In a virtual meeting, the Select Committee considered the oral and written submissions on the Economic Regulation of Transport (ERT) Bill [B 1B-20]. After an overview of the written submissions by the Committee content advisor, it received presentations from the South African Bus Operators Association, joint submissions from the Gauteng Management Agency, Gauteng Transport Authority and the Gauteng Department of Roads and Transport, Transnet, and the Western Cape Government Department of Mobility.
There was overall support for the ERT Bill, with reservations, on the basis that it may make for more effective regulation. The funding model had the potential to be effective and sustainable. The provisions for private sector participation were supported. There were concerns, however, that the failure to use the existing human resources to drive the new functions would cause undue delay and uncertainty in implementation, and that the establishment of various bodies and the appointment of officers would become a burden for the taxpayer.
The Committee was told that ERT Bill was primarily aimed at ending specialised sector regulators, and was written very broadly in a “catch all” manner. It could have unintended consequences for the contracted subsidised commuter bus industry, as this industry had exclusive geographical operating rights once a contract had been awarded. The South African Bus Operating Association asked to be exempted from this. It was concerned that the regulator had too many powers to set and adjust rates, fares, return on investments etc. This was a very powerful tool that could cause great financial hardship to regulated entities if the regulator got it wrong. It was suggested that the ERT Bill focuses on the entire industry and that there should be limits to the regulator's power to intervene in the market, as it may have serious consequences for investment in the industry.
The Gauteng Provincial Government viewed the provision of an efficient and cost-effective public transport system as being critical to economic growth and the realisation of the country’s social goals, and thus welcomed and supported the economic regulation of transport. The province thus saw the need to strike a careful balance between safe and secure public transport operations, as well as the provision of reliable and seamless transport services, and the economic imperatives underlying the ERT Bill as being fundamental to a sustainable regime of economic regulation of the sector. A number of uncertainty issues were raised over some clauses in the Bill.
Transnet supported the single framework of economic regulation. While it supported the economic regulation of access pricing, it proposed that the economic regulation of pricing for rail haulage be reconsidered as a matter of last resort, as it may have unintended consequences and further reduce the country's competitiveness in relation to commodities destined for global markets. Transnet recommended that the ERT Bill should endeavour to maintain the state of law applicable within the various economic regulators who were providing oversight to regulated entities in the current context, and also simplify the statutory landscape. Transnet’s view was that the ERT Bill would impose a huge financial burden on the regulated entities, and this would also make it more difficult for regulated entities to reduce their costs of doing business. In the case of the rail and the ports sector, any pass-through elements adding on to higher costs would cause freight customers to choose a cheaper mode of transport, which would lead to the use of road transport, as this was not regulated.
The Western Cape Government did not support the ERT Bill in its current form. It commended the improvements made to the Bill, but substantial aspects needed to be revised to ensure that the objectives achieved the required outcomes. It was critical that the Bill was holistically revised to ensure that the clause-specific provisions were addressed, the general comments were considered, and the legislative drafting considerations were followed before the Bill could be promulgated.
The Select Committee raised a concern around the economics of the maximum and minimum process fees, asserting that maximum fees would lead to supply shortages that would increase informal market activity, while minimum fees would lead to oversupply and higher prices to the consumer. Economics was something that had to be considered because if it was not, it may lead to unintended consequences. Concerns were also raised on whether a feasibility study was done for establishing a regulator; what effect the ERT Bill would have on the cost of transport for ordinary citizens in the country; and the overlap between the roles of the Competition Commission and the regulator.
Overview of written submissions on ERT Bill
Dr Anneke Clark, Committee Content Advisor, took the Select Committee through an overview of the written submissions on the Economic Regulation of Transport Bill [B 1B-20].
There was support for the ERT Bill. The powers which stood to be conferred to the new regulator were broader than those at the behest of the ports regulator, and would likely make for more effective regulation. The ERT Bill contemplates that the regulator would be funded by an annual fee levied against regulated entities. If implemented correctly, such a funding model has the potential to be effective and sustainable. The achievement of regulatory independence was linked to the manner in which the regulator was funded. Competition should be introduced by granting concessions to private operators to use publicly created transport infrastructure, including ports and rail. It was recognised that the ERT Bill made some provisions for private sector participation, which was supported.
While the ERT Bill attempts to ensure that the regulator is self-sufficient through levies against industry, existing capacity should be used to staff the administration. Failure to use existing human resources to drive new functions would cause undue delay and uncertainty in implementation. The ERT Bill envisages the establishment of a regulator (with a panel and a board), a council and the appointment of various officers. Establishing the various bodies and appointing officers should not become an additional burden on the taxpayer.
The main issues in the transport sector did not have much to do with price regulation and therefore were unlikely to be resolved by it. Where price regulation was related to challenges in the sector, the state already had the power to resolve this and its failure to make the necessary decisions would not be remedied by introducing a regulator. The broad regulatory model that would be used had not worked in other sectors like electricity, and had at times failed dramatically in transport sectors of other countries.
The regulatory model requires scarce resources and skills that the country either does not have or could be much better utilised, especially in a post-COVID-19 economy. Other, simpler models could be adopted, but ultimately the success of any model requires government to improve its management of the relevant transport sectors/modes.
Clause 3: Purpose of the Act
Evidence showed that climate change would have greater impacts on infrastructure and the way in which infrastructure needed to be planned for, designed, constructed, operated and maintained. It was critical to understand that decisions made in the short term without considering climate change could likely result in stranded assets or increased maintenance and replacement costs in future. There was also a risk to transport economic viability should these considerations not be included in decision-making and planning.
Clause 4: Application of the Act
In terms of clause 4(2)(a) of the Bill, if at least one entity had market power, the entire market could be regulated. Regulation was a cost to the entity, the market, and the consumers. This could discourage market entry and new investments. It was recommended that the specific entity with market power be regulated, rather than the entire market.
Clause 11: Determination of price controls
Regulation and price determination should be avoided. Maximum prices/fees lead to supply shortages and increased informal market activity. Minimum prices lead to oversupply and higher prices for consumers. Regulating the pricing of transport entities and access to their infrastructure, did not address the inefficiency within these institutions. Other potential options for consideration and further investigation include forced break-up of monopolies by government or to encourage more competition. It was recommended that competition be introduced by granting concessions to private operators to utilise publicly created transport infrastructure, including ports and rail.
Clause 38: Functions of Regulator
The National Land Transport Act 5 of 2009 (NLTA) set out various functions of the three spheres of government insofar as land transport was concerned. While it was noted that the ERT Bill amends a provision of the NLTA dealing with the functions of the National Public Transport Regulator, it was unclear to what extent the various functions of the three spheres of government set out in the NLTA were considered during the drafting of the ERT Bill. The regulator should not duplicate these functions. It was recommended that the provisions of the NLTA be considered to ensure that the regulator does not duplicate the functions of the three spheres of government set out therein.
Clause 41: Promotion of legislative and regulatory reform
Provinces may legislate freely on matters contained in Schedules 4 and 5 to the Constitution. While the Constitution requires all spheres of government to “co-operate with one another in mutual trust and good faith” by, among other things, “co-ordinating their actions and legislation with one another,” Clauses 41(1)(b) and 41(1)(c) create the impression that provinces would be required to amend their legislation to conform with the proposed amendments from the regulator. This goes beyond what was contemplated in the Constitution. Accordingly, a reasonable argument could be made that clauses 41(1)(b) and 41(1)(c) of the ERT Bill were unconstitutional. Delete clauses 41(1)(b) and 41(1)(c) and any other similar provisions. Alternatively, amend the clauses to ensure they do not go beyond what was contemplated in the Constitution.
(Please see presentation attached for further details)
Oral submission by Southern African Bus Operators Association (SABOA)
Mr Bazil Govender, Executive Manager, SABOA, said that the ERT Bill was aimed primarily at ending specialised sector regulators, and was written very broadly in a “catch all” manner. It could have unintended consequences for the contracted subsidised commuter bus industry, as this industry had exclusive geographical operating rights once a contract had been awarded. The nature of contracting in the subsidised commuter bus industry was “competition for the market,” and not competition “in the market”. In this regard an entity may enter a seven or 12-year contract, but once the contract was awarded, the successful contractor had the right to solely operate the subsidised service for the duration of the contract. By default then, the successful operator would have market dominance as far as bus services were concerned. It then appears as if this ERT Bill would be applicable to the subsidised commuter bus industry and therefore raises many concerns. The SABOA believes that the subsidised commuter industry should be exempt from the “market dominance” definition. The reasons include:
- The industry was heavily regulated via the contracting system, where the Contracting Authority (CA) (provinces and local authorities), amongst other, specify passenger fares per km, annual percentage fare increases, routes and networks to be operated and quality of services rendered.
- The CA formally monitors activities to ensure contract compliance.
- There was also an extensive financial and operating reporting requirement in place where this and other information must be submitted to the CA.
- Many of these requirements overlap with the information requirements of the regulator when investigating an entity.
It also appeared as if there was significant overlap with the functions of the Competition Commission (CC), as the Commission also focuses (amongst other) on “dominant” firms (it was acknowledged that this may be addressed in discussions between the two entities). It was conceivable that many cases would be before the regulator – many of which could be very complex. Would the regulator be properly resourced so that decisions were taken in a reasonable time so as not to prejudice the regulated entity? It seemed as if some of the timelines were very long. This could really prejudice an operator and cause financial harm. The SABOA was concerned that the regulator had so many powers to set and adjust rates, fares, return on investments etc. This was a very powerful tool that could cause great financial hardship to regulated entities if the regulator got it wrong. Regulated entities ought to have the ability to sue the regulator for such hardship in cases where wrongful regulatory decisions or decisions caused financial harm were not reversed/amended soon enough, as contemplated under section 12(1).
The presentation further consisted of a detailed table of the clauses in the ERT Bill, along with comments and suggestions.
(Please see slides 6-15 for more details)
The SABOA also included comments on the NLTA Bill. The NLTA Bill appeared to have been prepared before the ERT Bill was developed. It appeared from comments prepared by SABOA on the ERT Bill as if all contracted and subsidised commuter bus services may be considered “dominant” and exceed the 70% threshold for dominance defined in the ERT Bill. Should this be the case, there appeared to be a significant overlap between the functions contemplated in regulating regulated entities as defined in the ERT Bill and the NTLA, the prescribed reporting lines and responsibilities in the model tender documents, and this NLTA Bill. This was cause for concern, as it would place an unnecessary burden on operators to report to various entities in the exact same manner with the risk that what one entity may accept as regular business, another entity may consider in a totally different manner. This would cause major policy uncertainty.
The presentation also consisted of a detailed table of the clauses in the NLTA Bill along with comments and suggestions.
(Please see slides 17-25 for more details)
Joint oral submission by Gauteng Transport Authority, Gautrain Management Agency and Gauteng Department of Roads and Transport
Mr William Dachs, Chief Executive Officer, Gautrain Management Agency, said that the Gauteng Provincial Government viewed the provision of an efficient and cost-effective public transport system as being critical to economic growth and the realisation of the country’s social goals, and thus welcomes and supports the economic regulation of transport. The Gautrain Management Agency, Gauteng Transport Authority and the Gauteng Department of Roads and Transport operate primarily in the arena of public transport. The province thus sees the need to strike a careful balance between safe and secure public transport operations, as well as the provision of reliable and seamless transport services, and the economic imperatives underlying the ERT Bill as being fundamental to a sustainable regime of economic regulation of the sector. The province recommended that the ERT Bill be explicit in its:
- applicability to public transport and public-private-partnership projects;
- acknowledgment of the importance of striking a balance between user-pays revenue and government subsidy; and
- care taken in deciding on access to networks by requiring that the Transport Economic Regulator (TER) and/or Transport Economic Council consult with relevant regulatory bodies, who are mandated to regulate the provision of safe, secure, and reliable transport operations/services prior to deciding on access requests and disputes between access seekers and infrastructure or facility owners. This was important to ensure that safe, secure, and reliable operations were not compromised in the name of economic regulation.
The province also observed that the ERT Bill was not very clear on the envisaged relationship between the CC and the TER. It did not state whether the ERT Bill was intended to merely supplement the Competition Act 89 of 1998 or whether the transport sector would still be subject to the Competition Act in relation to matters that the Competition Act provides for. In addition, it was unclear which of the two Acts or regulatory authorities would prevail in the event of a conflict, i.e., if the Competition Act or the Economic Regulation of Transport Act would be applicable in such an eventuality. The ERT Bill could play a role in decongestion, by promoting modal shifts both in passenger and road freight movements through congestion charges -- that is, based on corridor network determined cost modes and ensuring that resultant pricing was related to these costs. The ERT Bill states that the regulator must promote public awareness and increase knowledge of the economic nature and dynamics of the transport market and when communicating with the public, the regulator must employ effective means of disseminating information, including freely accessible internet publishing. However, would the information be freely accessible? This was not clearly elaborated in the ERT Bill. The ERT Bill must elucidate on consequences where transport entities, sectors and services withheld information in the public interest.
(Please see slides 4-10 of the presentation for more details on the general comments)
The presentation further consisted of specific comments on the definitions and clauses in the ERT Bill. The specific comments of the province were neatly compiled in a detailed table consisting of the relevant statutory headings and references, comments and recommendations.
(Please see slides 11-37 of the presentation for more details on the specific comments)
Oral submission by Transnet
Adv Sandra Coetzee, Chief Legal Officer, Transnet, and Dr Andrew Shaw, Chief Officer: Strategy and Planning, Transnet, went through the entity's submission on the ERT Bill.
They said that Transnet was the custodian of rail, ports and pipelines; its value propositions were founded in the shareholder's mandate; and it supported the single framework of economic regulation. They provided a comparative analysis of economic regulation in the transport sector, and explained the need for balancing the cost of regulation and regulatory oversight. The presentation consisted of detailed graphs and tables.
(Please see slides 3-7 of the presentation for further details)
Transnet supported the single framework of economic regulation. The ERT Bill must regulate for competitiveness of South Africa’s transport sector. Transnet provided its comments and recommendations in a detailed table.
(Please see slides 8-12 of the presentation for further details)
Oral submission by Western Cape Government Department of Mobility
Adv Recardo Collins, Director: Litigation, Department of Mobility, Western Cape Government, took the Select Committee through its submission on the ERT Bill.
The Western Cape Government did not support the ERT Bill in its current form. It commended the improvements that had been made to the ERT Bill, but recommended that it be revised based on the proposals that include clause-specific provisions that would pose a significant impact on the national transport landscape; general comments related to the approach to certain transport-related matters; and language and legislative drafting considerations.
The clause-specific provisions included clause 4 and clause 11. It would be problematic to attempt to regulate a service where a single prescribed tariff may have an adverse outcome on the quality of service provided. It was submitted that a more suitable proposal, which would serve the purpose of introducing certainty, would be for a single declaration to be made by the Minister, after consultation with the regulator, that the listed regulators were incorporated into the regulator in terms of clause 4. It was recommended that a new clause be inserted in clause 4, which would make it clear that the regulator must consult with the affected provincial and municipal authorities concerning the service or entity that was to be regulated in their area.
Clause 11 did not expressly provide for consultation with the affected spheres of government. It was unclear from clause 11(1) whether the ERT Bill intended to regulate any transport-related fees or tariffs set by other spheres of government. It was recommended that clause 11 be amended to require the regulator to consult with the affected provincial and municipal authorities concerning the price control affecting their area of jurisdiction. This should be clarified. Regulation and price determination should be avoided. Regulating the pricing of transport entities and access to their infrastructure, would not address inefficiency within these institutions. It was recommended that options for considerations and further investigations should be done, such as a forced break-up of monopolies by government or encouragement of more competition. The clause appeared too prescriptive in that it limits regulated entities’ ability to generate revenue and utilise returns from assets. This would discourage investment. These clauses were recommended to be deleted or revised to remove these limits. The definitions of facilities and services should be clarified.
The Western Cape Government also provided general comments on the personnel and organisational structure; concessions to private operators; potential integration of the regulator and related bodies into existing structures; and language/drafting errors.
(Please see the presentation for further details)
Mr T Brauteseth (DA, KZN) said that slide 14 referred to maximum processes or fees that lead to supply shortages that increase the informal market activity, and minimum prices that lead to oversupply and higher prices to consumers. He would like to understand the economics of the maximum and minimum processing fees that lead to those outcomes. This would be very useful. One of the intentions of the ERT Bill was to try and protect consumers. Economics was a factor that was sometimes not considered. The economic factors that play out in the market conditions could lead to unintended consequences that were sometimes not taken into account.
He had an issue with the funding model of the regulator. Reference had been made to levies from industry players supporting the regulator. There was also reference made to no impact on the taxpayers but it was common knowledge that the industry players were also taxpayers and if costs were increased, they would be passed on to the consumer. He did not know if the question would be better suited for the Department of Transport to answer, but asked if any of the presenters could provide an idea of whether a feasibility study had been done on a percentage basis for the establishment of the regulator which consisted of the required amount per regulator and the percentage impact that it would have on a simple thing like fares. It was important to understand the actual impact it would have on the women and men on the street who were paying a fee to commute somewhere.
Slide 16 refers to the constitutional provisions that deal with intergovernmental cooperation. It referred to those sections that say that the spheres of government were independent, but obviously interrelated and interdependent, but although they were distinct and unique in that one sphere, they could not tell another sphere effectively what to do. Therefore it created a possible unconstitutionality of clauses 41(1b) and 41(1)(c), because it could create an unconstitutional environment where one sphere was telling another sphere how to operate. Mr Brauteseth asked for a comment on this.
Mr M Rayi (ANC, Eastern Cape) said that the ERT Bill and the presentations made referred to the consultation process embarked upon by the various stakeholders, including Transnet. Cabinet had approved the ERT Bill. He said during that time, issues had been raised by Transnet. He asked why Transnet went through the process, and what the outcomes were during that consultation process. He was looking at the application of the Act and whether the stakeholders were not accommodated in that particular section of exemptions. SABOA had raised these issues, and there were these contracting authorities that regulated issues that would be regulated by the TER.
Ms B Mathevula (EFF, Limpopo) left her questions in the chatbox due to a poor network.
The Chairperson asked the Committee Secretariat to read the questions.
Mr Hlupheka Mtileni, Committee Secretariat, read Ms Mathevula’s questions, which were directed at SABOA. She asked if the ERT Bill would provide benefit cover or infrastructure that would increase accessibility and provide an integrated transport system for locations in rural areas. What effect would this ERT Bill have on the cost of transport in the country for ordinary citizens?
The Chairperson said that the sense he got from SABOA was that the ERT Bill would impact the freedom to contract, relating to the specific contracting space and, to a certain degree, the regulation of that specific area. There was an area which captured the need to deal with a monopoly. He referred to the area of medium and small type enterprises' development that had been raised as an entry point. There was a reflection that these types of contracts would be between two to seven years and 12 years. Had this consideration been factored into the need to open up the industry? He was mindful of the views that had been presented, that there was a large degree of overlap between the work of the CC and the regulator. Issues had been raised around the accession and the drastic intervention of the ERT Bill. Issues of unintended consequences have also been raised. The presentations had an overall view that the ERT Bill would introduce extra red tape for the industry, and that this had to be confronted. There had to be trust in the industry. There were risks of investors not investing in the industry. He said it would be interesting to see if there was a common thread around this. There was an outcry for national rail and legislation, similar to what was happening in the airports, the energy sector and the water authorities. Had there been an attempt to kick-start that?
He asked the presenters to respond to the questions, and said that the Department of Transport would have the opportunity to present at the next meeting.
Mr Govender said that SABOA was fully cognisant of the barriers to entry, and that the barriers to entry for new operators were pretty much a self-created conundrum. In many aspects, the contracting environment had been set out to limit the entry of new operators because of size, scale, geography, access to finance and many other aspects. SABOA had looked at how the regulatory entity could add to that. It had been grappling with this for the past three decades. It had been looking at measures of creating sustainability and continuity in public transport and the road-based passenger subsidised contract model. It had looked at the documents of how tenders were to be put to the market. Some pretty glaring avenues were open to legal challenges in the way it had been set out and implemented by various entities, provinces or contracting authorities -- to the extent that the process did not gain any traction for transformation and transition of public transport.
On the flip side, a process should be developed to make it possible for new entrants to enter the markets. There were certain ways and mechanisms for new entrants to enter via a consortium with access to funding and capital, allowing new entrants to play in this space. Ultimately, it tied back to impact. Without certainty, one could not progress because capex required a medium to long term gain. Buses were depreciated anywhere between eight to 15 years, depending on the mechanism. All of these things were now coming together in an uncertain environment. The SABOA view was to support the process from the beginning of the regulatory entity. It was the mechanism proposed, but it would require a bit of debate and further discussion. He said the questions around benefit cover and providing infrastructure had been addressed in the submissions.
He made an example of various policies, and said there were fantastic policies, but also policies lacking in implementation. For instance, the national public transport subsidy policy spoke to dealing with issues around access to transport in rural areas, integrated transport and the subsidisation of households that needed access to safe transport. He could not answer what effect it would have on the cost of transport, because he had no idea how many entities would fall within the regulatory space. There needs to be a database of everybody that qualified to be a regulatory entity and then have a discussion around the cost of the regulator spread into a number of entities. All these discussions still needed to happen.
Insofar as Mr Rayi’s questions around the contracting authority were concerned, he said that SABOA had contextualised this against the current contracted regime that was very well set out, and whether this was going to be a deferred accountability to the regulatory entity or would be retained at the government or if the contracting authority would sit at the municipality. There was a space for this, but there were no contracting authorities in many places. There was therefore a bit of looseness, as no integrated plans talked to a holistic transport network and sustainable public transport. A regulator coming in was the right approach in principle, but would it have been able to navigate all these issues for the past three decades? There were issues of intergovernmental accountability. Currently, without a regulatory entity, the merger of accountability between government departments and spheres of government is highly problematic in respect of managing public transport.
Gautrain Management Agency
Mr Dachs said that it was very important to distinguish between social services and social infrastructure, and public transport fell in that area. Transnet would find its space in economic infrastructure. The thought of subsidising economic services and infrastructure did not make sense. Any impact which came from the regulated changing of prices in the economic infrastructure would have an impact on the job of Transnet. This was his simplistic understanding of the impact that would come in terms of public transport. The costs of operating the services had to be covered by the fares which people paid and the subsidy which the government paid. Assuming that it became more efficient and costs were reduced to become a more perfect operating system and public transport became a straight balancing act, it meant that for every rand of a reduced fare, there would be a rand increase for the subsidy. He said the concern came from a public and contracting agency perspective. He said that if the fares were reduced to a point where there was a demand for the services, then an increase might impose even more costs on the public authorities to provide more rail and bus services to cater for the increased demand.
He wanted to support what Mr Govender had said about the context of the very limited integrated transport plan. In a very complex environment, one was trying to make sense of good principles that everyone would support in the ERT Bill in terms of improving efficiency and cost effectiveness. This was now taking place in a very chaotic environment, and they were trying to say that the law of unintended consequences may apply here. He said that bus users would probably get lower costs, but better services would remain to be seen.
Western Cape Government
Adv Collins said that two questions relating to constitutionality and economics had to be addressed. He was not going to attempt to address the economic one, as the provincial treasury had done those representations. He asked for permission to respond in a short paragraph. The issue of constitutionality that had been put forward had to do with the fact that in terms of the Constitution (legislative capacities of provinces), this Act would squarely fall within Schedule 4 of the Constitution, allowing for the legislative authority to be located at the provincial level. The ERT Bill, particularly clause 41, spoke to the fact that the regulator could recommend amendments to provinces to the existing legislation. This may trample upon the ability or functionality of the province to exercise its right to legislate freely on specific items which fall within its legislative mandate. If there was any conflict or the regulator identified a conflict between national legislation and provincial legislation, there was a constitutional mechanism that should be followed to ensure that either the provincial legislation was amended, or which legislation would suffice in the particular circumstance. He was specifically referring to sections 146 and 147 of the Constitution. He was concerned that clause 41 was encouraging the regulator to encourage provinces to amend legislation while there was in fact a constitutional mechanism that allowed for the resolution of any conflict that may exist, or potential amendment that may need to be attended to, in terms of the Constitution.
The Chairperson said that Transnet would now be given the opportunity to provide responses.
Adv Coetzee started to respond.
The Chairperson said that Adv Coetzee could go ahead.
Adv Coetzee said that she wanted to apologise if she had interrupted the Chairperson. She would respond to some questions and then allow her colleagues to come in.
The Chairperson asked Dr Popo Molefe, Transnet Chairperson, to say something and then delegate his team to respond to the questions.
Dr Molefe said that he had nothing to add.
The Chairperson said that he thought that Dr Molefe would respond to the interface, that there might be a difference in terms of the ethical principle of the Department of Public Enterprises and the Minister of Transport concerning the fact that normally, when a bill was referred to Parliament, it should have served at Cabinet level, and that all the relevant authorities would have been consulted as part and parcel of the process towards Cabinet in endorsing the Bill and referring it to Parliament.
Dr Molefe said he wanted to be cautious not to throw a cat amongst the pigeons. It was correct to say that, to an extent, the legislation or policies being developed cut across more than one department or institution, and impacted even entities. The process of consultation should be one that permeated all those departments and entities that were affected. Transnet had endeavoured to engage with the various affected political authorities, such as the Department of Transport and the Department of Public Enterprises. It did happen on occasion that when a particular department endeavoured to develop policies and move rapidly to meet its timelines, matters fell between the cracks and others were left behind. The last thing anyone wanted to do was to run ahead of everyone else, which in the end, it would raise difficulties with the policies that had to be implemented. This was quite embarrassing and often resulted in litigation.
The constitutionality of the law, or the fairness of the ERT Bill, was being questioned. The legal department and the group chief executive were engaging with both sides of the Department of Transport and the Department of Public Enterprises. He said that rushing to legislate without following processes and considering the implications would cause problems. In 2005, legislation had been passed that Transnet National Ports Authority (TNPA) would become a standalone company, but a broad range of implications had not been considered. It had now been 18 years, and it had still not been able to fully implement that law. There were some serious snags, because some of the things had been legislated within the context in which the company entered into contracts with various funding authorities, and the basis of those contracts was a complete balance sheet. For instance, if a law was passed that said remove the TNPA -- it must be a standalone company -- this could not happen because the TNPA contributes approximately R70b to the balance sheet of Transnet. Would it immediately ask the government to provide that R70b? The R70b was needed for Transnet to be able to pay its lenders so that it did not end up in breach of its loan commitments. These were some of the things that needed to be considered before any piece of legislation was passed. Deeper consultation would enable all the parties involved to understand the risks associated with the legislation being considered.
He said that this was just a general response to say that indeed, it was important to have deeper consultations take place to obviate any possibility of legislation that would be deficient, and this process was continuing.
Adv Coetzee said that Transnet had engaged in various consultations with the Department of Transport. She said that Transnet was not resisting the ERT Bill, and was not resisting regulation. She wanted to clarify that Transnet was saying that to ensure that the complexities associated with the regulation of the railway sector, which had hitherto not been regulated, it should be equally underpinned by sector specific regulation that would recognise what was unique to that sector, and that should inform decision making. The regulator should ensure that the sector is regulated fairly and that it is regulated in a manner that is economically sustainable.
She had gathered that the Select Committee was alluding to the possibility of the Department of Transport kick-starting a National Railway Act. This was something that Transnet had called for, as it believed that it should ensure that all modes were regulated in a similar fashion, with equal attention to those criteria, especially concerning price control regulation that was unique to a particular mode or sector. As far as exemption was concerned, it could assist. She reiterated that although Transnet believed that exemption would provide the space to get to the National Railway Act, it was not resisting regulation. It was not resisting party access and regulation of associated fees. It wanted equal treatment concerning the unique circumstances that it finds itself in, to ensure that it was sustainable.
The Chairperson said that at the next meeting, there would be responses from the Department of Transport and the Parliamentary Legal Services. Afterwards, the process would move forward. This was critical, and he wanted to express appreciation on behalf of the Select Committee on Transport to the stakeholders in the meeting for expressing their views. Public participation was the world market for conditional democracy. There have been a number of recent court judgments concerning the failure to enable the public to participate.
Mr Brauteseth asked whether the submissions that were listed were the only submissions, and when the presentation of the Western Cape Government: Mobility Department would be received.
The Chairperson asked Dr Clark to respond.
Dr Clark said that the submissions listed were the only ones received.
Mr Rayi said that the Western Cape Government: Mobility Department presentation had been received on the morning of the meeting.
The Select Committee considered the minutes of the meeting of 31 May, which were duly adopted.
The Chairperson asked Dr Clark what the process was moving forward.
Dr Clark said that on 14 June, there would be responses to the submissions from the Department of Transport and the Parliamentary Legal Services. She said that final mandates would take place after the recess.
The Chairperson confirmed that the next engagement would be on 14 June.
The meeting was adjourned.
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.