ recruitment was found to be inadequate. There is no clarity on the role of the executive authority; boards; and the Chief Executive in the governance and operational management of SOEs.
The remuneration frameworks and practices are inconsistent and that they require urgent reconsideration because they impact directly on the performance of SOEs and influence the supply and demand for skilled personnel in the market.
Many SOEs currently require a massive injection of capital and finance policies require close re-examination. Funding models for social and economic development mandates of SOEs are blurred and confusing, leading in some instances to undercapitalisation, which impedes the SOE’s ability to contribute to meeting national challenges.
The service delivery performance of SOEs was found to be mixed. Some exhibiting excellence and providing high quality services, while in other areas there are deficiencies characterised by low levels of customer satisfaction, complaints and service delivery civil protests.
Finally, the performance of SOEs is subject to a number of variables, including the performance contracts between the executive authority and the board of SOEs. Despite the importance of these shareholder compacts, they are often not signed on time and make insufficient provision for objectives beyond the narrow goal of profitability.
Generally, SOEs tend to lack robust leadership and initiative on crucial transformation imperatives such as broad-based black economic empowerment, the creation of meaningful employment opportunities and comprehensive skills development. Collaboration and coordination among SOEs and their oversight is poor. This reduces the impact made by SOEs in service delivery and it increases their costs.
We too in the transport fraternity are not immune from these findings and misshapenness.
In the previous financial year 2015/16, our SOE’s performed as follows:
South African National Road Agency (SANRAL) in 2015/16 received an unqualified audit report from the Office of the Auditor-General for the 13th year in succession and attained 99% of its performance target.
Road Accident Fund (RAF) – In the period under review, the RAF managed to reduce the number of outstanding claims to 217,182 by 31 March 2016 despite a sharp increase in registered claims. It is encouraging to note that despite the obvious challenges affecting both the country and the RAF in particular, there was an improvement in performance, with the organisation fulfilling 90% of its APP targets
Road Traffic Infringement Agency (RTIA) In spite of the operational challenges the Agency’s Infringement Revenue in the year under review improved by 81.3% financial year.
Road Traffic Management Corporation (RTMC) performance achieved in the 2015/16 was 92%. This is due to the Entity rigorous focus on the Corporation’s goals throughout the year and the intensified road safety and law enforcement programmes supported by robust marketing campaigns.
Cross Border Road Transport Agency’s (CBRTA) overall achievement predetermined objectives, for the 2015/16 financial year is 67% and there is more room for improvement.
South African Civil Aviation Authority (SAACA) attained, for the second year in a row, 100% of the targets set for the 2015/16 financial year.
Airports Company South Africa (ACSA) recorded a 96% from 89% achieved in the previous year as stipulated in the Shareholders’ Compact.
Air Traffic and Navigation Services (ATNS) of the total number of planned targets of 43 the company achieved 33 in the 2015/16 financial year. The company achieved 76.7% performance level, the previous year it was 73.6%.
Passenger Rail Agency South Africa (PRASA) achieved 45% in 2015/16 of its pre-determined objectives, compared to 35% in the previous year, whilst the organisation only partially met 10% of its objectives during the 2015/16 financial year.
Rail Safety Regulator (RSR) achieved over 90% of the annual targets in the 2015-16 financial year.
South African Maritime Safety Authority (SAMSA) performance for the 2015/16 financial year is sitting at 70.5%.
Ports Regulator (PR) was awarded a ‘Clean audit opinion’ Certificate of Excellence from the Auditor General (‘AG’) last year (for 2014/15), the first such certificate achieved since the organisation was established. The organisation reported 85% of the delivery in 2015/16 and 100% for 16/17, which is yet to be audited.
Moving forward with South Africa aspiring to be a Developmental State, we are envisioning a framework for our SOEs reforms and optimal contribution to equitable growth, development, transformation, and service delivery in South Africa.
In order to ensure accountability to the electorate and for good corporate governance, our State Owned Entities agenda will include and focus on the following items, among others:
1. Performance will be assessed based on efficiency and effectiveness as well as service delivery with government socio-economic imperatives informing articulation of our performance indicators as well as our pre-determined objectives.
2. Financial analysis will be improved by enhancing the oversight capacity. Furthermore, the flow of information to the Department will be improved by mandatory regular and detailed reporting from all the SOEs.
3. As the Department of Transport, we will play a leadership and catalytic role in transformation and development. This will be achieved through transparent and development-focused procurement processes; gender parity and progression; targeted skills development in collaboration with other stakeholders, such as State agencies, business and the community; as well as focused and coordinated social development agencies.
4. Through viable financial principles, we will measure how well our SOEs deliver on their core mandates as well as meeting their determined developmental objectives. The principles will take into account the fact that in some SOEs, viability will have a bottom line or commercial orientation, while in some SOE’s other attributes will have equal or even more importance in determining viability and adequate funding will be necessary to ensure viability.
5. Our remuneration principles, policies and practices will be aligned and harmonised across all our SOE’s to ensure competitiveness and optimum retention of personnel as well as to ensure improved governance and oversight of SOE remuneration by the executive authority.
6. Good enterprises require capable people to run them. We will improve our investment in training at all levels, from managers and research scientists down to the level of ordinary workers to improve skills. In this regard, our SOEs Incentive systems will be related to performance.
7. We will be improving our SOEs collaboration and coordination by breaking down silos that exists in some of the SOEs and ensure that they take collective responsibility. This will enable different SOEs to be measured and held accountable collectively for their contribution to the achievement of a national objective where they need to co-operate to achieve optimal results.
8. We will be initiating a process to rationalise our SOEs with the transport sector with the intention to reduce their number and streamline where appropriate. This will mean better synergy and efficiency and it will reduce the demand on monitoring resources.
Having put measures to ensure that our SOEs in transport functions accordingly, as the Department of Transport we will also be sufficiently capacitated with appropriate and specialised skills and expertise to successfully manage the State’s SOE portfolio.
Likewise, the entire SOE including boards and executives will be appropriately skilled in understanding the unique role they play in society. Specialised capacity-building interventions for SOEs such as SOE board training, and executives training programmes will be developed to position them to fulfil their strategies.
In implementing all these reforms, we remain committed to fight against all forms of crime and corruption. National Government has introduced and promoted various pieces of key legislation such as the Protected Disclosures Act, Promotion of Access to Information Act, Financial Intelligence Centre Act, Promotion of Administrative Justice Act and the Prevention and Combating of Corrupt Activities Act inorder to deal with criminality.
As the Department of Transport, we are going to establish a strong institutional capacity to complement the basic investigative work, in collaboration with such institutions such as the Public Protector, the National Prosecuting Authority, the Special Investigating Unit, the Public Service Commission, the Financial Intelligence Centre and the Auditor-General. These institutions, individually and collectively, are reaching levels of maturity and efficiency that have provided the country with strong anti-corruption capacity.
In terms of corporate governance, we have already advertised all the vacant positions in the Boards of all entities.
Given all of the above, our entities are now expected to come with turnaround strategise that should cover amongst other the following key elements:
Diagnosis: clear articulation of the problem statement including the impact on service delivery, particularly the effect thereof to the people we serve;
What are the real causes, including human, structure and systems factor. In relation to the human factors, who was responsible for what and why were things not done the way they should and what will be the consequences;
The people we serve should be at the core of the turnaround, and adherence to the core mandate should be fundamental (matters that defocus the entity from the core mandate should be avoided at all costs);
Identifying and understanding the stakeholders as well as their needs should be the focus of the turnaround;
Actions: clear articulation of proposals turn the entities around, particularly those that are not performing well;
The proposed turnaround should include improvements in relation to structures, systems and people;
Strengthen governance structures;
Recruit able and capable men and women to lead the turnaround;
In the current economic environment indicate how the entities are going to tighten the belts, where possible operating within the available resources and means while not compromising service delivery
I thank you
Source: Government of South Africa