Minibus-taxi subsidy set to vex the transport market inquiry
The Competition Commission’s inquiry into SA’s land-based transport market comes not a moment too soon, as a succession of delegates describe the parlous state of the country’s public transport system.
As transport experts enumerate its obstacles, the exigencies of economic inclusion through transport become more apparent.
The answers, however, may not appear as soon as the economy demands. The commission is set to sit at venues across the country until August 31.
Although the hearings had barely begun by day three on Wednesday, it was already clear that the scope and complexity of the issues would go far beyond a simple review of the state of competition in the sector.
Under its terms of reference, the commission will consider factors that may prevent, distort or restrict competition in the industry, focusing on pricing, regulation, planning, transformation and subsidies.
Chief among the apparently intractable issues is minibus operators’ demand for a level playing field.
Put simply, minibus-taxi operators argue that they are equally entitled to the subsidies granted to bus operators and commuter train services.
While bus operators and trains are the beneficiaries, the dominant general transport mode for South Africans is minibus taxis, according to a 2013 household survey.
The transport department’s delegate, Modise Sojane, acknowledges this, plus the fact that the subsidy arrangement has not changed since 1996. Other sources say the system goes back 30 to 40 years.
The department receives a grant for bus and train subsidies of only about R2.2bn a year, or about half of the estimated R4bn requirement. In defence of subsidies, Sojane says it takes bus operators about seven years to achieve break-even on capital expenditure, and that without a subsidy guarantee, access to vehicle finance is unlikely.
Money is not the only problem, though. In Monday’s session, transport analyst Paul Browning argued that it was impossible to subsidise the unregulated and largely informal industry, but that it was equally impossible to formalise and regulate the industry without some form of subsidy.
To do this, he said, the industry would ultimately have to consolidate into larger corporate entities, with an interim support step along the way.
In its submission, the South African National Taxi Council (Santaco) acknowledges the safety and regulatory challenges in the industry but suggests that the way around it is to subsidise passengers, not operators, on the assumption there will be a resulting cash injection to fund critical vehicle upgrades.
"This sounds good in theory," says transport and automotive economist at Econometrix, Sam Rolland. "The problem is that, being informal, the business is cash based. It is likely that cash incentives will not be used as intended. The same applies to a ticketing system."
Voucher systems implemented in South America showed no change in commuter behaviour, says the Gautrain Management Agency’s CEO, Jack van der Merwe.
"The vouchers were used in trade for all kinds of goods, while commuters continued walking to work. The vouchers became stronger than the local currencies," he says.
Sojane says the department "is not currently looking at that".
The problem should be tackled differently, says Rolland. Commuter transport subsidies apply worldwide, particularly where the cost exceeds 10% of household income, as is the case in SA.
"Although it is very difficult to put a cost to the economy of a dysfunctional transport system, it is clearly enormous. Proxy indicators, such as the recent bus strikes, indicate our dependency on minibus taxis.
"Innovation will probably provide a solution to formalising the industry," he says.
"Perhaps the place to start is by digitally formalising the payment system."