Department of Transport on Taxi Recapitalisation: briefing

TRANSPORT PORTFOLIO COMMITTEE
3 September 2003
DEPARTMENT OF TRANSPORT ON TAXI RECAPITALISATION: BRIEFING

Chairperson: Mr J Cronin (ANC)

Documents handed out:
Department of Transport (DOT): PowerPoint presentation to the Portfolio Committee on Taxi Recapitalisation(document awaited)

SUMMARY
The Department of Transport (DOT) briefed the Committee on progress with the Taxi Recapitalisation Programme and on how new issues had been addressed. The Department presented background to the process, developments regarding the Electronic Management System (EMS), the issues raised by Santaco, the remaining challenges and Government's readiness to deal with these challenges. Committee members were chiefly concerned about the affordability of the programme, the impact it could have on taxi fares and the representivity of Santaco.

MINUTES
Department of Transport (DOT) briefing
Mr J Makokoane, Deputy Director General: Public Transport and Planning, briefed the Committee on progress with the Taxi Recapitalisation Programme (TRP). To give some background, he explained that the National Taxi Task Team (NTTT) was created in the mid-nineties to find ways of regulating taxis as part of the public transport industry. Government wanted to address issues of capacity in terms of business management and needed to ensure broader economic empowerment. The taxi industry had to be brought into the economic mainstream in order to be competitive like any other sector. In terms of regulation and control, they noted that:
Illegal operators caused an untenable situation leading to violence. A special legalisation process was introduced and a window period was provided for operators to be legalised.
A campaign was started in December 2002 with the help of provincial transport departments to manage the number of taxis.
Government looked at integrating transport plans, bearing in mind that the industry had historically been based on the provision permits for specific areas.

In order to achieve formalisation, the NTTT recommended a democratic process that lead to the establishment of Santaco. The process also had to cater for economic empowerment. The current taxi fleet was not sustainable and the broader public transport system needed assistance from government.

The TRP was conceptualised and presented to Cabinet. It proposed the introduction of 18 and 35 seater-taxis. A 20% scrapping allowance (out of the vehicle's retail price) was decided upon and a budget of R4 billion over four years was suggested. After Santaco was democratically elected in 2001, government engaged with the organisation leadership to take the matter forward in a formalised fashion. The Recapitalisation Steering Committee was created, led by representatives of the DOT and Department of Trade and Industry (DTI), to manage the tender processes.

Santaco agreed with the TRP but was very concerned about the proposed Electronic Management System (EMS). Government felt it needed to monitor taxi operators in terms of numbers of passengers; recording of overloading; fuel usage; route identification and vehicle maintenance. The EMS would assure banks regarding the operability of individual business operators and proper cash management. Four companies were shortlisted to supply the EMS system. There had been a dispute between Government and Santaco about Government managing the EMS tendering process. Government negotiated a 25,1% equity stake for Santaco in the company that would eventually win the bid.

Government was mindful that the R4 billion required for the four-year rollout of the programme had to be dealt with through the fiscus so a tentative agreement was reached with the national treasury. The issue of affordability still had to be finalised. A strategic review project was commissioned. Requirements were set out in the "Best and Final Offer" (BAFO) document. The BAFO process would close on 12 September.

Santaco felt they were not sufficiently consulted during the process leading up to Government issuing the BAFO document. The DOT and DTI subsequently held meetings with Santaco and two key issues were raised. Santaco thought the response to empowerment needs was not sufficient and also wanted more say regarding vehicles and technical requirements. Santaco wanted an equity stake and all the bidders agreed that they would give Santaco a 25.1% equity stake.

Mincom decided to establish a task team consisting of Mr Makokoane and three provincial MECs, to monitor progress and engage with Government about emerging urgent issues. There were now six bidders for the EMS. The deadline for their final proposals was 12 September, after which negotiations would commence for hopefully not more than a month.

There were three prerequisites before an operator could buy a new vehicle: membership of a registered association, a SARS tax certificate and an operating license, and so there had been meetings with the National Treasury and SARS officials. There had also been a need to ensure progress with the technical requirements of registration of operators across the country. By the end of 2006, Government should have the necessary capacity for law enforcement of new vehicle requirements. A training process was also envisaged to make the industry understand the demands of the programme and a communication strategy was being crafted.

Government had to make sure it had credible information in terms of the numbers on the ground. A consortium had been established to engage with the provinces to consolidate information. All stakeholders had to be part of the process.

In conclusion, the DOT and DTI felt that lost time had been recaptured. The EMS and new taxi vehicle processes had been consolidated. The BAFO document ensured that bidders knew Government's exact expectations.

Discussion
Mr P Sibande (ANC) asked whether the amount budgeted would be sufficient to facilitate the process. He also requested clarity on the relationship between Santaco and provincial or other taxi associations.

Prince E Zulu (IFP) wanted to know what financial impact the process would have on passengers. It seemed taxi fares would likely rise due to operators having to pay this new tax.

Mr S Farrow (DP) asked whether there was satisfactory communication between Santaco and relevant associations. He also wanted to know if the scrapping allowance was going to be increased or whether there was going to be a subsidy in terms of current value.

The Chair summarised that there were two basic issues - affordability and the representivity of Santaco in relation to other associations.

Mr Makokoane replied that Santaco had embarked upon a roadshow to consult with all provincial taxi councils and to brief associations on discussions with Government. No associations had refused to register with Santaco when it was created. One outstanding issue related to how Santaco would ensure that the broader industry benefitted from the 25,1% equity stake in a manner that would be agreeable to Government.
The R4 billion budget was made available in 1999 and the same figure still applied. Government was considering diesel as fuel for the new taxis for environmental considerations. Assembly lines for the new vehicles had to be inside South Africa to ensure job-creation and sustainability. Government would like to see commuters getting a better deal in terms of fares and safety. The scrapping allowance was currently 20%, but Government would allow a negotiation process on the matter.

Ms N Mbombo (ANC) asked about the training process - who would be trained, for what and how? Were long-distance taxis involved in this process?

Mr G Schneeman (ANC) was concerned that the new vehicles might end up costing a lot more than the current vehicles. He asked whether alternative processes could be considered, for instance improved safety requirements for existing types of vehicles.

Mr Farrow (DP) wanted to know why the number of taxis in the country have dropped from 120 000 to 97 000. He asked whether it would be possible to subsidise taxi fees in the same manner that bus and train tickets were subsidised. He also asked about the EMS system's control mechanisms and whether they could be extended to include speed control and security.

Ms H Matlanyane (ANC) asked what would happen if a certain taxi organisation decided to raise fares in order to recover the cost of the new vehicles.

Ms A Nothnagel of the DOT answered that long distance taxis would qualify for the TRP as long as they were registered. Regarding training, an education process was planned for operators and drivers to inform them about how the TRP would impact on their day-to-day activities.

Mr Makokoane said Government was hoping to arrive at a sensible, reasonable arrangement that would make the new vehicles affordable, but its first focus was to complete the negotiation process. Safety issues also would constantly be revisited. Different cost models had been worked out. If there were 126 000 vehicles in 1999 and there were 96 000 now, it could enable the current budget to cover costs more easily. There was an exit programme because the taxi industry had been oversaturated. Government did not want people to raise fares as they wished. Government believed that the benefits of subsidies should extent beyond bus and rail transport. Statistics SA was analysing data to identify the most vulnerable communities in order to subsidise taxi commuters in the poorest areas of the country. Ideally, not more than 10% of an individual's disposable income should be spent on transport, but this had not yet been achieved.

The Chair suggested that a Commission Report should be prepared to assist the DOT and DTI in the above-mentioned matters, especially regarding the issue of affordability. If the R4 billion budget was not sufficient, this needed to be indicated by a clear signal from Parliament. If the current architecture of the TRP proved unaffordable, it could be considered to use all or part of the money to upgrade the safety of existing taxis, for instance by improving tyre safety with anti-bursting devices. The current approach of only allowing 18 and 35-seaters on the country's roads by 2006 might also be too monolithic. This clause in the Bill might have to be amended.

The meeting was adjourned.