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Department of Transport

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. Contents. Introduction Adjusted Budget for 2008/09 Summary of expenditure per Programme for 2008/09

elizabeth-mcguire
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Department of Transport

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  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 • 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 2

  3. Introduction • 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) 3

  4. Introduction (continued) Actual expenditure against budget: (high level economic classification) 4

  5. Introduction (continued) Summary of expenditure per economic classification: 5

  6. Adjusted Budget for 2008/09 R’000 6

  7. Summary of expenditure per Programme 7

  8. Under expenditure per Programme per economic classification 8

  9. Expenditure per economic classification as % of budget 9

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

  11. Requests for roll over to 2009/10 Relevant under expenditure Rollover request 11

  12. Summary of under / (over) expenditure in 2008/09 12

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

  14. Compensation of employees 14

  15. Compensation of employees (continued) 15

  16. Compensation of employees (continued) • 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 16

  17. Compensation of employees (continued) • 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 17

  18. Compensation of employees (continued) • 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 18

  19. Goods and services 19

  20. Goods and services (continued) 20

  21. Goods and services (continued) 21

  22. Transfer payments 22

  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 23

  24. Transfer payments (continued) 24

  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. National Budget - Subsidy Distribution – 2008/09 27

  28. SUBSIDY DISTRIBUTION Western Cape 17% Eastern Cape 4% Gauteng 40% Tender/Negotiated Mpumalanga 10% Interim Contracts % Subsidy No. of Contracts No of Buses 66% 31 4 800 Free State 4% 3 300 34% 82 Kwa-Zulu Natal 18% Limpopo5% North West 1% Northern Cape 1% Tendered/Negotiated Contracts vs Interim Contracts Total Subsidy Split between Provinces for all Contracts 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. 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 30

  31. 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% 31

  32. Subsidy Allocation – 2005/06 32

  33. Subsidy Allocation – 2006/07 33

  34. Subsidy Allocation – 2007/08 34

  35. Subsidy Allocation – 2008/09 35

  36. SHORTFALL PER PROVINCE

  37. INTERVENTION MECHANISMS • 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 37

  38. 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 • 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 Contracting authorities will have to: • 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 INTERVENTION MECHANISMS (continued) Interventions to achieve change 2009/10 onwards: 38

  39. INTERVENTION MECHANISMS (continued) Intervention conditions:  • Operators that accept will sign a 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 39

  40. 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 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. 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 42

  43. Thank YouDankieEnkosi 43

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