ACSA & South African Civil Aviation Authority 2020/21 Annual Performance Plans, with Deputy Minister

This premium content has been made freely available

Transport

18 May 2020
Chairperson: Mr M Zwane (ANC)
Share this page:

Meeting Summary

Video: Portfolio Committee on Transport, 18 May 2020
Audio: ACSA &  South African Civil Aviation Authority 2020/21 Annual Performance Plans 

Annual Performance Plan (APP) of Government Departments & Entities 20/2021

The Airports Company South Africa and the South African Civil Aviation Authority presented their 2020/21 Corporate Plans and Annual Performance Plans, which had been approved before the COVID-19 pandemic.  Both explained their readiness preparations for a move to Level 3 pandemic lockdown regulations.  Both entities outlined the catastrophic effects of the COVID-19 crisis on air travel and indicated that they will prepare revised financial plans to reflect the radically changed environment. Air travel numbers are unlikely to return to their 2019/20 level for six years. Both entities said it is probable that they will need to ask for government assistance to deal with the collapse in revenue which they face. The Deputy Minister of Transport was present.

Members were concerned about the lack detail in the plan of the Airports Company on remedial action to address the concerns of the Auditor-General in the report on the previous financial year. Members asked whether the Airports Company had capacity to provide masks to passengers and carry out screening and enforcing social distancing. Questions were raised about the number of vacant positions, plans for job creation and the prevention of job losses as well as the status of construction programmes at the Cape Town and Johannesburg airports and the implementation of Black Economic Empowerment. The Chief Executive Officer promised that the Company would respond to questions from Members on the future of investments in Chhatrapati Shivaji International Airport in Mumbai and the Sao Paulo-Guarulhos International Airport in Brazil.

The Civil Aviation Authority will need to apply to government for financial assistance within the coming year – even under the most optimistic scenario assumptions on the impact of the pandemic. The Authority was questioned about the crash in January 2020 involving one of its inspection aircraft. Members expressed disappointment on the lack of transformation in the aviation industry, when the racial composition of registered and learner pilots and cabin crew were examined. Concern was expressed about flaws in supply chain management and irregular expenditure in the 2018/19 financial year.

As time for engagement with the Committee was limited, the Airports Company and the Civil Aviation Authority were asked to respond in writing by Friday May 15 to outstanding questions from Members. The Deputy Minister confirmed they would do so.

Meeting report

The Chairperson requested that the delegation from Airports Company South Africa (ACSA) brief the Committee only on key issues. As Members had all read the slides, it was not necessary to go through them one by one.

Ms Dikeledi Magadzi, the Deputy Minister of Transport said that COVID-19 was having a catastrophic effect on the aviation industry. She appealed to Parliament to assist the industry. She also asked Members to remember the importance of the aviation industry and that it has been self-sufficient prior to COVID-19.

The Deputy Minister apologised on behalf of the Minister, for his absence as he was being held up at another meeting.  As the Director-General of the Department had computer connection issues, the Deputy Minister asked ACSA to start with the presentation.

ACSA Corporate Plan for 2021-2023

Ms Fefekazi Sefara, ACSA, said the objective of the presentation was to present ACSA’s Corporate Plan for 2021-2023.

She asked Members to bear in mind the different contextual situation under which both Corporate Plan and Strategic Plan were drafted. At that time, there was no Moody’s rating downgrading or COVID-19. He said that the “new normal” provided a new context. ACSA is now reviewing its Corporate plan and the Strategic Plan in order to respond to this new normal.

Ms Mpumi Mpofu, Chief Executive Officer (CEO) of ACSA, said given the Chairperson of the Committee’s request to keep the presentation brief, she would only highlight a few parts of the presentation.

She discussed the entity’s Key Performance Indicators and corporate plan. As a result of COVID-19, she said a few targets would be missed. She highlighted the consolidated financial plan and ACSA’s strategies in response to COVID-19.

Mr Siphamandla Mthethwa, Chief Financial Officer (CFO) of ACSA, said that ACSA was a financially sound company before COVID-19. However, after COVID-19, based on data, it was estimated that there would be a 40% reduction in ACSA’s revenue in 2020/21. It was projected that air travel would still be lower than 2019/20 in six years’ time. There is no option but for all companies to adjust to this new normal. Globally, British Airways, Emirates, etc have all applied for government assistance. It was estimated that by the end of 2020, you would likely to see a 50% reduction in flights.

ACSA has reviewed its options for intervention. He highlighted that ACSA’s ability to raise debts is constrained as a result of the Moody Rating downgrading. He stressed that ACSA’s interventions alone are inadequate and thus it needs government’s support. ACSA required R10-R11 billion to be borrowed in the next five years. This will require shareholder support in the form of government guarantees. Approximately R3 billion of guarantees will be needed during the Medium Term Expenditure Framework (MTEF) period.

The CFO concluded that the situation for ACSA is dire. ACSA has begun to reduce operational costs and maintain a sustainable cash flow, but ACSA needs government support.

The CEO briefed Members on the COVID-19 recovery plan. She outlined an operational principle of a healthy journey for passengers as part of the new normal following COVID-19. She expressed concerns on baggage claim which she saw as a health hazard that ACSA needs to review. The CEO provided a detailed outline about the impact that Level 3 lockdown regulations will have on the aviation industry and ACSA. ACSA is ready to implement Level 3 on the 1st June 2020.

Discussion

Mr K Sithole (IFP) asked whether ACSA had enough masks for passengers and staff working at the airports under ACSA. He questioned ACSA’s capacity to carry out screening and the enforcement of social distancing. He asked whether ACSA has taken actions to prevent fruitless and wasteful expenditure in the entity because it has been flagged in past years as a key challenge for ACSA. He enquired whether ACSA had any plan to refill all the vacancies.

Mr M Chabangu (EFF) enquired about the implications of COVID-19 for the Department’s job losses and if there is any plan in ACSA to assist in job creation. Since the presentation mentioned the unsustainability of airline companies, he enquired if ACSA has any plan to revive them. He questioned if there is an ulterior motive to hand them to the palace for the elites. He enquired about the status of strict measures for screening in ACSA’s COVID-19 domestic recovery plan.

Mr L Mangcu (ANC) congratulated ACSA on its appointment of its CEO as there was no CEO the last time when the meeting was convened. He noted the challenging times in which she was appointed. Mr Mangcu said that even though COVID-19 has its implications for ACSA, the company was not in a good state from previous years. He wanted to know what has been done against the Auditor General’s (AG’s) report on ACSA for the 2018/19 financial year. The report stated that ACSA did not do well in the prevention of unauthorised expenditure, the procurement of contract management and had an increase in fruitless and wasteful expenditure. These are the facts that should be addressed. If these gaps have not been adequately addressed, he remarked that ACSA’s cry for help is not backed by facts.  He enquired about the status of those allegations which were not investigated in the 2017/18 financial year.

He asked about the status of ACSA’s investment in Chhatrapati Shivaji International Airport in Mumbai, India and the Sao Paulo-Guarulhos International Airport in Brazil. As both airports are likely to be negatively affected by COVID-19, he asked ACSA to provide an answer on the extent of impact. He asked whether ACSA has taken measures to cushion the negative impact.

Mr L McDonald (ANC) said that this was a better presentation and that he could see entity was well prepared to move to Level 3 lockdown rules.

He commented that [the concession to part-manage] Sao Paulo-Guarulhos International Airport in Brazil [had created] a huge loss to ACSA prior to COVID-19. What is ACSA’s plan with the investment in that airport? Does ACSA still plan to invest more?

He enquired about the impact of COVID-19 on the ongoing construction programmes at the Cape Town International Airport and the OR Tambo International Airport. Would the impact of COVID-19 stall the process of Cape Town International Airport’s second runway project and the construction of additional aircraft parking at the Johannesburg airport? Are they going to be stopped?

Mr McDonald queried implementation of Black Economic Empowerment (BEE) access in ACSA operated airports. He said that for those self-employed workers that polish shoes, it usually costs them R150 to get to airport and an additional R100 for occupying the premises. He asserted that there must be a way to empower them. In light of that, he asked how much money has been spent and is planned to be spent on black owned businesses and black women owned businesses in the budget in the next financial year? He enquired about litigation involving CASA.

ACSA must find a way to save jobs and recommended that it’s a good time to invest in the South African economy.

Mr P Mey (FF+) said Mr McDonald had asked half of the questions that he wanted to ask himself. He asked whether, under the circumstances of economic recession and most recently the impact of COVID-19, if the aviation industry was brought to a standstill, was ACSA still going ahead with its planned expansion at Cape Town international Airport and OR Tambo International since there is definitely going to be a decline in the number of passengers as a result of COVID-19?

Ms M Ramadwa (ANC) commented that most of her questions had been covered. However, she wanted to know if the issues flagged in Auditor-General’s report for ACSA’s 2018/19 financial year had been resolved.

Mr C Hunsinger (DA) commented that it was indeed a depressing time for the country but he believed in ACSA’s potential. He said the presentation focused a lot on safety protocols as a result of COVID-19, but too little had been said about the mitigation strategies that ACSA proposes to move forward. He asked ACSA to elaborate more on its mitigation strategies on the financial side. He commented that he never followed ACSA’s bookkeeping as on the one side there is outstanding loans and on the other they are making profits.

He enquired if there had been any changes in the shareholding of ACSA? He made reference to the presentation which mentions the technical advisory contracts with Libya, Zambia and Rwanda. He asked what the basis of those contracts were, are they short-term or ongoing?

He criticised ACSA for never having given the Committee a detailed report on its investments at the Chhatrapati Shivaji International Airport in Mumbai and the Sao Paulo-Guarulhos International Airport in Brazil. He asked ACSA to be mindful that it has been almost ten years since ACSA had won the bid for the Guarulhos airport project since 2012.

He wanted ACSA to provide with a more detailed operational procedures for material such as alcohol seized under the pandemic [disaster regulations]. He heard of an allegation at the Cape Town International Airport that alcohol that was designated for destruction was stolen and he wanted to know more details about that.

Mr T Mabhena (DA) asked how many cases are pending in the court for ACSA and the litigation fees that those cases would incur. Since the country is under the impact of COVID-19, there could not be many cases. He asked ACSA to give a projection on how many cases it anticipated. Mr Mabhena was glad to hear that domestic flights would be resumed under Level 3. But he needed clarity on the case-to-case basis mentioned in the presentation and asked whether ACSA knew that opening up domestic flights would improve ACSA’s cash flow.

Response

The Chairperson gave ACSA’s delegation team 15 minutes to respond to Members’ questions. Due to the time constraint, he said that if the team cannot finish answering within 15 minutes, the rest of the questions will have to be responded to in writing within 5-7 days.

Ms Sefara responded to questions about the company’s vacant positions. She recalled that Mr Mangcu had called the company a company of deserted Acting positions last year, so she was glad to inform the Committee that ACSA has appointed a full-time CEO and CFO.  Currently there were only two outstanding vacant positions at the executive level which he hoped would be refilled as soon as possible.

Ms Sefara responded to questions around the unauthorised expenditure at ACSA. Last year, ACSA indicated that it would embark upon finding the root causes of the unauthorised expenditure. The discoveries were that many of them fell in the area of the Supply Chain Management. ACSA has now engaged in a process of strengthen the control process in the supply chain as well as intensifying its training on tender adjudication in an effort to reduce unauthorised expenditure caused by this.

The CEO commented that with regards to the investment in Chhatrapati Shivaji International Airport in Mumbai and the Sao Paulo-Guarulhos International Airport in Brazil, there were more substantive issues on which to brief the Committee and she promised that ACSA would get back to the Committee.

On ACSA’s capacity for providing masks, the CEO said that wearing face masks for passengers is mandatory under the current Level 4 regulations. ACSA has stock but obviously it does not have face masks for everyone because it is mandatory for passengers to wear their own masks. However, ACSA can provide masks for passengers in emergency cases..

She explained that ACSA has established standard procedures for what happens after a passenger is detected with high body temperature. Passengers will be referred to the health department. Then the health department will conduct a COVID-19 test and if the passenger’s test is found to be positive, the passenger will be referred for quarantine. It is a collaboration between ACSA and port health authorities.

To address unauthorised expenditure identified in the Auditor-General’s report in the 2018/19 financial year and other legacy matters, ACSA had specifically formed a committee which she headed herself as the CEO. She assured the Committee that ACSA is committed to address these matters. The issues identified in the AG’s findings are either referred to National Treasury for condonation or dealt with by consequence management for those who were responsible for the irregular expenditure. ACSA aims to eradicate all those loopholes that cause irregular expenditure.

In addition, ACSA recommended linking audit findings to performance management of ACSA’s officials. ACSA has given performance contracts with specific Key Performance Indicators for officials to sign. ACSA is also in the process of reviewing its delegation authority framework to ensure accountability of directors.

The CEO acknowledged the challenges in the Supply Chain Management and that it was causing the bulk of the irregular expenditure. She assured the Committee that several matters are now under investigation by ACSA’s internal auditors. However, the CEO remarked that she has picked up a pattern in which staff that resigned or left ACSA are often the ones that are linked to ACSA’s current investigations.

The CEO explained ACSA’s business mitigation strategies. ACSA is currently reviewing its business strategies. The review will be presented to the Committee once it is concluded. She informed members of a few key points in the review such as the business strategy post-COVID which should focus on diversification. She pointed out that the current model relies on passenger flights for the bulk of revenue. This could not be sustained in the face of COVID-19. What this pandemic highlighted is the need to diversify ACSA’s revenue streams.

The CEO said that specific details regarding flights while level 3 [disaster regulations were in force] were still a proposal. The Department of Transport will inform on the specifics in due course.

Nothing had changed in ACSA’s shareholding environment.

The Chairperson interjected and asked for the rest of questions to be answered in writing by Friday due to the time constraint.

The Chairperson commented that the entity is doing well. This is a good example in the country that South Africans need to talk about. He expressed his optimism that COVID-19 will pass and reiterated that ACSA needs to focus on tackling fruitless and wasteful expenditure.

The Chairperson highlighted the issue of food for crew members to eat. In the presentation, the CEO said that crew members can only order take outs from restaurants which are available on UberEats. He disagreed and suggested allowing people to eat food at restaurants (while implementing social distancing) because UberEats is not available in areas like Polokwane and Eastern Cape.

The Chairperson said that because the security companies at airports are not ACSA’s own security this poses a risk. In conclusion, he appreciated the fact that ACSA’s presentation was well prepared.

Briefing by the South African Civil Aviation Authority

The Deputy Minister highlighted the challenge which South African Civil Aviation Authority (SACAA) faces. She said there would be a new normal for everyone in South Africa post-COVID 19. SACAA was able to be self-sufficient in the past which is commendable. But with COVID-19, it is a particularly challenging time for the entity. The Department had estimated the economic spin-off and proposed economic innovation to assist the entity post-COVID. She is optimistic that the entity will be able to make the African sky the best and strive to achieve that ideologically.

Mr Ernest Khosa, Chairperson of SACAA, said the aviation industry is the sector that to a great extent gets the hardest blow by COVID-19 as the financial sustainability of the industry is dependent on traffic volume.

Ms Poppy Khoza, Director of Civil Aviation, SACAA, presented the entity’s five-year strategic plan and Annual Performance Plan. [This was all approved prior to the Covid-19 crisis. A revised plan will be submitted to the Executive Authority for approval in May 2020.]

Ms Khoza outlined the SACAA’s mandate (which applies both on a daily basis and for the COVID-19 pandemic period); SACAA’s organisational structure, staff numbers, industry transformation indicators, aircraft register statistics and core ideology.

SACAA had reported zero fatal accidents in the commercial scheduled sector. She said that there has been no fatal accident on [a scheduled commercial flight] on South African soil in the past 30 years. However, there has been an increase in general aviation accidents since the 2016/17 financial year. 

She acknowledged that transformation in the aviation industry remains a challenging task with the majority of the pilot learners being white.

Ms Phindiwe Gwebu, Executive: Corporate Services, SACAA, outlined how the entity devises its outcomes according to government’s APEX priorities. SACAA’s outcomes included six aspects

  • Strengthened effectiveness of regulatory oversight
  • Financial sustainability
  • Enhanced human capital management
  • Innovation and technology management
  • Improved stakeholder engagement and service excellence
  • Sustained good governance

More details of those six aspects were provided to Members in the slides.

Mr Andries van Vuuren, Senior Manager: Finance, SACAA, presented the Medium Term Expenditure Framework (MTEF) budget. He highlighted that the entity had been in good financial position prior to COVID-19.  

SACAA is under way to revise its Annual Performance Plan in response to the impact of COVID-19. Based on SACAA’s current cash flow, it would be able to survive for seven months if the lockdown continues. Because of the COVID-19 crisis, SACAA had to postpone attendance at two major international aviation safety events. Overall, SACAA has implemented internal measures as well as industry measures since the COVID-19 outbreak.

Mr Van Vuuren outlined three scenarios on which SACAA made its projections on how long it would survive. It was projected that the entity could survive for 7 months in the worst case scenario, nine months in a pessimistic scenario and ten months in an optimistic scenario. After these periods, SACAA will have to request government assistance to continue in existence.

Ms Gwebu briefed the Committee about the entity’s mitigation strategies in response to the pandemic - such as the review of contracts and the deferral of capital expenditure and travel overseas and locally. SACAA was in a state of readiness [for the anticipated move to level 3 lockdown, when some limitations on air travel will be lifted.] As it is an essential service provider, staff will continue to provide oversight of the entire industry for most services except for physical inspection, examinations, and out-stations examination.

Discussion

Mr Sithole criticised the lack of transformation in the aviation industry. He noted that most licensed pilot members and cabin crew members are white. He said that it is a worrying factor. He asked how many applications that piloting training schools receive are made by black South African applicants? He noted that there is no improvement on transformation in SACAA’s staff numbers. Also, he pointed out the high vacancy rates at SACAA. He enquired human capital management and asked to know more about the scale of the youth transformation programme at SACAA.

Mr McDonald asked when the plane that had an accident was going to be replaced. He also enquired about when the final report would be ready as it had been five months since the accident. [PMG Note: A Cessna Citation flight inspection aircraft owned by SACAA crashed near Mossel Bay on 23 January 2020. Three staff members died in the crash - Captain Thabiso Collins Tolo, 49; First Officer Tebogo Caroline Lekalakala, 33; and Flight Inspector Gugu Comfort Mguni, 36.]

As COVID-19 would inevitably strain ACSA’s financial capacity, he asked if the Department was going to help ACSA in procurement. As he was aware of that the country was in the process of sourcing or renting flight calibration inspection equipment, he suggested that for the security and safety of the country, it is better to have South Africa’s own flight inspection calibration.

He commented on the transformation issue. He asked whether or not pressure had been put on cabin crew and flight schools to negotiate a better tuition deal for black South African applicants. He said that the main reason for lack of transformation in the industry was the exorbitant tuition fees at these schools.

Mr Mangcu congratulated SACAA on its presentation and noted that the entity would survive for seven to nine months under the worst scenario. He hoped that the country would grow out of COVID-19 soon. He also congratulated the entity on its achievement of 100% of Key Performance Indicators (KPIs). He expressed concerns over the regression in the performance of the entity’s Supply Chain Management. He asked the entity to be vigilant on the supply chain in order to avoid any funds allocated to the entity to cushion the impact of COVID-19 being squandered. He expressed his concern on the under expenditure in the SACAA budget in the 2019 financial year. He wanted an explanation on why SACAA was deferring its CAPEX. Given the dire economic circumstances, the Finance minister emphasised the role of infrastructure in economic development.

Mr Chabangu indicated on behalf of EFF that his party rejected SACAA’s APP due to the aircraft accident. He questioned what the cause of the accident was and if any plans on insurance coverage were made subsequently to deal with fatalities and the families of those who had died. He enquired about SACAA’s mechanism to identify the 40 learners a year in the presentation. Does SACAA identify through the department of education or through what other channels? Since the lockdown, he wanted to understand what SACAA is doing with learner pilots that need to complete their courses such as flight hours.

Mr Hunsinger appreciated SACAA’s presentation and acknowledged that the entity was under huge pressure to deal with a huge amount of issues as a result of COVID-19. He commented on the restrictions that are placed on aviation schools. He thought some aviation schools should be allowed to continue, within the confines of health protocols. They should continue operation in a restricted way for pilot learners to get the necessary flight hours.

Mr Mabhena commended the entity. For a State Owned Enterprise (SOE) to be able to survive for seven months in the worst case scenario, it is a job well done. He asked whether SACAA has applied for any of the stimulus packages announced by the President and the National Treasury or to the relevant department for assistance. He enquired about the calibration of aircraft and suggested that since only cargo aircraft are being allowed to fly, he said perhaps this presents an opportunities for SACAA to regulate air space. He requested for an update on SACAA’s accident.

He informed the delegation that the two email addresses for SACAA’s Director Civil Aviation and the Director-General of the Department do not work. Emails always bounce back. As public representatives, they need contactable addresses to contact them.

Ms Ramadwa appreciated the presentation and that the entity achieved an unqualified audit in the previous financial year. She expressed her concern on the six findings which included irregular expenditure. She wanted to know what was the reason for the entity achieving unqualified audits without findings in the 2018/19 financial year.  She enquired about the entity’s plan to address the issues raised by AG.

Response

Due to the time constraint, the Chairperson asked SACAA to submit all answers to Members’ questions in writing before Friday.

He heard the plea of the entity as a result of COVID-19 and fully understood the challenges lying ahead. He asked SACAA to proceed to do what needs to be done.

The Chairperson noted the lack of transformation in the aviation industry.

Prof Ntombizozuko Dyani-Mhango, SACAA board member, thanked the Committee on behalf of board of directors for inviting the entity to present. She recognised that the entity enjoyed unwavering support from the Minister and Deputy Minister and Department of Transport.

The Deputy Minister said she appreciated the successful meeting as well as Members’ probing questions. She said that the Department would review all of them and respond to all questions in writing. She urged people to envisage life beyond COVID-19 and think how to reshape businesses in their entirety whilst helping the country to deal with unemployment and food insecurity. South Africa needed to move swiftly. She said that the aviation industry and all entities under the Department are guided by the principle of how to cushion the negative impact of COVID-19.

The Chairperson thanked the Department officials and its entities. He urged entities to reduce and eliminate irregular expenditure and corruption. He reassured them that the Committee would always support the Department and engage in meaningful discussion with the Department.

The meeting had to be adjourned due to the time constraint. The adoption of minutes was postponed to the next meeting.

Audio

No related

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: