TAXI RECAPITALISATION : SANTACO CONCERNS AND RECOMMENDATIONS

Paper prepared for Presentation to Parliamentary Portfolio Committee on Transport
20 September 2006

20 September 2006

1. INTRODUCTION

Some two years ago, on 13 August 2004, a delegation from SANTACO addressed this Committee on the matter of the Taxi Recapitalisation Programme (TRP).

The delegation expressed its concerns about the length of time that was being taken to implement the Programme.

We would like to quote briefly from the introduction to the paper presented at that meeting :

"In May 1999, the then Minister of Transport introduced the results of the Moving South Africa Project. It found that the taxi vehicle fleet was dangerously old, posing threats to both economic stability and to safety. He announced that he was forming a task team and would put to Cabinet proposals for the 'recapitalisation' of the taxi fleet.

"More than five years later nothing has happened."

As we speak to you today, we can perhaps simply update that last sentence to read :

"more than seven years later nothing has happened."

One reason for the slow progress on which we commented in 2004 was the number of government Departments which were involved. The lead was taken by the DTI, an arm of government which had previously had little or no involvement with the taxi industry.

We were therefore very pleased that, following the appointment of Minister Jeff Radebe to the position of Minister of Transport, he made an announcement which showed clearly that the Department of Transport would be taking the lead.

The announcement, on 4 November 2004, included the following :

"Some serious delays were experienced in the past during the process. The evaluation of the original four bids received was finalised early this year. The evaluation of the bids indicated that the programme, in its original form which included the tender for the manufacture of the New Taxi Vehicle (NTV) and Electronic Management System (EMS), was neither affordable to the national fiscus nor profitable to the operators.

"At its meeting yesterday, Cabinet endorsed the recommendation of the Steering Committee. The decision of the Cabinet is primarily about taking forward the Taxi Recapitalisation Programme in a revised form, whilst retaining the central objectives of the original programme

"The following are the key pillars of the Taxi Recapitalisation Programme moving forward:

* The introduction of specifications for the NTV through Regulation by the Minister of Transport.

* The introduction of a once-off scrapping allowance of R50 000 per scrapped vehicle.

* Thresholds or bands for vehicle seating capacity instead of requiring that the NTVs have a seating capacity of 18 and 35."

SANTACO was very pleased about many aspects of this announcement. It showed that the complex original scheme was to be greatly simplified. The matter of the Electronic Management System (EMS) was to be separated from the renewal of the taxi fleet. Seating bands seemed to us to be far more sensible than the requirement for a fixed number of seats. And any manufacturer who was able to meet the specifications could now sell his vehicles to the industry, rather than the previous intention to have just one monopoly supplier.

But most of all we were pleased that the Department of Transport was taking control of the process. Now, we felt, we would see real progress.

We are sorry to say that this has not been the case. The Annexure to this paper shows the many events which have taken place both between 1999 and November 2004, and from November 2004 right up to today. Both show a seemingly never-ending series of missed deadlines, final cut-off dates, firm commitments, and other similar statements. None of them have resulted in any actual implementation on the ground.

In this short paper SANTACO describes its concerns. When we express our concerns in this way we are sometimes accused of being negative. That is not so. There are real and deep flaws in what is currently being proposed. We have a duty not only to our members, but also to the government, the commuters and the public at large, to point out these flaws. If they are not addressed and corrected, they will prevent the project from being successful.

2. TAXI RECAPITALISATION PROGRAMME

2.1 Consultation

We are not at all happy with the style of consultation adopted by the Department in respect of the vehicle specifications.

There are occasional high-level strategy meetings. At one of these which was held recently, the Department put to us its views on certain important matters. We gave our initial response, and discussion took place.

It was, however, clear that at least one or two follow-up meetings would be needed at which all the stakeholders would be present and able to offer their views, and we made proposals accordingly. Those follow-up meetings never took place, however.

The Department has proceeded to make pronouncements on the specifications, and even to gazette regulations, without adequate and comprehensive consultation.

2.2 Specifications

This paper is not the right medium, nor is this Committee the right forum for a technical analysis of the specifications so far gazetted.

We can, however, say very firmly that the process of determining appropriate specifications following the announcement of 4 November 2004 has been one of complete and utter confusion, a situation which has been compounded by the lack of adequate consultation by the Department with relevant parties including the vehicle manufacturers.

We can also say with the authority of a communication from NAAMSA that, insofar as the current specifications can be interpreted, no minibus (in the category of up to 18 seats) is available which meets the new legal requirements.

We have heard from the Department that it will introduce such a vehicle to the industry during October Transport Month. We wait with considerable interest to see what this vehicle is, and by whom it is produced.

A regular theme of recent speeches by both Minister Radebe and officers of his Department is that larger vehicles are available which do meet the specifications. Whether or not this is so, these are not the vehicles which most taxi operators want to buy.

There are many reasons :

they are more expensive both to buy, and to operate and service
our taxi ranks are not geared to handling them
they will have an effect on journey times – it will take longer (especially outside the peak times) to fill a 35-seater than a 16-seater.

It may be that the Department is highlighting the larger vehicle in this way in order to cover the embarrassment of the Department over the fact that smaller compliant vehicles are not available.

But we wonder – may there not also be a deeper reason? The policy on public transport is that the smaller vehicles should be confined to routes with few passengers, and to act as feeders to the routes operated by bigger buses. The inescapable conclusion is that fewer small vehicles will be needed. Taxi operators are to be encouraged to buy bigger vehicles and tender for subsidy contracts on the main routes.

So it may well be that the difficulties being placed in the way of those wishing to buy smaller vehicles are simply part of a hidden strategy to change the shape of the taxi industry – with or without the consent of those involved.

2.3 Affordability

The plain fact is that we have absolutely no idea what will be the cost of an 18-seater minibus which is fully compliant with the gazetted specifications, because no such vehicle exists.

Yet at the heart of the whole TRP process is the cost of the replacement for the tried and tested minibus which we have operated in one form or another for almost 40 years, and on which the financial success of our industry has been based. If the cost is too high we will either have to raise our fares, which will make us less competitive than our bus and rail competitors; or we will have to go out of business.

We cannot, therefore, say whether the proposed scrapping allowance of R50 000 is adequate. That figure was first mentioned in the Minister’s statement of November 2004 and so, simply in terms of elapsed time, it is two years out of date.

SANTACO is in favour of the TRP in principle. We cannot, though, offer our full support until we know exactly the amount that taxi operators will be asked to pay for a new and fully compliant minibus.

2.4 Subsidy

In the previous section we said that, to avoid going out of business, taxi operators would have to raise fares, and that this would make them less attractive than the competing bus and rail services. The phrase should of course be : "the competing subsidised bus and rail services".

The continuing discrimination in this matter, where bus and rail operators get subsidy but the taxi does not, continues to be an absolute disgrace. The scandal lies in the fact that taxi users, who comprise 65 per cent of the commuting population, do not benefit. But now this situation is to be made worse by government action to increase the costs of the taxi vehicle.

In his first transport budget speech, in June 2004, Minister Radebe said :

"A review of the public transport system is underway. Factors to consider include the mis-match between how the subsidies are allocated at the moment [and] the types of public transport used by commuters…….."

It is surely time that the review is completed and the system changed to one which is fair to all.

2.5 Availability

When in May 1999 Minister Maharaj announced the recapitalisation scheme, it was on the basis that the taxi fleet had grown dangerously old. More than seven years later we are still waiting for the first of the new vehicles promised under the TRP.

A logical conclusion is that the fleet which was old in 1999 is now collectively seven years older. But of course we know that is not true. Taxi operators have continued to buy new vehicles of the kind they are familiar with.
As we address the Committee, SANTACO’s trading arm has a waiting list of no less than 1 000 operators seeking to buy vehicles which meet the new specifications.

If a brand new vehicle has to be designed and built, there will be a lengthy tooling and production start-up process. There will be a significant gap in the supply of new vehicles to the taxi industry, and therefore to the taxi commuters..

2.5 Distribution

We understand that Minister Radebe has spoken of a possible strategy to restrict the number of outlets allowed to distribute the new vehicles, apparently in the interest of Black Economic Empowerment.

We point to the fact that SANTACO’s trading arm has already invested significantly in plans to provide a distribution channel for the NTVs. This began during the ‘old’ scheme (that is, before November 2004) and so we have been involved in this for a long time.

Our position is similar to that of the vehicle manufacturers who kept faith with the tender process right up to 2004, and spent a great deal of time and money in the process. They were eventually left stranded when the tender process was abandoned.

We do not seek any special preference in this matter, but we do ask that we be treated fairly, and that our efforts to provide a distribution channel should be properly recognised.

3. OTHER POLICY CONCERNS

3.1 Operating Licences

One of the requirements for an operator to get the scrapping allowance is that his permit must have been converted to an operating licence.

The process of application has been surrounded by administrative difficulties. In this short paper, however, we want to point to a specific area of concern regarding recapitalisation.

The old permit was issued more or less for life. It could be transferred, and so it had an asset value. It could not be withdrawn other than for reasons relating to misconduct on the part of the holder.

The new Operating Licence is quite different. It is intended to be issued in accordance with the Integrated Transport Plan of a planning authority.

The National Land Transport Transition Act 2000 allows the authority to withdraw what it deems to be ‘surplus’ licences. In doing so, it must offer compensation to the holder. The amount of that compensation is currently under debate, as indeed is the whole moral issue of an authority being able to take away the livelihood of a businessman.

However, for the purposes of this paper, we are concerned with the fact that the Act makes no provision for compensation for loss of value of the vehicle as a result of the withdrawal of the Operating Licence.

It may well be that a taxi operator buys a new and expensive NTV, only to find that a few months later his Licence is withdrawn with no compensation for the value of the vehicle.

This is an issue which must be tackled as a matter of urgency.

4. CONCLUSION

We are pleased to have had the opportunity to present this paper to the National Assembly Portfolio Committee on Transport.

SANTACO reaffirms its commitment to the recapitalisation of the taxi fleet at the earliest possible opportunity. We feel that this will only be possible if the concerns we have outlined in this paper are fully and properly addressed by the Minister and the Department of Transport.

Annexure

TAXI RECAPITALISATION PROJECT (TRP)

A TIMELINE SUMMARY OF
PRINCIPAL EVENTS

Version : 20 September 2006

TAXI RECAPITALISATION PROJECT (TRP)

A TIMELINE SUMMARY OF PRINCIPAL EVENTS

So, after five years of discussion on Plan A, Minister Radebe announced (November 2004) a change to Plan B to start 1 April 2005.

Overleaf – timeline progress on Plan B

Plan B – from November 2004