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THE TAXI BUSINESS INITIATIVES OF THE KZN DEPARTMENT OF TRANSPORT - SPEECH BY MR S'BU NDEBELE, KWAZULU-NATAL MEC FOR TRANSPORT31 May 2001, KwaZulu Natal Legislature
Mr Speaker My presentation to you this morning on the state of the minibus taxi industry in KwaZulu-Natal is aimed at putting into perspective the vision, goals, strategic objectives and programmes implemented by the KwaZulu-Natal Department of Transport in transforming the industry. Since I assumed the portfolio of MEC for Transport in 1994 major changes have taken place in regulating and stabilising what was once an industry that was characterised by utter chaos. We have scored many successes that have instilled hope for the social and economic upliftment of this province. These successes have derived from the interventions that we have made through a two-pronged strategy of establishing a policy framework towards a democratisation of the industry while simultaneously addressing the crises that have arisen from time to time as a result of the historical lack of an infrastructure to accommodate an area of public transport that has daily grown by leaps and bounds. Given the enormity of the responsibility that has had to be borne by my department, it is inevitable that there would exist in certain quarters a lack of understanding of the complex nature of this industry, and of why certain particular interventions have had to be made. As a consequence, a tendency has emerged to look upon organisational threats and weaknesses as utter failures rather than locating them within the context of the challenges we have had to overcome. This presentation is of necessity, then, based on an examination of where we have come from and where we are going. In the final analysis, I must make so bold as to predict that the public transport industry in KwaZulu-Natal is going to stand out as a major success story in the way of the social and economic empowerment of the people of this province. The reason for my optimism lies in the very fact that the strengths and opportunities that the industry exhibits far outweigh the threats and weaknesses it has experienced during the fledgling days of its transformation process. THE LEGACY WE INHERITED The past history of transport for Blacks has been particularly painful for the great deprivations they faced in obtaining suitable transport, especially for those who were forced to migrate to and from the cities. For Black operators there was no financial assistance, encouragement or incentive to develop their own industry. The public transport sector then could only be described as being in shambles. Provincial transport planning had overlooked entire townships. Bus parastatals were corrupt, and the previous government had ignored the peripheral taxi industry. There was no financial assistance, encouragement or incentive for Blacks to develop their own industry. When democratic government came into being, we inherited a dual public transport system in terms of which government subsidy was enjoyed only by established bus and rail operators. As a result of residential and workplace segregation, an unregulated transport system was provided by independent taxi operators and small bus operators. During the 1980s, the bus and rail sectors were the dominant mode of transport. The year 1986 marked the beginning of the decline in bus and rail patronage with a concomitant growth in the taxi industry. Today, we are in a situation in which the taxi industry commands 70% of the passengers, with the rest being shared between the buses and rails. When I became MEC for Transport in 1994 this dual system was beginning to unravel itself. The once-viable bus industry was now struggling to compete against the much more flexible and faster mode that is the taxi industry. The subsidy system could not arrest this decline. This was directly as a result of the following problems:
After 1994 most of these bus operators were in a state of financial collapse, and were constantly seeking bailouts from government. As an example, KwaZulu Transport has been sustained right up till the present moment by constant bailouts provided by government. Further, "PUTCO", one of the biggest bus companies operating in the Durban area, unceremoniously terminated their services due to cash flow problems. This decline has taken place despite the relatively high government subsidies that these companies command. As examples:
At the same time we inherited a declining commuter rail system due to the lack of investment in rail transport infrastructure over the years and a radical decline in commuter patronage. In the Durban Metropolitan Area alone, Metro Rail was commanding an annual government subsidy of R160m per year. Whilst enjoying a subsidy of this magnitude from the province, there have been delegations to Mr Dullah Omar, my counterpart at national level, for an increase in subsidy allocation. It has been estimated that to modernise the rail commuter transport system in South Africa an amount of R12 billion would be required. As a result of the factors outlined above, the minibus taxi industry has assumed a dominant position in public passenger services. The taxi industry experienced phenomenal growth at the expense of the other modes of passenger transport. While it was rapidly increasing its market share, the absence of any regulatory mechanisms has created its own distortions and problems for this sector of the industry, viz:
Some of the reasons for the dominance of the industry are as follows:
BUILDING BLOCKS OF A NEW SYSTEM It is no coincidence that by far the largest market share in public transport has been captured by the Kombi minibus taxi industry. The symbolic meaning of the Kombi having become the most distinctive national symbol in public transport has indeed not escaped the imagination of those who have declared that, as a nation of Kombis, we are effectively a Kombi-nation. It is quite clear that the various modes of public passenger transport have been in crisis, albeit for differing reasons. Whilst other modes of service have been experiencing rapid decline in passenger support, the taxi industry has grown. Paradoxically, however, that very growth has been the foundation for the conflicts that have begun to emerge within this industry. Hence, there arose a need to implement an integrated solution, which, while setting the policy framework for a re-structuring of the public transport industry, could also address the crises of the day. In view of the fact that the industry is central to the economic growth, upliftment and development of the historically disadvantaged people of our province, it was necessary for my department to implement a two-pronged strategy in dealing with the problems within the industry as a whole. The first was to institute mechanisms towards managing and resolving short-term problems for each mode as they arose, and the second was to develop sustainable political, legislative and administrative frameworks and capacities to re-structure and thereby transform the industry. Any objective analysis of my department's successes or failures, then, would warrant the location of such analysis in that context. BUS OPERATIONS The re-structuring programme for the bus industry is now crystallising. This re-structuring entails changing from the old subsidy system which benefited very few bus companies to a competitive tendering system properly monitored to ensure appropriate levels of service to commuters. A part of the process has been the commercialisation of bus parastatals. We have made various strides in that process. With the exception of the DTMB and South Coast Bus Service, all bus companies in the province have been converted to the new competitive funding system. The second phase of the re-structuring programme would be the integration of the public transportation system by involving taxi business structures in the bus tendering system. We want to ensure that happens by involvement of the taxi industry in the commercialisation of KwaZulu Transport and the DTMB. Whilst we were busy implementing that restructuring we have been dealing with crisis situations. Out-of-budget financial outlays have taken place within KwaZulu Transport by the provincial cabinet and within the DTMB by the Durban Metro Unicity Council. At least R70 million has been allocated as bailouts. Notwithstanding the government's injection of R70 million, it has not made the bus companies more profits. Yet, the government took the decision because if it did not help, the bus service industry would collapse, resulting in major social and economic implications. Hence, whilst the need for the implementation of a policy framework is being addressed, it is at the same time necessary to address the immediate crisis facing the bus companies. TAXI INDUSTRY The consolidation of business structures in order to enhance the process of real economic empowerment for the taxi industry will be facilitated because of the democratic and representative structures that have now been elected. A new leadership is expected to join with government and to agree on a comprehensive visionary strategy that would place the industry at the economic centre of the province. My department is deeply conscious of the fact that empowerment in itself is a process that constitutes many hazards. The fact that we took over an unregulated industry, in which the new democracy inherited a bureaucracy that had no viable infrastructure in place, made heavy demands on my department in fashioning order out of the chaos we inherited. We had to set about trying to put in place an institutional framework, both within the department and within the taxi industry itself, towards creating the type of vibrancy that would inspire hope for the future among both taxi operators and the commuters they serve. Within the taxi industry, a similar approach as that adopted for the bus industry, viz., the adoption of a dual strategy which would put into place a policy framework while simultaneously address the crises within the industry, has been adopted. And, like the bus industry, the establishment of a policy framework is the culmination of a process of extensive consultations, research and implementation of processes that would result in the democratisation of the industry. The framework is informed by a strategy founded on four pillars as follows: Regulation and Control Today, public transport in particular in KwaZulu-Natal has become an important vehicle for Black economic empowerment. Chaos has been largely replaced with legitimate regulation. Confrontation has been replaced with business development. Private sector partnerships have helped the taxi industry flex its economic muscle. Taxi legislation has formed the basis of a powerful investment strategy around Taxi Cities. And all this because of the strong institutional framework that we have put in place for our Provincial Taxi Task Team, our Taxi Office in Durban, our Taxi Registrar in Pietermaritzburg, our regular taxi industry indabas, and our Taxi Investment Conference. Through our strategic emphasis on rural mobility and inter-modal transport, we have broken up uneconomic bus contracts and put together smaller contracts to advance SMME's. Today, the minibus taxi industry is a triumph of the Black entrepreneurial spirit. There are:
My department has facilitated the provision of a curriculum and material development-training programme at Natal Technikon. It has spent R5 million in the training of 1 500 taxi owners and drivers. Conflict Resolution We have in place a structure that is fully operational in resolving conflicts. EMPOWERMENT In order for the taxi industry to be regulated the hope that a bright future was on the horizons had to be nurtured. It is in this context that my department has not recoiled from the challenge of spelling out that vision of hope and of being bold in the initiatives that it has had to take. Obviously, then, there have been hurdles to cross, and, in the process, strategic directions to be reviewed as the situation warranted it. Therefore, we must make so bold as to say that we will refuse to succumb to the trend whereby any temporary setbacks within the wider agenda of empowerment is projected by our detractors as evidence of wanton waste or failure, especially where democratic government is fulfilling its responsibility of being initiator and facilitator of hopes never before possible. As empowerment is a key objective of government, it is a priority that we will continue to pursue even in the face of adversity. We simply cannot avoid our responsibility to level the playing fields for those who were denied their right to social and economic prosperity. To fail to initiate bold empowerment initiatives is in effect to fail democracy itself. Indeed, it is in the interest of the nation as a whole that we bear responsibility as government to implement the empowerment objectives as part of the process spelt out in the preamble to South Africa's democratic constitution to 'heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights.' My department fully realises that unless the bulk of the population of our country actively participate, jointly with those who historically enjoyed protected participation, in the mainstream of the economy, empowerment would be a pipedream, and we would be nowhere nearer to dragging this country out of the misery of the negative economic growth that apartheid engendered. Against this background, the need to foster public-private partnerships as part of the empowerment process within the minibus taxi industry has driven my department to engage in bold economic ventures towards helping the taxi industry position itself as a relevant stakeholder in economic upliftment. The call of taxi operators is clear: whilst they will participate in the process of re-structuring the industry they would at the same time need financial assistance from government. The reason for this is that the economic decline of the industry has reached alarming proportions. For example, in 1990 a Toyota Kombi cost R1 500. In 2000 the cost escalated to R130 000. In 1990, a long-distance operator on the Durban-Johannesburg route was making a profit of R20 000 per week. Today, this profit margin is R10 000 per month. In 1990 there were approximately 6 000 taxis in KwaZulu-Natal. Today, the number stands at 21 000, an increase of 300%. All of this, coupled with the fact that an operator has to pay a deposit of 50% and an instalment interest of 25% per annum for acquiring a vehicle, point to the deep financial crisis faced by many operators. It is also within this context that an initiative such as the Umthombo Investment Company was conceived. The strategic vision behind the venture was that it would be fully owned by the co-ops, with government playing the role of facilitator of economic empowerment. The strategy depended on the availability of skills and the forming of business partnerships with other private sector players. All these requirements had been finalised and put in place when the national recapitalisation programme was announced and caused a crisis. Notwithstanding this, the initiative has been kept alive through a re-evaluation of its strategic directions in the light of the recapitalisation programme. Any temporary setbacks within Umthombo are really a small price to pay in beginning a development process that is aimed at promoting economic growth and opportunities that were never before extended to a sector that is arguably central to the economic prosperity of KwaZulu-Natal. And expenditure on personnel who could provide the necessary expertise to guide the process along, and to deal with unforeseen negative impacts of ever-changing market forces, would be well worth the expenses, subject, of course, to the constraints of government fiscal discipline. WHY WE FACILITATED THE FORMATION OF UMTHOMBO Having engaged, researched, dodged bullets, and lost - through firepower - a host of visionary leaders; we became convinced that successes on any of the three components of the strategy framework would not alone alleviate the problem. It became clear that the key to the solution of a stable taxi industry was an economic one, and that the other components of our strategy were merely the foundation. As stated at the public launch of Umthombo Investments Company in April 1999, the underlying issues plaguing the Taxi Industry were economic in nature. In proceeding to respond to any perception of failure and waste, we need to take cognisance of the very difficult challenge my department has had to grapple with in terms of restructuring a totally inequitable system of public transportation. THE REALITY OF UMTHOMBO After an intense programme of consultation, analysis and planning, culminating in the launch in April 1999, Umthombo commenced operations in June 2001. Its business programme was sufficiently challenging. The mobilisation of an entire industry to wake up to its potential could only be done through an elaborate and ambitious plan. The portfolio of business initiatives was designed largely around the buying strengths of the industry itself, as follows:
In terms of the above design, the department sought to make a meaningful and long overdue contribution to an industry that even today carries the burden of moving the workers and the poor from point to point without a single cent from government in the form of subsidy. This industry performs this task daily with an amazing amount of service reliability. A MAJOR EMPOWERMENT MILESTONE AT THE LAUNCH OF UMTHOMBO IN APRIL 1999 THE CHALLENGES IN THE UMTHOMBO INITIATIVE In unfolding the empowerment initiative of the Department of Transport we did not for a second believe it was going to be easy. We knew that there would be serious challenges and barriers to encounter. The following are some of the difficulties that have been encountered in this journey to set the Taxi Industry up as a model empowerment project: THE RECAP PROJECT The irony of it all is that Umthombo lost its original sense of direction the moment the national Taxi Recapitalisation Project was announced. For the record; the Recap Project called for tenders for the provision of an integrated package, in essence as follows:
The first time that anybody (other than the team that formulated the concept) knew about the project was in August 1999 when Mr Dullah Omar, the second National Minister of Transport, assumed office - which was only two months after the commencement of the operations of Umthombo. In the ensuing confusion the Department of Transport was now faced with a taxi industry that saw the Recap Project as holding direct implications for the provincial initiatives that had been facilitated by my department. Clearly, with the advent of the Recap Project, the empowerment initiative of the province was being validated at national level. The irony, however, is that the manner in which it was introduced had a devastating effect on the KwaZulu-Natal provincial initiative in that all provinces had found themselves in the dark about the project until the last moment. As a provincial department, our reaction to this had to be a responsible one, taking into account national imperatives. We immediately went on a campaign to counter the anti-recap sentiment that had begun to spread. We encouraged the Taxi Industry instead to participate in the programme through its business structures. It remains a fact, however, that the central strategy of Umthombo suffered a major unforeseen setback within an environment of a national initiative that had not taken into account the provincial initiatives that had already been underway. THE ISSUE OF CREDIBILITY Throughout the process of our engagement with the taxi industry, the department had to struggle with the problem of an industry that once had no credible leadership structures. The formation of the Taxi Task Team in 1995 had clearly been an interim arrangement for facilitating dialogue. At a practical level, any progress made in terms of the empowerment initiatives had to contend with the existing structural limitations. The Taxi Task Team, by its very nature, lacked the capacity to command discipline and support from the taxi industry membership base. Some of the problems experienced at the level of the Co-ops have reflected the weaknesses in the capacity of the leadership structures to mobilise support. THE STATUS OF THE PROGRAMME OF UMTHOMBO AND THE CO-OPS In view of the interceptive implications of the recap project and in view of the Democratisation programme that has developed over a period of months, the activities of the Umthombo Projects have been strained. It is, however, misleading to suggest a collapse. Below is a summary of the status of the projects. THE PETROL STATION ROLL-OUT PROGRAMME Following agreement with the petrol companies a programme is underway aimed at procuring petrol filling station sites for ownership by the co-ops. More than twenty sites have been identified and are in the process of being negotiated into the hands of the co-ops. In terms of this process three co-ops have acquired ownership:
Progress in this regard relies heavily on the co-operation of the leadership as well as on the efficiency of the documentation process involved. THE TAXI CITY DEVELOPMENT PROCESS There are a number of active projects in this regard:
THE PASSENGER BUS PROJECT It has been a key area of focus for Umthombo to facilitate the broadening of scope for the taxi industry into bus transportation. In this regard Umthombo stands positioned, having secured financial and expertise partners, for the following opportunities:
The quality of the partnerships that Umthombo has secured is such that the chances of success are positive. THE RECAP TENDER Through a partnership agreement with one of the short-listed companies and Umthombo KZN is the only province whereby the taxi industry will participate directly in the recap project. After it had proved difficult to maintain the Malandela Assembly Plant within an environment of a competitive tender, a deal was successfully negotiated with a view to ensuring the continued participation of the KZN taxi industry in the original idea of manufacturing their own vehicles. THE TRICYCLE PROJECT Another of the initiatives of the Department of Transport, through the co-ops and Umthombo, the taxi industry will handle is the distribution and dealerships of the cargo tricycles that I launched recently. WHERE WE ARE WITH THE EMPOWERMENT INITIATIVES The serious matter of the empowerment of the taxi industry will continue to be a challenge that we shall continue to tackle with vigour. Here is where we are with the process:
My department's growth-path has not occurred overnight. It represents the years of hard work, countless hours, and brave overhauling of the department from what it inherited to what it now commands for these changes to have come about. It is a progress report card which has been eloquently vindicated by the substantial budgetary increase we enjoyed this year - a recognition of our successes and of our ability to confront the challenges of transforming a once-barren department to one that is effectively serving as the engine-room of the major transformation and development initiatives that are taking place in the field of transport within the KwaZulu-Natal province. The minibus taxi industry in South Africa comprises some 20 000 owners, 120 000 vehicles, and 200 000 employees. It carries between 6m and 11m passengers daily, and has an approximate turnover of R12b in fuel per annum. The industry also spends approximately R10b per annum on fuel, vehicle spares, insurance and other overheads. Indeed, KwaZulu-Natal, with 17% of the current national taxi fleet, ranks second only to Gauteng which has 35% of the taxi fleet. Conflicts and difficulties of a business nature can be resolved through mediation, consultation, and a regular review of the procedures in place. It is a vital industry. The government can only initiate and facilitate it, not manage it. Umthombo is an experiment in development and empowerment. It represents a vital learning curve in bringing democracy to a group that was once totally ignored. We have a responsibility to help them build themselves up from the nothing they once had in the way of government support to the lifeline they have now even given the opportunity to grasp. There have been no failures. Indeed, any industry or institution would attest to the reality that an organisation is subjected to threats and weaknesses as much as it is to opportunities and strengths. Our opportunities and strengths are based not only on moral foundations; they are also based on my department's will of commitment to delivery. And we indeed do have the vision and the will to overcome the weaknesses and threats that confront us. Mr S'bu Ndebele
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