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SANRAL committed to eliminating irregular expenditure

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SANRAL has explained irregular expenditure to SCOPA, after an unqualified audit report from the Auditor General.

SANRAL CEO, Skhumbuzo Macozoma, said the road agency recognises the problem of irregular, fruitless and wasteful expenditure, and are committed to eliminating these and take heed of the committee’s recommendations in terms of their accountability and the application of legislation.

The South African National Roads Agency (SOC) Limited (SANRAL) appeared before the Standing Committee on Public Accounts (SCOPA) on 7 March 2018 to clarify incidents of “irregular, fruitless and wasteful” expenditure.

SANRAL received its 14th consecutive unqualified audit report from the Auditor General in 2017.

This means the agency achieved 32 out of its 37 targets related to corporate performance, which translates into an 86% achievement.

A Roll-over

Some of the irregular expenditure is a roll-over from 2015, such as routine road maintenance (RRM) contracts. These contracts are in effect on all of Sanral’s network.

These contracts are a great incubator of small, medium and micro enterprises (SMMEs), and in line with SANRAL’s policy of ensuring that a significant amount of work is awarded to them. RRM contracts are awarded for three years and renewable for two years, subject to satisfactory performance.

The finding of irregularity was made because neither the Preferential Procurement Policy Framework Act (PPPFA) nor its regulations define the lowest acceptable price, and SANRAL had, in the past, used a method to determine a viable lowest price that would be acceptable.

SANRAL’s outgoing Board Chair, Roshan Morar, said: “As a result, SANRAL developed and introduced a statistical method to establish the lowest acceptable price for each RRM contract. This method is independently calculated by the University of Pretoria for every contract. It allows for the appointment of a contractor with the most realistic rates at which SMMEs can do the work and be financially viable.”

A 63% decrease in irregular expenditure

The Preferential Procurement Policy Framework Act was in use for over 11 years with the AG’s knowledge of the rationale. During this time, there were no findings from the AG or complaints from contractors. However, in 2013 the AG declared the method non-compliant with the PPPFA.

Morar said: “We have been rectifying the irregularity in a phased approach as we had contracts in place that we left to run their course in order not to incur cancellation claims. The last contracts concluded in 2017, but the expenditure is still reported as irregular.

“It should be indicated that the 2017 irregular expenditure of R424-million is a 63% decrease from the R1.1-billion irregular expenditure of 2016. Of course, we are working hard to reduce it to zero. Considering we have a cumulative irregular expenditure of R10-billion from March 2012 to March 2017, we are beginning to see our corrective measures reversing this trend.”

Morar added that SANRAL had applied for condonation each year (from March 2012) to National Treasury but only received correspondence for the first time, in the first week of March 2018, requesting more information.

The committee also raised concerns about the frequency and extent of variations and deviations, as well as reiterating the urgency for transformation within SANRAL.

Skhumbuzo Macozoma, SANRAL CEO, said: “We take cognisance of the procurement deficiencies that may exist within our organisation, as pointed out by Scopa during a robust session. We also wish to put on record that SANRAL remains 100% committed to operating within the legislative prescripts of the PPPFA, which guides our actions.

“As SANRAL we recognise the problem of irregular, fruitless and wasteful expenditure, and we are committed to eliminating these as we take heed of the committee’s recommendations in terms of our accountability and the application of legislation. As such, we have already embarked on interventions to improve compliance, strengthen the institution and prevent non-compliance in our supply chain management processes. We are making concerted efforts to reduce variations and deviations, and intensify our appeal for cabinet to approve our transformation policy. In taking this approach, we can move from an unqualified audit, to a clean audit.”

Hammarsdale project suspended

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The Project Liaison Committee (PLC) for the Hammarsdale interchange upgrade is in disagreement
with the basic SANRAL policy on localising labour and SMMEs. The PLC members also developed
internal dissent. Several attempts to resolve the issues have failed. SANRAL had to instruct that the
works contract be temporarily suspended.

N7 upgrade progressing

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Upgrading of the N7 started in March 2015 and will be completed in the beginning of 2019. The
section between Melkbosstrand intersection and Malmesbury will see the single carriageway become
a dual carriageway, the Darling Road interchange and pedestrian crossings are being improved.

N2 Wild Coast road project update: Work on bridges starts

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Work on the construction of the Mtentu Bridge, near Lusikisiki, started on 11 January 2018. The
R1.63bn project will take 40 months and is expected to be completed by May 2021. The second
tender for the Msikaba Bridge went out in November 2017 and closed on 9 March 2018.
Construction should start towards the end of 2018.

Moloto Rd project update

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There are several planned upgrades along the R573 for 2018. Three more construction work
packages for Limpopo and five for Mpumalanga will be rolled out, plus three community development
projects in Limpopo and another five in Mpumalanga, targeting CIDB grade 1 SMMEs who are
seeking opportunities.

SANRAL takes high road to transformation

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SANRAL recently took a bold initiative to make its draft transformation policy public. During
October to December 2017, it discussed this policy in great detail with internal and external
stakeholders, including the construction and engineering sectors and other related industries. The
final version will be published in 2018 to complement its long-term strategic vision, Horizon 2030.

What sets SANRAL’s new policy apart from other transformation initiatives is that it is proactive,
implementable and sets realistic and achievable goals. It covers all aspects of its business, from
major projects to professional services.

As a first step to speed up transformation, SANRAL has committed itself to breaking down
monopolies in the supply chains of materials, equipment, technologies and procurement and to open
the sector to broad-based participation by black South Africans.

It commits itself to exceed the minimum levels set by the prevailing legislative and regulatory
frameworks. It identifies 10 subsectors of business that cover all of SANRAL’s activities and set clear
and reachable goals for each sector.

On capital projects, for example, it states that it will only do business with contractors that are a
minimum 51% black-owned with at least 30% management control by black people and Level 2 B-
BBEE rating. This policy will also apply to consultants and established suppliers whose annual
turnovers exceed R50m.

No company will receive more than 15 tenders in a year, with a further limitation of three per province.

To ensure a level playing field in the industry, SANRAL will enter into empowerment agreements with
entities at the top of the supply chains for construction material, equipment and supplies. Such
agreements will be broad-based in nature and designed to benefit local communities within the areas
where construction activities will take place.

Ismail Essa is SANRAL’s Head of Transformation

Ismail Essa is SANRAL’s Northern Region manager

Budget has impact on SANRAL

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A reduction of R2.6bn in SANRAL’s allocation and greater clarity on the government’s position on
road tolling were some of the key features of the 2018/19 budget statement delivered by former
Finance Minister Malusi Gigaba.

The speech and the Budget Review tabled recently contained important references to SANRAL that
will have an impact on its short- and long-term future plans. Among these are:

A reduction of R2.6bn in its budget, compared with the allocations in the 2017 Medium Term
Budget. Similar cuts were also announced for the SA Revenue Service, Prasa and four water
boards.
A commitment that SANRAL will continue to deliver on plans to resurface 3 200km and
strengthen 1 475km of national roads over the medium term.
An allocation of R29.1bn for capital investment in non-toll roads, with an additional R4.3bn for
the Moloto Road and R2.1bn – from 2019 to 2021 – for the N2 Wild Coast Highway.
In the Budget statement it is noted that “the finances of SANRAL remain weak” due to
opposition to the GFIP project. “The Agency may require recapitalisation in 2018/19,” it
states.

Gigaba did not refer to tolling or e-tolls in either his speech or the media conference that preceded its
delivery in Parliament. However, the extended budget statement makes it clear that the government is
committed to the principle of road tolling.

A Cabinet committee has been set up to develop a tariff determination framework that will oversee the
setting of road tolls.

Gigaba said that the government might be required to provide financial support to several SOCs in the
coming year through the disposing of non-core assets, strategic equity partners or direct capital
investments.

SANRAL budget – all the numbers:

  • Over the medium term, SANRAL intends to focus on undertaking preventative maintenance
    to improve and preserve the national road network.
  • It plans to resurface, strengthen or improve some 4 700km of roads and build new
    interchanges and bridges.
  • Total expenditure is expected to increase at an average annual rate over the medium term –
    from R34.7bn in 2017/18 to R37.2bn in 2020/21.
  • The bulk of SANRAL’s expenditure is going towards payment of service providers for road
    maintenance or construction. This is projected to increase at an average annual rate of 30%
    over the medium term – mostly due to upgrades to the N3 Mariannhill and the N2 North and
    South Coast roads.
  • Toll revenue is expected to increase at an average rate of 5%.
  • The staff complement is expected to remain constant at 390. Spending on compensation will
    grow at an average of 10.5% – from R312m in 2017/18 to R421.5m in 2020/21.
Malusi Gigaba, Minister of Finance
Ministry of Finance of South Africa at the World Economic Forum on Africa 2017 in Durban, South Africa. Copyright by World Economic Forum / Greg Beadle

SOE’s vital to economy

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The role of state enterprises to grow the economy and transform society remains a vital priority for
South Africa, said President Cyril Ramaphosa in his first State of the Nation address.

He also addressed problem areas:

  • Governance – Government will change the way in which boards are appointed so that only
    people with expertise, experience and integrity serve in these vital positions. Board members
    will play no role in procurement and the Auditor General will strengthen external audit
    processes.
  • Coordination – work will continue on the broad architecture of the state-owned sector to
    achieve better coordination, oversight and accountability.
  • Financial constraints – many SOEs experience severe challenges which has impacted on the
    performance of the economy and placed pressure on the fiscus. Government will “intervene
    decisively” to stabilise and revitalise SOEs.
  • Funding models – some SOEs don’t have a sufficient revenue stream to fund their
    operational costs. Government will review the funding models in consultation with
    stakeholders to address structural issues.
  • Size and composition – the structure and size of the state must be “optimally suited” to meet
    the needs of the people and ensure the most efficient allocation of public resources. He will
    initiate a process to review the configuration, number and size of government departments.
  • Corruption – the President promised that 2018 will be the year “in which we will turn the tide
    of corruption in our public institutions” and pointed to recent action taken at a prominent SOE
    as “just the beginning.”

The state has learnt “some valuable lessons” from its experience in building infrastructure, which will
inform the way ahead.

Thus, it will focus strongly on:

  • improvements in budget and monitoring systems;
  • improving the integration of projects; and
  • building a broad compact on infrastructure with business and organised labour

Tough decisions will be taken to restore confidence in the South African economy and put the country
on a path of growth, employment and transformation.

At the core is a commitment to form partnerships with business, labour and civil society and to draw
deeply from experience through the appointment of advisory bodies and the convening of high level
summits.

Radical economic transformation remains the objective especially through initiatives that are
underway to empower the youth, create more black industrialists and improve the position of black
women in the country’s economy.

What will be done:

  • Ramp up the role of small business.
  • Revive the manufacturing base.
  • Convene a jobs summit.
  • Establish an advisory Youth Working Group.
  • Youth Employment Service to get interns into private sector.
  • Boost tourism.
  • Intensify focus on infrastructure.
  • Embrace advances in science, technology, innovation.
  • Attract investment – international investment conference to be held soon.
  • Bring policy certainty.
  • Stabilise vital state institutions, like SARS and the National Prosecuting Authority.
President Cyril Ramaphosa reply to the debate on the State of the Nation Address in Parliament, Cape Town. 20/02/2018 Kopano Tlape, GCIS

 

Community engagement on Ndika’s radar

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Welekazi Ndika, the recently appointed Stakeholder Engagement Coordinator, joins SANRAL’s Southern Region with the intention to help people in need.

Welekazi Ndika has a soft spot for helping other people and has spent 28 years in public service.

Welekazi Ndika, the recently appointed Stakeholder Engagement Coordinator, joins SANRAL’s Southern Region with a wealth of knowledge and experience.

“We look forward to working with Welekazi. Her duties in stakeholder engagement play a key role in supporting stakeholders and project managers to deliver a number of community engagement initiatives,” said Mbulelo Peterson, SANRAL Southern Region Manager.

Her ability to communicate to relevant stakeholders about SANRAL’s programmes makes her the ideal person to build and maintain relations. Additionally, her role is to ensure the smooth implementation of infrastructure development projects in Eastern Cape.

She also leads and manages the coordination of consultation activities including community information sessions.

A heart of gold

Ndika has a soft spot for helping other people. Born in East London. Ndika has spent 28 years in public service, the first 14 of which was as a high school teacher in Mdantsane.

She has a BA degree from the University of South Africa, an honours degree in social science from Rhodes University, a master’s degree in development studies from Nelson Mandela University, a master’s degree in public administration from University of Fort Hare and she is currently studying towards her Certificate in Municipal Finance Management.

Yet, despite her many achievements, Ndika remains humble and committed to people. “I believe in staying humble and am committed to assisting needy people in whatever way I can.”

Many years spent in public service

In 2006 she joined the Office of the Premier in the Eastern Cape as the Assistant Director for Policy and Planning where she later specialised in strategy development and planning.

In 2008 she was headhunted by Eastern Cape Appropriate Technology Unit (ECATU) where she was responsible for dealing with the development of the five-year organisational strategy, implementation, as well as monitoring the performance of the organisation.

In 2010 she joined South African Local Government Association (SALGA) as the Strategic Support Manager for the Eastern Cape.

“SALGA unleashed great potential within me. It allowed me to engage with various stakeholders and represent municipalities on various inter-governmental relations platforms.

“I was involved in ensuring that SALGA continues to lobby and advocate policy issues for local government. SALGA also exposed me to governance related issues through my involvement in policy development issue discussions which took place between 39 municipalities at both a provincial and national level,” said Ndika.

Civil engineer graduates join SANRAL’s training academy

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A new crop of civil engineering graduates have joined SANRAL’s Training Excellence Academy (TEA) in Port Elizabeth.

Ivan Ellis, Training Academy mentor and professional civil engineer (centre), Theo Johannes, experienced designer of rural and urban roads and services (back, left) and newly appointed TEA mentor Ivor Burke, welcomed the newly appointed TEA candidates, from left, Siphesile Mthembu, Thapelo Ramaano, Gasan Jacobs, Nokwanda Phenyane, Morena Moloi, Shakeel Chicktay and Thando Mthembu.

The South African National Roads Agency (SOC) Limited (SANRAL) has welcomed new civil engineering recruits to its Training Excellence Academy (TEA) in Port Elizabeth.

Two of the seven candidates have already worked on-site on SANRAL projects in the Western and Northern Regions but will now spend time at the TEA honing their design skills.

The remaining five, recent university graduates, will start their training in the SANRAL materials testing laboratory. This laboratory enables SANRAL to test the properties of construction materials used in road maintenance activities as well as in the development and upgrading of Eastern Cape’s national roads.

Ivan Ellis, TEA mentor and professional civil engineer, said: “While the candidates all graduated from university, this is where they will complete their practical skills training and then be able to register as fully-fledged professionals with the Engineering Council of South Africa.

“At the TEA the candidates get the opportunity to participate in a structured training programme under the supervision of experienced professional civil engineers.”

TEA recruits

Shakeel Chicktay, originally from Cape Town, graduated from the University of Cape Town in 2015 with his BSc Engineering Civil degree.  His interest in civil engineering started when he was in high school.

Before joining the TEA, Chicktay joined SANRAL in 2016 as a candidate engineer and worked on-site as an assistant resident engineer in Malmesbury, working on the N7 road upgrade project.

“If I didn’t get the bursary, I would have had to make use of study loans to pay for my studies. The financial stability of having a bursary has allowed me to focus on my studies and not worry about getting a second job,” he said.

Morena Moloi, a former SANRAL bursary and scholarship recipient, joined SANRAL in Polokwane as a junior site engineer from February 2016 until January 2017. Thereafter he worked as an assistant resident engineer from January 2017 until January 2018 in Hendrina, Mpumalanga.

“I wanted to be a doctor at first but then I learned more about SANRAL and the work they do and what civil engineering is about,” he said.

Moloi earned the SANRAL scholarship in high school due to his academic marks.

“My matric year was my best year in high school.  Learners must learn to enjoy being at school but know that they have to find the balance between having a social life, studies and family time,” he said.

Both Chicktay and Moloi are completing their design training, after which they will receive training at SANRAL’s laboratory.

Nokwanda Phenyane is the first graduate in her family.  In 2017, she obtained a Bachelor of Science Degree in Civil Engineering from the University of the Witwatersrand.

“While learning about road design at university, my lecturer showed us examples of SANRAL’s pavement designs.  I did more research on SANRAL and the work they do, and I was really amazed and knew I wanted to be a part of this company.”

“Being passionate about civil engineering motivated me to work hard at university and I encourage high school learners to pursue career paths they are passionate about,’’ she added.

The roots of TEA

SANRAL established TEA in 2014, starting with three engineering graduates who completed their civil engineering studies under a SANRAL bursary.

This number has since grown to 32 graduates including nine from the Eastern Cape Department of Transport who have been deployed at the TEA to gain experience in road infrastructure design and planning.

In an industry that has always been male dominated, Ellis said nine of the 32 candidates are female.

The Candidate Training Masterplan was designed to enable candidates to meet the expectations and outcomes of the Engineering Council of South Africa (ECSA).  Participants undergo intensive training in the investigation and design aspects of projects under SANRAL’s continuous national road programme of works.

The masterplan covers all disciplines of road engineering, but is primarily focused on geometric design, traffic analysis and capacity, materials investigation and utilisation, pavement and materials evaluations and design, and storm water and sub-surface drainage.