COMPETITION COMMISSION MARKET INQUIRY INTO THE LAND-BASED PUBLIC PASSENGER TRANSPORT INDUSTRY

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1 T: +27(0) / 3320 F: +27(0) E: ccsa@compcom.co.za W: DTI Campus, Mulayo (Block C) 77 Meintjies Street, Sunnyside, Pretoria Private Bag X23, Lynnwood Ridge 0040, South Africa COMPETITION COMMISSION MARKET INQUIRY INTO THE LAND-BASED PUBLIC PASSENGER TRANSPORT INDUSTRY Response by Transport Department City of Johannesburg May 2018 A Licencing, Route Allocation and Entry Regulations A.1 What are the factors limiting the municipality from applying for the functions of issuing operating licences? The following factors limit the municipality from applying for the function: This would be an unfunded mandate and currently the City s priorities do not include licensing of public transport vehicles; The IT system for issuing licenses is a national system (called OLAS) which has a number of operational problems and the City would be reluctant to take over a function without efficient business processes and IT systems. It would thus only agree to take over if it had control of the systems environment; The City may also have a problem of being a referee and player at the same time since it operates Metrobus and is a contracting authority in respect of Rea Vaya Bus Rapid Transit (BRT). Certain regulatory steps would need to be put in place to ensure that there was sufficient segregation of duties; and Licenses are issued for reasons of safety on the one hand and matching supply and demand. However for these outcomes to be achieved, there also needs to be an effective enforcement regime within the City s control. At the moment, the JMPD is not responsible for public transport law enforcement nor do they have the resources. A.2 If the National Department of Transport was to assign the powers of issuing operating licenses and allocation of routes to municipalities, what resources would the municipality require? And is the municipality equipped to undertake such functions? If not, mention the reasons? competition regulation for a growing and inclusive economy.

2 2 In 2015/6, the City did a feasibility study to set up a Municipal Regulatory Entity (MRE). The study estimated that it will cost around R30 million to establish a MRE including office accommodation, staff resources and systems. The municipality would require a period of time and significant resources to become equipped to undertake such functions, even if this was desirable. A.3 How can the government ensure that commuter services provided by Metrorail are fully incorporated in the municipality s Integrated Transport Plan, with the municipality playing a significant role on issues such as timetables to ensure complementarity with other modes of transport? There are two issues here the first is how the government can ensure that Metrorail services are fully integrated into the ITP. The second is a role for local government on issues such as timetables. In respect of the government ensuring that commuter services of Metrorail services are incorporated into an ITP, this is adequately covered in the NTLA and its associated regulations. Municipalities must follow the processes in the Act. In respect of the municipality playing an operational role, this is limited due to the fact that PRASA is a state owned entity. However this has not and does not stop a local Metrorail region from setting up rail co-ordinating committees to discuss operational matters such as schedules which are in their control. A.4 When new routes are identified by mini-bus taxi operators, what is the process that is normally followed by the PRE in granting operating licenses, given that the minibus taxi operators would be already illegally operating such routes? This question should be answered by PRE. A.5 What mechanisms can be implemented to timeously deal with routes amendment applications, considering that operators in certain cases they start operating before the process is concluded? There is an important strategic question. In other sectors of the economy, when there is new or increased demand, the private sector can respond without any reference to a regulatory process. In a mostly free market economy, why should a private transport service provider, provided he/she meets the legal requirements for safety, have to apply to deliver a new service which is essentially what a route amendment application is about? One reason why operators start operating before the process is concluded is due to the fact that we have a market economy and they are testing the size and viability of the market.

3 3 While mechanisms may not be needed to be implemented for route amendments, there must be consequences for unfair and illegal trading practices such as preventing competing operators from entering ranks. These illegal trading practices can usually be addressed by law enforcement if they have the authority and are not compromised (e.g. own taxis) or are under capacitated. A.6 What could be the optimal process that new mini-bus taxi operators can follow for route allocation? See above. This should be a free market with strong law enforcement in respect of unfair and illegal trading practices. A.7 Are the current measures undertaken by the municipalities to identify the public transport needs sufficient? Currently the NLTA and its regulations sets out a process to identify public transport needs which requires the review and drafting of a Comprehensive Integrated Transport Plan. Part of what the municipality is required to do is a household travel survey, building of a transport model, looking at future projections for population and economic growth and intensive community participation. In reality, it is not practical and affordable to do all this every five years. For long term planning, five years is not really needed ten to fifteen years is more realistic. For identifying where there sufficient supply when a new school or office block is built, a five year plan is too long a period to wait. Thus the current measures undertaken by municipalities is not sufficient and may not be realistically possible. A.8 With respect to bus rapid transit system ( BRT ) and municipal buses. There are allegation that routes are outdated and are not responsive to the changing needs of the commuters. Thus BRT and municipal buses have low capacity utilisation. Please indicate how can government determine routes and ensure that they are responsive to the changing needs of the commuters? This question has many aspects for the City of Johannesburg. In the City, there are municipal buses operated by Metrobus and to date Metrobus decides on the routes that they will operate. There is also Rea Vaya BRT where the City is the contracting authority and where the routes were determined by the City after doing an ITP. There is a case that Metrobus routes are not responsive and out of date. One of the biggest reasons for this is that Metrobus traditionally served white areas and was not allowed by the mini bus taxis to enter so called townships. So until today in the City of Johannesburg

4 4 it does not transport people from many parts of Soweto, Ivory Park, Diepsloot, etc. The Transport Department in 2012 did an operational plan for Metrobus where it tried to align Metrobus routes with an Integrated Transport Plan but this has not been implemented. In respect of Rea Vaya, the majority of complaints are not about the existing routes but are requests or demand for the extension of Rea Vaya routes. For example, Rea Vaya services Protea Glen but not all of the many new extensions. However there are insufficient buses at this stage to service all these areas and in terms of the Rea Vaya model, if more buses are to be introduced, negotiations would need to happen with existing mini bus taxi service providers for them to relinquish their operating licenses and vehicles and become Rea Vaya Bus Operating Company shareholders. This is a time consuming process. In respect of Metrobus and Rea Vaya bus utilisation. Both bus services are usually full if not overcrowded in the morning and afternoon peak. There may be low utilisation in the off peak or counter direction. This is a product of our spatial legacy and nature of our economy which is primarily in the services sector. The City of Johannesburg determines routes through the process of Integrated Transport Planning. This is set out in detail in our Transport Sector Plan attached. A.9 Does the proposed amendments to the NLTA address the likely impact on competition between the traditional metered taxi services and e-hailing services? If not, propose mechanisms that would address the issues identified? The NLTA amendments only seek to provide a uniform or equal playing field for regulating traditional metered taxi and e-hailing services. This is a first and important step. In the City we refer to all such services as demand responsive and would like to include tuk tuks and four plus one vehicles in this category. The PRE when granting licenses must now grant licenses to metered taxis and e-hailing services in a similar way. It is the view of the City that licenses should be granted not with reference to supply and demand but with certain conditions and if these conditions are not met, the operating license should be withdrawn. The conditions should include that all vehicles must have: A devise including an App which can measure the kilometres and time taken between the time a customer alights and disembarks from the vehicle; A map of the area in which the vehicle usually operates; Information on the front left hand window indicating: That the vehicle is used for providing demand response services, The name and contact details of the owner; and

5 5 The minimum and maximum fee to be charged and the method by which the fee will be charged. The City is currently revising its transport bylaws to include such provisions. There should also be a way of removing the operating license from any operator who or whose driver is involved in violent or other anti-competitive behaviour. A.10 With regards to public passenger rail, indicate how route allocation for Metrorail commuter services can be improved in terms of aligning it with other modes of transport to ensure that commuters continue to use rail services. This has very little to do with route allocation. The City of Johannesburg allocates significant passengers to travel by rail but they do not travel by rail because of the poor performance of PRASA. Instead the City gets significant demands from areas in the South for example for more bus services. A.11 Mention the underlying reasons with regards to the issuing of moratorium by municipalities and the respective PRE s. Were there any studies undertaken to justify the moratoria? The City has never issued a moratorium. This has been done by the regulatory authority PRE. A.12 Is the imposition of moratoria by some of the PREs effective in deterring entry into the mini-bus taxi industry? No. A.13 Why is overtrading a common feature mostly in provinces where the moratoria is in place? Is the moratoria only put in place for the issuing of new operating licences to mini-bus taxi operators or the moratoria is also extended to renewals? We are not sure if there is a relationship between moratoria and overtrading. The second part of the question can be answered by the PRE who put the moratoria in place if they do. A.14 What mechanisms did the PREs and the municipality put in place to enforce these moratoria? N/A A.15 To ensure effective control of public transport, what is the best way to deal with over saturation of mini-bus taxis in some of the identified routes?

6 6 As mentioned above, due to the ineffectiveness of government regulation and enforcement, there is a de facto free market in respect of mini bus taxis and there is a philosophical and strategic question about whether it should be regulated or not. Ways to deal with saturation depend on the circumstances. Some ways can include: Identifying the route as part of an IPTN that should be serviced by a scheduled service. In this case, Section 41 of the NLTA provides for a once off negotiated contract with existing service providers and it is possible to negotiate an arrangement including exit of operators who do not become part of the Vehicle Operating Company. Identifying the route as part of an IPTN that should be serviced by a nonscheduled service. OLS are only provided to as many vehicles as demand is indicated and either the taxi association or law enforcement has to deal with illegal operators. Urge and enable the mini bus taxi association to practice self- regulation and selfenforcement. The positive way this is done usually involves the taxi association putting stickers/marks on their vehicles and having route supervisors/squad cars to police the route. The negative way that this is done is through threats and violence against competing operators including not allowing certain vehicles into a taxi rank, driver by shoot outs at drivers and assassinations. Law enforcement should monitor that no illegal/criminal trading practices are deployed. B Transport planning B.1 What is the current status in as far as the implementation of the proposed IRPTNs? The Transport Department has in place a high level city wide Strategic Integrated Public Transport Network (SIPTN) which is in the attached Transport Sector Plan and was approved by the Mayoral Committee in It is now proceeding to develop a ten year fundable plan which will review the current SIPTN. The review aims to primarily develop a fiscally and financially viable SIPTN ten year plan which will achieve the following Extensively upgrade the Transport Demand Model to be robust enough to estimate IPTN (Integrated Public Transport Network) passenger demands within acceptable levels of accuracy and provide operational, economic and financial confidence to the city s leadership in estimating levels of subsidy; Evaluate the best major corridors in relation to passenger demands and the best mode to service the corridor including rail and what we should require of and partner with PRASA and Gautrain;

7 7 Evaluate alternative public transport network options to identify the best network that will be fiscally and financially sustainable whilst achieving the objectives of the city including providing the best service to the citizens of the city. This will be achieved by: An economic evaluation of the current IPTN to assess its feasibility; A (financial) value for money review of the current IPTN to ensure that the CAPEX and OPEX estimates are within available budgets over a 10-year period; and, If the economic feasibility and affordability of the current IPTN are not satisfactory, then to investigate alternatives to the current IPTN that meet the economic and financial constraints. Identify which routes should continue to be built as trunk routes for BRT operations and when guided by available funding sources; and Which routes should have a new operational model which would involve existing operators (both mini bus and bus) on curb side dedicated lanes. B.2 What challenges has the municipality together with the different spheres of government encountered in implementing the IRPTNs and developing the ITPs? Key challenges include: Lack of sufficient skilled staff in the municipality with transport planning skills, project management etc.; Lack of sufficient skilled staff amongst transport planning and project management consulting firms; Lack of sufficient comparative experience in South Africa in respect of developing IRPTNs and ITPS; Unrealistic and sometimes inappropriate legislative and regulatory provisions e.g. for the ITP to be done every five years; Lack of sufficient budget to do the extensive surveys and modelling that is required as well as maintain the transport model once developed. B.3 What measures can be put in place to ensure that capacity is developed for the successful implementation of the IRPTNs and the development of ITPs? The following measures can be put in place: Improved training on transport planning at tertiary institutions; More realistic legislative and regulatory provisions; Guidance documents as the City Support Programme has done in respect of IRPTN planning in 2017; Clear and certain expectations/criteria as to what the national PTNG grant fund will fund in relation to the implementation of IRPTN s. Funding should not be allowed for

8 demonstration projects when the demand does not justify it and the operational funding is unlikely to exist. B.4 Does the difference in pricing mechanism have impact on competition between the metered taxis and app-based? Yes, that is one of the features that impacts on competition. It is however not the only one. The issues of safety, transparency and accessibility also has an impact. 8 C Transformation C.1 Identify the top 5 critical inputs for the municipal buses including the suppliers of municipal buses. This question is unclear but since it is under the heading of transformation one assumes it relates to inputs for transformation and will be answered accordingly. The critical inputs are: That previously disadvantaged individuals, especially women are given opportunities to train as bus drivers, bus mechanics, schedulers, transport managers and professionals, etc. That funding, political will, research and technical support exists for buses to have low emissions standards including exploring new energy sources including CNG and electricity from solar energy. That quality local capacity exists for increasing local content beyond 80% in bus body manufacture. C.2 What are the existing bottlenecks for transformation across the value chain? How best can meaningful participation of historically disadvantaged individuals be achieved in the industry? The key bottlenecks for transformation across the public transport value chain include: Lack of capacity across the public transport sector in respect of entrepreneurship, service excellence, public transport contracting and operations; Poor institution building and poor governance amongst the mini bus taxi sector with unsuccessful attempts at corporatisation and lack of sufficient incentives to corporatize. Inability of government to contract with historically disadvantaged individuals in innovating ways to be able to create mechanisms for empowerment. For example national and local procurement regulations and procedures do not allow for ring fencing or preferences to be given to previously disadvantaged mini bus taxi operators or associations. Not high cost margins for value chain activities such as cleaning and security of taxi ranks.

9 Meaningful participation by historically disadvantaged individuals can be achieved through the following: 9 High levels of training, capacity building and mentoring; Participation at level of shareholding in bus operating companies operating scheduled services including BRT s; Participation at the level of shareholding in companies that maintain, secure and clean public transport facilities; and Creative procurement arrangements to enable mini bus taxi associations who are the sole operators of a particular rank to be able to receive an income from the municipality for the cleaning securing and maintaining of that rank. D Other emerging issues: The implementation of BRT D.1 Implications of Government s policy with respect to BRT on competition BRT if they are properly planned and allocated a particular role in their ITP or IPRTN s should not be competing with other scheduled and subsidised services. The NLTA makes provision for negotiated contracts and inclusion of unscheduled services into the BRT so that there is no competition. D.2 The suitability of BRT in smaller cities This is better answered by smaller cities D.3 What options are available to promote integration between BRT and taxis As set out above, the City is committed to the integration of BRT and taxis through the development of an integrated public transport network as discussed above. Ensuring that transfers can happen safely and easily and that there is good passenger information can also promote integration.