The Gauteng Department of Roads and Transport provided the Committee with an overview of the status of the Mamelodi/Autopax bus contracts. The briefing included a detailed background of the issues involved, the eight affected contracts, an insight into Autopax -- its current operations and operational challenges -- objections from the taxi industry, the proposed way forward, the current funding situation, and the Finance and Fiscal Commission (FFC) recommendations.
The brief revealed that the current challenges had been initiated by Putco’s decision on 6 February 2015 not to accept further extensions to eight loss-making tendered contracts expiring on 31 March unless certain conditions were met. The affected areas were mostly the Mamelodi areas, Kathorus, and Evaton surrounding areas. As a tentative measure, the Department had requested Putco to extend its operations for three months after the contract to allow it to secure the services of another service provider, to which Putco had agreed.
The Department had signed a contract with Autopax on 29 June for only three months due to a court application made by Putco and the South African Transport and Allied Workers Union (SATAWU) at the labour court, for a declaratory order in respect of section 197 of the Labour Relations Act (LRA). There had been a reaction from the taxi industry, including an objection to the appointment of Autopax, and an outbreak of violence resulting in a Putco bus being shot at on 3 July.
In its current operations, Autopax operated 73 buses in Mamelodi, with five spare in its capacity. There had been an increased number of commuters, which was attributed to improved satisfaction levels with its services. Autopax’s major operational challenges were the absence of electronic ticket machines and the unfair reduction of fares by Putco prior to their withdrawal of service. There was a high possibility of extending Autopax’s contract, in line with clause 6.2 of its contract.
As a way forward, the Department stated that there was an option of the Minister devolving the contracting function to the municipality and appointing it as a contracting authority. As regards funding, R1.86 billion had been allocated to the province for 2015/2016 in the Public Transport Operations Grant (PTOG) aimed at bus commuter services only, and the Council for Scientific and Industrial Research (CSIR) had been engaged to conduct research on the rationalisation of routes. According to the Finance and Fiscal Commission (FFC) recommendations, the national Department of Transport and the South African Local Government Association (SALGA) should guide municipalities on the minimum skills set required to manage a modern transport system, given its complexity. A review of municipal Integrated Transport Plans (ITP), aimed at identifying its gaps, should be conducted.
Members generally expressed their appreciation of the information presented in the brief. The majority of their questions related to the integration of systems, contingency plans for service disruptions which might occur as a result of the pending court case, issues related to Putco’s monopoly, devolving functions to municipalities, and the duration of the CSIR’s research.
Chairperson’s opening remarks
The Chairperson welcomed attendees, and expressed her appreciation that the request for a briefing on the Autopax/Putco situation had been honoured within such short notice. She said commuters had attested to the comfortability, seating arrangements and cleanliness of the Autopax buses, as well as the politeness of drivers, as opposed to the Putco buses. The only concern of commuters had been time constraints. She appreciated the National Department of Transport (NDOT) and the government of Gauteng for making timely interventions. The Committee looked forward to changing the face of public transport in the country, and to engaging all involved entities.
Autopax/Mamelodi bus contracts
Mr Ismail Vadi, MEC: Gauteng Roads and Transport, gave an insight into the issues that had led to the briefing. He said that Putco, which had been a major player in the transport industry for decades, had advised of its intention not to accept further extensions of eight loss-making tendered contracts expiring on 31 March 2015 unless there was additional funding and rationalisation of the existing bus services in order to make the contracts more financially viable and sustainable. The eight affected contracts required 185 buses, and were mainly in the Kathorus, Mamelodi, and Evaton areas. The decision by the Putco board of directors had forced the Department to request its continued operation in the affected areas for three months after 31 March, to allow the Department to obtain the services of an alternative bus operator from 1 July 2015, and agreement was reached. A three-month contract had been signed with Autopax on 29 June, with a clause 6.2, which made provision for further extensions via a negotiated process.
The short duration of the contract had been subject to a court application made by Putco and the SA Transport and Allied Workers Union (SATAWU) at the labour court for a declaration order in respect of section 197 of the Labour Relations Act (LRA). Autopax and the Department had argued that section 197 was inapplicable, and would be onerous on the company. The court had ruled in favour of the Department and Autopax on 15 July.
Mr Vadi said that there had been objections from the taxi industry against Autopax, with demands that the taxi industry be given the exclusive right to operate the routes and acquire the subsidy. He added that the Mamelodi depot could not operate on 1 July due to intimidation by taxi drivers and operators, which had resulted in the deployment of the South African Police Service (SAPS) and metro police. A Putco bus had been shot at on 3 July, injuring several commuters. Autopax had resumed normal operations only after 5 July as a result of a public meeting addressed by the Premier, the Mayor, members of the community, and taxi representatives. Security had been beefed up during the first two weeks of operations and some taxis had been impounded as a result of non-compliance with road traffic regulations. An agreement had been reached on 11 July to release the impounded vehicles, providing all the legal requirements for their release had been met by the respective taxi owners
A joint working committee had been established, with the Premier as the chairperson, to discuss an integration of taxis into the public transport system in the province. Consequently, the Mamelodi Amalgamated Taxi Association (MATA) and MALLDA had to submit a business case within the existing policy framework to the Department and within two weeks. This was due by 2 August, but no proposals had been received to date.
The Gauteng North Taxi Association (GNTA) and Mamelodi Transport Solutions (MATRANS) had filed a notice of motion against the Department and Autopax to seek a declaratory order for a review, setting aside the decision to appoint Autopax and directing the Department to publish, evaluate, and adjudicate an open tender for the provisioning of public passenger services for the eight contracts. In response, the Department sought to oppose the court application.
As regards the status quo, Mr Vadi said that Autopax was currently operating 73 buses, with five buses as its spare capacity. Permits were being issued by the provincial regulatory entity, drivers were being recruited and trained in routes and operations, and improved satisfaction levels with Autopax services had significantly increased the number of commuters. Ticketing sales were currently conducted at four different points within Mamelodi.
He highlighted the operational challenges confronting Autopax. Autopax did not currently have facilities to sell electronic tickets on board, but had made arrangements to have 50% of the electronic ticket machines by the end of August, with the rest to be installed by the end of September. Other challenges were the late arrival of buses, and low revenue induced by the unfair reduction of fares by Putco prior its exit. To mitigate the challenges, Autopax had commenced consultations with commuters to inform them of a readjustment of fares to the initial level that had been charged by Putco prior to the last reduction.
Whilst highlighting the way forward, he said that current Autopax contract options included extension of the existing contract and simultaneously initiating procurement processes in respect of sections 41, 42 or 46 of the National Land Transport Act (NLTA), negotiating an extension of contract in line with clause 6.2 of the signed contract, or a devolution of function to the municipality and appointing the municipality as a contracting authority, or allowing the GNTA/Mamelodi Transport (Matrans) court application to run its course. A working group had been established by the Department with current bus operators to develop proposals for seven-year contracts, and engagements through the joint working committee (established by the Premier) with the taxi industry on the integration of the industry in the province would be continued. A public transport technical committee composed of the relevant entities, including the Council for Scientific and Industrial Research (CSIR) would report to a political committee led by the Premier with recommendations on procedures to follow to conclude long-term subsidised contracts with public transport operators.
Mr Vadi, whilst addressing the current funding situation, noted that R1.86 billion had been allocated to Gauteng for 2015/2016 from the Public Transport Operation Grant (PTOG) specifically meant for bus commuter services. The province was currently supplementing the grant for contracts that had been ceded from the North West Province. As regards research, he confirmed that the CSIR had been engaged by the Department to review all existing bus routes in the province and to streamline them, or make recommendations on the possible rationalisation of routes. The research results were expected at the end of 2015.
According to Financial and Fiscal Commission (FFC) recommendations, the municipal integrated transport plans (ITPs) must indicate how they intend to exercise control over the public transport network and required resources. The national Department of Transport (NDOT) should formulate and implement a transport subsidy framework which incorporateds social welfare, service productivity, and environmental management (Gauteng is the fourth largest carbon emitter in Africa) as endorsed in the current national policy. As a result of the ever increasing complexity of modern transport networks, NDOT and the SA Local Government Association (SALGA) should guide municipalities on the minimum skills set required to manage modern transport systems, as this would assist in unlocking service delivery constraints.
Mr Vadi said that a comprehensive review of municipal ITPs aimed at identifying loop holes should be conducted. It was not logistically viable to subsidise or fund the taxi industry in its current form due to unscheduled services, lack of proper managerial systems, the presence of individual operators, and low professional standards. These constraints made it difficult to contract with them unless they formed corporate entities.
Mr T Mulaudzi (EFF) inquired about the amount spent on extending Putco’s contract by three months. As regards the operation of Putco on other routes, he asked about the efforts being made to break Putco’s monopoly. In terms of municipalities and contracting, he inquired if it was carried out at SALGA level. He then sought clarity on the clause 6.2 of Autopax’s contract.
Mr C Hundsinger (DA) expressed appreciation for the honesty, openness and overall approach which was not merely based on handling issues, but rather on providing solutions. As regards profitability issues, he inquired if economic research had been conducted to ascertain the viability of the inclusion of smaller vehicles into the fleet, to reduce the running costs of fleets. As per the pending court cases, he inquired if there were contingency plans in place to deal with disruptions in service.
Mr M Sibande (ANC) said that with the current budget of R1.86 billion, R1.2 billion had been spent on acquiring Putco’s services, while the condition of Putco’s buses was still unacceptable. He asked about the control mechanisms in place to monitor the state of buses as well as their length of service in public transport. He inquired why funds were still being withdrawn from Putco’s contract while services had been withdrawn from certain areas. He asked about the department’s relationship with different entities and the integration plan. In terms of sections 41, 42, and 46 of the policies and the extensions of Autopax’s existing contracts, he sought clarity on the frustrations of Autopax. He also inquired about the time frame of CSIR’s research. What contingency plans were in place for service interruptions?
Ms S Xego (ANC) asked about the basis of Putco’s court applications. Were they enacted out of monopoly issues, partnering with SATAWU to make the case more relevant, or hostility? Why had services not been upgraded since the number of commuters had drastically increased? As regards issues of policy shifts and subsidies, she felt that taxis should be considered for funding. When contracts were awarded, consideration should be given to companies that would render a similar service to that of Autopax, since commuters seemed satisfied. She expressed her satisfaction about the presentation in terms of the establishment of working groups, the review of provincial routes, the transfer of functions to municipalities, and the working together of the three spheres of government.
Mr L Ramatlakane (ANC) expressed worry about devolution, as it got discussed mainly when there was a problem affecting the finances, skills, and capacity to run something. If an integration of the system at the transport level was not addressed, negative consequences – such as distracting competition and actions -- would be inevitable. Integration had to be led by the government in terms of policies and entity involvement. He asked why there had been no engagements yet with relevant entities and the taxi industry, and if the issues were applicable only to Mamelodi, or whether there were broader public transport issues. The operations were far apart for integration, and he asked how models become integrated. The state machinery at the operational level was incapable of implementing policies. He sought clarity on how the system would be integrated, as it had become the norm to subsidise entities that sued the government. He asked why Putco received R1.2 billion and still accounted for fewer commuters compared to the taxi industry, which transported more commuters without subsidies. The government was not ready for subsidising, as it currently appeared. He asked if the integration model could be forced, and if it was a radius module or a person-allocated module. He commented that the state has a huge responsibility to provide public transport.
The Chairperson said she was pleased about the analysis of the current challenges. If the national department could improve or capitalise on the job already done, it would be able to make informed decisions. She asked when the policies would be streamlined. There were three major provinces -- Gauteng, Western Cape, and Kwazulu-Natal -- with a massive haulage of people. The FFC recommendations were extremely important, especially in terms of environmental management. She also expressed her worries pertinent to when the policies would be devolved to where they belonged.
Mr Mathabatha Mokonyama, DDG: Public Transport, DOT, responded to a few concerns raised. He said that the FFC recommendations revealed real challenges at municipalities. There had been an historic under-investment in transport and 2.5 times more investments were needed for transport to be effective at the municipal level. Devolution could be a serious problem, as the function was currently not affordable. Issues of rationalisation had been indentified and would be addressed. The policy had never at any stage opposed the subsidisation of taxis. He claimed there had been a misinterpretation of the Public Transport Operation Grant as there had never been an intention to disqualify any mode of transport from receiving subsidies or funding. The idea of the subsidy was to provide a decent means of transport and that in terms of the National Land Transport Act (NLTA), provinces could not be contracting authorities.
He said that the Mamelodi contract was not a new contract but rather a replacement one, where an operator had pulled out and as a result, the new contract had to be an integrated contract. He confirmed that the new precedent court judgement had ruled that if a contractor had been doing business with government, and the government continued the services as it was, it was obliged to take over the labour and workers. He said municipalities were now contracting authorities, subject to section 11(5) of the new act, especially those that had been running metro buses. Every form of rationalisation and integration was welcomed, but when extensions to contracts were made, the scope of the original contract could not be changed as it gave rise to legal issues. He confirmed that funds were not enough and it currently seemed the Department was competing with other pressing issues by the government.
The Chairperson described the DDG’s response as just semantics, saying that he had not addressed the questions asked. She inquired when the developed policy would be implemented.
Mr Mokonyama said that the rationale for subsidising public transport was available and would be presented to the Committee. A new cooperative module had been developed in preparation for the problematic contracting with individual taxi operators, which required taxi operators to be formed into entities to prepare them for tendering.
Mr Vadi said that the money spent in extending Putco’s contract for three months had been obtained from PTOG grant savings as a result of penalties imposed on companies which had not met the daily operating requirements. The exact figure could be obtained from the Head of Department. He informed the committee that Putco had been established in 1945 and currently owned 1 800 buses. He said that 645 buses were operated by Putco in the Gauteng area, and no other company had 645 buses to take over Putco’s operations, even if the Minister cancelled the contract. Putco had capitalised on its monopoly, which had backfired after Autopax had commenced its operations. Putco hah had no history of rebellion until recently.
He confirmed that there were small contractors willing to negotiate. SALGA had not been met yet and there were currently three municipalities in the Gauteng area that had the capacity to take over responsibilities. It still appeared some municipalities were not ready to assume responsibility. The clause 6.2 stated that Autopax could provide services for only three years, provided clause 197 did not apply.
Addressing issues of profitability raised by Mr Hunsinger, he said that maintenance companies made huge profits from the bus companies, and expressed his doubts as to why a company would still be operational when it was running at such a loss. There was no clear explanation, if every company had instituted the best possible efficiency measures.
Sections 41, 42, and 46 of the contracts addressed renegotiation (empowerment of small businesses), normal tender, and negotiation exclusively with the current service provider. He said that the likelihood of extending Autopax’s contract was high.
The CSIR had requested 22 weeks to present its report, which would be in available in December 2015.
Addressing Ms Xego’s question, he said that in future contracts, a 30% empowerment stake would be adopted. In terms of devolving, the three functional municipalities could be involved. The Bus Rapid Transport (BRT) model had shown that capacity could be built within the taxi industry. He said there was currently an indirect subsidy system, and consideration was being given to more effective ways of giving subsidies to communities directly, as was applicable in other countries.
The Chariperson mentioned that was extremely possible to devolve the function to the three capable municipalities.
Mr Mokonyama quoted chapter 5 section 41 of the NLTA. He said the big companies always won open tenders and as a result, negotiated contracts would empower small businesses.
Mr Vadi stated that if a constitutional challenge was lodged against section 41 of NLTA, the Department might lose the case.
The Chairperson stated that other issues should be addressed as well, instead of focusing merely on funding. She inquired how the issues associated with an integrated system would be dealt with. Lessons had been learnt on how to ensure timely intervention by the government, and how Autopax had been able to assist due to their under-utilised vehicles. She said e-ticketing was achievable and integration in the form of cooperatives would drastically reduce unemployment. The Chairperson added that the three spheres of government should integrate and devolve to the municipality.
She thanked Mr Vadi for his informative brief.
The meeting was adjourned.
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