Challenges facing the Trucking Industry: briefing by the Department of Transport

Meeting report

Broad-Based Black Economic Empowerment in the Road Freight Sector: Briefing by the Department of Transport (DoT)
Mr Mawethu Vilana, Deputy Director-General, DoT, said that in 2002/3 the Department had begun an exercise to look at how to provide opportunities and also broaden the space for participation in the road freight sector. Intensive exercises were undertaken to seek determination on a whole range of issues. The characteristics of all sectors were reviewed. There was a need to contextualise the  reason for the Department's presence at the meeting and address the areas raised by the Chairperson in her invitation to the Department. The Department was not necessarily involved in operations but attempted to support individuals and entities that may want to participate in the various sub-sectors. This presentation would look at how that support was provided in the road freight sector and how the Department sought to have broad-based economic participation. It was important to note that the road freight sector was the biggest mover of freight.

Mr Moeketsi Sikhudo, Director, Black Economic Empowerment (BEE), DoT referred to the letter of invitation from the Committee for a briefing by the Department on the following issues: the Transport Sector B-BBEE Charter, in reference to the Road Freight Sub-sector B-BBEE Code; the support given by the Department to emerging trucking companies to protect them against exploitation and the monitoring of companies that contract BEE trucking companies. These three areas would be covered in the presentation. Mr Sikhudo explained the structure of the regulatory framework and the transport sector B-BBEE codes, and elements and weightings of the B-BBEE Scorecard.

The major challenges for emerging trucking companies were: the lack of finance, the lack of long-term contrants, unscrupulous brokers and the lack of skills and know-how of the trucking industry (see document).

Mr Mawethu said that in trying to deal with the challenge of  brokering, the Department sought to put measures in place that ensured interventions were monitored. One of the measured was that a   survey was conducted to get a sense of how far the Department had progressed. A verification exercise on implementation was in process in the Department, and in the entire public service. Everyone had been invited to the public process to make sure that everyone played a role. The Minister was about to be advised on the process. Evaluation and monitoring were also part of the strategy. The transport sector BEE code was more stringent. There was no legal way to deal with the problem at present unless legislation was introduced.

The Chairperson said that she was surprised and in a state of disbelief at Mr Mawethu's statement that nothing could be done. Were there no security forces or no justice system in the country? She was angered by the statement.

Mr Vilana replied that he had said that the problem could not be dealt with save through the enactment of legislation. The challenges would therefore continue.

Ms D Dlakude (ANC) asked if it meant that nothing could be done without legislation.    

Mr Vilana replied that it meant that without legislation the Department could not intervene. It was related to the challenges that had to be dealt with.

Discussion
Ms Dlakude thanked the Department for the presentation but added that it was not impressive at all. It made the country appear lawless. Her belief was that the Government, irrespective of the Department, should protect the citizens of the country. It was her understanding as a representative of the masses on the ground, that it was the responsibility of the Department to expose all wrongdoings that were taking place in its sector irrespective of the legislation. 

Mr L Suka (ANC) thanked the Department for having brought this matter to the attention of the Committee. The Charter had to be given to the Committee so that it could speak from an informed position. In the years 2002 and 2003, the intention of the Charter was to tilt the balance of forces from monopoly to hegemony, and provide guidance about the changes in the area. There was a sense that the Department was an appendix of the Department of Trade and Industry (DTI).  This was why most of the private companies, the big companies, tended to go to the DTI, and by-passed the DoT. The DoT was not  in control of this situation. The DTI was in control especially in the area of operations and policy. 

Mr Suka asked who the two companies which represented the small business in this council were. The extent of their progress could then be checked. 

Mr Suka asked for concrete steps as to how far the DoT had gone in assisting small entrepreneurs. This had to be substantiated by proof of record in the area of skills development. If the challenges were weighed against outputs, then it was clear that little had been done by the DoT. Mr Suka asked to what extent the Department had tilted the balance and what was the result of an impact assessment in this area.

Mr Suka felt that there was not a sense of any training being done. The DoT was not proactive and the status quo would remain, so what was the use of the Charter? It seemed that the DoT was still developing and would review after more than 10 years in existence. The Committee needed to hear tangible steps to rectify the situation. What is the problem?

Mr I Ollis (DA) said that it was important to understand what the problem was and he was convinced that the Department did not know what the problem was either. There was no meaningful understanding of what the situation was on the ground. The goal was to see emerging entrepreneurs running their own businesses, succeeding, growing and developing. The known problems of lack of capital and of contracts had disadvantaged emerging companies from getting enough capital. These problems were not addressed in this presentation. The City of Cape Town had provided a solution by cutting the bigger contracts into smaller parts, supplying smaller quantities and increasing slowly. The Department had to started thinking of similar solutions.

Mr P Mbhele (COPE) said that it seemed that the presentation was only good for spin doctoring. People were not in safe hands with the Department. It was unfortunate to hear that aspiring entrepreneurs were exposed to unscrupulous individuals and the DoT could not do anything about it. The DoT was not in touch with what was happening on the ground. When was the survey spoken about on page 12 of the presentation going to start unfolding? There were also no time frames attached.

Mr Mbhele asked if in terms of the Charter any particular medium was used for extending formal invitations.

Mr Mbhele asked if there was some kind of training given to individuals and if there was funding approved for this. The government often approved funding without people being properly trained. Mr Mbhele asked further why the Industrial Development Corporation (IDC)/ABSA funding scheme had not been renewed after its expiration last year.

Mr G Krumbock (DA) shared the concerns of other Committee Members about the Department’s presentation. The problem was that the Committee did not know more after the presentation than it had done before the meeting. He suggested to the Committee a framework on how to address problems regarding the process. Other than the years mentioned to implement policy, there were no numbers in the presentation. The problem needed to be quantified.  It would be useful to see numbers attached to, for example, big contracts issued to emerging trucking companies. The Department could provide numbers and reliable statistics to enable the Committee to look at trends. This could be a resubmission of their presentation.

Mr Suka supported the approach and added that the pictures on the cover of the presentation did to respond to the content.

The Chairperson said that she did not believe that the 14-slide presentation reflected the work that the Department had been doing for the past 13 years. This was the first time that the Committee had called the Department to present its work in transforming the trucking sector. It had never appeared in their strategic plan. The Department could have used this as a golden opportunity to showcase the amount of work that they had done, present the challenges and interact with the constituency. The DTI provided the tools as the constituency of the DoT, who could have presented and quantified them. The DoT missed the opportunity. Instead of getting the Committee to provide assistance, it had angered the Committee.  She accused the DoT of not taking Parliament seriously, and by that token not taking the public seriously. The slides presented provided reflections of work done from 2004, not from 1994 as should have been done. The results were the same as those achieved in the periods 1994 to 2002.

Slide five showed years without numbers in terms of quantities and without tangible results that could be measured. Measurable outcomes were given. This had also been identified by the Auditor-General as a typical presentation style of the Department, when a strategic plan had to be presented. This made it very difficult to assess progress as well as impact. Slide six did not show milestones that could be monitored. The B-BBEE scorecard was shown in slide seven to asses companies that were doing business with the government. That kind of subscription should not be used; there should not be a B-BBEE code that only applied to public companies. The policy of the country applied to all companies.

The Chairperson said that slide eight mainly identified three problems areas: transport brokers, associated labour brokers and management companies for owner drivers. This meeting was actually called because a company for owner drivers complained. The company had said that there were hidden ways of laying off drivers. This was a method used by big companies by which they gave small companies short-term contracts and rates that would not take them anywhere. The rates were only enough to pay off the truck, not even maintain the truck. Some trucks were even repossessed. This meant that all that the driver earned as an employee went down the drain. This was causing more unemployment, and the DoT was saying that nothing could be done to protect these people.

Slide nine showed an awareness that long term contracts resided with big companies. So this meant that from 1994 to 2013 the Department had not managed to come up with a possible solution to deal with this problem. This included the issue of unscrupulous brokers, and the giving of short-term contracts. The DoT was not telling the Committee what they had done to identify those people and hand them over to the police, or even talk to the police about the problem. Lack of skills and know-how of the trucking industry was mentioned as a challenge. The Department had as yet not designed a skills training programme to address this. It was unbelievable that the Department said that the government did not have any hope in this market. There were ways to make sure that laws were adhered or attended to. Slide 10 showed the support services offered but did not show quantifiable changes or how effective the changes were, if at all. The Chairperson noted that slide 13, like the others, did not show how the Department intended to deal with the challenges identified.     

Challenges facing the Trucking Industry: Road Freight Association
Mr Gavin Kelly, Technical and Operations Manager, Road Freight Association, explained the activities of the Road Freight Association and its functions in the industry. The challenges for the Broad-Based Black Economic Empowerment (B-BBEEE), Cross Border Road Transport Agency (CBRTA) and the Road Transport Management Corporation (RTMC) were explained. The current challenges around abnormal loads showed huge discrepancies between the provinces: no standardised policy; decisions taken without consultation; large levels of corruption in offices; no verifiable research done to support policy changes; and huge cost drag on the industry in the form of bribery, corruption and delays. Mr Kelly also outlined the many challenges in the area of consultation of which CBRTA tariff increases and regulation changes were considered very important (see document).

Small, Medium and Micro Enterprises (SMME) Business Networking Proposal: Tramarco Truck Division (PTY) Ltd        
Mr Laurence Charles, Director, Tramarco Truck Division, outlined the service provided by Tramarco Truck Division. The obstacles to the growth of the company were explained. The greatest obstacle was obtaining big contracts. To this day they had only been awarded year-to-year contracts, and had to service single load sales. Because of the lack of guaranteed medium- to long-term contracts, it was near impossible to build the company. Financial institutions were unwilling to award loans based on year-to-year contracts. Emerging SMME’s were not given fair and equal opportunities when applying for and tendering for large contracts. Mr Charles asked that they be granted a fair chance to compete, and asked for assistance in terms of business support services.

Mr Eleagene Helman, Director, Tamarco Truck Division, said that there should be monitoring processes in place to make sure that companies complied with the legislation. The situation was similar to what the DoT in the Eastern Cape had experienced, where there were no monitoring processes to explain the legislation so that the people in the industry knew what they were doing. This had been the case for 15 years. Trucking was mainly dominated by a certain sector. There was a lot of exploitation in the industry. In order for Tramarco to play a role in addressing the imbalance of the past, it asked for support from government and the space to compete fairly (see document).

Discussion
The Chairperson said that Mr Ollis had approached her to ask if the affected parties could be allowed to present so that at question time, the Committee would have a picture of their needs. She asked whether there had been interactions between the Road Freight Association (RFA) and Tramarco Division as one group with the Department.

Mr Charles replied that Tamarco had not had any interactions with the DoT, neither were they affiliated to the RFA.

Mr Helman replied that Tamarco had only interacted with the company they were working for, Mall, around areas they were unhappy about. 

Mr Ollis asked for clarity about the company they were working with.

Mr Charles said that their company was Tramarco trucking company. Mall was the ocean freight company they were working for. Mall called Tramarco on a weekly basis to do business for them. They had been trying for the last year to get a contract from Mall to do more for them because they had many containers. There was no contract because Mall had a contract with Imperial and only called Tramarco when they needed their services.

Mr Helman said that the contract was not explained, they only knew that their work had to do with transporting empty containers. They earned R450 from Port Elizabeth to Pretoria and the company earned R17 000.

The Chairperson said that the rate paid was based on tonnage, so more was earned when transporting a heavier load. Payment was according to weight and distance.

Mr Kelly said that the rate was actually determined by the value of the goods. For example the rate for television sets would be higher than coal. The delivery time was also a factor. So if something had to be transported in the shortest period of time the rate would obviously be higher.

Ms Dlakude thanked the RFA for their presentation. It was because the rules were not obeyed that there was overloading and delays. The delays spoken about had to do with being positioned at the weigh bridges. She used to work in this section hence she was aware of the situation with abnormal loads. Officials complained about the way roads were damaged by trucks. They were also still complaining that the fees for permits were ‘peanuts’ compared to what the government had to pay for maintainance and construction of the road. She did not agree that the permits were expensive. Trucks damaged the roads hence the fees for an abnormal truck load were not unreasonable high.

Ms Dlakude wanted to know more about the presenter's comment that Standard Bank and First National Bank would not assist small operators with finances if the association did not train them. She asked if this was the industry’s way of persuading small operators to become members of the association. Ms Dlakude asked further if the RFA had contracts with the bank, and would small operators be turned away if they did not comply with what the association was doing, which was training. This was not a bad way to proceed but it sometimes forced small operators to do things in a particular way.

Ms Dlakude said that the Road Transport Management Corporation (RTMC) was challenged by corruption by officials in the form of asking for bribes. This was the old image of the RTMC. The Committee had supported the RTMC to turn around its image. The problems and challenges had been identified and the Department had dealt with them. The new RTMC had had a facelift. The finances were intact and they had received a clean audit after the turnaround strategy. Corruption was a two way street, one could not tempt someone with money and expect them to refuse the offer. She asked what the industry was doing if officials asked for bribes.

Ms Dlakude asked if the RFA had seen the updates about abnormal loads.

Mr Ollis asked if the RFA, as the only large trucking association in the country, could suggest solutions to the problem where new entrants could not get long-term contracts. 

Mr Ollis asked for the RFA’s opinions on how the government was dealing with smaller operators. How could SMME and medium-size operators get into that market, and was the government being fair with them?

Mr Ollis said that private industry could not support making use of government leverage. The government could not choose but it could regulate. He asked if there was a way to do this.

Mr Suka said that both presentations presented a challenge to the DoT.  The challenge to the DoT was to what to do to improve the situation. It should create conditions to allow everyone to compete fairly. There was a need to move with speed and Charter should respond to the issues raised here.

Mr Suka said that the presenters had put the issues of bribes and corruption into the proper context so there was now an understanding of the issues. He proposed that the DoT should do thorough research in this industry and use the two samples provided. There was no audit but there was an assumption that there were around 14 000 operators. The Committee needed facts, research and  analysis to inform its work. The DoT should prepare a document to this effect and take the two presentations into cognisance.

Mr Krumbock agreed with other colleagues that it would be inappropriate as a Committee to interact on behalf of Tramarco, so he asked what the opinions of the RFA were as other companies were also facing experiences similar to Tramarco.

Mr Kumbock said that much had been said about how the Department could act in a more progressive, facilitiative way to address the problems. It seemed that the Department and government were as much in the dark about the problem as they were about the solution. He asked why there were very large administration fees that put small companies at risk, and why did small operators suffer more at the hand of corruption than bigger operators. 

Mr Krumbock said that a lot of qualitative adjectives were used to describe the extent of problems, but no figures were provided. He asked if, through the Chairperson, the RFA could do an updated version of the report using quantitative methodology. The 385 operators could even submit their financial information on a confidential basis. The RFA could then consolidate so that the Committee could see what each size company typically experienced. It would also then show the impact on the bottom line, for example how bribes affected the total cost if they were included in the cost.

Mr Mawethu asked Mr Kelly to deal with the challenge about Road Freight Strategy and Ministerial approval.

Mr Kelly said that on the second last page under ‘Challenges’ where it was stated ‘Road Freight Strategy: single official determines policy without Ministerial approval’,  Road Freight Strategy was what Mr Vilana was involved with. There was a Letter of Intent, so ‘Road Freight Strategy’ should be replaced with ‘Letter of Intent’.

Mr Vilana said that the Road Freight Strategy was developed by that team. There had been  extensive consultation with the RFA and the industry in general. The Letter of Intent was something that was issued on a request basis as and when needed or required. There was an official responsible for making those letters and getting approval from the two respective Deputy Director-Generals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

The Chairperson said that a follow-up meeting was needed. Better publicity was required when calling the next meeting as there was a lot happening in the trucking industry. What had been exposed was that there were scams in the industry and also a high rate of exploitation. The Committee would interact with the Department and the Ministry to look at how best to address these issues. Members should also take this matter to party caucases to look at  how best to approach this issue. There was a concern that the association which represented the freight industry was a voluntary association and this would then involve uneven levels of  voting and non-voting members. A level playing field had to be ensured and a fair way of doing things. Everyone was thanked.

Mr Krumbock registered a point of order about the fact that he had made a specific proposal to the Committee and RFA to resubmit their presentation with the quantifications that he had provided some detail about earlier. He had thought there was a fair degree of support. He asked if this was in order, otherwise what had been done in the meeting was not what should have been done as public representatives.

The Chairperson said that she did not agree with Mr Krumbock about the Committee not having done what it was supposed to. 

Mr Krumbock interjected and said that he was talking about himself.

The Chairperson continued and said that she did not feel that time was wasted in the meeting. The presentations allowed the Committee to identify gaps in those presentations. The Committee had done what it was supposed to have done as public representatives. However the information presented required more detail to allow for interventions. In order to take the process forward, another meeting would be scheduled in a workshop format and the whole day could be spent analysing the real problems.

The meeting was adjourned.