South African Taxi Council: briefing

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23 February 2000
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Meeting report

23 February 2000

Documents handed out:
Briefing by SATACO

Members of the SATACO executive briefed the Committee on the background to their involvement in the government's taxi recapitalisation project. The speaker outlined the reasons for SATACO's continued support of the project and concluded with addressing a number of questions on the unresolved opposition which the project is receiving from some quarters.

Mr Mboweni, Secretary-General of SATACO, presented (see Appendix 1). In addition to the presentation, the following matters were highlighted by the speaker:

The importance of the recapitalisation project:
The project is concerned with empowering 80 000 individual entrepeneurs known as operators. It will help operators deliver better services to commuters. The challenge faced by SATACO is to ensure that out of the recapitalisation project emerges an affordable solution for the operator. The project will also create a capital base with which the private sector can invest in the industry which generates billions annually but has never reaped any of the rewards. Mr Mboweni stressed that the individual operator buys the package and therefore will be taking the risk.

Contributions by each party:
The government's contribution to recapitalisation is the scrapping allowance which will total between R3 and R3.8 billion. This allowance will enable the taxi industry to convert to a formal industry quickly and efficiently.

The overall cost of the project is estimated at R40 billion. The contribution to be made by SATACO, indeed the risk it is assuming, is to cover the difference between the scrapping allowance and the R40 billion.


The Chairperson, Mr Cronin (ANC), asked Mr Mboweni to explain SATACO's claim to 'representivity'. They claim to represent 96 percent of the industry. How does the Council ensure representivity and how is it deepened and advanced?

Mr Mboweni said that after 1994 existing taxi bodies consolidated to form 12 mother bodies. A mother body is a federal organisation which assists members in their constituencies. In terms of the amendments to the Transportation Act, provincial taxi councils were established. These councils deal with issues in their own provinces. The 9 provincial councils and 12 mother bodies only deal with policy. Government then resolved that a business arm had to be established. This led to the establishment of taxi co-operatives in terms of the Co-operatives Act. It is through these co-operatives that some financial benefits are channelled to operators.

'Top Six' , an organisation based in parts of Soweto, does not form part of SATACO, but is a branch of SABTA. Mr Mboweni could not say whether it was a mother body but said that it was not on board the reconstruction process with SATACO. However the Council said their executive have resolved to invite 'Top Six' to participate fully in the process.

Referring specifically to their 96 percent representation, Mr Mboweni said that politicians and the corporate world wished to own part of the industry, hence the four percent not owned by SATACO.

Mr Slabbert (IFP) was concerned that, although discussions had been going on since 1995, the Portfolio Committee on Transport had been sidelined through the entire process and were only brought on board late last year.

The Chairperson, Mr Cronin, said that the question could not really be answered by the SATACO delegation. Mr Mboweni said that SATACO had spoken to a parliamentary committee previously, if not this particular committee. Mr Cronin assured members that the Portfolio Committee on Transport would be staying in touch with the rest of the process.

Mr Rockman (ANC) asked who these 12 mother bodies are and what other organisations have been excluded as mother bodies. Furthermore, Mr Rockman asked whether SATACO had in fact fully informed and consulted with its members since SATACO had experienced delays in receiving funds from government to go on roadshows to reach their members.

On the issue of consultation Mr Mboweni pointed out that key role players had been consulted; COSATU had issued a statement three days ago saying that they support the recapitalisation process. Two weeks ago the South African National Civic Associations said they had been consulted and that they supported the process. The Commuter Association of South Africa were also on board. He said that there had been public hearings to allow for input from any interested party. They were not stopping there; SATACO has agreed with local government bodies to launch a three-month road show to inform South Africans that 'purpose-built vehicles are on the way'. They were purpose built in the sense that they did not exceed 100 km and would take into account the 'bulkiness' of South African body shapes. In spite of the above steps, Mr Mboweni was puzzled that people still protested that they were not consulted.
Referring specifically to their 96 percent representation Mr Mboweni repeated that politicians and the corporate world wished to own part of the industry, hence the four percent not owned by SATACO.

Mr Mabaso, Chairperson of SATACO, briefly tried to resolve Mr Rockman's question regarding the success of the consultative process. He agreed that the inability to go on a roadshow was linked to funding. However he said that media reports have shown there is a 'third force' who wish to destabilise the process. Therefore it is not only taxi operators against one another but also people behind the scenes instigating uncertainty and mistrust.

Ms Hlangwana (ANC) asked whether road shows were the way forward. She added that in spite of the promise that 41 000 jobs would be created by the project, the figures were not the real issue. She asked him to expand on the real problems lying ahead such as those drivers who were without permits.

The reply was that the first roadshow had been delayed because up to 20 October 1999 government funds which were supposed to be released on 22 September 1999 were not made available. But a three month road show was being planned.

Ms Hlangwana asked when the organisation NATDO was formed and what the relationship between NATDO and SATACO was.

Mr Mboweni explained that NATDO was a registered association representing taxi drivers. However it had failed to submit its credentials when requested and its authority had expired. From its side SATACO wants to engage with them. However, taxi drivers are intimidating. There was still the thorny issue of NATDO forcibly using SATACO's vehicles to ferry members out of hostels. SATACO members have since laid charges against these NATDO members. Mr Mboweni said that his Council might soon lose patience with NATDO but would not risk being accused of taking the law into its own hands. They wanted to be responsible leaders.

Ms Hlangwana asked what would be happening to the fleet of existing taxis after the 18 and 35 seaters were brought in.

Mr Mboweni said that the existing fleet could be dumped on other African states such as Burundi or Zimbabwe but this would not be addressing the issue. Or they could agree on a process of scrapping the vehicles; it was a decision for Cabinet.

Mr Mboweni took the opportunity to say that jobs would also be created around manufacturing. The smart card issue is another area for job creation. He felt that those arguing about job losses are speaking from a position of ignorance. He cited their refusal to attend Minister Omar's briefing session. He suggested their agenda might be destabilisation.

Mr Mabaso, Chairperson of SATACO, briefly adressed members. On the issue of information he said that when SATACO holds meetings and resolutions are taken everything is disseminated to members through representatives. Moreover, the necessary proposal documents were drawn up early enough before SATACO came aboard the recapitalisation project. It was only the delayed road show which had hampered the consultation process.

In response to an earlier question from Mr Rockman regarding mother bodies and which bodies were excluded, Mr Mabaso said that the selection of the 12 bodies was controlled. The criteria were:
1. organisations in existence in 1996 could become mother bodies
2. they should have representation in not less than six of the nine provinces
3. they should be registered.

On the matter of consultation, Mr Rockman pointed out that in the Coloured townships, four taxi organisations were very strong and they represented some 800 taxis yet they were not a mother body. How do you bring them on board? Could the fault be accepted and amends be made?

Mr Mabaso said that the criteria used to classify a 'mother body' were adopted by Cabinet and would therefore have to be changed by Cabinet.

Ms Hlangwana said that some politicians might have a vested interest in the taxi industry. She asked that it be put on record that the public interest must always come first. The Chairperson accepted this point.

Mr Magubane (ANC) asked whether the physical fitness of taxi drivers would be attended to.

Mr Mboweni said that drivers would indeed go through medical testing, among other procedures.

Mr Schneeman (ANC) asked whether bidders would be asked to test the new vehicles to allay any fears which operators might have.

Mr Mboweni said that new vehicles have already been through hard testing at a car rally. Even operators from rural areas have indicated that these vehicles are what they have been waiting for.

The Chairperson asked Mr Mboweni to touch on the issue of the servicing of vehicles. Mr Slabbert (IFP) asked what plans had been put into place by SATACO for servicing vehicles during the transition period when the new vehicles would be introduced.

Mr Mboweni said that an outlay was needed to deal with the aged vehicles in the fleet. He proposed that where servicing was required 'back yard' mechanics will be trained and transformed into entrepeneurs.

The Chairperson concluded by promising that the Portfolio Committee would stay in touch with the process from now onwards. He said that it was a matter of concern that the road show had not been funded timeously by government because it was apparent that it had led to many problems. He stressed that although the majority party does support SATACO, the Portfolio Committee reserves the right to meet other groups if they need to.

The meeting was concluded.

Appendix 1
Briefing by SATACO
The Taxi recapitalization project was established in April 1999 among four National Departments, namely: Transport, Trade & Industry, Minerals & Energy and Finance. The four departments established a steering committee, which committee agreed to appoint a project leader from the department of Transport. It was further resolved that the project leader will report to the steering committee, chaired by Dr P Jourdan from the Trade & Industry. SATACO and l or the Taxi industry was not represented at all during the initial stages of the project.

Upon recognition of the SATACO by government as the national representative body of the Taxi Industry in May 1999, the steering committee resolved to invite SATACO as government's partner in the project. The project structure includes the four national departments mentioned as well as the SATACO, since each of these role players has a direct influence on the success of the project.

SATACO's role will be that of establishing a National Network of Fuel and Maintenance Delivery Outlets (estimated to cost no less that R 1.5 Billion, with some 18 000 permanent jobs being created at these outlets). Support and participation for the 'BE LEGAL CAMPAIGN', assisting in the Establishment of a National DATABASE, implementation of a Legal Internal Self Regulation Strategy alongside the government's Enforcement Plan, establishment of Drivers' registers in each of the nine provinces, Implementation of obligations in terms of contracts established with the winning bidders in terms of Equity participation, operational contracts, skills transfer and training, job creation etc. It is estimated that some 40-60 000 permanent jobs will be created arising out of these contracts entered into between SATACO and the winning bidders, also, that a TaxiBank aimed at banking the unbanked sector of our communities will be established, in which Bank (via the Electronic Management System) will create a further 7500 permanent jobs and wealth for the poor of our communities.

SATACO did engage various RSA - based banks, pension and provident funds and the life assurance industry in this regard, and talks are at a stage where a Transformation Bond of between R 2. and R 4. Billion can be made available to the Taxi Bank, and there are two other RSA based financial companies and one American-based investor who have shown interest and are ready to invest I inject (jointly) in excess of US$17 million. The Bond will be structured with a similar profile of the Republic of South Africa R150 bond issue.

Accordingly, the bond will have the following characteristics:
Annual coupon: 12.0%

Coupon payable:
equal payments semi-annually on 28 February and 31 August each year.

Capital redemption payable in three equal trances on:
28 February 2004
28 February 2005
28 February 2006

- Listing on the bond exchange of South Africa.

· The importance of the Recapitalization project is that it is fundamentally about empowering 80 000 individual entrepreneurs to do business better and safer, thereby servicing their customers, the commuters, more effectively. It is also about creating a capital base for an industry which generates billions of rands worth of revenue every year into the economy, which industry has never reaped the rewards as an industry. This is why SATACO is an equal partner to government in the recapitalization project. In the end, it is the individual taxi operators who buy the package and take the financial and commercial risks. Government '5 commitment to the scrapping allowance is a means in the short term to improving the affordability of the vehicles, and enabling the taxi industry to transition into the formal public transport sector successfully and relatively quickly.

· When we started this process of Formalizing and Democratising the Industry in 1995 with Minister Maharaj, it was in the belief that the taxi industry itself will benefit from doing so and that government would create an appropriate environment for better taxi operations if we got our house in order.

· We have got "our house in order": every obligation in the NTTT and in the MOU with government has been, or is busy being implemented by SATACO. Convincing individual operators to participate and be legally compliant in their operations depends however on the ability of SATACO to deliver real benefits. The time for delivery is now if the processes of the last five years are to be consolidated nationally.

· The benefits of recapitalization, formalising and democratising the industry can however only be sustainable if government creates an environment in which this is possible. Practically, this means appropriate legislation, regulations and most importantly enforcement.

Imagine provincial councils mobalising operators to join the "Be Legal campaign" only to find that pirate operators still exist, permits are being bought from corrupt officials and what we call 'izinkhabi' still control routes and ranks.

· The Recap project enables both government and the taxi industry to achieve our respective objectives. It remedies the problem of unsafe vehicles and makes for a sustainable solution to recapitalization, it simply closes the first chapter on the issue of Transport subsidies. In doing so it creates a new formalised platform for public transport service regulation and management, because the Electronics specified provide the necessary DATA and Tracking facilities which make business management by the individual operator better, and which enable government to access reliable information on operations. It also provides a basis upon which the private sector can invest in this industry as a partner with confidence, instead of the past practices in which taxi operators as individuals or individual organisations had deals struck with sections of the private sector for private gain.

· Our challenge as SATACO is to ensure that out of the Recap project we offer an affordable solution to the operator, and build out of the project a capital base for the industry through our recognised structures of SATACO.

· Much has been said about SATACO's business arms. We are in the process of drafting our final Constitution, but in the interim have got management council approval for the structures and procedures which govern the relationship between the council as a policy arm and the business arms. In brief, we have SATACO Limited which is 100% owned by SATACO. SATACO LTD. is a holding company through which all financial benefits flow to individual operators, either directly in the form of dividends, or indirectly through the co-operatives through surpluses in the coops.

Every registered operator will be a shareholder in this company, and there will be no non-taxi industry and no illegal taxi operators as shareholders. The council appoints the board of SATACO LTD.

SATACO LTD. has established an investment and trading arm called UBUNYE. SATACO LTD. owns 90% of this company as it stands and 10% is held by the auditors until strategic partners are found.

SATACO however must approve the appointment of the board of this company.

· Finally, whilst we agree that SATACO is by no means perfect, or that it represent each and every operator, it is the only taxi body that we as the industry have formed and it represent more-than 96% of taxi industry in this country. We established a basis for representation in the interim through negotiation and participation of the industry as a whole. It is interesting and probably only natural that when we embark on the project such as recapitalisation, those with individual vested interests find themselves at odds with us - we are after all taking into account the interests of every operator and the industry as a whole - not individual organizations or individuals.

· The persons elected by their organisations to serve in the SATACO structures have taken a big risk, and have paid the price for doing so. Many of our people have died in this process. People who believe that they can dismantle SATACO or undermine its efforts to realize the best outcome for the industry and the poor of the poorest of our communities, are not only enemies of progress and empowerment, but are the very people who would like to see chaos in the taxi industry once again. We will not resist this at all costs, but, if they succeed, it will not be for want of trying on the part of the taxi industry.

In conclusion we wish to pose these questions:
· Why are NISSAN & TOYOTA not fully supporting the project, having jointly held the taxi bus market for the past twenty years? Is it because they honestly don't have a vehicles to compete or is there an Agenda?

· Where are those RSA based banks who, for the past twenty years owned the rights of throwing our people into the credit bureaus, without allowing them any representation?

· Who is that benefit when Taxi operators kill each other?

· What it is wrong when the Industry says to government via the SARS we are committed to contributing our portion of tax?

· What is wrong with the "SATACO self empowerment strategy"?

· Why should our leaders make statements like 'You cannot be a referee and a player' , when this is supposed to a first in the "People Driven Project" of our South Africa and not the South Africa of the past?

· What is it that is wrong that we have done by risking our won lives, in lobbying our members to allow us to set aside the subsidy debate, what was wrong when we advised our members against second hand vehicles - which vehicles are not only "Mobile Coffins", but, are dirt dumped in our country to the detriment of our won economy?

· Who is it that will win if SATACO go it alone, or if government dictate and takes decisions unilaterally?

SATACO approach to empowerment
: the bargaining power of tile taxi industry as a
Formalised and collectively owned sector must yield real
benefits to each legal operator and place the taxi industry
in a position to participate in the economy at a corporate level
through the recognised structures of SATACO.

Guiding principle: viable business proposition in which risk and reward are shared between partners.

The value proposition from the taxi industry:
· fare collection
· fuel consumption
· spares and maintenance
· related taxi operation & commuter service
· technology: vendors, cards, distribution
· Infrastructural network of outlets


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