Enterprise Development Strategy for Small Bus Operators

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14 November 2011
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The National Small Bus Operators Council had been established following a convention of operators in 2009. A national structure had been established which would be reflected at provincial and regional level. Small bus operators faced several challenges, including high maintenance costs and low revenue. Most operated in rural areas where they were unable to maintain scheduled services. Operators were also burdened by strict conditions attached to contracts and the tendering process, which often forced them to make major investments with no guarantee of a return. It was very difficult for small bus operators to compete against established companies.

The Committee was fully in support of the operators. It was stressed, particularly in the light of recent accidents, that safety was of paramount importance. The Council was urged to consider a co-operative approach to save costs. Members queried the large number of Autopax buses placed in storage after the 2010 World Cup.

Meeting report

The Chairperson asked Members and guests to observe a moment's silence for the victims of the fatal minibus accident that morning. The purpose of the meeting was to create an opportunity for Parliament to interact with small bus operators (SBOs) and to engage with the Department of Transport (DoT) to assess the progress being made in organising SBOs and assisting them in their efforts to attain transformation. Parliament had to provide the legislative environment for this to happen.

The Chairperson explained the difference between a developmental and a welfare state. Government had to respond to the needs of the people. Capacity had to be created so that people could be masters of their own destiny. Government would only need to provide back-up support. Communities could then afford to pay for Government services while the revenue base grew.

The Chairperson said that there would be ongoing engagement. SBOs were a vital part of the economy. She urged the operators to familiarise themselves with the Co-operatives Act of 2005, as this had a bearing on the structure of the National Small Bus Operators Council (NSBOC). They should also be aware of the Broad-Based Black Economic Empowerment (BBBEE) Act. She wanted to move away from the definition of a business from where it started. Transport was big business. There were four different modes – maritime, aviation, rail and road. It was about more than infrastructure and mode. Consideration should be given to manufacturing as well.

The Chairperson said that the Committee wished to establish a working relationship by giving leadership to the industry. The market was 50 million people. The industry must tell Government what it needed to capture this market. This session was not meant to be a fight over the roadworthiness and licensing system issues. She wanted to be informed on the root causes of the industry's troubles, but the NSBOC had to appreciate that there were laws in the country. She called on Members, delegates and members of the DoT to introduce themselves.

Mr Simlindile Hintsa, Member of NSBOC Executive from the Eastern Cape, apologised that not all provinces were represented due to the late notice.

National Small Bus Operators Council presentation
Mr S Hintsa said that all provinces were represented on the Council. There were SBOs from previously disadvantaged backgrounds in all provinces. They were requesting Parliament to ensure that this industry was on a par with other industries. There had to be some commitment from the operators. This was in place.

Mr Ashley Paulse, Member of the NSBOC Executive from the Western Cape, said that the SBOs wanted to be part of the transformation process. This industry was not fully part of transformation, especially in the rural areas. The DoT was subisdising the bus industry but not the small operators. All modes should be integrated into a professional system. There were many benefits to a proper public transport system. Some of the problems were a lack of subsidy. SBOs were prominent in the rural areas, but were neither safe nor reliable. A formalised position would help address this problem.

Mr Paulse said that the process had started in 2009. There had been a convention in Midrand. The Council had been formed as a result. The whole Council was made up from the nine provinces, each in turn consisting of districts and municipalities. There were structures in place at each level. This created jobs. The implementation strategy would be top down. A consultative process was needed to develop a constitution. A business plan must then be developed. A comprehensive skills audit was needed in each province. The fourth phase was to develop guidelines to create a skills academy. This would create a platform for all other future projects. Support was needed. Finances and infrastructure were lacking.

Mr Paulse said that some of the operational requirements were in the document. The NSBOC presented Government with the opportunity to make a spectacular contribution. Policies that were marginalising the industry could be corrected.

The Chairperson said that Members might become emotional when addressing issues of development. A lot of work and commitment had gone into getting the Council to its current position. The body was in good hands. This Committee spoke with one voice even though different parties were represented. There was a common understanding on the role played by transport. It was the heartbeat of social development and economic growth. There had been a fragmented approach in the past. This meeting was the first page of a new book that would be written together with the Council.

The Chairperson said that the DoT had been restructured to put champions in place for each sphere of transport. The Deputy Director-General was the champion of public transport.

Presentation by Department of Transport
Mr Mathabatha Mokonyama, DoT Deputy Director-General: Public Transport, said that the DoT supported the SBOs. All of the issues raised by Mr Paulse were real. There had been a meeting two weeks previously on the issue of transformation. It was true that DoT had not provided support except by bringing the operators together. The name for the body still had to be finalised. There was a challenge of resources.

Mr Mokonyama said that the SBOs operated informal and unscheduled services. They often depended on special hire and tour services. There were major players in the bus transport business. About eight companies shared Government subsidies while the SBOs got nothing. Government had a plan going forward. This included preferential hiring but safety standards had to be met. There had been some progress with the taxi industry. The major challenge was on how SBOs could be qualified. This could be done in terms of the number of vehicles owned, income levels or some other yardstick. There was some dispute over the number of SBOs in the country. A Memorandum of Understanding or similar document would be drafted.

Mr Mokonyama said that there were different circumstances for the SBOs. They varied in the number of buses owned. Some had limited subsidised contractual arrangements. Some relied on seasonal contracts, such as at Easter. Income could vary from a few thousand to a few million Rand a month. The challenges were not insurmountable.

Mr Mokonyama said that a national SBO summit had been called in 2009. Government felt obliged to assist the SBOs. Where previously disadvantaged persons were favoured, it generally came down to taxis. They had been integrated into major public transport schemes. SBOs were not included in these plans. The summit was convened in November 2009. Some agreements had resulted. A formal structure had been ageed upon. A database had been established. A National Coordinating Committee (NCC) had been established, including two South Africa Bus Operators Association (SABOA) members. Almost all members present were still active in the industry. Agreements had been reached on the empowerment of SBOs and skills development. There were some problems in terms of competition caused by issues related to sub-contracting and set-asides. If the structure was industry driven there was a better sense of ownership.

Mr Mokonyama said that there had been some resolutions. One problem was that the steering committee had not met regularly. A database was being set up. The body was moving towards an election. A total of 872 SBOs were represented, operating 2 381 buses. These figures might need to be polished a bit still. This was an average of less than three buses per SBO.

Mr Mokonyama said that a workshop had been held on 4 November 2011. All the original SBOs were still involved. A mandate had been given to accelerate implementation, facilitate provincial debates and elections, and to meet regularly in the future. It was not necessary to re-invent the wheel. Elections had already been held in the Western Cape and KwaZulu-Natal. Not all SBOs had been represented but with more time this would have happened.

Mr Mokonyama put forward a structure with a National SBO Council, Provincial and Regional Councils. The viability of regional structures would depend on the number of SBOs in a particular area.

Mr Mokonyama said that DoT would assist SBOs to become part of mainstream public transport bodies. It would also advise them in business matters such as tenders and the suitability of particular vehicles.

Mr S Farrow (DA) had discussed these issues with some of the representatives some time before. It was an exciting development that had been afforded by the Peoples' Parliament in the Chris Hani Municipality. Where there was a formal organisation, Government would recognise the body. One could not discount responsibility, highlighted by the tragedy early that day. Operators had to safeguard the public with a sound maintenance and training plan. Those with an allocated route should receive a subsidy. Nearly 40% of the DoT budget was for subsidies. The Road Traffic Act was strict on what a bus should comply with. Operators had to understand this when traffic authorities took action on unroadworthy buses. There were also occupational health and safety considerations. Laws had been made for a reason. Autopax had been brought into the DoT fold for the World Cup. He wanted to know why the buses had not been distributed. They were all in a warehouse in Cape Town. It was a bold initiative but a business plan was needed. Parliament should facilitate in having experts assist the SBOs in developing business plans. The DoT needed to approach the operators to assist in making the operators viable. SABOA had such expertise. He did not know how membership was determined.

Mr Mokonyama said that the DoT would not compromise on safety. Self-regulation was needed. Taxi associations had their rules. Even a voluntary body could have a code of conduct. There would always be single vehicle operators, but they could not be ignored. Two years had been wasted by looking to develop such rules. Government should rather see what the private organisations were putting in place and then make inputs. Formal structures would create training programmes. Some operations would need some form of sub-contracting. This gave the SBOs the chance to compete with major companies. The Autopax story was interesting. There was supposed to be a post-World Cup plan. Before 2010 a demand had been calculated. Operators had never been expected to buy the buses. The majority of luxury and semi-luxury buses had already been commissioned for long distance routes. The challenge was with the commuter type buses. There had been few contracts. Durban had already made some agreements to take over eight of these buses as part of a public transport scheme. Some municipalities had not been prepared. Some still did not have the capacity to manage public transport plans. The Autopax fleet could be used to assist, but the municipalities would have to buy these from Autopax which fell under the Passenger Rail Association of South Africa (PRASA).

Mr Mokonyama said the SABOA participation had been one of mentorship and support. This body had its own rules. The SBO sector should still be assisted by Government. SABOA existed in provinces and regions.

Ms D Dlakude (ANC) felt that SBOs were in good hands. She wished to see SBOs go from strength to strength. They had come to the right people as Members understood their problems. She asked if there had been any attempt to register. She asked where the body saw itself in ten year's time. She asked how the Council would contribute towards job creation.

Mr Hintsa said that the DoT wanted to see proper, democratically elected structures in place. They were looking for a system to ensure that proper procedures were in place. They were still operating in silos. They knew where they were coming from, but not sure where they were headed. In the Eastern Cape 203 small operators had come together to form one large company. There were shareholders. It was the Council's fourth year of operation. It had received unqualified audit reports for the last two years. There had been engagement with taxi owners for uniform scholar transport. There were challenges and problems. Jobs would be created.

Mr Mokonyama said that there had been various requirements regarding registration. There was a strong lobby to enforce registration as voluntary bodies were not seen to be working. There was a 2007 cut-off for the Be Legal Campaign. Permits or operating licences were needed. These were granted subject to the production of roadworthiness certificates. This also applied to the granting of public contracts. Such certificates had to be renewed every six months. Unroadworthy vehicles would not be tolerated.

Ms N Ngele (ANC) understood the rural areas. She was worried about the conditions of the buses in these areas. The roads were in poor condition and seldom tarred. Passengers often doubted the wisdom of entering obviously unroadworthy vehicles. She asked if there was any monitoring.

Mr Hintsa said the Council was trying to sort out the problems with old, unroadworthy vehicles. Systems would be put in place to check the state of vehicles embarking on long distance routes. Ranks would be established.

Mr L Suka (ANC) enjoyed the brutal honesty of the presentations. He doubted the number of buses as provided. These figures were often an exaggeration. He agreed that a co-operative approach was needed. People were only looking inwardly. There were no buses in the Transkei area. There were no people to service the vehicles. Dynamic interaction was needed with the provinces regarding road infrastructure. Many roads fell under the control of provinces. Some introspection was needed. A long term vision had to be put forward. Correct systems had to be put in place.

Mr Hintsa said that in some cases operators were borrowing vehicles. This created problems. The procedures envisaged by the Council would alleviate such problems, in particular by reducing the practice of fronting. All the questions revolved around business structure.

Mr AM Mkutu, NSBOC Executive Member from Eastern Cape, said that in some areas strict licensing requirements were being put in place. No contracts would be awarded if this was not in place. However, the whole province could not be covered and some people did take chances. Routes were only allocated to owners. It was difficult to access funding. Bus owners had started as taxi drivers. It had been impossible for black people to enter the market in the past.

Ms R Motsepe (ANC) said that old men were driving old buses to take children to school. These vehicles were not maintained.

Mr Mokonyama said that there was some leverage on enforcing maintenance for the different routes which could be granted by Government. Old, unroadworthy vehicles could not be transferred to scholar transport. Government could set conditions for the granting of public contracts, such as maximum ages. There would be no compromises. Formalisation was the only option.

Ms Ngele told a story of dangerous driving using light delivery vans (LDVs) or even tractors to transport people. She asked how these people could be prevented from competing unfairly.

Mr Hintsa said that LDVs were not permitted to carry passengers. The Council informed the DoT on new routes. They would continue to provide this information. There was a budgetary issue which curbed financial support from DoT. He did not know how this could be sorted out. The large company he had alluded to had not been paid for four months. If this situation persisted service delivery would be hindered.

Mr MD Sambo, Member, NSBOC from Western Cape, said that this day was a wonderful day for SBOs. They had approached many Ministers without much success. The numbers quoted were only for operational vehicles but there were many more rotting in the yards. The Department of Education was the only customer, with just two trips in a day. Buses contracted for scholar transport could not be used for any other purpose. Long-distance permits were very specific about where passengers could alight and be dropped off. Tender applications were dependent on all vehicles being roadworthy. These things had to be in place before a tender could even be submitted. The lowest bids were always the ones to be accepted. He had a document where a price of a mere 9 cents a kilometre was offered. He cried when he heard of the death of children in a bus accident, but the buses on the road were little more than coffins. Traffic officials were very strict but constant travel on bad roads caused damage to buses. Legal battles against Government were prohibitively expensive. Companies like Golden Arrow in Cape Town added to their existing contracts when new areas were developed rather than giving other players a chance. He had served on the SABOA executive for twenty years. BBBEE was achieved by selling shares to workers rather than by giving all players a chance to compete in the market. The big companies took the cream and the small players got nothing.

Mr Farrow reminded the delegation that unity was strength. One could not even idle a bus at 9 cents. Tariffs should consider road conditions and other factors. The Department of Education, as a major contractor for transport services, knew nothing about transport. There were still some provinces where this situation applied. Education officials did not understand the cost factors and safety regulations. The cost of a bus was R1.2 million, but operators were expected to wait for the scraps after making the investment. The Western Cape had a good structure, but in other areas licences applications could take up to eighteen months. Operators could not carry such delays. There was no reason to think that people in the rural areas did not need luxury buses. PRASA must come tell the Committee how it was planning to distribute the hundreds of buses in storage. It was important to find out how this government agency could not factor in depreciation in making an eventual transfer.

The Chairperson confirmed that this was a big day. It was a first step in the right direction. She wanted the DoT to take some lessons from her. Any change happened because of a bold and radical approach. Nothing happened when one was gentle and conservative. The bus operators were mainly from the taxi industry. She could see that the members of the delegation were not wearing the finest clothes. There was a historical background. Appreciating this background would lead to a common understanding. The apartheid government had left a heritage of imbalances. It had not provided transport for black people in the rural areas. Rural buses had been mainly for delivering post rather than passengers. Rural communities had had to develop their own transport systems. This had led to monopolistic tendencies.

Mr Mokonyama confirmed that subsidies were still being paid, but not to the extent quoted by the Chairperson.

The Chairperson said that people with means had bought buses and sidelined the taxis. When SBOs and the taxi industry had started to feel marginalised there had been violence to preserve routes. Many people had died. Government could not close its eyes to this situation. Another disadvantage to the SBOs was the lack of scheduled transport. The market was in favour of the minibus taxi, as the vehicles were smaller and could operate profitably in areas where there were fewer potential passengers. All aspects of maintenance and fuel consumption were more expensive for bus operators.

The Chairperson said that the presentation of the DoT proposed some solutions, but it was not a full diagnosis of the problems facing SBOs. A historical context was needed to understand the industry. Operators could not be expected to make ends meet on the rates being paid. She asked what the transformation process was expected to achieve: the creation of a few millionaires or the alleviation of poverty. The President said that welfare services should go simultaneously with development of people as a long term objective. More and more people were receiving free services. A developmental state should reduce the number of people dependent on free services. The role of co-operatives in reducing poverty would have to be assessed at some future date. She had experienced the possibilities of co-operatives in Spain. As few as three people could form a co-operative with significant cost savings for all involved.

The Chairperson said that the South African National Taxi Council (SANTACO) had been formed before the Co-operatives Act had been passed. African countries to use this system included Kenya, particularly favouring the transport industry, and Namibia. The DoT did not share her enthusiasm. If invoices were not paid then operators could not afford to maintain their vehicles.

The Chairperson spoke at length in isiZulu.

The Chairperson said that a strategy could be developed. Government had to come up with possible solutions to the SBOs' problems. It was good that there was already a structure in place. Scholar transport was one means to transform the industry. She questioned the gender equity in the Council. It was a big achievement for a woman to own a bus. It was progress that the taxi industry was acknowledging the harm it was causing to commuters through the practices of some drivers. The Road Traffic Management Committee could not execute its mandate.

Mr Hintsa said it was important to speak out on what one saw that was wrong. One could get frustrated, but discussing problems led to solutions. The first buses that he bought were full of faults. One needed to voice one's concerns. He appreciated the opportunity afforded by Parliament. The Council was willing to make whatever changes were needed, and to contribute where it was needed. He promised that the Council would do its best to do the right things. The number of accidents was a crucial issue, and the SBOs would do what they could to address the matter. He had heard what the Chairperson had said about co-operatives and was keen to attend the workshops proposed by her.

Mr Mokonyama would not argue on the issue of co-operatives. The experience of where such bodies had failed should be taken up at the workshops. The Spanish model would be considered. A contract dependent on the applicant having his own vehicles already was very wrong. The applicant should only have to demonstrate his or her ability to acquire the required vehicles in time to take up the contract. The DoT did not owe any province money. All payments were made according to the schedule. It might be that the provinces were unable to pay what they owed. He appealed to Government to allow the DoT to make the structures permanent.

The meeting was adjourned.


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