Legal Succession to the South African Transport Services Amendment Bill [B43-2008]: Departments of Public Enterprises and Transport further briefings

Meeting report

Legal Succession to the South African Transport Services Amendment Bill:
Background Presentation on Autopax and Shosholoza Meyl by Department of Transport (DOT)
Mr Kuben Pillay, Deputy Director General, Department of Transport and Mr Jan de Villiers, Acting Chief Director: Public Transport, Department of Transport, gave a further presentation to the Committee on the background to the Legal Succession to the South African Transport Services Amendment Bill (the Bill). In this presentation the team discussed the services provided by Shosholoza Meyl and Autopax and the scope of the services being provided by Autopax (see attached presentation), including their bus business.

Discussion
Mr B Mashile (ANC) asked whether the transfer of the assets to the new entity would impact on the services provided by Autopax and Shosholoza Meyl.

Mr S Farrow (DA) asked whether the financial position of Autopax included City to City.

Mr de Villiers affirmed that the financial position of Autopax, as indicated in the presentation, included the financial position in regard to City to City.

Mr Farrow asked to know the details of the lease agreement of the buses and when it was going to expire.

Mr de Villiers replied that the lease agreements would be expiring either in the current year or next year, and would not be renewed afterwards.

Mr Farrow asked to know why Autopax was operating at a loss.

Mr de Villiers replied that the R36 million loss was from Translux services, and was partly due to high labour costs.

Mr Pillay added that until 2005/06 Autopax was making profits, although the maintenance costs were enormous.

Mr Farrow asked for more details on the financial position of Shosholoza Meyl.

Mr de Villiers replied that Shosholoza Meyl had a shortfall of R1.1 billion. He added that this, and Shosholoza Meyl’s capital shortfall, would be covered by the National Treasury.

The Chairperson asked to know whether Shosholoza Meyl would be requiring operational subsidies after the transfer.

Mr de Villiers replied that Shosholoza Meyl would be requiring operational subsidies after the transfer.

Mr Farrow asked to know whether the business plan model of the new entity was making provision for the shortfalls of Shosholoza Meyl,  as the DOT did not currently have the ability to subsidise.

Mr Elvin Harris, Chief Director: Transport, Department of Public Enterprises (DPE), commented that Autopax was currently subsidised by Transnet. He added that it was an internal subsidisation since Transnet was the major shareholder. He confirmed that Autopax had been making a loss due to high labour costs. He added that the labour costs were generally above average in the transport sector, and significantly impacted on the profits.

A Committee Member asked to know whether the Bill was only intended to apply in respect of long distance transport.

Mr de Villiers affirmed that this Bill would apply only to the long distance transport and thus the Bill’s scope was intended to cover both long distance rail and long-distance bus services.

The Chairperson aired his concern over the subsidisation of Autopax whilst it competed with private bus operators. He added that as a new public entity being subsidised, there would be social responsibilities, which may outweigh the profit making agenda.

Mr Farrow commented that it was imperative that an approach to reduce costs be taken. Contrary to what was stated in the Bill, there did seem to be financial implications. For example there was no model to address maintenance, leases and so forth.

Mr Pillay replied that the Committee had a strong argument warranting a reassessment of the financial implications.

The Chairperson commented that the Committee needed to monitor the transfer process. There was a need to change the wording of the bill and remove the statement that there would be no financial implications.

Department of Public Enterprises (DPE) Briefing on the Bill
Mr Elvin Harris then gave the DPE’s presentation to the Committee on the Bill. He noted that the consolidation of the Legal Succession Act (LSA) was now at its final stage. The arrangements had to cover pension funds, amongst other matters, and he noted that the pension funds of the employees would be kept aside for the transfer and formation of the new entity.

The amendment Bill also addressed the necessity to give the South African Rail Commuter Corporation (SARCC) the legal power or authority necessary to run efficiently.

There had been certain problems highlighted in the Amendment Bill. The Ministers should not be involved in the negotiations about the transfer, as it was intended that all negotiations should be concluded on a commercial basis by the two parties involved.

Section 25 (2) specifically provided for the assets to be transferred to Transnet from the SARCC by the Minister. This would be problematic because Transnet should be focusing on Freight Rail, which they were currently not doing effectively.

Section 25 (3) was providing for the determination of the value of the assets by the Minister. As indicated, this should ideally be a commercial process. Mr Harris said that several of the issues highlighted in the presentation should in fact be done outside the discussions about the legislation. This would also include the resolution of difficulties in reaching agreement. 

Department of Transport and the Department of Public Enterprises Proposal
The two Departments then tabled a proposal arising from the discussions after the first Committee meeting on 10 June. The Departments had discussed, and agreed upon, issues that were raised by the Committee and the Department of Public Enterprises.

The first proposal was that Section 15 should be deleted from the Legal Succession Act. This had been overlooked during the Amendment Bill drafts. This section should be repealed altogether.

The second proposal related to issues raised by the DPE, on transfer of assets in the passenger services, as detailed in Section 31 of the principal Act.

Discussion
The Chairperson and Mr Farrow with the assertion that certain issues needed to be kept outside the legislation. The Chairperson added that the Committee also did not want to become enmeshed in the negotiations between the two entities. He added that most of the problematic issues related to the current legislation and justified the need to amend it.

The Chairperson commented that local authorities needed to be involved, although the Committee did not want their involvement to result in other legislation and by-laws that would take years to be enacted and would slow down the transfer process. He added that he agreed with the assertion that the Ministers should be involved in the negotiation process.

Dr Petra Bouwer, Chief Specialist, Regulatory Analysis, Transnet, commented that the rationale behind section 25 was to address any red-tape that would potentially affect the transfer and section 31 was a consequential amendment.

The Chairperson commented that the Committee needed the State Law Advisers to determine whether the amendments did not undermine any other laws, although there was a general agreement on them.

The Chairperson commented that there was provisional agreement with the need for the Amendment Bill and the proposal to repeal section 15. He added that there was also a provisional agreement to the rest of the proposals, including the addition of section 25 A (1) to the principal Act, although the transfer needed to be done before the 31 March 2009.

Mr Mashile and Mr Mogale aired their concerns over the dates and asked whether the transfer was not being rushed if this date was to be included.

Mr Pillay replied that the Public Finance Management Act (PFMA) had safeguards against premature transfers, as it would not allow the transfers to proceed if there were insufficient funds available.

Mr Farrow aired his concern over the inclusion of the date in the Bill, as it would become a permanent provision.

The Chairperson commented that the inclusion of a date in the legislation needed to be reconsidered.

The Chairperson asked to know whether section 25(A)(3) allowed for any delays.

Mr Mashile aired his concern over the subsection that required the relevant local authorities to respond within a period of 30 days. He added that the duration appeared to be too short, and did not allow the municipality to do its job properly.

The Chairperson replied that the 30 day duration was essential, and attempted to ensure that the municipalities did not slow down the process.

Mr Farrow commented that the concerns of the Committee were not the rationale of the legislation but the cross-cutting nature of that legislation. He added that State Law Advises needed to advise the Committee in this regard.

Mr de Villiers commented that the 30 day duration was meant to further matters of national interest. The municipalities simply needed to declare their interest within 30 days.

Ms L Moss (ANC) asked to know if the amendment was intended solely for the transfer and formation of the entity.

The Chairperson commented that there was agreement that South African public transport was terrible. He added that the amendments to the legislation were a small building block towards resolving the issues affecting the transport system, although there were funds available to build on to the transport system, thanks to allocations made in anticipation of the 2010 World cup.

The Chairperson indicated that the Committee would decide on the amendments and the proposals given by the departments.

The meeting was adjourned.