Public Transport Taxi Recapitalisation Project and Subsidies: briefing

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01 June 2004
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report


1 June 2004

Mr J Cronin (ANC)

Departmental Delegation: Mr J Makoakone, Senior General Manager: Policy, Strategy and Implementation and Mr M Bopape, Manager: Taxi Operations.

Documents handed out:

Public Transport, Taxi Recapitalisation Project and Public Transport Subsidies
Presentation to Portfolio Comm on Taxi Recap and Subsidies

The Committee was briefed by the national Department of Transport on its integrated public transport system. The discussion that followed included the following topics:
* the importance of training taxi operators and drivers before the new taxi system come in operation.
* the need for a national system which would be applied throughout the country by provincial and local authorities
* what would happen if a taxi operator decides not to enter into the recapitalisation process or having initially entered, later decides s/he wants to exit
* how far is the tendering process for the taxi recapitalisation project
* how the general membership of the taxi industry would benefit from the 24.1 equity stake
* the management and administrative issues involved in the running of the new system
* bus subsidies versus taxi subsidies
* the problem with government agencies and how they could be better regulated.

It was noted that the Minister would touch on these issues when presenting the Department's budget on 17 June 2004 to the National Assembly. It was hoped he would consider the resolutions on prices and costs taken by the previous committee. The Committee noted with concern the massive backlog in capital expenditure allocations.

Mr J Makoakone (Senior General Manager) noted that the National Travel Survey was commissioned by the Department to determine commuter preference and the mode of transportation that would best accommodate their needs. Realizing that about 3.85 million people used public transport, it became necessary that an integrated approach is adopted to effectively regulate the public transport system. An overarching objective was to develop a sustainable public transport system that contributes to the general economic growth of the country.

Following the findings of the National Taxi Task Team (NTTT) that investigated conflict and violence in the taxi industry from 1996, the National Land Transport Transition Act (NLTTA) was promulgated in 2000. The Act required, amongst other things, the establishment of the National Transport Register and the registration of taxi associations and its members. The Act empowered the Minister to allow negotiated contracts and a window period and also to take into consideration proposals made by the provincial MECs. A National Supervision Monitoring Team is being appointed to ensure efficiency in this process and to see to it that commuters are satisfied with the whole process (See presentation).

The Chair asked for clarity on the statement that passengers received R198 on average in subsidies per month, equalling 6.7 percent of average household income. Mr Makoakone noted that this applied to passengers who are beneficiaries of bus subsidies.

Mr S Farrow (DA) asked whether the once-off capital subsidy, formerly known as the scrapping allowance, had been increased from its original 10:20 ratio. Mr Makoakone said the Department had informed suppliers that government wanted the scrapping allowance to remain at 20 percent.

Mr Farrow, noting that the presenter had referred to four companies originally shortlisted for the Electronic Management System (EMS) tender, asked why the presentation now listed only one received EMS bid. Mr Makoakone conceded that four companies responded to the original EMS tender in 2001. However, after technical evaluation by the department, only two companies remained in the running, namely PRISM and RSA EMS. These companies were invited to submit their final bids but PRISM withdrew leaving only the RSA EMS bid.

Mr Farrow asked whether all nine provinces complied with the Act and had put in place the required provincial registers. He also asked what standards and criteria the provinces used to issue taxi licenses. Mr M Bopape (Manager: Taxi Operations) responded that all provinces have complied with the Act and that provincial registers were in place. The provinces used the national standard for issuing licenses and were currently in the process of converting all radial permits to route based permits. He also noted that when operators were granted an opportunity to legalise their operations, the provinces applied the same national procedures and standards.

Mr Farrow contended that there was a conflict between the Department's statements and the actual issuing of operating licenses especially in the Eastern Cape. He requested the Department to investigate as a matter of urgency as there were serious problems in practice. The Chair stated that the concerns raised by Mr Farrow had also been observed by other Members of Parliament and he believed that major problems were looming at local level. Mr Makoakone conceded the Department was not well informed about problems at local level, but promised to look into it as such practices were not in line with the Act.

Mr Farrow asked whether taxi operators were at liberty to use either a recapitalised vehicle or their own roadworthy vehicle and whether those who initially opt to hire a recapitalised vehicle would be allowed to exit. Mr Makoakone said that the taxi recapitalisation project is based on the Act and the tendering process is simply a means through which the government tried to assist the process. Therefore, although no one would be forced to take up a recapitalised vehicle, government took a decision that it would only subsidise those taxi operators who accepted the scrapping allowance. He also noted that there was a provision allowing those operators who wished to exit the system to do so. In such cases, government would work out a compensation arrangement with them, as they would be deemed to have given up their permits.

Mr E Magubane (ANC) asked whether the twenty percent paid by government when someone exited the system also included the permit held for that vehicle. Mr Bopape responded that there were two types of compensation involved. The first was through the scrapping allowance where the physical vehicle is scrapped. A second type of compensation was given to those persons who wanted to exit the market and thus simply handed in their permits, but retained the vehicles for other uses.

Mr Magubane was of the view that the word "compensation" was misplaced as government should not compensate someone for his/her business, but should rather pay in terms of a normal business transaction.

The Chair noted that government does not see a taxi operator as conducting a business venture since government and not the operators owned the routes. This, however, is a complex issue that the Committee would have to scrutinise as a permit might represent an on-going concern in a business.

Mr Farrow wanted to know how the general membership of the taxi industry would benefit from equity ownership of 25.1 percent. Mr Makoakone responded that the Department is still waiting for the response of the taxi industry as it was made a bid condition that the industry would have to outline how its general membership would benefit from its 25.1 percent equity stake.

Mr Magubane wanted to know the life span of the vehicles from the four companies presently bidding for the NTV tender and asked the Department for the cheapest tender. Mr Makoakone said the information was being closely guarded, as it would be useful to the State when negotiating the final cost. He appealed to the Committee that the information should remain confidential as it might negatively compromise cost negotiations.

Mr Mogale (ANC) asked whether there is a company willing to offer the 25.1 percent equity stake. Mr Bopape responded that South African National Taxi Council (SANTACO) had signed a memorandum of understanding that it would distribute the 25.1 percent evenly amongst its members. No company had proposed an equity stake of lower than 25.1 percent, although there were companies that had suggested a higher equity stake.

Mr Farrow, noting delays in the issuing of the final bid, asked whether the strategic review took delays into account and had thus updated the fleet based on affordability and inflation rate, since the present fleet was costed in November 2002. Mr Makoakone responded that the Department had commissioned the strategic review so that it would be ready when it comes to the evaluation of the bids. The report was therefore a base-input case that will be used to evaluate the cost of the final bid.

Mr Farrow asked the Department to make the outcome of the strategic review available to the Committee for consideration. Mr Makoakone appealed to Members that as the report contains strategic information which will be used by the Department as a point of reference in negotiating the cost of the bid, it would not be proper to make it available at this time.

Mr Mashile (ANC), noting that the recapitalisation project would affect the administration and management of the taxi industry, asked whether the Department envisaged having an independent agency managing the industry. Mr Makoakone noted that two options were being weighed against each other. First, whether to outsource administration to an independent body or second, to create a new agency within government to deal with administration. Before making a final decision, the Department would consult with the taxi industry to obtain their views.

Mr G Schneemann (ANC) noted that it is very importance to have safe drivers, safe driving and sound management in the taxi industry as the interests of commuters were paramount. He asked for an update on the national programme that was launched, in collaboration with TETA (Transport Education and Training Authority), to focus on the training of taxi drivers and fleet management. Mr Bopape responded that they have always acknowledged that in order to succeed with this project, the taxi operators and taxi drivers would have to be thoroughly trained. In this regard a number of initiatives have already been earmarked targeting at least 900 operators in the first phase and another 900 in the second phase. He said that on 7 June 2004 the first round of training would be concluded. In terms of the training programme, taxi operators and drivers were trained, amongst other things, on the impact of the National Road Traffic Act, the National Land Transport Transition Act and other relevant pieces of legislation on their daily operations. The Department has also issued a tender, through TETA, on a K53 driving training course, which also involves customer care and business skills training for the taxi industry. Furthermore, the Department hoped that another tender which deals with Adult Basic Education and Training (ABET) would have been finalised by the end of June 2004.

Mr Mogale asked whether local government authorities were also involved in the taxi recapitalisation project and if so, what role they would be playing. Mr Makoakone responded that although local government did not form part of the tender committee, it was part of the process as there is an arrangement that local government officials would from time to time meet with the heads of department of transport to deal with all transport related matters. Such a meeting has been arranged for 7 June 2004 to receive updates and to develop joint strategies to deal with the process.

Mr Mashile asked whether the National Travel Survey took rural communities into account and the mode of transportation use by rural people. Mr Makoakone responded that the survey was instituted nationwide and thus included both urban and rural communities. Its main aim was to determine the feeling of commuters as to the type and mode of transportation they preferred.

Mr B Pule (UCDP) asked what assurances the Department could give to commuters that the shift to eighteen and 35-seater taxis would be practically functional. Mr Bopape responded that the National Land Transport Transition Act makes provision for operation of vehicles with a maximum of nine passengers, excluding the driver. It also has other provisions which are designed to cater for the operation of eighteen and 35-seater taxis. Furthermore, he noted that S.31(1) of the Act empowered the MEC, in consultation with the Minister, to proclaim that certain categories of vehicles should be adapted and thus made suitable to transport people as the public means of transport in that specified area.

Mr Mashile contended that it was likely that, when taxis become more comfortable, passengers would shift from using busses to taxis. He asked whether the Department considered adjusting subsidies from bus to taxi. Mr Makoakone responded that experience have thought them that subsidisation of the modes need to be looked at carefully before any decision could be taken. Based on that, the Minister has directed the Department to start investigating and to present concrete ideas based on the national travel survey.

Mr Farrow noted with concern that even though rail is responsible for almost fifteen percent of the country's transportation, the Committee still does not have any say in its operations since it is managed by a unit which report to another department. He asked what the Department was doing to remedy this situation. Mr Makoakone noted that the Ministry of Transport had already indicated that a merger between Metrorail and SARCC would take place. On 2 June 2004 there would be a meeting of all the affected parties so as to ensure that the process started. A final decision would be made before the end of the year, but a decision in principle had already been made at Cabinet level that all three units should fall under the Department of Transport.

Mr Schneemann noted that Metrorail is a business unit of Transnet for whom responsibility lay with the Department of Public Enterprises and asked what role the Department played in rail as a means of transportation. Mr Makoakone said the Department periodically met with Metrorail and SARCC in order to discuss issues affecting rail commuters.

Ms N Mbombo (ANC) asked the Department to provide the Committee with the report of the safety regulator with regard to its operations and especially as far the agencies and boards are concerned. The Chair noted that the Committee would look at all regulatory entities throughout the rest of the year.

Mr Farrow asked what the situation was with the rail extension in Khayelitsha. Mr Makoakone responded that it should be noted that the Khayelitsha rail extension is managed at national level, although the Cape Town Municipality and provincial officials are consulted on the project from time to time. As the plan was about to be finalised two issues cropped up which needed careful consideration before they could carry on with the plan. Those issues were about to be resolved.

The Chair said the importance of the working force in the economic growth of our country should be emphasised. He contended that while there was instability on the commuter rail it could have serious and devastating effects on our economy. He thanked the department for its presentation and noted that the Committee would have to invite all the key role-players before it so that it could get to grips with the situation.

The meeting was adjourned.


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