Economic Regulation of Transport Bill: deliberations

Meeting report

The Chairperson noted apologies from the Deputy Minister of Transport. The Committee observed a moment of silence for all those who have lost their lives due to COVID-19.

Economic Regulation of Transport Bill: general discussion
Mr C Hunsinger (DA) recalled that the Committee had decided to consider the financial implications of the Bill, which had not been adequately covered by the Department of Transport (DoT) at the previous meeting. This should happen before deliberating on the Bill clause by clause.

Mr L Mangcu (ANC) added that at the previous meeting the Department had not adequately indicated where and how it had incorporated the content of the public submissions in the Bill. It had only given a generic response to the Committee’s broad questions.

Mr Themba Tenza, Acting Deputy Director-General: Integrated Transport Planning, DoT, said that the Department would be willing to provide whatever information was required.

Mr L McDonald (ANC) said that although the figures presented by DoT at the previous meeting indicated that the Single Transport Economic Regulator (STER) would result in savings, the figures were inconsistent with figures found in the Annual Reports of the transport entities that it would replace. There was a risk that an additional R90m would be spent on a redundant regulator which would result in over-regulation and the stifling of growth. He supported the Bill but insisted that DoT return to the Committee with reliable financial information.

Mr T Mabhena (DA) recalled that DoT had assured the Committee that staff from the existing regulatory entities would be absorbed by the single economic regulator [lack of audio].

Mr Hunsinger agreed with Mr McDonald that DoT had not provided detailed, reliable financial information to justify the claim that the single regulator would save money. The Department needed to provide detailed financial information that included movement of staff as a core element. What were the financial implications of the “collapse” of regulatory entities and employment “casualties”? The information DoT had provided led to more questions than answers. He supported the approach of phasing in the single regulator over time but it had significant legal implications. For each new phase, a new Amendment Bill would have to be passed. Based on the experience of the Road Traffic Management Corporation (RTMC) when it took over the eNATIS system, there could be costly court cases.

Mr Moeketsi Sikhudo, Project Manager: Single Transport Economic Regulator, DoT, reminded the Committee that DoT had given a presentation on the incorporation of public submissions on the Bill in November 2020. He offered to summarise the contents of that presentation.

Mr Mangcu said that he did not get the sense that the actual text of the Bill had been changed at all in response to the public submissions. Could DoT confirm this?

Mr Sikhudo confirmed that no changes had been made. The Department had considered the public submissions and presented its position to the Committee. According to his understanding, it was DoT’s responsibility to indicate its support or opposition to the public submissions. Thereafter, it would be the Committee’s responsibility to indicate which submissions should be incorporated.

The Chairperson asked Mr Sikhudo to summarise DoT’s response to the public submissions.

Mr Sikhudo said that the main points of DoT’s response were: that it did not anticipate an overlap in the functions or jurisdiction of the STER and the Competition Commission, and that it did not plan to introduce price controls into sector where there was vigorous competition. He summarised the list of public stakeholders who had made submissions and whether they supported or opposed the Bill, and summarised DoT’s response to proposed changes to the definitions used in the Bill.

Mr Hunsinger was concerned that DoT should not “play tennis” with public comments. So little of DoT’s intentions for the Bill were known when it was published for comment. The public had raised concerns about the relationship between STER and the Competition Commission and DoT’s response was simply that there would be no conflict between them. But there was nothing in the current Bill to indicate what would happen if a person approached both the Regulator and the Competition Commission at the same time with the same complaint, for example. The public concerns should not be ruled out in the way they had been.

Mr McDonald agreed that the public input had not been adequately addressed. For example, Uber’s position that it supported the Bill as long as its own business was excluded from regulation required thorough scrutiny, and there was a risk of strangling Transnet with over-regulation.

Mr Sithole agreed that DoT had not addressed the concerns of stakeholders such as the Organisation for Undoing Tax Abuse (OUTA) and the Western Cape Provincial Government. It was not a true reflection of their full submissions to say simply that they supported the Bill. He was also concerned that no other provinces or municipalities had submitted comments, nor had the taxi industry.

Mr Mangcu pointed out that DoT must have done some sort of pre-consultation with the public before bringing the Bill to Parliament. He proposed that the Committee now needed to process the Bill line-by-line, with the assistance of the legal advisors.

The Chairperson confirmed that Parliamentary Legal Services and the State Law Advisor were present.

Ms Thiloshini Gangen, Parliamentary Legal Advisor, said that a systematic review of the Bill would be welcomed.

Mr Hunsinger agreed but noted that there was still a need for detailed information on the financial, human resources and legislative implications of the Bill.

Mr Mangcu said that the Committee needed to address three overarching issues: (1) the interface of the Bill with the Promotion of Access to Information Act (PAIA) and the Protection of Personal Information Act (POPIA), (2) making the funding mechanism of the Regulator explicit if permissible, (3) making the role of the Regulator explicit with respect to the Competition Commission, and (4) the accessibility of the Regulator to the public (to the extent that this could be legislated).

Mr McDonald agreed with Mr Mangcu’s proposal and the overarching issues he identified. He added that Clause 50(1)c referred vaguely to “other fees” the Regulator might impose and called for these fees to be made explicit.

The Chairperson replied that this could be done during the clause-by-clause deliberations.

Mr Mangcu suggested that the legal advisors summarise a chapter of the Bill, after which the Committee could deliberate on that chapter.

Mr Hunsinger recalled that the some regulatory entities such as the Railway Safety Regulator (RSR) would not be replaced.

Mr Sikhudo replied that the initial conception of the Bill in 2012 had been to consolidate all the regulators in the transport sector. However, DoT had found that safety regulators were functioning effectively and had decided to confine the Bill to economic regulation. He offered to share the Options Analysis and the draft Business Case document on which this decision had been based.

Mr Hunsinger asked for a full list of the transport entities that would be replaced by the Single Transport Economic Regulator. He noted that the public submissions might have been different had the scope of the Bill been made clearer at an earlier date.

Clause-by-clause deliberations

Chapter 1: Interpretation, purpose and application
Clause 1 Definitions
Adv Alma Nel, Committee Content Advisor, summarised the contents of Chapter 1, drawing attention to the definition of the 'Competition Act' and the definition of 'regulatory authority' which had significance to the discussion on the application of the Bill to municipalities.

Mr Mangcu asked if the definition of “regulations” was sufficiently explicit.

Mr McDonald observed that “other fees” referred to in Clause 50(1)(c) was not defined. If these other fees were not specified it might cause problems in the future

Ms Gangen was satisfied that the definition of “regulation” was sufficient, and said that if “other fees” was defined explicitly, the Committee would need to think about exactly what it might include.

Mr Mangcu accepted the response but recalled that the Portfolio Committee had raised a concern about regulations being promulgated without the involvement of the Committee. If this was not the intention, then something should be added to the definition. He agreed with Mr McDonald that the Bill should be more explicit about the definition of “other fees.”

Mr McDonald added that the Bill should err on the side of being too explicit, to prevent the Regulator from imposing spurious fees.

The Chairperson observed that if the Committee was involved in the promulgation of regulations, this would also address Mr McDonald’s worries about “other fees.”

Ms Gangen drew attention to Clauses 50 and 54 which stated that the Minister of Transport could make regulations without the involvement of the Portfolio Committee.

Ms Raksha Haricharan, State Law Advisor, agreed with Ms Gangen’s interpretation of these clauses.

The Chairperson asked if DoT might be limited in future if “other fees” were explicitly listed. Would it then require an Amendment Bill to change the list?

Ms Gangen confirmed that it would. This was the reason she had suggested leaving it open. There was, however, the possibility of amending the Bill to involve Parliament in the process of determining regulations.

Mr Mangcu supported amending the Bill to this effect.

The Chairperson asked Mr McDonald if this would address his concern.

Mr McDonald said that he would prefer an explicit list but accepted the suggested amendment.

Adv Nel noted that when tariffs were set, the public does have a chance to comment on them, so if the tariffs would have a severe economic impact they would be able to make a case at this point. Hopefully this addressed Mr McDonald’s concern.

Clause 2 Interpretation of Act
Adv Nel wondered if Mr Mangcu’s concern about the interface with PAIA and POPIA could be addressed by adding to this clause.

Ms Gangen agreed that Clause 2 could be broadened to make specific reference to information legislation.

Ms Haricharan also agreed.

Mr Mangcu asked the legal advisors to consider Clause 13, which dealt with information held by the Regulator, when considering changes to Clause 2.

Clauses 3 and 4 Purpose and Application of Act
Adv Nel summarised previous discussions. She recalled that for Clause 3(1), there had been several public submissions calling for clarity on which sectors would be regulated by the Act. On Clause 4, the Western Cape Provincial Government had asked if it would interfere with its right to regulate transport in the municipal sphere. There was also a question if it would apply to municipal bus and bus rapid transit services in all cities. The relationship between the Regulator and the Competition Commission should also be considered in Clause 4.

Mr Mangcu said that these clauses needed careful consideration and suggested that the Committee might come back to them after applying their minds. He observed that, although the main purpose of the Bill was to establish a new Regulator, Clause 3 only seemed to mention this in a very muted way.

Adv Nel asked the Committee to look at DoT’s response to the Western Cape Provincial Government submission on which sectors of the transport industry would be regulated and the application of the Act in the municipal sphere. They should indicate, at the appropriate time, if they agreed with the response or not.

Mr Hunsinger suggested that Clause 3 might be amended to provide clarity on the role of the Regulator with respect to the Competition Commission.

Mr McDonald agreed on the need to clarify the role of the Regulator with respect to the Competition Commission and exactly which sectors of the transport industry would be regulated. In particular, would the taxi and e-hailing industries and municipal bus services fall under the purview of the Regulator?

Mr Mangcu agreed with the Western Cape’s submission on amending the definition of “facility” in the Bill to cover unknown future forms of transport. He pointed out that transport was a concurrent function of national and provincial government and the Bill should not create unnecessary tension between different levels of government by granting the Minister powers that extend into provinces and municipalities. Given the concurrence of transport, Clause 4(2) was very dangerous and should be examined very closely.

Chapter 2: Access to rail infrastructure
Adv Nel summarised Chapter 2 of the Bill, drawing attention to the Gautrain Management Agency (GMA) and Transnet submissions, and the access agreements between Transnet and the Passenger Rail Agency of South Africa (Prasa). She also asked DoT to clarify if the Bill was intended to regulate access to actual railway lines only or railway precincts and the rail reserve as well.

Mr Sikhudo clarified that the Bill would regulate only access to the railway lines themselves.

Mr Mangcu asked Adv Nel to clarify the implications of Chapter 2 for infrastructure such as that used by the Gautrain and future rail developments which, given the disrepair into which Prasa’s infrastructure had fallen, would likely be similar in structure. He also recalled that Transnet had raised a question about the regulation of pipelines and wondered if this should be dealt with in Chapter 2.

Mr Sithole asked for confirmation that “must” was the correct word to use in Clause 5(3) and 5(4), rather than “may.” He requested an explanation of the logic behind Clause 5(2), which extended existing access agreements immediately after the effective date of the Act.

Adv Nel said that DoT could give clarity on general rail policy. The logic behind Clause 5(2) was that GMA was in a public-private partnership (PPP) with Bombela to use the latter’s rail infrastructure, and there were various access agreements between Transnet and Prasa governing the use of infrastructure, and these agreements would need to be protected. The Act would allow for private rail services, such as Rovos Rail,  to use public rail infrastructure in future. Pipelines might fall under the road or rail reserve and might be regulated as a part of the petroleum industry, even though it could be conceived of as a freight-like service, and DoT could perhaps provide clarity on its point of view.

Mr Mangcu asked if “rail infrastructure” could be defined explicitly in the Bill. Would this have any bearing on Chapter 2? He also expressed some reservations about the power granted to the Regulator by Clause 5 to determine the tariff that a private company would have to pay to access rail infrastructure.

Ms Gangen replied that a definition of “rail infrastructure” could be added.

Ms Haricharan agreed.

Mr Hunsinger was concerned that the one-year windows for infrastructure owners to review and report existing infrastructure access agreements in Clause 5 might cause extended, multi-year delays before the Regulator could determine the cost of access to rail infrastructure. He worried that the Act would become a gate-keeping mechanism that would complicate the current situation. He called for the amalgamation of Transnet and Prasa.

Mr Sithole wondered what would happen if the one-year period for reviewing existing rail infrastructure access agreements lapsed.

Ms Gangen agreed to provide a comprehensive response on the implications of explicitly defining “rail infrastructure” in Chapter 2 and a response to Mr Hunsinger’s concerns at a later date.

Adv Nel suggested looking at related legislation for precedent definitions of “rail infrastructure.” The wording of Clause 5 could be amended to clarify if the one-year windows ran concurrently.

Chapter 3 Part A: Price Regulation
Adv Nel explained that Chapter 3 and would cover rail infrastructure more broadly than Chapter 2, in addition to other transport infrastructure. Clause 11 on price controls might have an impact on existing long-term access agreements, and a wide range of stakeholders.

Mr Mangcu asked for confirmation of whether the price controls would determine the cost of hiring a car from a private company or the prices charged by a tour operator. He noted that the South African National Roads Agency Limited (SANRAL) currently determined toll road rates and had long-standing agreements with toll-road concessionaires. It would now be subject to the Regulator. What would be the economic impact of this change? SANRAL’s ability to collect tolls should not be compromised.

Mr Sikhudo confirmed that SANRAL would be subject to price controls determined by the Regulator. Tour operators would also be affected by price controls but private car hire companies would not. The Department had agreed not to interfere with existing long-term agreements between SANRAL and toll-road concessionaires. However, the Regulator would be involved in setting the terms of any new long-term agreements, and the role currently played by the Minister of Transport in SANRAL’s agreements would be taken over by the Regulator.

Mr Hunsinger asked for a list of current entities that would be affected by price controls. He drew attention to Clause 11(11), which gave the Regulator 60 business days to respond to a price deviation request from a regulated entity. What would happen if the Regulator did not respond?

The Chairperson indicated that the clause-by-clause discussion of the Bill would continue the following day and introduced the next item on the meeting agenda.

Civil Aviation Policy: consideration
Adv Nel recalled that DoT had asked for comments from the Committee on the Civil Aviation Policy. Some aviation policy issues that the Committee had raised on previous occasions included:

- The need for a review of all air fields not operated by the Airports Company of South Africa (ACSA), especially those in rural areas, to assess if they can be operated by ACSA to promote air access to remote areas and reduce road traffic.
- The need for greater transformation at all levels of the aviation industry.
- The need for improved safety and security at airports.
- The need to promote aviation-related opportunities at the basic education level.
- The need to assess current business opportunities for vendors at airports to increase revenue and provide for small businesses.
- The need to cooperate with other modes of transport and develop more “aerotropolis”-type airports.

Adv Nel asked the Committee to suggest other policy matters that they might want to consider for inclusion in a letter to the Department.

Mr McDonald was concerned about the autonomy of the accident investigation board. The way it was described in the Civil Aviation Amendment Bill, it appeared that it would be both player and referee. Could DoT clarify how it would remain autonomous within the broader structures? The January 2020 accident near George had not been resolved, and it was unacceptable if it took years to complete an accident investigation. What if there was an inherent safety defect with the plane design?

Mr Mangcu thanked Adv Nel for her summary of the Committee's previous comments and asked for a written copy. He stressed that it was important to promote small business development and transformation on the air-side as well as the land-side of airports. He understood that DoT had a clear policy on privately-owned and municipally-run airstrips, but recalled that some years ago, mercenaries had used Wonderboom Airport, run by the City of Tshwane and called for a tightening of that policy space. The Department should control airports. It should increase the efficiency of the process of registering airports, as one airport had not even received a response from DoT ten years after its application.

Mr Hunsinger agreed with the preceding points, and added that an aviation crash involving loss of life or injury should trigger an inquest automatically. Under the current framework, there was no obligation to inform the families of those involved of the outcome of an investigation.

Adv Nel undertook to include the points raised in a letter to DoT, noting that concerns about the autonomy of the accident investigation board and automatic inquests were still part of the Committee’s own discussions of the Civil Aviation Amendment Bill.

The minutes of meetings on 26 and 27 January 2021 were adopted and the meeting was adjourned.